Briarfield Iron Works Co. v. Foster

MANNING, J. According to tbe Bevised Code (§§ 1994, 1995,) the office of a special administrator is to collect and preserve the goods and chattels of the deceased “until letters testamentary or of administration have duly issued.” And he “has authority to collect . . . the debts of the deceased, and to secure and preserve such goods and chattels, at such expense as may be deemed reasonable by the probate court, and for such purposes may maintain suits as administrator.” These provisions are ample to authorize him to institute a suit in chancery, like the present, if the facts justify it, in order to protect property from destruction, or removal beyond reach, when the estate of which he is administrator is directly and largely interested therein. 2. On the application now before us, we will not inquire whether or not it affirmatively appears, that no material defendant resides in the county in the chancery court of which the bill was filed. The bill would be amendable in that particular ; no answer, plea or demurrer to it was yet filed. There was no default, however, on the part of any defendant. The time to file either had not elapsed; indeed, the defendants had not been brought into court when this appeal was taken from the action of the chancellor in appointing a receiver. 3. The regular appointment, if uncontested, of an administrator in chief, would terminate the authority of the special administrator. But there was an appeal taken and allowed from the action of the probate court appointing Mr. Lyon administrator; and this has the effect, under section 2015 of the Bevised Code, of staying the grant of letters to him until the appeal is disposed of finally. The statutes do not prescribe the amount for which an appeal bond shall be required, but leave it to the judge of probate to be determined by him. He is expected to see to it — if the proposed administrator is fit and competent, and can give ample security for a faithful administration — that the persons interested in the estate shall be indemnified by an adequate bond on behalf of the person taking the appeal, against the loss that may be sustained by continuing in office a special administrator whose authority may be inadequate to a proper administration. 4. The greater part of the complainant’s supposed equity arises out of an assumption, about which other parts of the bill show he has doubts — that the first mortgage made by the Briarfield Iron Works Company, March 19, 1867, is not valid, and that the debt it provides for is not the debt of the company; because, as appears by the mortgage, the debt was contracted the first of January, 1867, while the charter to the company was not granted until the 28th of that month, — 632 — and tbe company was not organized until March 1st of that year. The mortgage describes the very valuable property of the company as that which had been bought by Francis S. Lyon, for himself and others, from the United States, and conveyed by him to the company; and the debt to John T. Walton, to secure which the mortgage was made, is set forth as a debt for which Walton had the note of said Lyon and John Collins, James I>. Browder, Edwin A. Glover, (of whose estate complainant is special administrator,) I). F.Prout and Bryan W. Whitfield; who are the same persons that, with two or three others, are described in the charter as the corporators of the company. And the mortgage further declares that the note was given for “money borrowed for the Briar-field Iron Works Company,” Now, since complainant does not profess to know, or have any reliable information to the contrary, and since Mr. Glover, for the benefit of whose estate he is represented as filing this bill,- is a signer of the note and was a director of the company when the mortgage was made — it does not seem very difficult to believe it true, that the money was borrowed for the benefit of that company a few weeks before the persons composing it succeeded in procuring the passage through the general assembly of the charter which constituted them a corporation, and had been used in paying for or improving the very property to own and operate which the corporation had been created, and which, immediately after it was constituted, Mr. Lyon had conveyed to it. It could as well, in consideration of the transfer of this property to it, agree to pay the note given by the vendors to Walton, and make a mortgage to secure the payment of it, as execute a promissory note and mortgage for the price to the vendors themselves. By the former transaction, the corporation would then, in effect, become the principal debtor to Walton, and the original makers of the note become sureties for it and co-sureties with each other. And if after this, some of them and other persons, as appears from other parts of the bill and exhibits, contributed their money to purchase a transfer of .the note and mortgage from Walton, without recourse against him, to James Crawford, so as to preserve the liability of the company and its oldest mortgage, to secure reimbursement of the money so advanced for it, we are not acquainted with any rule or principle of equity which requires a court of chancery to interfere and defeat so proper an arrangement. As assignee of the mortgage for the benefit of himself and others, Mr. Crawford would seem from the bill itself and the exhibits, to have the