New River Coal Land Co. v. Ruffner Bros.
| Decision Date | 01 December 1908 |
| Docket Number | 757. |
| Citation | 165 F. 881 |
| Parties | NEW RIVER COAL LAND CO. v. RUFFNER BROS. |
| Court | U.S. Court of Appeals — Fourth Circuit |
On the petition of Ruffner Bros., the Frank Payne Shoe Company, the Dawley Furniture Company, and Lowenstein & Sons, creditors duly filed in the District Court of the United States for the Southern District of West Virginia, at Charleston, on the 25th of March, 1907, the Cataract Colliery Company, a corporation under the laws of the state of West Virginia was on the 18th day of April, 1907, duly adjudged bankrupt. Theretofore on the 7th day of February, 1907, J. M. Clark and C. E. Krebs, partners under the firm name of Clark & Krebs had filed their bill of complaint in the Circuit Court of Fayette county, W. Va., against the Cataract Colliery Company, a corporation, New River Coal Land Company, a corporation, and the Frank Payne Shoe Company, a corporation. In this bill it was alleged that the Cataract Colliery Company is a West Virginia corporation, with authorized capital of $50,000, and a paid-up capital for which stock had been issued of $32,700. That the principal asset of the said colliery company was a lease of a thousand acres of land, let to the said company by the New River Coal Land Company, under the terms of which the Cataract Colliery Company was authorized to mine and remove the coal from the land upon payment of a royalty of eight cents (8Sec.) per ton, and a minimum rental of $5,000 per annum, which minimum rental however, it was alleged, had been waived by the owners of the land. The bill further alleged that the colliery company had built on the lands leased 25 dwelling houses, a storehouse, tipples, side tracks, haulways, entries, and many vast improvements, and had equipped the plant with the necessary machinery and appliances for mining the coal from the land. That in addition to the interest in the lease the bill alleged that the colliery company had a small stock of merchandise, 7 mules, 40 mine cars, 3 mining machines, 1 set of blacksmith tools, and a few other appliances. Further, that the said colliery company, in order to carry on its operations upon the leased land, had been necessitated to borrow money, and had become largely indebted and unable to pay its just and legal debts, which, as alleged, amounted to about $36,000. The bill further alleged that the colliery company was indebted to complainant in the sum of $11,662.26. That it owed the Charleston National Bank of Charleston, W. Va., $6,200, which was indorsed by plaintiffs. That it owed Abney, Barnes & Co. $812.83, which was indorsed and guaranteed by plaintiffs. That it owed Louis Hubbard & Co. $456.98, which had been indorsed and guaranteed by plaintiffs. That it owed to the defendant the Chesapeake & Ohio Coal & Coke Company the sum of $4,000, which had been indorsed and guaranteed by the plaintiffs. And that in addition it owed various and sundry creditors for goods, merchandise, etc., all together amounting to $36,000, as above stated.
The bill further alleged that the creditors of the Cataract Colliery Company were pressing the company for payment of their claims, and that the defendant Frank Payne Shoe Company had instituted suit at law against the company for the debt due the said shoe company, and that other creditors were threatening to bring suits to enforce their claims. Further that the said colliery company had no money and no assets, except its coal plant and the personal property described, and that by reason of the cost of mining coal, etc., it had been unable to meet its obligations, and was, at the time of the filing of the bill, totally unable to pay any of its obligations other than its laborers and miners for work. The bill further alleged that by reason of the provisions of the lease under which the Cataract Colliery Company was operating it could not transfer or sell the lease or coal plant without the consent of the owners of the land, and that, in the event the creditors of the Cataract Colliery Company should obtain judgments and executions, the only property available to meet such executions would be the personal property above described, and which, it is alleged, would be totally insufficient to pay the debts. Thereupon the prayer of the bill was that receivers be appointed to take charge of the coal plant and property of the Cataract Colliery Company, with authority in the receivers to continue the operation of the coal plant under the contract of lease, and from the proceeds to pay the running expenses, and that the balance, if any, should be held subject to the order of the court, and for further relief as prayed for in the bill.
