Conklin v. United States Shipbuilding Co.

• Decision Date: 22 July 1903
• Docket Number: 569.
• Citation: 123 F. 913
• Parties: CONKLIN et al. v. UNITED STATES SHIPBUILDING CO.
• Court: U.S. District Court — District of Maine

123 F. 913

CONKLIN et al. v. UNITED STATES SHIPBUILDING CO.

No. 569.

United States Circuit Court, D. Maine.

July 22, 1903

Guggenheimer Untermeyer & Marshall and Chas. F. Libby, for petitioners.

Sullivan & Cromwell, W. J. Curtis, and Symonds, Snow, Cook &amp Hutchinson, for Mercantile Trust Company of New York and Reorganization Committee.

Orville D. Baker, J. M. Trott, Hornblower, Byrne, Miller & Potter and W. W. Miller, for Bath Ironworks and Hyde Windlass Company.

Charles W. Larrabee, for Marine National Bank and Lincoln National Bank.

This was an application on the part of the complainants to ratify approve, and confirm within the District of Maine the appointment by the Circuit Court for the District of New Jersey of James Smith, Jr., of New Jersey, as receiver of all the assets of the United States Shipbuilding Company. The application was made in this court to Judge Putnam on the 13th day of July, 1903; but Judge Putnam stating that it was his settled practice to make no appointments of receivers, either original or ancillary, without public notice, an order to show cause was made, returnable this day, of which notice was given by publication in daily papers at New York City and Bath, Me., with service of the same on the Bath Iron Works and the Hyde Windlass Company, constituent corporations within the district, as explained in the opinion of the court, and further like service on the attorney of the United States for the district of Maine. It appeared that the United States Shipbuilding Company is a corporation organized under the laws of the state of New Jersey; that it had absorbed various shipbuilding plants in New Jersey, Delaware, Maine, California, and elsewhere; that among the shipbuilding plants thus absorbed were those of the Bath Ironworks and the Hyde Windlass Company at Bath, in this district; that the business of the Bath Ironworks is the construction of seagoing vessels, and of the Hyde Windlass Company of certain fittings for such vessels; that the United States Shipbuilding Company had acquired the whole or the principal portion of the shares of the capital stock of these two corporations; that these two corporations had conveyed to the United States Shipbuilding Company their several plants; that, simultaneously with the conveyances, leases were executed by the United States Shipbuilding Company to each of the constituent companies of their respective plants, terminable in August, 1903, and also terminable on five days' notice by either party; that the rental reserved in each lease was the profits made by the lessee; that each local corporation had continued its business in its own name, as though there had been no change of title to the plant; that each had floating assets and floating liabilities; that the Bath Ironworks has under construction in the shipyards forming parts of its former plant several vessels, among which is a United States battleship, to be named the Georgia; that some of these vessels, including the Georgia, were contracted for before the conveyances and leases spoken of; that the contract with the United States for the construction of the Georgia contained the usual provision that, on certain conditions, the United States might take possession of the plant of the Bath Ironworks, and complete the vessel; that a bond, with sureties, in a very large amount, had been given by the Bath Ironworks to the United States, conditioned for the fulfillment of its contract; that the construction contracts of the Bath Ironworks necessarily extend over a series of years; that the Hyde Windlass Company has under way a large amount of work, but all can be completed without great delay; and that both corporations claim to be solvent, capable of performing all their contracts and meeting all their obligations, unless disturbed by the claim of this court.

