286 F. 88 | 2d Cir. | 1922
Lead Opinion
(after stating the facts as above). Section 2 (1) of the Bankruptcy Act confers upon the District Courts of the United States jurisdiction to “adjudge persons bankrupt who have had their principal place of business, resided, or had their domicile within their respective territorial jurisdictions for the preceding six months, or of the greater proportion thereof. * * * ” The six months here relevant are from January 19, 1921, to July 19, 1921, and may be logically divided into three periods; i. e.: (1) January 19 to March 18; (2) March 18 to June 9; and (3) June 9 to July 19. The third period may be eliminated at once, because during that time the business was conducted by the Delaware receivers at Wilmington, and there can be
The theory upon which appellants urge that the principal place of business of the company was in New York during the first period is that Hannevig controlled the affairs and destiny of the corporation during that time, and that reports were made to him from time to time by the officers of the company. From the report of the special master, it appears that all the manufacturing business during "the first period was carried on at Wilmington, and an examination of the testimony shows that during this period there was but one directors’ meeting held in the city of New York, and that occurred on February 14, 1921, at the apartment of Hannevig, who was ill at the time. Two days previous — i. e., February 12, 1921 — Hannevig had been thrown into bankruptcy. At the meeting referred to one matter was taken up for consideration, and the meeting was then adjourned until February 18, at which time there was not a quorum, and the meeting adjourned sine die.
On February 22, receivers for Hannevig were appointed, and during this period it became plain that not only was Hannevig insolvent, hut that a similar fate had been met by various enterprises promoted or acquired by him. As well pointed out by the special master, Hannevig during this period and during the nonrelevant period antecedent thereto had it in his power to make New York the principal place of business of the company; but he did not do so, and, on the contrary, the evidence is overwhelming that the principal place of business was at Wilmington.
Much is made in argument by appellants of the fact that the business of the company was considerably less than that which it had done previously as a result of war-manufacturing activities. There is no merit in this point. Such has been the result in the case of many plants whose manufacturing ability and output have greatly decreased since the war, for' one reason or another. It is difficult to understand an argument which fails to recognize that a business which employs 450 men and during the period in question had on hand work to the approximate amount of $2,300,000, collected approximately $1,100,000 cash and $200,000 in notes, and made a profit of approximately $38,-000, with a reconstructed and well-equipped plant, is a substantial and not a petty business.
The statute is not concerned with the size of the business, as compared with its previous and temporary business, but is solely concerned with the principal locus of the business. From the foregoing it will already appear that during more than half of the period under consideration, the principal place of business was unquestionably not in the city of New York.
This might dispose of the case, but, as much is made by appellants of th.e second period, it is desirable to consider the facts relating thereto. When Hannevig became bankrupt, it was found that his affairs were in a greatly involved state. In addition to his shipbuilding enterprises, he had acquired three marine insurance companies, which he
The stock of the Pusey & Jones Company was the chief asset of Hannevig and Hannevig, Inc. Obviously, it was to the interest of creditors to act unitedly, if- possible, in the effort to settle the claims against the United States, the United States Shipping Board, and the Emergency Fleet Corporation.
An agreement, dated March 18, 1921, was entered into by various interests, all the details of which need not be recited; but its principal features were (1) that a new board of directors was to be elected consisting of Mr. Wise, receiver of Hannevig, Mr. Cabell, representing the insurance departments of New York and Pennsylvania, Mr, Williams, representing the Baltimore Dry Docks Company, Mr. Eeonard, representing the.Shipping Board, and Mr. Coxe, the manager of the Wilmington plant; (2) that there should be an executive committee consisting of Mr. Wise, chairman, Mr. Cabell, and Mr. Williams; (3) that the election of a trustee in bankruptcy of the Hannevig estates was to be postponed and the enforcement of any judgment in favor of Baltimore Dry Docks Company suspended until November 1, 1921; and (4) that the then New York counsel of the company in its government litigations and the local Washington counsel should be continued, subject to. the approval of Messrs. Wise and Williams as to negotiations and settlements.
It was plain that the- adjudication in bankruptcy against Hannevig could not be stayed without an order of the District Court for the Southern District of New York and, upon application of the parties, that court, under date of March 22, 1921, made an order approving the agreement and staying the adjudication for six months, with leave to apply for adjudication within a shorter time, if so advised.
