Hanna v. Brictson Mfg. Co.

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Citation: 62 F.2d 139
• Docket Number: No. 9478.,9478.
• Parties: HANNA et al. v. BRICTSON MFG. CO. et al.
• Decision Date: 13 January 1933

62 F.2d 139 (1932)

HANNA et al.
v.
BRICTSON MFG. CO. et al.

No. 9478.

Circuit Court of Appeals, Eighth Circuit.

November 30, 1932.

Rehearing Denied January 13, 1933.

62 F.2d 140

William Ritchie, Jr., of Omaha, Neb. (David A. Fitch, of Omaha, Neb., Holton Davenport and G. B. Braithwaite, both of Sioux Falls, S. D., A. C. R. Swenson and Robert J. Webb, both of Omaha, Neb., and Clarence E. Talbott, of Winner, S. D., on the brief), for appellants.

M. E. Culhane, of Minneapolis, Minn., for appellees R. A. Bielski and others.

R. A. Bielski and D. S. Elliott, both of Sioux Falls, S. D., and Frank L. Weaver, and William M. Giller, both of Omaha, Neb., for appellees Martin Engebretson and R. A. Bielski.

Frank L. Weaver and William M. Giller, both of Omaha, Neb., for appellees Culhane, Weaver, and Giller.

H. V. Mercer, of Minneapolis, Minn., for appellees Ole A. and Helen S. Brictson and Brictson Mfg. Co.

Before KENYON, GARDNER, and SANBORN, Circuit Judges.

SANBORN, Circuit Judge.

The appellants were plaintiffs in the court below and the appellees defendants, and they will be so referred to in this opinion.

The plaintiff Doherty is the receiver of the Brictson Manufacturing Company, appointed by the circuit court of Tripp county, S. D., in quo warranto proceedings in which the charter of that company was canceled. The other plaintiffs are stockholders.

The defendants are: The Brictson Manufacturing Company, Ole A. Brictson, majority stockholder, his wife, Helen, and Michael E. Culhane, Frank L. Weaver, and William M. Giller, attorneys (plaintiffs in equity case No. 312, S. D.) who have appeared ostensibly on behalf of the company in various actions; Olaf Eidem, an attorney and supposed creditor who filed an involuntary petition in bankruptcy in the United States District Court for the District of South Dakota against the company; R. A. Bielski, who was appointed receiver by that court in equity case No. 312, S. D., wherein a decree pro confesso establishing a lien against the company in favor of Culhane, Weaver, and Giller was entered; and Martin Engebretson, who was appointed trustee in the bankruptcy proceeding initiated by Eidem, bankruptcy case No. 3228, S. D.

The complaint sets up two causes of action.

The allegations of the first are as follows: Ole A. Brictson, since the organization of the defendant company, has held the majority of the voting stock. For several years prior to the dissolution of the company, he and his wife Helen were the only persons actually acting as directors or officers of the company. They have not operated the business since September, 1921. Brictson has claimed the right to collect $10,000 a year from the assets of the company since September, 1921, and his wife, during the same period, has claimed large sums from the company for salary and rents. They have been attempting to secure personal possession and control of the assets and funds of the company in order to appropriate the funds to themselves in satisfaction of their fictitious claims. Since September, 1921, the defendants Culhane, Weaver, Giller, and Eidem have appeared in various legal proceedings, ostensibly on behalf of the company, but in fact on behalf of the defendants Brictson, in efforts to secure funds and property of the company, so that they might apply them to the payment of the pretended claims of the Brictsons. To prevent such misapplication of funds, the state of Nebraska has successfully prosecuted quo warranto proceedings against the company, and on February 16, 1924, the district court of Douglas county, Neb., entered a decree of ouster and appointed three trustees to administer the estate of the company in Nebraska, which they are now doing. On May 10, 1928, similar proceedings were instituted by the state of South Dakota in the circuit court of Tripp county, S. D. The plaintiff Doherty was first named temporary receiver by that court. On October 5, 1929, that court entered a decree forfeiting the charter of the company and appointing Doherty permanent receiver of the company for the purpose of winding up its affairs. Before the assets of the company were turned over to the trustees in Nebraska, the defendants Weaver, Giller, and Culhane had claimed fees of $30,000 due them from the company, and had asserted that they had a lien upon the assets of the company for such fees. As a result of litigation in the United States District Court for the District of Nebraska, they were denied a

