State ex rel. Davis v. Iman Min. Co.

• Decision Date: 02 December 1958
• Docket Number: No. 10946,10946
• Court: West Virginia Supreme Court
• Parties: STATE ex rel. C. S. DAVIS, Director Employment Security, v. IMAN MINING COMPANY, Inc., et al. William FOY et al. v. IMAN MINING COMPANY, Inc., et al.

Page 97

106 S.E.2d 97

144 W.Va. 46

STATE ex rel. C. S. DAVIS, Director Employment Security, v. IMAN MINING COMPANY, Inc., et al.

William FOY et al. v. IMAN MINING COMPANY, Inc., et al.

No. 10946.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 23, 1958.

Decided Dec. 2, 1958.

Syllabus by the Court

1. A court of equity has the power to authorize and direct issuance and sale of certificates of a receiver and prefer them to prior subsisting liens for the preservation of the property affected from waste, impairment or loss until such time as may be required to put the property in salable condition; but certificates of a receiver, authorized for the operation, improvement or development of a business, other than a railroad or other utility of paramount public importance, can not lawfully displace prior liens unless the holders of such liens expressly or impliedly waive them.

2. The general rule is that in administering the affairs of an ordinary insolvent private business corporation for which a receiver has been appointed, a court of equity can not authorize the receiver to incur indebtedness to carry on the business and make such indebtedness a first and paramount lien upon the corpus of the property superior to the liens of prior lienholders without their consent.

3. A lienholder who objects in good faith to the operation of the property of a private corporation by a special receiver does not waive its right to the priority of its lien over the lien of costs and expenses, or of the certificates of the special receiver, in connection with the operation of the property and, by objecting, does not consent, either expressly or impliedly, that such operating costs and expenses be given priority or preference over its lien.

4. A decree which gives priority to the costs and expenses and the certificates of a special receiver, appointed by a prior decree, in connection with his operation of the property of a private corporation, over the lien of a creditor who objects to such priority, but which does not adjudicate the principles of the cause, is not an appealable decree.

5. 'Where an appeal is properly obtained from an appealable decree either final or interlocutory, such appeal will bring with it for review all preceding non-appealable decrees or orders, from which have arisen any of the errors complained of in the decree appealed from, no matter how long they may have been rendered before the appeal was taken.' Point 2, syllabus, Lloyd v. Kyle, 26 W.Va. 534.

6. Under Section 31, Article 2, Chapter 77, Acts of the Legislature, 1939, Regular Session, the lien created by that statute for work or labor is given priority, over a subsequent lien, for such work or labor only as is performed during a period of one month or less before the creation of such subsequent lien.

Stathers & Cantrall, Mary Frances Brown, Clarksburg, for appellant.

John C. Southern, Clarksburg, Louis D. Meisel, Fairmont, for appellees.

HAYMOND, President.

On this appeal the defendant Barnes and Brass Electric Company, a corporation, an execution lien creditor of the defendant Iman Mining Company, Inc., seeks reversal of a final decree of the Circuit Court of Harrison County entered August 30, 1957, in the suit of State of West Virginia by C. S. Davis, Director of Employment Security, v. Iman Mining Company, Inc., and numerous other defendants, including the defendant Barnes and Brass Electric Company, a corporation, who are creditors or debtors of the defendant Iman Mining Company, Inc., instituted November 27, 1951; and in the suit of William Foy and numerous other labor lien creditors of Iman Mining Company, Inc., as plaintiffs, against Iman Mining Company, Inc., its special receiver, Indian Coal Company, a corporation, and Bethlehem Steel Corporation, a corporation, instituted July 12, 1952. These suits were consolidated and ordered to be heard together by decree entered August 25, 1952.

By the final decree from which this appeal was granted the circuit court, in determining the respective priorities of receivership costs, operating costs and expenses, and liens and claims against Iman Mining Company, Inc., gave priority to the operating costs and expenses and the certificates of its special receiver over the execution lien of the defendant Barnes and Brass Electric Company. It assigns as error in the final decree this action of the circuit court in fixing the priority of its lien.

