Hutchinson v. American Palace-Car Co.

• Decision Date: 01 October 1900
• Docket Number: 530.
• Citation: 104 F. 182
• Parties: HUTCHINSON et al. v. AMERICAN PALACE-CAR CO.
• Court: U.S. District Court — District of Maine

104 F. 182

HUTCHINSON et al. v. AMERICAN PALACE-CAR CO.

No. 530.

United States Circuit Court, D. Maine.

October 1, 1900

A. S Kneil, for complainants.

Clarence Hale, Geo. F. Gould, and Arthur F. Belcher, for defendant.

PUTNAM Circuit Judge.

This bill was filed by complainants, representing a minority interest in the stock of the respondent, and the matter now under consideration is an interlocutory application for the appointment of a receiver of the assets of the corporation pending litigation in this suit. So far as this opinion relates to matters of general practice in this district in regard to receiverships until formal adjudication with reference thereto, it has been deemed advisable that the profession should be advised concerning them, and the court is authorized to say that the learned district judge for this district expresses himself in harmony therewith.

There are some special objections of a jurisdictional character brought to the attention of the court which involve much doubt. If the points had been fully settled, and the propositions of law in reference thereto were clear, the court would feel compelled to dispose of them; and if, also they were of such a character as would involve a dismissal of the bill, the court would deny the petition for a receiver without investigating its merits. In this respect the principle is exactly the same as that stated in Ladd v Oxnard (C.C.) 75 F. 703, 729. The court, however, seems to be required to notice one objection raised by the respondent. This is the contention that, as the corporation has no assets in the district of Maine, the proper jurisdiction in which to apply for a receiver is New Jersey, where is to be found its property, if it has any. It is true that every state is entitled to take control, according to its own local rules, of property lying within it, and this independently of the question of domicile; so that, under exceptional circumstances, there is no doubt that a local tribunal may properly constitute a receivership of assets actually within its jurisdiction, independently of any question of domicile. Nevertheless, where the purpose is to wind up a corporation, or a joint-stock association, or a co-partnership, on account of alleged insolvency or fraudulent transactions, or where it is desired to obtain a general receivership, as this expression is commonly understood, initial proceedings should be at the place of domicile, and the other receivership should be ancillary thereto. This question was incidentally before the presiding judge in an unreported case in the district of Massachusetts, and the court refused to constitute a receivership of assets within the state of Massachusetts belonging to a corporation created by the laws of New Jersey, until application had been made to the United States circuit court for the district of New Jersey for the appointment of a general receiver.

On the filing of this petition for the appointment of a receiver the court ordered notice to the corporation, the only respondent named in the prayer for a subpoena, and also, on inquiry as to the probable residences of the principal stockholders and creditors of the corporation directed that notice of the pendency of the application be given by publication in newspapers of suitable circulation in their localities. An interlocutory receivership of a corporation ought not to be granted, except in very extreme emergencies, unless after public notice, so that creditors and shareholders generally may intervene, and be heard on the application, if they desire. Receiverships are too often sought in order to accomplish under color of judicial process what is prohibited by the common law and by the statutes against fraudulent conveyances; that is to say, for the purpose of delaying creditors. Moreover, the proceeding is so much of the nature of one in rem that notice of its pendency should, so far as practicable, be given to all concerned. This practice creates no difficulty, because it is now clearly settled that the jurisdiction of the court in which a bill is filed of such a character as to justify the appointment of an interlocutory receiver attaches to all the assets to which the bill relates from the time of its filing. Farmers' Loan & Trust Co. v. Lake Street El. R. Co., 177 U.S. 51, 20 Sup.Ct. 564, 44 L.Ed. 667. Moreover, in cases of emergency, it is feasible to appoint the marshal a temporary custodian, with directions not to interfere with the usual operations of the corporation; thus securing the actual possession by the hand of the court in addition to the theoretical possession which the filing of the bill gives it, and at the same time leaving the court in a position to rid itself of the property without the complications which arise from the appointing and discharging of a receiver, no matter how short the time the receivership continues. The spirit of the common law requires that judicial action should be taken in open court on issue between the parties, or after an opportunity for such issue; and a regard for its traditions will not only insure the rights of litigants, but will also protect from the unjust criticisms so often made, and, what is of more importance, will secure the courts themselves against hasty and ill-considered action.

This case brings to the court three essential conditions compliance with which is necessary to justify the appointment of a receiver as now asked for: First, that the case be fairly within...