Marsh v. Arthur C. Marsh Co.
| Decision Date | 24 March 1936 |
| Parties | MARSH et al. v. ARTHUR C. MARSH CO. |
| Court | Oregon Supreme Court |
Department 1.
Appeal from Circuit Court, Multnomah County; Louis P. Hewitt, Judge.
Suit by Arthur C. Marsh and others against the Arthur C. Marsh Company, wherein a receiver was appointed for the Arthur C Marsh Company. From a decree of the circuit court determining that the unpaid expenses due the receiver was $4,750, that the Investors Syndicate, mortgagee of property of the Arthur C. Marsh Company, should pay $3,950 of the amount due the receiver, and awarding judgment to the receiver against the Investors Syndicate for that amount, and directing that the payment of such amount be secured by lien upon the properties over which the Investors Syndicate held mortgages with priority over such mortgages, the Investors Syndicate appeals.
Remanded with instructions.
The sole issue presented by this appeal is whether the Investors Syndicate, appellant, which holds mortgages upon numerous properties of the Arthur C. Marsh Company, defendant, should be deemed liable to the receiver for any part of the compensation which he earned in performing his duties, and whether, if compensation is due him from the appellant, the liability should be deemed a charge upon the property covered by the appellant's mortgages with priority over the first mortgages held by that mortgagee. The receiver was appointed in a friendly suit instituted by a majority of the stockholders of the Marsh Company. The appellant was not a party to that suit, and did not participate in it in any way except to apply, on July 24, 1934, for leave to foreclose 38 of its mortgages, and, on November 5, 1934, to apply for leave to foreclose 16 more mortgages.
Near the city of Portland is a residential district known as Roseway plat No. 2. In 1930 there were 76 dwelling houses in that district; 65 of them being subject to mortgages in favor of the Investors Syndicate. These were first mortgages, and the total principal then unpaid upon them was $83,150.57. After the execution of these mortgages, the Arthur C. Marsh Company acquired ownership of the tract, but did not subject itself to liability for the payment of the mortgage debts. Mortgages on the 11 other properties were held by various individuals. All of these properties had been sold to purchasers who had agreed to pay the purchase price in monthly installments. July 25, 1930, the total unpaid upon these contracts, exclusive of the sums payable upon the mortgages, was $62,844.34. June 30, 1931, 54 of the properties were still in the possession of vendees who were making some payments upon the purchase price. Twelve of the properties had been abandoned by purchasers, and the houses were either vacant or were occupied by tenants.
July 25, 1930, a majority of the stockholders of the Arthur C Marsh Company filed a complaint in the circuit court against that company which alleged that the Marsh Company had assets The complaint prayed for the appointment of a receiver and "that all creditors and any and all persons be enjoined from instituting or prosecuting any actions, suits or proceedings in law or in equity against the defendant corporation and from foreclosing or attempting to foreclose" their mortgages. On the same day the Marsh Company, the sole defendant in the suit, filed its answer which admitted all the averments of the complaint, and concluded thus: "Expressly prays for the relief prayed for in the complaint." July 25, 1930, the circuit court, in an order which recited: "It appearing that great and irreparable injury will be suffered by the creditors and by the preferred and common stockholders of defendant corporation unless its assets be protected from further reduction and depreciation," appointed Mr. John K. Kollock, now deceased, receiver.
July 25, 1930, the receiver filed a report which included the balance sheet of the Marsh Company. The report and the balance sheet at the time the Marsh Company passed into receivership show that it carried upon its books as assets the following:
Cash on hand and in bank .................... $ 24.25
Accounts receivable .............................. 150.16
Notes receivable .............................. 23,532.23
Notes receivable on subscriptions to stock .... 46,535.27
Real estate loans and mortgages ............... 28,442.92
Investments ................................... 19,967.20
Roseway first mortgages ....................... 84,382.65
Roseway contracts ............................. 62,844.34
Roseway miscellaneous .......................... 1,575.95
Furniture and fixtures ......................... 9,761.66
Profit and loss ............................... 98,244.89
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$375,441.52
The same source of information indicates that the Marsh Company carried upon its books as liabilities the following:
Capital stock subscribed but not issued .... 51,125.00
Capital stock issued ...................... 215,700.00
Notes payable ............................... 3,100.00
Mortgage contracts payable ................. 10,000.00
First mortgages payable .................... 80,439.86
Second mortgages payable .................... 5,170.84
Accounts payable ............................ 9,905.82
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$375,441.52
The receiver was in charge during the four years and eight months that elapsed between the time of his appointment, July 25, 1930, and the time the attacked order was made, June 3, 1935. Of the various assets listed above, he was able to realize upon the following items only: Cash on hand and in bank, notes receivable, notes receivable on stock subscriptions, investments, furniture, and fixtures, and Roseway contracts. In each instance except the first the item brought much less than its valuation on the corporation's books. For instance, the furniture and fixtures, which were carried on the books at the depreciated value of $9,761.66, brought $675, and the investment item carried on the books at a value of $19,967.20 brought only $715.73. The item which became the receiver's principal source of income is the one entitled Roseway Contracts. Under this head the Marsh Company entered the sums payable by purchasers of the dwelling houses in Roseway; that is, a total of $62,844.34. As time passed, many of the purchasers of these homes abandoned their contracts. In some instances the vacated houses fell into a state of disrepair; the windows were broken and the plumbing fixtures were stolen. In other instances renters were substituted for the departed contract purchasers. But some purchasers abided by their contracts, and at the time this proceeding came on for hearing, June 3, 1935, three purchasers were still faithfully maintaining their payments and ten others had discharged their obligations. Thirty-two of the houses were then occupied by tenants at an average rental of $10 per month, which but few were able to pay regularly. The receiver's reports indicate that he received from the Roseway houses a total of $28,682.05. His total receipts from all sources were $64,423.56. Hence, since he received $28,682.05 from the Roseway properties, he must have collected from all other assets appearing upon the Marsh Company's balance sheet $35,741.51. Of the latter sum, $15,089.33 was received by the receiver through his liquidation of the Interstate Security Company, all of the stock of which was owned by the Marsh Company. The proceeds of the liquidation under a contract existing betwen the two companies was applied upon the Interstate Security Company's subscription to the capital stock of the Marsh Company. The reports filed by the receiver indicate that a total of $11,849.77 was disbursed in the payment of "receivership expenses," which included rent, salary, automobile, and minor office expenses. These reports indicate that there was paid to John K. Kollock, receiver, as compensation and fees, $6,200, and to his successor, Joseph H. Lieb, $1,800. Besides the latter sum, Mr. Lieb also received a salary as an employee of Mr. Kollock prior to the latter's death. All of the above have been paid. The award of $4,750 made in the attacked order is additional compensation for services rendered since July 31, 1934. In the first annual report of the receiver we find the following under the head of Roseway operating expenses:
Repairs ...... $ 67.73
Taxes ......... 300.70
Insurance ..... 535.91
Water .......... 18.45
Advertising .... 26.74
Survey ......... 15.00
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In the four following reports we find no similar subtitle, but...
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