In re Hudson River Elec. Power Co.

• Decision Date: 27 September 1909
• Citation: 173 F. 934
• Parties: In re HUDSON RIVER ELECTRIC POWER CO.
• Court: U.S. District Court — Northern District of New York

173 F. 934

In re HUDSON RIVER ELECTRIC POWER CO.

United States District Court, N.D. New York.

September 27, 1909

[Copyrighted Material Omitted]

See also, 167 F. 986.

These are five independent proceedings, in a sense, and still the same determination that is reached in one should obtain in all for reasons stated. The main question is: Are the corporations involved subject to the bankruptcy law? As the same questions, on similar facts, not identical, are involved in each case, they will be considered together.

RAY District Judge.

By purchase of stock and otherwise the corporations above named and the Hudson River Water Power Company, the Empire State Power Company, and the Ballston Spa Light & Power Company eight corporations in all, came under one ownership and management. They, and the companies as a whole, were organized and combined to generate electricity and manufacture gas, and transmit and sell same to customers and consumers, in the main to corporations, municipalities, and railroads. Each was a public service corporation. Each was incorporated under the transportation laws of the state of New York. While engaged in this business, and under the one management, and on the 26th day of October, 1908, a bill in equity was filed in the Circuit Court of the United States for the Northern District of New York, the district of the residence of such corporations, and where they were carrying on business, alleging their insolvency, unwise and prodigal management, etc., asking the appointment of a receiver and the winding up of the corporations. Each corporation is heavily bonded, the bonds being secured by mortgages on the properties, and each has a large unsecured indebtedness. This bill was presented to the court some days before its filing, and an order to show cause and containing an injunction clause was issued.

On the 31st day of October, 1908, George W. Dunn, Charles W. Andrews, and Milton Delano were appointed receivers of the properties of said companies and authorized to continue the business; the allegation and general concession being that all the companies should be conducted as one, and the business conducted as one business enterprise, as formerly. Since the institution of these proceedings in bankruptcy, permission has been granted to the parties interested to intervene in that suit and commence and prosecute foreclosures of the mortgages referred to, and such foreclosure suits. A careful inventory and appraisal of the various properties has been made by such receivers, and appraisers duly appointed, and from such appraisal it appears that the value of the properties involved are as follows:

Hudson River Water Power Company ..............	$3,049,642 40
Hudson River Electric Power Company ............	1,526,037 03
Hudson River Electric Company ....................	852,803 89
Hudson River Power Transmission Company ..........	681,199 21
Empire State Power Company .......................	357,654 73
Saratoga Gas, Electric Light & Power Company .....	443,701 98
Madison County Gas & Electric Company ............	150,634 69
Ballston Spa Light & Power Company ................	56,024 29
	-------------
Total ...................................	$7,117,698 22

This puts no value on the various franchises owned by the various companies. The inventoried value of the companies involved in these bankruptcy proceedings, exclusive of franchises not valued, is $3,654,376.80. There are litigations pending and conflicting claims as to the ownership of properties, or some of them, or some parts thereof, as between these companies, and their liability to creditors, etc. If placed in bankruptcy, it is quite certain that several trustees would be elected, and that almost interminable litigation would arise between them. It would in such event be difficult, if not impossible, to continue to operate the companies as one whole until a sale, and the effect upon a pending effort to reorganize, protect all, so far as practicable, and continue this vast and important business, cannot be foretold.

While these considerations are not to affect or deter this court in making adjudications, if the companies are subject to the bankruptcy law they are worthy of consideration in determining the real purpose of Congress in enacting that law and the character of the corporations that are subject to adjudication. If all corporations, including public service corporations and transportation corporations, had been included, the law would have been singularly and obviously incomplete and inefficient, without the addition of many provisions to take care of important situations, for instance one like the present. No petition in bankruptcy was filed against either corporation until after the commencement of the equity suit referred to. The petition in bankruptcy filed against the Empire State Power Company, after the adjudication was opened by this court, was dismissed on evidence taken and the consent of the petitioning creditors.

