GAY MANUF'G CO.
'Io
GITTINGS.
46
GAY MANUF'G CO. et al.v. GITTINGS et at (Oircuit Court of Appeals, Fourth Circuit. October 19, 18112.) No. 30. CORPORATIONS-RECEIVERS-PRovABLE CLAIlIS-GUARANTY.
A corporation which had guarantied the payment of the principal and interest of railt'oad. bonds payable in 1911 snbsequently went mto the hands of a receiver. The railroad cOJllpany was solvent. had secured the bonds by mortgage of all its property. and had promptly met all couppns. Held, that owners of the railroad bOlids could not prove the guaranty of the corporation, and have a dividend declared thereon, or have money retained in court to meet a possible future liability on the guaranty, as against creditors of the corpor"tion, who were pressing for a sale and distribution, and who held either specific and general liens or demands past due.
Appeal from the Circuit Court of the United States for the Eastern District of Virginia. Affirmed. Statement by SIMONTON, District Judge: The Oay Manufacturing Company is a corporation under the laws of Virginia, engaged in the lumber business. Its operations were extensive, and it enjoyed large credit. Getting into pecuniary straits, a bill was. filed against it by Gittings and others,-a creditors' bill. The bill sets out that there is outstanding a mortgage upon all the property of the company to secure payment of bonds issued by it to the amount of $60,000; that the company cannot meet said bonds, and that a sale under the terms of the mortgage is inevitable; that, besides this, the company owes some $70,000, pressing for payment; that of these at least $21,000 is in judgment or under mechanic's lien, and that there is danger that the large and valuable assets Of the company will be wasted and lost. The bill then prays the appointment of a receiver, and the settlement of the affairs of the company. The trustees of the mortgage and the corporation, parties defendant, filed their answers, substantially admitting the facts of the bill. A receiver was appointed. The cause was referred to a special master on 24th August, 1889, who made his report at length. This report was confirmed in part 13th January, 1892. On 4th April, 1892, an order for the sale of all the property of the company was entered. This order recognized certain claims as valid and existing debts of the Gay Manufacturing Company, and. as liens on the property in the order set out in the report; but no distribution of the proceeds of sale is provided for. Pending these proceedings, certain persons, among whom were Gittings, Brooks, and others, complainants in the bill above alluded to, filed a petition in the cause December 4, 1891. This petition, in substance, sets forth that they are holders of certain bonds of the Suffolk & Carolina Railroa.d Company, guarantied by the Gay Manufacturing Company. After stating in detail what bonds they hold, they add that many other persons unknown to them are also owners of bonds of the same class and issue as those held by the petitioners. The schedules filed with the petition show that on the 13th April, 1886, the Suffolk & Carolina Railroad Company prepared for issue coupon bonds payah11'. mol to pl'lnl'il'al, in 1911, With semiannual COIlI'JOIUI 'f01' illt(']·p;;t. II,," a 'O\'l'l"
4. ingall of. its property of every kind and description. That, as these bonds were Wl'lbe iSsnedTfor .the pUl'pOs&()f the road to $ll:bEl.r, la:q.p.s ·of.,the Company, some that company agreed to guaranty said bonds. .On each: bOild, before its issue, was indorsed the following: ·9f Virginia, to wit: The Gay Manufacturing' Company indorsement ofthe.Bum ,of one dollar and other g'ood and vi\li:u"tJIIlPou!llde'riLt1ouB,and'benefl.tll to It 'paId and acdtuing. the Gay Manufacturing' lJompaoy; (jf Suffo1k: jieteby g'uatantiesand assures uoto the hoJdet, of this bond the, p"yIIient of'the Ilame, principal and interest coupons, itll terms thereinse1:"out and' contained. In witness whereof, "etc.
