123 F. 913 | D. Me. | 1903
(orally). I think the interests of all the parties demand that I should give my views on this case now. The position is an extremely difficult one, arising from the fact that the two subsidiary corporations in Maine sold out their plants to the Shipbuilding Company, and yet continued to make contracts in their own names. It is also complicated by the more serious fact that, although the decree of the Circuit Court for the District of New Jersey, the place of domicile, in a certain way authorizes the receiver to continue the business of the United States Shipbuilding Company, yet it is apparent that it is not within the just power of any court to authorize a receiver to make the long-time contracts necessary to .carry on properly, and maintain to a proper standard of success, the construction of marine vessels, especially of one class which these subsidiary corporations build in this state and other states, namely, naval vessels of the United States. If the case were freed from those peculiar features, there would be no difficulty in my merely confirming, so far as this district is concerned, the decree entered in the Circuit Court for the District of New Jersey, including the conduct of the business by the receiver until the corporation was wound up as the statute of New Jersey contemplates it should be wound up when insolvent. As it is, I must struggle with the case the best I can.
The rule of so-called comity has little influence with me. The
The questions here, however, in addition to the difficulties to which I have referred, raise two material lines of investigation. One is whether the Circuit Court for the District of New Jersey was proceeding within the law at all, and the -other is, what is the nature of the judgment, decree, or order of that court, which is now brought before me for my action? There are some subordinate questions as to the nature of the bill before me which I ought to lay out of the case before proceeding further. I will say that I can make no order until the complainants have made the Hyde Windlass Company and the Bath Ironworks defendants in their bill. This is because of the rule in Minnesota v. Northern Securities Company, 184 U. S. 199. The question may arise, and does arise now, as to the transfer of the shares of the capital stock in these two corporations to the receiver, or trustee, appointed by the Circuit Court for the District of New Jersey, whose appointment I am now requested to confirm; and the control of those certificates of stock will be retained by this court, and they cannot be effectually transferred on the books of the local corporations until this court authorizes it. No decree can be made directing those corporations to transfer, and issue new certificates of, stock, unless they are made parties to this bill. Therefore, before proceeding to enter an order, the complainants must amend by bringing them in. In addition, I see a special reason for requiring them to amend, because those corporations have so large interests in the questions before me that I ought not preclude them from a right to appeal -from any order I may enter, if they desire so to do. Whether the Mercantile Trust Company, the mortgagee, should also be made defendant, I have no opinion about, and therefore I make no suggestion in regard thereto.
Now comes the question as to the nature of the bill before me. If this were a bill asking me merely to appoint a receiver ad interim, ancillary to an ad interim receiver appointed in New Jersey, I should pay no attention to it. But in my view it is a bill asking me to assist in enforcing a final decree made by the Circuit Court for the Dis
The first substantial question I have to consider is whether the Circuit Court for the District of New Jersey had jurisdiction in equity on the bill filed there. In my opinion, it had. The bill was framed under the statute of New Jersey looking to the winding up of corporations and the distribution of their assets. The bill, unfortunately, is mixed in its character. The statute is likewise somewhat mixed. Both the bill and the statute provide that, under certain circumstances, the corporation be not wound up, and its assets not distributed; but that is only a contingency. The real purpose is the ordinary one of a bill' filed for winding up an insolvent corporation and distributing its assets. In this state, independently of statute, no equity court has jurisdiction to take possession of the assets of an insolvent corporation, distribute them, and wind it up. Nor is this the basis of equity jurisdiction in the federal courts at common law. However, there is this statute in New Jersey, which invests state chancery courts with this jurisdiction. The question is: state courts having the statutory power in equity to wind up an insolvent corporation, do the laws of the United States prohibit a citizen of another state from going to the federal courts in the same' state, and obtaining, through those courts, the relief which the Constitution ordinarily furnishes citizens of other states ? In my judgment, there is no rule which requires that I should so conclude. It is settled, of course, that a mere state statute cannot confer upon a federal court equity jurisdiction. A state statute giving a state court jurisdiction in equity does not necessarily give a federal court like jurisdiction in the same state, but a state statute which confers on a state court jurisdiction which neither the state courts nor the federal courts had previously exercised, is recognized by the federal courts as giving, them like jurisdiction provided the subject-matter of the legislation is equitable in its character; and, by necessity, judicial proceedings winding up a corporation are ordinarily of that nature.
