In re M. Stipp Const Co.

• Decision Date: 25 March 1915
• Docket Number: 1895.
• Citation: 221 F. 372
• Court: U.S. Court of Appeals — Third Circuit
• Parties: In re M. STIPP CONST. CO. v. O'MALLEY. STIPP

221 F. 372

In re M. STIPP CONST. CO.

STIPP v. O'MALLEY.

No. 1895.

United States Court of Appeals, Third Circuit.

March 25, 1915

R. A Zimmerman and A. A. Vosburg, both of Scranton, Pa., for appellant.

Ralph L. Levy and R. W. Archbald, both of Scranton, Pa., for appellee.

Before BUFFINGTON, McPHERSON, and WOOLLEY, Circuit Judges.

McPHERSON Circuit Judge.

The Construction Company was adjudged a voluntary bankrupt in December, 1910, and in February, 1911, Charles P O'Malley was chosen trustee. On May 20, 1913, the trustee presented a petition to the District Court setting forth in substance as follows:

The scheduled debts amount to about $81,000, and the scheduled assets to about $1,700. The company was organized in 1906 with an authorized capital stock of $100,000, divided into 1,000 shares, of which 940 shares were subscribed for by seven persons (only six of whom need to be noticed at present). Mathias Stipp was a subscriber for 844 shares Arthur Stipp for 5 shares, and John J. Marquart for 1 share-- Mathias Stipp, however, being the person liable on these three subscriptions, aggregating $85,000. On the books of the company the following credit appears against these 850 shares:

Tools and equipment of Mathias Stipp . . .

$10,000 00

Good will of the said business . . .

65,000 00

Contract accounts of the said business . . .

2,659 09

Book accounts of same . . .

7,340 91

Total . . .

$85,000 00

The other three subscribers are Samuel O. Welles, 15 shares Thomas Palmer, 10 shares, and A.E. Stephens, 50 shares; a credit of $625 appearing against the subscription of Welles, but no credit appearing against the other two. The values given to the foregoing items credited to Stipp were false and fictitious, the property thus valued being worth not more than $2,000 in the aggregate, leaving at least $83,000 unpaid; and a further sum of $6,875 remains unpaid on the subscriptions of Welles, Palmer, and Stephens.

The petition prayed that an account of the assets and liabilities might be taken, in order that the amount due on each subscription might be ascertained, and that an assessment might be levied thereon in order to pay the debts and obligations of the bankrupt. Thereupon the court referred the petition to a special master, directing him to hear the parties and 'make such order thereon as may be proper in the premises. ' The order was ex parte, and after the master had fixed July 15 for the hearing, Mathias Stipp, Arthur Stipp, Welles, and Palmer petitioned on July 14 for a vacation of the order, setting forth as their reasons that the District Court had no jurisdiction to direct the master to ascertain the amount due from the stockholders and to make an assessment; that such an order could only be made in a court of law or equity, the authority of the bankruptcy court being 'limited to the directing of a trustee to collect the amount unpaid on the subscriptions if any be due'; and that the question, how much was due on a subscription, was 'a question of fact, which your petitioners have a right to have adjudicated before a court and a jury in a plenary proceeding.' They also averred that in December, 1911, the trustee had brought an action of assumpsit against Mathias Stipp in the court of common pleas of Lackawanna county 'to collect an alleged amount due on the balance of his subscription on the said stock,' and denied that they owed any balance on their subscriptions. On the same day, July 14, the court stayed the proceedings before the master. On July 21 Mathias Stipp, o behalf of himself, Arthur Stipp, Welles, Palmer, and Marquart's administratrix, filed an answer to the trustee's petition of May 20, averring that when the company was organized the directors made--

' * * * a true, correct, and exact inventory of all of the tools and equipment, book accounts, contract accounts, and appraised and estimated the same, together with the good will of the business of Mathias Stipp, which he had been previously conducting and carrying on, being a contracting and construction business, and appraised the same and fixed the value thereof at the sum of $85,000, and took over the said tools, equipment, contract accounts, book accounts, good will, etc., of Mathias Stipp at the sum or price of $85,000, and credited the same to the subscription of the capital stock of the M. Stipp Construction Company by Mathias Stipp, John J. Marquart, and Arthur P. Stipp, thus paying in full for the stock subscribed for by the said Mathias Stipp, John J. Marquart, and Arthur P. Stipp, and that there is not now and has not at any time since been any unpaid subscription due on said stock.'

Stipp's answer made certain averments, also, about the Welles and Palmer stock, and finally denied that false and fictitious values had been given to the tools, etc., declaring:

' * * * That the tools, equipment, good will, fixtures, book accounts, contract accounts, etc., of Mathias Stipp, which were turned over to the M. Stipp Construction Company and credited on the stock subscribed for by Mathias Stipp, John J. Marquart, and Arthur P. Stipp, were of the full value of $85,000, and were so inventoried and appraised by the directors of the M. Stipp Construction Company, and were so taken over by the directors of the M. Stipp Construction Company at the said appraised value. * * * And the directors of the said company having so appraised them, their act is conclusive upon the corporation and creditors thereof.'

With the record in this condition the District Court on July 28 modified the previous order, so that the special master 'instead of being directed to make such order on said petition as may be proper in the premises, be directed to recommend such an order as...