Kirkpatrick v. Eastern Milling & Export Co.

• Decision Date: 14 December 1904
• Docket Number: 57.
• Citation: Kirkpatrick v. Eastern Milling & Export Co., 135 F. 146 (D. N.J. 1904)
• Parties: KIRKPATRICK v. EASTERN MILLING & EXPORT CO. (2.)
• Court: U.S. District Court — District of New Jersey

135 F. 146

KIRKPATRICK v. EASTERN MILLING & EXPORT CO. (2.)

No. 57.

United States Circuit Court, D. New Jersey.

December 14, 1904

H Gordon McCouch, Samuel Dickson, and Henry S. Drinker, for petitioner.

H Reynolds Brown, for respondents.

ARCHBALD District Judge.

^[1] This being a hearing on petition and answer, the facts, in case of a conflict, are, of course, to be taken as stated in the latter, although, in the view which I take of the case this is not very material

The character of the proceeding determines, in large measure, the disposition to be made of it. It is simply for the purpose of securing certain incidental administrative relief, growing out of the fact that the corporation which is the defendant in the original bill has been put by the court into the hands of receivers, and it is not, in consequence, adapted or designed for the determination of substantive issues. The court is appealed to, to direct the receivers, by whom it has assumed to take charge of the corporate assets and affairs, to turn over certain property to which the petitioners lay claim, which has come into the receivers' hands. Confining our attention to this question, much that is set up in the answer becomes immaterial; nor is there anything in conflict with this view in the former ruling of this court by which it was held that the parties to the underwriting agreement to be presently referred to were entitled to be heard, and should be brought in as respondents, as they now have been; the character and extent of the hearing to be accorded them not having been passed upon. The only question, therefore, to be considered, is whether the petitioners have shown such title to the property in controversy that the court ought, in justice, to direct the receivers to turn it over to them.

It is the undisputed fact that on January 29, 1903, by agreement in writing with the corporation whose affairs are being administered, the respondents (other than the receivers), all of whom are stockholders and most of whom are directors of the company, subscribed for an issue of $600,000 5 per cent. income bonds, which it was decided to put out. These bonds were to be taken and paid for by them severally on or before February 1, 1904, in varying sums, at 50 per cent. of their par value, and therewith they were to receive as a bonus common stock of the company to the amount of 75 per cent. of the face value of the bonds allotted to each. This undertaking, however, was never carried out, and, the necessities of the corporate business requiring it, on May 13, 1903, a loan of $25,000 for two months was obtained from the Corn Exchange Bank, the petitioners; the bonds and the underwriting agreement by which the respondents were obligated to take them being pledged as collateral security. But whether by inadvertence or otherwise, the certificates for the shares of stock to which each would be respectively entitled, although actually made out and executed, were not turned over to the bank, and, being now in the hands of the receivers, by whom they were obtained along with the other papers of the company, the present proceeding has been instituted to secure them.

The right of the bank to the relief asked for depends on whether the written assignment by which the underwriting agreement was transferred to it, a copy of which is given in the margin, ^[2] was effective to carry title to the certificates which are now demanded. Of this, as it seems to me, there can be no doubt. By it the milling company, in express terms, assigns, transfers, and sets over to the bank 'all its right, claim and demand under the Memorandum of Agreement of January 30, 1903, between the said company and the underwriting subscribers thereto, and authorizes the said bank, in case of default, to bring suit in the name of the * * * company against any and all of the said subscribers. ' The bank is thus invested in the fullest manner with the rights of the company to and under the agreement, and therewith, by implication, with whatever is essential to the exercise and enforcement of those rights. To this the possession of the stock certificates is unquestionably material. While intrinsically worthless, their production and tender-- technically at least--is a prerequisite to any demand upon the respondents for a fulfillment of their part of the agreement, and the manifest purpose in opposing a delivery at this time is to block any such demand. The whole value to the bank of the underwriting agreement, including the right to sue which is expressly given, is thus made to depend on the possession of these certificates, which it must therefore be assumed it was the intention of the company that the bank should have,...