William Watts David Sachs

• Decision Date: 18 May 1903
• Docket Number: Nos. 15,16,O,s. 15
• Citation: 190 U.S. 1,47 L.Ed. 933,23 S.Ct. 718
• Parties: Re WILLIAM WATTS, Petitioner . Re DAVID SACHS, Petitioner . riginal
• Court: U.S. Supreme Court

190 U.S. 1

23 S.Ct. 718

47 L.Ed. 933

Re WILLIAM WATTS, Petitioner. Re DAVID SACHS, Petitioner.

Nos. 15, 16, Original.

Argued April 20, 1903.

Decided May 18, 1903.

M. Zier & Company, a corporation located at New Albany, Indiana, engaged in the boiler manufacturing business, was hopelessly insolvent on and prior to December 30, 1902, and some thousands of dollars had been drawn from its treasury by the manager of its affairs for the purpose of making certain payments, of which $3,100 had been paid to Ryerson & Son, a corporation of Chicago, Illinois, and a large creditor of the Zier company, previously to December 30, and $9,600 was on that day placed by M. Zier, the manager of the company, in the hands of his attorney to be paid over to Zier's sister-in-law, who was a stockholder and creditor of the Zier corporation. It was arranged by Zier's attorney with the Chicago corporation on December 29 that the latter should apply for the appointment of a receiver of the Zier corporation, and that the New Albany Trust Company should be appointed receiver, and this resulted in a complaint filed by the Ryerson corporation, represented by W. W. Watts, a member of the bar of Kentucky, in the circuit court of Floyd county, Indiana, charging that the Zier company was insolvent and was dissipating its property and assets, and praying for the appointment of a receiver, 'and that the court shall make such orders as shall be necessary and proper for the preservation of said property, for the continuance of said business for the purpose of completing unfinished contracts,' etc., to which defendant voluntarily appeared and consented to the appointment of the New Albany Trust Company as receiver. The appointment was accordingly made, and the trust company immediately qualified and proceeded to administer the estate and wind up its affairs.

On January 16, the trust company, as receiver, filed its report and petition, giving an inventory and appraisement of the assets of Zier & Co., the receipts and expenditures of the receiver to that date, the particulars in respect of outstanding contracts; raising the question as to the further operation of the plant, and advising an order for a meeting of the creditors to consider that subject; requiring creditors to prove their claims, and enjoining them from the prosecution of suits except by intervention. A list of the creditors was attached, which included the Inland Steel Company, John C. Thurston, and the Dey Time Register Company.

The court entered an order directing such meeting to be held January 24, and notice by mail to be given, which was done, and the meeting was held on that day, a large number of creditors being represented, including the Inland Steel Company. An order was thereupon entered for payment of rent, the completion of unfinished contracts, for the continuance of the operation of the plant to a specified extent, for the issue of certificates of indebtedness to a small amount, but that no new contracts should be made. It was further ordered that creditors be notified by mail and by publication to file their claims on or before May 11, and 'that all creditors and other persons be and they are hereby enjoined and restrained from prosecuting any claim or suit against this estate except by intervention in this cause or by first obtaining leave of this court.'

February 6, 1903, the Inland Steel Company, John C. Thurston, and John Dey, doing business as Dey Time Register Company, creditors of the Zier corporation to the amounts of $935, $15, and $100, respectively, filed their petition in bankruptcy in the United States district court for the district of Indiana against that corporation to have it declared a bankrupt. The petition alleged that the company was hopelessly insolvent and had committed, within four months next preceding the filing of the petition, acts of bankruptcy, which were specified. It was further alleged that it was necessary, for the preservation of the estate of Zier & Company and for the benefit of its creditors alike, that a receiver in bankruptcy be appointed at once to take charge of the affairs of said company. On February 11 a further petition was filed by the Inland Steel Company, and, on the same day, a supplemental petition, in which the appointment by the circuit court of Floyd county of a receiver and his being put in charge of the insolvent's property, were set up as additional acts of bankruptcy.

