In re EC Denton Stores Co., No. 3672.

• Court: United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
• Writing for the Court: Albert Spievack, of Cincinnati, Ohio, for certain New York creditors
• Citation: 5 F. Supp. 307
• Decision Date: 21 November 1933
• Docket Number: No. 3672.
• Parties: In re E. C. DENTON STORES CO.

5 F. Supp. 307

In re E. C. DENTON STORES CO.

No. 3672.

District Court, S. D. Ohio, W. D.

November 21, 1933.

5 F. Supp. 308

Peck, Shaffer & Williams, of Cincinnati, Ohio, for preferred stockholders.

Albert Spievack, of Cincinnati, Ohio, for certain New York creditors.

Estabrook, Finn & McKee, of Dayton, Ohio, and Froome Morris, of Cincinnati, Ohio, for bankrupts.

Joseph Lackner, of Cincinnati, Ohio, for Fifth-Third Union Trust Co. of Cincinnati, Ohio.

Joseph W. Henderson, of Philadelphia, Pa., for City National Bank of Philadelphia, Pa.

Pogue, Hoffheimer & Pogue, of Cincinnati, Ohio, and Martin & Corry, of Springfield, Ohio, for receiver.

Edward B. Levy, of New York City, and Kusworm & Shaman, of Dayton, Ohio, for three credit insurance companies and creditors' committee of New York.

HOUGH, District Judge.

Prior to the 6th day of January, 1933, the E. C. Denton Stores Company operated a chain of retail merchandise stores — three in the Southern district of Ohio, one in the Eastern district of Kentucky, and one in the Western district of North Carolina. The business was conducted from the company's principal office at Springfield, Ohio, and E. C. Denton was the president of the corporation and the managing head of the business, and L. P. Ballinger was one of the directors of the corporation.

The bank at Springfield, with which the company did its business, called the company's loan and appropriated its deposit account. Thereupon other bank creditors took like action, and the company found itself without working capital to conduct its business. The company, through Denton and Ballinger, then procured a nonresident merchandise creditor to file a bill in equity in the United States District Court at Dayton, Ohio, seeking the appointment of receivers for the business, and the usual injunctive and equitable relief. After that consent had been obtained, Denton and Ballinger withdrew from the company's funds the sum of about $7,000, and paid that amount to a bank creditor, of a bank in which Ballinger was indirectly interested. The answer of the company was then prepared and sworn to, in which the allegations of the bill in equity were admitted to be true, and consent given to the appointment of receivers. Denton and Ballinger then resigned as directors. They then withdrew $500 from the funds of the company for expense money, and the next day, to wit, January 6, 1933, filed the bill in equity, paid the cost deposit for the plaintiff creditor, filed the answer, and appeared before the federal court on application for the appointment of receivers. Upon that application the court appointed Denton and Ballinger coreceivers, and Martin & Corey, the company's counsel, as attorneys for the receivers. Later, three creditors in substantial amount, filed application, which resulted in January 23d in the appointment of James B. Malone as coreceiver with Denton and Ballinger, and Pogue, Hoffheimer & Pogue were at that time or later appointed as attorneys for the receiver. Later, irregularities in respect to the preferential payment to the creditor bank of the $7,000, and withdrawing of the $500 as expense money, were called to the attention of the court, and a hearing was had, which resulted on the 10th day of March, 1933, in Denton and Ballinger choosing to resign. The transcript of this hearing discloses that this alternative was adopted by Denton and Ballinger, rather than the alternative of discharge

5 F. Supp. 309

by the court, and the court accepted their resignation

At the hearing of March 10th, Denton was represented by Froome Morris, counsel, and the shareholders of the corporation were represented by Floyd Williams, of the firm of Peck, Shaffer & Williams. Morris also at a later date represented the corporation, as did also the firm of Estabrook, Finn & McKee.

On the 17th of April, 1933, pursuant to a notice, a shareholders' meeting was called and held at a hotel in Cincinnati. Morris called this meeting to order, and asked nominations for chairman of the meeting. Ballinger nominated Denton, and Denton was elected. Denton reported to the meeting that an audit had been made, and that the company's assets amounted to $1,194,279, with liabilities of $496,164, or a net value of assets over liabilities of $698,115. Morris, speaking before the meeting at the request of Denton, said, among other things, in respect to the hearing of March 10th, that, as the matter proceeded, the attitude of the court became quite hostile, and that, after the hearing, a consultation was held, where it was decided that "we had got into the wrong fight," and that we should resign, which was done, and accepted by the court. The meeting resulted in the appointment of a committee to prepare a plan. Denton appointed Williams as one member of a committee of three. Five directors were elected at this meeting, one of which was Denton. At an adjourned meeting, held on April 24th, Williams reported for the committee, and as a part of his report offered a resolution, which was passed, authorizing the board of directors to take action in lifting the existing receivership, and, if in their opinion the interests of the creditors and stockholders best can be preserved by a proceeding in bankruptcy and by working out a reorganization of such company by such means, they (the directors) were authorized to file a voluntary petition in bankruptcy.

On the 26th of April, 1933, the company...