Evening star., 1929-12-21
WHEAT D|SM|SSES
PLEAFOR RECEIVER
!. FORTH. SMITH CO.
Court Refuses to Act in Case
of Corporation or
individuals.
SAYS ACTION WOULD HURT
FIRM AND STOCKHOLDERS
Decision Points Out Plaintiffs Did
Not Allege Any of Defendants
Are Insolvent.

Justice Alfred A. Wheat Of the Dis
krict Supreme Sourt today dismissed the
application of a number of bondholders
of the F. H. Smith Co., for the appoint
ment Of receiver for the company.
The suit was filed recently by Attor-
ney w. Gym Gardiner, and in addition
to the company was directed against
Representative Frederick N. zihlman,
chairman of the District committee of
the House; Daniel r. CrisSinger, former
controller of the currency; G. Bryan
Pitts, chairman of the board of di-
rectors of the Smith Co.; Samuel j.
Henry, president of the company, and
three other officers of the corporation
Zihlman, CriSsinger, Pitts and Henry
are under indictment on charge OF
! using the mails to defraud growing out
of the activities of the company which
Tecently moved its offices to New York.
In the decision today that court held
that the allegations of the petition are
not sufficient to support the appoint
ment of a receiver either for the in
dividual defendants or for the corpora
tion.
1t was pointed out that the plaintiffs
did not allege that any OF the de-
PENDANTS are insolvent or have detaulted
in meeting their obligations. The
plaintiffs are not Judgment creditors of
the defendants nor are they contract
creditors, for the bonds which they
hold are not the obligations of the de-
PENDANTS, the court pointed out. 1t IS
undisputed that each issue OF bonds
sold by the Smith company was Sc
cured by mortgage or deed OF trust
upon specific piece Of real estate, and
is the obligation of the owner OF that
particular property.
IncalcuIable Injury Seen.
'DTo grant the plaintiffs request" the
court said, would benefit no one but
the receiver and might do incalculable
injury to the corporation and the hold
ers of its securities. The motion for
she appointment of receiver for the
property of the individual defendants
Is without merit"
"The appointment of a receiver for
corporation" said Justice Wheat, "is
serious matter and is not to be done
except in accordance with well recog-
nized principles of law. The purpose of
o receiver pendente lite is to preserve
property pending its disposition by final
decree. In this case, the prayer for
final relief asks nothing against the
corporation, unless the clause TO pay
over into the corporation or to re-
ceiver then duly and permanently ap-
pointed may be regarded as a prayer
for a permanent receiver.
Notwithstanding its broad general
allegations, the final prayer of the bill
Is against the individual defendants
only, that they be required to pay for
the benefits Of the corporation all sums
of money which in equity the corpora
ton is entitled to receive from them.
To appoint a receiver now for the as
sets OF the corporation in the District
in connection with such demand as
this and in the absence of any prayer
for final relief against the corporation
would, in my opinion, be wholly unjust1-
fable. The motion for receiver viii
be denied"
Dissipation of Assets Charged.
The motion for appointment of re-
ceiver was made by Mr.. Gardiner in
behalf of four bondholders, Andrew B.
Caldwell, Grace Caldwell, 3401 Six
teenth street; Mary H. Farmer, 1854
Columbia road, and Eva B. Middleton,
1919 Oak street. They also asked for
an injunction and accounting.
Gardiner charged that Zihlman, Girls
singer, Pitts and Henry, as officers OF
the F. H. Smith Co., had diSsipated the
cbrporation's assets and that certain of
the corporations papers and effects had
been removed from the city.
Wilton j. Lambert and Rudolph H.
Yeatman, appearing for the defendants,
contested the motion on the grounds
that the company is solvent, that it
has never defaulted on its bonds and
that appointment of a receiver at this
time would seriously affect the interests
of the holders of the preferred stock.
They introduced affidGvits from each
of the defendants named, declaring that
the companys funds had not been dis
sipated in any way and there was moth
ing irregular about the firms business
practices.
The courts decision disposed finally
of the application for a temporary re-
ceiver for the company. There is still
pending, however, a request for ap-
pointment of permanent receiver for
the individual defendants and this pc
tition will not be disposed of until after
O final hearing of the case.