Harnischfeger Sales Corp. v. Pickering Lumber Co.

• Decision Date: 01 July 1938
• Docket Number: No. 11042.,11042.
• Citation: 97 F.2d 692
• Parties: HARNISCHFEGER SALES CORPORATION v. PICKERING LUMBER CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

97 F.2d 692 (1938)

HARNISCHFEGER SALES CORPORATION v. PICKERING LUMBER CO. et al.

No. 11042.

Circuit Court of Appeals, Eighth Circuit.

July 1, 1938.

Rees Turpin, of Kansas City, Mo. (August F. Behrendt, of Kansas City, Mo., on the brief), for appellant.

Paul Barnett, of Kansas City, Mo. (Henry N. Ess, Elton L. Marshall, and Watson, Ess, Groner, Barnett & Whittaker, all of Kansas City, Mo., on the brief), for appellee.

Before GARDNER, SANBORN, and THOMAS, Circuit Judges.

GARDNER, Circuit Judge.

This is an appeal from the order of the lower court overruling the objections of Harnischfeger Sales Corporation to the classification of claims and to the plan of reorganization in proceedings under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207.

Before Pickering Lumber Company filed its petition for reorganization under the provisions of Section 77B, a receiver had been appointed for it by the lower court, in a suit entitled Harold W. Woodbury, plaintiff, v. Pickering Lumber Company, defendant. In the receivership proceedings, an appeal was taken to this court and in an opinion filed May 11, 1935 (Commerce Trust Co. v. Woodbury, 8 Cir., 77 F.2d 478), this court sustained the lower court in holding that Pickering Lumber Sales Company was an agency or department of the Pickering Lumber Company and that it should be administered by the receiver of the Lumber Company.

In 1930, in an attempt to meet a situation involving financial embarrassment, the Pickering Lumber Company caused the Pickering Lumber Sales Company to be incorporated, and transferred to it a substantial amount of unincumbered assets, receiving in exchange all the stock of the Sales Company. As a part of the transaction, the Sales Company, in a written contract, agreed, among other things, as follows:

"It (Pickering Lumber Sales Company) will assume, pay and discharge when and as they become due the accounts payable of the Lumber Company except the following accounts payable: Payrolls, obligations for slash disposal, merchandise checks and coupons outstanding and personal injury awards."

This court, in Commerce Trust Company v. Woodbury, supra, held that while the Pickering Lumber Sales Company was an agency or department of the Lumber Company, yet the transfer of assets effected by the above noted contract should not be set aside, but that the creditors of the Sales Company, including banks whose claims against the Lumber Company it had agreed to pay, should be paid first from its assets, and that any surplus should be regarded as an asset of the Lumber Company for the payment of its general creditors. When the mandate of this court went down, the lower court entered an order requiring the receiver to respect the integrity of the Sales Company as a separate legal entity and directing that that company should pay its indebtedness, and that after such debts had been paid, any surplus remaining should be made available to the receiver as an asset of the Lumber Company.

On November 30, 1934, before the receiver had taken over the assets of the Sales Company, proceedings under Section 77B of the Bankruptcy Act were taken by the Lumber Company. On December 21, 1934, the Lumber Company filed a petition asking leave to propose a plan for reorganization and for orders relative to the time and manner of filing claims, the classification of creditors, and the time for hearing upon confirmation of the proposed plan. A copy of the proposed plan was attached to the petition. The court entered an order granting leave to file the petition, and ordered the receiver to file a schedule of the claims filed with him as receiver, which should be deemed as filed in the proceedings for reorganization under Section 77B of the Bankruptcy Act without refiling.

Appellant, Harnischfeger Sales Corporation, had filed a claim with the receiver, alleging that on April 17, 1929, the Lumber Company entered into a written contract with it, whereby appellant agreed to construct certain monorail equipment and to furnish a specified number of feet of special track and other operating equipment and materials for an agreed price of $72,100.79, for use in the lumber mill; that appellant caused work to be commenced upon the equipment, and continued with it until May 31, 1929, when it received instructions from the Lumber Company to stop work. The contract contained the following provision:

"Should the purchaser request suspension of construction after work has begun the purchaser agrees to reimburse this company promptly for all direct expenditures for material and labor and engineering services, also for a proportionate share of indirect manufacturing, engineering, selling and general and administrative expenses incurred in connection with the work so far as it has been completed in accordance with invoices to be rendered by us."

The claim was originally in the sum of $44,268, and it was alleged in it that the failure of the Lumber Company and the receiver "to revoke the order of suspension given on May 31, 1929, and the failure to instruct this claimant to proceed with the completion of said work and the delivery thereof in accordance with said contract constitutes a breach of said contract." The claim as filed is for expense of construction, selling expense, lost profit, and interest, and credit is given for salvage value of some of the constructed equipment. The...