The Washington times., 1929-12-21
RECEIVE RSHIP
Of SMITH CO.
DENIED
lcentinaedI froa. Paas Onsl

6NNfNANANeS&
ing them to be firstInortgage
bonds when, as q matter Of fact.
the property securing the bonds
was encountered in many cases
by q number Of mortgages,
All Of the common stock Of the
company was owned by the direc-
tors, according to the bill, and in
order to pay enormous salaries,
bonuses and fees to the directors,
including Representative Fred
erick N. Zihlmarls chairman Of
the House District COMMITTEES.
and Crissinger, q former comp
'trolIer Of the currency, the Smith
Company had increased its CAPT
talization from $1.1O0, 900 to ST.
0OO, 900 and sold preferred stock
To the plaintiffs and others.
It was admitted in the bill that
dividends had been paid on the
stock, but it was complained that
the dividends had not been
earned and that the eapitaiiza-
ton Of the company was unsound
because it owned no property in
its own name except its office
building on Fifteenth Street.
The funds Of the corporation
were being dissipated fraudll-
lentIy, according to the plaintiffs.
who asked that r. Golden DON
ALLISON. former attorney for the
Smith Company and president Of
the Commercial National Bank,
be required to pay to the tempo
rary receiver SIS. 900 he IS alleged
to have received from the Boyle
Robertson Construction Co. to
induce his client to award build
ing contracts to the latter.
In denying the motion for q
temporary receiver Justice Wheat
first took llp the matter Of ap-
pointing q receiver for the assets
OF the individual defendants and
declared that he knew Of no
statute or principal permitting q
court to appoint q receiver for
an individual except In cases Of
fraud involving the conveyance
Of property to defeat q judge
utcI1t EI6uAIOLlS U1ns
The court went into greater
detail in explaining his refusal
to order q temporary receiver
for the corporation. He pointed
out that In the first place both
corporations were foreign corpora
tions, having been chartered
under Delaware law.
Allegations In the plaintiffs
bills we're serious enough. accord
ing to the court. and some OF
them ''if unexplained, tend to
indi ate that there has been mis-
management Of the Smith Corn
pany'S business, and misconduct
by some Of the individual de-
PENDANTS, who are charged with
having improperly profited &C
the expense Of the company
through bonuses, fees ETC. All
Of the allegations, however,
were based on information and
belief. according to the court.
without disclosing the sources OF
information or the grounds Of
the belief.
Each Bond Secured
The court pointed out that it,
had not been shown that any
Of the defendants were insolvent
or had ever defauited ii meeting
their obligations. he further
pointed out that the plaintiffs are
not judgment creditors Of the de
PENDANTS, because the bonds which
they hold are not the ObIigat lions
of the defendants. but that each
bond sold BY the Smith Company
was secured BY B mortgage on B
specified piece Of real estate, and
Is the obligation Of the owner Of
that particular property and not
OF the corporation selling the
bonds.
The appointment of d receiver
for q corporation Isl !. serious mat
ter and Is not to Be done except
In accordance with wellFecog
nized principles OF law, the
courts opinion reads, and con.
tiilueE To point out that the pttr-
pose Of temporary receiver 81
To preserve property pending its
disp osition BY q final decree The
plaintiffs IN this action included
no prayer for final relief against
the corporation, which might be-
regarded as b prayer for d perna-
nent receiver, and was considered
by the court ATS applying I'LL its
final sense to the individual de-
PENDANTS only.
It would benefit no one but the
receiver and might do incalcul-
able injury to the corporation and
the shareholders Of It's securities, !,
Justice Wheat declared I'm holding
such en- appointment unjustifi-
able.
Attorneys Lambert. Yeatnall
and Horning, Of this city, and
Frank q. Raichle, Of New York
city. represented the +. III. Smith
Company and the individual de
PENDANTS in the arguments, which
were heard Wednesday,
The litigation involving the
Smith Company and its alleged
subsidiaries Is the most coEnpli-
Gated Ia District Supreme Court
records. It began year ago
when d Grand Jury reported an
indictment against e. Bryan Pitts,
chairman 81 the board Of di-
rectors, accusing him of commit
ting perjury before q referee in
bankruptcy during the bank
ruptcy hearings Of the Hamilton
Hotel Company. The first linking
of what was to follow came at
that time, when it was alleged