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IN RE PRESTON MINING CO.

January 19, 1962

In the Matter of PRESTON MINING COMPANY, Inc., Debtor


The opinion of the court was delivered by: DUSEN

Approximately a year after the VOLUNTARY PETITION UNDER CHAPTER X was filed in this case, the trustee filed this Petition, requesting that the creditor (A. T. Massey Coal Company, Inc.) having an outstanding lien on the primary asset (cleaning plant and tipple) of the debtor, which might be productive of income, show cause why an order should not be entered against it requiring it to make available, at its place of business in Richmond, Va., to the trustee, and accountants acting in the trustee's behalf, all records of the sales transactions between the debtor and the said creditor having a lien on such primary asset (Document No. 28). After receipt of a copy of the above-mentioned Petition and attached Rule to Show Cause, sent by certified mail to its office in Richmond (see Document No. 30), the A. T. Massey Coal Company, Inc. has appeared specially, contending that this court has no jurisdiction to enter any order requiring it to make the requested records available to the trustee or his accountant.

The above-mentioned creditor has been the exclusive selling agent for the debtor's coal and, in this capacity, has acquired an unsecured claim against the debtor as well as a claimed lien upon the cleaning plant, tipple, and mining machinery of the debtor in an amount in excess of $ 200,000 (par. 4 of Document No. 26). The trustee (an experienced, retired coal company executive) has stated that the clause under which this creditor has been establishing the price for which it has sold the debtor's coal, and pursuant to which the above unsecured claim and alleged lien are stated to have been acquired, *fn1" is a most unusual one (see testimony at hearing of 1/17/62 and Exhibit P-1). *fn2" One of the largest Philadelphia law firms has made this statement:

 'There is a serious question as to whether Massey was actually acting as a selling agent or whether he was in effect purchasing the coal for himself at a price less than could be obtained on the market. Nevertheless, Massey charged Preston with full sales commissions.' (See pp. 1-2 of Exhibit A to Document No. 26).

 Also, the contract contains this language:

 The trustee has made this statement in a Petition For Leave To Employ An Accountant, which has been granted:

 '3. From information which he has acquired, it would appear that the employment of accountants is particularly necessary to investigate the transactions between the debtor and its selling agent, A. T. Massey Coal Company.' (Par. 3 of Document No. 26.)

 The record discloses that the Small Business Administration, by Authorization bearing Docket No. L163,343 Rich., has approved the debtor's request for a loan of $ 350,000 for new capital (par. 3 ff. of Document No. 25), subject to certain conditions and limitations, and that the debtor is in negotiation with a third party who may submit a proposition for the reorganization of the debtor and may utilize the Authorization (par. 6 of Document No. 27). However, this third party will not participate in any reorganization of the debtor until a determination is made of the debit and credit position of the debtor and the A. T. Massey Coal Company, Inc. (par. 6 of Document No. 27).

 Under § 111 of the Bankruptcy Act (11 U.S.C.A. § 511), this court has 'exclusive jurisdiction of the debtor and its property, wherever located.' This cleaning plant, tipple and machinery on which this creditor asserts a lien are subject to the jurisdiction of this court, even though located in Virginia. Collier states that the purpose of this section is 'to render the authority and control of the reorganization tribunal paramount and all-embracing to the extent required to achieve the ends contemplated by Chapter X; * * *.' (6 Collier (14th Ed.) p. 572).

 At 6 Collier (14th Ed.), p. 601, the following language is used:

 'Accordingly, exclusive jurisdiction over the debtor and its property, wherever located, carries with it -- as we have already seen -- the power to protect that property and adjudicate all claims and interests relating to it and this includes 'by necessary inference' the power to send process to that and for service upon the persons affected 'wherever they may be found within the United States.' The usefulness of corporate reorganization would be greatly minimized if the Reorganization Court were powerless when exercising its summary jurisdiction to send its process into any state when necessary to effectuate the purpose of the statute. Indeed, such interpretations would be in the very teeth of the expressed intent of Congress.'

 See, also, Warder v. Brady, 115 F.2d 89, 93 (4th Cir.1940); In re Standard Gas and Electric Co., 139 F.2d 149 (3rd Cir. 1943); In re Cuyahoga Finance Co., 136 F.2d 18, 20-21 (6th Cir.1943).

 Section 167 (11 U.S.C.A. § 567) ...


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