Esarey v. Pierson

• Decision Date: 11 October 1923
• Docket Number: No. 11374.,11374.
• Citation: 84 Ind.App. 109,141 N.E. 87
• Parties: ESAREY v. PIERSON.
• Court: Indiana Appellate Court

84 Ind.App. 109

141 N.E. 87

ESAREY

v.PIERSON.

No. 11374.^*

Appellate Court of Indiana, Division No. 2.

Oct. 11, 1923.

Appeal from Superior Court, Marion County; Solon J. Carter, Judge.

Proceedings for allowance of claim of Solomon H. Esarey against Edward W. Pierson, receiver of the Standard Electric Manufacturing Company. From judgment disallowing claim, the claimant appeals. Affirmed.

Ward H. Watson, of Indianapolis, for appellant.

Joseph Collier, of Indianapolis, for appellee.

McMAHAN, C. J.

On January 25, 1918, on complaint of a stockholder and without notice a receiver was appointed for the Standard Electric Manufacturing Company. A few days later the defendant appeared and filed answer. The court after a hearing refused to set aside the appointment. After the expiration of the 10 days allowed for appealing, a number of stockholders and the directors of the company held a meeting and employed counsel and authorized them to take such steps as were deemed necessary to have the receiver discharged. February 23, a motion for a new trial was filed and thereafter overruled. Conferences were then held with the court with the idea of raising sufficient money to pay the debts of the company and reorganizing the board of directors, so as to eliminate from its management and control the then president and manager who was also a director and who held about three-fourths of the outstanding capital stock.

Through the efforts of the counsel so employed, parties were found who were willing to advance the necessary money to pay the debts. The then president resigned as president and director and one of the lawyers so employed by the company was elected director and president. The court again refused to discharge the receiver, after which counsel who had been elected president resigned, and the former president was again elected as a director and president, and on July 13, 1918, the board of directors authorized an appeal from the order appointing the receiver, and in order to raise the money for that purpose executed the company's note to appellant, and he advanced them thereon $2,160.43, which was used to pay the attorneys for their services and the expenses of the appeal. When the money was so advanced by appellant, and when all the property of the company was in the hands of the receiver, the company executed a chattel mortgage to appellant to secure the payment of the money so advanced, and which was advanced by appellant in good faith and under the belief that he was secure. When the receiver was appointed, the debts of the company were about $10,000, and the property which it owned at that time was worth $40,000. In June, 1918, the receiver procured an order authorizing him to sell such property and after advertising it for sale had an offer of $40,000 for it. The attorneys perfecting and prosecuting the appeal were the same attorneys who acted for the company in attempting to perfect the reorganization of the company. For their entire services they were paid $1,500, that being the reasonable value of such services. Pending the appeal the sale of the property on the application of the company was stayed.

When the appeal was disposed of in 1921, the property had depreciated in value and was sold by the receiver for $16,000. After the sale of the property, the receiver filed a report and set out a schedule of the creditors and the priority in which he recommended they be paid. He reported certain claims filed with him which he had disallowed, appellant's being one that he reported should not be allowed. Of the claims which the receiverreported as preferred were two for machinery purchased on conditional sale contracts aggregating $8,664.75. Then came court costs, receiver's expenses, and claims which we infer are for debts contracted by the receiver aggregating more than $7,000. Next in priority were claims aggregating $2,967.07 contracted prior to the receivership. The total amount of claims reported as allowed and entitled to payment was $17,725.50. Claims disallowed, including appellant's, totaled $7,416.40. The court approved the report, and after making an allowance to the receiver and his attorneys directed that a dividend of 25 per cent. be paid on the general debt contracted before receivership and disallowed appellant's claim.

Appellant contends that the decision of the court disallowing his claim is not sustained by sufficient evidence and is contrary to law. In support of this contention appellant says it is not only the duty of a corporation, in good faith, to resist the appointment of a receiver, but that, after a receiver has been appointed, it has the right and power to charge the corporation's assets with the reasonable expenses of necessary litigation to reclaim its...