In re New York & W. Water Co.

• Decision Date: 08 January 1900
• Citation: 98 F. 711
• Parties: In re NEW YORK & W. WATER CO.
• Court: U.S. District Court — Southern District of New York

98 F. 711

In re NEW YORK & W. WATER CO.

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

January 8, 1900

Edward Harding, W. Kintzing Post, and William C. Choate, for petitioning creditors.

William C. Prime and Allan McCulloh, for alleged bankrupt.

BROWN District Judge.

This matter arises upon a petition of various creditors of the New York & Westchester Water Company to have that corporation adjudged a bankrupt, alleging its insolvency and several acts of bankruptcy. The answer to the petition as was ruled upon the hearing of the issue, a jury trial being waived, admitted in effect the insolvency of the corporation, but denied the acts of bankruptcy alleged, and also denied the jurisdiction of the court, on the ground that this corporation is not subject to the provisions of the bankrupt act (section 4b) because not 'engaged principally in manufacturing trading, printing, publishing or mercantile pursuits,' as alleged in the petition. The evidence as respects the acts of bankruptcy is somewhat complicated; but from the conclusions I have arrived at on the other branches of the case, it will not be necessary to consider that subject.

The company was incorporated under the Laws of 1873 of the state of New York, for the supply of pure and wholesome water to the village of Westchester and others, under contract with the local authorities. By an amendment of its charter in 1895, its business and powers were extended so as to include the right 'to accumulate, conduct, store, furnish, buy sell, use and deal in water for power, manufacturing and hydraulic purposes. ' Its water supply was derived mainly from the Hutchinson river in Westchester county and from wells and other sources of supply owned or leased by the company. It had some 80 miles of mains laid in the streets of the several villages supplies with water, and received, both from the public authorities as well as from private citizens, large rentals for the supply of water distributed for private and public uses. On December 31, 1897, a contract was executed, dated December 2d, with the city of New York, whereby the latter authorized this company to tap the city's Bronx river supply pipe in Yonkers, and to draw therefrom not to exceed 500,000 gallons per day, to be paid for by the corporation at the rate of 10 cents per 1,000 gallons, by assigning to the city authorities 'hydrant rentals' to become due from the city for water supplied to it by the company for fire protection in the Twenty-Fourth ward; with the privilege to the company of severing such connection with the supply pipe at pleasure and of discontinuing the taking of water from the city supply, and the privilege of subsequently again making connection and resuming the use of the water, as the company might desire.

For some period preceding the trial, how long does not appear, the company had been drawing from the city's supply at about the average rate allowed of 500,000 gallons per day. This was resorted to, as I infer the evidence, to insure a uniform distribution to the company's customers, partly in consequence of inefficiency in one of the company's pumps and machinery, and the liability to occasional breakdowns, and partly to insure a full supply.

Although the company, by the amendment to its charter, above referred to, was empowered 'to buy and sell water for power, manufacturing and hydraulic purposes,' this power does not appear ever to have been used, since it has never supplied, according to the testimony, any water for those purposes, nor done any commercial or mercantile business; 'but has confined itself entirely to obtaining and furnishing water for the customers, cities and municipal boroughs mentioned,' that is, to the residents of the villages, and to the municipal corporations referred to, for fire purposes and the supply of fire hydrants. At Pelhamville the company had 16 driven wells; and besides the amount drawn from the city's supply pipe, the ordinary consumption from the company's own sources of supply was about 750,000 gallons daily.

I am of opinion that this water company is not within the provisions of the bankrupt act, because not 'engaged principally in either trading or mercantile pursuits,' in the sense in which I think those words are used. The question depends entirely upon the proper construction to be given to those words, since there are plainly no other words in the present act that could include an incorporated water company like this.

The act of 1898 is much more limited in its application to corporations than the act of 1867. By the latter act it was declared (section 5122, Rev. St.) to 'apply to all moneyed, business or commercial corporations and joint stock companies. ' The present act is restricted to corporations 'engaged principally in manufacturing, trading, printing, publishing, or mercantile pursuits.'

The intention of congress greatly to restrict the application of the present act appears manifest, not only from comparison of the phraseology of the two acts, but also from the report of the congressional conference committee upon this point, showing that at least railroad and transportation corporations and banks were intended to be omitted and left to be dealt with under the state laws. 31 Cong. Rec. p. 6247, June 28, 1898. In the recent case of In re Cameron Town Mut. Fire Lightning & Windstorm Ins. Co. (D.C.) 96 F. 756, it was accordingly held, that the present act does not apply to a mutual insurance company, and the petition in that case was dismissed. On the point here considered, Phillips, J., observes:

'Can it be said that a company 'organized for the sole purpose of mutually insuring the property of the members, and for the purpose of paying any loss incurred by any member thereof by assessment,' is principally engaged in a mercantile pursuit? When the legislature changed the statute from 'moneyed, business or commercial corporations' to the language 'principally engaged in mercantile pursuits,' it is to be presumed it was done for a purpose. The word 'mercantile,' in its ordinary acceptation, pertains to the business of merchants, and has 'to do with trade, or the buying and selling of commodities.' A merchant is one who traffics, or who buys and sells goods or commodities. * * * The term 'mercantile pursuit' necessarily carries with it the idea of traffic, the buying of something from another or the selling of something to another, and is allied to trade. This concern has nothing in its business of the character of mercantile pursuit.' 96 F. 757, 758.

The case of a water company like this, obtaining by purchase about two-fifths of the supply which it furnishes to its customers, is not so clearly excluded as mutual insurance company. But in each case as it arises the limitations imposed by the act must be carefully observed. No such corporation can be subjected to the operation of the bankrupt law, nor can the court acquire jurisdiction over it, unless it is found to be 'engaged principally in trading or mercantile pursuits. ' These words must be interpreted in the sense in which they are commonly used and received, and not in any strained or unnatural sense for the purpose of including or of excluding particular corporations.

In Bouv. Law Dict. a trader is defined as 'one who makes it his business to buy merchandise or goods and chattels and to sell the same for the purpose of making a profit. ' Black, Law Dict., says: 'On whose business is to buy and sell merchandise or any class of goods deriving a profit from his dealings; ' and the weight of authority seems to be that the proper description of the business of a...