Burnrite Coal Briquette Co. v. Riggs

• Decision Date: 11 August 1923
• Docket Number: 2977.
• Citation: 291 F. 754
• Parties: BURNRITE COAL BRIQUETTE CO. v. RIGGS et al.
• Court: U.S. Court of Appeals — Third Circuit

291 F. 754

BURNRITE COAL BRIQUETTE CO. v. RIGGS et al.

No. 2977.

United States Court of Appeals, Third Circuit.

August 11, 1923

Rehearing Denied October 4, 1923.

G. W C. McCarter, of Newark, N.J., and J. J. Lynch, of Chattanooga, Tenn., for appellant.

Merritt Lane and Joseph L. Smith, both of Newark, N.J., for appellees.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

BUFFINGTON Circuit Judge.

The appointment of receivers for a corporation is a matter of grave concern, because it takes its property, and the management thereof, out of the hands of those in whom the law vested it. It follows, therefore, that when a court exercises this power, its warrant so to do must be shown. Such action over the protest and objection of the company, the District Court of New Jersey took in the appointment of receivers for the Burnrite Coal Briquette Company, a corporation of the state of Delaware, which company that court at the same time found was not insolvent.

Such being the case, the basic and controlling question here involved is: Did the District Court of the United States for the District of New Jersey have jurisdiction to appoint receivers for a solvent foreign corporation? In our opinion it had not, and the reason for so holding is that the law of New Jersey, as interpreted by its highest tribunal, has given no such power over foreign corporations to its own local courts, and the jurisdiction of the court below was in that particular determined by that of the state courts. Clark v. Smith, 38 U.S. (13 Pet.) 195, 10 L.Ed. 123, and citations in 3 Rose's Notes (Rev. Ed.)

Turning then, to the statute law of New Jersey and the interpretation thereof by its highest court, we find the act of that state authorizing its courts to appoint receivers for foreign corporations doing business in the state is the law of 1896 (P.L.p. 298) as amended in 1912 (P.L.p. 535), and which, so far as here pertinent, reads (section 65) as follows:

'Whenever any corporation shall become insolvent or shall suspend its ordinary business for want of funds to carry on the same, or if its business has been and is being conducted at a great loss and greatly prejudicial to the interest of its creditors or stockholders, any creditor or stockholder may by petition or bill of complaint setting forth the facts and circumstances, * * * apply to the Court of Chancery for a writ of injunction and the appointment of a receiver or receivers.'

And section 96 (P.L. 1896, p. 307), which provides:

'Foreign corporations doing business in this state shall be subject to the provisions of this act, so far as the same can be applied to foreign corporations.'

From a study of the New Jersey cases, a list of certain of which is printed in the margin, ^[1] we are of opinion that in the case of foreign corporations the sine qua non of jurisdiction over them in the state courts to warrant the appointment of receivers is insolvency; and where, as here, the corporation was solvent, the state courts of New Jersey are without jurisdiction to appoint receivers for foreign corporations, even though they might have jurisdiction to name receivers for domestic corporations on the other statutory recited grounds. In other words, these 'other statutory grounds' applicable to domestic corporations fall within the prohibition of the quoted statute as not being matters which 'can be applied to foreign corporations.'

Commenting on the original act, it was said in National Trust Co. v. Miller, 33 N.J.Eq. 155:

'By express provision, foreign corporations, doing business in this state, are made subject to all the provisions of our statute concerning corporations, so far as the same can be applied to foreign corporations. Rev. 196, Sec. 103. The legislative design was, unquestionably, to confer upon this court the same powers, in respect to insolvent corporations, created by foreign jurisdictions, having property in this state, that it exercised over insolvent domestic corporations, so far, at least, as the exercise of such powers was necessary to the recovery of any assets whether legal or equitable, which should go in discharge of debts.'

In Minchin v. Second National Bank, 36 N.J.Eq. 436, it is said:

'Obviously, there are provisions of the

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