Summit Silk Co. v. Kinston Spinning Co.

• Decision Date: 29 March 1911
• Parties: SUMMIT SILK CO. v. KINSTON SPINNING CO.
• Court: North Carolina Supreme Court

70 S.E. 820

154 N.C. 421

SUMMIT SILK CO. v. KINSTON SPINNING CO.

Supreme Court of North Carolina

March 29, 1911

Appeal from Superior Court, Lenoir County; O. H. Allen, Judge.

Action by the Summit Silk Company against the Kinston Spinning Company. From the judgment, defendant appeals. No error.

G. V Cowper and H. E. Shaw, for appellant.

Loftin Varser & Dawson, for appellee.

WALKER J.

Plaintiffs allege that they contracted to sell to the defendant, Kinston Spinning Company, what is known as a "throwing machinery plant," which is used in the manufacture of certain kinds of silk products, upon the understanding and agreement that the spinning company should increase its capital stock from the amount ($50,000) it was then represented to be to $80,000, and that said capital stock, when so increased should be divided into preferred stock to the amount of $30,000 and common stock to the amount of $50,000, the plaintiff G. W. Graham Company to receive as its part of said stock preferred shares of the par value of $12,000 and shares of common stock of the par value of $25,000, the balance of the preferred and common stock to be issued to William H. Ashley, and that when this arrangement was perfected and the stock issued in accordance with the said agreement the throwing machinery plant should become the property of the Kinston Spinning Company, and in the meantime the title to remain in the plaintiffs or the G. W. Graham Company. That the machinery plant was delivered under this agreement to the spinning company, who receipted for it as the property of the G. W. Graham Company. It is further alleged that the spinning company, by its officers or agents, who acted for it in the transaction, falsely represented their capital stock to be $50,000, whereas it was much less than that amount, and also falsely represented the amount and condition of its assets, and, instead of being a solvent and going concern as the plaintiffs were led to believe, it is an insolvent and crippled institution, badly managed, and with no funds to conduct its business; and, further, that it has repeatedly refused, upon demand, to comply with its part of the contract of sale and is really unable to do so, and that plaintiff's machinery plant has, by hard usage, become greatly deteriorated and diminished in value, and that plaintiffs are in imminent danger of losing the said property. That the spinning company has used the plant and received and enjoyed the benefits thereof for a long time, which use is reasonably worth the sum of $6,000, and that the spinning company is indebted to the plaintiff in that amount, and also is liable for the injury to the plant, other than ordinary wear and tear, and for its value, if delivery of the plant to the plaintiff cannot be secured. The plaintiff demands judgment for the sum of $6,000 for the detention and use of the plant, for the recovery of the plant itself, for the appointment of a receiver to take charge of the said plant and the estate and effects of the spinning company, and for general relief. The defendant denied the material allegations of the complaint, and affidavits and exhibits were filed by the respective parties for the consideration of the judge, upon the application for the appointment of a receiver.

At a hearing before Hon. O. H. Guion a temporary receiver was appointed, and the cause afterwards came before Hon. O. H. Allen, who upon the pleadings and proof found as a fact that plaintiff had shown an apparent right to the property, the subject of the action, which is or should be in the possession of the defendant, and that the property and the "rents and profits" thereof are in danger of being lost; the value of the throwing machinery plant being $15,056. He also found as a fact that the Kinston Spinning Company is insolvent and is indebted to the plaintiffs, its creditors, as above set forth, and that the Summit Silk Company, the G. W. Graham Company, plaintiffs in this action, the Kinston Spinning Company, and Kinston Real Estate Company are all corporations created and existing under the laws of the state of New Jersey; the two last-named companies having real and personal property in this state. The Kinston Real Estate Company was, on motion of the plaintiffs, made a defendant because, as the judge found, it has or claims an interest in the subject of the controversy. Upon these and other findings not material to be stated, his honor, Judge O. H. Allen, made the receivership permanent, and invested the receiver, E. M. Land, with all the powers conferred by the statute (Revisal, c. 12, subc. 41, §§ 846 et seq.), and especially with those conferred by chapter 21, entitled "Corporations," and subchapter 13 (section 1219 et seq.), with special directions to advertise for creditors to come in and prove their claims, and for all parties, including stockholders, interested in the assets of the defendant to come in and make themselves parties to the action and protect their rights. It was provided in the order of the court that no finding of fact made for the purpose of passing upon the motion for the appointment of a receiver should prejudice either party in the further progress and trial of the case, and that the parties should have the right of amending their pleadings. The order appointing the receiver having been duly entered and the cause retained for further orders and directions, the defendant, Kinston Spinning Company, excepted and appealed.

The judge, at the request of the spinning company, reconsidered his findings of fact, but declined to change the same, and we will not do so; there being ample evidence to support them. The objections urged by the appellant to the judge's order are: (1) That the plaintiffs had a complete and adequate remedy at law by an action for the recovery of the specific property and damages, with the ancillary remedy of claim and delivery. (2) That a general receiver should not have been appointed, but only a special receiver, to hold and preserve the property pending the litigation.

We do not understand it to be necessary, since the change in the constitution of our courts, the blending of the two systems of law and equity, and the radical, though useful and practical innovations in pleading and in the practice and procedure of our courts, that a plaintiff, who resorts to an equitable remedy for the protection of a right or the redress of a grievance, should first reduce his claim to judgment and exhaust his legal remedy by execution or other appropriate process, as under the old system. We have held that this is not required to be done, but that the right will be administered and full relief given in one action. Bank v. Harris, 84 N.C. 206; Mebane v. Layton, 86 N.C. 574; McLendon v. Commissioners, 71 N.C. 38. The subject is so fully discussed in Bank v. Harris that we need not longer dwell upon it.

Our statute is so broad and comprehensive in its provisions regarding the appointment of receivers that it is not necessary to refer to the general power of a court of equity in such cases. Revisal, § 847, provides that: "A receiver may be appointed before judgment on the application of either party when he establishes an apparent right to property which is the subject of the action, and which is in the possession of an adverse party, and the property or its rents and profits are in danger of being lost, or materially injured or impaired; except in cases where judgment upon failure to answer may be had on application to the court;" and by section...