International Shoe Co. v. Picard & Geismar

• Decision Date: 15 December 1939
• Docket Number: No. 20012.,20012.
• Citation: 30 F. Supp. 570
• Court: U.S. District Court — Eastern District of Louisiana
• Parties: INTERNATIONAL SHOE CO. v. PICARD & GEISMAR, Limited.

30 F. Supp. 570

INTERNATIONAL SHOE CO. v. PICARD & GEISMAR, Limited.

No. 20012.

District Court, E. D. Louisiana, New Orleans Division.

December 15, 1939.

COPYRIGHT MATERIAL OMITTED

Abe Frey, of St. Louis, Mo., and Leslie Moses, of Houston, Tex., for petitioner International Shoe Co.

Walter Lemann of Donaldsonville, La., and Guion & Schulze, of New Orleans, La., for intervenor Harold S. Mayer.

Weiss & Weiss, of New Orleans, La., Borron, Owen & Borron of Baton Rouge, La., and Frymire & Ramos, Lazarus, Weil & Lazarus, Jonas C. Sporl, John H. Hammel, Jr., Matthew A. Grace, and Harry R. Cabral, all of New Orleans, La., for various intervening creditors.

G. F. Purvis, Jr., Sp. Asst. Atty. Gen., for State of Louisiana.

Schwarz, Guste, Barnett & Redmann, of New Orleans, La., for Victor J. Gros, receiver of respondent.

PORTERIE, District Judge.

On January 29, 1930, upon a creditor's bill and answer filed by the respondent, a receiver was appointed for Picard & Geismar, Ltd., a Louisiana corporation, domiciled in the parish of Ascension, within this district. The decree contained injunctive provisions forbidding any creditor from causing to issue out of any court any process against the assets and the property of the corporation. By order dated February 3, 1930, the receiver was directed to employ a certified public accountant to audit the books and affairs of the company. In the course of the audit, the accountant sent to all those appearing as creditors on the records of Picard & Geismar, the customary request for statements of accounts. Prior to March 17, 1930, all creditors had furnished to the receiver or to the accountant statements of their respective claims in the amounts shown in the auditor's report. The result was a net difference between the indebtedness of the corporation, as shown by its books, and the amount claimed by the creditors, of less than $60.

On March 22, 1930, the report of the accountant, listing in detail every creditor appearing on the books of the corporation, was filed by the receiver. According to the audit report, the creditors numbered three hundred and seventy-three and their claims aggregated $303,331.42.

The full operation of the business of the corporation, sugar plantations and general commissaries in connection, having resulted in loss, was, with the approval of the court, discontinued in 1932. One of the plantations (Waterloo, for cane crop) was leased, however, during 1933 for $903.27; also, rents for land for the years 1934 to 1938, both inclusive, amounted to $5,144.63. See statement of receiver for period April 1, 1932 through September 30, 1938. It followed, therefore, that the principal source from which the creditors might expect to realize payment was approximately sixty-four hundred acres of land. This land was not disposed of until 1938, when it was sold at public sale by the receiver for $108,000 cash. The receiver, having funds out of which a distribution might be made to creditors, and being advised that issues would be raised either by opposition to any account which he would file, or by other appropriate procedure, obtained from the court (1) an order requiring all creditors to file within a stated time with the receiver sworn proof of claim and providing that "any such claims not filed within the time fixed by this Order shall be debarred from sharing in the benefits of any monies now or hereafter in the hands of the Receiver"; and (2) an order fixing a date of hearing on the issues and providing for the giving of proper notice of such hearing to all of the creditors and other interested parties.

Whitney National Bank of New Orleans held promissory notes of Picard & Geismar, Ltd., on which the unpaid principal amount is, in round figures, $73,000. Canal Bank & Trust Company, in liquidation, held notes of Picard & Geismar, Ltd., on which the unpaid balance is approximately $37,000. One Harold S. Mayer, who was not a creditor of Picard & Geismar, Ltd., purchased the claim of Whitney National Bank of New Orleans on April 18, 1938, and the claim of Canal Bank & Trust Company, in liquidation, on May 19, 1938, thus becoming, for the first time, a creditor of the insolvent corporation. Canal Bank & Trust Company, in liquidation, had filed an intervention in the receivership proceedings, asserting its claim, on December 3, 1934; and Whitney National Bank of New Orleans, after having obtained formal permission from this court, filed suit in the state court on December 6, 1934.

