In re Tidewater Coal Exch.

• Decision Date: 26 July 1921
• Citation: 274 F. 1011
• Parties: In re TIDEWATER COAL EXCHANGE.
• Court: U.S. District Court — Southern District of New York

274 F. 1011

In re TIDEWATER COAL EXCHANGE.

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

July 26, 1921

James F. Curtis and Root, Clark, Buckner & Howland, all of New York City, for petitioning creditors.

William Mann, of New York City, for alleged bankrupt.

Peale &amp McLaughlin and John C. Myers, all of New York City, for objectors.

Thomas K. Schmuck and Hulon Capshaw, both of New York City, for Delaware Steamship & Commerce Corporation.

LEARNED HAND, District Judge.

This case now comes up upon motion for an adjudication on further stipulated facts, on motion by the petitioning creditors to strike out the answers of McNeil & Co. and of the 'Protective Committee' of shippers, and on motion of the Delaware Steamship & Commerce Corporation to be allowed to intervene and to file an answer.

As to the adjudication, I may say at the outset that the answers already in do not put in issue any material allegation of the petition. They allege that the Exchange cannot be adjudicated, which is matter of law, and that it is not insolvent, which is irrelevant. There is no material traverse at all, and the adjudication might go forthwith. The petitioners have, however, for reasons which I do not quite understand, disregarded these omissions, and both sides have prepared a new stipulation touching the act of bankruptcy i.e., the resolution of May 11, 1921. Even this is incomplete because it is only from the affidavits of Mr. McLaughlin of July 20, 1921, and Mr. Snider, of July 15, 1921, that I can glean the whole situation which the parties mean to discuss.

I might, and perhaps I ought to, decline to consider any issues not embodied in a pleading but picked up from a mass of desultory papers in such way as best I may. Nevertheless, I prefer to try to dispose of what the parties apparently think they have presented, rather than to throw them back upon the letter of what they have done. However, I have not considered the question whether the petitioners are creditors of the Exchange. That allegation of the petition is not only not at issue, but it is not mentioned in the briefs, nor was it argued at the bar. Therefore I consider only the question whether there was an act of bankruptcy. In that consideration I disregard in toto the answer of the Exchange as a pleading though not, as will transpire, as an act in pais. It is nothing that I can discover but a well-intentioned statement of evidence concluding with an expression of doubt. In contentious matters a court is entitled to be left less in the position of advisor and more in that of judge.

In the stipulation now submitted I find no statement of the composition of the executive committee of the Exchange on May 11, 1921, when the resolution was passed at a special meeting. On its face the resolution was an authoritative action of that body, to which the closest analogy is a board of directors of a corporation, and such a board has the power to make such a declaration, in states where it may make an assignment for the benefit of creditors. Re Moench & Sons Co., 130 F. 685, 687, 66 C.C.A. 37 (C.C.A.2d). The powers of the executive committee of the alleged bankrupt are defined by rules 4 and 7 of the 'Revised Rules.' They give that committee 'supervision' over the Exchange and the right to amend the rules. There is to be but one meeting of the members every year, and no provision is made for calling special meetings, as is done in the case of the executive committee (Rule 6). It appears to me that between the annual meetings of members, the executive committee which was the only body in existence capable of acting at all, had complete authority to do everything which a normal board of directors could do. I must proceed by analogy, doubtless, but the analogies all make for the powers exercised in this instance.

Next arises the question whether the power was in fact exercised. The affidavits show that of the eleven members of the executive committee provided for in the rules, only nine were ever elected, and, of these nine, one had resigned before the day in question, though his resignation was not accepted. It makes no difference as I view it whether there were eight or nine members. On May 11, 1921, the date of the resolution, there were present at the meeting three members of the committee and two other persons holding proxies to act for two other members. All these five united in the vote and no more. The first question is whether this was a legal vote of the executive committee. I am satisfied that it was not, in spite of the fact that the business of the committee had customarily been conducted in that manner. Again, having recourse to the analogy of a board of directors, such discretionary powers could not be lawfully delegated. Craig Med. Co. v. Merchants' Bank, 59 Hun, 561, 14 N.Y.Supp. 16; Perry v. Tuscaloosa, etc., Co., 93 Ala. 364, 9 So. 217; Atty. Gen. v. Scott, 1 Ves. 413, 417.

Nevertheless, the act was in fact done on behalf of the company and in its name, and, though unauthorized, it might be ratified by acquiescence after knowledge brought home to the other members of the committee. Here again I revert to the analogy of a corporation. Rolling Mill v. St. Louis, etc., R.R., 120 U.S. 256, 7 Sup.Ct. 542, 30 L.Ed. 639; Pittsburgh, C. & St. L.R. Co. v. Keokuk & H. Bridge Co., 131 U.S. 371, 381, 9 Sup.Ct. 770, 33 L.Ed. 157. If, then, the other members had knowledge of this resolution and after a reasonable time for action remained acquiescent, or expressed their concurrence, they must be deemed in effect to have ratified it, and it would be valid ab initio according to the common maxim of the civil law.

The resolution was passed on May 11, 1921, and the Exchange appeared before May 24th, through its attorney, whose authority to appear and act must be taken as authorized without further proof than the appearance itself. Osborn v. U.S. Bank, 9 Wheat. 738, 829, 830, 6 L.Ed. 204; Ritchie v. McMullen, 159 U.S. 235, 241, 16 Sup.Ct. 171, 40 L.Ed. 133. On June 7, 1921, after several extensions, he filed an answer which not only did not repudiate the resolution, but spoke of it as passed by the executive committee. The question is whether this answer after an interval of four weeks, together with the reasonable inferences to be drawn from the situation as a whole, make prima facie proof of acquiescence, or indeed of positive assent.

I think that the evidence is enough. That the...