Hanssen v. Pusey & Jones Co.

• Decision Date: 21 July 1921
• Docket Number: 429.
• Citation: 276 F. 296
• Parties: HANSSEN v. PUSEY & JONES CO.
• Court: U.S. District Court — District of Delaware

276 F. 296

HANSSEN v. PUSEY & JONES CO.

No. 429.

United States District Court, D. Delaware.

July 21, 1921

William G. Mahaffy and John P. Nields, both of Wilmington, Del., for complainant.

George N. Davis and Robert Penington, both of Wilmington, Del Chester N. Farr, Jr., of Philadelphia, Pa., and Selden Bacon Henry A. Wise, and Hartwell Cabell, all of New York City, for defendant.

MORRIS District Judge.

The bill of complaint was filed by Hans Karluf Hanssen against the Pusey & Jones Company, a Delaware corporation, praying the appointment of a receiver for that corporation. The bill alleges, among other things, that the complainant is a subject of the king of Norway and a resident of Norway; that the jurisdictional amount is involved; that a statute of the state of Delaware authorizes the appointment of a receiver of a Delaware corporation on the application of any creditor or stockholder thereof, whenever the corporation is not one for public improvement and shall be insolvent. The bill further alleges that the complainant is a stockholder and a creditor of the respondent corporation, that the respondent is not a corporation for public improvement, and that it is insolvent in that it is unable to pay its obligations as they fall due in the usual course of business.

Upon filing the bill the complainant moved for the appointment ex parte of one or more receivers. This motion was based upon the further allegation of the bill that a judgment entered in this court on the 22d day of March, 1921, at the suit of Baltimore Dry Docks & Shipbuilding Company against the Pusey & Jones Company for $800,125, was illegally, unlawfully, and in effect collusively obtained. As the judgment would pass beyond the control of the court at the end of the term at which it was entered, unless an application to vacate and set aside the judgment should be made before the rising of the court on the last day of the term, and as the bill of complaint was filed on the 9th day of June, and as the term of this court at which the judgment was entered would end on the 13th day of June, receivers were appointed ex parte and without delay, in order that they might have an opportunity before the end of the term to qualify, examine the matter and take such action with respect to the judgment as they might deem proper or be advised.

The matters now before the court arise upon a rule, issued at the time of the filing of the bill, directed to the respondent, and made returnable on June 18th, to show cause why the receivers appointed ex parte, to continue until the further order of the court, should not be continued during the pendency of the cause. The rule was heard upon bill, answer, affidavits, and exhibits filed by the respective parties. Paragraph 3883 of the Revised Code of Delaware of 1915, upon which complainant relies, provides that--

'Whenever a corporation shall be insolvent, the Chancellor, on the application and for the benefit of any creditor or stockholder thereof, may, at any time, in his discretion, appoint one or more persons to be receivers of and for such corporation, to take charge of the estate, effects, business and affairs thereof, and to collect the outstanding debts, claims, and property due and belonging to the company, with power to prosecute and defend, in the name of the corporation or otherwise, all claims or suits, to appoint an agent or agents under them, and to do all other acts which might be done by such corporation and may be necessary and proper; the powers of such receivers to be such and continued so long as the Chancellor shall think necessary; Provided, however, that the provisions of this section shall not apply to corporations for public improvement.'

While the defendant admitted in open court that the allegations of the bill were sufficient to warrant the appointment ex parte of receivers, it contends that, in view of the facts disclosed by the affidavits filed in support of and in opposition to the rule, the plaintiff has failed to establish that he is either a stockholder or a creditor of the defendant corporation, or that the defendant is insolvent in the sense that it has not available funds to meet current liabilities as they mature, and further that, even if it appears that the complainant is a stockholder or a creditor, and that the defendant company is insolvent as alleged, that the facts shown do not warrant the exercise of judicial discretion in favor of the appointment of receivers.