The district court thereupon appointed Frederick D. Connor as receiver, and directed that he should take into his possession the plant of Zier & Company and all its other property, and further ordered that the New Albany Trust Company should deliver up to the receiver all the property of Zier & Company and refrain from in any way interfering with him. The receiver immediately qualified by giving bond as required by the court.

February 13, 1903, and before the receiver of the district court had made demand for the property, on learning of Mr. Connor's appointment as receiver, Mr. Watts, after consulting with the local attorneys of Zier & Company, communicated with the district judge and requested that the Federal receiver should not proceed until he, Mr. Watts, could procure an order from the Floyd circuit court permitting him to do so, and could come to Indianapolis, and present to the district judge reasons why the receiver should not have been appointed by that court, and why his order to that effect should be vacated. The district judge immediately caused the court's receiver and the attorneys interested in the case to be notified to take no further steps until a hearing could be had on the questions suggested by Mr. Watts, on February 16, at Indianapolis. No further action was taken by the receiver of the district court, but he presented to the Floyd circuit court a petition setting forth his appointment and qualification, together with a certified copy of the order appointing him, on the morning of Saturday, February 14, and asked the delivery to him of the property and effects of Zier & Company and the discharge of the trust company as receiver. The Floyd circuit court entered an order reciting that Connor, as receiver, came by his attorney, 'and by leave and order of the court, and upon his own motion, makes himself a party to this proceeding, and thereupon by leave of the court files his verified petition showing his appointment as receiver of said M. Zier & Co. by order of the United States district court for the district of Indiana,' and praying for the surrender of the property; 'and the matter of said petition is now continued until the next term of this court.' Saturday, February 14, was the last day of the term, and the next term of the court commenced on the 9th day of

On the same day, February 14, the trust That, with a view to the due observance of the comity existing between the state and the Federal courts, and of avoiding a clash of jurisdiction, petitioner had communicated through its attorneys with the United States district judge and requested the nonenforcement of his order until after the matters in question had been presented to the state court, with the request that that court direct it and its attorneys to lay said matters before the judge of the district court, whereupon the district judge requested counsel to notify the attorneys of the creditors petitioning in bankruptcy that the matter would be heard on Monday, February 6, in Indianapolis, and that in the meantime the order appointing Connor was not to be enforced.

The petition further alleged that the court was about to ad- journ over to the first day of its next term, March 9; that the order of January 24 directed petitioner as receiver to go on and complete various contracts; that it had entered upon the work; that the operation of the plant was for the beneficial purposes of the estate; and that the stoppage of the plant would involve loss to the creditors and many complicated questions of damage; that it would work great hardship to leave the estate with the court adjourned and without instructions as to what to do; and that the petitioner was this court's officer, and must be ordered and directed by this court, only, with respect to the property in its hands.

Petitioner averred that the injunction and restraining order of the state court had been knowingly violated by the Inland Steel Company and the Dey Time Register Company; that these two creditors and all other creditors were estopped from prosecuting the petition in bankruptcy, and from seeking to take from petitioner the assets in its hands as receiver; and that all the creditors were enjoined from prosecuting any attempt to take from the receiver any of the assets in its hands except by leave. And, further, that the record in the district court of the United States for the district of Indiana did not disclose all the facts regarding the matters herein; that that court had no information as to the restraining orders, and estoppels, by entry of appearance, participation, and otherwise. That the assets of the Zier company were in custodia legis; that the parties had submitted themselves to this forum; that the court came into lawful custody of the property, and the orders and proceedings were entered and had before the institution of the bankruptcy proceedings, and the attempt to oust this court and receiver therefrom. Petitioner, therefore, asserted its belief that the district court, under the peculiar circumstances of the case, would coincide with the state court, if it should deem wise to enter orders specifically restraining the Inland Steel Company, John L. Thurston, and the Dey Time Register Company and their attorneys, Connor, and the United States marshal from further prosecuting any matters in relation to the estate or of the taking of the assets in any manner, except by intervention in this action.

Petitioner prayed for instructions; that it should present the facts to the...