In re J.B. & J.M. Cornell Co.

• Decision Date: 15 November 1912
• Citation: 201 F. 381
• Parties: In re J. B. & J. M. CORNELL CO.
• Court: U.S. District Court — Southern District of New York

201 F. 381

In re J. B. & J. M. CORNELL CO.

United States District Court, S.D. New York.

November 15, 1912

Murray Prentice & Howland, Charles P. Howland, Lemuel Skidmore, and Luke Vincent Lockwood, all of New York City, for the motion.

Russell Lord Tarbox, Van Wyck & Mygatt, Albert T. Scharps, Kiddle Wendell & Margeson, Floyd K. Diefendorf, and Edwin C. Ward all of New York City, opposed.

MAYER District Judge.

By order of this court, dated June 9, 1911, it was provided:

'(1) That both of the bids of the New York Trust Company and Sarah K. Cornell, and of the bondholders of the bankrupt, both dated April 24, 1911, are accepted according to their respective terms and the conditions contained therein, and the receivers, the trustee, and the bankrupt are hereby directed to convey, transfer, and deliver forthwith to the bidders or their assignee the property, real and personal, described in their respective bids, free and clear from all liens and incumbrances of any character by whomsoever asserted, except as in said bids and hereinafter provided.

'(2) That, in full consideration for the purchase by the New York Trust Company and Sarah K. Cornell, the receivers accept the following: (a) The surrender for ultimate cancellation of the outstanding receivers' certificates, aggregating the principal sum of $175,000, with all accrued and unpaid interest thereon. (b) The undertaking of such bidders, as expressed in their bid, to pay in cash up to the sum of $16,000 the unpaid fees of the receivers, trustee, and their counsel; and also the fees of the referee and appraisers as and when the same shall be fixed by this court. (c) The undertaking of such bidders contained in their joint and several bond filed in this court and hereinbefore referred to.

'(3) The receivers are hereby directed, pursuant to the proviso contained in the bid of the New York Trust Company and Sarah K. Cornell, to use their best efforts diligently to collect and to realize upon all assets now in or hereafter coming into their hands not directed to be sold by this order and to pay over the proceeds of the same up to the amount of cash paid by such bidders under subdivision 'b' of the foregoing clause of this order to such bidders or their assignee.

'(4) That, in consideration for the purchase by the bondholders, the receivers accept the surrender for ultimate cancellation of the entire amount of outstanding bonds of the bankrupt, secured by mortgage to the United States Mortgage & Trust Company, aggregating $630,000, with all unpaid coupons attached and the offer of said bondholders that such creditors as shall under the terms of their bid of April 24, 1911, establish a right to share in the proceeds of sale if the same were paid in cash, shall have respective liens in such amounts and with such respective priorities as they would have been entitled to if the purchase price had been paid in cash, subject as to the amount of such respective claims to the deduction of the amounts of cash respectively received by such creditors from any other source.

'(5) That all claims against the receivers, present or inchoate, of creditors entitled to participation in the purchase price payable under either bid be filed, in writing and duly verified, with William Allen, Esq., referee in this proceeding.

