Lydick v. Neville
| Decision Date | 26 February 1923 |
| Docket Number | 6110. |
| Parties | LYDICK v. NEVILLE. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Grenville P. North, of Omaha, Neb. (Fay H. Pollock and Michael L Donovan, both of Omaha, Neb., on the brief), for appellant.
Arthur F. Mullen, of Omaha, Neb. (W. C. Fraser and William Ritchie both of Omaha, Neb., on the brief), for appellee.
Before LEWIS, Circuit Judge, and TRIEBER and BOOTH, District Judges.
This is an appeal from an interlocutory order refusing to grant the petition of the appellant to dissolve a temporary restraining order, and granting an interlocutory injunction enjoining appellant from prosecuting an action instituted by him in the district court of Douglas county, state of Nebraska, against the Skinner Packing Company. The facts so far as necessary to an understanding of the issues involved are:
On April 15, 1921, a number of stockholders of the Skinner Packing Company, who were all citizens of the state of Nebraska, instituted a suit in the court below against the Skinner Packing Company, a corporation created and existing under the laws of the state of Maine, all of whose property is situated and its business carried on in Douglas county state of Nebraska, charging that said company had sold a large number of shares of its capital stock to citizens and residents in the state of Nebraska; that through its officers the affairs of the corporation were mismanaged, paying excessive salaries to some of its officers under contracts for 20 years, and otherwise dissipating the assets of the corporation; that it had erected, at a large cost, a packing house, but is not operating the same, although retaining a large number of employees at excessive salaries. There are many other charges of waste and mismanagement, which it is unnecessary to set out in this statement of facts, but which show a great waste of the corporation's assets, and also fraudulent acts on the part of its officers. It is further charged in that bill that the stock subscribed is approximately $7,000,000, and its principal assets are a packing plant and the land surrounding it, of the value of $3,000,000, a cold storage plant representing an investment of about $1,000,000, and notes given by stockholders in part payment of their subscriptions for the capital stock of the company, amounting to about $1,200,000; that it had also authorized a bond issue of $2,000,000 to be secured by a mortgage on all its property, and that the officers are about to sell $500,000 of these mortgage bonds at a ridiculously low price; that there are creditors having liens on the packing plant in the approximate sum of $25,000, and on the cold storage plant for about $18,000, which they are threatening to foreclose; that it owes other debts, amounting to about $300,000, irrespective of suits and claims by stockholders. Each of the plaintiffs is the holder of the stock of the corporation for more than $3,000. The prayer of the bill is for the appointment of a receiver in order to preserve and hold intact the corporate property, prevent great loss to the stockholders, and the usual prayer for injunction, etc. An answer was filed by the company, but in this proceeding it is only necessary to state that the corporation in its answer, while denying the charges of fraud and mismanagement, admits the necessity of the appointment of a receiver for the protection and preservation of the property, and joins in the prayer therefor.
On April 25, 1921, the appellee was appointed as a receiver, with the usual powers. On February 20, 1922, the receiver asked for authority to bring suit against the makers of the notes executed to the corporation in part payment of the stock they purchased and foreclose the liens on the stock given as collateral security therefor; the notes having come into the possession of the receiver by virtue of his appointment. This authority was granted on the same day. On May 20, 1922, the appellee filed in the court below a dependent bill against appellant to recover on a negotiable note for the sum of $6,120 executed by him to the corporation on March 1, 1920, payable 12 months after date, with 8 per cent. interest, which note, it is alleged, was given by appellant to the packing company in part payment of his subscription for 100 shares of 8 per cent. guaranteed stock of the corporation, the price he paid therefor was $125 a share, the face value of each share being $100. The balance of the purchase money he paid in cash at the time of his subscription under an agreement, providing that the shares of the stock were to be held by the company as collateral security for the payment of appellant's note, and to be delivered to him upon payment thereof. It is then alleged that on December 10, 1920, appellant instituted an action in the district court of Douglas county, state of Nebraska, against the corporation, to recover the amount he had paid for the stock, and the negotiable note he had executed in part payment, amounting in all to $12,500 and interest; that the note sued on by appellee was included in appellant's suit, although he had not paid it, and it is now in the receiver's hands by virtue of the order and decree of the court appointing him, and unless payment is enjoined by the court the rights of said note would be adjudicated by the state court, and thereby oust the federal court of the jurisdiction to property in its possession through its receiver. He also prays judgment against the appellant for the amount of the note, with 8 per cent. thereon, and that, if the judgment is not paid the stock, pledged as collateral to secure the note, be sold, and the proceeds thereof applied on the judgment. On the day this bill was filed the temporary restraining order was granted on the ex parte application, and the motion of appellant to dissolve the temporary restraining order and injunction, filed at a later day, was by the court denied.
The only allegations of the appellant in the motion to dissolve the temporary injunction, which it is necessary to set out on this hearing, are that on January 18, 1921, several months before the filing of the complaint in the court below asking for the appointment of a receiver of the company's property, he had instituted his action in the district court of Douglas...
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