In re Receivership of First Trust & Savings Bank of Billings

• Citation: 122 P. 561,45 Mont. 89
• Parties: In re RECEIVERSHIP OF FIRST TRUST & SAVINGS BANK OF BILLINGS. v. McCONNELL. GAZETTE PRINTING CO. et al.
• Decision Date: 27 February 1912
• Court: Montana Supreme Court

122 P. 561

45 Mont. 89

In re RECEIVERSHIP OF FIRST TRUST & SAVINGS BANK OF BILLINGS.

GAZETTE PRINTING CO. et al. v. McCONNELL.

Supreme Court of Montana

February 27, 1912

Appeal from District Court, Yellowstone County; Sydney Sanner Judge.

In the matter of the receivership of the First Trust & Savings Bank of Billings. From an order granting a motion of the Gazette Printing Company and others to set aside a sale by the receiver to Odell W. McConnell, the latter appeals. Affirmed.

Chas A. Taylor, O. W. McConnell, and Gunn & Hall, for appellant.

O. F Goddard, F. L. Tilton, and T. J. Walsh, for respondents.

SMITH J.

On the 14th day of July, 1910, the district court of Yellowstone county, Hon. Sydney Sanner, judge presiding, on petition of the state of Montana, a creditor in the sum of $25,000, appointed Samuel G. Reynolds as receiver of the First Trust & Savings Bank of Billings, Mont., an insolvent corporation theretofore organized under the laws of this state. The Gazette Printing Company is a domestic corporation, having a capital stock of 300 shares of a par value of $100 each, located at Billings, owning a plant and Associated Press franchise, and engaged in publishing two daily newspapers, the Billings Daily Gazette and the Billings Evening Journal. Among other assets of the First Trust & Savings Bank of Billings, which came to the hands of the receiver, were 297 shares of the capital stock of the Gazette Printing Company which stock was the absolute property of the bank, and certain claims against the printing company. It appears to be admitted that on November 29, 1910, these claims, which were evidenced by promissory notes, amounted, with accrued interest, to the sum of $13,035.38. The stock in the printing company was carried arbitrarily on the books of the bank at a valuation of $6,001. The total of these two amounts is $19,036.38, the significance of which sum will hereafter become apparent. P. B. Moss was the president of both corporations. He testified: "I paid $40,000 for the stock, and charged it down from the profit of the company and otherwise down to $6,000. That is how the value of $6,000 got into the stock." It will thus be seen that the amount at which the stock was carried on the books of the bank was no criterion of its real value. On or about the 31st day of October, 1910, the receiver, at the request of Mr. Moss, procured from Hon. Sydney Fox, judge of the Thirteenth judicial district, an order authorizing him to sell the notes and capital stock of the printing company to unnamed persons for the amount due upon said notes, and $6,001 additional for the 297 shares of capital stock. This order was never filed in court. There was some controversy at the hearing subsequently had as to what conversations took place between Reynolds and Moss after the order was procured; but, at any rate, it is clear that Mr. Moss was experiencing some difficulty in getting the money. He himself testified that on November 15, 1910, he offered to pay enough money to take up the stock, and was told by Reynolds that Judge Fox had instructed him not to surrender the stock until the notes were paid, whereupon they agreed that the matter might rest until Moss could get all the money. On November 21, 1910, the notes and stock not having been sold to Moss, the receiver presented to Judge Fox a petition wherein he set forth that the former order of the judge had not been complied with; "that such proposition has not been fulfilled, and now your petitioner has a proposition offered to pay in full liquidation and payment of the obligations of the Gazette Printing Company to the defendant for the capital stock now held by the bank and carried on its books at the sum of $6,001 the sum of $15,000; that your petitioner now desires to submit this proposition to the court, and, if in the judgment of the court or judge thereof such sale should be made, your petitioner asks for an order to sell," etc. The court thereupon ordered the sale to be made in accordance with the terms set forth in the petition last mentioned. The sale was accordingly made to Odell W. McConnell, the appellant; and the notes and certificates of stock were transferred to him. On December 3, 1910, a petition was filed in the district court of Yellowstone county in behalf of the Gazette Printing Company, verified by P. B. Moss, and entitled, "In the Matter of the Receivership of the First Trust & Savings Bank of Billings, Montana." The petition recites the facts substantially as hereinbefore set forth, and alleges that the second order of sale was made nothwithstanding the prior order, "and notwithstanding the said P. B. Moss was ready, able, and willing to take up said indebtedness and receive said notes and shares of