In re Tidewater Coal Exchange
Decision Date | 20 February 1922 |
Docket Number | 117,112,118. |
Citation | 280 F. 638 |
Parties | In re TIDEWATER COAL EXCHANGE. |
Court | U.S. Court of Appeals — Second Circuit |
James F. Curtis and Root, Clark, Buckner & Howland, all of New York City, for New England Coal & Coke Co., and others.
Peale & McLaughlin and John Caldwell Myers, all of New York City (John W. Davis, of New York City, of counsel), for Archibald McNeil & Sons Co., Inc., and protective committee of shippers of Tidewater Coal Exch.
Nelson B. Cramer, of Cincinnati, Ohio, and T. K. Schmuck, of New York City, for Delaware Steamship & Commerce Corporation.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
The New England Coal & Coke Company, which is a Massachusetts corporation, together with two other corporations, alleging themselves to be creditors of the Tidewater Coal Exchange hereinafter called the Exchange, filed a petition in the District Court for the Southern District of New York on May 12, 1921, in which they asked that the Exchange be adjudged a bankrupt. The claims of the petitioning creditors aggregated $276.687.37. The petition alleged that the Exchange was insolvent, and that while insolvent, and within four months of the filing of the petition, to wit, on May 11, 1921, it committed an act of bankruptcy, in that it admitted in writing its inability to pay its debts and its willingness to be adjudged a bankrupt on that ground.
The Exchange put in an answer, and set up certain facts hereinafter more fully referred to, and averred that, in view of the facts which it alleged, it was in doubt whether or not it was subject to the provision of the Bankruptcy Act (Comp St. Secs. 9585-9656).
A 'protective committee of shippers of Tidewater Coal Exchange,' by Howard Adams, chairman, pursuant to leave of court, intervened and filed an answer, in which they denied that the Exchange was such a person or incorporated company as could be adjudicated a bankrupt under the act. The answer also denied that the Exchange had committed the acts of bankruptcy set forth in the petition, and further stated on information and belief that the Exchange was not insolvent.
The Archibald McNeil & Sons Company, Inc., similarly intervened, and put in a separate, but similar, answer.
The Delaware Steamship & Commerce Corporation asked leave to intervene and answer. Its proposed answer the court, in the exercise of its discretion, declined to receive.
The petitioning creditors afterwards moved to strike out the answer of the protective committee of shippers of the Tidewater Coal Exchange and the amended answer of Archibald McNeil & Sons Company, Inc. The ground upon which this petition was based was that neither the protective committee nor the Archibald McNeil Company was a creditor of the bankrupt, or a person authorized to file an answer under the provisons of the Bankruptcy Act. These motions were denied by order dated August 4, 1921. The petitioning creditors thereupon filed a petition to revise the order denying the motions to strike out the answers above referred to.
The Protective Committee and the Archibald McNeil Company each appealed from the order of July 27, 1921, which adjudicated the Exchange a bankrupt.
The Delaware Steamship & Commerce Corporation also filed a petition for appeal from the order of July 27, 1921, adjudicating the Exchange a bankrupt, and from the order, dated August 4, 1921, denying its motion to intervene and file its answers. It also filed a petition to revise both orders.
On August 12, 1921, the District Court entered an order consolidating the appeals and petitions to revise, and directed that they should be heard on a single record. They were argued in this court together, and they will be disposed of in a single opinion. The case was disposed of by the District Judge upon a stipulation of facts, certain of which will be referred to as we proceed.
