Lyle v. Staten Island Terra-Cotta Lumber Co.

• Decision Date: 01 April 1901
• Citation: 48 A. 783,62 N.J.E. 797
• Parties: LYLE v. STATEN ISLAND TERRA-COTTA LUMBER CO.
• Court: New Jersey Supreme Court

48 A. 783

62 N.J.E. 797

LYLE

v. STATEN ISLAND TERRA-COTTA LUMBER CO.

Court of Errors and Appeals of New Jersey.

April 1, 1901.

(Syllabus by the Court.)

Appeal from court of chancery.

Bill by Robert W. Lyle against the Staten Island Terra-Cotta Lumber Company. Decree for defendant, and J. E. Addicks, a general creditor, appeals. Affirmed.

Sherrerd Depue, for appellant.

George L. Record, for respondent.

ADAMS, J. This is an appeal taken by a general creditor of an insolvent corporation from a final decree dealing with the distribution of assets. The essential features of the ease are these: The appellant J. Edward Addicks, is the largest stockholder and bondholder, and also the largest general creditor, of the Staten Island Terra-Cotta Lumber Company, an insolvent corporation. He is also one of its receivers. John V. Bacot is the other receiver, and has alone been active in the administration of the trust. There are other general creditors, and also creditors who hold preferred claims for labor. The appellant on July 2, 1897, presented to the chancellor, by petition, an offer to pay for the entire plant, stock, good will, and assets of the company in the hands of the receivers, subject to two mortgages, the sum of $100,000, in a mode specified in the offer. This offer received the approval of the chancellor, and on July 23, 1897, was accepted by an order of that date, which sanctioned the proposed mode of payment, and gave further direction in respect thereto. The offer of $100,000 specified the following mode of payment: That the petitioner, Addicks, should be required to pay in cash into court upon his bid, if accepted, only such proportion of $100,000 as should be determined by the court to belong to creditors other than himself; the remainder of the bid to be paid by proper receipts from said petitioner. The order of July 23, 1897, accepted the offer, directed a deed, instructed a master to examine and report on the claim of Addicks against the company, and contained the following provision as to the mode of payment: "That the said Addicks shall pay unto the said receivers the sum of one hundred thousand dollars in the manner following: That he shall pay of the said one hundred thousand dollars the sum of twelve thousand dollars in cash; that he shall secure by security satisfactory to the said receivers the payment of the further sum of six thousand dollars, if the report of the said master shall show the same to be required; and that he shall pay the balance of the said one hundred thousand dollars by proper receipts as a creditor of the said company." In other words, the plan was that the full amount of the bid, instead of being actually in court, should be theoretically in court, and that the sum to be actually paid into court should be only what was coming to creditors other than the petitioner, Addicks. This arrangement was for the convenience of the petitioner, who naturally wished to save himself the trouble of raising and paying a great sum of money, only that it might be afterwards returned to him. It is apparent that the direction for the payment of $12,000 in cash, and for further security to the amount of $6,000, was not based on exact figures, but was a tentative provision then estimated to be adequate, but which might turn out in the end to be either too large or too small. The sale was made pursuant to this order. The petitioner, Addicks, paid to the receivers the sum of $12,000 in cash, and furnished further security satisfactory in kind and amount. There are no assets other than the proceeds of this sale that are available for distribution. The offer and the order accepting it established in outline the rights of the parties in interest. The orders that followed related, for the most part, to matters of detail, and are to be read in connection with the offer and order of acceptance. The engagement of the accepted bid amounted to this: that, out of the sum of 8100,000, the labor claims, which were only a little more than $2,000, should be paid in full, and that a dividend should then be distributed to general creditors, including the petitioner, Addicks, whose share of the dividend would be represented by his receipts. This construction gives effect to the terms of the offer and order of acceptance, maintains the preference of labor claims, and secures among general creditors the equality that is equity. The offer said nothing about expenses. Nevertheless they were to be paid, and paid so as to make them a common burden upon the general creditors. Preferred claims for labor are always to be paid in full, unless it be necessary to encroach upon them to meet the expenses of the receivership. This was not the fact here. The expenses were to be taken care of in this case by charging them against the dividend to general creditors proportionally to the amounts of dividend due to the general creditors respectively. The outcome, then, would be this: Each preferred creditor would get the full amount of his claim. Each general creditor other than the petitioner, Addicks, would get a cash dividend on his claim, charged with a proportional part of the expenses. The petitioner would be charged, as general creditor, with his proportional part of the expenses. If any other questions should arise, they would be settled on equitable principles, and so as to harmonize with the scheme above indicated.

This being the general relation of the parties in interest, the court of chancery proceeded, by orders made from time to time, to fill in the detail. As all the papers in the suit have not been sent up, some points are obscure. This obscurity need not embarrass this court in deciding the case, since the record that is now before it would lead to a decree more unfavorable to the appellant, Addicks, than the one to which he objects. The receiver Bacot and the appellant differ as to the state of the account. The receiver insists that the cash payment of $12,000 is insufficient, and asks for authority to make up for the insufficiency out of the security given by the appellant. On the other hand, the appellant says that the cash payment was larger than was necessary, and that the receiver should refund a part of it. The amount of the claims of preferred creditors for labor was fixed at $2,279.39. By an order dated August 8, 1898, the receivers were directed to pay these labor claims. They have done so, except in the case of certain creditors who could not be found, and of one Creditor who refused to take his money. The sum of $1,000 was allowed to the counsel for the receivers, and this somehow—perhaps by interest or disbursements—was increased to $1,016.36. The sum of $600 was allowed to Bacot, receiver, for services rendered subsequent to October 1, 1897, besides $103.38 for certain of his disbursements, and also a sum not exceeding $100 for the expenses of carrying out the order of distribution. The taxed costs of the complainant and of the re ceiver were taxed and ordered to be paid. The amount of these taxed costs does not appear. The allowance to the receiver was thus, it seems, or in some other way, brought up to $1, 198.92. The expenses, therefore, so far as the record shows them,...