International Shoe Co. v. U.S. Fidelity & Guaranty Co.

• Decision Date: 24 February 1938
• Docket Number: 14621.
• Citation: 195 S.E. 546,186 S.C. 271
• Parties: INTERNATIONAL SHOE CO. et al. v. UNITED STATES FIDELITY & GUARANTY CO.
• Court: South Carolina Supreme Court

195 S.E. 546

186 S.C. 271

INTERNATIONAL SHOE CO. et al. v. UNITED STATES FIDELITY & GUARANTY CO.

No. 14621.

Supreme Court of South Carolina

February 24, 1938

Appeal from Common Pleas Circuit Court of Cherokee County; S.W. G Shipp, Judge.

Action by the International Shoe Company against the United States Fidelity & Guaranty Company for the collection of claims against the receivers for whom the defendant was surety, for goods sold to the receiver. Similar actions were begun upon similar claims, and the actions were consolidated into one action and the matter was referred to a master as referee. By court order, Susie Buckner Perry and A. C. Pridmore receivers, were made parties defendant to the consolidated action. The master filed his report holding the defendant liable. From a decree modifying the findings and conclusions of the master and holding the defendant not liable, the International Shoe Company and others appeal. The defendant surety appeals from the decree because of its failure to reverse an order refusing to dismiss an appeal from a prior decree. The defendant surety renewed the motion to dismiss the appeal in the Supreme Court.

Decree affirmed.

Wolfe & Fort, Dobson & Dobson, G. W. Speer, and H. R. Swink, all of Gaffney, and Perrin & Tinsley and Horace Bomar, all of Spartanburg, for appellants.

Carlisle Brown & Carlisle, of Spartanburg, for respondent.

BONHAM Justice.

For convenience, we shall speak of the appellants-respondents as plaintiffs, and of the respondent-appellant as defendant.

W. B. Caldwell was a merchant operating a chain of stores, four in number, at Gaffney, Blacksburg, and Chesnee. In the evil days of the depression he became indebted to a number of creditors, whose claims he could not pay. In September, 1932, Junie Smith, a creditor of W. B. Caldwell, brought action for the collection of his debt. September 26, 1932, Hon. T. S. Sease, judge of the Seventh circuit, on motion of Junie Smith, appointed Miss Susie Buckner receiver of the property and assets of W. B. Caldwell. We may say that Miss Buckner married and is now Mrs. Susie Buckner Perry; we shall, therefore, speak of her by her present name. Thereafter, by an order dated October 11, 1932, Judge Sease appointed A. C. Pridmore co-receiver with Mrs. Perry, and required each of them to enter bond in the sum of $10,000. This each of them did, with the defendant herein as surety.

A referee was appointed by the court, and numerous claims were proved, and testimony taken.

The receivers during the year 1934 paid the general creditors three dividends of 10 per cent. each. No other dividends were paid.

Under an order of Judge Mann, the receivership was terminated November 30, 1935. Under this order the remaining assets, comprising balance of stock and fixtures, were sold and brought $1,100, and were disbursed.

The plaintiff brought its action against the defendant for the collection of claims against the receivers for goods sold them from September 27, 1934, to December 12, 1934. The surety alone was sued; in the meantime other similar actions were begun on similar claims. The attorneys representing these various claimants and the attorneys representing the defendant entered into an agreement by which the pending actions were consolidated into one action and the matter was referred to Hon. LeRoy Moore, master for Spartanburg county, as referee, to hear and determine all issues of law and fact.

By order of court, Susie Buckner Perry and A. C. Pridmore, receivers, were made parties defendants to the consolidated action and were required to plead to the issues therein on penalty of having judgment go against them by default. A. C. Pridmore never appeared, nor pleaded to the issues; Mrs. Susie Buckner Perry appeared by her attorney, Jesse W. Boyd, Esq., who attended one reference, submitted written argument to the special referee, filed exceptions to the report of the special referee, and argued them orally before Judge Shipp.

The notice of plaintiffs of their intention to appeal from the decree of Judge Shipp was never served on Mrs. Susie Buckner Perry nor on A. C. Pridmore.

The defendant moved before Judge Sease to dismiss the appeal on the ground that by failing to serve notice of intention to appeal on the defendant Mrs. Susie Buckner Perry, appellants thereby permitted the judgment of the court in her favor to become final as to her, upon the grounds stated in the exceptions of United States Fidelity & Guaranty Company in its appeal from the decree of Judge Shipp.