The first question we have to consider is whether the Exchange is such a person or company as can be adjudicated a bankrupt within the meaning of the Bankruptcy Act. The District Court concluded that it came within the purview of the act, and accordingly adjudged it a bankrupt. Before proceeding to consider whether the Exchange comes within the terms of the act, it is necessary to refer to the nature of the association and the object which it was created to accomplish and how it came into being. It appears that it was organized at the instance of the Council of National Defense on June 20, 1917, and that it continued in existence until April 30, 1920. It was established to expedite the transshipment of coal at tidewater points and to secure the prompt release of coal cars at the various ports. In November, 1917, under an order of the Fuel Administrator, every shipper of bituminous coal for transshipment at any one of the tidewater ports where the Exchange operated was obligated to consign all shipments of coal to the Exchange. These shipments and consignments were to be made in accordance with and subject to the provisions of the existing rules of the Exchange. As a result of this order, shippers of coal were forced to use it in connection with tidewater shipments, although nothing in the Fuel Administrator's order made such an involuntary shipper a member of the Exchange. The Exchange was not incorporated. It had no constitution or articles of association or by-laws. When it was formed certain rules were adopted, and were subsequently revised, and under its rules the Exchange functioned.
The original rules of the Exchange provided that any tidewater coal shipper or consignee could become a member of the Exchange, subject to the approval of the executive committee, provided he subscribed to the agreements covering the handling of coal through the Exchange. The membership of the Exchange included, not only individuals, but corporations and partnerships as well. No member was required to contribute any capital, to pay any initiation fee or suffer any assessments, or to bear or pay any of the expenses of the Exchange. Its operations were conducted at no cost to the members and without any possibility of pecuniary profit. There was no capital involved in this common undertaking, and by arrangement with various railroads all of the operating expenses of the Exchange were borne and paid by the railroads. During the period of government control of railroads, the Director General of Railroads took over and assumed the obligations of the railroads with respect to expenses.
The chief administrative officer of the Exchange was a commissioner. There was also an executive committee, which seems to have had its origin in the executive committee of the tidewater producers, who, with the railroads, co-operated in bringing about the formation of the Exchange. The original rules of the Exchange made no provision for the selection of a commissioner or for the selection or election of an executive committee. The revised rules of the Exchange provided that the executive committee should be elected by the members of the Exchange, but these contained no provision with respect to the election or selection of a commissioner.
We now come to consider whether the Exchange comes within the purview of the Bankruptcy Act. Section 4 of the act (Comp. St. Sec. 9588) enumerates the persons who shall be entitled to the benefits of the act. Subdivision 'b' of section 4 declares that--
'Any natural person, except a wage-earner, or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company, and any corporation engaged principally in manufacturing, trading, printing, publishing, mining, or mercantile pursuits, * * * may be adjudged an involuntary bankrupt. * * * '
The act in section 4 makes three classes subject to its provisions and liable to be adjudged an involuntary bankrupt: (1) 'Any natural person,' except such as are engaged in certain enumerated pursuits; (2) 'any unincorporated company;' (3) 'any corporation' engaged in certain enumerated pursuits. And section 5 (Comp. St. Sec. 9589) provides a fourth class and declares that 'a partnership' may be adjudged a bankrupt.
The act in its first section defines the meaning of words and phrases used in the act, and there are 30 of such definitions. But nowhere in the act is there to be found any definition of the meaning of the words 'unincorporated company.' The court must therefore determine their meaning, and in attempting to do so we find little assistance in the cases. In 1904, in Burkhart v. German-American Bank (D.C.) 137 F. 958, Judge Thompson, speaking of an 'unincorporated company' under section 4b of the act, said:
'It is generally understood to be a body or association occupying middle ground between partnerships and stock corporations, possessing some of the powers and privileges of both, and is generally so recognized by the courts.'
In 1905 the District Court for the Southern District of New York in the case of In re Seaboard Fire Underwriters, 137 F. 987, held that an unincorporated Lloyd's association of fire underwriters was 'an unincorporated company,' within the meaning of the act, and as such subject to be adjudicated a bankrupt, although, if it had been incorporated, it could not have been proceeded against, because corporations carrying on the business of insurance were expressly excepted from the provisions of the act. Judge Holt in the above case, referring to section 4b, said:
'Under this provision, in my opinion, any unincorporated company may be adjudged a bankrupt,' and 'that any unincorporated company engaged in any kind of business may be put into bankruptcy if it is insolvent and has committed an act of bankruptcy.'
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