best and oldest deed of the property, and the legal title, with the right as mortgagee, to the pos — 633 — session. Whether as such he is trustee for those only who joined him in advancing and paying the amount of the note, and in procuring a transfer of it to him, or in some aspects for them and complainant as administrator also, we need not stop to inquire. For if the latter, complainant would not be entitled, in opposition to all others equally interested, to have Crawford removed from his trusteeship upon the allegations against him in this bill. Much less can complainant be allowed, according to ' one of the prayers in his bill, to have the note and mortgage, which do not, at' all, belong to him, taken away from Crawford, who holds them for, and by the wishes of, their owners, as evidence of their rights against the company, and put into the hands of a receiver. Indeed, we do not understand upon what principle the prayers in the bill are founded, which seek to have the notes and mortgages which belong to these and other creditors mentioned in the bill, taken from the owners of them and delivered to a receiver of the debtor’s property. “The court,” (says Mr. Kerr in his work on Receivers,) “by taking possession at the instance of the plaintiff, may be doing a wrong to the defendant; in some cases an irreparable wrong. If the plaintiff should eventually fail in establishing his right against the defendant, the court may, by its interim interference, have caused mischief to the defendant, for which the subsequent restoration • of the property may afford no adequate compensation.” — (p. 5): The authority, therefore, to appoint receivers, should be used by a chancellor with great circumspection. Property is not taken from a party in possession, claiming in good faith the right to it, before judgment in actions at law, without first exacting from him at whose suit it is done ample security for the protection of his adversary against injury. Neither a writ in detinue, nor a writ of attachment for the seizure of property, can be obtained until the person suing it out shall execute an adequate bond, with good sureties, for the indemnification of the defendant against all loss he may thereby unjustly sustain. In courts of equity, writs of injunction and equitable attachment, are allowed only upon like conditions; and a compliance with them is required by express statutory enactments. And whenever either of these writs will afford all needed protection to rights asserted by the plaintiff in a court of equity, and these rights are disputed, it should rarely appoint a receiver tb take the property from the defendant; receivers being appointed, ordinarily, without indemnifying bonds being required of those procuring the appointment to be made, and only upon the bond of the receiver with sureties for his fidelity as such. There has — 634 — been, indeed, too much facility on the part of chancellors and registers in the exercise of this authority. The discretion which they have on this subject must not, however, be too strictly limited. Such is the variety, more or less defined, in the countless cases arising out of human transactions in which redress may be sought in a court of equity, that they can not be so classified as to be subject to rules which shall precisely prescribe for each, when and when not, the power in question should be exerted. Only a few general principles may be regarded as established according to which the power ought to be exercised. One of these is, that a receiver ought to be appointed only “ to prevent fraud, save the subject of litigation from material injury, or rescue it from threatened destruction.” — Baker v. Backus, 32 Ill. 79; Voshel v. Hynson, 26 Md. 92; Crawford v. Ross, 39 Geo. 44. Nor should it be done then, until answer to a bill praying it has been made by defendant, “unless the necessity be of a most stringent character.”' — ■ Leddell v. Starr, 4 C. E. Green (N. J.) 159; Blondheim v. Moore, 11 Md. 365; Voshell v. Hynson, (supra); Sanford v. Sinclair, 8 Paige, 372; Gibson v. Martin, Id. 481. Of course, also, it ought further to appear from the case made, that the plaintiff is quite clearly entitled to the interest he claims in the property for which a receiver is asked. Although that interest need not be conclusively shown to exist, yet as a general rule the facts alleged, and the exhibits and affidavits in support of them, ought to tend strongly to establish it. .The averments, especially, ought not to be uncertain or inconsistent, either as to the interest of plaintiff and those he represents, or to the circumstances of peril which justify the court in a procedure which (as said in Beverly v. Brooke, 4 Grattan, 208), “reverses, in a great measure, its ordinary course of administering justice; beginning at the end, and levying upon the property a kind of equitable execution, .....and afterwards determining who is entitled to the benefit of its quasi process.” The bill in this cause is prepared with care and consideration. It elaborately suggests much more than it sufficiently charges. It is in many respects uncertain and in some inconsistent. The averments seem to be made almost entirely upon information. Complainant filed his bill as special administrator only, (signing it as sole solicitor for himself,) on the 26th of October, 1874. His appointment was made just one week before, on the 19th of the