New River Collieries Co. v. Snider

• Decision Date: 02 January 1923
• Citation: 286 F. 667
• Parties: NEW RIVER COLLIERIES CO. v. SNIDER et al.
• Court: U.S. Court of Appeals — Second Circuit

286 F. 667

NEW RIVER COLLIERIES CO. v. SNIDER et al.

United States Court of Appeals, Second Circuit.

January 2, 1923

The Tidewater Coal Exchange is the same 'unincorporated Company' held to have been properly adjudicated a bankrupt in (C.C.A.) 280 F. 638, affirming (D.C.) 274 F 1011. See, also (D.C.) 274 F. 1008.

The nature of the Exchange and its business, the occasion for its existence, and the reasons why it was held a concern capable of having creditors and debtors, are sufficiently set forth in the cases above referred to, but especially in 280 Fed.at pages 640, 641, and 643.

The plaintiff was a shipper of coal but not an original member of the Exchange. It claims to have joined the Exchange under governmental compulsion exercised by the Fuel Administrator. But it did after joining deliver coal to 'Pool No 1.' Instead of being permitted to use its own coal for its own purposes or to sell the same to its own customers . . coal or some of it was assigned, i.e. delivered for use to parties not customers of plaintiff, and such deliveries out of Pool 1 have not in all cases been made good by the consignment of other and similar coal to the pool by those who took what they had not put in. It is suggested that the same sort of thing happened with other pools, i.e. in respect of other classes of coal; the arrangement of pools being in accordance with the differing classes and kinds of coal shipped to tidewater.

The object of this suit is to treat the managers of the Exchange as bailees of coal delivered to the several pools and to compel them as trustees to account for such money and property as may be found or decreed to belong to Pool No. 1 in which plaintiff is especially interested, and in short to compel (since plaintiff sues on behalf of itself and all others similarly interested) an adjustment of the affairs of the Exchange pool by pool and to prevent any settlement of accounts by aligning all shippers or Exchange members who had taken out more coal from all pools than they had put into the same as debtors to the Exchange and treating all those who, considering all the pools together, had consigned more than they took out, as creditors.

No other shipper to or member of the Exchange has joined with plaintiff in the prosecution of this suit. The trustee in bankruptcy has been admitted as a party defendant and has practically displaced Messrs. Snider and Howe (chairman and commissioner, respectively, of the Exchange) in the defense of the suit. The Chemical Bank is named as a defendant because it was the depositary of what was known as the Exchange's 'liquidation account.'

We find that it was the intent of those who formed the Exchange that all who consigned coal to it should get coal back and not be paid in money by the Exchange for what they shipped. If a given shipper consigned a thousand tons and another shipper was permitted to withdraw that particular thousand tons for his own purposes, it was the obligation of the second shipper promptly to put back into the receptacles of the Exchange a thousand tons of the same grade of coal that he had procured. By this means all accounts would be kept in terms of coal and there would be a perfect balance when all the coal was gone.

This suit and the bankruptcy proceeding arose because some shippers failed to make good their engagements and the account could not be made to balance in terms of coal because those who obtained coal they did not ship did not fill with coal the bins they had emptied.

We think it clearly shown that long before the business of the Exchange terminated the existence of this condition was recognized as a fact. It was further seen as probable that the situation so produced would grow more acute, and that these considerations led to a revision of the original rules of the Exchange, to which revision plaintiff must be deemed to have assented and under which all the transactions said to give rise to this suit occurred.

The Exchange rules which we regard as important and controlling in this litigation are set forth in a footnote. ^[1] It will be seen that New Rule 22 is an amendment of original Rule 9, and so is New Rule 23 of original Rule 12, and new Rule 28 of original Rule 10.

Simpson, Thacher & Bartlett, of New York City (Thomas D. Thacher and Louis S. Weiss, both of New York City, of counsel), for appellant.

James F. Curtis and Root, Clark, Buckner & Howland, all of New York City (Chauncey Belknap, of New York City, of counsel), for appellees.

Before ROGERS, HOUGH, and MAYER, Circuit Judges.

HOUGH Circuit Judge (after stating the facts as above).

The necessary implications of our decision in 280 F. 638, go far to dispose of this case. We there affirmed the adjudication as bankrupt of the Exchange, and did so on a creditors' petition. The stipulated facts in that litigation showed (and they are not now denied) that owing to the guaranty by the tidewater rail lines of all the Exchange expenses, the only method in or by which the association could incur debts or have debtors was by recognizing as creditors those who had consigned more coal than they got, and as debtors those who had gotten more than they consigned; and it furthermore appeared (and is recognized as true by the joinder as defendant herein of the Chemical Bank) that settlement in cash had resulted in the 'Liquidation Account,' and such cash was produced by the Exchange drawing drafts on 'debit members' as debtors to the Exchange.

In other words, not only could there have been no adjudication, if settlements had taken place only in terms of coal as originally intended, but also if cash settlements had been called for only pool by pool; because no one would have been a creditor of the Exchange in the sense of being entitled to sue upon a general assumpsit, and look to all the assets of the Exchange from whatever source derived as means of judgment satisfaction.

It is true that this plaintiff did not join in the bankruptcy proceedings, but neither did it seek to oppose. The decree of adjudication cannot be collaterally attacked; and whether a suit that assumes and asserts, as does this one, a legal status inconsistent with adjudication can itself be maintained, is a point on which we shall not dwell, but without decision pass to consideration of plaintiff's argument. We note, however, that we have no desire to depart either from the terms of our previous decision or its legitimate implications.

The already prolonged litigation over this war measure of a coal exchange has largely been before Learned Hand, J., who has repeatedly stated his view that in the beginning, in concept the Exchange was no more than a manager of and for a series of co-operative pools,...