Davis v. Hayden

• Decision Date: 09 November 1916
• Docket Number: 1422.
• Citation: 238 F. 734
• Parties: DAVIS et al. v. HAYDEN et al.
• Court: U.S. Court of Appeals — Fourth Circuit

238 F. 734

DAVIS et al. v. HAYDEN et al.

No. 1422.

United States Court of Appeals, Fourth Circuit.

November 9, 1916

R. S Douglass and George M. Hoffheimer, both of Clarksburg, W.Va (William H. Taylor and Melvin G. Sperry, both of Clarksburg W. Va., and Charles McCamic and James Morgan Clarke, both of Wheeling W. Va., on the brief), for appellants.

John J Coniff, of Wheeling, W. Va., for appellees.

Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.

KNAPP Circuit Judge.

The underlying question in this case is the question of jurisdiction. Briefly stated, the material facts are these:

During a period of years prior to January 19, 1915, when this suit was commenced, the appellee, Josiah V. Thompson, a citizen of Pennsylvania, had become the owner of extensive tracts of coal lands and other properties in that state and the state of West Virginia. His holdings in the former state amounted to over 78,000 acres, and in the latter state to some 26,000 acres. On the date named this bill was filed, the nature and purpose of which will be presently explained. In the meantime, and on various dates between December 3, 1914, and January 19, 1915, certain creditors of Thompson, citizens of West Virginia, had brought suits against him in the circuit court of Harrison county and levied attachments upon all or a large portion of his coal lands in that state, and these suits were pending and undetermined when the bill of complaint herein was filed.

The plaintiff in the bill is the appellee Hayden, and Thompson was the sole defendant. Hayden was the holder of two past-due notes of Thompson, each for $10,000, but his claims had not been reduced to judgment, and he had no lien or other security; he was a simple contract creditor. After setting out the notes, and averring that the amounts thereof were admittedly due, without offsets or deductions of any sort, the bill alleges, among other things not needful to recite, that the total indebtedness of Thompson was approximately $22,000,000, of which about $7,000,000 was unsecured; that the balance of $15,000,000 was secured by mortgage or pledge of substantially all his assets, 'which assets are of the fair value of $70,000,000, leaving nothing but equities out of which your orator and other unsecured creditors can be paid, ' and that such creditors could not collect their claims by execution; that the equities belonging to Thompson were worth approximately $48,000,000, and that if his assets could be conserved and sacrifice prevented they could be sold at even very low prices for a sum largely in excess of the indebtedness to both secured and unsecured creditors; that Thompson was unable to pay the interest already past due upon a part of his obligations, or to provide for the interest soon to become due on other obligations; that suits had been brought against him by certain creditors, and judgments entered on which executions were threatened; that other creditors were threatening to sell the collaterals held by them as security for their claims; and that in consequence there was great danger that early and forced sales under mortgages and pledges would exhaust the equities of Thompson and leave little or nothing for the payment of plaintiff and other unsecured creditors. Other allegations related to the situation of the properties, the fact that certain tracts were owned by Thompson in common with other parties, the depressed condition of the market for coal lands, and the like. The relief prayed for was the appointment of a receiver and an injunction, in substance restraining creditors, whether secured or unsecured, from taking any proceedings for the collection of their debts.

On the day this bill was filed, at Wheeling, in the Northern district of West Virginia, Thompson was conveniently in that city and at once accepted service of the subpoena. On the same day he filed his answer, admitting the allegations of the bill, averring that his assets were 'fairly and conservatively worth more than three times the amount of my indebtedness,' and consenting to the appointment of a receiver, and thereupon a receiver was immediately appointed according to the prayer of the bill. Thereafter, on April 15, 1915, the plaintiff filed in open court an 'amended and supplemental bill,' which reiterated the allegations of the original bill, recited the previous order appointing a receiver and enjoining creditors, alleged that the receiver had qualified and taken possession of all the assets and property of Thompson in West Virginia, and set out a long list of creditors in that state, with the amounts due to them and the securities, if any, held by them respectively, and the proceedings, if any, severally taken by them to enforce their claims. All these creditors were named as defendants, but it appears that no subpoena to answer was ever issued. On the same day a temporary restraining order was entered, to the like effect in substance as the original injunction, which order by its terms was to remain in force 'only ten days from this date, within which time plaintiff shall give notice to the parties of a motion for preliminary injunction as required by the seventy-third equity rule.'

The motion accordingly made was heard on the 24th of April, and with it the motions of certain defendants, all or most of whom had levied attachments, to dissolve the injunction, vacate the order appointing a receiver, and dismiss the original and amended bills for want of jurisdiction and other reasons. The order made that day, after reciting that the court, 'being not now advised what order to enter in the premises, thereof takes time to consider,' gave the parties 15 days to file briefs, and continued the temporary restraining order in force 'until this motion for a preliminary injunction can be determined. ' The situation thus brought about remained practically unchanged, so far as the record discloses, until the 29th of October, when a memorandum opinion was filed and an order entered which, in effect, as we hold, denied the motions to dismiss and granted a preliminary injunction. It was provided, however, that the injunction be so far modified as to allow creditors to prosecute their claims to judgment, but not to enforce the judgments by execution sales or otherwise. From that order appeal was taken to this court.

A motion is made here to dismiss the appeal on the ground that it was prematurely brought; the contention being that the order of October 29th was not an interlocutory order granting a preliminary injunction, but merely a modification and continuance of the temporary restraining order of April 15th, and therefore not appealable. We are unable to sustain this contention. In terms, it is true, the 'restraining order' was 'continued' until further order of the court; but the substance and intent of what was done must be regarded rather than the form of words employed. As was said in Western Union Tel. Co. v. United States & M.T. Co., 221 F. 545, 137 C.C.A. 113:

'Conceding that a restraining order granted without a hearing is not ordinarily appealable, yet a restraining order which is granted, or sustained, or denied, after a hearing of the parties, and which in effect and in everything but name is a temporary injunction, falls within the evident meaning of the statute, and is reviewable by appeal, and the orders in question were of that character.'

So in this case. The first injunction was binding, under the Clayton Act (Act Oct. 15, 1914, c. 323, 38 Stat. 730), upon no one but Thompson, because he was the only defendant in the original bill. When the amended bill was filed, making other creditors defendants, an ex parte restraining order was granted for 10 days from its date. Within that time there was a full hearing upon notice of plaintiff's motion for a preliminary injunction and defendants' motions to vacate and dismiss. Desiring further time to consider, the court continued...