The morning news. [volume] (Savannah, Ga.) 1887-1900, 1900-01-09
sTEININGER CASE DECIDED.
JUDGE sPEER UPHELD RIGHTS OF
THE UNSECURED CREDITORS.

rho Thfrty-nine Mortgages Given Inv
the Company to Certain of Its
creditors Declared to BE Invalid
and Ineffective in Creating Liens
AGAINST the PrOperty-The Circum-
stances of Their Execution Made
Their Good Faith n Matter of Sus-
uiciOn--The Fund Arising From the
sale of the Property Has Been a
Hone of Legal Contention for a
Year.
The decision of Judge Speer in the mat
fer Of the Steininger Mercantile Company.
bankrupt of cambridge, was received by
tb, clerk of the United States Court here
Yesterday. 1t is favorable to the unse-
cured creditors of the corporation, direct
ing that the fund accruing from the sale
Of its property be turned over to them
The decision touches and determines for
this jurisdiction interesting questions of
bankruptcy law. 1t appears, from the
statement of facts that precedes the de-
clsion and the text of that paper itself,
that the company was engaged in the con-
bridge, one of the largest in that section
of the state. 1t had become hopelessly In
solvent. and its affairs were in such a
tangled condition that it was determined,
after a conference between its officers and
its counsel, to protect certain of the cred
itors against loss by giving them mort
CAGES, covering all of the company's prop
erty
On the night of Nov. 20 and the early
morning of Nov. 80, 1898, this determination
was carried into effect, the president and
secretary of the corporation executing in
its behalf thirty-nine mortgages, covering
all that it possessed These were in favor
OF a number of the creditors, among them
the banks that had advanced the COM
pany money TO carry on its business, and
the counsel who had advised the COM
pany how this business should best be car
red on.
Shortly after the execution of the mort
cages a petition, seeking to throw the
company into involuntary bankruptcy
filed by some of the creditors whose
claims had not been secured by mort
gage, and on Jan. u, 1899 the company
was duly adjudged bankrupt.
In the meantime the mortgages had
been foreclosed and the sheriff of Deca-
tur county was proceeding to sell the
property of the company, consisting prin-
cipally of its depleted stock in trade, I'M
der execution in favor of the mortgage
creditors. To stay this action Judge Speer
at the requests of the unsecured creditors
granted an injunction, directing the sher-
if to turn the property over to the trus-
tee appointed in the bankruptcy proceed
ings and that further litigation as to
rights in the fund arising from the sale
should be in the bankruptcy court
BY consent of counsel or both sides a
case was carved out of the record, reduc-
ing it to the question whether or not the
mortgages were to be regarded as valid
liens and their holders entitled to share
in the distribution of the estate. 1t is this
case that Judge Speer was called upon to
decide 1t was argued at the last session
of the court, Messrs. Bower and Hayes
of cambridge, appearing for the mort
gage creditors, including themselves, and
Messrs. Garrard & Meldrim and Marion
Erwin, for the unsecured creditors Judge
Spear took the decision of the issues in
volved under Amusement.
His decision covers four pages of type
written matter, reviewing the whole his
tory Of the case. The court decides that
the mortgages cannot be regarded as valid
liens as they mounted virtually TO an as
slgnment, constituted preference of GER
tam of the creditors over Others forbid
den by the statutory law of the state,
and We're executed under conditions OF
insolvency, known to the preferred cred
Hors and of which they suffered them
selves TO take advantage, 10 the certain
disadvantage and loss of the others
The mortgages were further invalid by
reason of the fact that they We're execut-
ed by the president and secretary of the
with 41Ys.
ufy or authorize this step. 1t does not
appear that these officers Were, under
inc charter of the company. empowered
TO pledge its credit and incumber its
property in this manner
The work of executing the mortgages"
says Judge Speer, in mis- decision, was
suspciously done, at night and about dawn
the next morning, with every circum-
stance to betray that the officers of the
bankrupt company perceived the neces-
s''y OF haste and secrecy. so that the
transaction might be concealed from the
general creditors
For these reasons. and others that
might readily be gathered from the vol
luminous record. it is the conclusion of the
court That a decree should be entered de
hEng The prayer of the petitioning mort
eagees that the fund should be paid to
sle account Of the alleged liens they hold
out' on the contrary, directing that it
' ne ulStIlDuleu Dy the trustee TO
me general creditors"
The decision in this case affords an Illus
Nauon of the length to which the bank
.up'ey courts Will go in enforcing the de-
lland of the law that bankrupt estate
suau be equitably divided among all the
3edltors and not devoted to the satisfac-
Goh Of the claims Of q favored few. A
pecIe", In accordance with the decision
VIII De drawn and signed by the court at