Wing & Evans v. Hartupee

• Citation: 122 F. 897
• Decision Date: 29 May 1903
• Docket Number: 35.
• Parties: WING & EVANS v. HARTUPEE et al.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

122 F. 897

WING & EVANS v. HARTUPEE et al.

No. 35.

United States Court of Appeals, Third Circuit.

May 29, 1903

George E. Shaw, for appellants.

Boyd Crumrine, for appellees.

Before GRAY, Circuit Judge, and BRADFORD and McPHERSON, District judges.

J. B McPHERSON, District Judge.

This is a suit in equity brought by a judgment creditor of the Charleroi Plate Glass Company to compel William D. Hartupee and George W. Crouse to account, inter alia, for the value of certain shares of stock of the Pittsburgh Plate Glass Company. Other questions were also raised in the court below but no other need be considered here. The facts, which are not in dispute, are so clearly stated by the learned circuit judge that we reproduce nearly all his opinion from the report in 112 F. 817 et seq.:

'The purpose of the amended bill is to charge the defendants George W. Crouse and William D. Hartupee, personally, with the plaintiffs' judgment against the Charleroi Plate Glass Company. The answers are responsive to, and in denial of, all the averments of the amended bill upon which the plaintiffs' case rests. The only witnesses examined by the plaintiffs were the two named defendants, and their testimony sustains the answers. The amended bill does not allege that the Charleroi Plate Glass Company was insolvent at the time it sold its plant and other property to the Pittsburgh Plate Glass Company, or at the time when these defendants entered upon the service of receiving and applying the stock and bonds derived from the sale. The evidence does not show such insolvency. To the contrary, it satisfactorily appears that the company was then entirely solvent. The sale was voluntary, and made because deemed by the vendor company advantageous to it. It was the confident and reasonable belief of all its directors and stockholders that, after payment of all its debts, there would remain a large surplus of the consideration realized from the sale for distribution among the stockholders. In that expectation, these defendants undertook the discharge of the duties of their appointment.

'Their appointment was in this wise: At a meeting of the board of directors of the Charleroi Plate Glass Company held March 26 1895, the following resolution was adopted:

''Resolved, that the directors of this company recommend to its stockholders, at their meeting to be held this day, that a resolution be passed, appointing George W. Crouse and William D. Hartupee as trustees to receive the shares of stock in the Charleroi Plate Glass Company held by each stockholder, and make the proper exchange for the same in shares of the Pittsburgh Plate Glass Company.' 'Accordingly, at a meeting of the stockholders of the Charleroi Plate Glass Company held the same day, the following resolution was adopted:

''Resolved, that the recommendation of the board of directors, suggesting that George W. Crouse and William D. Hartupee be appointed trustees for the transfer of stock, be approved by the stockholders, and that the stockholders of the company be instructed to place their holding of stock in the hands of said trustees, to be exchanged for their proportion of the shares of the capital stock of the Pittsburgh Plate Glass Company after the debts of the said Charleroi Plate Glass Company are paid, and that said trustees shall give each shareholder their trustees' receipt for all stock delivered to them of holdings in the Charleroi Plate Glass Company, and that each shareholder give proper receipt to said trustees for stock delivered to them of the Pittsburgh Plate Glass Company.'

'At this same meeting of the stockholders the following resolution, also, was adopted:

''Resolved, that in view of the sale of the property and business of this company to the Pittsburgh Plate Glass Company, with the exception of its cash, book accounts, and bills receivable, that the president be, and he is hereby, authorized and empowered with full authority to close up the affairs of the company, and make proper distribution of the remaining assets by dividends to the stockholders of the company, and that he be authorized to employ such assistance as he may deem necessary in performing these duties.'

'George W. Crouse was the president of the Charleroi Plate Glass Co., and William D. Hartupee was the secretary of the company.

