Dayton Hydraulic Co. v. Felsenthall
| Decision Date | 03 June 1902 |
| Docket Number | 1,029. |
| Citation | 116 F. 961 |
| Parties | DAYTON HYDRAULIC CO. v. FELSENTHALL. |
| Court | U.S. Court of Appeals — Sixth Circuit |
The question for decision involves the right of the Dayton Hydraulic Company, as lessor of a certain leasehold estate to be paid the rentals which have accrued thereon since the appointment of a receiver for the lessee, the Columbia Straw Paper Company.
The material facts are as follows: The Columbia Straw Paper Company is a corporation organized in 1892 under the laws of New Jersey. It purchased, during that year, 39 independent mills operating in western states, and closed down 9 of them on acquiring title and possession. Among the mills so purchased and closed down was a mill at Dayton, Ohio. This Dayton mill was upon land leased by the Dayton Hydraulic Company for a term of 99 years, renewable forever, the lessee to pay all taxes. Appurtenant and incident to the land, and included in the same lease, was let the use of 450 cubic feet of water per minute, to be used on the said parcel of ground same being supplied from a headrace owned and maintained by the lessor. For the land the lessee and its assigns covenanted to pay $75 per year in semiannual installments and for the water power the sum of $400 per annum in like installments. A right to re-enter for default in rents was reserved.
This lease was originally made in 1854, but by several mesne conveyances came finally to the Columbia Straw Paper Company as assignee in 1892. These 39 mill properties, so acquired, were included in a general mortgage, made by the New Jersey company in 1892, to secure an issue of bonds. A default in interest having in due course occurred, a foreclosure bill was filed in January, 1895, by the mortgage trustees, in the circuit court of the United States for the Northern district of Ohio, and so-called ancillary bills were immediately filed in other jurisdictions. George P. Jones was appointed receiver under the original bill. One of these ancillary bills was filed in the circuit court for the Southern district of Ohio, and under that George P. Jones was also appointed receiver for the mortgagor company in Ohio.
The mortgage thus sought to be foreclosed included the property held under lease from the Dayton Company, it being therein conveyed and described as a leasehold. It was also described in the decree appointing Jones receiver in the Ohio suit, and the receiver was therein authorized and directed 'to take immediate possession of all and singular the property above described, wherever situated or found,' and all persons were 'enjoined from interfering in any way whatever with the possession or management of any part of the business or property over which said receiver is so appointed as aforesaid,' etc.
The Columbia Straw Paper Company acquired this Dayton mill in December, 1892, and immediately closed it down. All machinery was removed from and out of the mill, and when the receiver was appointed there was no movable property in said mill, or upon the leased ground, and the New Jersey company never thereafter had any actual possession of the premises. The company, however, paid the semiannual installments of rent until November, 1894, when it failed, and shortly thereafter went into the hands of a receiver. The receiver in the Ohio suit never took any actual possession of the dismantled Dayton mill, or made any actual use of the appurtenant water power.
It is also shown that in May, 1895, a receiver was appointed in New Jersey for the corporation, the appointment being under the act of that state of April 7, 1895. It does not, however, appear that the corporation ever had any property within that state, or that the receiver thus appointed ever became a party to any of the suits pending against the corporation in other jurisdictions where its property was situated.
The lessor semiannually sent bills to the Ohio receiver for the rents which accrued after the receivership. When the first of these bills was received, the receiver acknowledged its receipt, and replied under date of May 5, 1895, saying:
Nothing more was heard from the receiver, nor did he make any offer to restore the property to the lessor or to surrender his constructive possession. No rent or taxes were ever paid by him, or offered to be paid. There is some evidence of negotiations between some of the agents of the lessee corporation and the counsel representing the bondholders, of which the lessor was advised, looking to a surrender of the lease, but nothing ever came of it. Under date of July 8, 1896, Messrs. McMahon & McMahon, counsel for the lessor, addressed a letter to the receiver in the following words:
'My Dear Sir: We represent the Dayton Hydraulic Co., lessors of the Dayton property to the Columbia Straw Paper Co. The property has been forfeited to the state for taxes, the amount now due being $352. The amount of water rent due the Hydraulic Co. is $1,234.37, to May 1, 1896. As receiver of the parent company, you have never taken possession of this property, and undoubtedly do not want it with the incumbrance of the overdue water rent. We would be pleased to have your attorney enter an order declining the property, or, if you prefer, accepting the same, and providing for the payment of the rent. We would then make some arrangement to reclaim the property. As it is, no one is getting any benefit. Yours, truly,
McMahon & McMahon.'
