Harris-Woodbury Lumber Co. v. Coffin

• Decision Date: 28 April 1910
• Citation: 179 F. 257
• Parties: HARRIS-WOODBURY LUMBER CO. v. COFFIN et al.
• Court: U.S. Court of Appeals — Fourth Circuit

179 F. 257

HARRIS-WOODBURY LUMBER CO. v. COFFIN et al.

United States Circuit Court, W.D. North Carolina.

April 28, 1910

Merrimon & Merrimon and C. C. Cowan, for complainant.

R. C Strudwick, Norwood & Norwood, Wm. P. Bynum, Jr., and Justice & Broadhurst, for defendants.

PRITCHARD Circuit Judge.

This is a bill in equity filed by the complainant for the purpose of removing a cloud upon its title. The complainant alleges that it is the owner in fee and in actual possession of a tract of mountain land containing 78,000 acres, and deraigns its title, showing grant from the state and various mesne conveyances down to a deed to the Foreign Hardwood Log Company in 1894, and then deed from the said company to the Tuckaseigee Timber Company in 1895, and deed from the Tuckaseigee Timber Company to the Whittier Lumber Company, a New Jersey corporation, in 1896, and deed to complainant in 1906 by a commissioner appointed by this court to sell said land pursuant to a decree rendered in a proceeding instituted in this court in 1906 to foreclose a mortgage executed by the Whittier Lumber Company. The complainant further alleges that in 1904 E. G. Coffin and F. M. McDonald, trading under the firm name of Coffin & McDonald, instituted a suit in the superior court of Swain county, N.C., against one Charles R Flint, and caused an attachment to issue in their favor from said court against said Flint, and to be levied against said lands, pretending that he was the owner thereof, or had an interest therein, which suit was removed to this court, and in 1907 a judgment was rendered therein for $85,000 in favor of Coffin & McDonald, and that Coffin & McDonald, claiming that said judgment was a lien upon said lands because of said attachment, procured a writ of execution to issue from this court, and by virtue thereof the marshal sold at public auction on May 4, 1908, all the right, title, and interest of said Charles R. Flint in and to said lands to said E. G Coffin, the last and highest bidder, for $100, and that said Coffin assigned his bid to the defendant D. Samuel White, to whom the marshal made a deed, which was filed and recorded in Swain county, N.C., where the land is situated. The complainant further alleges that the defendants, E. G. Coffin and D. Samuel White, claimed to be the owners of said lands or to have an interest therein, because of said deed, and had repeatedly threatened to enter upon said lands under their purported claim and remove the timber therefrom, and to otherwise injure and molest complainant, and the complainant prays for a decree quieting its title, canceling said deed to the defendant D. Samuel White, and perpetually enjoining the defendants from asserting or claiming any interest or estate in said lands by reason thereof.

The defendants in their answer admitted that the title had been properly deraigned by the complainant down to the deed to the Foreign Hardwood Log Company, but denied that the complainant was the owner of said lands, or had any right to the possession thereof. They allege: That Charles R. Flint furnished the money for the purchase of said lands, and had the title made to the Foreign Hardwood Log Company, a 'dummy' corporation under his control, and that said corporation held the title in trust for Charles R. Flint, as resultant beneficiary and owner of the equitable estate therein, and that afterward, for the purpose of cheating and defrauding said E. G. Coffin and F. M. McDonald, Charles R. Flint caused the Foreign Hardwood Log Company to make a deed for said lands to the Tuckaseigee Timber Company, another 'dummy' corporation controlled by him; but the defendants denied that any title passed by such deed, both because of its fraudulent purpose and because the Tuckaseigee Timber Company was never lawfully organized and was never capable of owning real estate or holding title thereto. That subsequently said Flint, still designing to cheat and defraud said Coffin and McDonald and his other creditors, caused the Tuckaseigee Timber Company to make a deed for said lands to another 'dummy' corporation, the Whittier Lumber Company, formed by employes under his control, but that no title passed, because the Tuckaseigee Timber Company had no power to receive or convey the title, and because the Whittier Lumber Company was never properly organized, and never became a legal entity capable of holding title to real estate; but, if the Whittier Lumber Company did acquire any title by said conveyances, it held the same for the benefit of Coffin and McDonald and other creditors of Flint, because said conveyances were made for the purpose of cheating and defrauding said creditors. That the Whittier Lumber Company, or those who controlled it, for Flint, fraudulently pretended to execute a mortgage of said lands as security for an alleged issue of bonds, but that said bond issue was fraudulent, without consideration, and done to enable Flint to further incumber the title for the purpose of cheating his creditors, and said lands never passed into the hands of bona fide purchasers. That the complainant, with full knowledge of all these things, acquired possession of said lands, and fraudulently procured the institution of the suit to foreclose the mortgage executed by the Whittier Lumber Company, and misled the court by collusion with the Whittier Lumber Company, and procured a decree ordering sale of the lands, and at such sale pretended to become the purchaser of said lands, using said bonds in making payment. That there was an understanding with complainant and Flint whereby the actual payment for said lands depended upon the complainant's establishing title thereto by the conveyances set out in the complaint, and that this proceeding by the complainant is in furtherance of said nefarious scheme, and that complainant is not entitled to the aid of a court of equity in carrying it out. That the defendants were the real owners of said lands, having acquired the title by the sale under the judgment against Charles R. Flint, who was the real owner; the title having been acquired and held in trust for him.

