In re Laird

• Decision Date: 04 June 1901
• Docket Number: 921.
• Citation: 109 F. 550
• Parties: In re LAIRD. In re COE et al.
• Court: U.S. Court of Appeals — Sixth Circuit

109 F. 550

In re LAIRD. In re COE et al.

No. 921.

United States Court of Appeals, Sixth Circuit.

June 4, 1901

This case raises the question as to whether certain labor claimants who filed claims asking for preference in payment out of the assets of the bankrupt in the hands of the trustee are entitled thereto. It is submitted upon an agreed statement of fact which is as follows:

'(1) On the 27th day of August, 1898, and for some time prior thereto, B. F. Powers, George E. Needham, Henry L. Coe, and E. C. Powers, as partners under the firm name and style of Coe-Powers & Co., were engaged in the manufacture of certain products of iron by the operation of a large iron mill at Findlay, Ohio.

'(2) On said 27th day of August, 1898, said B. F. Powers and George E. Needham filed their petition for receiver dissolution of partnership, and equitable relief in the court of common pleas of said county of Cuyahoga, naming H L. Coe and E. C. Powers defendants therein, and setting forth in their said petition the facts following, to wit: That said partnership had been formed as and for the purpose aforesaid in December, 1897. That adjustments and changes were necessary requiring additional capital and liability, which capital and liability the plaintiff's were, to some extent, compelled to advance and assume largely in excess of the amounts advanced and obligations assumed by the defendants, or either of them; for which amounts so advanced and obligations assumed by the defendants the plaintiffs had no security; and that there is an irreconcilable difference of opinion between the plaintiffs and defendants as to the management of the business, and the plaintiffs will sustain irreparable injury unless a receiver is appointed to take charge of the assets of the firm, and administer the same for the interest of the members thereof, the creditors and all persons interested. That the firm had on hand a large quantity of raw material, with supplies of coal and other articles, and has unfilled contracts for tubing and other things manufactured by said firm aggregating $150,000. That, if the said orders can be filled under competent and economical management, there will be a large net profit realized therefrom; and that, if they are not filled, and the work should stop, there will be a great loss, not only of the benefits of the contracts made with the purchasers, but there will be a great sacrifice on materials and supplies on hand. And the plaintiffs further say that, when said firm was formed, it was agreed that the same should exist only so long as the same was prosperous and satisfactory to the plaintiffs; that said business, not being prosperous, is not satisfactory to the plaintiffs; and that they have a right to have said firm dissolved, the assets reduced to money, and applied on the debts, and the balance divided among the members of the firm. And the plaintiffs further say that it will be advantageous for said receiver to continue the business, at least to the extent of filling the orders now existing, and working up material now on hand, purchasing such material as may be necessary for the economical management of the business. And concluding with a prayer that a receiver be appointed for the purpose aforesaid.

'(3) That, no opposition to said petition and prayer being interposed by the defendants, W. A. Creech was, on the 27th day of August, 1898, duly appointed by said court of common pleas of said county as receiver, and as such duly qualified according to law, and immediately entered upon the performance of his duties as such receiver, and so continued under the orders of said court until relieved therefrom as hereinafter stated.

'(4) That on said 27th day of August, 1898, there was due and payable to said labor claimants, the several amounts set opposite their respective names for labor performed as operatives for the defendants in their said mill within three months next preceding that date, the several sums set opposite their respective names in said schedule attached to this agreed statement of facts, and marked 'Exhibit A.' That, prior to the filing of the petition in bankruptcy, said labor claimants, and each of them, filed with said receiver an itemized and duly-verified statement of their said account for allowance and payment by said receiver as secured labor claims under the provisions of section 3206a, Rev. St. Ohio.

