Hubbard v. Mills

• Decision Date: 22 November 1886
• Parties: Hubbard and others v. Camperdown Mills and others.
• Court: South Carolina Supreme Court

1 S.E. 5

(25 S.C. 496)

Hubbard and others

v.Camperdown Mills and others.

Supreme Court of South Carolina.

November 22, 1886

1. Corporations— Insolvency — Receivers — Counsel Fees of Petitioning Stockholders.

A. claim for professional services, resting, as it does, upon contract, cannot be made a charge against persons other than the client, by the simple fact that the services have inured to their benefit; and the attorneys of a minority of the stockholders of an insolvent corporation, who have filed a bill for injunction, receiver, and sale, charging fraud and confederacy on the part of the defendants, are not entitled to have their fees allowed out of the proceeds of sale made by the receiver appointed under the bill, and the fact that the defendants consented to the receivership does not make the plaintiffs' attorney their counsel.

2. Same—Counsel Fees of Receiver.

In such a case, the corporation being a necessary party to the action, it had the right, through the receiver, to employ counsel, and the fees of attorneys so employed should be paid out of the fund.

S. Same—Reference to Tax Fees—Notice.

On a reference to ascertain the amount of such fees, the parties interested in the fund have a right to be heard, both by evidence and argument, and a notice of such a reference is necessary; overruling Nimmons v. Stewart, 13 S. C. 445, as to this point.

4. Appeal—What the Court will Consider—The "Case: "

The supreme court of South Carolina will not accept any fact, unless it appears in the "case, " as prepared for argument before it; and facts incorporated in the exceptions or in the argument, which do not appear in the case, " will be disregarded, unless admitted by the other side.

Appeal from common pleas, Greenville county.

Action by stockholders for injunction, receiver, and sale. Judgment for plaintiffs. Defendants appeal.

Perry, Perry & Heyward and Stokes & Irvine, for appellants, Camperdown Mills and others.

Wells & Orr and T. Q. & A. H. Donaldson, for respondents, Hubbard and others.

McIver, J. The Camperdown Mills, a corporation duly chartered under the laws of this state, was for several years successfully engaged in the manufacture of cotton goods, running two mills, in or near the city of Greenville, South Carolina, known as "Mill No. 1" and "Mill No. 2. " The company having contracted debts to a large amount which it was unable to provide for from the income, the stockholders, at a meeting held on the twenty-eighth of April, 1883, adopted a resolution authorizing the issue of coupon bonds to an amount not exceeding $75,000. The bonds were accordingly prepared, and made payable to the defendant Hamlin Beattie, or bearer, and were secured by a mortgage on all the property of the company, executed to said Beattie, as trustee, for that purpose. This scheme not proving effectual for the relief of the company, only a few of the bonds having been sold, and others pledged as collaterals, on the twenty-first of January, 1885, a majority of the stockholders adopted a resolution for the sale of all the machinery in Mill No. 1, and the same was advertised for sale on the eleventh of March, 1885. Thereupon this action was commenced, about the first of March, 1885, by the plaintiffs, who are holders of a minority of the stock of the company, two of them being also creditors of the said company.

The plaintiffs in their complaint, after stating the facts above mentioned, allege that the sale of the machinery out of one of the mills would be disastrous to the interests of the company; and charge that the holders of a majority of the stock have wrongfully and fraudulently confederated together to get possession and control of the entire property of the company, and buy it at a sacrifice, to the great prejudice of the other stockholders, as well as the creditors of the company. They therefore demand judgment that the sale of the machinery in Mill No. 1 may be enjoined; that the trustee, Hamlin Beattie, be enjoined from further negotiating any of the said coupon bonds; that the creditors be enjoined from enforcing their claims against the company, except under these proceedings, and that, for this purpose, they may be required to come in and establish their demands; that a receiver may be appointed, and that all the property of the company may be sold and applied to the debts of the company, and the remainder be distributed among the stockholders according to their respective rights.

On the fifth of March, 1885, a temporary restraining order, with an order to show cause why it should not be made perpetual, was granted. On the seventh of March, 1885, sundry creditors of the corporation, including the defendant Hamlin Beattie and the plaintiff William Wilkins, issued attachments against the company, aggregating a sum exceeding $37,000, and on the same day considerable of the property of the corporation was levied on under said attachments.

On or about the twenty-first of March, 1885, the defendant Hamlin Beattie, as president of the corporation, filed his answer, in which, among other things, he states that a large majority of the stock of the company is held by parties resident in the states of Massachusetts and Pennsylvania; that it has not been practicable, since the service of the summons and complaint in this case, to have a legal meeting of the stockholders, and that he is not advised as to the position which they desire the company to take; that while the statements in the complaint as to the condition of the company, and the official action of the stockholders, are substantially true, he has no knowledge or information sufficient to enable him to form a belief as to the truth of those allegations in which the majority of the stockholders are charged with improper motives and wrongful conduct, but he does know that the sale of the machinery in Mill No. 1 was indefinitely postponed by the officers of the company before the service of the summons and complaint herein, and that, so far as he is advised, there is no desire or intention on the part of said stockholders to sell said machinery separately; that he concurs in the opinion that the property can be sold to the best advantage by selling it as a whole, and submits the rights of the corporation to the judgment of the court.

The answers of the other defendants are not set out in the record, but it is simply stated that George F. Hall, as treasurer of the company, who seems to have been the chief manager of the affairs of the company, put in an answer, and that his answer, with that of the president, concurred in the prayer of the complaint.

On the sixth of April, 1885, an order was granted appointing Hamlin Beattie receiver, in which it was stated that all parties agreed that one should be appointed; enjoining the creditors from enforcing their claims otherwise than under this proceeding, and requiring them to come in by a given day, and establish their claims before the master; and enjoining Hamlin Beattie, as trustee, as well as the officers of the company, from negotiating or hypothecating any of the coupon bonds which had not then been sold or used as collaterals. On the eighth of April, 1885, the receiver was ordered to sell all the property of the company, and hold the proceeds of sale, after paying the costs and expenses thereof, subject to the further order of the court.

From the report of the master as to claims proved, and from the report of the receiver on sales, it appears that the debts of the company amount to something over $102,000, while the proceeds of sale are something over $86,000. It is apparent, therefore, that the creditors cannot be paid in full, and the stockholders will get nothing. It is stated in the "case" that, on the application for the appointment of a receiver, the plaintiffs contended for the appointment of H. P. Hammett and the appellants for the appointment of Hamlin Beattie. The funds in the hands of the receiver being ready for distribution, two orders were granted by Judge Wallace, referring it to the master to inquire and report what would be a suitable fee to bepaid to Messrs. Wells & Orr, attorneys for the plaintiffs, for their services in this action, and also what would be a suitable fee for Messrs. T. Q. & A. H. Donaldson, attorneys for the Camperdown Mills, and Hamlin Beattie, as receiver. Under each of these orders the master reported "that he had held a reference, and from the evidence adduced, and herewith filed, he finds" that $2,500 would be a reasonable and proper fee for Messrs. Wells & Orr, as attorneys for the plaintiffs, and that $2,000 would be a reasonable and proper fee for Messrs. T. Q. & A. H. Donaldson, as attorneys for the Camperdown Mills, and Hamlin Beattie, receiver. Upon hearing these reports, Judge Wallace, on the fourth of December, 1885, granted orders confirming said reports, and directing the receiver to pay these gentlemen the amounts...