King Lumber Co. v. National Exch. Bank of Roanoke

KNAPP, Circuit Judge. In April, 1916, the King Lumber Company, a general contractor, borrowed from the National Exchange Bank of Roanoke the sum of $15,000, payment of which was secured by assignment of that amount of the moneys due and to become due on its contract with the city of Roanoke for the erection of a municipal building. In December following the lumber company was adjudicated bankrupt. Later it made an offer of composition which the creditors voted to accept. The offer contained this provision: “There is due the King Lumber Company, the bankrupt, about the sum of $21,000 by tbe city of Roanoke, Va., on account of the construction of the City Hall; $15,000 of this amount was in April, 1916, assigned to the Exchango National Bank of Roanoke, Va., and there are sums due supply men and subcontractors, much more than sufficient to take up the balance of said sum of $21,006. This sum of $21,000 is to be distributed between the National Exchange Bank and said supply men in the order to which they may be entitled, and to be determined by tbe law and chancery court of the city of Roanoke, in a suit now pending therein for that purpose, and this sum is entirely abandoned, so far as the King Lumber Company is concerned, if its offer of composition is accepted.” [947] In the suit referred to it was decided by the Supreme Court of Appeals of Virginia (121 Va. 460, 93 S. E. 699), that .the supply men and subcontractors were entitled to priority of payment from the fund in question, with the result that the balance left for the bank was some $10,000 less than the face of its debt and interest. For this deficiency, whatever it might prove to be when all the supply men and subcontractors had’ been paid in full, the bank in due time, filed a claim with the referee, setting up in detail the facts above summarized. Objections of the lumber company were sustained, and the claim rejected by the referee, on the ground in substance that the claimants of the Roanoke fund had agreed, when the offered composition was accepted, to look to that fund only for the payment of their debts, and to waive all right to prove the same in the bankruptcy proceedings. On review by the court below the ruling of the referee was reversed, and the claim allowed, with directions for payment to the bank, in accordance with the terms of the composition offer, of “30 per cent, of such part of its original claim as has not been satisfied out of the Roanoke city fund.” The lumber company thereupon filed in this court a petition to superintend and revise, under section 24b of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 553 [Comp. St 1916, § 9608]). The bank moves to-dismiss. [1, 2] The sole question raised by the petition is alleged error in allowing a claim of more than $500. The lumber company contended that the hank was not entitled to prove a claim because it had agreed to take what it could get out of the Roanoke fund without resort to-other assets. When this contention was overruled, and the claim allowed, the only way in which the decision could be brought here for review was by appeal within 10 days as provided in section 25a of the act (section 9609). This was distinctly held in Matter of Roving, 224 U. S. 183, 32 Sup. Ct. 446, 56 L. Ed. 725, in which the Supreme Court says: “We think this subdivision (24b) was not intended to give pn additional remedy to those whose rights could be protected by an appeal under section 25 of the act. That section provides a short method by which rejected claims can be promptly reviewed by appeal in the Circuit Court of Appeals, and, in certain cases, in this court. * * * Under section 24b a question of law only is taken to the Circuit Court of Appeals; under the appeal section controversies of fact as well are taken to that court, with findings of fact to be made therein if the case is appealable to this court. We do not think it was intended to give to persons who could avail themselves of the remedy by appeal under section 25 a review by petition under section 24b.” Moreover, as this authority holds, only questions 'of law can be brought to this court by petition to superintend and revise. But the controversy here presented turns on a disputed question of fact. The provision in the composition offer above quoted informed all creditors that the Roanoke fund would be insufficient to pay both the bank and the supply men, but it failed to state whether the party not paid in full from that fund could come in as an unsecured creditor for the deficiency and get the percentage offered by the bankrupt. What the understanding or agreement was in that regard became the subject of sharply conflicting testimony, and on the determination of this issue of [948] fact depends the allowance or rejection of the bank’s claim. Manifestly such a controversy cannot be reviewed on a petition to superintend and revise. On both grounds the petition must be dismissed.