Knott v. Evening Post Co.

• Decision Date: 20 July 1903
• Citation: 124 F. 342
• Parties: KNOTT v. EVENING POST CO. et al.
• Court: U.S. District Court — Western District of Kentucky

124 F. 342

KNOTT v. EVENING POST CO. et al.

United States Circuit Court, W.D. Kentucky.

July 20, 1903

Humphrey Burnett & Humphrey, for complainant.

Helm Bruce & Helm, for defendants.

Dodd &amp Dodd and Kohn, Baird & Spindle, for petitioner Louisville Trust Company, receiver.

EVANS District Judge.

The Evening Post Company, a corporation, was organized under the provisions of chapter 56 of the General Statutes of Kentucky on the 1st day of May, 1878. By its articles of incorporation it was to continue in existence for a period articles of incorporation it was to continue in existence for a period of 25 years, namely, until May 1, 1903. The complainant, a citizen of Missouri, holding the past-due notes of the company for $6,000, brought a suit at law against it in this court for the recovery of a judgment thereon. The company having confessed the indebtedness and its nonpayment judgment was rendered accordingly, and soon afterwards an execution of fieri facias which issued thereon was returned nulla bona. This action in equity, in the nature of a creditors' bill, was instituted on May 27, 1903; and on the following day, upon the motion of the complainant and by the consent of the defendants, Lewis C. Humphrey was appointed the courts's receiver, and was directed, as such, to take possession of all the property of the Evening Post Company, which was accordingly done by him on that day. That property, before the issual of the execution, had been placed in the hands of the defendant the Columbia Finance & Trust Company, as liquidator, under a plan for winding up the affairs of the Evening Post Company, adopted on April 30, 1903, by the almost unanimous vote of its stockholders at a meeting held for that purpose. On the 28th day of June, 1903, the cause was referred to the master, to advertise for, ascertain, and report to the court the debts proved against the company. On the 6th day of July, 1903, the master made a partial report, showing the names of the creditors who up to that time had proved their claims, and the amounts of the latter, which aggregated $119,163.51. The gross indebtedness, when all the claims shall be proved, will probably increase that aggregate to $120,000 or over.

At this stage of the proceedings in this court, the Louisville Trust Company, alleging itself to be the receiver of the Evening Post Company, appointed by the judgment of the Jefferson circuit court, chancery branch, First Division, rendered June 27, 1903, in the action therein pending of Bruce Haldeman and others, executors of the will of W. N. Haldeman, deceased, against the Evening Post Company and others, presented, and was given leave by the court to file, its intervening petition herein; and, having filed it, the said trust company thereupon moved this court for an order directing its receiver, Lewis C. Humphrey, to turn over to the state court receiver all the property of the Evening Post Company in his hands, and based this motion upon the ground, stated generally, that the state court, in the proceedings therein pending, had first acquired jurisdiction over the assets and property of the Evening Post Company, and the consequent right to adjudicate all questions relating to its administration and distribution among the parties entitled to share therein.

The application thus made raises the question of which of two courts of concurrent power shall control the administration and distribution of the assets of the Evening Post Company. Such conflicts are always somewhat embarrassing, not, perhaps, because either court is at all tenacious of its rights, or especially anxious to perform the labors required, but rather because litigants become embittered, or imagine that one court will take a view of the law more favorable to one than to the other of the parties in interest. The courts themselves, with the fullest respect for each other, and with a natural tendency to abdicate rather than to seize upon burdens, must consider merely what are the rights of the court and the litigants under the established principles of law applicable to such cases. With nothing but the highest respect for the state court in this instance, coupled with the fullest determination to yield to it everything that established principles of law demand, I enter upon the consideration of the very interesting, though perhaps not novel, questions involved.

