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In re Harbor Tank Storage Co.

decided: September 20, 1967.


Staley, Chief Judge, Hastie, Circuit Judge, and Sheridan, District Judge.

Author: Staley


STALEY, Chief Judge.

This is an appeal by Murray Oil Products Co., Inc. from an order of the district court for the district of New Jersey denying appellant's petition to file, nunc pro tunc, a claim as a general creditor in reorganization proceedings of the Harbor Tank Storage Co., Inc. under Chapter X of the Bankruptcy Act, 11 U.S.C. ยงยง 501-676 (1964). At the time appellant filed its petition, the district court had already confirmed a plan of reorganization of the debtor, and had previously entered an order barring further filing of claims in the proceeding. Appellant sought to avoid the thrust of the bar order on the basis that he was never given notice of the bar order or any other notice of the steps in the reorganization proceeding, although the trustee had actual knowledge of appellant's claim.

The district court considered the petition as addressed to its discretion. On the basis of various affidavits and arguments of counsel, as well as the plan of reorganization, the district court denied the petition because it found that appellant would only be entitled to file a claim as a "Warehouse Receipt Creditor" and appellant had refused the offer of a committee of such claimants which would have allowed Murray Oil to participate on a parity with them. The district court also found the appellant guilty of laches. We hold that under the circumstances, appellant had an absolute right to file a claim nunc pro tunc in the proceeding, and we remand to the district court for further proceedings in order to classify Murray Oil's claim as it would have been classified had it been timely filed.

The instant reorganization proceedings began on December 9, 1963 when the debtor filed a petition under Chapter X. The debtor, Harbor Tank, had engaged in the business of operating oil storage facilities. Harbor Tank's principal place of business was in West New York, New Jersey, and it also operated a field tank farm in Bayonne, New Jersey. This latter facility was involved in the gigantic "Salad Oil" swindle which precipitated the debtor's financial difficulties. The debtor's petition for relief under Chapter X indicated that although Harbor Tank was otherwise solvent, relief under the corporate reorganization provisions was necessary because "Claims in an unknown amount have been made against debtor company for the delivery of certain stored oils, for which certain warehouse receipts have been allegedly issued in connection with the operation of Allied Oil * * *" These claims were estimated to be in the neighborhood of $40,000,000, only a fraction of which was covered by actual oil.

Soon after the petition for reorganization was filed, the district court appointed a trustee. Notice of the trustee's appointment and of hearings to consider objections to his appointment and to fix a date for submissions of reorganization plans was mailed to creditors on January 17, 1964, and was published in the Newark Evening News on January 24, 1964, the eve of the hearing. No notice was mailed to Murray Oil Company.

Over the course of the year, various proofs of claim were filed with the trustee. On January 12, 1965, the district court entered an order limiting the time to file proofs of claim of creditors and of interests of stockholders to March 22, 1965, and directing the trustee to send a copy of the order to all interested parties and to publish a copy of the order in the Newark Evening News. No copy of this order was mailed to Murray Oil Company.

In July, 1965, the trustee submitted a plan of reorganization and on July 12, 1965, the district court entered an order approving the plan and ordering hearings to consider objections and amendments. The trustee was ordered to mail copies of the plan, a "Summary of Plan" and notice of the hearing to all creditors and parties in interest. No copy of this plan or notice of the hearing was sent to Murray Oil Company.

Extensive hearings on this plan of reorganization were held throughout the remainder of 1965 and into 1966. Finally on March 23, 1966, the district court entered an order, finding that the plan of reorganization as amended and so "served on all creditors and interested parties" was fair and equitable, and confirming the amended plan.

Under the reorganization plan, as confirmed by the district court, there are five classes of creditors: (1) wage claimants; (2) claims of the United States of America; (3) claims of the State of New Jersey and local municipalities; (4) Warehouse Receipt Creditors; and (5) General Creditors. The plan defines general creditors to include "* * * the holders of all unsecured claims against the Debtor which are not entitled to priority, other than Warehouse Receipt Creditors;" and "'Warehouse Receipt Creditors' shall consist of those creditors who are such by reason of being the holders of or possessing interests in unsatisfied valid warehouse receipts issued by the Debtor for vegetable oil and/or lard and/or other animal fats and/or fish oil." The order confirming the plan contains a listing and valuation of the commodities represented by warehouse receipts and included in the class of "Warehouse Receipt Creditors:" Soybean oil, cotton oil, lard, tallow and crude menhaden oil (fish oil).

The plan provides that the claims of all creditors in classes 1, 2, 3 and 5 are to be paid in full, while the Warehouse Receipt Creditors will receive "pro rata participation in $600,000 worth of new stock to be issued by the new company * * * in addition to sharing any recovery on certain choses in action specifically reserved for them in the Amended Plan and the net proceeds of the sale of commodities in the tanks subleased to the Debtor at Bayonne, New Jersey * * *" We are informed that the amount of $73,000,000 of warehouse receipt claims has been filed and is included in this 4th class of creditors. 100% of the Warehouse Receipt Creditors approved the plan, as was required by its terms before confirmation.

Murray Oil Company had been doing business with the debtor, Harbor Tank, for several decades, storing oils at the debtor's West New York facility only. The business between the parties was conducted under the supervision of a marine bulk oil and chemical surveyor who would certify the quantity of oil stored by Murray Oil to both parties. Harbor Tank issued a "Report of Oils & Merchandise Received for Storage" to Murray Oil upon storage, and honored Murray Oil's written delivery orders as received.

At the time of Harbor Tank's petition for reorganization, Murray Oil had a substantial quantity of tung oil stored with the debtor at West New York. However, a large deficiency of tung oil was discovered equal to about 1/4th of the amount delivered. Murray Oil knew of the initiation of the reorganization proceedings virtually from the outset, and the trustee did honor Murray Oil's delivery orders for ...

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