The master filed his report, holding the surety, the defendant, liable. The exceptions to the master's report were heard by his honor, Judge S.W. G. Shipp, who, in a decree filed May 7, 1937, modified the findings and conclusions of the master, and held that the surety, the defendant, was not liable.

It is on appeal from this decree that the matter is now before this court.

The complaint, as the basis of its claim that the surety is liable to it for its claim for the merchandise sold by it to the receivers, is thus stated:

That the order of Judge Sease appointing the receivers, "provided and directed among other things, that 'if conditions of trade appear to justify, the receivers are hereby authorized and empowered to use from the proceeds of sales, sufficient funds to replenish saleable stock * * * and to file with the Referee, a report showing all monies received from sale of merchandise and paid out for replenishing stock, etc., * * * that said Receivers shall from time to time, pay a dividend to creditors, holding in reserve, a sufficient amount of funds to protect costs and expenses of the receivership."'

That in accordance with the discretion thus vested in the receivers, they purchased from plaintiff the merchandise shown by "Ex. A."

That the receivers breached their bonds, and failed to comply with the order of court in the particulars alleged with respect to the purchasing of merchandise, in that, they failed "to pay for said merchandise with the proceeds of sales, and neglected to conserve, or 'hold in reserve' sufficient funds from the sales of merchandise to defray the expenses of the receivership, a part of which expenses was the replenishing of the stock with saleable merchandise, and instead, failed to apply the proceeds of sales to the payment of the obligation herein and diverted said proceeds to other purposes * * *" That the balance of funds remaining in the hands of the receivers when the receivership was ended by order of Judge Mann "was consumed in the payment of Court costs and certain preferred claims," and the plaintiff's claim was not paid because of insufficient funds to the receivers' credit.

That notwithstanding said order of this court (Judge Mann's order) held the receivers liable for the separate amounts due for merchandise purchased by them.

The answer of the defendant admitted the allegations of the complaint touching the corporate capacity of the defendant, touching the appointment of the receivers, and their qualifying and filing of their bonds, and denied the material allegations contained in the epitomized statement set out above.

It may not be amiss to state that no suggestion is made by anyone interested in this action that the receivers did not act in good faith in the discharge of their duties. The special referee found that "the testimony does not warrant the slightest criticism of the Receivers so far as honest conduct is concerned. Apparently everything they did was done in good faith." Judge Shipp concurred in this finding and there is no dissent therefrom by anyone.

Both parties appealed from Judge Shipp's decree.

The appellants appeal upon nine exceptions, which they elect to present under three heads, viz.:

1. Did the failure of the receivers to file monthly reports of their doings, as required by the order of appointment, constitute such a breach of their bonds as to warrant a recovery by appellants against the surety?

2. Did the failure of the receivers to hold in reserve a sufficient amount of funds from the proceeds of sales to protect costs and expenses of the receivership, including the purchase of new goods to replenish salable stock, constitute such a violation of the order of appointment and a breach of their bonds as to warrant a recovery by appellants against the surety?

3. Did the receivers purchase goods which they knew, or had reason to know, they could not pay for and thus cause a loss or damage to plaintiffs?

The defendant appeals from the decree of Judge Shipp on several exceptions, viz.: 1. That he should have reversed the order of Judge Sease refusing to dismiss the appeal which was made on the ground that by failing to serve notice of intention to appeal on Susie Buckner Perry, the judgment of the court in her favor became final as to her: (a) The appellants base their claim to relief on the joint liability of A. C. Pridmore and Susie Buckner Perry, as co-receivers, therefore to release Susie Buckner Perry also releases A. C. Pridmore; (b) The United States Fidelity & Guaranty Company is sued as surety on the joint liability of Susie Buckner Perry and A. C. Pridmore, therefore to release Susie Buckner Perry will release the surety, United States Fidelity & Guaranty Company.

2. That Judge Sease erred in overruling the motion to dismiss the appeal which was based upon the ground that the proposed transcript of record did not comply with the statute law of South Carolina and the rules of the Supreme Court regulating appeals, (a) because it was in skeleton form; (b) it disregards section 3 of Rule 4 of the Supreme Court, which requires that pleadings, orders, judgments, charges, and exhibits must not be set out in full unless it be necessary to a proper...