Virginia Iron Coal & Coke Co. v. Olcott

• Decision Date: 12 July 1912
• Docket Number: 1,099.
• Citation: 197 F. 730
• Parties: VIRGINIA IRON, COAL & COKE CO. et al. v. OLCOTT.
• Court: U.S. Court of Appeals — Fourth Circuit

197 F. 730

VIRGINIA IRON, COAL & COKE CO. et al. v. OLCOTT.

No. 1,099.

United States Court of Appeals, Fourth Circuit.

July 12, 1912

On the 3d day of August, 1910, an involuntary petition in bankruptcy was filed against the Ferguson Contracting Company in the United States District Court for the Southern District of New York, and thereafter the company was duly adjudged a bankrupt. At the time the petition in bankruptcy was filed the respondent, J. Van Vechten Olcott, of New York City, was appointed receiver with power to continue the business of the bankrupt by the United States District Court for the Northern District of New York, and duly qualified and is now acting as such receiver. On the 10th day of August, 1910, a supplemental petition was filed in the United States District Court for the Western District of North Carolina, at Greensboro, N.C., and the respondent was appointed ancillary receiver of the Ferguson Contracting Company for the Western District of North Carolina under a separate bond, and the respondent duly qualified and is now acting as such receiver.

It appears that from time to time the respondent was further authorized to continue the business of the bankrupt, and is now acting under an order to continue the business until the 1st day of August, 1912, this order being made by both the United States District Court for the Southern District of New York and for the Western District of North Carolina.

It appears that, by orders of the United States District Court the respondent was authorized to prosecute such action or actions as he may be advised are necessary and advisable to recover moneys due the receiver or the bankrupt for work done by either of them; that at the time of the filing of the petition in bankruptcy the bankrupt had a contract with the Winston-Salem Southbound Railway Company for the construction of two sections of the railway in the counties of Davidson Stanley, and Forsyth, in the state of North Carolina. Under the terms of the contract certain amounts earned by the bankrupt were retained by the railway company as retained percentages pending the completion of said contract. The amount so held by the railway company to August 3, 1910, the date of bankruptcy, was $39,605.28. Of this amount there was due subcontractors the sum of $26,154.63, but this retained percentage was not payable until the work to be done under the contract was performed.

It further appears that, after the appointment of the respondent as receiver of the bankrupt, the respondent by an order made by the United States District Court entered into a new contract to complete the work remaining to be done under the contract between the bankrupt and the Winston-Salem Southbound Railway Company upon the same terms, prices, and conditions. The respondent has completed all the work required to be done under the various contracts, and there is due the receiver the sum of $25,735.10 under the contract in addition to the sum of $39,605.28 above mentioned.

It appears that at the time of the filing of the petition in bankruptcy herein the bankrupt owed the Carolina Portland Cement Company, one of the petitioners, the sum of $2,221.83 for cement, and that thereafter the receiver returned certain empty sacks to the petitioner amounting to $536.85, thereby reducing the amount due by that much. The bankrupt also owed the E. I. Du Pont De Nemours Powder Company, one of the petitioners herein, the sum of $9,466.01 for powder and other explosives, and the sum of $887.70 to the Virginia Iron, Coal & Coke Company, one of the petitioners herein, for coal.

It appears that at various times within the time limited by the statute the petitioners filed liens with the clerks of the superior courts of Davidson, Stanley, and Montgomery counties, claiming and asserting a lien upon the Winston-Salem Southbound Railway Company and upon its property for the indebtedness above set forth. Thereafter the petitioners filed a petition in the United States District Court for the Western District of North Carolina, praying for an order permitting them to take such action as they may deem necessary in the courts of North Carolina to enforce the liens filed as above set forth, and the court, on the 25th day of October, 1910, made an order permitting the petitioners 'to institute such suits as they may be advised as necessary to enforce the liens set out in the petition, and that process issue to the said J. Van Vechten Olcott, receiver. ' Thereupon the petitioners brought suit in the superior court of North Carolina in the county of Forsyth, asking the court to declare that the petitioners had a lien upon the property of the Winston-Salem Southbound Railway Company in accordance with their liens filed as above set forth, and that the court cause to be made such orders as may foreclose said lien.

The petitioners also asked the superior court of North Carolina to make all persons interested in the fund due from the Winston-Salem Southbound Railway Company to the Ferguson Contracting Company or its receiver parties to this action in the state court. There was no money due the bankrupt at the date of the bankruptcy because the retained percentages were not due the bankrupt until the work under the contract had been performed by the contractor.

The bankruptcy of the contractor prevented its performance and the United States District Court authorized the respondent as one of its officers to complete the contract with the Winston-Salem Southbound Railway, and thereby make the retained percentages earned by the bankrupt prior to bankruptcy payable, together with certain amounts earned by the respondent as receiver, and, after the United States District Court had taken jurisdiction and by its powers made these retained percentages available to creditors, these petitioners brought the action in the North Carolina courts above referred to, and not only sought to foreclose their alleged lien, but sought to make all persons in interest in the fund due the bankrupt or its prior receiver, this respondent, parties to the action, and prayed the state court to make such orders as may be necessary for the parties to be brought before the state court.

To these suits it appears that the respondent suggested that the superior court of North Carolina had no further power to proceed in the premises, and thereafter the respondent demurred to the complaints, which demurrer was overruled by the superior court of Forsyth county, and respondent prayed an appeal to the Supreme Court of North Carolina which was granted and will be heard some time in November next unless petitioners are restrained. The complaints of the petitioners in the superior court of Forsyth county prayed that the court assume jurisdiction, not only over the fund earned by the bankrupt prior to the time of bankruptcy, but over the entire fund due the bankrupt and the receiver, regardless of the fact that a portion thereof had been earned pursuant to the contract made by order of the United States District Court above referred to. In view of the extraordinary proposition that all questions of lien and priority in a bankruptcy proceeding should be determined in a state court, the respondent called the attention of the United States District...