William Firth Co. v. South Carolina Loan & Trust Co.

• Decision Date: 05 May 1903
• Docket Number: 481.
• Parties: WILLIAM FIRTH CO. et al. v. SOUTH CAROLINA LOAN & TRUST CO. In re GOLDVILLE MFG. CO.
• Court: U.S. Court of Appeals — Fourth Circuit

122 F. 569

WILLIAM FIRTH CO. et al. v. SOUTH CAROLINA LOAN & TRUST CO.

In re GOLDVILLE MFG. CO.

No. 481.

United States Court of Appeals, Fourth Circuit.

May 5, 1903

S. J Simpson (Simpson & Bomar, N. B. Dial, and Simpson & Cooper on the briefs), for appellants.

W. C Miller and Henry Buist (T. M. Mordecai, on the briefs), for appellee.

There was in the county of Laurens, in the state of South Carolina, a mercantile firm composed of J. S. Blalock and L. W. C. Blalock, father and son, doing business under the name of the Goldville Manufacturing Company. In 1900 the firm enlarged its business, erected cottin gins and cotton oil machinery, and contemplated erecting a cotton mill. These gins and cotton oil machinery were upon a tract of land owned by the copartners. The cotton mill was to be erected on the same land. Carrying out the scheme of a cotton mill, they placed orders for machinery with many parties. After this was done it was deemed best to form a corporation. To this end application was made to the Secretary of State, under the provisions of the act of Assembly in that behalf made, and a charter was issued to the Goldville Manufacturing Company of Goldville, S.C., on the 23d October, 1900. The capital stock of the corporation was fixed at $100,000, books of subscription were opened, and the whole stock subscribed for by L. W. C. Blalock, M. E. Browning, and J. S. Blalock, on the 22d October, 1900. The stock was paid up in full in property. On the 24th October, 1900, at a meeting of the stockholders, it was resolved that a special meeting of the stockholders, as required by law, be called for the purpose of authorizing the issue of bonds to the amount of $100,000, secured by mortgage of all the property of the corporation. The declared purpose of the proposed issue was to provide the necessary means to complete the buildings, and to purchase machinery, looms, engines, boilers, implements, and tools, and to enable the directors to carry out the purpose for which the corporation was formed. These purposes are expressed in the charter as follows: 'The general purpose of the corporation, and the nature of business it proposes to do, is to manufacture, spin, dye, print, finish, to make yarns, and sell all goods of any kind, made of cotton or wool, or of which cotton or wood, or other fibrous articles, may form a part, or any other article of any nature or kind whatsoever which they may from time to time desire, also the manufacture of cotton seed, cotton seed oil, hulls, linters, and all other cotton seed products, and to sell the same, and to make all machinery, tools, and implements necessary to or used for such purpose, and to erect such mill buildings, machine shops, stores, and all other works, as may be required to carry on such branches of manufacture and business.'

At the called meeting of the stockholders, by unanimous vote, an issue of bonds to the amount of $75,000 was authorized for the purpose indicated, and the South Carolina Loan & Trust Company was selected as trustee of the mortgage to be executed to secure these bonds. The bonds were prepared and a draft of the mortgage was made by W. H. Lyles, Esq., solicitor of the corporation. This draft was sent by Mr. Lyles from his residence in Columbia to Goldville, in South Carolina, by his clerk, and was returned to him signed by the Goldville Manufacturing Company, without the addition of the words, 'of Goldville, South Carolina,' and with two subscribing witnesses, sealed with the seal of the company. Consequently he and the secretary went to Charleston, delivered the deed to the president of the South Carolina Loan & Trust Company, and saw him and his cashier write upon it the acceptance of the trust. At the same time the bonds were to be delivered to the trustee. The mortgage covered two tracts of land, one of 1,365 acres and another contiguous of 190 acres, 'together with all the buildings and improvements situated on said premises, consisting in part one cotton mill building, 280 by 75 feet, with boiler room 33x35 feet, and engine room 38x35 feet, attached; one 20-ton oil mill building; one ginnery building; 20 operatives' houses and other buildings; also all machinery, shafting, engines, boilers, tools, and appliances belonging to said mortgagor, and used in its cotton mill business, its cotton oil business, and its ginnery business, consisting in part of A. T. Atherton & Co.'s pickers and intermediates, Saco and Petee's cards, spoolers, and drawers, Providence spindles, Fales and Jenks twisters, Fall River spinning frames, Atlas engine and boilers, International sprinklers, General Electric Company's Dynamo Climax Engine, Cumberland Iron & Machine Company shafting and pulleys, belting, mill supplies, etc.; also one Cardwell Machine Company 20-ton cotton oil mill outfit, one Daniel Pratt Gin Company's ginnery outfit, consisting of three gins, one power press, and other articles, together with all and singular the rights, members, hereditaments, and appurtenances to the said premises belonging or in any wise incident or appertaining, and all and singular the corporate rights and franchises of the said the Goldville Manufacturing Company.'