It also appeared that the Circuit Court for the District of New Jersey (which is the domicile of the United States Shipbuilding Company), Judge Kirkpatrick presiding, had taken jurisdiction on a bill in equity between the parties to this proceeding under the act of the state of New Jersey of 1896 entitled 'An act concerning corporations' (P.L. 1896, p. 277, c. 185); that that act vests in the chancery courts of the state of New Jersey power to wind up insolvent corporations and distribute their assets; that it also contains a provision by virtue of which, in the event, after such proceedings are commenced, it appears that the corporation can discharge its liabilities, the proceedings may be discontinued, and the corporation restored to the control of its officers and stockholders; that, after a hearing, the Circuit Court in New Jersey entered a decree appointing James Smith, Jr., receiver, which decree is made by the complainants in this case the basis of this proceeding; that that decree gives certain enumerated powers to the receiver, among which is that of carrying on the business at the different plants of the United States Shipbuilding Company; that the decree also, in a general way, vests in the receiver all the powers contemplated by the act named, without in any way stating in detail the powers thus intended to be vested; that the decree, except in this general way, does not provide for the distribution of the assets of the corporation and for a winding up of its affairs; that, therefore, in many respects, the decree fails to have the aspects of a final decree, but gives color to a suggestion that it was intended only for temporary purposes; that the decree does not provide in terms that the receiver may terminate the leases referred to by giving the five days' notice, but that the receiver had undertaken so to terminate them; that, assuming he had the power so to do under the decree, the receiver had taken to himself, as receiver, a conveyance of all the assets of the United States Shipbuilding Company within the District of Maine, as well as elsewhere, including the plants of the Bath Ironworks and of the Hyde Windlass Company; that the shares of the capital stock of those corporations belonging to the United States Shipbuilding Company had been transferred to him by the indorsements of the certificates, but had not been transferred on the stockbooks of the respective corporations, or new certificates issued to him therefor; that, while the decree gives the receiver general authority to conduct the business of the subordinate corporations, it does not contain such specific powers as would clearly justify the receiver in assuming such contracts as that for the construction of the Georgia, or entering into new contracts for the building of seagoing vessels; and that the complainants maintain that this decree is final, and, in connection with the conveyances to the receiver, vested in him a complete legal title to all the property within the District of Maine which, at the time of the decree, belonged to the United States Shipbuilding Company.

It also appeared that all the plants belonging to the United States Shipbuilding Company were mortgaged to the Mercantile Trust Company of New York, as trustee, for the benefit of holders of bonds described in the mortgage.

On the return day of the notice, the court heard informally all parties claiming an interest under the proceeding, reserving the determination to what extent, if at all, the court could or would allow any or all of them to intervene formally.

PUTNAM Circuit Judge (orally).

I think the interests of all the parties demand that I should give my views on this case now. The position is an extremely difficult one, arising from the fact that the two subsidiary corporations in Maine sold out their plants to the Shipbuilding Company, and yet continued to make contracts in their own names. It is also complicated by the more serious fact that, although the decree of the Circuit Court of the District of New Jersey, the place of domicile, in a certain way authorizes the receiver to continue the business of the United States Shipbuilding Company, yet it is apparent that it is not within the just power of any court to authorize a receiver to make the long-time contracts necessary to carry on properly, and maintain to a proper standard of success, the construction of marine vessels, especially of one class which these subsidiary corporations build in this state and other states, namely, naval vessels of the United States. If the case were freed from those peculiar features, there would be no difficulty in my merely confirming, so far as this district is concerned, the decree entered in the Circuit Court for the District of New Jersey, including the conduct of the business by the receiver until the corporation was wound up as the statute of New Jersey contemplates it should be wound up when insolvent. As it is, I must struggle with the case the best I can.

The rule of so-called comity has little influence with me. The best late writer on international law-- Dicey-- says very truly; 'The term 'comity,' as already pointed out, is open to the charge of implying that the judge, when he applied foreign law to a particular case, does so as a matter of caprice or favor. ' It is rather a scapegoat, an opportunity of escape for the court. I know of few propositions that now come before the courts which are not governed by law, and in this case I must be governed by the law as practiced, and by the precedents, and not by any mere matter of comity. The law as recognized in the Circuit Courts of the United States is that, when the federal court of jurisdiction at the domicile of the corporation appoints a receiver, or makes a decree winding up a corporation and disposing of its assets, a decree of foreclosure, or any other decree looking to a disposition of its property, thereupon, assuming...