Guaranty Trust Co. v. Williamsport Wire Rope Co., 11502.

• Decision Date: 16 May 1955
• Docket Number: No. 11502.,11502.
• Citation: 222 F.2d 416
• Parties: GUARANTY TRUST COMPANY OF NEW YORK, Complainant, v. WILLIAMSPORT WIRE ROPE COMPANY, Defendant. Carl C. GEHRON et al., Petitioners, George R. Shepherd et al., Intervening Petitioners, v. BETHLEHEM STEEL COMPANY, Respondent, Raymond D. Coble, d/b/a Interstate Finance & Mortgage Company, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

222 F.2d 416 (1955)

GUARANTY TRUST COMPANY OF NEW YORK, Complainant, v. WILLIAMSPORT WIRE ROPE COMPANY, Defendant.

Carl C. GEHRON et al., Petitioners, George R. Shepherd et al., Intervening Petitioners, v. BETHLEHEM STEEL COMPANY, Respondent, Raymond D. Coble, d/b/a Interstate Finance & Mortgage Company, Appellant.

No. 11502.

United States Court of Appeals Third Circuit.

Argued March 24, 1955.

Decided May 16, 1955.

Rehearing Denied June 9, 1955.

William J. Oliver, Scranton, Pa., for appellant.

John Barbe Cupp, Williamsport, Pa. (Williamson & Cupp, Williamsport, Pa., on the brief), for appellees.

Before GOODRICH, and McLAUGHLIN, Circuit Judges, and LORD, District Judge.

McLAUGHLIN, Circuit Judge.

The central issue on this appeal is whether a certain purported assignment of all the remaining claims of a corporation in receivership operated to transfer title to a subsequently adjudicated right to participate in damages for the redress of a fraud practiced upon the assignor many years earlier when it was the owner of particular stock certificates.

The corporation in receivership is the Lycoming Trust Company of Williamsport, Pennsylvania. The right to participate in damages is based upon that company's ownership in July, 1936 of 175 shares of the preferred and 549 shares of the common stock of Williamsport Wire Rope Company. All of these shares were sold by the liquidating trustees of the Lycoming Trust Company to Bethlehem Steel Company in December, 1936.

In 1937 all of the assets of Williamsport Wire Rope Company were sold to Bethlehem Steel Company. Nine years later, in 1946, some stockholders, former stockholders, and former bondholders of Williamsport Wire Rope Company began the within-named class suit to set aside the 1937 sale of Williamsport's assets to Bethlehem on the ground that such sale had been tainted with fraud. The trustees of the Lycoming Trust Company did not join in this action either as petitioners or as interveners, and so far as the record shows took no interest in the proceedings until after the adjudication.

The Lycoming trustees proceeded with the liquidation of that company. By August 9, 1952 they believed they had liquidated all of the assets transferred to them with the exception of a few notes, judgments and other claims which they considered to be of little or no value. They accordingly mailed to each of the Trust Company depositors a check described as "the 18th and final dividend of 4% which the holders of participation certificate `A' will receive", and in the covering letter, they wrote:

"The Trustees have in their possession a very few notes and judgments remaining unpaid, and which, in their opinion, are of questionable value. These few remaining assets will be sold at public sale to the highest bidder, at 2:30 P.M., on the 17th day of September 1952, in the corridor of the Court House at Williamsport, Pennsylvania. The list of the assets to be sold will be available for examination at the office of the Sheriff of Lycoming County in the Court House, Williamsport, Pennsylvania."

They then inserted the following advertisement in the Williamsport Sun once a week for three consecutive weeks, commencing August 29, 1952:

"Notice is hereby given that there will be exposed at public sale on the seventeenth day of September, 1952, at 2:30 P.M., in the corridor of the Court House at Williamsport, Pennsylvania, certain assets now owned and held by Herbert M. Carson, Ira M. Witt and Peter G. Cameron, Liquidating Trustees of the Non-Liquid and Depreciated Assets of Lycoming Trust Company, and consisting of promissory notes secured by judgments entered in the Court of Common Pleas of Lycoming County and promissory notes not secured by judgments, certain shares of corporate stock, one piece of real estate and whatever other items appear on the list hereinafter mentioned, all of which are more specifically and particularly shown on a certain list of assets, which list is presently lodged in the office of the Sheriff of Lycoming County at the Court House, in Williamsport, Pennsylvania, and may be examined by any prospective bidder on any day except Saturday, between 9:00 A.M. and 5:00 P.M.

"The aforesaid assets will be sold to the highest bidder either in bulk or separately, or partly in bulk and partly separately, at the decision of the sellers. The right is reserved to withdraw from the sale any part or all of the items hereinabove referred to and as shown on the aforementioned list at any time up to the date and hour of said sale. The right, however, is reserved to reject any and all bids.

