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UNITED STATES v. GLENEAGLES INV. CO.

April 10, 1984

UNITED STATES OF AMERICA, Plaintiff,
v.
GLENEAGLES INVESTMENT CO., INC., et al., Defendants


Muir, District Judge.


The opinion of the court was delivered by: MUIR

I. Introduction.

 The United States has sought in this litigation to set aside as fraudulent conveyances mortgages on the lands of Raymond Colliery (hereinafter the IIT mortgages) and to foreclose on tax liens against Raymond Colliery and its parent, Great American Coal Company, free and clear of the IIT mortgages. Those mortgages were delivered by Raymond Colliery on November 26, 1973 to Institutional Investors Trust (IIT) and assigned by IIT onto Defendant McClellan Realty. The United States has also sought in this lawsuit to set aside the 1976 and 1980 tax sales of the lands of Raymond Colliery by Defendant Lackawanna County.

 Blue Coal and Glen Nan are bankrupt subsidiaries of Raymond Colliery and their assets are also encumbered by the IIT mortgages. (Raymond Colliery and its subsidiaries will be called hereinafter "the Raymond Group"). The Defendant Trustee in Bankruptcy for Blue Coal and Glen Nan filed a cross-claim in which he sought, inter alia, to set aside the IIT mortgages. The United States and the Trustee will be hereinafter called "the Creditors." The Defendant Commonwealth of Pennsylvania is not within the group classed as Creditors because it filed no cross-claim but it is a creditor of Raymond Colliery and has participated in this litigation as though it were a cross-claim plaintiff.

 This lawsuit has been the subject of two earlier opinions by the Court. In the first opinion, the Court concluded that the IIT mortgages were fraudulent conveyances within the meaning of §§ 354, 355, 356, and 357 of the Pennsylvania Uniform Fraudulent Conveyance Act, 39 Pa.Stat. § 351, et seq (hereinafter sometimes referred to as "the Act"). United States v. Gleneagles Inv. Co., Inc., 565 F. Supp. 556, 585-86 (M.D. Pa. 1983) (hereinafter Gleneagles I.) In the second opinion, the Court concluded that Pagnotti Enterprises which purchased the IIT mortgages and caused the assignment thereof to its subsidiary, McClellan Realty, was not a purchaser of the IIT mortgages for fair consideration without knowledge that they were fraudulent conveyances. United States v. Gleneagles Inv. Co., Inc., 571 F. Supp. 935, 958 (M.D. Pa. 1983) (hereinafter Gleneagles II). We also concluded in Gleneagles II that the Lackawanna County tax sales of the lands of Raymond Colliery in 1976 and 1980 and the consequent tax deeds were void and ineffective to transfer title to the purchasers at those tax sales. Id.

 The Creditors also asserted claims against the Gillen and Cleveland Defendants, former shareholders of Raymond Colliery who were found liable in Gleneagles I. After that finding, the United States, the Trustee and the Commonwealth of Pennsylvania entered into settlement agreements with the Gillen and Cleveland Defendants relating to this and other litigation. Under those settlements the Cleveland Defendants paid $5,500,000 and the Gillen Defendants paid $600,000 in satisfaction of all claims asserted against them in this litigation and the other litigation. The Court dismissed the Gillen and Cleveland Defendants as parties to this lawsuit pursuant to those settlement agreements.

 Below are the Court's findings of fact, opinion and conclusions of law with respect to the priority and validity of liens on the lands of Raymond Colliery.

 II. Findings of Fact.

 1-167. The findings of fact in Gleneagles I are incorporated herein by reference.

 168-410. The findings of fact in Gleneagles II are incorporated herein by reference.

 411. On November 26, 1973, Thomas Gillen received $1,675,000 from Great American Coal and a note payable to his order by the Raymond Group for $125,000 in payment for his stock in Raymond Colliery.

 412. On November 26, 1973, John Gillen received $1,675,000 from Great American and a note payable to his order by the Raymond Group for $125,000 in payment for his stock in Raymond Colliery.

 413. On November 26, 1973, the Cleveland group of shareholders received $3,350,000 from Great American and notes payable to their order by the Raymond Group for $250,000 in payment for their stock in Raymond Colliery.

 414. Judgments were confessed on the notes described in Paragraphs 411, 412, and 413 on June 16, 1975.

 415. No. 1 Contracting Company and Old Forge Bank lent money to James J. Durkin to assist him in acquiring the stock of Raymond Colliery and these loans were the only loans from third parties for such purpose which were not disclosed by Durkin to IIT in connection with his loan application to IIT.

 416. During the period from November 26, 1973 through April, 1976, the financial condition of the Raymond Group worsened.

 417. During the period from November 26, 1973 through April, 1976, Raymond Colliery, Blue Coal, Olyphant Associates, and Glen Nan paid to IIT a total of $4,589,640 in principal and interest on the IIT mortgages.

 418. On December 16, 1976, L. Robert Lieb on behalf of IIT paid to the Commonwealth of Pennsylvania $44,368.74 in delinquent ...


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