In re Fixen & Co.

• Decision Date: 15 September 1899
• Docket Number: 1,282.
• Citation: 96 F. 748
• Court: U.S. District Court — Southern District of California
• Parties: In re FIXEN & CO.

96 F. 748

In re FIXEN & CO.

No. 1,282.

United States District Court, S.D. California.

September 15, 1899

E. T Dunning, for petitioning creditors.

John T Jones, for witness M. N. Sheldon.

R. H F. Variel, for Chapin-Tibbot Co.

WELLBORN District Judge.

The material facts are these:

A creditors' petition was filed against said bankrupt Fixen & Co., a corporation, August 14, 1899, and the order to show cause thereon was made returnable on the 21st day of the same month. On September 1, 1899, said corporation was duly adjudged a bankrupt, and a general reference of the cause was made. Prior to the adjudication, to wit, on August 19, 1899, on the application hereinafter mentioned, it was ordered by the court:

'That Edward W. Forgy be, and is hereby, appointed receiver herein, and that said receiver shall cause to be executed a bond in the sum of five thousand dollars, conditioned as required by law, for the faithful discharge of his duties as such receiver. And said receiver is hereby authorized to take charge of the property of said bankrupt, and to keep the same until the further order of this court. And it is further ordered that the said receiver is authorized to commence and prosecute all necessary actions for the recovery of the property belonging to said bankrupt.'

The application or petition for said order alleged, among other things: That said bankrupt for many years last past, and up to and just prior to June, 1899, had been the owner of a retail store, containing a large stock of merchandise, in Los Angeles, Cal., worth $60,000, substantially all the property of said corporation. That Elias C. Chapin and seven other persons, specifically named, conspired together to, and did, organize, under the laws of the territory of Arizona, a corporation known as the Chapin-Tibbot Commercial Company, with an authorized capital of $350,000, of 3,500 shares, of $100 each, of stock, nonassessable, and the stockholders not personally liable for corporate debts. That said stock was divided into common stock of $175,000 in amount, and the balance preferred stock (only common stock entitled to vote at stockholders' meetings), and that said parties subscribed for $226,700 out of a total subscription of $284,400, and that, of their subscription, $154,200 consisted of common or voting stock, out of a total of $160,000 of common or voting stock. That the officers and directors, who were Elias C. Chapin, president, John W. Tibbot, vice president, S. Goodenow, treasurer, W. M. Sheldon, secretary, J. M. Davies, J. B. Tibbot, M. N. Sheldon, and two others to petitioners unknown, also conspired, by false and fraudulent representations and fraudulent promises made to the said Fixen & Co., to procure, and did procure, from said Fixen & Co., in June, 1899, a transfer of said store and merchandise, without any adequate, sufficient, or legal consideration, and with intent on the part of the promoters, officers, and stockholders of the said Chapin-Tibbot Commercial Company to obtain said stock of merchandise, and appropriate the same and the proceeds thereof to the use of the said Chapin-Tibbot Commercial Company, without the payment of any adequate or proper consideration therefor, and to hinder, delay, and defraud the creditors of said Fixen & Co. of their just debts and obligations. That said Fixen & Co. were indebted to various creditors in the aggregate sum of about $55,000 at the time of said transfer, none of which debts were assumed by said Chapin-Tibbot Commercial Company, and by said transfer, and the want of any adequate consideration therefor, said Fixen & Co. were rendered irretrievably insolvent, and that of all the matters and things aforesaid said Chapin-Tibbot Commercial Company and the stockholders, directors, and officers thereof, then and there had notice. That said Chapin-Tibbot Commercial Company took immediate possession of said stock of merchandise and business, and from thence until the 22d day of July, 1899, sold and disposed of the same at reduced prices, and rapidly converted the same into money, for the purpose of raising funds to pay off the notes of said Chapin-Tibbot Commercial Company, amounting to $25,000, which had been given in part payment for said merchandise; only $5,000 having been paid in cash; the balance of the consideration for said transfer being worthless stock in said Chapin-Tibbot Commercial Company. That, on the day and year last aforesaid, said Chapin-Tibbot Commercial Company, being unable to meet said notes, and having no money or means of raising money upon its property with which to pay said notes, and being then and there insolvent, and to avoid attachments upon said property, illegally, and without any adequate, sufficient, or lawful consideration, transferred said stock of merchandise and business to said S. Goodenow, who took said transfer of said merchandise, then amounting to $40,000 in value, and agreed to pay and take up said notes of the said Chapin-Tibbot Commercial Company; and immediately thereafter said S. Goodenow caused to be organized a new corporation, by the name of the Goodenow-Sheldon-Fixen Company, and transferred to it the remaining portion of said stock of merchandise. That said corporation is organized under the laws of the state of California, with an authorized capital of $200,000, $75,000 of which is subscribed as follows: S. Goodenow, 350 shares, $35,000; Willard M. Sheldon, 120 shares, $12,000; A. H. Fixen, 100 shares, $10,000; Frank N. Gibbs, 80 shares, $8,000; Millard N. Sheldon, 100 shares, $10,000,-- and which said subscription embraces all the stock which has been subscribed or issued by said corporation. That said corporation has no paid-up capital, other than the stock of merchandise and good will so transferred to it as aforesaid, and that said A. H. Fixen and W. M. Sheldon are financially irresponsible. That said Goodenow-Sheldon-Fixen Company is rapidly selling and disposing of said merchandise at greatly reduced prices, and sacrificing the same. That a trustee in bankruptcy cannot, in all probability, in the ordinary course of procedure, be elected herein before some time in October, 1899, and in the meantime said stock of merchandise, or at least the substantial portion thereof, will, in all human probability, have been dissipated and disposed of, and nothing left for the creditors of said Fixen & Co., except actions for damages and stockholders' liabilities against the persons connected with said corporation, which would be inadequate remedies for the creditors of said bankrupt. That it is absolutely necessary for the preservation of said bankrupt estate to take charge of the property of said bankrupt, until the trustee has qualified, by the appointment of a receiver, with authority in him to begin and prosecute all necessary actions and proceedings to recover and preserve said estate. Said receiver duly qualified on the 19th day of August, 1899.