'(5) Under the order of said court said receiver converted the assets of said firm into money, duly reporting the same to said court. December 24, 1898, a petition in involuntary bankruptcy was filed by Samuel Mather et al. against said partnership of Coe-Powers & Co., as well as against the individual members of said firm, of the pendency of which petition the said receiver had notice within one week after the filing thereof. On the 12th day of January, 1899, said W. A. Creech, receiver, duly filed in said court his report of that date, a copy of which, with all indorsements thereon, is hereto attached, marked 'Exhibit B,' and made a part of this stipulation. It is admitted that the statements set forth in the said motion are true; that the list of said labor claimants mentioned in said motion is the same as attached to this statement of facts and marked 'Exhibit A,' and that no payments have subsequently been made to apply thereon. On the 13th day of January, 1899, said motion was granted by W. C. Ong, one of the judges of said court of common pleas, and duly entered upon the journal of said court; but said receiver, acting upon advice of his counsel, did not comply with said order granting said motion, and the order granting said motion was never appealed from, or in any way modified, except so far as the same may be found to have been affected by the proceedings in bankruptcy then pending, or by the subsequent rulings of the state courts as hereinafter set forth. On February 27, 1899, said co-partnership of Coe-Powers & Co., and the individual members thereof, were duly adjudged bankrupt on grounds set out in opinion of Judge Ricks, reported in 92 F. 333, and on the 7th day of April, 1899, Henry S. Davis, Esq., was duly elected by the creditors of said bankrupts as trustee, and duly qualified as such, and on May 13, 1899,said Henry S. Davis, trustee as aforesaid, filed his answer and cross petition in said case in said common pleas court, asking an order from said court directing its said receiver to turn over to him all properties and assets of the partnership of said Coe-Powers & Co. This was the first appearance in that case by said trustee. May 30, 1899, said trustee filed his application in the United States district court, Northern district of Ohio, Eastern division, in said cause, being No. 83, in bankruptcy, for a summary order upon the receiver, W. A. Creech, directing him to turn over all property to said trustee, which order was granted by said court, and of which said receiver had due notice, and to which order no error or appeal has been prosecuted.

'(6) June 13, 1899,said cause, still pending in the said court of common pleas, came on to be heard on the application of said trustee for the possession of said assets, and on the application of said labor claimants for the payment of the several amounts due them under the former order of said Judge Ong, and upon full consideration by said court the application of said trustee was refused, and an order entered for the payment of said labor claims under the former order of Judge Ong, and further ordered that the residue of said funds and assets be turned over to said trustee in bankruptcy; to which order and judgment of the court in that behalf said trustee, by his counsel, excepted, and upon proceeding in error to the circuit court of said county of Cuyahoga, prosecuted by said trustee to said court, the said circuit court reversed the order of Judge Dissette in that behalf, and directed said receiver to turn over all of said assets to said trustee, the grounds of reversal appearing in Davis v. Coe, 19 Ohio Cir.Ct.R. 639, to which ruling of said court in that behalf said labor claimants at the time excepted, and set about to institute proceedings in the supreme court of Ohio to reverse said order of the circuit court. After the expiration of the time limit for proving of claims against said bankrupt's estate, it was stipulated between the said labor claimants, the said trustee, Henry S Davis, and all other persons in any manner interested in said estate, that said funds be turned over to said trustee without further proceedings in the state courts, and without prejudice to the interest of any parties to said stipulation, and that their respective rights be determined by the referee or the court to which said cause may be carried for review upon the statement of facts herein set forth, and the terms of the said stipulation, which said stipulation was duly approved and signed by all of said parties in interest. It was and is one of the provisions of the said stipulation that one of the said labor claimants, to wit, the above-named Archibald Laird, might prove his individual claim; which said claim so proven, and which was then and there so proven according to law, should be submitted as test case, by the decision of which all parties to the said stipulation should abide; that, if Archibald Laird be found entitled to the payment in full of his said claim, then all the residue of said claimants should be paid in like manner as set forth in said Schedule A; a fortiori, if the claim of said Archibald Laird be not sustained, then none of said claimants should be paid as preferred claims. Said funds being turned over to said trustee, said Archibald Laird's claim being duly proven and filed as a secured claim with said referee for allowance, to the...