same month, by the probate court of Marengo county. He does not appear to have been in any way related to Edwin A. Glover, deceased, or to be a creditor of his estate. The property for which he asks — 635 — a receiver, and the situs or home of The Briarfield Iron Works Company, are in Bibb county. There is nothing to show that he has ever been to that county to inquire into the history of the company, or the condition of its property, or to ascertain from the county records, or books of the corporation, what are the terms of the several mortgages or trust deeds, or what the nature of the transactions, of which he says he knows nothing. And there is no evidence in support of the averments in the bill, except complainant’s own affidavit, upon mere information. Much stress is laid upon the supposed disorganization of the company. It is alleged that in March, 1867, there was an election of a president, of a vice-president, secretary and treasurer, (of one person to these three offices,) and of a number of directors ; but that the president removed from the State some years ago, and no other president has been elected; that Mr. Glover, one of the directors, removed out of the State and afterwards died; that no by-laws were ordained for the government of the company; and that there has been no election since the one mentioned. These sound like very serious charges. But when it comes to be known that only a few individuals composed this company; that most of these were elected to the positions just mentioned; that the charter itself did not create any offices, or prescribe at what periods elections should be held, or require the adoption of any by-laws, but left it to the company “to provide for the election of such officers as may be deemed necessary for the government and management of the affairs of the corporation,” and “to ordain, establish and put in execution such by-laws, ordinances and resolutions as they shall deem necessary and expedient,” a court could hardly hold that this manufacturing corporation was insufficiently organized.— Especially could this not be assumed, when the bill shows that this company has, in fact, been carrying on business, that “ large amounts have been realized from the rents of said property, and from the manufacture of iron, to-wit, not less than $10,000 per annum,” and that large sums of money have been borrowed for the company — some from Glover himself, and some from other persons, to whom he by his agent, became liable as surety for the payment thereof by the company — and when, so far as appears, neither Mr. Glover in his life time, nor any other member of the corporation or creditor of it, has ever objected that it was in a condition which made it incapable of transacting business. It is apparent from the record that Mr. Glover continued to participate in its affairs, either personally, or by an agent in — 636 — whom he confided, and in harmony with the other parties, long after his removal to Texas. In respect to the $10,000 a year, or more, above mentioned, complainant says that he “does not know, and has been unable to ascertain, which, if any, of the officers of said company has received the large annual income derived from the rents and profits, or how the same has been expended. And your orator charges that the affairs of the company have been so managed as to render the stock owned by the said Edwin A. Glover therein of no market value, to make the estate liable for the debts of said corporation to the amount of his stock, and further to cause the said estate to lose a large amount of money lent by the said Edwin A. Glover to said company, and also liable for all, or a large portion of a debt of nearly $40,000 which is afterwards shown in the bill, to be the same debt mentioned in a former part of this opinion, of which plaintiff complains that it was the debt of the individuals who signed the note, including Glover, to John T. Walton, which the company illegally assumed, and executed its mortgage for. But it is not any where alleged in the bill that any of the stockholders of this company or any of the defendants to this cause, had appropriated this money, or any part of it to his own use, or been guilty of any fraud in respect to it, or in any other particular, or that complainant had used any endeavors, or made any inquiries of these defendants or other persons, to obtain full and correct • information in regard to those matters. Eor aught that appears to the contrary, all the money received either as income from the works, or by borrowing, was used in purchasing or improving the very valuable property of the company; of which the mineral lands, about 10,000 acres, are alleged in the bill, to be worth $75,000, and the machinery is estimated to have cost about $100,000. The adventure certainly appears not to have been fortunate. But this does not necessarily imply fraudulent mismanagement, or incapacity.' Alike indefinite is a charge on information that “ a deed of trust was made to one William White prior to the close of 1873, and that the said William White received as commissions for his services, the sum of $2,000, and had under his control assets belonging to the Briarfield Iron Works. Company to a large amount; but your orator has no information what these assets consisted of, or how or for whose benefit the trust was created — and he is advised that it is his duty as special