Little v. Southern Cotton Oil Co.

The opinion of the Court was delivered by Mr. Justice Blease. This action was commenced in the Court of Common Pleas for Chesterfield County in 1917, the plaintiffs seeking to recover of the defendant the sum of $1,000.00, the value of certain cotton seed, alleged to have been converted by the defendant. Plaintiffs claimed that the cotton seed was incumbered by a duly recorded crop mortgage in their favor, executed by one H. E. Braswell in 1912, and that the indebtedness, the payment of which had been secured by the mortgage, had not been satisfied at the time of the institution of the suit. The defendant first filed a general denial. Later, by successive amendments, the defendant alleged that the defend *482 ant corporation was a subsidiary company of- the Virginia-Carolina Chemical Company, another corporation, all of the stock of the defendant being owned by the last-mentioned corporation; that in 1924, both the Virginia-Carolina Chemical Company and the defendant were placed in the hands of receivers by the orders of the United States District Courts for the Eastern District of South Carolina and the Western District of North Carolina, these proceedings being ancillary to prior orders appointing receivers for the said corporations in the United States District Court for the District of New Jersey; that by orders of the District Courts of the United States for the Eastern District of South Carolina and the Western District of North Carolina, made in the receivership proceedings, all creditors were required to file their claims within a specified time with the persons designated, or else suffer their claims to be barred; that the capital stock of the defendant corporation, with the approval of the proper Court, was sold by the receivers of the Virginia-Carolina Chemical Company; that the sale was confirmed by the New Jersey Court, and also by the United States District Courts for the Eastern District of South Carolina and that Court of the Western District of North Carolina; and later, in 1925, the receivers were duly discharged. Defendant claimed further that the demand of the plaintiffs, if any they had, had been transferred to the funds representing the purchase price of the stock of the defendant corporation, and consequently the plaintiffs are barred from any claim or demand against the defendant. ' Although the action was one at law, both the parties waived jury trial, and consented to an order referring the case to the Master to take the testimony and report the same to the Court. Upon the filing of the Master’s report, the cause was heard before Hon. E. C. Dennis, Circuit Judge, at chambers, on September 21, 1929, who rendered a verdict, and ordered judgment in favor of the plaintiffs for the sum of $1,000. Judge Dennis specifically held: (1) That the preponder *483 anee of the evidence showed the allegations of plaintiffs’ complaint were true, and that the defendant was liable for the cotton seed converted; and (2) that the decrees of the Federal Court did not bar the suit of the plaintiffs. From the order of the Circuit Judge, the defendant has appealed to this Court. The six exceptions interposed raise the three questions stated hereinafter, which we pass upon. In determining the appeal, we must be guided by the rule of law that, in this action at law, we are bound by the findings of fact of the Circuit Judge, if there was any evidence at all upon which those findings were based. The first question is this: Was there any evidence from which delivery of the seed to the defendant • could be reasonably. inferred ? There was sufficient eyidence, although it was not particularly strong, to sustain the finding of the Circuit Judge' against the defendant in this regard. Braswell, the mortgagor, was also the agent of the defendant for the purpose of buying cotton seed. Fie admitted to one of the plaintiffs that he sold to his principal the seed covered by the plaintiff’s mortgage. There was also evidence that Braswell’s cotton, on which plaintiffs held a mortgage, was ginned at Braswell’s gin, the seed commingled and hauled away with other seed of Braswell, sold and shipped to the defendant, and that Braswell received checks from the defendant in payment of the seed. The second question is this : Is the defendant relieved because Braswell, its agent, was acting against the principal’s interest? Even if Braswell was attempting to defraud, and did defraud, his principal, while defrauding plaintiffs, the defendant is still liable for the value of the seed, unless perhaps, it could be shown that Braswell and the plaintiffs were acting in concert. There seems to be no evidence of any collusion between the plaintiffs and Braswell. The general rule is that when an agent is engaged in á transaction in which he is interested adversely to his principal, the *484 principal will not be charged with knowledge of the agent acquired therein. 