The matter was referred by consent to a special master, to hear and take the evidence and state his findings of fact and conclusions of law. After taking the testimony and hearing arguments thereon by counsel for the parties, the master filed his report on September 7, 1909, in which he found as facts, among other things: That the purchase money for the land when it was conveyed to the Foreign Hardwood Log Company was not furnished by Charles R. Flint, and that the title to the said lands was duly conveyed by the Hardwood Log Company to the Tuckaseigee Timber Company, and by the latter company to the Whittier Lumber Company, and that the Whittier Lumber Company duly issued its bonds and duly executed the mortgage on said lands as security therefor, and that all these things were done regularly and without fraudulent intent on the part of Charles R. Flint to hinder and delay or cheat and defraud E. G. Coffin and F. M. McDonald, or any other creditors. That the bonds by the Whittier Lumber Company, after having become widely scattered in the regular course of business, were assembled for and bought by Charles J. Harris, one of the incorporators of the complainant, the Harris-Woodbury Lumber Company, and that said Harris became the bona fide purchaser of said bonds for a valuable consideration, without collusion, conspiracy, or fraud on his part with Charles R. Flint or any other person, and without any knowledge or notice of any of the things done by the corporations which held the title to said lands, or by those interested in said corporations, except such as was given by the public records, and that there was not sufficient evidence in any of such records which had been introduced to put Charles J. Harris or any prudent man on notice of any fraud which may have been attempted or perpetrated by Charles R. Flint, or by said corporations which held the title to said lands, or by any of those interested in said corporations. That the suit to foreclose the mortgage executed by the Whittier Lumber Company was duly instituted in this court about April 16, 1906, and that after the bill was filed the Whittier Lumber Company, the defendant in that suit, in due time filed its duly verified answer, in its corporate name and under its corporate

seal, by its president, confessing the allegations of said bill,

and also appeared by attorney, and that a regular decree of foreclosure of said mortgage was made by this court on March 26, 1906, directing that the lands described in said mortgage, and which are the lands described in the bill of complaint filed in this suit, be sold at public auction, after due advertisement, and appointing a commissioner to conduct such sale. That the commissioner did sell said lands in pursuance to said decree and as therein directed, and that Charles J. Harris became the last and highest bidder therefor at the price of $449,024.05, and duly assigned his bid to the complainant herein, the Harris-Woodbury Lumber Company. That said sale was duly reported to and confirmed by this court, and the commissioner was ordered to make deed conveying the title in fee for said lands to the Harris-Woodbury Lumber Company, which was done, and that there was no collusion or fraud in any of these proceedings.

The special master also found as a fact that on May 2, 1900, the Governor of the state of New Jersey, in which state the Whittier Lumber Company had been incorporated, duly issued his proclamation declaring inoperative and void all corporate powers conferred by law upon the Whittier Lumber Company because of its failure to make the required reports and to pay the taxes assessed against it by said state...