The novel argument is now advanced that the agreement and order supra created a receivership of Pusey & Jones Company, ancillary to the Plannevig and Hannevig, Inc., receiverships. The mere statement of the proposition carries its own refutation. But the argument is pressed upon the theory that, in some manner unknown to the law, the court’s order could change Wilmington as the principal place of business, and create a new principal place of business in New York, because most of the directors and the executive committee lived in New York, and there much discussion and consideration of the questions relative to the litigations took place.
If it be conceded, solely for purposes of argument, that where a corporation is not otherwise doing business, and the only activities are litigation or reorganization, then that the principal place of business is where such affairs are conducted, yet the case at bar does not fall under this classification for two reasons: (1) That part of these litigation or negotiation activities were carried on in Washington, several suits having been brought there; and (2) that the business, inter alia,
Numerous cases are cited. We need consider only a few. In the case of In re Guanacevi Tunnel Co., 201 Fed. 316, 119 C. C. A. 554, the bankrupt was an Arizona corporation, which never had any property and never did any mining in Arizona, and, as stated by the court:
“Its activities have been principally connected with the sale of its stock and the payment of its running expenses, and that the only place in which the business has been conducted has been at 55 liberty street [New York City].”
In the case’ of In re Matthews Consolidated Slate Co. (D. C.) 144 Fed. 724, and Id., 144 Fed. 737, 75 C C. A. 603, the facts (described in detail in the opinion of the District Court at pages 729 and 730) show activities in Boston quite different from and much more important and varied than those in New York in the case at bar.
Cases like In re Munger Vehicle Tire Co., 159 Fed. 901, 87 C. C. A. 81, and In re Pennsylvania Consolidated Coal Co. (D. C.) 163 Fed. 579, are so far from applicable to the case at bar that further comment is unnecessary. It is sufficient to support the order below to refer to Roszell Bros. v. Continental Coal-Corporation (D. C.) 235 Fed. 343, affirmed 242 Fed. 243, 155 C. C. A. 83; In re Tennessee Construction Co., 207 Fed. 203, affirmed 213 Fed. 33;
. Finally, it is merely necessary to state that the litigation arising out of the Delaware equity receivership does not in any manner affect the controversy here. .
Order affirmed, with costs.
Dissenting Opinion
(dissenting). The affairs of Hannevig and Hannevig, Inc., were being administered through receiverships. The principal asset of the Hannevig estates consisted of all the stock of the Pusey & Jones Company. This property consisted of a plant at Gloucester, N. J., another at Wilmington, Del., and a large claim against the United States Shipping Board. The shipbuilding plant at Wilmington was idle, as was the plant at Gloucester, because ship- 1 building activities had ceased. It appears, however, that at the Wilmington plant the Pusey & Jones Company was engaged in manufacturing some paper-making machinery. The principal asset of the Pusey & Jones Company consisted of the claim against the Shipping Board amounting to $14,000,000. That this was the principal asset is asserted by the special master in his findings. Negotiations were pending, looking to an adjustment of this claim, and were conducted by Mr. Wise, who was named receiver for the Pusey & Jones Compány. On March 18, 1921, an order was entered in the District Court, pursuant to an agreement of that date, which recognized that the administration of the Pusey & Jones Company was necessarily ancillary to the .receivership of Hannevig and Hannevig, Inc. In this way, under one' general control, the affairs of the Pusey & Jones Company were
■ The question presented by this appeal is: What was the principal business of the corporation for six months prior to July 19,1921, when the receiver was appointed for the bankrupt? The manufacturing of paper-making machinery at this time was a small part of its business, considering all of its business in the entirety. This principal business was endeavoring to make an adjustment of this large claim against the Shipping Board. The order of the District Court, which approved the agreement of May 18,1921, read in part:
“The court, after due deliberation, being of the opinion that the interests of this estate and of all other parties requiré a prompt, just, and equitable distribution of all claims of the Pusey & Jones Corporation against the United States government and the United States Shipping Board and the Emergency Meet Corporation, and the court finding further that the plans proposed to be carried out pursuant to said agreement should accomplish such a disposition of said matters.”
