Brown v. Four-In-One Coal Co.

• Decision Date: 12 February 1923
• Docket Number: 3751.
• Citation: 286 F. 512
• Parties: BROWN v. FOUR-IN-ONE COAL CO. [1]
• Court: U.S. Court of Appeals — Sixth Circuit

286 F. 512

BROWN v. FOUR-IN-ONE COAL CO. ^[1]

No. 3751.

United States Court of Appeals, Sixth Circuit.

February 12, 1923

Shackelford Miller, of Louisville, Ky., for appellant.

Emile Steinfeld, of Louisville, Ky. (Morris B. Gifford and Isaac L Steinfeld, all of Louisville, Ky., on the brief), for appellee.

Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.

DONAHUE Circuit Judge.

On September 9, 1921, Eli H. Brown, Jr., brought an action in the Jefferson circuit court of Kentucky against the Four-In-One Coal Company to recover a balance due upon a promissory note. An attachment was issued and served on the Liberty Insurance Bank as garnishee. Thereupon the coal company for the purpose of releasing this attachment gave two bonds with sureties as provided in sections 214 and 221 of the Kentucky Civil Code of Practice. The bond given under section 214 is what is known as the forthcoming bond. The bond given under section 221 is a bond to perform the judgment of the court.

On December 29, 1921, less than four months after the service of the attachment and garnishee process, a petition in involuntary bankruptcy was filed against the coal company and on January 16, 1922, that company was adjudged bankrupt and the matter referred to a referee in bankruptcy. On May 25, 1922, what purports to be a petition by the coal company for a discharge was filed in the bankruptcy court, signed 'Four-In-One Coal Company, per Fred A. Zeigler, Acting Vice President, Bankrupt. ' The District Court entered an order staying further proceedings in the case in the Jefferson circuit state court until after the application for a discharge should be determined. To this application Brown filed written objections thereto, averring the bringing of the suit in attachment in the state court, the issuing and service of the attachment and garnishee process in that action, and the execution of the bonds for the release of the property attached; the necessity of obtaining a judgment in the state court before action could be brought on either of these bonds; and further averring that no action had ever been taken by the Four-In-One Coal Company, its directors or stockholders, seeking a discharge in bankruptcy or authorizing any person to seek or petition for such discharge; that Fred A. Zeigler, who signed the petition for a discharge of the bankrupt, was not the vice president or any other officer of the Four-In-One Coal Company and had no power or authority to sign the application for a discharge and praying that a discharge in bankruptcy be denied the bankrupt or at least withheld and stayed as against Brown until his action in the state court proceeded to final judgment. The District Court refused to set aside the stay of proceedings in the attachment action in the state court or withhold action on the application for a discharge or to reserve to Brown the right to proceed to judgment in the action in the state court against the company with a perpetual stay of execution against the bankrupt, but, on the contrary, entered an unconditional discharge in bankruptcy.

The application for discharge in bankruptcy was clearly for the benefit of the bankrupt corporation. In the absence of evidence to the contrary, the presumption would naturally obtain that this was a corporate action and that Zeigler either had original authority to sign this application or that his action in that behalf was subsequently approved and ratified by the corporation. Brown offered no evidence tending to prove that this application was not authorized by the corporation or that Zeigler had no authority to sign the application. It is true that it is recited in an order made by the referee that when Zeigler was examined by him he stated he was nominated as vice president of the company that his qualifications ended with said...