Phelan v. Middle States Oil Corporation
Decision Date | 11 January 1955 |
Docket Number | Docket 22426.,No. 284,284 |
Citation | 220 F.2d 593 |
Parties | Joseph A. PHELAN, Complainant, v. MIDDLE STATES OIL CORPORATION et al., Defendants. Meyer KRAUSHAAR and Sophie D. Cohen, as executors of William W. Cohen, deceased, Sophie D. Cohen, individually, and Levy Brothers, Appellants, v. Joseph GLASS and Joseph P. Tumulty, Jr., executor of Joseph P. Tumulty, receivers, and Middle States Petroleum Corporation, Appellees. |
Court | U.S. Court of Appeals — Second Circuit |
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Meyer Kraushaar, New York City, for appellants.
Leslie Kirsch, New York City, for Glass.
Ralph Montgomery Arkush, New York City, for Middle States Petroleum Corp.
Joseph P. Tumulty, Jr., Washington, D. C., pro se.
Before L. HAND, SWAN and FRANK, Circuit Judges.
Writ of Certiorari Denied May 16, 1955. See 75 S.Ct. 772.
We dismissed an appeal from the judgment in this case because it was not final against Glass, and because, although it was so against Tumulty and the Middle States Petroleum Corporation, it would have resulted in great duplication of time and expense to go over the same issues twice. We suggested then that the parties might stipulate to delete those parts of the judgment that limited its finality as to Glass and to discharge him unconditionally.1 This they did, but in two other opinions, on January 15 and February 8, 1954,2 we concluded that such amendments must be approved by the district court under Fed.Rules Civ.Proc. rule 23(c), 28 U.S.C.A.; and we therefore remitted the cause to Judge Smith. On May 21, 1954, after hearing on notice to all parties he entered a judgment amending the judgment, from which, as amended, the original appellants have again appealed. The present judgment (disregarding the reversal of the dismissal of the counterclaim of the Middle States Petroleum Corporation against the executors of Cohen) now unconditionally declares (1) that Cohen's executors, and Levy Brothers and Sophie D. Cohen individually "have failed to establish any right to surcharge against Joseph P. Tumulty and Joseph Glass, as Receivers of the United Oil Producers Corporation, or recovery against Middle States Petroleum Corporation in favor of the estate of United Oil Producers Corporation or any of those claiming through said estate"; (2) denies all motions to surcharge the receivers and approves their accounts; (3) discharges them as such receivers; (4) dismisses the "general charges of fraud and conspiracy"; and (5) dismisses nine "specific claims of fraud and conspiracy" which it describes severally in detail. The judgment leaves undisposed of all liabilities of Glass and Tumulty, as receivers of the Middle States Oil Corporation, or of any of its 35 and more subsidiaries. We need not decide many of the issues litigated at the trial, even though these related to the rights and liabilities of the United Oil Producers Corporation against, or to Middle States Oil Corporation, or any of its subsidiaries, save as decisions on these bear upon the value of the assets of United Oil Producers Corporation, sold in reorganization. Ordinarily, of course, it would be necessary to liquidate these claims as to both their validity and amount in order to appraise their value, and to decide whether the price at which they were sold to the Middle States Petroleum Corporation was "fair." However, as we shall show, it is not necessary to do this in the case at bar because the intercorporate claims were complicated far beyond any possible liquidation within in the time allowed by the district court for that purpose. The only question is whether the price fixed and obtained was the best attainable in the circumstances. If it was, that was all for which the appellants can now demand the receivers of the United Oil Producers Corporation to account. For these reasons we shall not discuss any claims of Cohen's executors, as shareholders of the Southern States Oil Corporation, or the claims of Sophie D. Cohen, individually, or of Levy Brothers, as such shareholders. These have no bearing upon the liability of Glass and Tumulty to the bondholders or creditors of United Oil Producers Corporation. Nor has the claim of Sophie D. Cohen, as a shareholder of the Oil Lease Development Company, any such bearing, because, even though we will assume for argument that she may have been entitled to prosecute the claims of that company, its only claim against the receivers of United Oil Producers Corporation, was as a pledgee of some of the bonds of that company, so that whatever disposes of the interest of Cohen's executors, as holders of such bonds, applies equally to the interest of Sophie D. Cohen, as shareholder of Oil Lease Development Company.
We shall use the following abbreviations: The "Bondholders" will mean all those bondholders who did not deposit their bonds in reorganization; "U.O.P." will mean United Oil Producers Corporation; "M.S.O." will mean Middle States Oil Corporation; "M.S.P." will mean Middle States Petroleum Corporation; the "Receivers" will mean Glass and Tumulty, as receivers of United Oil Producers Corporation. The appeal involves only three questions: (1) Whether the sale to "M.S.P." in reorganization of the assets of "U.O.P." was conducted as the law requires; (2) whether the plan of reorganization satisfied the Boyd Rule3 by giving to bondholders an "equitable equivalent" in "M.S.P." of their former claims against "U.O.P."; and (3) how far the "Receivers" are liable personally if either answer to the foregoing questions is negative. The claim against "M.S.P." is that, as it was a party to the sale and to the consequent plan of reorganization, it was a grantee of a fraudulent conveyance. The charge against Glass rests more particularly upon the allegation that he actively promoted the reorganization fraudulently as part of a conspiracy to secure an interest for himself in "M.S.P."; and that, even if not a party to any such actual fraud or conspiracy, he had such personal interests in transferring the assets of "U.O.P." to "M.S.P." as conflicted with his duty as receiver, and threw upon him the burden of justifying his conduct, a burden which he did not carry. Furthermore, the "Bondholders" charge that, even though Glass was not engaged in a conspiracy to defraud them, the "Receivers" were derelict in their duty as such, in the conduct of the sale of the assets, and that the burden of proof lay upon them to show the extent of the loss incurred and their profits therefrom.
After a long and warmly contested trial, Judge Smith handed down a comprehensive opinion, accompanied by 272 findings of fact, in which he decided that the "Bondholders" had failed to establish any liability against the "Receivers" or "M.S.P."; but which dismissed the counterclaim of "M.S.P." against Cohen's executors. To the allegation that Glass and the committee that reorganized "M.S.P." united in a conspiracy to secure the assets of "U.O.P." in fraud of the "Bondholders," Judge Smith found that the "general charges of fraud and conspiracy are not proved." 124 F.Supp. 779. Of Glass he said that Although it is of course true that such a finding is not exempt from review by us, "it is not enough that we might give the facts another construction, resolve the ambiguities differently, and find a more sinister cast to actions which the District Court apparently deemed innocent."4 We have again and again laid especial weight upon the importance of findings that touch the good faith and honesty of a witness, whom the judge has seen; for, as we have said, on such occasions the printed record does not preserve a part of the evidence, which on that issue is often crucial. To ascertain another's motives we are of necessity driven to inferences, for they are never manifest to our senses; no one can see, hear or feel what has actuated someone else. Among the sensible facts on which we must rely is the manner in which the witness utters his testimony: i. e., his address and bearing, his frankness, his directness and freedom from evasion, his assurance as to what he has personally observed, and his readiness to admit his uncertainty as to what he has not: all these things are among the most convincing means of deciding whether to believe his testimony. And so, when a judge of tried experience has had the opportunity to observe a person through days...
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