Acme Harvester Company v. Beekman Lumber Company

• Decision Date: 18 December 1911
• Docket Number: No. 9,9
• Citation: 56 L.Ed. 208,222 U.S. 300,32 S.Ct. 96
• Parties: ACME HARVESTER COMPANY, Plff. in Err., v. BEEKMAN LUMBER COMPANY
• Court: U.S. Supreme Court

222 U.S. 300

32 S.Ct. 96

56 L.Ed. 208

ACME HARVESTER COMPANY, Plff. in Err.,

v BEEKMAN LUMBER COMPANY.

No. 9.

Argued and submitted April 25, 1911.

Decided December 18, 1911.

Messrs. Alexander New, Edwin A. Krauthoff, and Arthur Miller for plaintiff in error.

Mr. Hannis Taylor for defendant in error.

Mr. Justice Day delivered the opinion of the court:

This case is here upon writ of error to the supreme court of the state of Missouri. The facts stated in the record disclose that on October 19, 1903, an agreement was formulated, having for its purpose the placing of the affairs of the Acme Harvester Company, plaintiff in error, in the hands of a committee of creditors. With this purpose in view an agreement for the signature of the creditors was circulated, naming a committee of five, and calling upon the stockholders of the Acme Harvester Company to deposit their shares with the committee, the directors and officers of the company to resign their respective offices, and the committee to have power to elect a board of directors, who should act until the debts of the company were paid in full, and, when so paid, the shares of stock to be redelivered to the owners. In the circular accompanying the agreement for the signature of the creditors it was set forth that the affairs of the company were in such shape that, if kept a going concern, the debts could be paid, and deprecating a resort to legal proceedings in court.

On October 22, 1903, certain creditors filed a petition in involuntary bankruptcy against the Acme Harvester Company in the district court of the United States for the Northern district of Illinois, seeking to have the company adjudicated a bankrupt, charging that it was insolvent and had made certain preferential transfers of property. On October 24, 1903, the creditors' committee issued a circular in which they recited that one half the creditors in number and two thirds in amount had already signed the creditors' agreement; that a petition in bankruptcy had been filed by a law firm claiming to represent three claims, for the purpose of throwing the company into bankruptcy; that one of the creditors had already withdrawn from the proceedings, and setting forth that the success of such proceedings would wreck the company, destroy its business, and sacrifice the value of its assets. The committee added an expression of its confidence that the court would deny an application for a receiver, and leave the business in the hands of the creditors. On October 26, 1903, the creditors' committee issued another circular, in which it was said that the United States district court in Chicago had refused to appoint a receiver, and in so doing the judge had said:

'This estate is a very large one, and is in the hands of a committee of reputable creditors. It is my judgment that the creditors ought to manage and control the estate. The creditors can produce results much better than any receiver in handling a large manufacturing concern like the Acme Harvester Company.'

The circular further said that the court had referred the matter to the referee in bankruptcy to inquire into the truth of the allegations of the petition, and to ascertain whether the petitioning creditors had any standing or right to file the petition, adding that there was really only one creditor left in the bankruptcy proceeding. On November 2, 1903, a circular was issued in which it was stated that an overwhelming majority of the creditors had signified their approval of the plan, and had executed and forwarded the agreement to the creditors' committee. On December 2, 1903, the Acme Harvester Company, by its vice president, wrote to the Beekman Lumber Company, calling attention to the fact that the lumber company had not yet signed the creditors' agreement, and saying:

'You may not be aware that U. S. Judge Kohlsaat has stopped the matter of anyone bringing suit against this company, or endeavoring to throw it into bankruptcy, he having decided that we are solvent, and that the only reasonable and fair way to handle the business, paying its debts, etc., is through the medium of the credit committee, elected by our heaviest creditors. This being the case, the only basis on which your claim will receive recognition is by joining with the balance of our creditors, signing the agreement, thus putting yourselves on record that you are a creditor, and are entitled to such dividends as from time to time the committee might declare.'

