Miller v. American Bank & Trust Co.

Williams, Judge: The Glass Brick Company, a domestic corporation, having its principal office and place of business at Huntington, West Virginia, being largely indebted, issued $100,000 of 'bonds secured by deed of trust on its plant, and deposited $33,800 of said bonds and a note of $10,000, executed by it to C. B. Lawton and endorsed by him and others, with the American Bank & Trust Company as collateral to secure a debt of $33,900 which it owed said bank. It also deposited with the Ohio Valley Bank $16,000 of said mortgage bonds to secure a debt which it owed the bank of $12,000. These debts becoming due and not being paid, the aforesaid banks published notice in the Huntington Advertiser, a newspaper published in said City of Huntington, that they would sell the collateral so held by them to the highest bidder, the former on the 18th, and the latter on the 16th of October, 1918. Thereupon James I. Miller, an unsecured creditor and stockholder of said Glass Brick Company, brought this suit on behalf of himself and all other stockholders and unsecured creditors who chose to become parties plaintiff thereto and help defray the expenses thereof, for the purpose pf enjoining said sales and having a receiver appointed to administer the assets of said corporation, alleging its insolvency, and that it was compelled to cease operation because its business was not essential to the prosecution of the War; that it has no capital nor the ability to acquire any, with which to resume operations; that there is no market for its bonds; and that if the sale is permitted to be made as advertised it will result in great sacrifice of the company’s assets to 'the injury of all unsecured creditors. The bill prays for the appointment of a receiver to take charge of the assets of said company and collect the claims and demands due it, and for an injunction prohibiting said sales from being made as advertised. The judge of the circuit court, in vacation, on the 18th of October, 1918, granted the injunction as prayed for. Both of said banks demurred to the bill, and [84] gave notice that on the 31st of October, 1918, they would move the judge of said court in chambers to dissolve the injunction. The motion was heard on the 2nd of November, 1918, the parties'appearing by their respective attorneys, and the plaintiff by counsel joining in the demurrers and resisting the motion, 'on consideration whereof, the court sustained the motion and dissolved the injunction; and from that order the plaintiff has appealed. The only question is whether or not the pledgees have a right to sell the bonds pledged to them to secure their respective debts, pending a suit by an unsecured creditor and stockholder brought to wind up.the business and administer the assets of the pledgor, an insolvent corporation. Section 58, chapter 53, Code and Waggy v. Jane Lew Lumber Co., 69. W. Va. 666, and Parr et al. v. Blue Ridge Coal Co., 73 W. Va. 174, are cited as authority for staying the hands of the secured creditors, and requiring them to come into the suit and await its determination: The citations do hot sustain the proposition. In the Waggy Case an unsecured creditor’of the insolvent corporation sought to obtain an advantage over other creditors by procuring a judgment against the debtor, after a receiver had been appointed. This, of course, á creditor could not do when the assets of the insolvent debtor were in custodia legis. The principal question decided in the latter case was that, where a suit had been brought to wind up the affairs of an insolvent mining corporation, operating under a lease, the court had a right to prevent the lessor from declaring a forefeiture of the lease. This was for the purpose of protecting the property of the insolvent corporation for the benefit of its creditors who, if the lease had been forfeited, would have received nothing. The lease constituted the chief asset of the mining company, and the right of the lessor to declare a forfeiture was primarily intended as a security for his rents and royalties, and if they were paid or secured he had no right to complain. Equity will generally relieve against a forefeiture. In the present case the bonds were pledged with the banks before the suit was brought, and the debts for which they were pledged had become due and payable. It is well settled law that a pledgee has the right to sell the property pledged, without [85] judicial process, upon proper notice to the pledgor, when authorized by the pledgor to do so, even if the pledge consists of commercial paper past due or presently to become due. When authorized to sell such paper the pledgee is under no obligation to hold and collect rather than sell it and apply the proceeds on his debt, 21 R. C. L. 688. The bill avers that the banks have served notice on the directors of the Glass Brick Company that, on the dates above named they will proceed to sell the said collateral securities “under and by virtue of the terms of the collateral notes executed as aforesaid by the said defendant, Glass Brick Company, to the said banks.” It thus appears that the sale was authorized, and that the . pledgees are violating no agreement with the pledgor in proceeding to sell the bonds and notes; and their right to sell, without judicial process, upon proper notice to the pledgor, is too well settled to require discussion. 21 R. C. L. 687; Alex., Loud., & Hamp. R. R. Co. v. Burke et als., 22 Grat. 254; and Richardson v. Insurance Company of Valley of Virginia, 27 Grat. 749. We find no error in the decree and must affirm it. Affirmed.