Parker Peanut Co. v. Felder

• Court: South Carolina Supreme Court
• Writing for the Court: The opinion of the Court was delivered by MR. CHIEF JUSTICE BONHAM.
• Citation: Parker Peanut Co. v. Felder, 200 S.C. 203, 20 S.E.2d 716 (S.C. 1942)
• Decision Date: 02 June 1942
• Docket Number: 15419.
• Parties: PARKER PEANUT CO. v. FELDER et al.

20 S.E.2d 716

200 S.C. 203

PARKER PEANUT CO. v. FELDER et al.

No. 15419.

Supreme Court of South Carolina

June 2, 1942

See also, 196 S.C. 271, 13 S.E.2d 143.

Felder & Rosen and Zeigler & Brailsford, all of Orangeburg for appellants.

Adam H. Moss, James A. Moss, R. A. Bowman, and C. E. Summers, all of Orangeburg, for respondent.

BONHAM Chief Justice.

The action in this case, which now involves a number of parties had its inception in a proceeding commenced by the respondent against M. H. Felder and Company, on March 28, 1940, in the nature of a creditor's bill containing a prayer for the appointment of a receiver, to which complaint the defendant strenuously objected, denying insolvency, and resisting, by its pleadings, the appointment of a receiver. After due notice, the question of receivership was heard by the Honorable G. Dewey Oxner, Presiding Judge, who took considerable testimony and continued the hearing until a later date.

On or about March 29, 1940, Bob Clark, by summons and complaint, commenced a suit against the same defendant for the same purposes as those named in the earlier action. To the latter action the defendant, by its answer, duly verified by Grace K. Felder, one of the owners of the business, admitted the necessity of a receiver, and by consent the Honorable M. M. Mann, resident Judge, on April 4 1940, appointed a receiver for the defendant company in the Clark suit. Immediately thereafter, Parker Peanut Company, whose action had been commenced one day earlier than the action in the Clark case, intervened in the latter suit. The matter was again referred to Judge Oxner, who consolidated both actions, continued P. F. Haigler as receiver for the defendant, and appointed an auditor to audit the affairs of the defendant.

Following the merger of the two creditor's bills, Charles R. Allen, on behalf of himself and all other creditors of the defendant, instituted an ancillary proceeding therein for the purpose, among other things, of stripping the corporate veils from the named defendant, M. H. Felder and Company, and also from M. H. Felder Real Estate Company and from M. & H. Grocery Company, and holding M. H. Felder and Grace K. Felder liable as an association of persons.

The persons thus sought to be held liable as an association of persons are husband and wife. In 1922 the State of South Carolina had issued to them a charter permitting them to form a corporation to be known as M. H. Felder and Company. The proposed business firm was to have no officers, directors or stockholders other than M. H. Felder and Grace K. Felder. Two years after the issuing of the first charter, a second charter was issued by the State, authorizing the incorporation of a second business, which was to have only the same personnel, and which was to be known as the M. H. Felder Real Estate Company. On February 1, 1940, the State issued a third charter, empowering M. H. Felder and Grace K. Felder to organize a business firm to be known as M. & H. Grocery Company. It was contemplated that the two named individual defendants herein were to be the only stockholders, officers and directors of any of the three business organizations for which charters had been granted. Upon the issuing of the charters, M. H. Felder and Grace K. Felder commenced trading in the names contained respectively therein, and up until the time of the commencement of this action there had been no change in the ownership, control, or management of any of said businesses.

On May 14, 1940, a rule was issued requiring all defendants named herein to show cause why a receiver should not be appointed to take charge of the assets and affairs of all. After a hearing, orders were passed by the Court appointing P. F. Haigler as receiver for all defendants. From these orders of the Court, the defendants appealed to this Court, and after due time this Court adopted the order of the Honorable M. M. Mann, Circuit Judge, dated June 21, 1940, as its opinion in the case of Parker Peanut Company v. M. H. Felder and Company (Allen v. Felder et al.,) 196 S.C. 271, 13 S.E.2d 143.

In view of the fact that a receiver was appointed for the assets and affairs of the defendants upon a prima facie showing, the defendants desired a final determination of the facts upon which the appointments were made. Following the first appeal to this Court, the case was then referred to the Honorable J. A. Merritt for the purpose of determining all issues of law and fact raised in the original action, together with such issues raised in the ancillary action of Charles R. Allen. Numerous references were held, and an abundance of testimony was submitted.

