Buell v. Kanawha Lumber Corp.

• Decision Date: 31 December 1912
• Citation: 201 F. 762
• Court: U.S. District Court — District of South Carolina
• Parties: BUELL v. KANAWHA LUMBER CORPORATION. Ex parte WILLCOX & WILLCOX. Ex parte McCULLOUGH.

201 F. 762

BUELL v. KANAWHA LUMBER CORPORATION. Ex parte WILLCOX & WILLCOX. Ex parte McCULLOUGH.

United States District Court, E.D. South Carolina.

December 31, 1912

F Barron Grier, of Greenwood, S.C., and E. M. Blythe, of Greenville, S.C., for petitioners.

Iredell Meares and A. G. Ricaud, both of Wilmington, N.C., for intervening petitioners.

SMITH District Judge.

This cause came on to be heard upon the application of Messrs Willcox & Willcox for fees as counsel for the plaintiff herein and for the receivers, and also upon the application for fees of Joseph A. McCullough, Esq., heretofore appointed special master, and was heard upon these applications, the report of the standing master thereon, the testimony taken on these applications, and generally the record in the cause.

The facts appear to be as follows:

On the 7th day of March, 1908, George F. Buell presented his bill of complaint in this cause to Hon. J. C. Pritchard, United States Circuit Judge, against the Kanawha Lumber Corporation. In that he set out that he was the secretary of the defendant corporation, which owed him the sum of $187.50 on account of unpaid salary, and was also a stockholder in the corporation being the owner of 100 shares of its capital stock, that the total liabilities of the corporation were about $133,000, and that the value of its assets was about $531,000. The bill stated that the company was involved, and could not get funds to carry on its business, and that the only way in which it could proceed and be saved as a property for the corporation and stockholders would be by the carrying on the business by receivers appointed by this court, who could conduct its business at a profit and prevent its disintegration by being subjected to numerous actions and suits and the claims of creditors under levy and sale, and prayed that the court would appoint receivers to take charge of the assets and property of the corporation and conduct its business. On the same day the defendant, the Kanawha Lumber Corporation presented its answer, admitting the allegations of the bill, and joining with the complainant in its prayer for relief. The attorneys for the complainant, George F. Buell, were Messrs. Willcox & Willcox, and the attorney for the Kanawha Lumber Corporation was Mr. Henry E. Davis. On presentation of the bill of complaint and the answer the Honorable J. C. Pritchard, United States Circuit Judge, made an order dated the 7th March, 1908, appointing three receivers to take possession of all the assets of the Kanawha Lumber Corporation, with power to carry on and continue its business. The bill and order were filed on March 9, 1908. A few days afterwards, on the 10th March, 1908, Messrs. Willcox & Willcox, signing themselves as attorneys for the receivers, gave notice to Mr. Davis as attorney for the defendant that they would apply to Judge Pritchard at his chambers for an order authorizing the receivers, among other things, to issue receivers' certificates to an amount not exceeding $30,000. It appears that a bill of complaint and answer of the same tenor as those in the Circuit Court for this district had been filed in the District Court of the United States for the Eastern District of Virginia, and that the notice of application to issue receivers' certificates, together with the petition of the receivers for the purpose of having that issue authorized, was made in the United States Circuit Court for the Eastern District of Virginia, although the assets of the defendant mentioned in the bill were in the district of South Carolina. On the 14th March, 1908, Judge Pritchard by an order made upon this application in the cause in the Circuit Court of the United States for the Eastern District of Virginia ordered, among other things, that the receivers should issue certificates not to exceed the sum of $30,000, with interest at 6 per cent. per annum, payable quarterly, which should be by their terms a first lien upon all the assets of the Kanawha Lumber Corporation, except such of its assets as are now subject to lien, and should be by their terms a lien on such assets as are now subject to lien, second only to existing liens.

