Zeitinger v. Hargadine-McKittrick Dry Goods Co.

• Decision Date: 21 July 1917
• Docket Number: 4900.
• Citation: 244 F. 719
• Parties: ZEITINGER et al. v. HARGADINE-McKITTRICK DRY GOODS CO.
• Court: U.S. Court of Appeals — Eighth Circuit

244 F. 719

ZEITINGER et al. v. HARGADINE-McKITTRICK DRY GOODS CO.

No. 4900.

United States Court of Appeals, Eighth Circuit.

July 21, 1917

Randolph Laughlin and Matt G. Reynolds, both of St. Louis, Mo. (Julian Laughlin and Chase Morsey, both of St. Louis, Mo., on the brief), for appellants.

Charles A. Houts, of St. Louis, Mo., for appellee.

Before SANBORN, CARLAND, and STONE, Circuit Judges.

CARLAND Circuit Judge.

This is an appeal from a decree, entered February 6, 1917 adjudicating appellee a bankrupt on its voluntary petition and also from an order denying to appellants the right to intervene in said proceeding.

The appellee was first adjudicated a bankrupt on January 6, 1917 on its voluntary petition, and a receiver of its property appointed. Subsequently, on the same day, the order of adjudication and the order appointing a receiver were vacated, and a hearing ordered on the voluntary petition for January 13, 1917. On January 6, 1917, the board of directors of appellee adopted a resolution authorizing and directing the president and secretary of appellee, or either of them to execute on behalf of the corporation an instrument in writing, admitting the inability of said company to pay its debts and its willingness to be adjudged a bankrupt on that ground, and authorizing the president and secretary, or either of them, to take such immediate steps on behalf of said corporation as would be appropriate to have the same adjudged a bankrupt and a receiver appointed to take charge of its assets. On the same day the voluntary petition in bankruptcy of appellee was prepared, signed, and filed; the same being signed by Martin P. Donahoe, president. Schedule A attached to the petition named the following creditors:

Suit by George H. Allan, of St. Louis, Mo., for shares of profits on the manufacture and sale of bags ..............................	$30,000.00
Guaranty to Missouri Pacific Railroad Co. on account of its lease on Pontiac Building. Matured claim January 1, 1917 ...............	118,577.45
Unmatured claim on the same lease ..................................	343,000.00
Salaries due workmen, clerks, or servants for month of January .........	820.00
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Total ........................................................	$492,397.45

Schedule B showed assets of the value of $300,959.96, one item of which was: Deposits of money in banks and elsewhere, $196,176.73. At the hearing on January 13, 1917, appellants, being stockholders of appellee, presented to the court for filing a petition in intervention, setting forth the petition, findings of fact, conclusions of law, and decree of the circuit court of the city of St. Louis, Mo., in an action commenced in December, 1915, wherein the intervening petitioners were plaintiffs and the appellee and its board of directors were defendants.

It appeared, from the intervening petition and duly certified copies of the record of the suit in the circuit court, that the intervening petitioners, as stockholders of appellee, had commenced an action in said circuit court in December, 1915, against appellee and its board of directors, the general nature and purpose of which was to take from the possession and control of the board of directors all of the assets of appellee of every nature and kind, and to secure an accounting against the members of the board of directors for loss, waste, and damage caused by their fraudulent mismanagement of the affairs of the corporation; that appellee was a necessary party to said action in the circuit court, and appeared therein and filed its answer, as also did the board of directors; that upon the assurance by the defendants in the action in the circuit court that the status quo of appellee and its assets would be maintained, and that the same would not be disposed of until the case was finally determined and judgment entered, no temporary injunction was granted or a receiver appointed at the commencement of the action; that the case in the circuit court was finally brought to trial, the trial thereof continuing over a period of four weeks. At the end of the trial the case was taken under advisement, and was held until December 29, 1916, when the court announced its decision to the effect that it would grant an accounting and appoint a receiver, and at the same time fixed the bond of the receiver at $500,000.

Appellee and the board of directors contested the suit in the circuit court at every step. On the day the decision was announced counsel for the plaintiffs were asked to prepare a decree and submit the same to opposing counsel; the court stating that, if counsel could not agree upon the terms thereof, the court would settle same. On January 5, 1917, the decree was prepared and copies furnished to counsel for the directors and appellee. The circuit court on January 8, 1917, formally entered its judgment and decree, which had been informally announced on December 29, 1916. A receiver was appointed and took possession of all the assets of appellee, in the possession of the board of directors and what is known as the executive committee, and ever since has held the possession of said property subject to the order of the circuit court. It appeared, from the findings of fact, conclusions of law, and decree of the circuit court set forth in the record, that the circuit court adjudged that the board of directors had wasted, misappropriated, and lost the...