Upon the filing of the bill the court, on the 9th of February, 1907, appointed L. L. Abbott special receiver of the property of the Cataract Colliery Company, and the said receiver took possession thereof pursuant to the decree, and continued to operate the mining plant by virtue of the authority thus conferred upon him.
On the 6th of March, 1907, the defendant the New River Coal Land Company filed its answer, which it also asked to be considered in the nature of a cross-bill. In this answer many of the allegations of the complainant's bill were denied, but the lease, as set out, was admitted. The defendant claimed, however, in the answer substantially that the Cataract Colliery Company had failed to comply with the terms of the lease; that it had not paid royalty on the coal mined; had left the taxes upon the property unpaid; and that, by reason of these and other failures to perform the contract according to the terms, the lease to the company had terminated and become forfeited to the New River Coal Land Company, and that the said last-named company had a right, under the terms of the contract, by reason of the default of the colliery company in the performance of the stipulations, to reenter without notice upon the premises, and to take possession of and have and hold all the property of the said colliery company located upon the leased premises as liquidated damages for the default. Others of the defendants named also filed answers in which debts were alleged to be due from the colliery company, or rights to have certain obligations of the colliery company carried out.
On the 9th of February, 1907, as appears from the record, the special receiver reported to the court that it would be impossible for him to continue the operation of the coal mines of the Cataract Colliery Company without the expenditure of large sums of money and without authority to purchase supplies, etc. Thus the status of the case in the state court appears to have remained until the 10th of May, 1907, after the adjudication in bankruptcy, when Ruffner Bros., as creditors of the Cataract Colliery Company, filed a petition in the circuit court of Fayette county, in the said chancery suit, and prayed that the proceedings therein might be stayed until the District Court of the United States, sitting in bankruptcy, determined the questions arising between the creditors and the said Cataract Colliery Company, bankrupt, and asked that the New River Coal Land Company and others be restrained from further proceeding in the case and from disposing of the property of the said Cataract Colliery Company.
The prayer of the petition of the Ruffner Bros., was denied by the circuit court of Fayette county. On the same day the said circuit court in the said cause entered a decree of forfeiture, in which it was ascertained that the Cataract Colliery Company, in violation of the terms of the lease which was set up by the New River Coal Land Company in its cross-bill, had defaulted in the payment of royalty and taxes under the lease, by reason of which the said New River Coal Land Company had elected to terminate and have declared forfeited the said lease; and thereupon the court ordered and decreed that the said lease be forfeited, and that said New River Coal Land Company have the permanent possession of the real estate and lands mentioned and described in the lease because of the forfeiture, and so forth.
It appears from the record, however, that said lands and property of the bankrupt still remained in the hands of the special receiver, and were in his custody and possession undelivered to the New River Coal Land Company on the 2d day of July, 1907, when the Ruffner Bros., as creditors, presented their petition to the District Court of the United States for the Southern District of West Virginia, in substance as follows:
That the Cataract Colliery Company had been adjudged bankrupt as before stated, and that no trustee of the estate had been appointed. That the suit of Clark & Krebs before referred to had been brought as stated, and proceedings had therein as set forth, including the appointment of the special receiver, the filing of the petition by Ruffner Bros. for stay, and the denial thereof by the court, the decree of forfeiture, etc.
It is further set forth in the petition: That the debts of the Cataract Colliery Company aggregate about $60,000; that the value of the property of said company is greater than the claim of the New River Coal Land Company, and that the lien claimed by the said last-named company is not valid; that the leasehold and personal property are assets which should be administered for the benefit of the general creditors, and that a sale of the property would sacrifice the same to the detriment of the general creditors, if made by the special receiver.
Upon this petition the District Court was asked to stay by its order further proceedings in the suit in the circuit court of Fayette county, and also to enjoin the New River Coal Land Company from further prosecuting said suit, and for such other relief, etc. In response to this prayer, the District Court entered...
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