Wheeling Valley Coal Corporation v. Brady

• Decision Date: 06 January 1947
• Docket Number: No. 5510.,5510.
• Citation: 159 F.2d 155
• Parties: WHEELING VALLEY COAL CORPORATION et al. v. BRADY.
• Court: U.S. Court of Appeals — Fourth Circuit

159 F.2d 155 (1947)

WHEELING VALLEY COAL CORPORATION et al. v. BRADY.

No. 5510.

Circuit Court of Appeals, Fourth Circuit.

January 6, 1947.

Gordon D. Kinder, of Martin's Ferry, Ohio (George A. Blackford, of Wheeling, W. Va., on the brief), for appellants.

Carl G. Bachmann, of Wheeling, W. Va., for appellee.

Hugh Wells, of Cleveland, Ohio (Charles McCamic, of Wheeling, W. Va., on the brief), for objecting creditors as amici curiae.

Before SOPER and DOBIE, Circuit Judges, and CHESNUT, District Judge.

DOBIE, Circuit Judge.

This is an appeal from a judgment of the United States District Court for the Northern District of West Virginia (affirming a decision of the Referee in Bankruptcy) disallowing certain claims of the appellants for alleged obligations of a special bankruptcy receiver appointed by the District Court.

A brief chronology may help to make the whole situation clearer. In August, 1942, appellants leased to Warner Coal Corporation (hereinafter called Warner) certain coal mines formerly operated by appellants. On October 9, 1943, an involuntary petition in bankruptcy was filed against Warner, resulting on February 10, 1944, in an adjudication of bankruptcy. This was affirmed by us on appeal and certiorari was denied by the United States Supreme Court. The mandate was received January 8, 1945, and, on January 11, 1945, an order of reference was entered, referring the matter to T. H. Duval, Referee in Bankruptcy.

On October 22, 1943, the Court (with the consent of all interested parties, including the appellants) appointed A. Spates Brady as receiver to operate the mines and pay appellants a royalty of 12 cents per ton for all coal mined. Under this appointment Brady operated the mines from October 23, 1943, until January 15, 1945, when the receiver was ordered by the Court to return the mines to the appellants. The Court, however, continued Brady as receiver for the purpose of winding up all matters connected with the receivership, and the Court (not the Referee) continued to hear and decide all receivership matters until the receiver was discharged by the Court on July 25, 1945.

Brady was elected Trustee in Bankruptcy on February 19, 1945. On June 7, 1945, the Court ordered notice sent to all creditors notifying them that if any creditor had any objection to any matter involved in the receivership proceedings, or any motion to make concerning these matters, that they do so on June 27. On June 27, 1945, the Court ordered all creditors who desired to file any further petitions concerning receivership matters to do so on June 28. At the hearing on June 28, appellants' attorney being present, the Court inquired whether there were any additional petitions to be filed or motions to be made concerning receivership matters. No petitions or motions were presented and the Court ordered the case continued until July 25. On July 10, pursuant to the court order of June 28, the Clerk notified all creditors that any matter of any kind whatsoever pertaining to the operation of the receivership, or to the discharge of the Receiver, should be brought to the attention of the Court on July 25, at two o'clock. At the hearing on July 25, though the appellants were present in Court, they filed no claim or petition and made no motion of any kind. The Court thereupon ordered the Receiver discharged and all his books, accounts and remaining assets turned over to the Referee.

On August 15, 1945, three weeks after the discharge of the receiver by the Court, the appellants filed their claims with the Referee. On October 11, 1945, at a meeting of bankrupt's creditors, the Referee considered these claims of the appellants, together with objections to the claims filed by the Trustee in Bankruptcy. The Referee disallowed the claims on the ground that it was improper for him to consider them in the bankruptcy proceedings before him under the order of reference and that the claims should have been presented to the Court which appointed the receiver.

The District Court, having heard the matter on a petition to review the referee's decision, affirmed the referee on May 24, 1946. In a memorandum opinion, the District Court stated: "The Costanzo interests were in daily, if not constant, contact with the operation of this mine by the receiver. In fact, Louis Costanzo was employed by the receiver to manage the mine. They had ample opportunity, while the receiver still had assets in his possession, to have presented this claim to this court as a claim against the receiver, which they failed to do. They cannot now attempt to penalize the bankrupt corporation and its creditors for something which they allege was done by the receiver of this court and over which said corporation had no control whatever. I deem it fruitless to pursue this question further." It will thus be seen that neither the referee nor the Court passed on the merits of the claims asserted by the appellants. Therefore, the question of the merits of these claims is not before us.

The only question, then, before us on this appeal is whether an alleged claim against a bankruptcy receiver appointed by the District Court, ordered to be filed in the District Court by a specified date, and not so filed, no excuse being given, may be lawfully proved after this date by a claimant with full notice and opportunity, before a referee in bankruptcy under a general reference, in the absence of a vacation of the order entered by the District Court or any motion to set aside this order or to extend the time prescribed under the order for the filing of claims against the receiver.

In this connection it might be noted that a great majority of the claims asserted by the appellants were not obligations incurred by the bankrupt. At least one of the claims, No. 4, for damages alleged to have arisen from an explosion in the mine during December, 1942, seems to have arisen prior to the appointment of the receiver. The other claims, apparently, had no existence prior to the petition in bankruptcy or before the Court appointed the receiver; they are alleged to have arisen out of the operation of the mines by the receiver. No demand was ever made on the receiver, nor was there even an attempt to assert these claims or to give notice of them, prior to the receiver's discharge. This was not altogether a conventional receivership; the parties in interest all asked for the appointment of the receiver and the operation of the mines by him, the war emergency having created an exceptional demand and market for coal.

We think the Court acted within its jurisdiction in fixing a reasonable time within which claims against the receiver were to be filed. In re Lathrop, Haskins & Co., 2 Cir., 223 F. 912. See, also, In re Zimmermann, 2 Cir., 66 F.2d 397; In re Irving Whitehouse Co., 9 Cir., 293 F. 287. Such orders are necessary for the expeditious winding-up of bankrupt estates. People of State of New York v. Irving Trust Co., 288 U.S. 329, 53 S.Ct. 389, 77 L.Ed. 815; In re Riemer, 2 Cir., 82 F.2d 162; In re T. A. McIntyre & Co., 2 Cir., 176 F. 552. Nor was there any abuse of the Court's discretion in refusing to consider the claims of the appellants which arose out of the operation of the mines by the receiver; for the appellants, with more than ample notice (one of the present counsel for appellants participated in the fixing of the date within which claims arising out of the receivership were to be presented), and without any excuse, took no steps whatever until three weeks after the lapse of the time prescribed in the Court's order for the presentation of claims against the receiver. United States Trust Co. of New York v. Territory of New Mexico, 183 U. S. 535, 22 S.Ct. 172, 46 L.Ed. 315; Leadville Coal Co. v. McCreery, 141 U.S. 475, 12 S.Ct. 28, 35 L.Ed. 824. See, also, 53 Cor.Jur. §§ 393-394; 45 Am.Jur., Receivers, § 247; 28 U.S.C.A. § 125; Halsted v. Forest Hill Co., 4 Cir., 109 F. 820. Had appellants seasonably moved for an extension of this time upon any reasonable ground, we must presume the Court would have harkened to their...