The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1894-09-22
BOTH ALLEGE FRAUD.
Receiver and Owners of Third
Street Line at Outs.
SENSATIONAL SUITS ENTERED.
Receiver Bzckus Sues the Dennys for
stock Asxessment-His Removal IL
Asked in Return

in the United States court last evening,
and promise 10 result in one Of the great
est Law suits in the history of the county.
Receiver Backus brought suit against GER
tain alleged delinquent stockholders OF the
company. and a fes hours thereafter
petition was filed asking for the removal
of the receiver In both documents
charges OF fraud are freely made.
The suit brought by Receiver Backus
names as defendants David 7. Denny, his
wife. Louisa Denny, d. Thomas Denny,
George Kinnear, w. Gladstone Dickinson
and the Western Mill Company. and
seeks to recover judgment against David
T. Denny in the sum of s33. 80: Mrs.
Denny. $4,000; d. Thomas Denny,
s.. 30; Dickinson. $500; kinnesr. 1000;
Western Mill Company, 5000 in ali
Judgment and execution for $445, $50, with
interest, costs. etc. The suit is brought at
the instance of the National Bank of Com
merce. of Providence, T. l., large judg-
ment creditor. which petitions the court
for the recovery of the amounts named.
The principal features of the case are the
allegations of the liability of Mrs. Denny,
and long chain of legal complications is
set forth substantially IS follows:
The railway company originally started
with q capital stock of COO shares of 500
each, fully subscribed for, and afterward
increased its stock to 5000 shares of the
same denomination. The increase of 1900
shares was taken out by the Western Mil
Company. and the latter sought to pay its
liability of 100000 by transfer of its
assets TO the railway company, and both
companies appear TO have been controlled
by the Dennys. 1t is alleged that the mill
company's assets were frauduIently over
valued to the extent of $3.50. 600, and that
at the very beginning the railway com any
oyerpaid the mill company to that extern.
in stock. In addition to this the receiver
complains that the mill company was, at
the time of the transfer, about $3.50. 600 in
debt, which it agreed TO discharge, but
failed 10 do so. and the railway company
was forced to assume payment. Ii is fur
Their alleged that while David T. Denny
Jointly assumed these debts with the rail-
way company. he, in effect. forced the
railway company TO bear the whole bur-
den. On this point the allegations are
that Denny pledged his real estate to the
mill company's creditors. and the railway
company pledged 1927 900 o: its first mort
gage bonds. Then Denny compelled the
company TO secure him for his portion of
the liability by a corporate resolution set
ting over to him the legal title TO The COM
pany's $4,000 worth of first mortgage
bonds. For these reasons the receiver
complains that whatever consldera-
ton the railway company did re-
ceive in the mill company's
assets was cancelled by its having to se-
cure the mill company's debts There is
all fh 70
give the company 1900 shares of its own
stock as a consideration for this assump-
ton OF the mill company's debts, but that
he never at any time was the owner of
that amount; that he never has performed
this part of the agreement. and that the
stock was so much inferior to the bonds
that the transaction constituted a
fraud upon the railway company,
OF which he was director. 1t
is then alleged that in the latter
part of August the mill company
gave Mrs. Denny 1900 of the shares held
by it in the railway company; that she
appears on the books of the company as
the holder of that amount, and that she is
Liable for 500, coo on an assessment made
upon the capital stock; it is claimed that
she gave nothing for the shares and had
not been paid for by the mill comrany.
The petition asking for the removal of
Receiver Baekus names Mrs. Denny as
| petitioner and sets forth several
| reasons why he should be discharged,
| principal among them being charges of
| ineompeteney. mismanagement and fraud
| 1t is alleged that previous to the
| appointment OF the receiver certain
II al.
| railway company and that David t.
/ Denny, being president of the company
| aud desiring to give the concern ample
| time in which 10 pay the claims. satisfied
| the creditors By his own personal notes
and executed real estate mortgages upon
/ his individual property Subsequent to
| the execution of the notes and mortgages,
! it is claimed, Denny gave second mort.
l gage upon the same lands for $40. 500 to
| Anhie A. Roe. being delivered to her for
! the benefit of NJ. r. Baekus and E. O.
/ Graves. and intended as security for the
/ payment of the money. 1t is alleged that
/ the order of court on January last, di-
/ rseting the receiver to pay the loggers
! out of the proceeds OF the lumber remain
/ ing in the yards. was made without notice
| 60 the petitioners or any of the general
I petition on which the order vas made vas
/ presented by the receiver with the .'fui
/ knowledge taat the claims we're entitled to
/ no preference aud the purpose and intent
4 OF the petition vas to frandalently secure
1 the payment of the CLAIMS as pre-
/ ferFed claims from the assets OF the
/ company and to discharge the first
/. mortgage held by the ioggers from d. t.
{ Denny, and thereby TO make the second
/ mortgage by Denny to Ahbie A. Roe a
/ first lien upon the lands for Backus' oyn
/ interest and benefit. and against the rights
1 OF the petitioners and OF the other credit
oFs Of the company"
The other charges consist princinaIlv of
/ incom potency and misman Agenlent and
/ represent that the receiver. being IN
/ familiar with the work required Of him.
/ has beea compelled 10 employ other men
al large pay. that the operating expenses
are far in excess Of what they should be
/ acre competent man acting a. receiver.
/ that the sasmtsl Is operated improper!x
and. because Of the Incompetence and
/ neg igence Of The receivers employees. is
/ Tuu AZ rulnousiy excessive expense. In
sdaiu0n 70 asking thar Receiver Bsekus
/ be ~ moved petitioners ask the court 70
/ cut dsNn The salary % $50 per Iaonth
hsTe,osors allowed the receiver 10 a
smaller sam.
Company te Own Odd TeIiaws' Hall.
Articles % incorporation Of the Oad
. Fellows Building Association OF SEATTLE
we're aied ssth the cosnsy auditor yxstsr-
day, capita. stock s41oo This CORPORA
& Hon has keass ma assa saess.ss~.- -. - = ..