Burroughs v. Toxaway Co.

182 F. 129, 1910 U.S. App. LEXIS 5634

This text of 182 F. 129 (Burroughs v. Toxaway Co.) is published on Counsel Stack Legal Research, covering U.S. Circuit Court for the District of Western North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Burroughs v. Toxaway Co., 182 F. 129, 1910 U.S. App. LEXIS 5634 (circtwdnc 1910).

Opinion

CONNOR, District Judge.

This cause came on for hearing upon the exceptions filed by the defendant Toxaway Company, E. H. Jennings, and others to the report of Haywood Parker, Esq., special master. The said exceptions were argued by counsel representing the respective parties, upon the motion for allowance to the receiver, A. H. Burroughs, Esq., for his services and for counsel fees. I find, from an examination of the original bill and exhibits filed therewith, the affidavits read upon the hearing, and the testimony taken before the master, the following facts;

The defendant Toxaway Company, a North Carolina corporation, having its principal office at Brevard, N. C., by deed of trust dated the 1st day of May, 1902, conveyed its real estate, consisting of large bodies of land, hotels, etc., lying in the counties of Transylvania and Jackson, to the Colonial Trust Company, of Pittsburg, Pa., as trustee, to secure an issue of bonds aggregating $200,000, upon the terms and conditions therein set.forth.

[131]*131Of the authorized issue,, bonds aggregating $172,000 were outstanding at the time of the filing of the bill herein, and of this amount plaintiff R. B. Arrington was the holder of $132,000. A copy of said deed of trust is attached to the bill and marked “Exhibit A.”

The said Toxaway Company, on the 1st day of July, 1903, executed a second deed of trust to secure a bond issue of $100,000, the whole amount of which was outstanding at the filing of the bill herein, and of these bonds the plaintiff R. B. Arrington was the owner of $80,000. A copy of said deed is attached marked “Exhibit B.”

By article 18 of said deeds of trust it is provided that the said trustee may be removed by an instrument in writing under the hands of two-thirds in amount of the holders of the then outstanding bonds, and a new trustee may be appointed by the holders of two-thirds in amount of the then outstanding bonds by an instrument in writing signed by them.

Some four months prior to the 28th day of April, 1910, the plaintiff R. B. Arrington purchased an amount of said bonds secured in said deeds of trust, aggregating more than two-thirds of the total amount outstanding at that time, paying full value therefor, including accrued interest thereon. The remainder of said bonds, being the minority thereof, was in the hands of E. H. Jennings, of Pittsburgh, Pa. Pursuant to the provisions of article 18 of said deeds of trust, said R. B. Arrington on April 28, 1910, executed a paper writing removing the said trustee named in said deeds of trust, and appointed in lieu thereof the plaintiff A. H. Burroughs trustee. A copy of said paper is attached to the bill.

On said 28th day of April, 1910, the said R. B. Arrington, as he was authorized by the provisions of the said deeds in trust to do, addressed a letter to the said A. H. Burroughs, trustee, notifying him that the said Toxaway Company was in default in the payment of the interest on said bonds, and in other respects set forth therein, and that, pursuant to the power vested in him, he declared the principal of all the bonds secured by said deeds of trust due and payable, and requested the said trustee, under the terms of said deeds, and by any other means by which he might be entitled under the terms of the deeds in trust, to proceed at law and in equity to collect the same.

On the said 28th day of April, 1910, the said R. B. Arrington, after conference with A. H. Burroughs, trustee, concurred in the opinion that they should file a bill in the Circuit Court of the United States at Asheville, N. C., for the purpose of having said Burroughs appointed receiver of the said property, and for the other purposes set out in the said bill.

The said A. H. Burroughs drew the bill while in the city of New York, and at the same time drew the order which he proposed to have signed by the Circuit Judge.

At the same time, and in his office, A. H. Burroughs dictated a letter to be signed by Mr. Allsop, the president of the said Toxaway Company in the city of New York, consenting to said appointment, to be used upon his application to the Circuit Judge for the appointment of himself as receiver, and the same was signed in Burroughs office. That he took the bill and order drawn by him to the city of Richmond, [132]*132on May 4, 1910, where Judge Pritchard, judge for the Pourth circuit, was attending the Circuit Court of Appeals, and read the same to him, together with the letter from Mr. Allsop, the president, whereupon the order as drawn was amended by the judge, by the adding thereto the words:

“Any person who is not a party hereto, and claiming an interest in the subject-matter of this suit, may, upon giving five days’ notice in writing, move for a dissolution of the injunction hereby granted, for the discharge of the receiver, or for any other modification of this order.
“May 4, 1910.”

The judge signed said order as thus modified, under the circumstances testified to by Burroughs. The bill was also filed in the clerk’s office at Asheville, N. C.

On May 7, 1910, certain parties therein named, “stockholders and creditors of the company, gave notice to the attorneys for the complainants that .they would apply to the court to vacate the order appointing said Burroughs as receiver.

On said day the hearing of the motion was continued until May 31, 1910. On May 28, 1910, notice was given that the defendant Toxa-way Company would move the court to dismiss the bill and vacate the order made therein. Upon the hearing, the holders of the minority of the outstanding bonds came in and offered to pay to the complainant Arrington the full amount of the bonds held by him, including interest thereon, which was accepted by him, and said bonds and receiver’s certificates turned over to said Jennings. All of which appears on the record.

The annual meeting of the stockholders of the said Toxaway Company had been called to be held at Brevard, N. C., on the 4th day of May, 1910. This was well known to the said Allsop, R. B. Arrington, and A. H. Burroughs. This fact did not appear in the bill, nor was it communicated to the Circuit Judge by the said Burroughs at the time he applied for the order hereinbefore recited.'

At the said annual meeting the stockholders, Mr. Allsop, E. H. Jennings and other stockholders being present, informed them of his action in regard to writing the letter, addressed to Judge Pritchard, consenting to the appointment of Burroughs as receiver. Some objection was made, on the part of Jennings, to this action; but nothing was-done by the stockholders in regard thereto. Mr. Allsop was unanimously re-elected president, and the same directors, with the exception of two who had died and one who had resigned, were elected; others being elected to fill the vacancies. Mr. Allsop states, in an affidavit filed June 6, 1910:

“In tbis meeting some complaint was made by one of the stockholders of my having consented to the appointment of a receiver without first getting express authority from the company so to do; but no action was taken to revoke anything I had done, and, on the contrary, the consensus of opinion of those present was that a receiver was necessary. In fact, no one contended that a receiver was not necessary. We all knew and realized that the company was insolvent. So far .from anything I had done being condemned, I was at that meeting re-elected president of the company.”

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Bluebook (online)
182 F. 129, 1910 U.S. App. LEXIS 5634, Counsel Stack Legal Research, https://law.counselstack.com/opinion/burroughs-v-toxaway-co-circtwdnc-1910.