James Supply & Hardware Co. v. Dayton Coal & Iron Co.

• Citation: 223 F. 991
• Decision Date: 08 June 1915
• Docket Number: 2623.
• Parties: JAMES SUPPLY & HARDWARE CO. et al. v. DAYTON COAL & IRON CO., Limited.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

223 F. 991

JAMES SUPPLY & HARDWARE CO. et al. v. DAYTON COAL & IRON CO., Limited.

No. 2623.

United States Court of Appeals, Sixth Circuit.

June 8, 1915

Frank Spurlock and C. C. Moore, both of Chattanooga, Tenn., for plaintiffs in error.

George H. West and D. L. Grayson, both of Chattanooga, Tenn., for defendant in error.

Before KNAPPEN and DENISON, Circuit Judges, and EVANS, District Judge.

KNAPPEN Circuit Judge.

On a trial to a jury of the issues joined upon a creditors' petition for adjudication in bankruptcy verdict was rendered by direction of the court, and judgment of dismissal entered accordingly. The case is here on writ of error. Elliott v. Toeppner, 187 U.S. 327, 23 Sup.Ct. 133, 47 L.Ed. 200.

There was substantial evidence tending to show insolvency. The act of bankruptcy finally relied upon is that respondent, as alleged, being insolvent applied for a receiver of its property. B.A. Sec. 3a(4). The receivership in question was applied for and obtained in a suit brought in a state court of Tennessee in the names of three creditors of the Dayton Company, claiming priority in favor of Tennessee creditors under sections 2551, 2552, of Shannon's Tennessee Code and asking a winding up of the corporation. There was testimony tending to show that this proceeding was instituted at the instance and for the benefit of the Dayton Company and through its representatives. The district court held that, as matter of law, on the record made the institution of this proceeding and the obtaining of the receivership was not the act of the Dayton Company. Whether this conclusion is correct is the pivotal question. We of course state the testimony, so far as given, in the aspect most favorable to the petitioning creditors against whom verdict was directed.

The Dayton Coal & Iron Company was a British corporation, having its home office in Glasgow, Scotland. It was engaged at Dayton, Tenn., in mining coal and making pig iron. Sir Peter Donaldson, who resided at Glasgow, was the managing director of the company, and there was testimony that he 'had control of all the company's affairs. ' He was a member of the Glasgow firm of James Watson & Co., which owned a majority of the stock of the Dayton Company, controlled it and financed its affairs. The Dayton Company maintained an office at Cincinnati, from which the sales and commercial transactions were handled. Mr. Whitaker was assistant to the managing director and the highest representative in the United States of the Dayton Company. He had charge of the Cincinnati office and general supervision of commercial affairs at Dayton. Mr. Miller, of Chattanooga, was the general counsel in the United States of the Dayton Company and 'represented the company in its legal affairs. ' Watson & Co. bought pig iron in the United States, and in that relation dealt directly with the Dayton Company. Shortly before June 9, 1913, Watson & Co. failed, and so defaulted on a draft for . . . 4,000 drawn by the Dayton Company upon Watson & Co., and held by the Equitable Trust Company of New York. This failure immediately embarrassed the Dayton Company, which was unable to protect the draft, and the Dayton Company's bank creditors became insistent. Whitaker cabled the situation to the Dayton Company at Glasgow, asking what advice should be given, and stating that 'director must come with full power to act. ' Sir W. B. Peat, a member of an accounting firm doing business both in Great Britain and in the United States, was in New York as 'the representative of Watson & Co.,' and was slated as liquidator of the affairs of that firm. The Dayton Company cabled Whitaker from Glasgow to go to New York and consult with Peat respecting the failure of the Dayton Company, and, if possible, to take Miller with him. Whitaker was also advised that liquidation could not be avoided, and to pay nothing more without consulting Miller. The latter was unable to go to New York at the time, but had a conference with Whitaker, and gave his opinion, from what Whitaker told him, that a receiver should be appointed. Whitaker met Peat in New York on June 14th, and communicated to him Miller's views as to the necessity of the appointment of a receiver. Peat concurred in these views. On the evening before the interview with Peat, Miller wired Whitaker at New York:

'Am impressed immediate receivership suit here is best. Wire me your views quickly on arrival and also later after consulting with parties there.'

The subject seems to have been further discussed between Miller and Whitaker over the telephone, and Whitaker wired that he thought Miller's method so communicated correct, and that he would 'wire just as soon as can see Peat. ' During the 13th and 14th Miller and Whitaker exchanged telegrams Miller stating that he would not 'precipitate action unless forced,' and expressing himself as 'anxiously awaiting your advice as to whether bankruptcy inevitable,' Whitaker wiring Miller on the 13th that he had seen Peat, 'who states to adopt plan outlined by you over telephone at once,' and on the 14th, 'to proceed at once.' On the morning of June 14th the insolvency proceeding was instituted, the bill therefor being drafted under Miller's direction and largely by his dictation, and without definite arrangement (previous to its drafting) with the creditors in whose names it was to be filed. The bill was filed by another solicitor, who spent part of his time working in Miller's office on a salary. On the same day Whitaker wired Miller that he had 'consulted with Peat who is instructed by Watson,' and that Peat 'advises receivership and desires his partner here Archibald Bowman appointed a receiver. ' An injunction was issued in the proceeding under the creditors' bill on June 14th, but no receivership was then ordered. The original bill alleged the Dayton Company's insolvency. An amended bill, decided upon by Miller, and filed on the 16th, withdrew that charge; the Dayton...