In re St. Lawrence Condensed Milk Corporation

• Decision Date: 02 November 1925
• Docket Number: No. 11.,11.
• Parties: In re ST. LAWRENCE CONDENSED MILK CORPORATION. Petition of ST. LAWRENCE CONDENSED MILK CORPORATION et al.
• Court: U.S. Court of Appeals — Second Circuit

9 F.2d 896 (1925)

In re ST. LAWRENCE CONDENSED MILK CORPORATION.

Petition of ST. LAWRENCE CONDENSED MILK CORPORATION et al.

No. 11.

Circuit Court of Appeals, Second Circuit.

November 2, 1925.

Sparks & Fuller, of Brooklyn, N. Y. (Jesse Fuller, Jr., of Brooklyn, N. Y., of counsel), for revising petitioners.

Lawrence Russell, of Canton, N. Y., and Frank L. Cubley, of Potsdam, N. Y., for respondents.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

MANTON, Circuit Judge.

A petition in involuntary bankruptcy was filed against the alleged bankrupt on the 21st of December, 1923, by three petitioners — one, Rowland B. Page, president and general manager of the alleged bankrupt, and two small creditors. The claim of Page set forth that the exact amount of the claim is ascertainable only by means of an accounting by the corporation, and it was petitioned that under section 63 of the Bankruptcy Act (Comp. St. § 9647), the claim be liquidated by an accounting to be made by the corporation pursuant to a decree of the court, and that it be thereafter proved and allowed against the estate of the bankrupt corporation.

Concededly the claim of Page arises from a contract, made and entered into by the bankrupt, whereby he was employed as general manager, and whereby it was agreed that he should receive as compensation $100 per week, and that there be "issued to him one-third of the capital stock thereof" when certain payments should have been made to one Caldwell and Bailey as trustees. A copy of this agreement is annexed to the petition and marked Schedule A. That exhibit provides for his employment to begin on November 1, 1917, and to continue until he shall have received from Caldwell and Bailey one-third of the issue of outstanding stock of the corporation, as provided in the agreement between Page, Caldwell, and Bailey. This latter agreement was dated November 1, 1917. It is clear from Schedule A that the corporation did not, in that contract, agree to give Page any compensation except $100 per week, and whatever claims he may have had for the stock were against Caldwell and Bailey, for they agreed to share their individual stockholdings with Page upon the happening of certain conditions. At the time of signing the petition, Page had no claim against the corporation.

It appears from the record that the Brown & Bailey Condensed Milk Company had a place of business in Brooklyn and dealt in condensed milk. Prior to November, 1917, Page was introduced to the Brown & Bailey Condensed Milk Company, and after some negotiations Page undertook to organize the St. Lawrence Condensed Milk Company to deal in case goods, which was to be under his management and direction. Thereupon a promoter's agreement was entered into on November 1, 1917, between the stockholders of the Brown & Bailey Condensed Milk Company and Page, under which it was agreed that the stockholders would advance $100,000 in exchange for capital stock in the new corporation; that an option would be procured for the new corporation on the plants of the Brown & Bailey Condensed Milk Company for $90,000, and that a lease would be obtained pending the purchase. Thereupon the agreement for Page's employment at $100 per week was made.

The bankrupt was organized on November 9, 1917, and a lease was made of the Brown & Bailey Condensed Milk Company's plant. The new company prospered until January, 1923, when a difference of opinion arose in the board of directors over the question of winding up the corporation; the right to do so having been reserved in the original charter of the corporation. This gave rise to a controversy, but the business was continued during the year 1923. The Brown & Bailey Condensed Milk Company advanced money to the extent of $100,000 from time to time during 1923, in order to pay the bills owing by the alleged bankrupt. On October 2d it was decided to dissolve the corporation, and turn back the plants to the Brown & Bailey Condensed Milk Company, and to discontinue the case goods business unless within the next 40 days Page should procure a purchaser for the corporate assets sufficient to pay all the corporate obligations and leave some surplus. Page, who is a director of the alleged bankrupt, later was present at a meeting of the board of directors at which it was resolved to dissolve the corporation. Releases were executed, canceling and discharging the promoter's agreement of November 1st and the agreement of employment of Page. But Page was employed at $100 per week as manager of the Brown & Bailey plant and received his pay up to November 21st. It was later that Page made claim to the capital stock of the bankrupt.

It appears that the very next day, and continuously thereafter, he was in conferences with his attorneys, and this resulted in his signing a petition in bankruptcy on December 18th. On the next day, Page and his attorneys appeared before the District Judge on their application for the appointment of receivers. On December 20th they appeared at the office of the alleged bankrupt in Brooklyn, New York City, where a meeting of the board of directors was scheduled to be held, and filed a statement purporting to show that the surplus of the alleged bankrupt over all obligations was $187,000, and thereupon demanded payment of one-third of the same. Upon refusal, they returned to Albany, and on the afternoon of December 21st filed their petition in bankruptcy, and a petition asking for the appointment of receivers, which was granted, and the present receivers were appointed. No notice of this appointment was given until December 24th, when an application was made for the appointment of ancillary receivers in the District Court for the Eastern District of New York. Thereafter the books of the alleged bankrupt were seized. Overtures for the settlement of the claim were made by Page and his attorneys, but his terms were not met. The other petitioning creditors were a garage keeper, who had a claim of $270.24, and a repairman, with a claim of $22.95.

After notice of the appointment of the receivers, and on December 23d, the petitioners applied for an order, which was signed by the District Judge, directing the petitioning creditors and the receivers to show cause on January 2, 1924, why the appointment of the receivers should not be vacated and the petition in bankruptcy dismissed. This order to show cause was made on the petition of the Brown & Bailey Condensed Milk Company, by its president, Theodore G. Caldwell, which petitioner was an unsecured creditor to the extent of $250,000. On the return day of the order to show cause, a postponement was had, but on December 5, 1924, after argument, the court reserved...