* * * That said referee take proof of the validity, effect, and relative priority in respect of any of the items or assets of each claim so filed, and report the same, with his decision thereon, to this court with convenient speed, with the right in all claimants, including all the bidders, to contest the validity, effect, or relative priority of the claim of any other creditor until final adjudication as defined in said bids. That the receivers' certificates of indebtedness and the bonds of the bankrupt secured by its mortgage to the United States Mortgage & Trust Company, although surrendered to the receivers hereunder, shall be regarded as outstanding for the purpose in the case of the receivers' certificates of enabling the New York Trust Company and Sarah K. Cornell to prove before the referee the claims represented thereby, and in the case of the bonds of enabling the holders of said bonds to prove before the referee the lien of the mortgage securing said bonds and the claims of such bidders to the purchase price payable under their bid if the same had been in cash, and in the case of both sets of bidders for the purpose of enabling them to contest the validity, effect, and relative priority of the claim of any creditor of the receivers; and such certificates of indebtedness and such bonds shall be canceled only upon the final adjudication of such of said claims of creditors as may be filed with the referee as in this order provided, or at the expiration of the time for filing such claims as herein provided if no such claim shall then have been filed. Neither such certificates of indebtedness nor such bonds shall be canceled in the event that a review should be prayed for or appeal taken from this order, nor until the time for praying such review or taking such appeal shall have expired; and in the event that this order should be reversed or should be so modified as to invalidate either bid or either sale in whole or in part, or to provide for the payment of the purchase price of either bid in any manner or upon any other terms than as in said bid contained, then the certificates of indebtedness of the receivers and the bonds of the bankrupt shall be by the receivers returned to the respective persons who shall have surrendered the same, and the rights of the owners thereof both as to principal and interest shall be in all respects revived and restored with the same effect as if said certificates of indebtedness and said bonds had never been surrendered.

'(6) This court retains jurisdiction of the cause and of the parties, and of the property and assets directed to be sold to the bondholders of the bankrupt, in order to enforce compliance with the terms of this order and to protect the rights of the parties to this proceeding. In the event of any controversy, the manner of determination of which is not herein provided for, the parties may present the controversy to this court or to the referee herein, and the receivers or the trustee may at any time apply to this court or to the referee for instructions with regard to their or his conduct in the premises.'

Notice pursuant to the order was duly advertised, and was duly given to those entitled thereto.

The special master has made a painstaking inquiry into the merit and priority of claims, and, having reported, motion is now made to confirm that report, and for such other relief as may seem just. Confirmation is opposed by several merchandise creditors.

To understand clearly the somewhat difficult questions presented, it is desirable to follow the proceedings in chronological sequence. It is only in this way that the orders of court can be satisfactorily interpreted. When the bankrupt company was petitioned into bankruptcy, it was engaged in the fabrication of structural steel and iron work. It had long enjoyed a high reputation for efficiency and integrity. Its repute and business were well worth preserving as a good will asset. The petition having been filed March 20, 1909, receivers were appointed by order dated that day and bearing file date two days later.

They duly qualified, and authority was given to continue the business for 60 days.

By petition verified March 24, 1909, the receivers stated to the court as follows:

'Fifth. The company has outstanding contracts for work amounting to about $1,200,000, on some of which no work has as yet been done, while in others the work has reached various stages of completion. There are contracts aggregating in amount $780,816 for structural work to be performed in connection with the barge canal improvements for the state, and the remaining contracts are mainly for structural steelwork on buildings in the course of construction in the city of New York. Work has been wholly or partly suspended on practically all of said contracts for lack of funds necessary to provide the necessary labor. A part of the material necessary to complete the work under certain of said contracts is in stock, and as your petitioners are informed and believe, can, with moderate outlay, be worked into shape. It will be necessary from time to time to purchase additional raw material for fabrication, and your petitioners desire authority of this court to make such purchases on credit, on such terms as they may be able to secure. It has been estimated by an expert connected with one of the creditors of the company that there is an equity of at least $200,000 in said contracts. * * * '

'Seventh. It is absolutely necessary, therefore, that your petitioners should be authorized to negotiate immediately a temporary loan of at least $50,000 on such terms as to time of payment as they may be able to secure at 6 per cent. interest, in order that the property and assets committed to their care may be properly protected and preserved, and that the business of the company may be continued. It is the intention of your petitioners to apply as soon as possible to this court on proper notice for authority to issue receivers' certificates, to be a first lien on the property, ahead of the mortgage indebtedness, for the purpose of funding these temporary obligations, and also to provide additional working capital for the company, but in the present condition of affairs, and from lack of definite information necessary to present such an application, your petitioners desire authority to negotiate a temporary loan of at least $50,000.

'Wherefore, your petitioners pray that they may be

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