A certified copy of this order was by direction of the court in the order sent from the Circuit Court of the United States for the Eastern District of Virginia to, and filed in the proceedings in this court on 20th March, 1908. On the 28th July, 1908, the receivers appointed by Judge Pritchard filed a statement in the form of a balance sheet as of March 9, 1908, showing the total assets of the Kanawha Lumber Corporation to be according to the book entries filed by them, $427,016.57. The receivers, in pursuance of the order authorizing them, issued the certificates up to the full amount of $30,000, and these certificates, with interest according to their terms to an amount aggregating for the same some $35,000, are all still due and unpaid. In September, 1908, certain petitioners, viz., D. C. Boyce, F. M. Boyce, Bettie Boyce, the Murchison National Bank, and the Charleston National Bank, filed an intervening petition in the cause to have the court direct the receivers to stop all operation, and also that the receivers appointed by the court should be removed. This petition was afterwards also joined in by the Bank of Horry, the Burroughs & Collins Company, and the Horry Hardware Company. Another petition was filed on September 19, 1908, on behalf of George F. Buell, the complainant, W. C. Lewis, Laura Lewis, and W. S. Lewis, also asking that the receivers be removed. The receivers filed their answers to the petition, and it was ordered by an order made by Judge Pritchard on September 19, 1908, that all matters and things referred to in the petition and the answer of the receivers and all issues arising thereon be referred to the Honorable Joseph A. McCullough of Greenville, S.C., as special master, to take the testimony and report the evidence with his findings of fact thereon to the United States Circuit Court for this district. The special master took the testimony and made his report, and, the cause coming on to be heard upon the same, Judge Pritchard by an order dated April 21, 1909, allowed the receivers to continue to operate for a limited time, and refused to remove the receivers, but allowed the receiver, J. C. Causey, Jr., to resign, and appointed J. J. Britt in his place, and referred the cause back to the special master to take proof of claim and report. Later, by an order dated July 6, 1909, Judge Pritchard allowed James J. Britt to resign, and appointed William H. Chadbourn in his place. The cause having come on to be heard before Judge Pritchard on December 28, 1911, he made a decree wherein he adjudged the certificates issued under the order of the court to be valid obligations of the court, and entitled to be paid by the receivers from the funds in their hands, and next that the claims of the Russell Wheel & Foundry Company and the Climax Manufactory Company were entitled to liens upon the same funds to the extent of their debts, and the receivers were directed to pay them.

By interim orders the sale of all the property had been ordered, which has been made, and it appears that there are now in the hands of the receivers remaining after the payments and disbursements made by them as a total result remaining of all the sales in cash and notes respectively, $38,240.94, representing the entire assets to be administered at this date. This is subject to the payment of whatever may be the incidental and necessary costs of the court, to be paid out of this fund the claim of the Russell Wheel & Foundry Company, amounting to some $3,719, with some four years interest to be added, and the claim of the Climax Manufactory Company, amounting to some $1,050. with four years interest. It is also stated, although the record does not show, that there is some $2,000 still due upon unpaid bills of the receivers. From the fund in court, therefore, there must be first deducted in any event the total of the claims due to the Russell Wheel & Foundry Company, and the Climax Manufactory Company, viz., at least $5,000, leaving applicable to the payment of receivers' certificates the sum of not more than $33,240.94, while the total amount due upon the receivers' certificates with interest to date is stated to be not less than $35,000. So that, in any event, there will not be enough to pay off these certificates, with interest in full.

There is now presented to the court claims on behalf of Messrs. Willcox & Willcox, attorneys, for $7,500, and of the special master, J. A. McCullough, Esq., for compensation of $1,000, making a total of $8,500 to be deducted from this fund, which, if taken from the fund, would leave only applicable to the receivers' certificates the sum of $26,000, irrespective of any other incidental costs of court to be paid out of the same. The question for the court to decide now is whether these applications of Messrs. Willcox & Willcox and Joseph A. McCullough, Esq., should be allowed as payments to be made out of this fund ahead of the certificates.

The issuing of receivers' certificates is the exercising of an extraordinary power by a court of equity, and is done for the purpose of saving and preserving property whose destruction or loss or impairment is threatened. Their issue for purposes of business operations began apparently in the issuance of receivers' certificates for the purposes of public service corporations so as to permit them to perform their duties to the public by continuing their operation; the court holding that the performance of these public duties came before all other demands upon a public service corporation. It was therefore held by the court that in the case of a public service...