Lee v. Koppel Industrial Car & Equipment Co.
| Decision Date | 10 January 1924 |
| Docket Number | 1660. |
| Citation | 295 F. 23 |
| Parties | LEE v. KOPPEL INDUSTRIAL CAR & EQUIPMENT CO. |
| Court | U.S. Court of Appeals — First Circuit |
Philip N. Jones, of Boston, Mass. (Henry G. Molina, of San Juan P.R., on the brief), for appellant.
Henry E. Warner, of Boston, Mass. (Francis H. Dexter, of San Juan P.R., on the brief), for appellee.
Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.
This appeal involves the right of the appellee to be held a preferred creditor in the liquidation of a business concern in the hands of the court's receiver. While the record is inadequate for us to determine in exact detail the rights of the parties, we think enough appears, so that we may settle the questions of controlling importance, leaving the case open for further hearing in the court below on any subordinate questions of fact which may thus become relevant. The salient facts are as follows:
In July, 1921, on a so-called 'creditors' bill,' alleging that the defendants were solvent, but embarrassed for lack of liquid capital, the court, with the consent of the defendants, constituted a receivership of a large sugar plantation and mill and other allied businesses. The receivership went, as usual, upon the theory that a moratorium was necessary to protect the rights of creditors. Compare the Imbrie Case, cited as Brooks et al. v. Smith et al. (C.C.A.) 290 F. 33. In February, 1922, an order was made for filing with the receiver claims against the defendants. After various proceedings, the details of which are not now material, it was determined that there was due the appellee, as 75 per cent. of the purchase price of railroad materials sold and delivered by the appellee to the defendants before the receivership, a sum which, with interest, amounted to $38,739.71. We note that interest may have been improperly compounded. But, apart from interest the indebtedness is undisputed by the receiver and by other creditors, who at the trial opposed the appellee's claim of preference. In its claim the appellee set up that it was entitled to priority of payment, 'because the amount due is the sales price of movable property now in the hands of the debtor, according to section 1823, Civil Code of Porto Rico, paragraph 1. ' The sale covered about 5 kilometers of 35-pound rails, part of which were laid and used before the receivership, and part of which were afterwards used by the receiver; 75 small 2 1/2-ton cane cars, which the receiver reported as not needed in the operation of the plant; and some larger cane cars and engines, etc., which were used. There was evidence tending to show, but no findings by the court, that the cost of the rails laid before the receivership, and contended by the receiver thus to have become a part of the realty, was $8,344.67; that the value of the personal property, which the receiver reported as useful and recommended keeping, was, as of January, 1922, $10,751. The receiver therefore recommended that the appellee's claim be held preferred to this amount of $10,751, that the small cane cars be returned or sold for the account of the appellee, and that the balance of the claim be allowed as an ordinary debt. But the court entered an order that the appellee's claim be 'allowed as a preference and prior claim as a part of the operating expenses, with interest at the rate of 8 per cent. on the sum of $31,344.71 from July 8, 1921' (the date of the receivership), 'and interest at the same rate on $7,395 from the 30th of January, 1922,' which was the date of the maturity of one of the notes given the appellee by the defendants.
From this order the receiver, 'at the request of the parties to this suit and of intervening creditors of defendants, and pursuant to leave granted on June 8, 1923,' claimed an appeal to this court, which was duly allowed.
Although, as noted above, the record is inadequate, in that, inter alia, nowhere does it appear that the concern was found to be, or became during the receivership, insolvent, yet the irresistible inference from what is before us is that the business is being liquidated as an insolvent enterprise. Otherwise, the rights of creditors, inter sese, would not be involved. If the concern were solvent, all creditors would, of course, be paid in full. Other creditors would not have appeared and contested the appellee's claim of preference. We conclude, therefore, that the questions before us arise in connection with a quasi bankruptcy or insolvency proceeding.
The appellee's contention that the receiver had no right to appeal cannot be sustained. Bosworth v. Terminal Co., 174 U.S. 182, 188, 19 Sup.Ct. 625, 43 L.Ed. 941.
1. The main question is as to the scope and effect of section 1823 of the Civil Code of Porto Rico. The pertinent parts of that section are as follows:
We agree with counsel for the receiver that the mere reading of this section suffices to show that the priority, preference, or lien (whatever it be called) is limited:
(a) To personal property that remains in the possession of the debtor or has been surreptitiously removed; and (b) to the value thereof at the time when the right takes effect. And such have been the holdings in all the cases brought to our attention that throw any light on the problem. Gandia v. Cadierno, 233 F. 739, 147 C.C.A. 505; Hudson v. Uncle Sam Planting & Mfg. Co., 136 La. 1071, 68 So. 129; McMicking v. Tremoya, 14 Phil.Rep. 253; Swoop v. St. Martin, 110 La. 237, 34 So. 426.
Rather faintly it is suggested that the priority claim can be sustained as an administration expense of the...
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Cutler v. 65 Sec. Plan
...See also, utilizing "quasi bankruptcy" approach when case does not fall neatly within federal bankruptcy law, Lee v. Koppel Indust. Car & Equip. Co., 295 F. 23, 25 (1st Cir.), cert. denied, 265 U.S. 584, 44 S.Ct. 459, 68 L.Ed. 1191 A "quasi bankruptcy" approach may be desirable for several ......
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Koppel Industrial Car & Equipment Co. v. Lee, 1784.
...Judges. BINGHAM, Circuit Judge. This is the same case in which the court rendered an opinion January 10, 1924. Lee v. Koppel Industrial Car & Equipment Co. (D. C.) 295 F. 23. We then held that the order of the federal District Court for Porto Rico, allowing the claim of the Koppel Industria......
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...supplies may be in order to harvest and reduce the crop to cash, would be to abrogate the statute. The cases of Lee v. Koppel Industrial Car & Equipment Co. (C. C. A.) 295 F. 23, and Koppel Industrial Car & Equipment Co. v. Lee (C. C. A.) 3 F.(2d) 886, are not decisive upon the facts here, ......