The bill of complaint was filed, as stated, October 26, 1908, and an order to show cause why receivers should not be appointed issued, and made returnable October 26, 1908. Such order, duly served October 24, 1908, also enjoined and restrained each of said companies, their agents, servants, employes, and officers, from commencing or prosecuting either in the state or United States courts any action or proceeding involving in any way the property or property rights of either of said companies, or incumbering or embarrassing the same. On the 27th day of October, 1908, the day after such order to show cause, etc., was returnable, and several days after its service on the officers of the companies, the board of directors of the Hudson River Electric Power Company had a meeting and adopted the following resolution:

'Resolved, that this company is unable to pay its debts, and for that reason is willing to be adjudicated a bankrupt on that ground.

'Further resolved, that the secretary be authorized to certify a copy of the above resolution for such use as may be required.'

A copy was furnished to aid a petition in bankruptcy filed by certain alleged creditors, who thereupon instituted this proceeding. It is based on that resolution and allegation of insolvency. It is evident that some one was endeavoring to thwart the purposes of the suit in equity and interfere therewith, and that the directors either intelligently consented and violated the spirit of the injunction or were induced to take such action ignorantly.

The Hudson River Electric Power Company was incorporated on or about December 28, 1903, under the transportation corporation law of the state of New York, the object of its formation being:

'To maintain, conduct, and manage, in the state of New York and elsewhere, the business of generating, manufacturing, producing, purchasing, selling, transmitting, and dealing in electricity; the use of electricity for light, heat, and power; the carrying on of the business of lighting by electricity, and using it for heat and power, in cities, towns, and villages within this state, and the streets, avenues, public parks, and places thereof, and public and private buildings therein, and for the purpose of such business to generate and supply electricity, and to make, sell, or lease all machines, * * * and to lay, erect, and construct suitable wires and other conductors, with the necessary poles, pipes, or other fixtures, in, on, over, and under the streets, * * * for conducting and distributing electricity,' etc.

The evidence gives quite in detail what this corporation actually did, and it may be summarized fairly as follows:

In 1904 and 1905 it constructed a steam electrical plant at Utica, N.Y., for the generation of electricity, and was generating electricity and supplying same to one or more electric railroads. It acquired the site for same, constructed a tower transmission line from Ballston Spa to Amsterdam, N.Y. transmission lines from Utica to Clark's Mills, N.Y., substation building and apparatus at Amsterdam, and electrical machinery and substation or Oriskany, Frankfort, and Little Falls, N.Y., and acquired the Freeman property at Glens Falls to cover and protect water power and lands for a storage reservoir in Scandaga Valley, N.Y. It has also acquired franchises in Johnstown, Little Falls, Ft. Plain, and Nelliston. This company also acquired and owns all the capital stock of the Hudson River Electric Company, 30,000 shares, 2,108 shares of the capital stock of the Saratoga Gas, Electric Light & Power Company, 7,000 shares of the capital stock of the Ballston Spa Light & Power Company, 2,900 shares of The empire State Power Company, 47,947 shares of the issue of 50,000 shares of the Hudson River Water Power Company, and the capital stock of the Madison County Gas & Electric Company, 1,820 shares, common stock. In April, 1905, after it had acquired these interests, or most of them, it took over the keeping of the books of all the companies, and its officers became the managing and controlling officers of all the companies.

Considered as a whole, as one corporation and business enterprise, the evidence shows conclusively and beyond all doubt that the principal business was generating electricity and transmitting it to consumers. The Hudson River Electric Power Company had a store in the city of Albany, with two employes where it kept electrical supplies issued to the other companies as required. This company, from the opening of this supply store in 1905, to November 1, 1908, delivered supplies to the other companies in carrying on the business to the value of $426,376.17, viz.: Hudson River Water Power Company...