It must be borne in mind that the gravity of this question, the mere fact that there is doubt, so far from barring a court from issuing an
What is the result of this in connection with what appears as to the title to the plants of these two subordinate corporations in Maine, and the occupation of them ? The position is simply this: At common law, on the 8th day of August, by a title which, under the decisions of the Supreme Court, I must recognize, this receiver, appointed in New Jersey, having obtained under the order of the court of domicile a deed of all the property, will be entitled to immediate and absolute possession of the plants of both of these corporations; and I cannot sit here, knowing what that means, without making some order, not only for the purpose of acting in harmony with Judge Kirkpatrick, as I ought to do, but for the protection of all the parties concerned, especially the subordinate corporations, which need my assistance here more than the receiver needs it. Whether I can work out a satisfactory disposition of the difficulties, I do not know. I do not propose to make an order to-day, but simply to map out what I think the order should be. Counsel will have the benefit of what I say. .They can ascertain whether they deem what I propose practicable, and they can afterwards make such suggestions with reference thereto as they think proper. Whatever order I may now map out, it is plain the future may require to be modified; and counsel need not hesitate, whatever is now entered, to apply to me in the future for any modification which they think should be made, as experience is developed by the progress of events.- It is necessary that I should act in harmony with the Circuit Court for the District of New Jersey so far as I can. Yet this court cannot do either party before us much good. We may do all parties much harm by working in one direction while the court at the place of domicile is working in another. The general interests require that I should conform my action here, both with
Let us take, in the first place, the Hyde Windlass Company. The position, so far as it is concerned, is quite simple. It has brought on itself the condition now before me. The legal title to that plant vests in the receiver appointed by the court in the District of New Jersey. There is the lease to it, terminating on the 8th day of August next. There is no reason why I should not apply to that plant the general rule by virtue of which I am bound to work in harmony with the Circuit Court for the District of New Jersey. I am speaking now simply of that property which was conveyed by the Hyde Windlass Company to the United States Shipbuilding Company. I am not speaking of the cash belonging to the Hyde Windlass Company, nor of its bills receivable. Neither am I speaking of the stock, and other like property, purchased in the course of business, the title to which vests in the Hyde Windlass Company. The receiver has no jurisdiction over any of these, and they will be distinctly excepted from any order which may be entered in pursuance of what I am now stating. There will be an order that on the 8th day of August the Hyde Windlass Company surrendered to the receiver all the plant and property conveyed to the United States Shipbuilding Company which now remains in existence; but the receiver will be directed to give the Hyde Windlass Company all convenient facilities for the purpose of enabling it to complete the work on hand on the 8th day of August. After that day the receiver will be authorized, subject to the facilities thus to be given the Hyde Windlass Company, to operate the plant. This he may do himself or through the agency of the Hyde Windlass Company, as shall be determined by the court on application made before or after the 8th day of August. So far as the Hyde Windlass Company is concerned, I have no alternative except to enter an order in that way, unless I violate all the precedents which govern federal courts under these circumstances.
