192 F. 392 | D.N.J. | 1911
Both of these orders cannot stand. They are based upon the same state of facts, but the findings are variant and inconsistent. The first order directs the payment over of $395,130.77, of which the sum of $371,674.50 is the total receipts from the sale of the capital stock of the bankrupt. To sustain the order as to the latter amount, the referee had to find that the shares so sold by the respondents were the property of such corporation; and, as to the' second, that such stock was owned by them, but not paid for. Either order may, but both cannot, stand.
■ In my judgment the’ so-called turn-over order can be sustained, though not for the amount found. The jurisdiction of the referee to make such order is challenged upon the ground that neither he nor the United States District Court had jurisdiction over the subject-matter of such petition, and that both Ellis and Graves are adverse claimants, and have never consented to such jurisdiction.
The proceedings resulting in such order were begun by the filing of a petition praying:
“That an ordbr may be made herein fixing and determining the amount due your petitioner from said Ellis and said Graves, as officers of the corporation, and for an order requiring them to show cause why they should not pay over the same to your petitioner, and for an order requiring them to pay to your petitioner such sum of money so fixed and determined by this court, and for such other and further relief in the premises as to the court may seem proper.”
■ Thereupon the referee made an order directed to Ellis as president and Graves as vice president and manager of such bankrupt, requiring them to show cause why the order prayed for should not be made. In response thereto respondents, respectively, filed their answers, in which) after protesting the jurisdiction of the referee and the United States District Court over the subject-matter of said petition, they admitted some of the allegations of said petition, disclaimed knowledge as to others, denied the remainder, and set up in great detail facts relating to the subject-matter of such petition as a defense to the charges therein made, praying that such petition be dismissed, and for such other and further relief therein as may be just and proper.
To find the exceptions therein referred to a reference to section 23 is necessary. By paragraph “a” of this section, jurisdiction is given to the United States Circuit • Courts. in certain circumstances over •controversies between trustees and adverse claimants concerning
The court having jurisdiction over the respondents as well as the subject-matter, the remaining question is whether the facts justify the finding o.f the referee. The testimony amply justifies the conclusion reached by the referee that respondents were the dominant force in the incorporation and organization of the bankrupt; its purchase of the Bierich patents from Jones; the issuing of $499,000 par value, being all of the authorized capital stock of the company, less $1,000 held by the incorporators, and the $25,000 in notes, as consideration for such purchase; the subsequent turning into the treasury of $200,-000 of such capital stock, and the making of the contract with Ellis for the sale of such treasury stock on a 40 per cent, commission; also that the turning over to Ellis of $74,000 and to .Graves of $72,500 par value by Jones of the capital stock issued to him as aforesaid was in pursuance of an agreement between such persons prior to the incorporation of such company.
In my opinion the moneys paid into the company by the respondents and used to meet the legitimate expenses of the company, whether incurred before pr subsequent to the beginning of such sales, should be credited to them on such sales of stock. This, as noted, the referee has not done. In the proceeding eventuating in his order levying an assessment upon the capital stock he allows respondents for alleged disbursements the sum of $125,026. These disbursements were made by respondents in the same transactions upon which the turn-over order is based, and it is difficult to understand why, if these disbursements were allowed in the stock assessment proceedings, they were not also allowed in the turn-over proceedings. The referee does direct that on the turn-over order the respondents be credited with any payments they may make under the order in the stock assessment proceedings; .but this relates to payments yet to be made, and has no reference to any payments made by respondents before the making of such order. The record brought up on review of the turnover proceedings will therefore be sent back in order that the proper credits may be made.
“By stipulation between counsel made in open court, and appearing "upon the record or transcript of the testimony, it was agreed that any testimony taken in either proceeding should be considered as taken also in the other proceeding, so far as it might apply thereto.’’
This statement, counsel for the respondents claims, is not the fact, and the stipulation entered on page 1772 of the record, taken literally, sunnorts respondents’ contention. Inasmuch as it is admitted that Ellis is possessed of property — and both the trustee and referee evi
Action upon the stock assessment order will be deferred awaiting final determination on the turn-over proceedings.