Harold S. Mayer, at the hearing fixed, filed pleas of prescription under the Louisiana statutes, Civil Code of Louisiana, Arts. 3538 and 3540, against the claims of all creditors who had not filed suit, either by way of independent action or intervening bills, within three years on open accounts, and within five years of maturity on claims based on promissory notes; and also, of three years against all unpaid taxes accruing prior to January 1, 1936. If these pleas of prescription be maintained, then of the three hundred and seventy-three creditors, only International Shoe Company, the original complainant, Commercial & Savings Bank, in liquidation, and Harold S. Mayer, assignee of Whitney National Bank of New Orleans and of Canal Bank & Trust Company, in liquidation, would share in the proposed distribution to creditors.

There was offered and filed in evidence an agreed statement of facts, in which the receiver denied the right of one of the claims assigned to Harold S. Mayer to participate in the proposed distribution, and asserted a claim against the adjudicatees of the corporation's property for revenues therefrom, collected between the date of the adjudication and the date of the delivery of the receiver's deed.

The uncontradicted testimony of the receiver, given at the hearing, was to the effect that, at all times, he recognized as creditors all those appearing on the audit report; that from time to time he sent circular letters to all creditors, advising of the status of the receivership; and that, in many instances, he discussed the situation with creditors and local attorneys for creditors; and at no time did he ever have any other thought in the matter than that all of the parties so listed were recognized creditors in the amounts shown on the audit report.

The contention of Harold S. Mayer is (1) that the law of Louisiana, as evidenced by the decision of its Supreme Court in Taylor v. Vossburg Mineral Springs Co., 128 La. 364, 54 So. 907, is that receivership proceedings do not interrupt the running of prescription; and (2) that this court is bound to apply the state law in equity receivership proceedings, citing Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, and Ruhlin v. New York Life Insurance Company, 304 U.S. 202, 58 S.Ct. 860, 82 L.Ed. 1290.

The receiver denies the claim of Mayer, as assignee of Canal Bank, on notes of Picard & Geismar, Ltd., amounting to $37,000, on the ground that through the action of that bank and its predecessor in title, Marine Bank & Trust Company, the value of collateral pledged as security for said notes in an amount in excess thereof was wholly destroyed. These mortgage notes so pledged were five of an issue of twelve, in the principal sum of $5,000 each, secured by first mortgage on Clover Ridge Plantation and improvements. The act of mortgage required the mortgagor to keep the improvements on the mortgaged property insured against fire in the sum of $100,000, to have the policies payable to the holders of the notes, as interest may appear, and to deliver the policies to such holders. Canal Bank & Trust Company became the pledgee of all twelve of the mortgage notes; seven of them having been pledged to the Marine Bank (with which the Canal merged) by Clover Ridge Planting & Mfg. Co., Inc., and five having been pledged to it, as above stated, by Picard & Geismar, Ltd. Accordingly, policies were obtained and renewed, containing proper loss payable clauses, and were delivered to the Canal Bank as holder of the mortgage notes.

Clover Ridge company was placed in receivership in the state court on March 6, 1926, and A. I. Picard was appointed receiver. Its sugar factory was destroyed by fire on May 22, 1930. On that date the seven first mortgage notes of the Clover Ridge Company amounted, in principal and interest, to $38,818.90, and the five first mortgage notes held by the Canal Bank as collateral to the notes of Picard & Geismar, Ltd., amounted, in principal and interest, to $45,069.32.

The fire loss was settled for $68,643.84 and, by agreement, this amount was deposited with the Canal Bank in escrow to await judicial determination of the rights of the parties claiming therein. Neither Picard & Geismar, Ltd., nor its receiver was a party to the settlement or to the escrow agreement. Upon learning of the settlement and of the escrow agreement, the receiver of Picard & Geismar, Ltd., filed an auxiliary bill in this court against the Clover Ridge receiver, the Canal Bank & Trust Company and others, claiming that the insurance proceeds, pro tanto, should be applied to the payment of the mortgage notes owned by Picard & Geismar, Ltd., and pledged to the Canal Bank. On motion and after hearing, this bill was dismissed for lack of jurisdiction.

Thereafter, the Clover Ridge receiver filed an account in the state court in which he treated the insurance proceeds as being in his possession, which proceeds he proposed to apply to the payment of administration costs and outstanding receiver's certificates, leaving a balance of $13,000 to be paid to Canal Bank, as holder of the mortgage notes. Various oppositions to this account were filed, including one by the receiver of Picard & Geismar, Ltd., claiming that the insurance proceeds should be applied in their entirety to the payment of the first mortgage notes. At the trial of these oppositions the receiver of Picard & Geismar, Ltd., learned for the first...