These bonds and.this the guaranty referred to in the petition. 'Thti'petitionavers' 'that finder the terms of the guaranty stated they are of the Gay MallUfacturingdompany, and that, in case of are entitled tl' be. recognized as such, and their claims duly taken into account in the distribution of, To this end they ask that the proper di.vidend be as· certainell ?arid allowed,and I1'etained in court until the contingency shall occl'ir. If the bonds be paid by the railroad company, the money, so retained may be .distributed among' the other creditors; if not, 'th8it ittlje used in mooting the guaranty. They ask to be made parties :to this suit. No formaIpleading but the petition came tobe:heard as on ·demurrer, and was dismissed by the circuit court ,o:ti: 21st January, 1892. The petitioners appeal to this court, assigning' for' errors the refusal' to allow the petitioners to. file their petition; to 'a]1()w petitioners to be' made parties to the ¢ause; tne !refusalto aseertain and adjust the claims of the petitioners, and .if:(},awllil'd their share of the assets of the Gay ManufacturiD:g Company;·,'the' decree of- the sale of the property' of the Gay 'ManUfacturing without first making the petition· ers' '.l'here is no' ground for suspicion of insolvency in the Railway Company, and to this day it has met its coupons tIiaturity." It'is not known' whether the assets and propert:rof'the Gay M'anufucturing Company will· pay the mortgage, and claims proved in the main cause. W.L. , , " Robert ll, ,})pentis and Alfred P. Thom, for appellees. Before<OOFF, Circuit Judge, and HUGHES and SIMONTON, District Judges. ' SIMONTON,District Judge, (after stating facts.) This is a case of novel iimpression. In th'e argument before us no caiile ip point wasqnotedj · and no authorities presented, bearing <llrectly on the issues involvetfl.The petitioners are holders of. bonds of the Suffolk & Car9linaRailroad Compa.ny, due, as to principal, in 1911, with semiannual coupons for interest. On of these bonds is the gliarantyo:HheGay Manuf8lCturing They claim. the right to prove their contract in the main caUSe,' and to have a dividend declared thereon, the amount of which is. to be retained by the court until it shall appear whether the guaranty go into effect or not; and they do this admitting that the railroad company is perfectly solvent,
GAY, MANUF'G CO. ". GITTINGS.
47
with no "fMr' of its insolvency in the near future. If the petitioners' bondholders had this contract of guaranty secured by a lien, they could not ask or receive Inore than they now claim. It is contended, however, that thel!!e proceedings in the main cause are virtually the destruction of the corporation, and will end in the administration of its assets; that the assets of a corporation, under these circumstances, are impressed with a trust in favor of creditors, and that, as such creditors, they are entitled to come in and be protected.. This brings us to the vital issue in this appeal: Are the bOndholders, holders of this guaranty, entitled to rank as creditors on the present assets of the Gay Manufacturing Company? The creditors be. fore the court, pressing for a sale and distribution, are creditors holding a special lien by way of mortgage; creditors holding general liens by way of judgment and execution and mechanic's lien; and, third, creditors holding demands past due, recognized and allowed by the court. It is clear that, as against the rights of lien credioors, these petitioners' cannot be heard. These liens must and will be enforced as of right. What are the equities of these petitioners as against the holders of demands past due, recognized by the court? The petition contemplates one of two courses: Either to postpone the allltributionof the aSsets until the period shall arrive when the responsibility under the guaranty shall have been determined,' or to set apart" now ollt'of the assets the dividend to" which these bonds would be entitled were they present creditors,and retain this in court to await the result of the guaranty. 11 this shows that the guaranty is not needed, then the money thus retained will be divided among the creditors. The first looks to the entire postponement of payment of the claims of past-due creditors; the second, to the postponement ,in part. The bare statement of the first proposition stamps it as one so inequitable that no court would entertain it. With regard to the second, the creditors before the court have fulfilled all that the law requires. They made their contract on short time. When default occurred they took prompt steps to obtain payment, and have, by activity and vigilance, established them in court. The petitioners hold the bonds of a solvent railroad company, secure,d by mortgage of all of its property, the coupons of which have been; a.re, and in all human probability will be, promptly met. On each of these bonds is the guaranty of the Gay Manufacturing Company, which mayor not become an actual liability in 1911. 'l;he first difficulty in their way is, is this a provable clam at this stage of the main case? When a court of equity calls upon creditors to come in and prove their claims before the master, it is a substitute for separate suits ltt law on each of these claims; and it would seem as if the party proving must have not only a cause of action, but a right of action. Claims not yet due have no standing in court, unless special provision be made by statute for them. There is no such statute in the United States Statutes. Under the bankrupt law, (Rev. St. 5069,) "when the bankrupt is bound as drawer,** * surety, or bail, or guarantor upon any *' *' * contract,*' * *' but his liability does not become absolute until after the adjudication of bankruptcy, the creditor may prove the
REPORTER,
vol. 58..
