New York Trust Co. v. Island Oil & Transport Corporation

• Decision Date: 07 March 1932
• Docket Number: No. 183.,183.
• Citation: 56 F.2d 580
• Parties: NEW YORK TRUST CO. v. ISLAND OIL & TRANSPORT CORPORATION et al. ISLAND OIL & TRANSPORT CORPORATION'S RECEIVERS v. ISLAND OIL MARKETING CORPORATION'S RECEIVERS.
• Court: U.S. Court of Appeals — Second Circuit

56 F.2d 580 (1932)

NEW YORK TRUST CO. v. ISLAND OIL & TRANSPORT CORPORATION et al.

ISLAND OIL & TRANSPORT CORPORATION'S RECEIVERS v. ISLAND OIL MARKETING CORPORATION'S RECEIVERS.

No. 183.

Circuit Court of Appeals, Second Circuit.

March 7, 1932.

Martin Conboy, of New York City (Martin Conboy and David Asch, both of New York City, of counsel), for appellants Oil Transport Company and Sun Oil Corporation, Creditors of Island Oil Marketing Corporation.

Chadbourne, Hunt, Jaeckel & Brown, of New York City (William M. Chadbourne, Howard H. Brown, Alfred H. Phillips, all of New York City, of counsel), for receivers of Island Oil and Transport Corporation.

Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

MANTON, Circuit Judge.

This appeal seeks a review of an order confirming the report of the special master allowing the claims of the Oil Transport Company and the Sun Oil Corporation in participation with other creditors of the Island Oil & Transport Corporation against the assets in the name of the Island Oil Marketing Corporation and its receivers. The creditors of the Transport Corporation and the Marketing Corporation are to share in pari passu.

The same persons were appointed receivers, on March 20 and 21, 1922, for both the Island Oil & Transport Corporation and the Island Oil Marketing Corporation. A special master passed upon the respective claims of ownership to the moneys and assets which came into the possession and control of the receivers of the two companies. On April 15, 1927, the receivers of the transport company filed a claim to all the moneys and property in possession of themselves as receivers of the marketing company. The transport company was incorporated under the laws of Virginia; the marketing company was organized in Delaware, and was authorized to do business in New York state. Subsidiary corporations of the transport company were organized to hold leases to oil lands in Mexico. All the capital stock of the Mexican subsidiaries and the marketing company was owned by the transport company. The marketing company was organized for the sole purpose of marketing oil products from the Mexican properties and to manage the operations in Mexico and buy supplies. After marketing the oil, it made deposits in its account in New York City. It paid the cost of operation and other sales expenses out of this account.

The claim of the appellant, Oil Transport Company resulted from nonpayment of freight charges under a charter party entered into with the marketing company. A secondary liability was assumed by the transport company and the Massachusetts Oil Refining Company, both guaranteeing performance by the marketing company. The claim of the Sun Oil Corporation was also for freight charges under a charter party, likewise guaranteed by the transport company and the Massachusetts company.

At one time the transport company did the purchasing and selling necessary in the operation of its business, and kept all accounts, banking and otherwise, but since June, 1919, the date of its creation, the marketing company has attended to these incidents of the enterprise. Indeed, it was an instrumentality created for the purpose of purchasing and selling and otherwise acting as fiscal agent for the transport company. The method of accounting followed by the marketing company indicates that it did not derive any benefit from the transfer of the cash and accounts receivable, and that the entire beneficial interest remained in the transport company; the marketing company acted merely as the agent either for the transport company or the Mexican subsidiaries, without beneficial interest to itself, although such assets were formally placed in its name. The accountant testified that the monthly balances between the marketing and the transport companies in all cases represented the difference between the amounts entered in the books of the marketing company as due the Mexican companies and the total assets standing on the books in its name.

The appellants claim that the funds in the hands of the marketing company at the time of the receivership and those having since come into the hands of the receivers, are trust funds for the benefit of the creditors who contracted directly with the marketing company, and that it assumed the direct obligations and must pay out of its assets; that the funds in question are its assets for the purpose of paying debts. The stock of the Mexican companies, while owned by the transport company, was pledged as security under the trust indenture to secure gold notes. The marketing company was found by the master to have been organized for, and did act as fiscal agent of, the transport company. The court below approved this finding, and allowed the creditors of the transport and...