The mortgage, when thus executed, was sent by Mr. Lyles, attorney for the mortgagor, and lodged for record and deposited with the officer in Laurens county charged with the registration of deeds of conveyance and mortgages of real and personal property. It was recorded by him in a book set apart for recording mortgages of realty. He had in his office another book in which chattel mortgages were recorded. He did not record this mortgage in that book. When the resolutions were passed authorizing the issue of these bonds, they contained a resolution authorizing the president and treasurer to sell the bonds at not less than . . . cents on the dollar, and until sold these officers were authorized to pledge the bonds as collateral for notes of the company for the purpose of borrowing money upon the machinery, etc. Various efforts were made to sell the bonds, without avail, and they were then used as collateral. Ten thousand dollars were borrowed from the Charleston Savings

Institution, by note, upon 15 bonds, of $1,000 each, as collateral; $5,000 were borrowed from F. J. Peltzer, by note, with seven $1,000 bonds as collateral; $10,000 were borrowed from the People's National Bank, with thirteen $1,000 bonds as collateral; $5,000 were borrowed from the Bank of Charleston, N.B.A., by note, with six $1,000 bonds as collateral. Another loan of $5,000 was made with the People's National Bank, by note, with six $1,000 bonds as collateral; $4,654.58 were borrowed from the Bank of Columbia, by note, with five $1,000 bonds as collateral. All of the proceeds of these loans, except those from the Bank of Columbia, were applied to payment for machinery purchased and contracted for. The proceeds of the loan from the Bank of Columbia were used for the payment of freight on the machinery. The contracts for the machinery were made by the mercantile firm, the Goldville Manufacturing Company. They were not paid for when the corporation was formed. The corporation then purchased all the machinery, assuming the contracts thereupon with the assent of the creditors, who accepted the corporation as their debtor. All the remaining bonds were used as collateral security for machinery purchased from various companies and individuals. The original mortgage, after its record in the clerk's office of Laurens county, was lost, presumably in the mail. By stipulation of counsel for office copy was used in its stead. The office copy represents that it was signed and sealed for the corporation in the presence of two witnesses, one of whom proved the deed for record. Acceptance by the trustee is also witnessed by two subscribing witnesses, one of whom proved the deed for record. The name of the corporation expressed in its charter is the Goldville Manufacturing Company of Goldville, S.C. The mortgage is signed in the name of the Goldville Manufacturing Company, without the concluding words, and the same designation, with the same omission, it used in the bonds.

Having erected its mill, the corporation went on in business and incurred numerous debts. It did not meet with success, and became greatly embarrassed. Proceedings were instituted in the state court by the trustee, praying foreclosure of the mortgage and the appointment of a receiver. Very soon thereafter proceedings were instituted in the District Court of the United States by the unsecured creditors, seeking to put the corporation into bankruptcy. After some negotiation it was agreed that the corporation should be declared a bankrupt upon its own petition, and that all future proceedings should be conducted in the bankrupt court. C. C. Featherstone, Esq., was duly appointed trustee. Thereupon the South Carolina Loan & Trust Company, the People's National Bank of Charleston, the Charleston Bank, Charleston Savings Institution, F. J. Pelzer, and Saco & Petee Machine Shops filed their petition in the court below praying the foreclosure of the mortgage executed to secure the bonds held by them. Thereupon an order was entered requiring service of the petition on the bankrupt corporation, upon the trustee, Mr. Featherstone, and upon the creditors who had filed their petition in bankruptcy against the corporation, calling upon them to answer. This was done, other creditors holding bonds as collateral intervened, and the case was referred to a referee to take the testimony. The referee made his report, and the case came on to be heard upon the pleading and testimony. The court below entered a decree for foreclosure in accordance with an opinion filed in which there was a full and complete discussion of the...