The Beekman Lumber Company, it appears, did not sign the creditors' agreement, nor, so far as the record discloses, prove its claim in bankruptcy, and on December 7, 1903, filed a petition in the circuit court of Jackson county, Missouri, for the purpose of recovering a judgment against the Acme Harvester Company upon an ac- count for lumber sold and delivered prior to the institution of the proceedings in bankruptcy. No trustee having been selected in the bankruptcy proceedings, the Acme Harvester Company appeared in the state court to file a motion to stay the proceedings, setting up the pending proceedings in bankruptcy. This motion was sustained on January 11, 1904. On May 14, 1904, motion to stay was overruled, and the former order set aside. On October 3, 1904, a petition was filed in the district court of the United States at Chicago, where the bankruptcy proceedings were pending, for an injunction against the Beekman Lumber Company to restrain it from further pursuing its action in the state court. An injunction was granted, without notice to the Beekman Lumber Company, on ex parte hearing the same day. From reports in the record it appears that the creditors' committee took charge of the company's property, and, as such committee, amde reports to the United States district judge at Chicago of the doings of the committee in the management of the property, purchases, sales, etc. The creditors' committee also, issued a statement to the creditors, showing the results of the business, inclosing copies of the reports made to the Federal district court, and commending a reorganization of the company on the basis of stock issued to creditors, at par, for their claims, and 50 cents on the dollar to creditors who did not go into the reorganization. A circular letter, issued by the committee on April 1, 1905, states that two thirds of the creditors had already been heard from, about eighty per cent (80%) of them desired stock, and the rest preferred fifty per cent (50%) in cash.

On October 12, 1904, the Acme Harvester Company answered in the state court, setting up the pendency of the bankruptcy proceeding and the issuing of the injunction in the district court of Chicago. Replication was filed by the plaintiff, and, upon trial, a judgment on the account was directed and rendered on June 20, 1905, in favor of the plaintiff for the amount of its account. Thereafter proceedings in review were prosecuted to the supreme court of Missouri, and that court held that the district court of the United States had no authority to issue the injunction against proceedings in the state court, and held further that the facts disclosed that the district court of the United States had declined to adjudicate the Acme Harvester Company a bankrupt, and left the property to be administered outside of the bankruptcy law, and that the prosecution in bankruptcy had been abandoned. 215 Mo. 221, 114 S. W. 1087.

A motion to dismiss the proceedings for want of jurisdiction was made in this court and passed for consideration to the merits. The contention is that, inasmuch as the supreme court of the state found, as a matter of fact, that the bankruptcy proceedings had been concluded, by denial of the adjudication and an abandonment of the proceedings, that this finding of fact is binding upon this court upon writ of error to the state court, and therefore there is no substantial basis for the writ of error. We are of the opinion that the contention in this respect is not well founded. The defendant below set up a proceeding in a Federal court as a protection against further prosecution in the state court. It further set up the issuing of an injunction in the Federal court, undertaking to stay proceedings in the state court. Thereby the defendant claimed the benefit of a Federal right, which brought the case within § 709 of the Revised Statutes of the United States (U. S. Comp. Stat. 1901, p. 575). The denial of a right claimed under the judgment of a court of the United States lays the foundation for a review in this court. Pittsburgh, C. C. & St. L. R. Co. v. Long Island Loan & T. Co. 172 U. S. 493, 43 L. ed. 528, 19 Sup. Ct. Rep. 238; Deposit Bank v. Frankfort, 191 U. S. 499, 48 L. ed. 276, 24 Sup. Ct. Rep. 154.

The alleged finding of fact that the jurisdiction of the Federal court had ended cannot conclude this court in reviewing a question of this character. The defendant asserted the power and jurisdiction of the Federal court, invoked before the beginning of the state proceedings, and alleged its sufficiency to protect it against further proceedings in the state court. The right of ultimate determination of a contention of that character in this court cannot be defeated by the finding of the state court that the Federal court had exceeded or ended its jurisdiction. The determination of a question of that kind is not a finding upon a disputed question of fact, nor within that class of cases in which this court has repeatedly held that the facts as found in the state court would be regarded as conclusive here. Moreover, the case involved a construction of the bankruptcy act. As the plaintiff in error contended that the proper construction of the act would defeat the jurisdiction of the state court, the adverse ruling gave this court jurisdic...