In re Kingston Realty Co.

• Decision Date: 17 February 1908
• Docket Number: 209.
• Parties: In re KINGSTON REALTY CO.
• Court: U.S. Court of Appeals — Second Circuit

160 F. 445

In re KINGSTON REALTY CO.

No. 209.

United States Court of Appeals, Second Circuit.

February 17, 1908

W. H Hamilton (Norman C. Conklin, of counsel), for appellant.

Beattys & Lamb (G. D. Beattys, of counsel), for appellee.

Before LACOMBE, WARD, and NOYES, Circuit Judges.

NOYES Circuit Judge.

The only question presented upon this appeal is whether this corporation-- the Kingston Realty Company-- prior to the institution of these proceedings was engaged principally in manufacturing, trading, and mercantile pursuits, and so is within the following provision of the bankrupt law:

' * * * any corporation engaged principally in manufacturing trading, printing, publishing, mining, or mercantile pursuits, owing debts to the amount of one thousand dollars or over may be adjudicated an involuntary bankrupt. ' Section 4b, Act July 1, 1898, c. 541, 30 Stat. 547 (U.S. Comp. St. 1901, p. 3423), as amended by Act Feb. 5, 1903, c. 487, 32 Stat. 797 (U.S. Comp. St. Supp. 1907, p. 1025).

The certificate of incorporation of this company stated:

'The purposes for which it is formed are the purchasing, holding, improving by grading, paving, sewering, and construction of houses and other buildings, and the selling and leasing of real estate.'

It is true that 'the susceptibility to bankruptcy of a corporation does not depend upon its charter. ' Matter of Quimby (D.C.) 121 F. 139, quoted with approval by this court in Re Const. & Dry Dock Co., 130 F. 447, 64 C.C.A. 648. Whether it can be adjudged a bankrupt depends upon what it actually does, not what it is empowered to do.

The principal assets of the Kingston Realty Company are real estate, and it carried on a business amounting to $10,000,000 in three years, the general nature of which was as follows: It acquired many parcels of real estate, and improved them by the erection of buildings and otherwise. When improved it sold them and purchased other parcels which it likewise improved. It held some of its property and leased it. Sometimes it sold the vacant lots which it acquired. It purchased large amounts of materials for its buildings. It operated window frame factories and stone crushing and concrete making plants, most of the products of which it used in its operations. Some of its products, however, were sold to outside parties, and it sometimes bought and sold building materials. It operated a city hotel which it owned, and had at one time operated a summer hotel. But it did not appear that these last dealings were of magnitude as compared with the real estate operations. The principal business of the corporation, therefore, was that stated in its certificate of incorporation, although it engaged in some incidental, and possibly ultra vires, transactions. Its president, who was called in the bankruptcy proceedings testified:

'Q. Wasn't its principal business set forth in its articles of incorporation? A. Its principal business is set forth, and no doubt its principal business was that; but then it did lots of other business besides.'

The corporation was a real estate company. Apparently it was not engaged in manufacturing or in trading or mercantile pursuits. One of these two propositions must then be established before the bankrupt law can possibly apply: (1) Building houses is manufacturing. (2) Dealing in real estate is trading or a mercantile pursuit. And even if one of these propositions be established, the basis for apportioning the business and determining what particular branch the corporation was principally engaged in is not obvious. But we need not consider that question unless and until it is reached.

Is the building of houses manufacturing? It strains the term to so use it. Goods, wares, and merchandise are manufactured; houses are constructed.

Houses are real estate. They are not articles of commerce, and the term 'manufacturing' as used in the statute does not apply to their construction. 'The distinction would seem to run along the line of those articles which are more or less fixed in place, and not ordinarily the subjects of bargain and sale as articles of commerce, as contradistinguished from those which are movable and ordinarily regarded as subjects of sale and manual transfer--articles of trade in the common course of mercantile business. ' Columbia Iron Works v National Lead Co. (Court of Appeals, Sixth Circuit) 127 F. 99, 102, 62 C.C.A. 99, 102, 64 L.R.A. 645. If this corporation had been engaged in constructing houses upon other persons' land instead of upon its own, there might possibly be more ground for claiming that the statute applies. But it is held that construction companies are not engaged in manufacturing. Thus,...