In due time reports were filed by the Special Referee, sustaining the contentions of the respondent, Parker Peanut Company, and of the ancillary complaint of Charles R. Allen, whereupon notice of a motion for an order confirming the reports was duly served.

On February 17, 1941, three days after the reports of the Special Referee had been filed, M. H. Felder and Grace K. Felder, each, individually, and in behalf of their three business concerns, being all of the appellants herein, filed voluntary petitions in bankruptcy, and upon ex parte appearances before the United States District Court, obtained orders recognizing each of the business concerns as a separate entity, and affording to each the privileges and the protection due litigants entering that Court in good faith. Whereupon Charles R. Allen, one of the plaintiffs herein, filed petitions in each of the bankruptcy proceedings, praying leave to intervene therein and to move for an order setting aside each of the adjudications in bankruptcy and dismissing the proceedings on the ground of fraud. The petitions thus filed by Charles R. Allen were practically identical in each of the bankruptcy proceedings, as were the returns which were filed thereto. On May 29, 1941, the Honorable Alva M. Lumpkin, Judge of the United States District Court, signed separate orders, dismissing each of the bankruptcy proceedings, all upon the same grounds, and in similar orders, except that the order in the matter of M. H. Felder, Bankrupt, D.C., 39 F.Supp. 453, 455, contained a fuller discussion than is found in the other cases. In that order Judge Lumpkin found that:

"The fraud disclosed by the record before me and as found by the Supreme Court of South Carolina will prohibit this court's granting discharges to the petitioners in bankruptcy, and I know of no relief available to the litigants in this court which is not available in the state court.

*****

"When the Supreme Court of South Carolina in adopting Judge Mann's decision determined that the corporations in question were mere fictions and that the veil of each should be pierced by the court and the property of each brought into the hands of the receiver for the individuals involved as an association of persons, then I am bound by this adjudication, but even if I were not, from my study of the evidence I am convinced that these findings were correct.

*****

" His [Judge Mann's] final decision was approved in every detail and adopted by the Supreme Court of South Carolina as its decision in this case, and this court is and ought to be bound by the conclusions reached there, and I so conclude.

*****

"It is therefore ordered, adjudged and decreed, that the adjudication on the voluntary petition in bankruptcy of M. H. Felder filed in this court be set aside and rescinded and the same is hereby dismissed."

No appeals were taken from the orders of Judge Lumpkin, the effect of which was to recommit the appellants and their estates to the jurisdiction of the Court of Common Pleas, and accordingly, shortly thereafter, attorneys for appellants were served with notice that their exceptions to the reports of the Special Referee would be called up before the Circuit Court on July 3, 1941, for determination. The exceptions were duly heard by Judge Mann, who, on July 25, 1941, filed an order confirming the findings of fact of the Special Referee and slightly modifying his conclusions of law. On August 20, 1941, Judge Mann filed a short amendatory order therein. From these orders of Judge Mann, the defendants, M. H. Felder, Grace K. Felder, M. H. Felder Real Estate Company and M. & H. Grocery Company, now appeal to this Court upon eleven exceptions. In addition, there is also before the Court one additional sustaining ground filed by the respondent.

We quote the exceptions in full:

"1. Because the Court erred in holding that the order of Judge Lumpkin dismissing the petitions of the defendants in bankruptcy was res adjudicata of any issue raised by the pleadings or record in this case; the error being that the said order did not determine any such issue on its merits, and the effect of the said order was merely to hold that the defendants did not have the right at that stage of the proceedings to have their affairs litigated in the Bankruptcy Court.

"2. Because the Court erred in holding that while the exceptions of the defendants which called for the application of the principle that the transfer of an asset could not be brought in question by a creditor who was not in existence at the time of the transfer, nor unless the debtor was insolvent at the time the transfer was made, invoked a principle that was fundamentally sound, yet it was not applicable to the facts in this case; the error being that the testimony shows that all of the transfers made in this case were made under the circumstances stated, except some of the transfers made to the 'stores' (M & H Grocery Company) and some to M. H. Felder.

"3. Because the Court erred in holding that the defendants were engaged in a 'gigantic scheme' or plan to defraud creditors generally; the error...