It is to be constantly borne in mind that, in order to sustain a motion for the appointment of a receiver pendente lite, it is not necessary to decide in favor of complainant upon the merits, nor is it necessary that such a case be presented as will, beyond all doubt, entitle him to a decree upon the final hearing. In granting temporary relief by the appointment of such receiver, courts of equity in no manner anticipate the ultimate determination of the questions of right involved. They merely recognize that a sufficient case has been made out to warrant the judicial preservation of the rights or property in controversy, for the benefit of all parties in interest, until a hearing upon the merits shall have been had, without expressing, and, indeed, without having the means of forming, a final opinion as to such rights. The court will not, however, upon an application for temporary relief, ignore the probability of plaintiff's finally establishing his alleged right, nor will it, by the appointment of receivers pendente lite, disturb defendant in the possession of its property without a probability that plaintiff will prevail upon the final hearing.

The affidavits and exhibits filed herein disclose the facts hereinafter stated. In December, 1919, one Christoffer Hannevig, then the president of the respondent corporation, was indebted to nine Norwegian individuals and corporations in an amount exceeding $1,250,000. To secure the payment of that indebtedness the complainant came to America as the authorized representative of the Norwegian creditors. After negotiations between Hannevig and the complainant, the former delivered to the latter on February 13, 1920, certain shares of stock and nine promissory notes, aggregating $650,000, made by the Pusey & Jones Company, of which eight were payable to the order of Christoffer Hannevig, Inc., and the remaining one to the order of Hannevig. One note was dated July 27, 1917, another October 1, 1917, and the remaining notes bore intervening dates, Some were payable in four months, others in three months, after their dates. All the notes were indorsed in blank by the respective payees. They have at all times since their delivery to the complainant remained in his possession. The delivery of the notes was accompanied by a memorandum, written in Norwegian, signed by Hannevig and the complainant, a translation of the pertinent portions of which is as follows:

'The undersigned, Christoffer Hannevig, hereby acknowledges this date that he has delivered to Mr. H. Karluf Hanssen, as representative of the nine contract holders at the Pusey & Jones Co. which have a certain amount owing to them for overpayments and differences on the installments. The shares, etc., given below as security correct payments for the obligations with interest which are now due. * * * I reserved the deposited values shall be delivered to me, and can be disposed of by me free of any incumbrances on condition, that I pay my obligations in Norwegian currency at an exchange taken at the respective installment dates with an interest of 6 per cent., and this shall not acknowledge that I am bound to pay anything else except $565,875, which I have already paid out in taking over the S.S. Fire Island in American dollars.'

At the time of the delivery of the notes to the complainant, Hannevig of matters wholly unconnected with the notes, in a sum exceeding the aggregate amount thereof. On September 18, 1917, Hannevig entered into an agreement with the United States Shipping Board Emergency Fleet Corporation that he would extend the terms of payment of the notes until the completion of the last of eight ships requisitioned by an order of the Shipping Board of August 3, 1917. Pursuant to that agreement with the Shipping Board, a memorandum was made on the back of each of the notes as follows:

'Extended according to letter dated September 18, 1917, to U.S. Shipping Board Emergency Fleet Corporation.'

The ships referred to in the letter or agreement were all completed before the 1st day of August, 1919. The claim against the defendant, evidenced by the notes, has not been reduced to judgment.

Under this state of facts the defendant makes four contentions: First, that by the agreement of September 18, 1917, the negotiability of the notes was destroyed; second, the notes having been delivered to the complainant after their maturity, they were received by him subject to all equities against Hannevig, and Hannevig being indebted to the defendant in a sum in excess of the amount of the notes, nothing is due thereon; third, that the notes having been delivered to the complainant as the representative of the Norwegian creditors of Hannevig, the complainant has not title to the notes and is not a creditor of the defendant corporation; and, lastly, that even if complainant is a creditor he is only a general creditor, and a suit of this character may be maintained in this court only by a judgment creditor.

As to the first contention, it is unnecessary to decide whether an agreement for an indefinite extension of time for payment embodied in a note or entered into between the parties thereto destroys its negotiability, for the agreement here under consideration touching that matter was one made, not with the maker of...