Scattergood v. American Pipe & Construction Co.

• Decision Date: 18 December 1917
• Docket Number: 1731.
• Citation: 247 F. 712
• Parties: SCATTERGOOD et al. v. AMERICAN PIPE & CONSTRUCTION CO.
• Court: U.S. District Court — Eastern District of Pennsylvania

247 F. 712

SCATTERGOOD et al. v. AMERICAN PIPE & CONSTRUCTION CO.

No. 1731.

United States District Court, E.D. Pennsylvania.

December 18, 1917

Runyon & Autenrieth, of Jersey City, N.J., and Horace L. Cheyney, of New York City, for the motion.

F. B Bracken and Morgan, Lewis & Bockius, all of Philadelphia Pa., and Collins & Corbin, of Jersey City, N.J., opposed.

DICKINSON District Judge.

The considerations which lead to the disposition to be made of this motion are of the very broadest and most general character. Every legal controversy of sufficient importance to be taken seriously presents two phases. It has its practical side, involving very practical consequences, and its legal side, involving the formulation of legal principles and their application, and these may be approached through forms of procedure, and raise questions of the appropriateness of the special remedy invoked. These purely professional or legal considerations are also of importance because they directly affect or indirectly influence the development of the science of the law and enter into the building up of our system of laws. In this molding process the legal profession, as well as the courts, cannot avoid having a part and are expected to have a part. The profession can make its influence felt only through the courts, and the courts must stop short of any invasion of the proper domain of the Legislature. Even when the power of the Legislature is not in question, wisdom would dictate that there should be no purely arbitrary interference on its part with the natural growth and development of the remedial side of the law along proper and approved lines. This freedom to grow and develop is one of the many claims to merit which the so-called common-law system possesses. To it we are indebted for many of our most effective and efficient legal and equitable remedies. The possession of this judicial power has led, it is true, to the courts being subjected to general criticism for being overconservative, and in notable specific instances to the charge of usurpation of power. On the whole, however it has worked to the common good, and as the Legislature has amply adequate defensive power at its command there is little practical danger of permanent harm from judicial action.

All this seems very academic, but these considerations are really intensely practical, and the practice of the courts in appointing receivers for corporations, which has grown almost literally by leaps and bounds, affords a good illustration of the thought intended to be expressed. If bills under which such receivers have been appointed were listed and analyzed, the growth and development of this branch of remedial law would be disclosed. It would doubtless be found that of all of them, from the beginning, at least 80 per cent., resulted in the making of a decree which has nothing more or less than the declaring of a moratorium against creditors, and of the proceedings in late years, 95 per cent. of the bills had this more or less veiled end in view. It is difficult for a solicitor devoted to old established principles of chancery practice to understand how the courts can protect a corporation, which is in financial straits, against suits creditors, when it would not protect an individual under like circumstances, and yet so widespread and general a recognition and acceptance of the assertion of the power has been accorded its assertion, that in at least two notable instances in Pennsylvania it was even attempted to be extended, and, until halted by the Supreme Court, actually was extended to individual debtors. We do not need to search far for the reasons for this acquiescence. The end reached was a good end, and the remedy applied justified itself in practical results. The lawyer, who advised his clients who were interested in such a corporation that no such remedy could be had through a bill in equity, would have found himself supplanted by other counsel who promptly had the needed remedy applied through just such a bill. Such an analysis would disclose two other things. One is that in the early cases the solicitor, who filed the bill, resorted to the subterfuge of formally averring something of no real importance, for the sole purpose of presenting technical grounds of equitable jurisdiction; in the later cases, such subterfuges are abandoned. The other is that the early cases disclose a reluctance on the part of the courts to appoint receivers, and a refusal in many instances to appoint them; the later cases disclose appointments made evidently almost as a matter of course. It will further be observed that this change came about by gradual approaches. It doubtless had its beginning in the resort to receiverships by corporations having public functions to perform, but the practical need to conserve the assets of other corporations was so real and so urgent that the courts yielded to it to the extent of naming a temporary receiver with leave to move to vacate, and a recognition of this same practical need prevented any such motion being made. Indeed, the history of this very case discloses precisely that condition-- not a single creditor has appeared to avail himself of this right, leave to assert which was invited by the decree. It may be further said that even the broad distinction between different forms of action, and the necessity to assert a given cause of action by means of its appropriate form of action, is breaking down under the assaults, legislative and otherwise, which are being made upon it. In Pennsylvania, for instance, under the provisions of the act of 1907, resort may be had to a bill in equity to redress almost any wrong, of which the complainant may complain, leaving to respondent the right to raise the question of equitable jurisdiction by a prompt application to have the case referred to the law side of the court.

Our present equity rules show a like attitude in the permission given by Rule 22 (198 F. xxiv, 115 C.C.A. xxiv) for such transfers. To those of us who have been schooled in the older and more strictly logical system of practice, these new doctrines may seem almost heretical; but, however reluctant an acquiescence in them, we cannot refuse recognition of the fact that they have been accepted, and further cannot deny to them the merit of bringing good results. Numberless precedents establish the facts of such acceptance from the multitude of which we cite at random one as an illustration, although perhaps not the best illustration. Stokes v. Williams, 226 F. 146, 141 C.C.A. 146.

Our conclusion is that these precedents establish the jurisdiction and power of the court to appoint receivers in proceedings such as the instant one, and that the challenge of such jurisdiction cannot be deemed ground to vacate the decree. Our view being that the jurisdiction having been...