RJ Reynolds Tobacco Co. v. AB Jones Co.
| Decision Date | 04 December 1931 |
| Docket Number | No. 9231.,9231. |
| Citation | 54 F.2d 329 |
| Parties | R.J. REYNOLDS TOBACCO CO., Inc., et al., v. A.B. JONES CO., Inc., et al. |
| Court | U.S. Court of Appeals — Eighth Circuit |
COPYRIGHT MATERIAL OMITTED
Horace Sloan, of Jonesboro, Ark. (H.M. Cooley and A.T. Welborn, both of Jonesboro, Ark., on the brief), for appellants.
Archer Wheatley, of Jonesboro, Ark. (N. F. Lamb and A.L. Adams, both of Jonesboro, Ark., on the brief), for appellees.
Before STONE and VAN VALKENBURGH, Circuit Judges, and SANBORN, District Judge.
On April 24, 1931, the R.J. Reynolds Tobacco Company, Turnbull Cone & Machine Company, and T.E. Brooks & Co. filed an involuntary petition in bankruptcy against the A.B. Jones Company, an Arkansas corporation engaged in the wholesale grocery business with its headquarters at Jonesboro, Ark., and with branches at Blytheville and Leachville. The petition charged insolvency, acts of bankruptcy within four months prior to the filing of the petition, stated that the assets of the Jones Company were of a perishable nature, that the appointment of a receiver was absolutely necessary, and asked that J.Q. Lane, of Jonesboro, be appointed receiver, and that the Jones Company be adjudged bankrupt. The petitioning creditors gave bond in the sum of $1,000, and J.Q. Lane was at once appointed receiver by the referee in bankruptcy, in the absence of the judge. He qualified by giving the $5,000 bond required by the order of appointment. On the same day, the Jones Company filed a petition to dismiss the receiver, on the ground that no bond as required by law was filed, before his appointment, by the petitioning creditors; that during 1930 the sales of the Jones Company amounted to $1,000,000, and during 1929 to $1,400,000; that its collections in 1929 were $1,448,000; that seventy-five persons were employed; that it had five hundred customers; that it was not insolvent; that, due to drought and financial conditions since the summer of 1930, it had not been able to collect cash sufficient to discharge current obligations as usual; that its officers believed that collections in the fall of 1931 would enable it to pay its past-due accounts and to carry on its business; that the $1,000 bond filed by the petitioning creditors was grossly inadequate; and that the Jones Company had already sustained irreparable damages from the filing of the petition. The petition asked that the receiver be discharged and the business returned to the officers of the company, or that, in the alternative, the petitioning creditors be required to give bond in the sum of $100,000, and that the receiver be directed to continue the business.
Upon this petition, and on April 25, 1931, the court found that it would be for the best interests of all concerned to continue the hearing of the petition for dismissal of the receiver, and to permit the Jones Company to give a forthcoming bond for $25,000 and be restored to possession of its property pending a hearing on the involuntary petition; that an inventory should be taken of the stock of merchandise on hand; that the business should be continued, the Jones Company to retain all funds coming into its hands pending final hearing; and that a statement of all assets and liabilities should be filed. The order entered provided that the forthcoming bond should run to J.Q. Lane, as receiver; that the statement of assets and liabilities should be filed with the inventory; that the bankrupt might use the proceeds of cash sales for continuing the business, but might incur no indebtedness; that the application for dismissal of the receiver be continued pending the final hearing; and that the property be surrendered by the receiver to the Jones Company. The forthcoming bond was given in accordance with the order, and the assets and business of the Jones Company restored to it.
On May 2, 1931, the Jones Company filed its answer, denying that the petitioning creditors were creditors, and denying that it was insolvent or had committed any acts of bankruptcy. It prayed that the involuntary petition be dismissed and that it have judgment against the petitioning creditors for $100,000 damages. The answer was verified by J.H. Hawthorne, president.
On May 22, 1931, the New Orleans Coffee Company, Limited, the United States Tobacco Company, and the Chicago Macaroni Company, asserting that they were unsecured creditors of the alleged bankrupt, joined the petitioning creditors in praying for an adjudication.
On the same day, the Jones Company filed a statement of assets and liabilities as of April 25, 1931, as shown by this statement.
The total assets were, $654,345.07
Consisting of —
Cash ............................... $ 1,510 40
Accounts receivable
unsecured ............ $273,033 03
Notes receivable ...... 8,736 50
Accounts receivable
secured by
real estate
mortgages and
notes ................ 23,791 44
Accounts receivable
secured by
chattel mortgages
stocks
and notes ............ 28,638 49
Accounts receivable
secured by
real estate
deeds and notes ...... 144,177 74
___________
Total notes and
accounts receivable $478,377 20
Merchandise inventories 44,809 65
Real estate ........... $114,955 67
Office and warehouse
equipment ............ 8,492 15
Automobile and
truck equipment ...... 6,200 00 129,647 82
___________ ===========
Liabilities, total ............................... $184,787 91
consisting of —
Accounts payable .................. $ 65,982 86
Bank overdrafts ................... 13,710 96
Notes payable, due banks .......... 73,594 09
Notes payable, due brokers ........ 22,500 00
Bonds on West Memphis
Building ......................... 9,000 00
===========
The petitioning creditors (including those who joined in the involuntary petition), on May 25, 1931, moved the court to require the Jones Company to annex to its answer an itemized schedule of its assets and liabilities as a bill of particulars, to enable them to prepare their case for trial, since the statement of assets and liabilities already filed failed to give any detailed information. The Jones Company filed a response to this motion, denying that the petitioning creditors had any right to any more information than was furnished. The motion for a bill of particulars was denied by the court on the same day. The court then, upon motion of the Jones Company, required the creditors to make the allegations of their petition more definite and certain, which they did on May 27, 1931, by filing an amendment to the involuntary petition. To this amendment the Jones Company made answer on June 1, 1931, denying its allegations.
On June 2, 1931, the receiver, Mr. Lane, applied for an examination of certain officers of the Jones Company under section 21a of the Bankruptcy Act (11 USCA § 44(a), asserting, among other things, that by a financial statement as of December 31, 1930, the company had shown merchandise on hand of $129,562.53, whereas the inventory filed with the court showed merchandise at $44,809.65, a decrease of almost two-thirds within four months' time, without any corresponding increase in other assets, and an increase in liabilities, the statement of December 31, 1930, showing total liabilities of $184,471.02, as against $184,787.91 total liabilities as of April 25, 1931; that the receiver should inform himself as to what had caused the decrease in merchandise inventory; that the receiver believed that the Jones Company was interested in thirteen retail grocery stores in Jonesboro known as Martin Cash Stores and in other stores at other points; that it was essential that he be informed as to the actual facts with reference to the ownership of these stores, for the protection of creditors. The granting of this application was opposed by the Jones Company in a response verified by Mr. Hawthorne, which asserted that the retail stores referred to were customers of and debtors to the Jones Company.
On June 3, 1931, the court entered the following order:
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