Lyon v. Russell, 41 App. D.C. 554

Lyon v. Russell

41 App. D.C. 554 | D.C. Cir. | 1914

Mr. Justice Robb

delivered the opinion of the Court:

Whilst “the bankruptcy law is paramount and the jurisdiction of the Federal courts in bankruptcy, when properly invoked, in the administration of the affairs of insolvent persons and corporations, is essentially exclusive” (Re Watts, 190 U. S. 1, 27, 47 L. ed. 933, 941, 23 Sup. Ct. Rep. 718, 14 Am. Crim. Rep. 48), that law does not necessarily deprive a state court of jurisdiction conferred by a state law to dissolve a local corporation, even though the reason for exercising such jurisdiction be the insolvency of such corporation. Murphy v. Pen*558niman, 105 Md. 452, 121 Am. St. Rep. 583, 66 Atl. 282; Singer v. National Bedstead Mfg. Co. 65 N. J. Eq. 290, 55 Atl. 868. Where, however, bankruptcy proceedings are seasonably instituted, the winding-up proceedings in the State court are superseded. A general assignment for the benefit of creditors is governed by the same rule, and is voidable only in case bankruptcy proceedings are seasonably instituted. Randolph v. Scruggs, 190 U. S. 533, 47 L. ed. 1165, 23 Sup. Ct. Rep. 710.

The Virginia statute under which appellee was appointed is not an insolvency law. Its purpose is to provide a speedy method for the winding up of a corporation whose object has failed, or whose management has been abandoned by its officers and directors, or whose operations have been suspended for a period of three years, or which has become insolvent. Of course, if the corporation is to be dissolved, its assets must be distributed, but the real object of the statute is the winding up of the corporation. We have a somewhat similar statute in this jurisdiction. See Code, sec. 7 67. There is certainly nothing in the bankruptcy act to .prevent a State court from exercising such a power where bankruptcy proceedings are not seasonably instituted thereafter.

The bankruptcy act of July 1, 1898, (30 Stat. at L. 544, chap. 541, U. S. Oomp. Stat. 1901, p. 3418), as amended by the act of February 5, 1903 (32 Stat. at L. 797, chap. 487, U. S. Comp. Stat. Supp. 1911, p. 1493), declares it to be an act of bankruptcy if, because of insolvency, a receiver or trustee has been put in charge of the personal property of any person under the laws of a State, of a territory, or of the United States. That the Towles-Scofield Company was insolvent when the receiver was appointed in Virginia is plain. Therefore the appointment of the receiver and his taking possession of the assets of the corporation constituted an act of bankruptcy. Hooks v. Aldridge, 76 C. C. A. 409, 145 Fed. 865; Re Pickens Mfg. Co. 158 Fed. 894; Re Electric Supply Co. 175 Fed. 612; Exploration Mercantile Co. v. Pacific Hardware & Steel Co. 101 C. C. A. 39, 177 Fed. 825. Had bankruptcy proceedings been instituted within four months, there can be no doubt that *559the corporation could have been adjudged a bankrupt and its property wrested from the receiver for administration in the bankruptcy court. But the creditors elected to lie by and permit the time within which they might have invoked the jurisdiction of the bankruptcy court to elapse. By their failure seasonably to act, the jurisdiction of the State court, rightfully acquired, became fixed, and not subject to interference. Boese v. King, 108 U. S. 379, 27 L. ed. 760, 2 Sup. Ct. Rep. 765; Pickens v. Roy, 187 U. S. 180, 47 L. ed. 129, 23 Sup. Ct. Rep. 78; Randolph v. Scruggs, 190 U. S. 535, 47 L. ed. 1169, 23 Sup. Ct. Rep. 710; Re Heckman, 72 C. C. A. 8, 140 Fed. 859; Re Knight, 125 Fed. 35.

It is suggested that the title of the receiver to the personal property located in this jurisdiction is not one that should be respected here. Had the Virginia court, in the exercise of its jurisdiction, directed the corporation to transfer this property to its receiver, the courts of this jurisdiction, in the circumstances of this case, would have recognized and protected the title tlms acquired. Oliver v. Clarke, 45 C. C. A. 360, 106 Fed. 402. See also Great Western Min. & Mfg. Co. v. Harris, 198 U. S. 561, 49 L. ed. 1163, 25 Sup. Ct. Rep. 770. Is the title of the receiver any less secure because the corporation voluntarily surrendered the property to him ? We think not. H e is not here seeking to obtain title to property within this jurisdiction by reason of his foreign appointment. lie is merely attempting to retain a tide legally acquired, and no reason has been made to appear why that title should not he respected. Jenkins v. Purcell, 29 App. D. C. 209, 9 L.R.A.(N.S.) 1074; Union Sav Bank v. Carnegie Trust Co. 37 App. D. C. 548.

In behalf of the trustee in bankruptcy the point is made that, having filed a general replication to the answer of the receiver, the court erred in accepting as true the averment that the receiver took possession of the property, with the consent, approval, and acquiescence of the corporation. The replication was filed too late. Having gone to hearing upon the original hill, the intervening petition, and the answer thereto, the trustee will not now be permitted to raise a new issue.

*560Some question is also made as to the right of the appellee to bo heard in a court of equity, although no such question was raised below. It is apparent, we think, from the statement of the case, that a more complete remedy may he had in equity than at law, and hence this point is not well taken.

There was no occasion for making the attorneys of the attaching creditors parties defendant, and the suit as to them should be dismissed. American Federation of Labor v. Buck's Stove & Range Co. 33 App. D. C. 83, 110, 32 L.R.A.(N.S.) 748; Campbell v. Brown, 2 Woods, 350, Fed. Cas. No. 2,355; Peck v. Chouteau, 91 Mo. 138, 60 Am. Rep. 236, 3 S. W. 577; Ford v. Williams, 13 N. Y. 577, 67 Am. Dec. 83. Inasmuch, however, as they have appeared in this court as counsel for their respective clients, no costs will be awarded them.

As modified, the decree will be affirmed, with costs-.

Affirmed.