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lien, and the decree of that court was affirmed here in Culhane v. Anderson, 17 F.(2d) 559. Subsequently Culhane, Weaver, and Giller filed suit against the company in the United States District Court for the District of Nebraska, asking for $51,000 in fees. That claim was disallowed. In spite of these judgments and decrees, the defendants Weaver, Giller, and Culhane filed equity suit No. 312, S. D., in the United States District Court of South Dakota, asking for a decree that they were entitled to $51,000 for fees against the company, that that sum be declared a lien on the company's assets, and that a receiver be appointed to enforce the lien. Equity suit No. 312, S. D., was commenced after a conference with the defendant Olaf Eidem, and was pressed to judgment with the acquiescence of Ole A. Brictson as a part of a scheme of the Brictsons, Culhane, Weaver, Giller, and Eidem to create a fictitious act of bankruptcy, and thus to defeat the effect of the quo warranto decrees in Nebraska and South Dakota and the orders of the United States District Court of Nebraska with respect to said fees and liens. Subpœna in equity suit No. 312, S. D., was served on George N. Breed, a supposed director of the company, a 72 year old man living on a farm, who was not at the time a director or officer, and who had been so ill for ten months prior to service of subpœna that it had been impossible for him to move from one place to another without assistance, and who was so little interested in the matter that he did not advise any officers of the Brictson Company of the service of notice. He had been a director, having been given one share of stock by Brictson in 1923. He had attended one meeting of the board of directors in 1923, but since that time had received no notice of any directors' meeting, and had attended none prior to September 2, 1929. In default of an answer by the company, Weaver, Giller, and Culhane obtained a decree pro confesso for $51,000, a lien upon the assets of the company, and the appointment of the defendant R. A. Bielski as receiver of the company for the purpose of enforcing this lien

The second cause of action includes the pertinent allegations of the first cause, and recites that: In furtherance of the scheme to procure the assets of the company for themselves, the defendants Brictson executed a pretended assignment in the name of the company to themselves of certain assets of the company, and subsequently in the United States District Court for the District of Nebraska sought to enforce said assignment. The assignment, however, was held invalid by that court. The defendant Olaf Eidem filed a petition in involuntary bankruptcy against the company (bankruptcy case No. 3228, S. D.), alleging two acts of bankruptcy: (1) The pretended assignment to Helen S. and Ole A. Brictson, and (2) the appointment of the receiver in equity case No. 312, S. D. Service in the bankruptcy matter was also had on Breed, under like circumstances and with like results as in equity case No. 312, S. D. An adjudication in bankruptcy was thereby obtained on default. In furtherance of the purpose to divert the assets of the company to the Brictsons, the Brictsons, Weaver, Giller, Culhane, and Eidem have filed numerous and fictitious claims in the bankruptcy proceedings, have secured the appointment of the defendant Martin Engebretson as trustee in bankruptcy, and controlled his actions. The plaintiffs believe that said Engebretson is a relative of Brictson. Engebretson is friendly to the other defendants, and as trustee in bankruptcy has employed Weaver, Giller, and Culhane to represent him as attorneys. None of the filed claims of the defendants are valid. Unless the proceedings in bankruptcy case No. 3228, S. D., are set aside and further proceedings restrained, the defendants will appropriate for themselves all the assets of the Brictson Manufacturing Company.

The plaintiffs ask for a decree vacating the decree in equity suit No. 312, S. D., vacating the adjudication in bankruptcy in bankruptcy case No. 3228, S. D., restraining the defendants from enforcing the adjudication, requiring the trustee in bankruptcy to account to the plaintiff Doherty for all funds belonging to the company in the possession of the trustee, and for such other relief as they may be entitled to.

The court entered an order providing for the service of subpœnas upon the nonresident defendants, wherever they might be found. Service was had upon the defendants Brictson, the company, and Culhane, in Minnesota; upon Weaver and Giller in Nebraska; and upon the other defendants in South Dakota.

None of the defendants put in an answer. Engebretson, Bielski, and Eidem moved to dismiss the bill on the following grounds: That there was want of equity; that the court had no jurisdiction to hear the suit; that there was a misjoinder of causes of action, a defect of parties plaintiff, and a defect of parties defendant. Culhane, Weaver, and Giller appeared specially and moved to quash the service of subpœnas on the ground

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that the court had acquired no jurisdiction of them. The company moved to dismiss the bill on the following grounds: That the first cause of action was invalid for want of equity; that it was not joint as to the plaintiff stockholders and the plaintiff Doherty, within equity rule 26, or at all; that the plaintiffs did not have an interest entitling them to the relief prayed for; that the liability alleged could not be...