stock, and without giving any notice or warning whatever to said Moss or the Gazette Printing Company." It is therein further alleged: "That on the 24th day of November, 1910, the Gazette Printing Company, by P. B. Moss, its president, and also by and through O. F. Goddard, Esq., its attorney, made demand upon the receiver that he call in said notes and certificates of stock, and that the printing company was ready to pay over the full amount of the indebtedness held by said trust against it, but the receiver refused to do so; that on the 29th day of November, 1910, the Gazette Printing Company, by P. B. Moss, its president, made a formal tender to the receiver of $19,036.38, being the amount due, principal and interest, on said promissory notes, and also including $6,001, for which the said receiver had the said 297 shares of stock, which amount the receiver 'took into his possession,' but has refused to deliver the notes and shares of stock; that, unless the last-mentioned order [the McConnell order] is rescinded, the creditors of said trust will be damaged in the sum of $4,036.38, and the Gazette Printing Company will be irreparably injured and defrauded of its property, and great injury will be done." The prayer was that the court set aside the order by virtue of which the appellant purchased the notes and stock; "that the first-mentioned order be revived and the receiver required to accept the $19,036.38, and to surrender to the Gazette Printing Company the promissory notes, as well as the 297 shares of its stock." After answers filed by Reynolds, as receiver, and Mr. McConnell, and a reply to the receiver's answer, filed by P. B. Moss, who styled himself "the petitioner herein," a hearing was had before Judge Sanner. At this hearing Mr. Moss testified that in the latter part of August, 1910, the Gazette Printing Company was indebted to the First National Bank of Billings in the sum of about $12,000; that Reynolds did not inform him of the second order of sale until after the notes and stock were sold to McConnell; that, if he had done so, he, Moss, could have gotten the money for him, but he did not suppose there was any hurry about it; that the inventory value of the physical property of the Gazette Printing Company is $30,000, the good will and franchise is worth from $30,000 to $40,000, the profits "last year" were around $8,000; "that would be a profit on $75,000 or $80,000 at 10 per cent. net profits, including the interest paid and the net profit and the addition to the plant, figures up about $8,000." "Q. What do you say as to $15,000 or $19,000 being an inadequate price or consideration for the Gazette Printing Company's business and plant? A. The price was entirely inadequate as to the value of the property, but the estimate that the state examiner placed upon the assets of the trust company put down the stock as worthless, and I figured from conversations that I had with Mr. Reynolds, and some time previous, that the plant would be sold for very much less than its value. I got that part of the tender to meet and liquidate these notes held by the receiver from Mr. Snidow. I did not undertake to tender any part of this upon the part of the Gazette Printing Company to obtain this stock of the Gazette Printing Company. My wife was paying $6,001 for the stock. The First National Bank has since been paid in full. One share of the Gazette Printing Company's stock was issued to me, one to Mr. Hays, one to Mr. Becker, and 297 to the First Trust & Savings Bank. The paper was bought with the money of the First Trust & Savings Bank, except the three shares. There has been no election of officers or directors since 1907. The vacancy caused by the resignation of Mr. Becker has not been filled yet. The amount of the note which Snidow got of the Gazette Printing Company was $25,000. I don't know why it was that in my reply I styled myself as the petitioner, and not the Gazette Printing Company at all. I think this paper of the Gazette Printing Company is worth around $75,000. The company owes Mr. Snidow $25,000 and Mr. Jenizon $2,000. Out of the $25,000 paid by Snidow the trust company and the First National Bank were paid. I paid the First National Bank between $12,000 and $13,000."

C. E. Wood, manager of the Gazette Printing Company, produced as a witness by the petitioners, testified: "During the last year I think it [the Gazette Printing Company] has paid a profit of probably 10 per cent. I think it made a profit of 10 per cent. on the gross $80,000 or $90,000. I think that would be safe. The property, the franchise, and the good will of the Gazette Printing Company possibly is worth somewhere between $60,000 and $70,000--might be more than that."

Judge Sanner filed a "memorandum and order," wherein he recites, referring to the hearing had before him "Nothing appeared to especially engage the concern of the court in behalf of either Moss, or Mrs. Moss, or of the printing company. Whether or not Moss, or Mrs. Moss, or the printing company can be said...