The Bath Ironworks affords no present difficulty to my mind, provided it is competent to carry on its own industry. It has what, in equity, is regarded as a lease. Underlying all these proceedings, underlying the general mortgage from the Shipbuilding Company, it had what the equity courts would enforce as an equitable lease against everybody, unless except against a purchaser for value in good faith, and ignorant of the existing circumstances. The Bath Ironworks undertook the construction of certain vessels in its yard. When the property was conveyed to the Shipbuilding Company, the fact that these vessels were under construction was known; especially the fact that, for the purpose of completing the battleship Georgia now there, the Bath Ironworks had stipulated with the United States that they might, under certain conditions, take possession of the plant, and finish the vessel. I do not rest the case on the Georgia. If a person owning a shipyard makes a parol lease, or, even, an implied lease, to another to construct a vessel in the yard, although, at the common law, such a lease may be terminated at will, or by sum
I may hereafter be called on to apportion out the plant; but I can perceive no advantage to be derived from the receiver’s taking possession at present of a part of the plant of the Bath Ironworks, even though the whole of it may not be needed by the Bath Ironworks for carrying out its contracts, if such were possibly the fact. Therefore, for the present, I shall deny him possession of any part thereof; and the decree must be framed so that, until-the court otherwise orders, the Bath Ironworks may occupy the entire plant for the purpose of finishing the vessels now under construction. Of course, the receiver will be entitled to apply for further orders in case he finds that he can make use of a portion of the plant not required for the completion of the vessels now under way, or in case he finds that the Bath Ironworks is unable to proceed with its contracts, or is proceeding in a dilatory manner. The purpose of this order will be simply that the Bath Ironworks may have an opportunity to proceed promptly to complete its present contracts, if it demonstrates that it is able to complete them. If it is not able to complete them, events must take care of themselves.
Other things, however, must be borne in mind. The receiver may control the capital stock of the Bath Ironworks, and his advice, suggestions, and counsel, and to a certain extent his desires, cannot be
Of course, the Hyde Windlass Company and the Bath Ironworks must pay the receiver their rentals in accordance with the purpose of the terms of the leases. Counsel, in drafting the orders, will make proper provision in reference thereto. I do not know about the times of payment, how the amounts can be ascertained, or when ascertained. I leave that to counsel.
I shall also appoint masters to immediately take inventories, to be returned to court, of the assets of the Bath Ironworks, the Hyde Windlass Company, and the United States Shipbuilding Company, within this district. I can conceive that there may be some difficulty in discriminating, and in determining what assets belong to each of these corporations; but, the sooner this is done, the better for avoiding confusion and disputes in the future. I will allow the complainants to name one of the masters, the respondents another, and the third master I will appoint myself. In that way, I think we will be able to get an inventory which will be correct, and which will not require the attention of the court in undertaking to pass on questions of detail. It will be borne in mind by counsel that in this court the rule is administered most liberally as to what a mortgage, assuming to cover after-acquired property, covers in fact. In equity we follow Pennock v. Coe, 23 How. 117, 16 L. Ed. 436, to the fúllest extent. If it is practicable for the Mercantile Trust Company to take a part in the inventory, it may save some difficulties hereafter ; but the inventory should be made at once.
Of course, the Hyde Windlass Company and the Bath Ironworks must account to the receiver, not only for rent, but for whatever assets they use, now on hand, belonging to the United States Shipbuilding Company. That must be provided for in the order. Whatever funds come into the hands of the receiver from any of these sources must be accounted for to this court until further orders are made.
The court at present requires no bond from the receiver in this district. Whether a bond will be needed will be a matter for further consideration on application by the parties.
I ought to say one thing I omitted in its proper place, and that is with reference to the effect of the present statutes of bankruptcy on statutes like that of New Jersey. That is a grave question, and one which is left absolutely open by the Supreme Court, so that no decision of any court prior to In re Watts & Sacks, 190 U. S. 1, 31, 32, 23 Sup. Ct. 718, 47 L. Ed.-, is of the slightest consequence to my mind with reference thereto. I can see why the Supreme Court should hesitate. In the first place, it seems rather extraordinary that a state should not control the life of its own creature; but, what is a more
I believe I ha-ve touched on all the questions practically in issue before me. If I have not, the counsel will have ample opportunity, taking the notes of what I have said, to call my attention to anything I have overlooked; and, if what I propose appears to be impracticable or unwise, they may ask me" to revise anything which I have suggested.
The order will provide for the confirmation of Mr. Smith as receiver within this district, subject to the qualifications which I have stated.