"Williamson & Cupp Solicitors of the Liquidating Trustees of Lycoming Trust Company"

The list at the sheriff's office referred to in both the letter and the advertisement contained no reference whatsoever to the Williamsport stock certificates, to any claim which the trustees might have against Bethlehem Steel Company in connection with the sale of Williamsport's assets, nor to the proceeding which had been instituted in part by other former stockholders of Williamsport Wire Rope Company against Bethlehem.

At the public auction, held as scheduled on September 17, 1952, only two bids were made: one for $25 by Mr. Cupp, the attorney for the liquidating trustees; the other for $30 by Mr. Coble on behalf of Interstate Finance and Mortgage Company, the appellant herein. The $30 bid was accepted.

Immediately after the sale the parties made arrangements for the formal transfer of the assets sold to Interstate Finance and Mortgage Company. It was agreed that Mr. Coble should return to Williamsport in a week or ten days and at that time the Lycoming trustees would have a rubber stamp ready with which they could formally endorse the notes and other evidences of indebtedness. There was no conversation at this time regarding any general assignment.

On his return to Williamsport Mr. Coble brought with him a general assignment which he asked the liquidating trustees to sign in addition to executing a specific assignment of each note and other evidence of indebtedness. The general assignment, which the trustees thereupon signed, read:

"Know All Men By These Presents

"That we, Herbert M. Carson, Ira M. Witt, and Peter G. Cameron, Liquidating Trustees of Lycoming Trust Company of Williamsport, Pennsylvania, for a valuable consideration, to us in hand paid by Interstate Finance & Mortgage Company, of Harrisburg, Pennsylvania, before the ensealing and delivery of these presents, the receipt whereof we do hereby acknowledge, have granted, bargained, sold, released and delivered, and by these presents do grant, bargain, sell, release and deliver unto the said Interstate Finance & Mortgage Company, all the right, title and interest of the said Liquidating Trustees in and to all of the remaining unpaid notes, judgments and/or other claims receivable owing to the aforesaid Lycoming Trust Company, as more particularly described, without prejudice to the ownership of the said Interstate Finance & Mortgage Company because of any omissions, in schedule hereto attached and made a part hereof;

"To Have and To Hold the said receivables, all and singular, for the use, ownership and behoof of the said Interstate Finance & Mortgage Company, and its assigns, absolutely.

"In Witness Whereof, we have hereunto set our hands and seals this 17th day of September, A.D. 1952, at Williamsport, Pa.

"(s) Herbert M. Carson (Seal) (s) Ira M. Witt (Seal) (s) Peter G. Cameron (Seal) Liquidating Trustees of Lycoming Trust Company"

While the above assignment purports to incorporate a "schedule hereto attached" no schedule was ever attached or prepared.

At the time the general assignment was executed, neither the liquidating trustees, their manager nor their counsel, so far as the evidence shows, gave any consideration to the possibility of recovering anything by virtue of their having been a stockholder in 1936 of Williamsport Wire Rope Company. The notes for which this stock had been held as collateral had all been settled or written off. And while a special master's report had been filed with the district court recommending that the sale of Williamsport's assets be set aside, the manager for the trustees testified that he was completely unaware of this report at the time of the assignment.

On October 14, 1952, the district court adopted the report of the special master. 107 F.Supp. 759. That report found that the sale of Williamsport's assets had been accomplished through fraud and that such fraud had had its inception in July, 1936. It recommended not only that the 1937 sale of assets be set aside and that Bethlehem account for the assets and the profits made on the operation of Williamsport since the sale but also that Bethehem restore to the former stockholders of Williamsport whatever stock had been sold by them to Bethlehem after July, 1936. In final settlement Bethlehem Steel Company paid into the district court the sum of $6,000,000 for distribution to the former stockholders of Williamsport Wire Rope Company. By order of December 29, 1952 the matter was referred again to the special master to receive and report on the claims of all persons asserting any interest in the $6,000,000. 107 F.Supp. 762.

The Lycoming liquidating trustees and the Interstate Finance and Mortgage Company asserted conflicting claims for approximately $300,000 of the amount deposited. Both the special master and the district court recommended and ruled in favor of the trustees. Interstate appeals from the district court's order.

The special master admitted over objection parol evidence to explain the terms of the general assignment. The matters allowed included proof of all the facts referred to above plus testimony from both sides as to the reasons for the general assignment and what the parties intended by it. Interstate assigns this as error. We think such evidence was admissible for a number of reasons.

The writing in question is...