Accompanying the intervening petition of the Louisville Trust Company, the receiver appointed by the state court, is a transcript of the record in the case of Haldeman's executors against the Evening Post Company, the Columbia Finance & Trust Company, trustee of the Evening Post Company, Richard W. Knott, J. M. Atherton, John R. Knott, Eugene Q. Knott, and Laura G. Boyle, defendants, the last five of whom are called in the petition 'individual defendants.' This suit in the state court was commenced on May 12, 1903. The petition therein is too long to be copied in full in an opinion, but in substance it avers the following facts, and nothing more, namely, that in June, 1898, their testator, W. N. Haldeman, acquired 48 shares of the capital stock of the Evening Post Company, which at his death came to their hands as part of the assets of his estate; that the capital stock of that company-- $60,000-- was divided into 600 shares, of $100 each, which were claimed to be owned by certain of the defendants, as follows, namely, Richard W. Knott, 427 shares; J. M. Atherton, 65 shares; Laura G. Boyle, 50 shares; John R. Knott, 5 shares; and Eugene Q. Knott, 5 shares-- besides the 48 shares owned by the plaintiffs; that under its charter the corporate existence of the company expired May 1, 1903; that the individual stockholders named, other than the plaintiffs, had for years been the officers and directors of the company, and had operated it as their own private property, without any meeting of the stockholders or election of directors; that being informed about April 25, 1903, that the charter of the company was about to expire by its own terms, the plaintiffs repeatedly demanded, both verbally and in writing, the right, as stockholders, to examine and inspect the books and affairs of the company, but that they were always absolutely and positively refused the right and opportunity to do so, that they demanded repeatedly, and were as often refused, a statement of the assets and liabilities of the company, and full data respecting the same; that a meeting of the stockholders was called by the defendant for April 30, 1903, which they attended, and that over their protest the stockholders adopted a resolution in the following language:

'Whereas, the charter of the Evening Post Company will expire on the first day of May, 1903; and, whereas, it has become necessary to have all the assets of every character of the company sold for the purpose of paying its debts and distributing the surplus, if any, among the stockholders; and, whereas, it is impossible to properly advertise and sell said property by the 1st of May next; therefore, be it resolved: First. That the Columbia Finance & Trust Company be, and it is hereby, appointed liquidator of the affairs of the corporation, with directions to operate for the use of the stockholders the affairs and business of said corporation as they have been operated until the property can be properly advertised and sold, and the possession thereof delivered to the purchaser. Second. That prior to the said sale the liquidator shall cause to be made for the use of the stockholders a comprehensive statement of the assets and liabilities of the corporation, and furnish said stockholders with a copy of said statement. Third. That the said liquidator shall, in its advertisement, specify the nature of the articles to be sold, and shall make such sale for cash, to be paid on the delivery of possession, and shall require of the purchaser that he deposit a certified check for an amount equal to one-third of the total purchase price, which the liquidator shall hold and credit upon the purchase price when the sale is consummated, or, if for any reason it shall be set aside, return to the bidder. If the said bidder to whom the property is knocked down shall fail at once to deliver to the liquidator the certified check as herein provided, the liquidator shall immediately resell the property, and refuse to receive bids from said former bidder. Fourth. Said liquidator may, in his discretion, employ an auctioneer or other agent necessary or proper to be used in the sale of the property. Fifth. Until said sale, and during the operation of said property, said liquidator is given full authority and permission to employ such agents and persons as may be necessary to properly, conveniently, and economically operate the property, and keep an account of all its expenses, and take vouchers therefor. And after the property has been fully administered it shall make out a comprehensive account of its acts and doings, and shall furnish a copy thereof to each of the stockholders. Sixth. The said liquidator shall from the proceeds of the sale of the property pay all debts of the corporation, and the balance, if any, shall be distributed among the stockholders according to their legal rights.'

The petition further alleged that on April 30, 1903, the said liquidator qualified as such; that the plaintiffs renewed their demands to it, and that it also has denied and refused to grant any of them; that they do not know and are not advised as to any indebtedness of the company, nor how it was created or secured, nor are they advised of the assets of the company; that they can only obtain such information from the books of the company, which are under the control of the individual defendants, who positively refuse to allow the...