In re LF Popell Co.

• Citation: 221 F. Supp. 534
• Parties: In the Matter of L. F. POPELL CO., Inc., Debtor.
• Decision Date: 30 August 1963
• Court: U.S. District Court — Southern District of New York

221 F. Supp. 534

In the Matter of L. F. POPELL CO., Inc., Debtor.

United States District Court S. D. New York.

August 30, 1963.

O'Brien, Driscoll & Raftery, New York City, Edmund C. Grainger, Jr., and Harold Fischman, New York City, of counsel, for debtor.

Levy, Levy & Ruback and Martin Caine, New York City, Chauncey H. Levy, New York City, of counsel, for Unofficial Creditors' Committee.

Krause, Hirsch, Gross & Heilpern, New York City, Sydney Krause and Myron Kove, New York City, of counsel, for Delta Airlines, Inc. and J. Thomas Callahan Advertising, Inc.

FEINBERG, District Judge.

This is a motion to transfer a Chapter XI proceeding from this Court to a Federal District Court in Florida. L. F. Popell Co., Inc. ("the Debtor") filed a voluntary Chapter XI petition in this Court on July 26, 1963. On August 1, two creditors ("the objecting creditors") moved to transfer the proceeding under Section 32, subs. b and c of the Bankruptcy Act ("the Act"), 11 U.S.C. § 55, subs. b, c. Subsequently, at the request of the Debtor, the matter was adjourned to August 20, 1963, when it was argued.¹

The essential facts do not appear to be in dispute. The Debtor is a Florida corporation which manufactures and sells coatings for buildings called Perma-Glaze and Perma-Cement. Its operation is a sizeable one, with over $3,300,000 in sales for the fiscal year ending November 30, 1962. It has offices in Miami, as well as its only manufacturing plant, its machinery, raw materials, and finished inventory. The rent for its Miami plant and offices is $59,100 per year.

In Miami, the Debtor presently employs approximately seven people in its production process and nineteen people in administrative and clerical work; about four months ago the total number employed in Miami was approximately sixty. According to the latest information in the record, the Debtor's principal bank account, along with six others, was located in Dade County, Florida; the Debtor has no bank account in New York City. The Debtor also has had a telephone line in Miami covering forty-nine states on a twenty-four hour basis. The cost of this special telephone service, allowing the Debtor to call any location in these states at no additional expense, was approximately $2,000 a month, and business of the Debtor was conducted through this system.

Although the Debtor apparently has not qualified to do business in New York, it has leased a furnished apartment in a residential New York City building. This standard form apartment lease, providing for a three year term, is dated January 7, 1963, and is made out to the L. F. Popell Co., Inc., of 2501 Northwest 15th Street, Miami 47, Florida. The apartment is used for conferences with and entertainment of potential customers and distributors by the Debtor's Atlantic seaboard sales representative. At the apartment, which is listed under the corporate name in the New York telephone directory, the Debtor keeps accounting, sales, and other records, although its original corporate records are kept in Miami. The premises are also used by the Debtor's president who is in New York approximately three days out of every week.

With regard to the Debtor's creditors who are not stockholders, the following appear to be the facts. There are apparently slightly more creditors over $1,000 in the Florida area than there are in the New York area. By far, the greater number of small creditors are also in the Florida area. The claims of Florida creditors are apparently somewhat greater in total dollar amount than the claims of New York creditors. According to the papers, more creditors in total dollar amount prefer to have the Chapter XI proceeding continue in this District, although a substantial number of individual creditors do not.

In addition to the above, other factors are urged by the parties as being relevant. It is claimed that if the proceeding is transferred to Florida, a receiver will be almost automatically appointed, whereas the contrary is the case in this District. Also, the Debtor is presently negotiating to obtain new capital from a firm which prefers the proceedings to remain here.

Under Section 32, sub. b of the Act, 11 U.S.C. § 55, sub. b, the proceeding may be transferred to a court in which it could have been brought if venue in this District is improper. This Section provides as follows:

"(b) Where venue in any case filed under this Act is laid in the wrong court of bankruptcy, the judge may, in the interest of justice, upon timely and sufficient objection to venue being made, transfer the case to any other court of bankruptcy in which it could have been brought."

However, the Debtor first argues that venue here is proper under Section 2, sub. a(1) of the Act, 11 U.S.C. § 11, sub. a(1) and therefore Section 32, sub. b does not apply. Section 2, sub. a(1) vests jurisdiction in courts of bankruptcy to:

"Adjudge persons bankrupt who have had their principal place of business, resided or had their domicile within their respective territorial jurisdictions for the preceding six months, or for a longer portion of the preceding six months than in any other jurisdiction."

The Debtor urges that it resided in this District within the six months preceding the filing of its petition and therefore venue is proper.

It should be noted that this contention was not made in the original Chapter XI petition filed by the Debtor. The petition alleged that the Debtor had its principal office and principal place of business in this District within the preceding six months, a position not supported by the facts. The petition did not allege that the corporation "resided" in this District. However, whether an afterthought or not, the Debtor's residency argument should be decided on the merits.

The Debtor urges that a corporation, for purposes of bankruptcy venue, has a residence apart from its domicile and that Section 2, sub. a(1) should be construed accordingly. It seeks to draw support from 28 U.S.C. § 1391(c), a venue provision applicable to corporations generally. That section provides:

"A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes."

The Debtor argues that since it is doing some business in this District, venue is proper here even though this is a bankruptcy proceeding with a different venue statute.

However, in 1 Collier, Bankruptcy ¶ 2.19, at 200 (14th ed. 1962), it is pointed out that:

"A distinction between natural persons and corporations is avoided in § 2a(1) by use of the generic term `persons,' which by reference to its definition in § 1(23) of the Act, embraces corporations. It might seem, therefore, that even as to corporations, residence and domicile are separate and alternative bases for laying the proper venue. But, in fact, residence and domicile must be identical unless a corporation can be said to reside wherever it is doing some business. Such a test would render ineffective the `principal place of business' requirement. A more sensible interpretation in line with jurisdictional cases would treat the residence and domicile of a corporation as one; and the domicile as the state or states of the corporation's incorporation."

This view appears to me to be the correct one. To begin with, 28 U.S.C. § 1391(c) clearly does not apply to bankruptcy proceedings so that any argument based upon it must proceed on the basis of analogy only. In the Matter of Elk City Placer Mines, Inc., 171 F.Supp. 894 (D.Idaho 1959). Therefore, the Debtor's argument is, in effect, that under Section 2, sub. a(1) of the Act a corporation "resides" wherever it does business. However, this proves too much. Not only, as indicated above, does this make redundant the concept of principal place of business in Section 2, sub. a(1), but it similarly emasculates use in that section of the concept of domicile. Under Section 1391(c), residence is defined in terms of three concepts: the district in which a corporation is incorporated, licensed to do business, or is doing business. If all of these — and the Debtor does not point out why the analogy drawn from 1391(c) should be limited to the concept of doing business alone—are to be considered as embraced by the concept of residence in the bankruptcy venue provision (Section 2, sub. a(1)), then there is no need in that provision for any reference to domicile. Therefore, the analogy to Section 1391 (c) is inappropriate. Finally, Section 2, sub. a(1) clearly uses concepts which may or may not apply depending...