•Thus recognizing the chief duty of the directors of the Pusey & Jones Company. It appears that after this agreement a new board of .directors was elected for the Pusey '& Jones Company. Thus, by this arrangement, it was determined to try to avoid a receivership of the Pusey & Jones Company. It is clear from the record that the administration of the affairs of this company, in so far as the acts of its board of directors are concerned, were carried on in the city of New York, and the office at which this business was carried on was that of Mr. Wise, who was one of the receivers of Hannevig and Hannevig, Inc., and chairman of the hoard of directors of the Pusey & Jones Company, as newly constituted. He says he spent 50 per cent, of his time about the affairs of the Pusey & Jones Company. Dam con-, vinced that the principal business of this corporation was endeavoring to liquidate its affairs in New York City. The special master found that, since the appointment of the new executive committee, all its meetings have been held in New York City, except in one case, when it was held in Washington; all the new directors’ meetings were also held in New York City, and the same is substantially true of the old board, although a few meetings were held in Wilmington and Philadelphia. This applied to the period of six months preceding the bankruptcy. This corporation was in the position of one which has more than one plant situated in different districts, with an office from which supreme direction or control of its property is had. Under thése circumstances, the rule is that, if the corporation has an office in a third state, having plants in two different states, and business operations are conducted by management and control from such office, that would constitute its principal place of business within the meaning of the bankruptcy statute. In re Guanacevi Tunnel Co., 201 Fed. 316, 119 C. C. A. 554; In re Matthews Consolidated Slate Co. (D. C.) 144 Fed. 724. In the Matthews Case the court said (144 Fed. at page 738, 75 C. C. A. 604) :
“We are of the opinion that when a corporation, operating factories, mills, oe mines in various states, has a principal office where business is transacted*100 of the character of that conducted at the Boston office, * * ” rather than a factory, mill, or mine, according to ordinary understanding and speech, as well as according to the intent of Congress, constitutes the ‘principal place of business,’ within the meaning of the Bankruptcy Act. Not only is this the natural interpretation, but it seems to us the only practical interpretation; for, since there can be but one principal place of business, if regard is paid to the amount of property owned or kept in a particular jurisdiction, or to the aihount of product there turned out, or to the number of workmen employed, it might follow that the inquiry would be, which is the largest mine or factory? a question having little relation to the purpose of administering the assets.”
To the same effect, see Continental Coal Co. v. Roszelle Bros. (C. C. A.) 242 Fed. 243, 155 C. C. A. 83, and In re Marine Machine & Conveyor Co. (D. C.) 91 Fed. 630.
The principal place of business of a corporation is usually where the general offices or headquarters are located, without regard to the place named in the charter as the principal place of business. The test is where the actual business of the concern is chiefly prosecuted and managed, and where a corporation has several places of business located in different districts, its principal place of business is where the affairs of the corporation are actually managed. To be sure, this is a question of fact, to he determined by the circumstances of each par-, ticular case; but the rule is clear. It appears that Hannevig was the principal stockholder of the Pusey &, Jones Company; that the Pusey & Jones Company was in fact Hannevig. He conducted all his business and had a place of business in the city of New York, with these plants in New Jersey and Delaware. His financing was done there. When the new board of directors carried on the business under this arrangement with the District Court, they but continued what Hannevig did before them.
It also appears that a voluntary petition in bankruptcy, verified July 25, 1921, was filed, and the corporation, after due authority, petitioned the District Court to be adjudicated a bankrupt in the Southern district of New York. A board of directors of a foreign corporation has power to file a voluntary petition in bankruptcy. In re De Camp Glass Casket Co. (C. C. A.) 272 Fed. 558. And this authority includes the power to declare the place which the board has regarded as the principal place of business and to determine any bona fide and serious question which may arise as to its locality. Such power is inherent and incidental to the power to determine whether the corporation is solvent or not and whether or not it has committed acts of bankruptcy:
“The corporation is presumed to know where it has had its principal place of business, and when the corporation itself files its petition jurisdiction is conferred on the court where filed, subject to a showing in that court that the principal place of business was or had been elsewhere.” In re Beiermeister Bros. Co. (D. C.) 208 Fed. 945.
I think the facts require a finding that the principal place of business, as well as the actual management of the corporation, was in the Southern district of New York. Therefore I dissent.
