Buckwalter v. Whipple

• Decision Date: 04 June 1902
• Parties: BUCKWALTER et al. v. WHIPPLE et al.
• Court: Georgia Supreme Court

41 S.E. 1010

115 Ga. 484

BUCKWALTER et al.

v.WHIPPLE et al.

Supreme Court of Georgia.

June 4, 1902.

FRAUDULENT CONVEYANCES—ORGANIZATION OF NEW CORPORATION—REMEDY BY ATTACHMENT—EXCEPTIONS TO AUDITOR'S REPORT—EXPENSES OF RECEIVERSHIP.

1. When the members of a trading corporation, which is in debt, for the purpose of defeating its existing creditors, form a new corporation of like character, and, in pursuance of their scheme, take possession of the assets of the first, and issue stock to its members to the amount of the agreed value of such assets, the whole transaction is void as to such creditors, and they may by attachment cause those assets to be seized, and on rendition of judgments in their favor subject such assets to the satisfaction of those judgments as against any person claiming any right or lieu as a stockholder of the new corporation; and this is so whether such person was or was not a party to the attachment litigation, or had notice of the pendency of the same.

2. It is not erroneous, even after a case has been referred to an auditor, and is on trial in the superior court on exceptions to his report, to admit testimony showing that a declaration in attachment had, at a certain time, been deposited with the clerk of the superior court, who, through inadvertence, omitted to make an entry of filing thereon; nor is it error, upon such showing being duly made, to allow the clerk to make such an entry nunc pro tunc.

3. No party is entitled to attorneys' fees out of a fund brought into court at his instance, and to which another has a superior claim, when it appears that the bringing of the fund into court in no way operated to the benefit of the latter, but to his injury, because of the fact that the amount of the fund was diminished by being charged with the payment of the necessary expenses of a receivership.

4. No error in any ruling or finding of the judge which has not been specifically referred to has been shown.

(Syllabus by the Court.)

Error from superior court, Wilcox county; D. M. Roberts, Judge.

Petition by J. P. Buckwalter and others, against one Whipple, as receiver, and others. From a judgment on a report of the auditor, plaintiffs bring error. Affirmed.

Hal Lawson and Eldridge Cutts, for plaintiffs in error.

J. T. Hill, Thomas & Whipple, and D. B. Nicholson, for defendants in error.

LITTLE, J. Buckwalter, the general manager of a trading corporation known as the Cypress Lumber Company, exhibited an equitable petition against C. T. Nelson & Co., C. T. Nelson, H. B. Nelson, M. C. Lilly, Jr., F. L. Serage, F. B. Serage, the Cypress Lumber Company, and W. S. Thomson. Subsequent ly this case was, together with the case of the First National Bank of Cordele et al. against Serage-Watkins Company et al., referred to an auditor to hear evidence and report upon the various issues arising therein. The record is voluminous, and much confused. The pleadings and the evidence make substantially the following case:

The Serage-Watkins Company was a corporation engaged in the manufacture of lumber in Wilcox county. In the year 1896 its stockholders sold and conveyed the assets of this corporation to the Cypress Lumber Company, which latter corporation was composed of the same shareholders as were stockholders in the former, except P. B. Watkins, a shareholder in the old company, was not a shareholder in the new, and J. B. Buckwalter, the petitioner, who was not a shareholder in the old company, subscribed and paid in to the new corporation $5,000, for which he received 167 shares of stock in the Cypress Lumber Company. All the property of the Serage-Watkins Company, except its choses in action and bills receivable, by the arrangement which was entered into, went into the hands of the Cypress Lumber Company. In these were included the sawmill plant, etc., of the old company. The capital stock of the Cypress Lumber Company, the assets of which consisted of the property conveyed to it by the stockholders of the Serage-Watkins Company plus the $5,000 paid in by Buck-waiter, was $50,000, divided into 500 shares of the par value of $100 each. At the time of the transfer, the Serage-Watkins Company owed certain debts, of which Buckwalter had knowledge, and which were not paid at the time of the organization of the Cypress Lumber Company. Among these creditors was the First National Bank of Cordele, which, together with other creditors, after the organization of the Cypress Lumber Company, sued out attachments against the Serage-Watkins Company, and had them levied upon the mill and plant, which the defendant in attachment had before that time conveyed to the Cypress Lumber Company. The 500 shares of stock of the Cypress Lumber Company were held and owned as follows: J. P. Buckwalter, 167 shares; F. B. Serage, 296 shares; M. C. Lilly, 10 shares; C. T. Nelson, 10 shares; H. B. Nelson, 10 shares; and F. L. Serage, 7 shares. Of these shareholders F. B. Serage, M. C. Lilly, and C. T. Nelson composed a firm doing business under the name of C. T. Nelson & Co., in Columbus, Ohio. This firm was indebted to the Cypress Lumber Company in an amount exceeding $3,000, and, being in a falling condition, Buckwalter had sued out an attachment against the firm, and caused the same to be levied on the individual shares of the capital stock of the Cypress Lumber Company owned by the members of that firm. Of the attachments which had issued in favor of the different creditors of the SerageWatkins Company which had been levied on the mill and plant in possession of the Cy-press Lumber Company, only that one in favor of the First National Bank of Cordele had been tried. That trial resulted in a judgment in favor of the bank. A motion to set aside the judgment and grant a motion for a new trial had been made, and was pending at the time Buckwalter filed his equitable petition, in which, after referring to the issuance of the attachment by him against C. T. Nelson & Co., he alleged that the members of that firm were seeking to devest their stock from the lien which the Cypress Lumber Company had on the same by virtue of a bylaw of the company. He also alleged that a transfer which members of that firm claimed to have made was fraudulent, and that, owning a majority of the stock of the lumber company, they had entered into a fraudulent scheme to settle their indebtedness by retiring 150 shares of their stock in payment of their debt. He further alleged that it was the intention of such majority stockholders, through their attorney, Thomson, to have the attachment which the petitioner had sued out dismissed and marked "Settled." He also alleged that the other defendants, H. B. Nelson and F. L. Serage, are confederating with the members of the firm of C. T. Nelson & Co. In their fraudulent scheme. Under these allegations he prayed that the defendants C. T. Nelson & Co. be enjoined from any Interference with any of the property, choses In action, or other assets of the corporation, and that they and their attorney, Thomson, be enjoined from in any manner interfering with the attachment proceedings instituted by him, which were then pending, and from having the same dismissed. He also prayed for the appointment of a receiver to take charge of the property and assets of the Cypress Lumber Company, to collect all debts due said company, and hold the same for final...