Massey v. Farmers & Merchants Nat. Bank & Trust Co.
| Decision Date | 02 February 1938 |
| Docket Number | 4292-4294,No. 4269,4297.,4269 |
| Citation | 94 F.2d 526 |
| Parties | MASSEY v. FARMERS & MERCHANTS NAT. BANK & TRUST CO. OF WINCHESTER, VA., et al. (four cases). SAME v. C. L. ROBINSON ICE & COLD STORAGE CORPORATION OF WINCHESTER, VA. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Robert H. McNeill, of Washington, D. C. (John W. Cleaton, of Washington, D. C., Raymond E. Perrine, of Winchester, Va., and Harold C. Dalaker, on the brief), for appellants.
B. P. Harrison, of Winchester, Va., for appellee Farmers & Merchants Nat. Bank & Trust Co.
Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.
The appeals in these cases question the correctness of certain orders of the District Court whereby petitions filed by Elizabeth E. Massey, a debtor, under section 75 of the National Bankruptcy Act, as amended, 11 U.S.C.A. § 203, were dismissed on the ground that they were lacking in good faith and did not justify the extensions of credit which she sought. Mrs. Massey is the owner and operator of 106 acres of land near Winchester, Va., comprising 90 acres of apple orchards, an apple candy plant, a homestead and woodland. On August 13, 1937, she filed a petition under section 75 in which she listed liabilities due creditors holding securities in the sum of $57,747 and assets of $60,800, consisting of the farm valued at $60,000 and certain machinery and equipment valued at $800. Subsequently, on September 30, 1937, amended schedules were filed in which the total debts were listed at $58,912.81. Included in this amount were secured debts as follows: A debt contracted on October 6, 1911, and extended from time to time secured by deed of trust on the farm in the sum of $16,400; a debt of $15,000 contracted September 1, 1914, subsequently enlarged and extended from time to time, secured by a second deed of trust on the farm in the sum of $30,947.47; and a crop lien of January 5, 1937, in the sum of $2,500, making an aggregate of secured debts of $49,847.47, all of which were due and owing the Farmers & Merchants National Bank & Trust Company of Winchester, Va. There were also listed unsecured debts in the aggregate sum of $9,055.34, consisting of promissory notes due and owing other persons. Assets were listed in the amended schedules in the aggregate sum of $103,652.79, the excess over the value shown by the original schedules, consisting largely of an increase of $22,260 in the valuation of the farm, and the addition of $8,000 representing the estimated sales value of growing fruit which, being subject to a lien of $2,500, was not listed at all in the original schedule.
Upon the filing of the petition, the District Judge, reciting that the petition appeared to be in proper form and to have been filed in good faith, see Bankruptcy Order 50, subd. 2, 11 U.S.C.A. following section 53, referred it to a conciliation commissioner as contemplated by the act; and restrained the bank from proceeding with a sale of the farm which had been advertised to take place on August 14, 1937. Subsequent proceedings are shown by a report and memorandum of the conciliation commissioner filed in the District Court on October 15, 1937. The first meeting of creditors was held on September 9, 1937, at which the bank was represented by counsel and the debtor was represented by counsel and by her son Carl F. Massey who had had active management of the debtor's business for a number of years; and it was agreed that the son was qualified to speak for his mother, who was then eighty-four years of age, and that she would be bound by his statements. A proposal for the extension of the debtor's obligations was submitted and the debtor's son was examined with reference thereto; but it was rejected by the bank holding a majority of the indebtedness. It did not appear to the conciliation commissioner, from the evidence presented by the son, that there was "any probability of the debtor making any proposal which bona fide had any chance of being accepted by the creditors"; but the commissioner, being of the opinion that if more time were given, an agreement with the creditors might be reached, called a second meeting of the creditors for September 30, 1937. At this meeting the amended schedules were filed, and an amended proposal was submitted by the debtor which was, however, substantially the same as the first. It was rejected by the creditors for the reason that no showing was made that the debtor could carry it into effect. The conciliation commissioner examined the debtor and reached the same conclusion, but nevertheless granted another extension of time for further negotiations.
