In re Alabama Coal & Coke Co.

• Decision Date: 01 December 1913
• Citation: 210 F. 940
• Court: U.S. District Court — Western District of Kentucky
• Parties: In re ALABAMA COAL & COKE CO.

210 F. 940

In re ALABAMA COAL & COKE CO.

United States District Court, W.D. Kentucky.

December, 1913

Drury &amp Drury, of Morganfield, Ky., for Bank of Waverly.

Vance &amp Heilbronner, of Henderson, Ky., for trustee and creditors.

EVANS District Judge.

On February 18, 1913, P. A. Blackwell & Co., instituted an action at law in the Henderson circuit court against the Alabama Coal Company upon an open account for $1,043.07. In their petition they alleged that the defendant had no property at that time in the state of Kentucky subject to execution, or not enough thereof to satisfy plaintiff's demand, and that the collection of said demand would be endangered by delay in obtaining judgment or a return of no property found. Upon this allegation and under the Code of Practice (Ky.) Sec. 194, they prayed for and obtained an order of attachment directed to the sheriff of Henderson county upon which the plaintiff's attorneys made the following indorsement:

'The object of this attachment is to attach in the hands of the Illinois Central Railroad Company, any money or other thing owing by it to the Alabama Coal Company, or any of the defendant's property in the possession of said Illinois Central Railroad Company, to amount sufficient to satisfy plaintiff's demand sued on and the costs of this action.

'Vance & Heilbronner, Attorneys for Plaintiff.'

The sheriff's return on the order of attachment is as follows:

'Executed on the within named Illinois Central Railroad Company by delivering to Geo. H. Waltz agent a true copy hereof Feb. 18, 1913, also on Alabama Coal Company by delivering to A. M. Hobson agent a true copy hereof.

'A. H. Abbott, S.H.C., by R. B. Eastin, D.S.'

The summons issued by the clerk in the action was also directed to the sheriff of Henderson county, whose return thereon is as follows:

'Executed on the within named Alabama Coal Company by delivering to A. M. Hobson agent a true copy hereof. This Feb. 29, 1913.

'A. H. Abbott, S.H.C., by A. Hatchett, D.C.'

On February 26, 1913, the plaintiffs P. A. Blackwell & Co., filed an amended petition, wherein they state:

'That by oversight the defendant in this action was styled Alabama Coal Company, whereas its true name is Alabama Coal & Coke Company.'

In this amended pleading the plaintiffs restate their cause of action in full, and also their grounds for an attachment, and caused another order of attachment and another summons to be issued thereon in due form, and each of which was directed to the sheriff of Henderson county. On this attachment was also placed an indorsement in this language:

'The object of this attachment is to attach in the hands of the defendant, Illinois Central Railroad Company, any money, or other thing owing by it to the defendant Alabama Coal & Coke Company, or any property of the Alabama Coal & Coke Co., in its hands to an amount sufficient to pay plaintiffs' demand, and the costs of this action.

'Vance & Heilbronner, Attorneys for Plaintiff.'

The sheriff returned the order of attachment:

'Executed on the within named Illinois Central Railroad Company by delivering to Geo. H. Waltz agent a true copy hereof. This April 8th, 1913.

'A. H. Abbott, S.H.S., by R. B. Eastin, D.S.'

On the summons on the amended petition the sheriff made this return, to wit:

'Executed on the within named Illinois Central Railroad Company by delivering to Geo. H. Waltz agent a true copy hereof Feb. 26, 1913, also on Alabama Coal & Coke Company by delivering to A. M. Hobson agent a true copy hereof. This Feb. 29, 1913. A. H. Abbott, S.H.C. By R. B. Eastin, D.S.'

The railroad company, though summoned as a garnishee, was never otherwise a party to the suit brought by Blackwell & Co. against the bankrupt.

Answering as a garnishee the order of attachment, the Illinois Central Railroad Company denied any indebtedness at that time, but subsequently, on the 30th day of May, 1913, it paid to the trustee the sum of $1,445.66, and apparently this sum was due in February previously when the orders of attachment were issued.

This proceeding in bankruptcy was begun by certain creditors on March 8, 1913, and with the consent of the bankrupt the adjudication was made on April 1st, following. These two last-named dates being less than four months after the orders of attachment were issued, that fact, per se, discharged the attachment so far as the plaintiffs P. A. Blackwell & Co., were concerned; but under section 67f of the Bankruptcy Act the latter, as well as the trustee, petitioned that the lien of the attachment might be preserved for the benefit of the estate, and an order to that effect was entered by the referee, and the propriety thereof has not been questioned.

On February 22, 1913, the bankrupt executed in Union county, Ky., its note payable on demand to the Bank of Waverly, located at Waverly in that county, for $1,300 for money simultaneously loaned to the bankrupt to satisfy its pay roll, which pay roll represented the sums then due the laborers in its mines, and to secure the payment of the note the bankrupt assigned and pledged to the bank as collateral security certain accounts it had against divers individuals, including the Illinois Central Railroad Company. The bank proved its debt as one secured by the assignment and pledge referred to. Blackwell & Co. filed written objection to the allowance of the bank's claim as a secured debt. These objections were stated as follows:

'They deny that the Bank of Waverly on February 22, 1913, or at any other time, loaned to the bankrupt, the sum of ($1,300.00) thirteen hundred dollars to meet a pay roll, or that simultaneously with the execution of said loan or advancement thereof, the bankrupt assigned or transferred to the Bank of Waverly any accounts for coal mined or sold by the bankrupt at Waverly, Ky., during the first half of the month of February, or that said bankrupt so transferred or assigned any of the accounts mentioned in said bank's proof of claim filed herein. That, if the Bank of Waverly ever loaned to the bankrupt the sum of ($1,300.00) thirteen hundred dollars, or any other sum, it loaned same prior to February 22, 1913, and before the assignment or transfer of any of said accounts by the bankrupt to said bank, and within four months before the adjudication of bankruptcy herein, and said assignment is and was a preference under the Bankruptcy Act of 1898 and amendments thereto. Wherefore petitioners ask that the said claim be disallowed as a preferred claim, and if claim has been allowed as a preferred claim that the same be reconsidered by this court and the order allowing same to be set aside and held for naught and claim expunged.'

Subsequently they filed what they called an amendment of their objections. In their amendment they only stated the facts respecting their attachments, and prayed that the lien thereof might be preserved for the benefit of the bankrupt's estate. They made no averment that the bank had any 'notice' of the attachments when the pledge was made to it, nor did they make any allegation that the bank had any 'reasonable cause for inquiry' when it loaned the money to the bankrupt which the pledge secured. Subsequently the trustee joined in and adopted all this.

After a hearing, the referee, on October 10, 1913, entered an order as follows:

'The objections of P. A. Blackwell & Co. and E. R. Morton trustee, to the allowance of the claim of the Bank of Waverly as a lien claim, and the petition of the said Blackwell & Co. and the said trustee that the attachment lien obtained by the said Blackwell & Co. by suit in the Henderson county, Ky., circuit court be preserved for the benefit of the estate of the abovenamed bankrupt, having been heard, it is adjudged and ordered that the said objections be and the same are hereby overruled as to all of the accounts assigned, except as to the sum of $1,043.07 of the...