Colonial Trust Co. v. Montello Brick Works

• Decision Date: 02 August 1909
• Docket Number: 32.
• Citation: 172 F. 310
• Parties: COLONIAL TRUST CO. v. MONTELLO BRICK WORKS.
• Court: U.S. Court of Appeals — Third Circuit

172 F. 310

COLONIAL TRUST CO. v. MONTELLO BRICK WORKS.

No. 32.

United States Court of Appeals, Third Circuit.

August 2, 1909

Richmond L. Jones, Charles Henry Jones, and John G. Johnson, for appellant.

Harry F. Kantner, for appellee.

Wellington M. Bertolet, J. Howard Reber, Arthur G. Dickson, and Duane Morris & Heckscher, on brief of objecting creditors.

Before GRAY and BUFFINGTON, Circuit Judges, and BRADFORD, District judge.

BUFFINGTON Circuit Judge.

In the court below the claim of the Colonial Trust Company, trustee for bondholders of the United States Brick Company, against the Montello Brick Works, a bankrupt, was denied. Thereupon the trust company appealed. The claim in question consisted of promissory notes given by the bankrupt company to the United States Brick Company for borrowed money, and assigned as additional security for its bonds, to the Colonial Trust Company, trustee. The United States Brick Company was a corporation of the state of Delaware, and never registered as directed by the Pennsylvania act of 22 April, 1874 (P.L 108), which provides:

'It shall not be lawful for any corporation to do any business in this commonwealth, until it shall have filed in the office of the secretary of the commonwealth, a statement under the seal of said corporation and signed by the president or secretary thereof, showing the title and object of said corporation, the location of its office or offices, and the name or names of its authorized agent or agents therein. * * * Any person or persons, agent, officer or employe of any such foreign corporation, who shall transact any business within this commonwealth for any such foreign corporation, without the provisions of this act being complied with, shall be guilty of a misdemeanor, and on conviction thereof shall be punished by imprisonment not exceeding thirty days, and by fine not exceeding one thousand dollars, or either, at the discretion of the court trying the same.'

If the Delaware Company in the advance of this money and the taking of these notes was doing business in the state of Pennsylvania, the claim was rightly refused. Delaware Co v. Passenger Ry. Co., 204 Pa. 25, 53 A. 533; Pittsburgh Construction Co. v. West Side Belt Ry. Co., 154 F. 929, 83 C.C.A. 501, 11 L.R.A. (N.S.) 1145. We turn then to the question whether it was so doing business.

Now, it may be conceded that, if the transaction here in question consisted simply of the loan of money made in Pennsylvania by a foreign corporation to a company in business in that state, we would under Construction Co. v. Winton, 208 Pa. 469, 57 A. 955, hold it was not doing business in that state. Moreover, if the alleged doing of business by a foreign corporation in Pennsylvania consisted simply in its purchase of stock in a corporation of that state, we would under Commonwealth v. Standard Oil Co., 101 Pa. 119, also hold this did not constitute doing business within the state. And it has been contended this was all that was done in this case. Regarded from mere surface view that may be the case, but when the transaction is judged by what was intended and done by all parties, including the Delaware Company, we think it clear the latter was doing business in the state of Pennsylvania.

This requires a due appreciation of the relation between the United States Brick Company and the Montello Brick Works. The Montello Brick Company, a Pennsylvania corporation chartered December 8, 1899, owned brick plants in that state. It leased its plants to the Montello Brick Works, the present bankrupt a Pennsylvania corporation chartered December 4, 1902. The board of directors of the two companies at that time and during the transactions here detailed consisted of the same persons. On November 18, 1904, the same persons who were interested in both the Montello companies, with a view to financing a number of brick plants in Pennsylvania, in addition to the Montello plants, joined in the organization of a holding and promoting company under the laws of Delaware, and of which the directors in the two Montello companies became directors also. This Delaware Company took over the patents of one Gery covering a process for making brick, subject to a license held by the Montello Brick Works, paying therefor its entire capital stock to Gery. This stock was distributed in part to the stockholders of the two Montello companies, a part used as a bonus to accompany a proposed bond issue of the United States Brick Company and a part retained as treasury stock. The object of the creation of the Delaware Company was to develop these patents, and this was to be done by its financing of the Montello Brick Works, which company was to operate and develop the same at its plants. The loans in question were accordingly made to that company under arrangements made prior to the organization of the Delaware Company and to effectuate which purpose it was chartered. In pursuance of these financing plans the Delaware Company on December 24,...