'At a meeting of the board of directors of the Charleroi Plate Glass Company held on June 6, 1895, the following resolution was adopted:

''Resolved, whereas, the stockholders and the directors of this company did heretofore appoint George W. Crouse and W. D. Hartupee trustees to act with reference to the exchange of the stock of this company for the stock of the Pittsburgh Plate Glass Company, deliverable to this company in payment of its property; and whereas, certificates representing the stock of the Pittsburgh Plate Glass Company have been issued and delivered in part, and the residue thereof is ready for issue and delivery upon performance by this company of certain requirements respecting title or incumbrances: Therefore, resolved, that the officers of this company be, and they are hereby, authorized, empowered, and directed to transfer upon the books of the Pittsburgh Plate Glass Company to George W. Crouse and W. D. Hartupee, trustees for the Charleroi Plate Glass Company, all the stock of the Pittsburgh Plate Glass Company due or coming to this company as aforesaid, with full authority to said trustees to assign and transfer the said stock to the various persons entitled thereto through or under this company, when and as said trustees shall see fit so to do; and said trustees, pending the liquidation of the company's affairs, are authorized to pledge said stock standing in their name to secure any indebtedness that exists or that may be hereafter created.'

'Crouse and Hartupee acted under the above-quoted several resolutions adopted by the board of directors and the meeting of stockholders of the Charleroi Plate Glass Company.

'By the terms of the agreement of sale between the two plate glass companies, the amount of stock and bonds of the Pittsburgh Plate Glass Company deliverable to the Charleroi Plate Glass Company was as follows, namely: Of stock, $580,000 (par value); of bonds, $441,000. The whole thereof came into the hands of the two named defendants, and the stock and bonds were sold by them from time to time as they could find purchasers. As sales of stock and bonds were made, they were reported to the treasurer of the Charleroi Plate Glass Company, and the proceeds fully and satisfactorily accounted for to and with the company, through its treasurer. These sales resulted in a large loss upon the face value of the securities by reason of depreciation in their market value. The stock realized $324,675. The bonds realized $432,180. The entire proceeds were applied by the defendants Crouse and Hartupee to the debts of the Charleroi Plate Glass Company. Nothing was distributed to or among any of the stockholders.

'I am fully satisfied from the evidence that the defendants Crouse and Hartupee sold and disposed of all the stock and bonds intrusted to them at fair and proper sales, and for the very best obtained prices. The charges to the contrary made in the amended bill of complaint are not sustained by the proofs. Crouse was the accommodation indorser of all the outstanding notes of the company about to be mentioned and obviously it was his interest in his own belief to realize the utmost from the assets of the company. That he was diligent and faithful in all this business is abundantly shown.

'Was there any misapplication of the fund? The agreement of sale bound the Charleroi Plate Glass Company to convey its property to the Pittsburgh Plate Glass Company by good and sufficient deeds, free and discharged of all liens and incumbrances. Now, at the date of the agreement of sale the real estate of the Charleroi Plate Glass Company was incumbered by a mortgage of the company given to secure corporate bonds to the amount of $500,000, which were all then outstanding. Of these mortgage bonds, $31,000 had been used previously to pay a debt owing by the mortgagor company to the Charleroi Coal Co., and all the rest of the bonds were held by various banks as collateral security for the payment of corporate notes which the Charleroi Plate Glass Company had issued. These notes amounted to over $700,000, and for the payment of all of them the mortgage bonds had been pledged to the holders of these notes. In order to carry out its agreement of sale, and to obtain the consideration, it was necessary for the Charleroi Plate Glass Company to lift all these mortgage bonds, and have its mortgage satisfied. To accomplish this, the board of directors of the Charleroi Plate Glass Company passed the above-quoted resolution of June 6, 1895, and, acting under the authority thereby conferred, Crouse and Hartupee pledged the stock of the Pittsburgh Plate Glass Company to the banks to secure the corporate notes held by them, and thus, by arrangement with the banks, they were able to lift the pledged mortgage bonds.

'It is clear to me that the board of directors had lawful power to pass the resolution of June 6, 1895, and that Crouse and Hartupee were justified in acting under it in the manner in which they did. The company was then solvent, and it had not lost the right to control its affairs and dispose of its assets. The authority conferred by the resolution of June 6, 1895, upon Crouse and Hartupee, as the representatives of the company, was necessary in order to fulfill the company's obligation to its vendee, close the sale of its property, and obtain the proceeds of sale. Without the grant and exercise of that authority, these things could not have been

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