Gordon v. Washington
Decision Date | 28 September 1934 |
Docket Number | 5280.,No. 5279,5279 |
Citation | 73 F.2d 577 |
Parties | GORDON, Secretary of Banking, et al. v. WASHINGTON et al. SAME v. O'BRIEN et al. |
Court | U.S. Court of Appeals — Third Circuit |
Wm. A. Schnader, Atty. Gen., Shippen Lewis, Sp. Deputy Atty. Gen., and Joseph K. Willing, Sp. Atty., of Philadelphia, Pa., for appellants.
David Bortin and Hirschwald, Goff & Rubin, all of Philadelphia, Pa., for appellees.
Before BUFFINGTON, DAVIS, and THOMPSON, Circuit Judges.
This is an appeal from a decree appointing receivers for two mortgage pools of the Chester County Trust Company located at West Chester, Pa. There are two cases here involving identically the same questions of law and practically the same facts. They will, therefore, be disposed of in a single opinion.
On February 14, 1933, the Secretary of Banking of the Commonwealth of Pennsylvania took "possession of the business and property" of the Chester County Trust Company, hereinafter called the Trust Company, in accordance with the provisions of the Act of Pennsylvania of June 15, 1923, P. L. 809, known as the Banking Act of 1923, as amended by Act May 5, 1927, P. L. 762 (7 PS § 1 et seq.) and the Act of May 15, 1933, P. L. 565, known as the Department of Banking Code (71 PS § 733 — 1 et seq.). On that day he filed a certificate of possession in his office at Harrisburg and on the following day he filed a certified copy of the certificate in the office of the prothonotary of Chester county in accordance with the requirement of the Act of June 15, 1923, which provides in section 22 (7 PS § 22) that: "When the secretary shall have duly taken possession of the business and property of a corporation or person as provided in section twenty-one of this act, he shall forthwith make, under his hand and official seal, a certificate setting forth that he has so taken possession, and shall file such certificate in his office, and cause a certified copy thereof to be filed in the office of the prothonotary, who shall index the same in the judgment index under the name of the corporation or person as defendant and the name of the secretary as plaintiff."
Among the assets of the Trust Company there were two mortgage pools, consisting of groups of mortgages held by the Trust Company as trustee, against which it had issued participation certificates.
The secretary held possession of these mortgage pools from February 14 to August 25, 1933, when Laura A. Washington, a citizen of the state of Connecticut, and holder of mortgage certificates, filed a bill in equity in one mortgage pool against the secretary and his deputy as agent in possession of the Trust Company, wherein she alleged that because of the little effort made by the secretary or his deputy to collect interest and to pay bonds and taxes, irreparable damage to her and other holders of certificates would result unless receivers were appointed, and prayed for the appointment of receivers. A similar bill was filed by Mary A. O'Brien, a citizen of New Jersey, in the other mortgage pool.
On October 29, 1933, two receivers were appointed for each mortgage pool. They were authorized to hold and preserve all the assets, to collect the principal and interest, and to make quarterly reports to the court.
The receivers on September 1, 1933, demanded possession from the deputy secretary of banking, but this was refused, and on the following day on petition the court issued a rule to show cause why the deputy receiver and his two subordinates in charge should not be adjudged in contempt for such refusal. These three persons in each pool appeared before the District Court, filed an answer in the contempt proceedings, and moved the court to dismiss the bill and vacate the appointment of receivers. The court refused the motions, but entered orders amending his decrees, and made the receivers "temporary" rather than permanent. Appeals were taken from the decrees, appointing receivers, making them temporary, and refusing the motions to dismiss and vacate.
The real question upon which the determination of this case depends is whether or not the filing of the certified copy of the certificate of possession in the prothonotary's office of Chester county conferred jurisdiction on the state court. If it did, this case was erroneously decided, for of two courts, state and federal, having concurrent and co-ordinate jurisdiction of the subject of an action, that court which first obtains jurisdiction has the right to proceed to its final determination without interference from the other. O'Neil v. Welch (C. C. A.) 245 F. 261; Harkin et al. v. Brundage, 276 U. S. 36, 48 S. Ct. 268, 72 L. Ed. 457. This principle of law applies not only to actions involving corporations generally, but to those involving quasi public corporations. This we held in the case of Commonwealth of Pennsylvania v. John G. Williams et al., 72 F.(2d) 509 (decided July 23, 1934), and it is unnecessary to repeat here what we said there.
The appellants say that "not only has the state officer (Secretary of Banking) long ago taken possession of the assets of the trust company, but the state law has put him in possession as `receiver' and has subjected him to the jurisdiction of a particular state court," and therefore the United States court could not appoint receivers of the fund already in his possession. They base this contention on section 701 of the Act of May 15, 1933, P. L. 565 (71 PS § 733 — 701) which provides that:
This section defines the status of the secretary as the statutory receiver of the institution and defines his rights, powers, and duties. It "subjects" him to the jurisdiction of a particular court, only in the sense that it points out the state court which shall have jurisdiction over him when it is invoked.
Judge Kirkpatrick, in commenting on this section of the statute in the case of General Baking Company v. William G. Gordon & John J. Sullivan (D. C.) 9 F. Supp. 210 (decided October 11, 1932), said:
Upon taking possession of the business and property of the corporation, the secretary shall forthwith make and file in his office at Harrisburg a certificate that he has taken possession and file a "certified copy thereof" in the office of the prothonotary. Counsel says that ...
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