21 R. C. L., 843; Wardlaw v. Troy Oil Mill, 74 S. C., 368, 54 S. E., 658, 114 Am. St. Rep., 1004; Knobelock v. Bank, 50 S. C., 259, 27 S. E., 962; Akers v. Rowan, 33 S. C., 451, 12 S. E., 165, 10 L. R. A., 705. We do not know of any decision in our reports, however, which would permit the defendant to escape liability for goods received by it on account of the fraudulent act of its agent, unless as indicated, collusion between the agent and the third party could be established. The recorded mortgage of Braswell to the plaintiffs was constructive notice to the defendant of the plaintiffs’ lien on the cotton seed. The third question is as follows; Are the plaintiffs barred by the injunction issued in 1924 in the Federal Courts, and by their failure to file claim with the receivers ? It is to be remembered that the injunctions staying the proceedings were issued some seven years after the plaintiffs commenced this action in the State Court. Section 265 of the Judicial Code (U. S. Code, title 28, § 379, 28 U. S. C. A. § 379, Section 1242 U. S. Compiled Statutes), which, it seems, has been in force since about 1793 is as follows: “The writ of injunction shall not be granted by any Court of the United States to stay proceedings in any Court of a-State, except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy.” The recent case of Riehle, Receiver, v. Margolies, 279 U. S., 218, 49 S. Ct., 310, 312, 73 L. Ed., 669, construing the quoted section, is, we think, conclusive of the question under consideration, and sustains the legal position taken by the Circuit Judge. In that case, in many respects very close to the case at bar, Mr. Justice Brandéis, speaking for a unanimous Court, said this; *485 “The appointment of a receiver of a debtor’s property by a Federal Court confers upon it, regardless of citizenship and of the amount in controversy, federal jurisdiction to decide all questions incident to the preservation, collection, and distribution of the assets. It may do this either in the original suit, * * * or by ancillary proceedings. * * * And it may, despite Section 265 of the Judicial Code (28 USCA, § 379), issue under Section 262 (28 USCA, § 377), or otherwise, all writs necessary to protect from interference all property in its possession. * * * But the appointment of the receiver does not necessarily draw to the Federal Court the exclusive right to determine all questions or rights of action affecting the debtor’s estate. * * * This is true, a fortiori, as to the subject-matter of a suit pending in a State Court when the receivership suit was begun. * * * The rule that, when the jurisdiction of a Court, and the right of a plaintiff to prosecute his suit in it have once attached the right cannot be restrained by proceedings in any other Court, applies to protect the jurisdiction of the Court unless the case is within some recognized exception to Section 265 of the Judicial Code. * * * Here there is no basis for any such exception. “The contention that the judgment is not conclusive rests upon the argument that, because the appointment of the receiver draws to the appointing Court control of the assets and in the distribution of them among creditors there is necessarily involved a determination, both of the existence of the claim and of the amount of the indebtedness, the Federal Court must have the exclusive power to. make that determination. The argument ignores the fact that an order which results in the distribution of assets among creditors has ordinarily a twofold aspect. In so far as it directs distribution, and fixes the time and manner of distribution, it deals directly with the property. In so far as it determines, or recognizes a prior determination of, the existence .and amount of the indebtedness of the defendant to the several *486 creditors seeking to participate, it does not deal directly with any of the property. The latter function, which is spoken of as the liquidation of a claim, is strictly a proceeding in personam. Of course, no one can obtain any part of the assets, or enforce a right to specific property in the possession of a receiver, except upon application to the Court which appointed him.” In the United States Code Annotated (West Publishing Company), beginning at page 194 of title 28 (Section 379), notes of many decisions in support of the holdings of the Riehle case will be found. Clearly, the plaintiffs in this action, having instituted their action in one of the Courts of this State with proper jurisdiction thereof, had the right to continue the same in that Court, for, under the principles announced in the Riehle case the Federal Courts did not have power to enjoin the continuance and final adjudication of that action. The injunctions issued had no effect upon plaintiffs’ suit. The plaintiffs have at no time sought to proceed against any of the assets of the defendant corporation, in the control of the receivers of that corporation. The plaintiffs simply sought, and have at last obtained, a judgment against the corporation itself for the amount of its demand, as they had the right to do. All the capital stock of the defendant corporation, which was owned by the Virginia-Carolina Chemical Company, was sold to other parties. These parties became the stockholders thereof by the transfer. The plaintiffs have not sued the stockholders or the former receivers. They have just continued their suit against the corporation, which is still in existence. The judgment of this Court is that the judgment below be affirmed. Mr. Chiee Justice Watts and Messrs. Justices StabeEr and Carter concur.