In re Connecticut Brass & Mfg. Corp.

• Decision Date: 03 April 1919
• Docket Number: 4666.
• Citation: 257 F. 445
• Parties: In re CONNECTICUT BRASS & MFG. CORPORATION.
• Court: U.S. District Court — District of Connecticut

257 F. 445

In re CONNECTICUT BRASS & MFG. CORPORATION.

No. 4666.

United States District Court, D. Connecticut.

April 3, 1919

Carmody Monagan & Larkin, of Waterbury, Conn., for receiver.

Bronson Lewis & Hart, of Waterbury, Conn., for petitioning creditors.

Allan K. Smith, of Hartford, Conn., for the United States.

Cummings & Lockwood, of Stamford, Conn., for noteholders' committee.

Rosenberg & Ball, of New York City, for certain creditors.

THOMAS District Judge.

In the suit of Equitable Trust Co. of New York v. Connecticut Brass & Manufacturing Corporation of Waterbury, Conn., now pending in this court, receivers were appointed for the defendant corporation on September 5, 1918. The suit in this court is ancillary to the suit in equity between the same parties pending in the federal court in Delaware, and by a decree in that court it appears that receivers were duly appointed and qualified. The bill, answer, and decree in the Delaware suit are part of the file in this suit.

In the suit pending here the bill alleges that practically all of the assets of the defendant corporation, worth at a fair valuation $1,700,000, are located in this district, and that nearly all of its business is carried on here. It is further alleged that the corporation has assets of about $1,700,000 and that its liabilities amount in all to $1,265,000 consisting of notes amounting to $565,000 and a general indebtedness of about $700,000, so that from the face of the bill it appears that the assets are $435,000 more than the liabilities and that the corporation is solvent. It is further alleged that certain of the defendant's creditors are pressing for immediate payment of their respective claims, and are likely to bring suit against the defendant, to attach its property and to cause its property to be sold in satisfaction of such judgments.

The defendant corporation filed its answer, admitted the allegations of the bill, and joined in the application for the appointment of the receivers, and pursuant thereto receivers in equity were appointed. The receivers were authorized to conduct the business, and have conducted it as a going concern in an endeavor to conserve the assets, preserve the estate, and eventually to turn it back to the stockholders, after satisfying its indebtedness.

On September 14, 1918, certain creditors filed an involuntary petition in bankruptcy against this respondent in which petition they represented as follows:

'That said the Connecticut Brass & Manufacturing Company is insolvent, and within four months next preceding the date of this petition said the Connecticut Brass & Manufacturing Company committed an act of bankruptcy, in that it did heretofore, to wit, on the 4th day of September, 1918, being insolvent, apply for a receiver of its property and because of insolvency a receiver was appointed by the United States District Court for the District of Connecticut, which said receiver, because of said insolvency, was put in charge of the property of the corporation in the state of Connecticut, in an action brought by the Equitable Trust Company of New York against said the Connecticut Brass & Manufacturing Corporation, in which action ancillary proceedings are now pending in said United States District Court for the District of Connecticut. The defendant admitted the averments contained in said bill and complaint in said action, and joined in said application for the appointment of said receiver, and on said 4th day of September one William H. Coverdale, of the city and state of New York, who had been appointed receiver of the property, income, and assets of said the Connecticut Brass & Manufacturing Corporation by the District Court of the United States for the District of Delaware, was appointed ancillary receiver by the District Court of the United States for the District of Connecticut.'

No proceedings were taken by the petitioning creditors after said petition was filed, but the alleged bankrupt on the 23d of September, 1918, filed its answer to said petition, in which it denied all the allegations contained in the petition. On March 11, 1919, counsel appeared before the court, and the hearing on the involuntary petition was assigned for April 1, 1919. On March 26, 1919, counsel representing noteholders' and creditors' protective committee and an individual creditor appeared, and on March 29, 1919, filed a motion to dismiss the involuntary petition in bankruptcy against the respondent, on the ground:

'That said petition on its face does not state any facts upon which an adjudication in bankruptcy could be granted herein. The ground upon which the involuntary petition is filed is the appointment of a receiver in a suit in equity in the above court. We refer to and make a part of this motion, the same as if here set forth, the bill of complaint in the said suit in which the Equitable Trust Company of New York is complainant and the Connecticut Brass & Manufacturing Company is defendant, said bill of complaint having been filed in this court on September 4, 1918, and being a part of the records of this court, and, as appears from the face of the said bill in equity in said suit just referred to, and by examination of said bill, it affirmatively appears that no act of bankruptcy has been committed, as we respectfully contend, by the alleged bankrupt.'

On October 3, 1918, the petitioning creditors moved for permission to amend the bankruptcy petition which motion was, on said day, granted, but counsel for the petitioning creditors failed to avail themselves of the opportunity thus afforded them to file said amendment, so that the present motion to dismiss is addressed to the original petition quoted supra.

The court might properly dismiss this petition on the ground of laches and failure to prosecute, but as substantial questions are here presented, which ought to be considered and decided, I have concluded not to pass on the question of laches further than to make the above suggestion.

This motion is made pursuant to the provisions of equity rule 29 (198 F. xxvi, 115 C.C.A. xxvi), which, so far as is here pertinent, provides:

'Every defense in point of law arising upon the face of the bill, whether for misjoinder, nonjoinder, or insufficiency of fact to constitute a valid cause of action in equity, which might heretofore have been made by demurrer or plea, shall be made by motion to dismiss, or in the answer.'

This rule is applicable here and is properly before the court, but objection is made by the petitioning creditors that under section 18b of the act (Act July 1, 1898, c. 541, 30 Stat 551 (Comp. St. Sec. 9602)), the creditors must appear and plead within five...