administrator,” &c., “ to seek a discovery touching these matters,” &c. Was any examination made of the records in Bibb county, to ascertain the trusts of this deed, or — 637 — any inquiries there prosecuted concerning the property embraced by them ? It is only the uncertainty in this allegation that can create any suspicion of wrong-doing. So it is averred near the conclusion of the stating part of the bill, that “ orator is informed that the said company has ceased manufacturing iron, steel and castings, has no office or known place of business, and the valuable property at Briarfield is not used in any way; the costly machinery is liable to sustain injury and damage, and that James Crawford has never taken possession of the property,” &c. There is nothing, however, to remove the impression created by that part of the bill in which “rents” are spoken of, that the property was in the hands of a lessee, who might find it unprofitable in the depressed condition of the iron trade, men- • tioned in another place, to operate the factory. Nor is it at all unreasonable to suppose, if the property was not leased, that the company has ceased to run it for the same reason, that it would now be unprofitable to do so. Nor is it alleged that the property was not in the hands of a careful agent. There is no reason to suppose that the company would not take good care of the valuable machinery of this factory, by an agent or otherwise, while it remains unused. The insolvency of the company would not prevent them, or the mortgagees, from doing this. And there is no averment that it is not done. There is, on the contrary, proof made by affidavits that a careful and competent agent had been and was in charge of the property. Finally, it is brought conspicuously to view in the bill and exhibits, as well as by the affidavits in the record, that this controversy arises out of another in respect to the last will and testament of Edwin A. Glover, deceased. He died in Texas in February, 1874; without any haste, an instrument purporting to be his last will and testament was' established as such five months afterwards, (in July, 1874,) in the court having jurisdiction of the matter in Texas. By this will, most of the property of testator was given to his niece, Mrs. Amanda Sterling, who was also appointed executrix; and she is made legatee of his interest in the Briarfield Iron Works. Against this, Pearson J. Glover, of Marengo county, a nephew of testator, claims this property by an alleged subsequent testamentary paper. The bill alleges that “ a suit is now pending between Pearson J. Glover and Mrs. Amanda Sterling, in the district court of Waller county, Texas, in which said Pearson J. Glover is seeking to establish and probate the instrument dated the 26th day of November, 1873, as the last will and testament of Edwin A. Glover, deceased, or a codicil thereto, and is contesting the validity of — 638 — the instrument dated the 24th day of February, Í872, and is objecting to the probate of the same as the last will and testament of deceased, unless the instrument he holds is admitted as a codicil thereto, or a part thereof.” A transcript from the probate court of Marengo county, shows also, that complainant was appointed special administrator, upon the application of Pearson J. Glover, and not of any creditor of Edwin A. Glover. Of course this court, or the chancellor, cannot now know anything in regard to the ultimate rights of Mrs. Sterling and Pearson J. Glover, respectively, or anything about the legal controversy concerning them, except what is disclosed by this record. But this shows that in July, 1874, the will in favor of Mrs. Sterling was established; that a suit is now pending (that is, when the bill was filed October 26th, 1875, a year and nine months after the death of testator,) instituted by Pearson J. Glover, in the same court in which that will was established, to contest the probate of it. What is the condition of this pending suit, when and how it was begun, whether anything more than a petition has been filed, the bill does not inform us; but it shows that Pearson Glover intends to contest the will previously established, “unless the instrument he holds is admitted as a codicil thereto, or a part thereof.” How can it be known that this suit also is not brought in order to aid in effecting such a compromise. We cannot know whether it is or not, and we do not assume that it is. But since the fact of such a controversy and the purpose of it, between Mr. Pearson Glover, and those claiming under the will admitted to probate in Texas, is thus presented upon the record, a court of equity should not interpose by the exercise of its extraordinary powers, without requiring ample security from those seeking it, that no unjust loss shall be inflicted thereby on adverse parties. And the complainant, as special administrator, had the right to require of those desiring these remedies that they should furnish such security. We do not mean to intimate that this is a ease in which, upon such security being given, complainant would be entitled to the aid of some one of the extraordinary writs which a court of chancery, or a chancellor has authority to employ. But we think it clear that the chancellor erred in appointing a receiver in this cause. And for this error his order making the appointment is reversed and annulled, and the cause remanded.