Peckett v. Wood

• Decision Date: 08 June 1916
• Docket Number: 2120.
• Citation: 234 F. 833
• Parties: PECKETT et al. v. WOOD et al.
• Court: U.S. Court of Appeals — Third Circuit

234 F. 833

PECKETT et al. v. WOOD et al.

No. 2120.

United States Court of Appeals, Third Circuit.

June 8, 1916

Henry P. Brown and W. B. Bodine, Jr., both of Philadelphia, Pa for appellants.

Wm. A Glasgow, Jr., J. H. R. Acker, and Conlen, Brinton & Acker all of Philadelphia, Pa., for appellees.

Before BUFFINGTON, McPHERSON, and WOOLLEY, Circuit Judges.

BUFFINGTON Circuit Judge.

In the matter of the receivership of the Florence Iron Works the court below entered a decree confirming the master's report and findings that the claims of Walter Wood for $461,255.88, of R. Francis Wood for $64,664.86, and of Stuart Wood's executors for $101,552.50, 'be allowed and added to the list of claims heretofore approved by the receiver and confirmed by the court. ' Assuming, but without deciding, such decree was one from which an appeal lay to this court, all parties have acquiesced in that view, and a committee of the creditors of the Florence Iron Company have taken this appeal.

The facts of the case have been heretofore set forth in the opinion of the court below, which is given in full on the margin. ^[1] As there stated, the case finally narrows to two questions of fact, summarized in that opinion as follows

'The only reasons urged as to why the special master's report should not be confirmed and the claim allowed are: (1) That the moneys advanced by the claimants, upon which their claims are based, were not loans to the corporation, but rather were payments in advance for its capital stock to be thereafter issued; and (2) that the relationship existing between the claimants and the corporation was such that the claims of the former, in any event, should be postponed in payment to the claims of the other creditors.'

On those two questions this court has had the enlightening help of a very thorough discussion of the proofs by the master in his elaborate report, of the court below in its careful review of the master's work, and of the earnest argument of counsel for the creditors' committee, challenging both the master's report and the court's opinion. After a careful examination on our own part of the proofs, and on due consideration had, we are led to concur in the findings of fact and the conclusions reached below, and to hold that the court committed no error in its decree. In view of the elaborate opinion rendered both by the master and that court, and of the expressed desire of all parties for a decision in timely advance of a pending sale of the company's plant, we restrict our opinion to simply announcing our conclusion as above stated, feeling as we do that anything said further by this court would in the nature of things be but a repetition of what has already been said by the master and elaborated by the court.

We may add that, with a view to its early decision, this case was taken up the first on the list, and all the proofs have had the careful personal attention of each of the judges. We deem it proper to make this statement, so that the promptness of the decision and the brevity of the opinion shall not be regarded as indicating a lack of that due consideration which the case deserves and has had.

NOTE.-- The following is the opinion of Haight, District Judge, on exceptions to the report of Harold B. Wells receiver of Florence Iron Works, as special master, recommending the allowance of the claims presented against the defendant corporation by Walter Wood, individually and as trustee, and the estate of Stuart Wood:

HAIGHT District Judge.

The only reasons urged as to why the special master's report should not be confirmed and the claim allowed are: (1) That the moneys advanced by the claimants, upon which their claims are based, were not loans to the corporation, but rather were payments in advance for its capital stock to be thereafter issued; and (2) that the relationship existing between the claimants and the corporation was such that the claims of the former, in any event, should be postponed in payment to the claims of the other creditors. After carefully reading all of the evidence and exhibits presented to the special master, and considering the arguments of the respective counsel, I have reached the conclusion that the special master's determination is correct, both in respect to the existence of valid and enforceable obligations of the claimants against the corporation, as well as their right to share proportionately with the other creditors in the distribution of its assets.

The Florence Iron Works was incorporated under the laws of New Jersey in 1873. Only 1,250 shares of its authorized stock, of the par value of $100 each, were issued. All of these shares, at the time the bill in this case was filed, as has been the fact for some time previous thereto, were owned by Walter and Stuart Wood, with the exception of a very few, which were distributed among other persons, admittedly for the purpose of qualifying the latter to act as directors. Walter had about three times as many shares as Stuart. The board of directors were five in number, two of whom were Stuart and Walter. The other directors, I think, may be properly considered, as they are commonly termed, 'dummies.' The corporation, which was originally formed for the purpose of distributing the real estate belonging to R. D. Wood among his heirs, had been for many years engaged in manufacturing various iron products, all of which had always been marketed through or by the firm of R. D. Wood & Co. The latter was a partnership composed, during a number of years preceding the filing of the bill in this cause, of Walter Wood and Stuart Wood, although at various times previously there had been other members. There had for a great many years existed between this firm and the corporation an arrangement whereby the latter paid the former's expenses of selling its product and purchasing its supplies, and the former received one-half of the profits realized by the corporation from its business, and bore one-half of the losses, if in any given year losses were sustained. From time to time, as the business of the corporation expanded and necessitated more working capital, moneys were advanced by Stuart Wood and Walter Wood and by the trust estate of Juliana R. Wood. These moneys are the basis of the three claims in controversy. In each case, as the advances were made, demand promissory notes of the corporation, bearing interest, were delivered. Certain securities were pledged for the payment of two of the notes given to Walter Wood, individually, as was the case in respect to all of the moneys advanced by the estate of Juliana Wood. All of the notes given to Stuart Wood were indorsed by either Walter Wood or R. D. Wood & Co. From time to time payments were made on account of the principal of the moneys so advanced by Walter Wood and Stuart Wood, and all of the interest which accrued was likewise paid, sometimes in the form of new notes. The notes were always carried on the books of the corporation among the 'bills payable.'

The evidence upon which the exceptants rely to support their contention-- that the moneys so advanced were not loans-- consists of certain testimony given by Walter Wood during a trial of a controversy between himself and the executors of Stuart Wood in the common pleas court No. 2 for the county of Philadelphia, certain averments in an answer filed by him in that suit, and certain statements made by him to a representative of a commercial agency. As to the latter it should be noted that there is no evidence whatever that any creditor was misled thereby. In fact, it is difficult to see how any creditor could have been misled, even if the evidence showed that the mercantile report had been brought to his attention prior to the time he extended his credit. All that the report shows is that two of these claims--that is to say, the individual claim of Walter Wood and that of Stuart Wood--are referred to as 'contributions to capital.' They were listed among the liabilities and went to make up the total thereof. The capital stock which was issued was not so listed. I think, therefore, that any creditor examining this report would undoubtedly consider these claims as subsisting liabilities of the corporation, and not in the category of capital stock. There is no competent testimony to overcome the presumption of indebtedness to the estate of Stuart Wood, which arises from the existence of the notes upon which the claim is based. The statements made by Walter Wood before mentioned are, of course, not competent evidence against the estate of Stuart Wood. This is...