and before final dividend is d.oolared." Such a claim. cannot be proved before the liability has becromefixed. Until that time it is not regarded as a debt due and paya;l>le, or even as a debt existing, but not payable until a future daY,soas to be prov,able:. In re Loder, 4: Ben. 305. But it is said that the 'petitioners ha.ve an equity which this Court will recognize alldafuninister. The practical difficulty is inl!lurmountable. If this equity is recognized and .protected,to what extent shall it be done? Will: ,the courts declare:a, dividend proportio;Qate ,to the whole prinand ,the coupons accruing be,tween this. date and 1911.? Will it go into an estimate by balancing probabilities, and attempt now to fix a $Um. which will represent the present. value of this 'gul¥ratity? When! ,the' holders of these. bonds accepted the simple (;guaranty of· tha, rGay Manufacturing Oompany at the long date, they did so knowing· that it was subject to all the vicissitudes whichmay,befall a.::trading corporation. They voluntarily sus· of action until a IlJ,teperiod, knowing that the. cQrporationwould incur 'debts, and that these debts must be paid. The petitioners at this 'stage o{ the cause ,can have no standing in c.Qurt. This ease has been,decided as, between creditors and persons clai.ming to be creditors·. , It at the bar that the property of the ,Gay ManUfacturing Oompany may realize more than enough to pay theUensand the proved past-due debts. Shoul4 this be the result of the sale, there way arise a very different ques· titmwith regard to tbds surplus, as between the petitioners and the stockholders. :No optnion -is expressed on this point. . Deciding the case simpty, upon the equities between creditors and these peti: tionel's, ;we ,lUfum the; c,ircuit decree dismissing the petition, with costs. Let tne case be remanded to the circuit court for such proceedings as may be. proper. .As great delay has already in enforcing .the unquestionable rights of lienholders, let the man· date issue on the filing of this opinion. NORTHERN PAC. R. co. v. AMACKER et aI. (Circuit Court, D.. November 14, 1892.)
same, ·after such' liability becomes fixed,
1.
PUBLIO LANns--PRE,lCMP'l'ION-ABANDONMENT.
One S. :(lied his declaration of intention to claim certain land near Helena, Mont., .under. the pre-emption law. He built a cabin, and lived there part of. the year. 1869. He thim removed to Helena," and resided there Iiine.years.Thereatter he resided in Butte City. 'He failed to comply in any way with thepre-emptlon law after leaving the land. Held, that he had lI,bajldoIl,ed his right to purchase 'When hp left the land.
2.
SAMljl-,..BoMEsTE.\D
its land grant, which was to littach when the,Me should be definitely fixed, and a plat filed in the geneta11and office: . The general toute was located ]'ebruary 1, 1872. ,On May 3, 1872, one;M.·,filed an auplication to enter certain land as part Of his homestead clahn. Notice of the withdrawal of the lands at the time of the ti,xWg. of t;he {:eneraI route of the railroad from sale, entry, or preemption was filed in the local land office in Helena, Mont., May 6, 1872. The act of' April 21, 1876, provided that entries made in good faith by actualsettlers !UDder any law of the United States upon laUds within the
Ill. 18(f4 the .. Northern. Pacific Railroad received
LAND GRANT.