In re American Anthracite & Bituminous Coal Corp.

• Decision Date: 12 March 1959
• Docket Number: No. 92887.,92887.
• Citation: 171 F. Supp. 377
• Parties: In the Matter of AMERICAN ANTHRACITE & BITUMINOUS COAL CORP., Debtor.
• Court: U.S. District Court — Southern District of New York

171 F. Supp. 377

In the Matter of AMERICAN ANTHRACITE & BITUMINOUS COAL CORP., Debtor.

No. 92887.

United States District Court S. D. New York.

March 12, 1959.

COPYRIGHT MATERIAL OMITTED

Cardillo & Smith, New York City, for petitioner Leonardo Arrivabene, S. A. Daniel L. Smith, Jr., Humphrey Statter, New York City, of counsel.

Chauncey H. Levy and Sydney Basil Levy, New York City, for debtor-respondent Sydney B. Levy, New York City, of counsel.

James J. Geraghty, Huntington, N. Y., for estate of Hector C. Dracoulis and Tramp Tankers Corp.

Booth, Lipton & Lipton, New York City, for creditors' committee.

DAWSON, District Judge.

This is a petition to review an order, dated January 12, 1959, by the Referee in Bankruptcy, which denied priority status to certain claims of creditors. This petition is filed on behalf of the following creditors:

1. Tramp Tankers Corporation of Liberia (Claim No. 32).

2. The late Hector C. Dracoulis (and the Dracoulis estate) (Claim No. 27).

3. Leonardo Arrivabene, S. A. (Claim No. 34).

The total amounts of their claims are not in controversy. The only question here is whether these claimants may assert a right to priority status.

An agreed statement of the facts necessary to a decision on the issues was placed on the record at a hearing held before the Referee in Bankruptcy on December 17, 1958. A brief summary of these facts follows:

The debtor, American Anthracite & Bituminous Coal Corp., was engaged in the business of exporting coal from the United States to various foreign countries. On October 21, 1957 the debtor filed a petition for an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C.A. § 701 et seq., and on the following day, October 22nd, this court authorized the debtor to continue to operate its business.

Although the relevant facts for all three claims are similar, the claims of Tramp Tankers and Dracoulis are basically the same, and these will be treated first and the claim of Arrivabene will be treated separately.

Claims of Tramp Tankers and Dracoulis

The debtor had entered into a charter party with claimant Tramp Tankers, dated May 10, 1956, covering approximately twelve trips of the vessel Archanax to last through January 31, 1959. Another charter party was entered into with claimant Dracoulis, dated January 9, 1957, covering approximately twenty trips of the vessel Calliope to last through April 30, 1959.

These executory contracts were in operation at the time of the filing of the Chapter XI petition by the debtor. Both vessels had been tendered to debtor at United States loading ports shortly prior to the institution of the Chapter XI proceedings on October 21, 1957. However, the debtor was unable to provide cargoes for these ships and demurrage charges started to accrue.

The vessels remained at the loading ports until the middle of November, 1957, when, pursuant to stipulation (dated November 8 and approved by the court November 14, 1957) between claimants and debtor in possession, both vessels were released to make a charter party with third parties for a limited number of voyages, during which time it was agreed that the debtor would apply to the court for authority to assume or reject the executory contracts.

On January 2, 1958, upon debtor's petition dated November 29, 1957, an order was made authorizing debtor to reject both charter parties.

On or about January 20, 1958 claims were filed for damages for rejection of the contracts and seeking priority as to the following:

1. Tramp Tankers' Claim No. 32 for stevedore damages of $1,037.54, as per invoice dated June 27, 1957; demurrage of $4,403 accrued from October 15, 1957 to October 21, 1957 (pre-petition); and demurrage of $23,037, accrued from October 21, 1957 to November 16, 1957 (post-petition).

2. Dracoulis' Claim No. 27 for demurrage from October 23, 1957 to November 19, 1957 (post-petition). (Dracoulis also seeks to amend his claim to include pre-petition demurrage of $11,000 earned from October 11, 1957 to the date of the petition.)

As previously indicated, there was no question as to the amount of the claims; the only question being whether the claimants are entitled to priority of payment.

By order dated September 10, 1958 this court confirmed a plan of arrangement under Chapter XI of the Bankruptcy Act in this proceeding. On September 22nd the debtor by notice of motion objected to the priority claims of the petitioners and scheduled a hearing thereon to be held October 16, 1958. By order dated January 12, 1959 the Referee disallowed priority claims No. 27, No. 32 and No. 34 of petitioners Dracoulis, Tramp Tankers and Arrivabene, respectively.

