KOPPEL INDUSTRIAL CAR & EQUIPMENT CO. v. LEE.
(Circuit Court of Appeals, First Circuit.
January 6, 1925.)
No. 1784.
I. Receivers <§=>163 — Receiver held liable for value of personalty on which claimant held a lien at the time the receiver took possession.
Wher.e a receiver took possession of and used railroad equipment sold by claimant to defendant, and on which it held a preferred lien, claimant was entitled to the admitted value of the property at the time it was taken over by the receiver, and could not be compelled to accept the proceeds of its sale after it had been used by the receiver for several months.
2. Appeal and error <§=>327(9) — Parties; general creditors are sufficiently represented by receiver in appellate proceedings.
The general creditors of a receivership estate are sufficiently represented by the receiver in appellate proceedings.
Anderson, Circuit Judge, dissenting.
Appeal from the District Court of the United States for the District of Porto Kieo; Arthur F. Odlin, Judge.
Proceeding in equity between the Koppel Industrial Car & Equipment Company and Albert Lee, receiver. From a decree determining the amount of the Koppel Industrial Car & Equipment Company’s preferred lien, it appeals.
Reversed and remanded, with directions.
Francis H. Dexter, of San Juan, Porto Rico, for appellant.
Henry G. Molina, of San Juan, Porto Rico (Leopoldo Feliu, of San Juan, Porto Rico, on the brief), for appellee.
Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.
BINGHAM, Circuit Judge.
This is the same ease in which the court rendered an opinion January 10, 1924. Lee v. Koppel Industrial Car & Equipment Co. (D. C.) 295 F. 23. We then held that the order of the federal District Court for Porto Rico, allowing the claim of the Koppel Industrial Car & Equipment Company at $38,-739.71 as a preference and prior claim, on the ground that it was a part of the operating expenses of the receivership, with interest on a portion of the sum from July 8, 1921 (the date of the receivership), and interest on another portion from January 30, 1921 (the date of the maturity of one of the notes given the claimant by the Central Puerto Real, the debtor), was erroneous; that the Koppel Industrial Car & Equipment Company (claimant) had no lien or preference for the cost of the rails that were purchased and laid prior to the Receivership, amounting to $8,344.67, as they had become a part of the realty; but that it had a lien or preference in the movable property that remained in the possession of the debtor or its receiver, and to the value thereof at the time when the claimant’s right took effect; and that its right took effect and was to be determined as of the date of the beginning of the receivership proceedings, after which time interest stopped.
In other words, the claimant was entitled to have his security sold or valued as of the date of the receivership proceedings and that no interest could be allowed after that date, citing Sexton v. Dreyfus, 219 U. S. 339, 344, 345, 31 S. Ct. 256, 55 L. Ed. 244.
It was also pointed out in the opinion that the receiver’s amended report of July 19, 1922, showed that there was movable property in the hands of the receiver, previously sold by the claimant to the debtor, which the receiver had used in the conduct of the debtor’s business as receiver, and which, in January, 1922, at the time he took it for use, he valued at $10,571. In that report the receiver not only admitted that the said movable property, in January, 1922, was of the value, of $10,571, but stated that the same was essential in carrying on the business of the Central Puerto Real, and must be used by him during the present crop, if the business was to be carried on; that 75 small cane ears in his hands were not needed in the operation of the plant, and should bo either returned to the claimant or sold. He therefore recommended that the claimant be allowed priority under section 1823, paragraph 1, of the Civil Code of Porto Rico, for the balance of its claim to the extent of the value of said used materials, to wit, $10,571.
The contention of the receiver at the time the case was previously before us, the 75 small cars then not having been sold, was “that the decree or order [then] appealed from should be reversed, and a decree entered allowing the claimant priority to the extent of $10,571, and the appellee ordered to pay costs of this appeal,” and this court, in its opinion, in speaking of the contentions of the receiver, further said: “Our general conclusions are that the receiver was substantially correct in his contentions as to the nature and extent of the plaintiff’s right to priority.” Having reached this conclusion, we reversed the decree of the District Court, and remanded the ease to that court for further proceedings. The matter then came on for hearing in the District Court, and it appearing that the 75 small cano cars had, subsequent to the prior decree, been sold at public sale for $750, and the balance of the movable property in the receiver’s hands for $2,157.95, making a total of $2,-907.95, a decree was entered for the claimant in that sum, and this appeal was taken.
We think the District Court misinterpreted the opinion of this court and that the claimant was entitled to have a priority or preference to the extent of the value of the movable property in the possession of the debtor at the date of the receivership and before the property was used by the receiver, as that was the date at which the claimant’s right arose. As previously pointed out, the record shows that the receiver admitted that (at that time) the value of the movable property, outside of the 75 small cane cars, was $10,571, and it now appears that the 75 small cane ears which were not used by the receiver were sold for $750. The claimant, therefore, should have been allowed in the District Court the sum of $10,571 plus $750, or $11,321, without interest. It would be wholly unjust to require the claimant to sustain the loss of $8,413.05, due to the depreciation of that part of the property used by the receiver; he having insisted that it was necessary to keep and use it in the conduct of the business of the receivership and for the benefit of the general creditors of the estate, and having done so.
The general creditors are sufficiently represented on this appeal by the receiver,, and the motion to dismiss is denied.
The decree of the United States District Court for Porto Rico is reversed, and the ease is remanded to that court, with directions to enter a decree for the claimant for $11,321, with costs.