By their petition containing cross assignments the plaintiffs William Foy and other labor lien creditors of Iman Mining Company, Inc., who were also defendants in the suit instituted November 27, 1951, assign as error in the final decree the action of the circuit court in determining the amount and in fixing the priority of their labor lien claims.

In the creditor's suit of the State of West Virginia by C. S. Davis, Director of Employment Security, against Iman Mining Company, Inc., and numerous other defendants, including Barnes and Brass Electric Company, a corporation, and the labor lien creditors, on motion of the plaintiff, and after notice to the defendant Iman Mining Company, Inc., and Indian Coal Company, a corporation, by decree entered December 3, 1951, a special receiver for the defendant Iman Mining Company, Inc., was appointed and authorized to hold, preserve, care for, manage and operate its mining plant, equipment, properties and other assets; to collect all its accounts, notes, and other assets; to do and perform all such other acts and things as may be proper and necessary in the preservation of its property and assets and the operation of its coal mining plant until the further order of the court; and to borrow such money as may be necessary upon his certificates or otherwise in such amounts and upon such terms and conditions as to the court should appear to be necessary and proper; and all defendants who were creditors or debtors of the defendant Iman Mining Company, Inc., were enjoined until the further order of the court from institutingany proceeding against it and from doing or causing to be done any act by which its property and assets would be withdrawn from the jurisdiction and control of the court and from paying to it or any person other than the special receiver any money to which it was or might be entitled. The decree also required the special receiver, before operating the property of Iman Mining Company, Inc., or issuing any certificates, to cause its property and assets, consisting entirely of personal property, to be appraised and an inventory to be made and filed.

On December 8, 1951, the special receiver filed an inventory and an appraisement of the property and assets of Iman Mining Company, Inc., and a report which contained certain recommendations. According to the inventory and the appraisement the property and assets, consisting of unused equipment stored near its mine in Barbour County, valued as a going concern at $80,782.13, an account due from Indian Coal Company for coal mined and furnished for October 1951 of $7,430.00, and an account due from Indian Coal Company for coal mined and furnished during November 1951 of $7,300.00, were appraised at $95,512.13, and the total liabilities of Iman Mining Company, Inc., were listed at $68,902.03.

The report of the special receiver recommended that he be authorized to resume the operations of the company which had ceased in October or November, 1951. All the recoverable coal in the area in which it had operated had been removed from the mine and, according to the special receiver, the cost of resuming operations by opening a new mine in other available coal would amount to $21,530.00 and such operations, under existing contracts between Iman Mining Company, Inc., and Indian Coal Company, a corporation, would within two weeks after the opening of a new mine produce a monthly tonnage of from 5,000 to 7,500 and result in a net profit of approximately forty five cents per ton. He recommended that he be authorized to borrow on certificates or otherwise the sum of $15,000.00 which together with the money he was authorized to collect from Indian Coal Company would enable him to obtain the capital necessary to resume and continue the mining operations of the company.

On December 10, 1951, the defendant Barnes and Brass Electric Company on whose judgment, dated October 20, 1951, for $6,703.00 with interest and costs against Iman Mining Company, Inc., executions were issued and delivered to the sheriffs of Barbour and Harrison County and recorded in the office of the clerk of the county court of each of those counties on November 1, 1951, filed its answer to the bill of complaint and objected to the issuance of certificates by the special receiver for the purpose of operating the plant of Iman Mining Company, Inc., and also objected to any preference to any creditor for the purpose of resuming such operation.

The answer to the bill of complaint contains allegations, among others, that to continue the mining operation it would be necessary to make a new opening and in effect to start a new mine; that instead of the cost of $3,110.00 of a new opening, as estimated by the special receiver, the cost would amount to at least $10,000.00; that the maximum capacity, of the new mine could not be reached in the production of coal for a period of at least two or three months after the start of operations; that the Redstone seam of coal available for mining was subject to faults and, until after sufficient development, it could not be determined whether it existed at the proposed location in sufficient quantity to be productive; that to determine that fact would require the expenditure of from $20,000.00 to $30,000.00; that the operations of the company in the past had not been profitable; that at the rate of thirty five cents per ton it would be necessary to mine 200,000 tons to pay the principal of the indebtedness of the company; that at the rate of production ...