A third meeting of the creditors was held by the commissioner on October 11, 1937, at which time affidavits of the debtor and her son were submitted to the effect that the debtor was carrying on negotiations with two commercial financing companies with a view of a complete refinancing of the debtor's property, and that both companies were giving favorable consideration to the proposed transactions, and a further extension of six weeks in order to make a definite report to the commissioner was requested. The son was again interrogated by the commissioner and the extension was refused since no substantial or concrete showing was made that there was any probability that the debtor would reach an agreement with the creditors. The commissioner filed a report to this effect in the District Court on October 15, 1937.
Summarizing his findings, the commissioner pointed out that it was made plain to the debtor at the first meeting of creditors that no plan would be acceptable to them which provided for the relinquishment by them of any substantial legal right; that the amended proposition submitted at the second meeting was nevertheless subtantially the same as that presented at the first, and that there was no evidence whatsoever of its feasibility, since it was based upon a number of contingencies which were, to say the least, remote; and that no evidence to alter the situation was presented at the third meeting of creditors with the result that the repeated requests for extensions of credit "bordered close to bad faith on the part of the debtor." Specifically the commissioner pointed out that at the third meeting of creditors the debtor did not disclose the names of the persons with whom negotiations for refinancing the business were being conducted or give any assurance of ultimate success except to say that "both companies are giving favorable consideration and interest to the proposed transactions." The commissioner therefore reported to the court that the debtor had failed to make a bona fide, clear, concise, and definite proposal to the creditors supported by facts and capable of being carried out. The District Judge accepted the report of the commissioner and ordered that the petition and all proceedings thereunder be dismissed with the right to the creditors to proceed as they might be advised.
An examination of the proposals submitted by the debtor's son and of his testimony discloses ample support for the commissioner's findings. The first proposal submitted provided for the payment by the debtor on or before August 1, 1938, of the sum of $50,600 and of the additional sum of $6,000 on or before August 1, 1939. These sums were to be provided as follows:
1. $ 5,000 from the proceeds of the apple
crop of 1937
2. 5,000 from a loan on the dwelling
house on the farm
3. 5,000 from a loan to be made by Margaret
E. Massey, the wife of
Carl F. Massey
4. 10,000 from the sale of two by-product
plants on the farm to a corporation
being organized in
Washington, D. C
5. 9,600 from the sale of 1,200 feet of
land fronting on the highway
bordering the farm
6. 16,000 from refinancing the first mortgage
on the property
7. 6,000 from the proceeds of the apple
crop of 1938
In the amended proposal it was provided that the bank should be paid $20,000 on or before January 2, 1938, upon the condition that the bank should release from the lien of its mortgages 6 acres of land, comprising the site of the buildings, and 530 feet of road frontage. This part of the amended proposal was substantially a repetition of items 2, 3, and 4 of the original proposal. The amended proposal also provided for the assignment to the bank of the entire proceeds of the 1937-8 apple crops, being a repetition of items 1 and 7 of the original proposal. It was also proposed that the debtor on or before January 2, 1939, should refinance and pay off in full all of the moneys due the bank; and should pay the interest annually on the unsecured debts and the entire principal thereof on or before January 2, 1940.
The testimony, however, did not indicate any reasonable assurance on the part of the debtor or her son that the moneys promised would be forthcoming when needed. There was indeed testimony tending to show that the estimated proceeds of the apple crops were comparable with prior experience; but there was no evidence that the loan of $5,000 on the dwelling house and its curtilage could be actually secured "through relations in Minnesota," or that the daughter-in-law, against whom there were outstanding unpaid judgments in the aggregate sum of $35,000, would make a loan of $5,000 to the debtor, or that the road frontage, without provisions for roads or sewers or water, would be salable on a front foot basis in a real estate development within the year, or that there was any probability of the sale of the by-product plants for the sum of $10,000, the only evidence in this respect being that negotiations for the sale were being conducted with a Mr. Whittier of Washington, D. C.; or that it was possible to secure the sum of $16,000 by refinancing the first mortgage, the son merely testifying that he proposed to...
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