In re Erie Lumber Co.

• Decision Date: 26 September 1906
• Citation: 150 F. 817
• Parties: In re ERIE LUMBER CO.
• Court: U.S. District Court — Southern District of Georgia

150 F. 817

In re ERIE LUMBER CO.

United States District Court, S.D. Georgia, Western Division.

September 26, 1906

Walter A. Harris, for Charles Schimmelfing, mortgagee.

John P Ross, for Citizens' Bank of McRae, mortgagee.

Lane &amp Park, for American National Bank, holder of receiver's certificates.

George S. Jones and William E. Martin, Jr., for creditors furnishing supplies to receivers.

Merrill P. Callaway, for bankrupt.

SPEER District Judge.

The Erie Lumber Company had its manufacturing plant near Lumber City, in this district. It was a venture of an important character in the manufacture of lumber. In addition to the sawmill, there was extensive machinery for the manufacture of veneering, which is largely used in furniture and cabinet work. The plant was under the control of one Alfred Short who represented certain interests, and Sylvester J. Tinthoff who represented others. There was an utter disagreement between these men, and finally Tinthoff, who represented the creditors, filed a proceeding praying that the Erie Lumber Company be adjudged an involuntary bankrupt. This petition was filed on November 8, 1904. Shortly thereafter the creditors filed an ancillary petition for the appointment of a receiver. It alleged, among other facts, that the property of the company consisted principally of steam sawmills, planing mill, veneering mill, kilns, lumber, logs, and timber; that a great deal of timber had been felled and was lying in the woods unprotected; that this was subject to be carried off and appropriated; and that there were other properties consisting of mules and live stock used in connection with the mills which were not receiving proper care. The representations of the petition were of that urgent character which induced the action authorized by the bankruptcy law, and the court appointed the marshal to take charge of the property and assets and preserve them. Thereafter Alfred Short, secretary and treasurer of the company, filed an answer in its behalf. This answer, however, was subsequently withdrawn. It denied the bankruptcy, and charged that the original petition had been collusively brought. There had been, as stated, great friction between the Short and Tinthoff interests. It seemed now that this would be removed. An agreement was drawn, signed by counsel representing Short, party of the one part, and the petitioning creditors, of the other part. The agreement provided that the parties should jointly apply to the court for an order providing for the operation of the business by joint receivers, according to the stipulations outlined in the agreement. A pertinent clause is the following:

'Alfred Short and Sylvester J. Tinthoff, by leave of the court, are to be appointed joint receivers of the Erie Lumber Company, and shall be by the court authorized to carry on the business of the said Erie Lumber Company as a going concern under the provisions of the acts of Congress relating to bankruptcy. In the apportionment of the duties between the said receivers, the said Sylvester J. Tinthoff shall keep and have charge of the books and correspondence of the said receivers operating said company, and shall be responsible for the correct keeping of said books. The said Alfred Short shall give his entire time to the business of operating the saw-mill and plant, and both receivers shall be consulted and shall act jointly in the operation of the business; and that no money obligations shall be incurred except by the joint act of both receivers, and no money shall be paid out except upon check signed by both receivers.'

The recital of the agreement was that it was 'advantageous to the said Erie Lumber Company and its creditors that said business be conducted by receivers of the court of bankruptcy. ' All parties at interest represented to the court that it was highly advantageous, both to the bankrupt and to the creditors, to keep the estate as a going business, and, having been convinced that this was true, on December 21, 1904, by a decree of that date, the agreement was approved and made effective. The order authorizing this policy was carefully considered and was drawn with great care. It attempted to guard the interests of all the creditors, and to provide for every reasonable contingency which could be anticipated. Substantially the full order is as follows:

'It appearing to the court, from the representations of parties at interest, and from the facts agreed upon by the petitioning creditors and the debtor in bankruptcy, the Erie Lumber Company, that it is necessary in the best interests of the estate of the said Erie Lumber Company and of all persons interested therein as creditors or stockholders that the business of the said Erie Lumber Company be conducted by receivers, and that it is absolutely necessary for the preservation of said estate that the property of the said Erie Lumber Company be taken charge of and held by receivers, with full power and authority to conduct and operate its business as a going concern, and that great loss will accrue if the mills and the business of said company should remain idle and shut down during the pendency of bankruptcy proceedings, it is thereupon ordered by the court, that, in lieu of the custodian heretofore appointed by the court to take charge of the property of the said Erie Lumber Company, Alfred Short and Sylvester J. Tinthoff be, and they are hereby, appointed joint receivers of the said Erie Lumber Company; and the said Alfred Short and Sylvester J. Tinthoff as receivers of this court are hereby authorized and directed to carry on the business of the said Erie Lumber Company as a going concern until the further order of the court. And it is ordered that said receivers shall, as early as practicable, put in operation the sawmill, the planing mill, and the veneer mill, and shall continue to operate said mill business, including the purchasing and stocking of said mills with logs, and they also have authority to conduct and carry on in connection with said mills a commissary in the usual way such commissaries are conducted, if they deem it expedient.

'It is ordered that, for the purpose of starting the operation of said mills and the defraying of necessary expenses until such time as moneys shall be coming in from the operation of the business sufficient to defray expenses of operation, and the said receivers shall have authority to borrow money and incur obligations to an amount, however, not to exceed, in the aggregate $3,000, and for the purpose of preventing unnecessary expense in the carrying on of said business, it is by the consent of both parties ordered that the said Sylvester J. Tinthoff, one of said receivers, shall keep and have charge of the books. * * * And the said Alfred Short shall give his entire time to the business of operating the mills and plant, but this order shall not be construed as in any way limiting the responsibility of both receivers for the proper carrying on of said business, and both receivers shall be consulted and shall act jointly in the operation of the business, and no money obligations shall be incurred except by the joint act of both receivers, and no money shall be paid out except upon check signed by both receivers, provided, however, that the receivers shall borrow no money except upon order of the court after presenting a petition, and making a showing of the necessity therefor. And, in order to the convenient carrying on of said business as a going concern, said receivers are authorized to make deposits and carry a bank account in such bank, located at McRae, Georgia, as they shall select, which bank shall enter into a bond in the sum of fifteen thousand dollars to insure its continued solvency and the safety of the funds intrusted to it; and said receivers shall have authority, upon their joint check, to pay out all necessary operating expenses, not to exceed $7,000 per month without special orders of the court, such operating expenses including pay rolls for labor, purchase of logs and the stock of said mills with logs, the cost of necessary supplies, costs of necessary repairs, purchase of goods for commissary, cost of books and necessary stationery, personal expenses of the receivers, and said receivers shall be entitled to draw monthly on account by way of salary $100.00 each per month during the operation of said mills and the carrying on of said business, until otherwise ordered by the court, which said salary allowance shall be on account against such compensation as may be ultimately fixed by the court for the services of such receivers.

'And, it appearing to the court that upon certain logs at the mills and upon the banks of the river and floating in the river, liens are held and claimed which it will be necessary to pay off and discharge in order that said logs may be used by the receivers without let or hindrance, and that thereby said Erie Lumber Company may save the amount of money already invested by it in said logs, and that, in order to obtain logs in future, it is necessary that the claims of the persons furnishing said logs shall be paid as a part of the operating expenses, it is ordered by the court that the said receivers are hereby given authority to pay to the persons furnishing said logs or holding liens or claims on logs furnished the amount of their respective claims, to the end that said mills may obtain logs without delay, let, or hindrance. And it is ordered by the court that said receivers shall make reports to the court at least once a month of all receipts and disbursements and as accurately as may be the profit or loss in the operation of said mills. And it is ordered further that if at any time it shall appear that said business is unprofitable and is being

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