On August 26, 1899, the court ordered:

'That M. N. Sheldon, Elias C. Chapin, John W. Tibbot, S. Goodenow, Willard M. Sheldon, J. W. McCracken, and Frank N. Gibbs be and appear before William D. Stephens, referee in bankruptcy of this court, to whom this matter is hereby referred, to be examined before him, on the 26th day of August, 1899, at 2 p.m., at the office of said referee, rooms 5-7 of the Law Building, 125 Temple street, in the city of Los Angeles, California, concerning the acts, conduct, and property of said bankrupts, Fixen & Co.'

The petition for said order alleged, among other things:

'That the Chapin-Tibbot Commercial Company kept books of account showing in part, at least, its dealings and transactions with Fixen & Co., and which contain the only record of such transactions. That said receiver is investigating the facts relative to the transfer from said Chapin-Tibbot Commercial Company of the property of said bankrupt; and in such investigation, and to arrive at the facts thereof, it is essential to have access to, and an inspection of, the books and papers of said Chapin-Tibbot Commercial Company. That, after much difficulty and repeated demands, an inspection was twice obtained of the minute book of said Chapin-Tibbot Commercial Company, and the said minute book was materially altered, at the time of the last inspection thereof, from what it was at the first. That among the assets that have come into the hands and possession of said receiver is certain stock of the Chapin-Tibbot Commercial Company. That said receiver, as such, and as the owner and holder of stock in said Chapin-Tibbot Commercial Company, has repeatedly requested and demanded an inspection of the cash book of said Chapin-Tibbot Commercial Company, which is now in the custody, control, and possession of M. N. Sheldon, who is the secretary and a director of said Chapin-Tibbot Commercial Company, and is also the secretary and a director of the Goodenow-Sheldon-Fixen Company. That said receiver refers to the petition in bankruptcy herein, and to the petition for the appointment of a receiver herein, and to the other files, records, and papers in said matter, as a part hereof. That, unless an immediate and expeditious examination of said cash book and other books and papers of said Chapin-Tibbot Commercial Company can be obtained, great and irreparable injury will ensue to the trust of which your petitioner is receiver. That the statutes of California (Pen. Code, Sec. 565) provide, 'Every officer or agent of any corporation, having or keeping an office within this state, who has in his custody or control any book, paper, or document of such corporation, and who refuses to give to a stockholder or member of such corporation, lawfully demanding, during office hours, to inspect or take a copy of the same, or any part

...