Miller v. Pyrites Co.
| Decision Date | 11 June 1934 |
| Docket Number | No. 3647.,3647. |
| Parties | MILLER et al. v. PYRITES CO., Inc., et al. |
| Court | U.S. Court of Appeals — Fourth Circuit |
William Burnet Wright, of Washington, D. C. (Lester H. Crowther, of Baltimore, Md., on the brief), for appellants C. Wilbur and Ernest B. Miller.
Harry E. Karr, of Baltimore, Md. (Edward J. Colgan, Jr., of Baltimore, Md., on the brief), for appellants O. E. Merrell and Edwin H. Brown.
William L. All, of Baltimore, Md. (William F. Allen, of New York City, on the brief), for appellee Pyrites Co., Inc.
G. Ridgely Sappington, of Baltimore, Md. (Wilson K. Barnes, of Baltimore, Md., on the brief), for appellee Chester F. Hockley, receiver.
Before PARKER, and NORTHCOTT, Circuit Judges, and PAUL, District Judge.
This is a suit in equity brought in the District Court of the United States for the District of Maryland by the Pyrites Company, Inc., a Delaware corporation, against the Silica Gel Corporation, a Maryland corporation. The bill of complaint was filed on April 17, 1933, and alleged, in substance, that the plaintiff was a creditor of the defendant corporation on an unsecured claim, in the nature of an open account, in the amount of $25,626.46; that the total indebtedness of the defendant corporation was in excess of $3,000,000, and that its principal assets consisted of numerous patents and processes with regard to a colloidal silica which adapts absorption or capillary attraction to commercial uses and which is designated and known generally in commerce and in the arts by the defendant's trade-name "Silica Gel"; that the condition of its affairs was such that it was necessary that a receiver should be appointed to conserve the assets, and ultimately to liquidate them for the benefit of all concerned; and that the suit was brought on behalf of all creditors who cared to join in it.
On April 22, 1933, the answer of the defendant corporation was filed, admitting the allegations of the bill; consenting to the relief prayed and admitting the claim of the plaintiff to be due in an amount exceeding $3,000, but reserving the right to demand strict proof, and to contest any and all claims of indebtedness of others and of the plaintiff beyond the amount admitted.
On April 22, 1933, the same day, a petition was filed on behalf of C. Wilbur Miller and Ernest B. Miller, as minority stockholders and minority directors, and also as officers of the defendant corporation, asking leave to intervene, and stating that the existing situation with regard to the affairs of the corporation was such that it was desirable, if not necessary, to have a receiver appointed; that the receiver should be appointed to hold the assets of the defendant together and to keep it as a going concern, but that there should be no sale of the assets. The petition for intervention also denied the indebtedness of the defendant to the plaintiff, and denied that the defendant was indebted in the amount of anything like $3,000,000. The petitioners were allowed by order of court to intervene. Mr. C. Wilbur Miller was president of the defendant corporation and also a director and one of the three voting trustees under a voting trust agreement for holders of trust certificates for stock of the defendant corporation. Mr. Ernest B. Miller was operating vice president of the defendant corporation. Both Millers had held these positions since the organization of the company, in 1921, and together owned certificates for between 90,000 shares and 100,000 shares of the approximately 675,565 shares of common stock, without par value, of that corporation's issued stock.
On the same day (April 22, 1933), the court entered an order appointing Chester F. Hockley as receiver of the defendant corporation, with the usual powers. Hockley was also the receiver of the Davison Chemical Company, the largest creditor of the defendant corporation. At the hearing at which the receiver was appointed, counsel representing the Millers consented to the appointment of the receiver and did not object to the appointment of Hockley, but suggested to the court that Mr. Ernest B. Miller be made a coreceiver. This suggestion the court did not accept, stating that it was not his policy to appoint a managing official of a company that was in financial difficulties as receiver, but the court stated that he would be glad to receive the suggestion of other names, satisfactory to the court, as a coreceiver. No such suggestion was made.
On May 12, 1933, the Millers filed an answer and at the conclusion of their answer they prayed that the bill of complaint be dismissed.
On July 13, 1933, after a hearing on a motion made on behalf of the defendant on May 31, 1933, to strike out this answer on the ground that it violated General Equity Rule No. 37 (28 USCA § 723), the court sustained the motion on the ground that the answer was not in subordination of the main purpose of the equity case. The Millers, as interveners, were granted leave to file an amended answer which was done on July 17, 1933; the amended answer alleged in substance that the action of the majority of the board of directors in consenting to the receivership was fraudulent and collusive, and finally prayed: (1) That the complainant's cause of action be transferred to the law side of the court for trial and determination by a jury; (2) that further proceedings in the receivership be suspended and held, except such as were necessary to maintain the business of the defendant as a going concern, and to maintain the contracts for silica gel and licenses theretofore issued for processes for use; (3) that after the determination of complainant's cause of action by a jury trial on the law side of the court, further proceedings therein should then be ordered.
On July 29, 1933, there was filed a petition of Messrs. O. E. Merrell and Edwin H. Brown for leave to intervene, they describing themselves as stockholders owning in excess of 1,600 shares of the outstanding common stock of the defendant corporation. An order was entered allowing the intervention of these last-named petitioners.
On September 15, 1933, the receivers petitioned for an order of court requiring the officers of the defendant corporation to assign its patents to the receiver, to enable him properly to administer the receivership estate. On the same day an order was signed requiring them to show cause why they should not make the assignments, and on September 29, 1933, the answer of certain officers and directors, submitting to that order of the court, was filed.
On September 30, 1933, Messrs. C. Wilbur Miller and Ernest B. Miller filed an answer showing cause against the assignment of the patents, and renewing their contention as previously asserted with regard to the right to a jury trial, and the lack of the jurisdiction of the court. On September 30, 1933, a similar answer was filed on behalf of O. E. Merrell and Edwin H. Brown, opposing the order for the assignment of patents. On October 6, 1933, O. E. Merrell and Edwin H. Brown filed an answer to the original bill of complaint.
After numerous motions were made by attorneys representing both the plaintiff and the defendant and the interveners, the court heard the various motions and the evidence with regard to the claim of the plaintiff company and on October 19, 1933, the court entered an order denying the petition of all the interveners to have the complainant's claim referred to the law side of the court for trial by jury and denying the motion of the interveners, the Millers, to dismiss the bill of complaint and on the same day entered another order allowing the claim of the Pyrites Company for the sum of $25,626.46, without interest. From this first order the interveners, the Millers, appealed and the interveners Merrell and Brown appealed from both orders.
In the meantime, pursuant to notice properly given, the claims of eighty-five creditors totaling in all $3,946,582.04, had been filed and the claims of two creditors had been filed, not in the stated amount of dollars, but in francs and pounds, one being for 51,620 francs and the other for 1,459 pounds, 1 shilling, and 8 pence.
In considering the appeal of C. Wilbur Miller and Ernest B. Miller from the first order entered, which order denied the motion of the Millers to dismiss the bill and also denied the motion to have the plaintiff's claim referred to the law side of the court for trial by a jury, we are of the opinion that this decree was interlocutory and therefore not appealable. All of the decisions we have found are to the effect that an order denying a motion to dismiss is interlocutory. In Cox v. Graves, Knight & Graves, Inc., 55 F.(2d) 217, 218, Judge Parker, of this court said:
See, also, Scriven v. North (C. C. A.) 134 F. 366; Bronx Fire Ins. Co. v. Wasson (C. C. A.) 62 F.(2d) 556; Childs v. Ultramares Corporation...
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