The petitioners argue that the Referee was in error in disallowing priority to the above-mentioned claims. This argument, urged in a very lengthy brief, may be summarized as follows:

1. The debtor has no standing to object to the priority of the claims.

2. The claims are entitled to priority under the Bankruptcy Act.

3. The debtor is liable under New York law.

4. The debtor is liable for rents earned within a three-month period prior to the filing of the petition.

I. The Contention That the Debtor Has No Standing to Object

The order of confirmation, dated September 10, 1958, directed that a hearing on any objections to claims "shall be brought on within 30 days from the date of entry of this order." Petitioners claim that since the hearing was held October 16, 1958, or at a time later than 30 days from the date of the order, the debtor was precluded from making any objections.

As pointed out by the Referee in his opinion dated December 19, 1958, the hearing was "brought on" by notice of motion dated September 22nd, well within the 30-day period allowed by the order of confirmation. While the hearing was actually held October 16th, it appears that this date was fixed by the Referee as the earliest date which was then open to him. Therefore there is no basis for the petitioners' contention that the motion was not timely.

Petitioners also argue that the debtor is not a party in interest and has no standing to object to the priority status of shipowners' claims since the debtor had no legal interest in the fund in which the creditors would participate under the plan. Petitioners cite In re Woodmar Realty Co., 7 Cir., 1957, 241 F.2d 768 as a basis to show that debtor here is not a party in interest capable of objecting to a claim. However, that case is not authority for this contention. The court there stated:

"* * * The decisions have generally confined the bankrupt's and creditors' right to petition for reconsideration to situations in which the trustee clearly and unreasonably refused to act or in which there was no trustee. * * *" (Emphasis added). 241 F.2d 768, at page 771.

In the instant case there is no trustee and therefore the debtor is a proper party to make an objection to a claim.

While it may be a fact that the debtor will not participate in the fund which was deposited, General Order 21 (6), 11 U.S.C.A. following section 53, expressly authorized a "debtor" to apply to the Referee for reconsideration of any claim:

"Order 21. Proofs of Claim * *

"(6) When the trustee or any creditor or the bankrupt or debtor shall desire the reconsideration of any claim allowed against the estate, he may apply by petition to the referee to whom the case is referred for an order for such reconsideration * * *."

There is no basis, nor are any cases cited, in support of the contention that subsection (6) of General Order 21 relates only to contests with respect to the amount of a claim and not to contests over priority of claims. Therefore, by virtue of General Order 21(6), the debtor was a proper party in interest and could validly object to a claim of priority. See In re Povill, 2 Cir., 1939, 105 F.2d 157.

Petitioners also urge that the debtor is estopped by laches from objecting to these claims because the claims were filed January 20, 1958 and objections to those claims were not filed until after the confirmation date of September 10, 1958. However, this contention has no merit. These objections were raised within the 30-day period provided for by the confirmation of the arrangement. Furthermore, under § 369 of the Bankruptcy Act, 11 U.S.C.A. § 769, the court retains jurisdiction "until the final allowance or disallowance of all debts affected by the arrangement." On these grounds therefore the Referee properly denied the contentions of the petitioners and permitted the objections of the debtor to stand.

II. The Contention That the Claims Are Entitled to Priority under the Bankruptcy Act

Petitioners Dracoulis and Tramp Tankers contend that their claims have a right to priority by virtue of § 64 of the Bankruptcy Act, 11 U.S.C.A. § 104. It is to be noted that no priority statute exists under Chapter XI. However, § 302 of Chapter XI does incorporate into such proceedings the general bankruptcy sections "insofar as they are not inconsistent with or in conflict with the provisions" of Chapter XI. Therefore, the priorities enumerated in § 64 of the Act, 11 U.S.C.A. § 104, are applicable.

Section 64 of the Bankruptcy Act provides, in part, as follows:

"§ 64. Debts which have priority. (a) The debts to have priority, in advance of the payment of dividends to creditors, and to be paid in full out of bankrupt estates, and the order of payment, shall be

"(1) the actual and necessary costs and expenses of preserving the estate subsequent to filing the petition; * * * the costs and expenses of administration * * *."

If these claims are to be awarded priority at all they must be shown to fall within one of the categories of § 64. Petitioners allege that these claims are costs and expenses of administration, or actual and necessary costs of preserving the estate. However, the statutes involving priorities are strictly construed and the burden falls upon those asserting priority to establish that they come within the intended...