This was replied to by Dupee, Judah, Willard & Wolf, attorneys in Chicago, as follows:
'Gentlemen: Mr. George P. Jones, receiver of the Columbia Straw Paper Company, has handed us for reply your letter of the 8th inst. As we recollect, we wrote Mr. L. P. Conover, of this city, about the latter part of March, he then representing, as we understood, the Dayton Hydraulic Company, that we had no doubt the lease could be surrendered, so far as the bondholders and the two receivers are concerned, by orders entered in court here, where the mortgage receivership is, and in New Jersey, where the general receivership is, upon condition that all rent claims be released, and that the lessor assume all back taxes. Whether or not you would wish also to get a separate release from the company, we do not know. Yours, truly,
Dupee, Judah, Willard & Wolf.'
The Mr. Conover referred to was an attorney for the Dayton Hydraulic Company, in whose hands the rent accounts had been placed. Dupee, Judah, Willard & Wolf were the attorneys for the mortgage trustees, and as such had filed the several foreclosure suits. They had not represented the receiver after October 1, 1895. No reply was made to this by McMahon & McMahon, and neither party applied to the court for any order in the matter. June 18, 1898, the Dayton Company filed its petition in the Ohio suit, praying that the rents and taxes accrued since the receivership be paid by the receiver. This the receiver answered, denying the liability for such rents. This answer did not propose to surrender the property, or express any past or present willingness to permit a re-entry by the lessor. In this situation the matter stood until July 8, 1898, when counsel for the Dayton Company addressed a letter to the Hon. W. H. Taft, the judge of the circuit court under whose order the receiver was acting, in these words:
'My Dear Sir: I am coming to Cincinnati some day next week to see you about the petition of the Dayton Hydraulic Co. against the Columbia Straw Paper Company, and write that you may, at your leisure, look over the petition and answer of the receiver. I am not coming down to call the matter up for hearing at this late day, and expect to have postponed the question of an order for rent and taxes past due. What I do not understand is how an officer of the United States court can hold property for four years, pay no rent or taxes, and, when called upon, still continue to hold the property, denying all responsibility for rent, taxes, etc. We expect to push the question, at the right time, for past-due rent. What I want to confer with you about is the further question whether the court will permit the receiver to continue to hold the property (unoccupied and unused), and require us to litigate in New Jersey about rents, etc. The action of the receiver strikes me as scandalous outrage. Very truly yours,
J. A. McMahon.'
On July 11, 1898, the same counsel addressed a letter to Messrs. Kittredge & Wilby, attorneys for the receiver, which was as follows:
'Dear Sirs: I will be in Cincinnati to-morrow morning, wanting to see Judge Taft in the petition of Dayton Hydraulic Co. vs. Jones, Receiver of Columbia Straw Paper Co. I do not go with the expectation of calling up the case, but only to find out if the court will continue to hold this property now in default for taxes, rent, etc. Yours,
J. A. McMahon.'
Mr. J. A. McMahon accordingly saw the receiver's counsel, and what occurred there is shown to have been included in a letter to Judge Taft, under date of July 12, 1898. That letter is as follows:
correspond with them. As the receiver has the right to hold the property if the court so orders, I...
To continue reading
Request your trial
-
In re Curry Printers, Inc.
...& Trust Co., supra; 136 U.S. 89, 10 S.Ct. 950, 34 L.Ed. 379 (1890) Fleming v. Noble, supra; 250 F. 733 (1st Cir.1918) and Dayton Hydraulic Co. v. Felsenthall, supra. 116 F. 961 (6th Cir.1902). Debtors not only have the right to retain and use leased property while deciding whether to assume......
-
In re Sturgis Iron & Metal Co., Inc.
...Reisenwebers, Inc. v. Irving Trust Co. (In re Cigar Stores Co. of America), 69 F.2d 513, 515 (2nd Cir.1934); Dayton Hydraulic Co. v. Felsenthall, 116 F. 961, 965 (6th Cir. 1902) (equitable receivership Frazin also addressed the Committee's argument regarding the apparent inconsistency betwe......
-
In re Magnolia Gas Co., LLC
...debtor or creditor at the expense of those who have valid charges against property of the estate.")(quoting Dayton Hydraulic Co. v. Felsenthall, 116 F. 961, 965 (6th Cir.1902)). The rationale underlying the minority view is that the trustee had an opportunity to benefit from the continued p......
-
American A. & B. Coal Corp. v. Leonardo Arrivabene, SA
...claim for priority may be allowed, so long as some benefit is conferred upon the estate. The Sixth Circuit so held in Dayton Hydraulic Co. v. Felsenthall, 1902, 116 F. 961. There the bankrupt had leased certain industrial real estate to prevent his competitors from making use of it, but had......