Fidelity Ins. & Safe-Deposit Co. v. Shenandoah Iron Co.

42 F. 372, 1889 U.S. App. LEXIS 2662
CourtU.S. Circuit Court for the District of Western Virginia
DecidedMay 14, 1889
StatusPublished
Cited by7 cases

This text of 42 F. 372 (Fidelity Ins. & Safe-Deposit Co. v. Shenandoah Iron Co.) is published on Counsel Stack Legal Research, covering U.S. Circuit Court for the District of Western Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fidelity Ins. & Safe-Deposit Co. v. Shenandoah Iron Co., 42 F. 372, 1889 U.S. App. LEXIS 2662 (circtwdva 1889).

Opinion

Paul, J.

On October 12, 1888, all parties in interest appearing by .counsel and consenting thereto, it was ordered that the order entered on March 8, 1888, in the cause of Seventh National Bank v. Shenandoah Iron Co., appointing G. E. Lipe as special master to report certain accounts, the master’s report thereunder, the exceptions thereto, and also the •vouchers, accounts, and reports filed in said cause, be held and taken, to all intents and purposes, as if filed in this cause, with leave to parties in interest to file exceptions to said special master’s report, dated June 15, 1888, and filed October 12, 1888. On the same day, October 12, 1888, an order was entered in the suit of Seventh National Bank v. Shenandoah Iron Co. dismissing the same for want of equity: but the special master’s report was, by consent of all parties in interest, filed in the cause now in hearing, to have the same effect as if it had been taken in this cause, and numerous exceptions were filed thereto. The most important of those exceptions were filed by the first mortgage bondholders, and are as follows, in substance: (1) That claims 1-9 are erroneously in class 4, because, being for hay and oats furnished the Shenandoah Iron Company before the appointment of the receivers, they are not entitled to priority over the first mortgage; (2) that claims 10-12, 14-17, $31,481.70, are erroneously classed in class 4, because they are not entitled td priority over the first mortgage: (3) that claim 13 is erroneously in class 4, because, being for lumber furnished the Shenandoah Iron Company before t ho appointment of the receiver, it is not entitled to priority over the first mortgage; (4) that receivers’ certificates 2-13 are erroneously in class 2, because exceptants insist that said receivers’ certificates are not liens prior to their mortgage. There are a number of other exceptions, but the questions presented by them will all be answered in the determination of those above recited. Counsel for “other creditors” have, in argument, urged the following objections to the consideration of these exceptions:

First. “That they are not signed by any one who would bo liable for costs under the provisions of equity rule 84; that no bondholder is known by name in the record; and that, in the event of the failure of the bondholders to maintain their exceptions, there is no one against whom costs could be recovered.” It is true that the bondholders are not parties to the suit by name. They are represented by their trustee, the plaintiff in this suit, and any step taken in their name is virtually taken in the name of the trustee. They are really the parties in interest in the suit. They are the beneficiaries under the mortgage, — the cestuis que trust; and in filing exceptions, by counsel, the bondholders are only doing what the trustee might do, and the court sees no difficulty in entering a decree against the trustee for costs, in the event the bondholders fail to sustain their exceptions. It would be entirely impracticable to make all the bondholders parties defendant to the suit, or to' have them file exceptions in their own names to the master’s report. They are represented [374]*374by counsel throughout the proceedings. This objection the court considers purely technical, and cannot be sustained.

Second. “That the exceptions are not sufficiently specific, are too general in their terms, and do not point out the grounds of exception.” Counsel argue that, as the counsel for the bondholders insist that the Virginia statute which gives priority to material, supply, and wage claims is unconstitutional, this objection should have been specifically stated in the exceptions, and that it is too late to raise the question in the argument of'the cause. This objection to the form of the exceptions to a master’s report was a question presented and passed upon by the supreme court of the United States in Goddard v. Foster, 1 Black, 506. In that case, Justice SwayNE, speaking for the court, said:

“Before proceeding to consider the four remaining exceptions, we deem it proper to advert to an objection made to their form by counsel for the complainant. It is said that such an exception is in the nature of a special demurrer, and that these are not so full and specificthat the court can consider them. Such is not the rule of this court. All that is necessary is that the exceptions should distinctly point out the findings and conclusions of the master which it seeks to reverse. Having done so, it brings up for examination all questions of fact and of “law arising upon the report of the master relative to that subject.”

Applying the doctrine as laid down in Goddard v. Foster to the exceptions to be considered in.this case, the court is very clearly of the opinion that the exceptions are sufficiently full and specific. “They distinctly point out the findings and conclusions of the master which they wish to reverse.”'

Third. A third objection urged to the consideration of these exceptions is “that they were not taken at the proper time; that they should have been filed before the master before he had completed his report, so that, if there were errors in the report, the master could have had the opportunity to correct them.” This was formerly the English chancery practice. The master made a draft of his report, notified counsel of his findings, gave them an opportunity to point out errors, and the master considered and corrected them. It was also the practice of the federal courts in chancery, prior to the adoption of the equity rules of practice. This was .the practice when Story v. Livingston, 13 Pet. 359, was decided. This case has been strenuously urged upon the attention of the court as applicable to the exceptions, under consideration. Story v. Livingston was decided in January, 1839. The rules of equity practice were promulgated by the supreme court on March 2, 1842, and since that time the practice has been different from that indicated in Story v. Livingston. So far from its now being required that exceptions shall be filed before the master during the time he is making up his report, one month is allowed after the report has been completed and returned to the clerk’s office in wdiich to file exceptions thereto. Rule 83 of rules of practice in equity provides:

“The master, as soon as his report is ready, shall return the same into the clerk’s office, and the. day of tiie return ‘shall be entered by the clerk in the order book. The parties shall have one month from the time of filing the [375]*375report to file exceptions thereto; and, if no exceptions are within that period filed by either party, the report shall stand confirmed on the next rale-day after the month is expired.”

This provision leaves no question as to the correctness of the practice pursued in this case. This view is sustained in the opinion of Judge Gresilam in Hatch v. Railroad Co., 15 Myer, Fed. Dec. 839, 9 Fed. Rep. 856-860.

The most important question presented for the determination of the court in this case is as to the priority of lien between certain supply and wage claims which existed against the Shenandoah Iron Company before the appointment of the receivers and the mortgage bondholders. The priority of these supply and labor claims, as reported by the master, rests upon the provisions of an act of the general assembly of Virginia, passed March 21, 1877, and amended by act of April 2, 1879.

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Bluebook (online)
42 F. 372, 1889 U.S. App. LEXIS 2662, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fidelity-ins-safe-deposit-co-v-shenandoah-iron-co-circtwdva-1889.