Cresson & Clearfield Coal & Coke Co. v. Stauffer

• Decision Date: 21 November 1906
• Docket Number: 9.
• Citation: 148 F. 981
• Court: U.S. Court of Appeals — Third Circuit
• Parties: CRESSON & CLEARFIELD COAL & COKE CO. v. STAUFFER.

148 F. 981

CRESSON & CLEARFIELD COAL & COKE CO. v. STAUFFER.

No. 9.

United States Court of Appeals, Third Circuit.

November 21, 1906

Boyd Lee Spahr, for appellant.

Henry N. Wessel, for appellee.

Before DALLAS, GRAY, and BUFFINGTON, Circuit Judges.

GRAY Circuit Judge.

This is an appeal from the decree of the district court for the eastern district of Pennsylvania, sitting as a court of bankruptcy, in the matter of The International Coal Mining Company, adjudicating the said corporation a bankrupt.

The opinion of the district judge (143 F. 665), in making this adjudication, is as follows:

'Holland District Judge. On July 14, 1905, a writ of fieri facias on a judgment obtained by the Cresson & Clearfield Coal &amp Coke Company, was issued against the alleged bankrupt, which was returned unsatisfied. Whereupon the judgment creditor filed a petition under the Pennsylvania Act of April 7, 1870 (P. L. 58), and the common pleas court of Philadelphia directed the issuance of a special writ of fieri facias authorized by this act, under which the Sheriff seized upon the bankrupt's property and duly advertised for sale the 'franchise right to be a corporation, together with all property, real, personal and mixed, and all book accounts, claims, choses in action, causes in action arising out of contracts, torts or penalties, and assets of every description belonging to or in any way appertaining to the International Coal Mining Company, excepting only lands held in fee,' and on the twenty-ninth day of September, 1905, sold the same to P. H. Walls for the sum of forth dollars ($40). The costs of the said proceedings were twenty-five and ninety-two hundredth dollars ($25.92), which are retained by the sheriff, and the balance, fourteen and eight-hundredth dollars ($14.08), is distributable pro rata among all the creditors of the International Coal Mining Company under the seventy-fourth section of the Pennsylvania act of June 16, 1836 (P. L. 775). It does not appear, however, that this distribution has been made.

'On December 5, 1905, an involuntary petition in bankruptcy was filed against the alleged bankrupt, setting forth as one of the acts of bankruptcy the execution and sale of the alleged bankrupt's property above mentioned, and its failure to vacate or discharge this alleged preference. It is also alleged in the petition that on the twenty-fifth day of November, 1905, the International Coal Mining Company admitted in writing its inability to pay its debts and its willingness to be adjudged a bankrupt on that ground.

'The Cresson & Clearfield Coal & Coke Company in due season, objected to the International Coal Mining Company being adjudged a bankrupt, for the reason that the sale under the special fieri facias authorized by the Pennsylvania act of 1870, supra, worked, under the laws of Pennsylvania, a dissolution of the corporation, and at the time of filing the petition in bankruptcy it had no legal existence, and, further, that the equal distribution required under the seventy-fourth section of the act of June 16, 1836, in effect prevented the preference, which is prohibited by the Bankrupt Act, Sec. 3, subd. 3, Act July 1, 1898, c. 541, 30 Stat. 546 (U.S. Comp. St. 1901, p. 3422), and there was consequently no commission of this act of bankruptcy. It is further contended that on November 25, 1905, when the alleged bankrupt corporation, through its board of directors, admitted in writing its inability to pay its debts and its willingness to be adjudged a bankrupt, that it and no legal existence, and this act of the board of directors, is a nullity.

'Prior to the passage of the act of April 7, 1870, supra, a return of 'unsatisfied in part or in whole' to an execution against certain corporations entitled the plaintiff in the judgment, upon petition, to have a sequestrator appointed, whose duty it was to distribute the net proceeds of the property among all the creditors of such corporation according to the rules established in the case of insolvency of individuals, and such sequestrator was accorded all the powers and was subject to all the duties of trustees appointed under the law relating to insolvent debtors. The fieri facias, which this act of 1870 authorizes, after the insolvency of the corporation is established by a return of nulla bona, is in lieu of the provisions or proceedings by sequestration under the seventy-fourth section of the act of 1836, P. L. 775 (Philadelphia &Baltimore Central Railroad Co. v. McCullough, 70 Pa. 355), and the duties of the sequestrator are performed by the sheriff who is still required to make equal distribution of the proceeds of sale to all the creditors of the insolvent corporation. Bayard's Appeal, 72 Pa. 453.

'The proceedings in effect, beginning with an execution, a return thereto, establishing the insolvency, followed by a sale of all the property of the insolvent corporation on the special fieri facias under the act of April 7, 1870, and an equal distribution among creditors of the corporation, is nothing more or less than a state insolvent law for the purpose of administering the property of insolvent corporations. It is made an act of bankruptcy to put a receiver or trustee in charge of the property of a corporation under state laws by section 3, subd. 4, and the substitution of the sheriff to effect the same result will not defeat the provisions of the act.

'In these proceedings the property of the insolvent corporation is not placed in the hands of a receiver or trustee by that name, but it is so in effect, because the sheriff, after a sale of the property on execution, is required to...