DocketNumber: No. 10849
Citation Numbers: 3 F.2d 149
Judges: Schoonmaker
Filed Date: 5/15/1924
Status: Precedential
Modified Date: 7/20/2022
This is an involuntary petition in bankruptcy filed originally by C. H. Stolzenbach, trustee in bankruptcy of the West Penn Fuel Company, Inc., a Pennsylvania corporation, as sole petitioner. Later, two other petitioning creditors are joined as petitioning creditors. On motion of alleged bankrupt to dismiss by reason of the pend-ency of another involuntary petition in bankruptcy against the Penn American Gas Coal Company, and for other reasons, this court dismissed the petition in bankruptcy in the instant ease. On appeal, we were reversed.
Whereupon the alleged bankrupt answered, denying that the petitioning creditors were in fact creditors with provable claims, or that any act of bankruptcy had been committed. The ease was heard on petition, answer, and proofs.
C. H. Stolzenbach, as trustee in bankruptcy of the West Penn Fuel Company, Inc., claimed as a provable claim under the Bankruptcy Act (Comp. St. §§ 9585-9656) a loss of $121,499.59, sustained in equipping, developing, and operating the Penn American Gas Coal Company’s coal mine under the terms of a contract between the parties dated June 15, 1920, whereby the Penn American Gas Coal Company constituted the West Penn Fuel Company, Inc., as its agent, with full power to complete and operate the plant and coal mine of the Penn American Gas Goal Company, upon the agreement that the West Penn Company advance at its reasonable discretion such sums of money as may be necessary for the completion of said plant, as well as working capital for the necessary operation thereof, and also such sums as may he necessary to maintain the corporate organization of the Penn American Company, to meet maturing payments of purchase money for coal lands and rights of way theretofore purchased or then held by the Penn American Company under agreement of purchase or lease, to pay bills already incurred by the Penn American Company in said operation shown in list attached to said agreement, and to pay the salaries set forth in said agreement.
These advances were to be repaid to the West Penn Company out of the net earning of the coal mine, and the same were to be carried until they were paid off by operations under the contract. The agency created by the contract was irrevocable until such advances or other indebtedness of the Penn American Company to the West Penn Company were fully liquidated, when the agency was to cease and the property was to be restored to the Penn American Company.
We find that the West Penn Company
The court of common pleas entered a decree dismissing the bill for specific performance on the finding as a fact that the West Penn Company had dropped the contract 1 under its discretion and could not therefore be made specifically to perform.
While .this suit in equity was pending in the court of common pleas of Allegheny county, and on the 13th day of August, 1921, the West Penn Company and others filed an involuntary petition in bankruptcy in this court against the Penn American Company at No. 9956 in bankruptcy. The same issue as presented in the instant case was before the court in the ease at No. 9956 in bankruptcy, and it was there decided that the West Penn Company did not have a provable claim in bankruptcy against the Penn American Company for advances under the contract of June 15, 1920 *, the court holding that it was intended by the contract with the West Penn Company that' that company should repay itself out of the operations for all advances which it made in its reasonable discretion, and that it was specifically provided that it should carry those operations until they had been repaid, and that, not having done so, they could not drop the operations, cease to operate, andsaddle the corporation, the Penn American Company, with a large liability which was never contemplated by the parties to the contract should be imposed upon it. And therefore a judgment was entered in favor of the respondent, and that judgment was affirmed by the Circuit Court of Appeals. G. B. McABee Powder & Oil Co. v. Penn-American Gas Coal Co., 295 F. 630.
In the meantime, by voluntary petition filed in this court, the West Penn Company was adjudged a bankrupt on August 13, 1921, and in the instant ease the petition in bankruptcy is filed by its trustee.
In the instant ease the trustee in bankruptcy of the West Penn Company undertakes to nullify the effect of the judgment in bankruptcy ease at No. 9956 by alleging certain new facts occurring after the date of the filing of the petition in the ease at No. 9956; i. e., that on or about October, 1922, due to the advance in the market price of coal, the trustee in bankruptcy of the West Penn Fuel Company made preparation for and was ready, able, and willing to operate the mine and market the coal, but was prevented by the Penn American Company, which, on October 18, 1922, entered into a lease with John B. Shrader for the operation of said mine, under which Shrader took immediate possession, and at the same time the Penn American' Company executed a mortgage on the premises in question, in the sum of $75,000, to the South Side Trust Company, as trustee, which mortgage was set out as an alleged preferential transfer, in that it was given to secure payment to certain creditors of the Penn American Company of their claims.
Between .February, *1921, and October, 1922, neither the West Penn Fuel Company nor its trustee in bankruptcy had done anything to affirm any claim of right of operation under the contract of June 15, ‘1920. The only thing then done by the trustee was to negotiate with coal men relative to leasing or operating the mine in question. There •was no evidence of any notice or demand on the part of the trustee of any right to possess or operate the mine. He excuses this failure in this regard by saying that the property was in the hands of receivers appointed by the court of common pleas of Allegheny county until October 16, 1922, when a decree was entered in the court of common pleas dismissing the bill for specific performance on the claim of the West Penn Company of abandonment of" the contract. After a decree is entered in his favor on the abandonment claim in his answer, he seeks to shift his position and place himself in a position' of readiness to perform. We are of the opinion that he cannot play fast and loose with this contract of June 15, 1920. If the West Penn Company had the discretion to abandon the contract, and did abandon it, why the contract is at an end, and cannot be revived at the pleasure of the trustee in bankruptcy of the West Penn Fuel Company. We do not believe that the West Penn Fuel Company was under any disability under the receivership in this case.
This makes it unnecessary to discuss whether the execution of the mortgage to the South Side Trust Company as trustee, without allegation of any preferential payment of creditors, constituted a preference or not.
A decree may be entered dismissing tho petition.