In re Pusey & Jones Co.

• Decision Date: 20 November 1922
• Docket Number: 47.,46
• Citation: 286 F. 88
• Parties: In re PUSEY & JONES CO. (two cases). [1]
• Court: U.S. Court of Appeals — Second Circuit

286 F. 88

In re PUSEY & JONES CO. (two cases). ^[1]

Nos. 46, 47.

United States Court of Appeals, Second Circuit.

November 20, 1922

The question litigated was whether or not the principal place of business of the Pusey & Jones Company, under section 2(1) of the Bankruptcy Act (Comp. St. Sec. 9586), was in the Southern district of New York. An involuntary petition in bankruptcy was filed against this corporation on July 19, 1921, and the company filed an answer, admitting the allegations of the petition, and adjudication was had on July 19, 1921, and receivers were appointed. Notwithstanding this adjudication, a voluntary petition was filed by the company on July 23, 1921, and an adjudication was had on the same day.

On June 9, 1921, the United States District Court for the District of Delaware had appointed receivers for the same company, and these receivers took appropriate proceedings to resist the adjudication of the Southern district of New York on the ground that the court had no jurisdiction. The subject-matter of the controversy was referred to Walter C. Noyes as special master, and after an elaborate inquiry he filed his report holding that the principal place of business of the company for the period of six months preceding the two bankruptcy proceedings was in Wilmington, in the state of Delaware, and not in the Southern district of New York, and recommending that the adjudication in bankruptcy made in the Southern district be set aside and that the proceedings be dismissed. This report received careful consideration by the District Court, which agreed fully with the conclusions reached and the reasons stated therefor by the special master, except that the court sustained the exception to the special master's refusal to find the proposed finding of fact No 62. It is the order entered after this decision by the District Court that is now here on appeal.

The report of the special master covers so fully and accurately the essential features of the testimony, as well as the antecedent history of the Pusey & Jones Company, that it will be conducive to brevity in the long run and to clear understanding of the facts to set forth the report, together with the request to find No. 62.

Request No. 62, which should be read with the report, is as follows:

'(62) The duties of Mr. Coxe, as vice president and general manager, were confined to operating the plants. The finances of the corporation were entirely out of his hands, and he had nothing to do with them, nor had he anything to do with employing sales managers or treasurers of the company, or discharging them.'

Omitting formal preliminaries, the report of the special master is as follows:

'In order to enable the parties to present fully the questions of law to the court from their different points of view, I have made findings of fact and have numbered them separately. As I view the case, some of these findings have very remote bearing upon the real questions in issue. But they have been requested, and it has seemed desirable to include them.

'Following the numbered findings, I shall discuss the issues, and will undoubtedly make statements of fact in addition to those contained in the findings. Such statements are to be regarded as my findings of fact to the same extent as if they were included among the numbered findings. The following facts are found:

'(1) The Pusey & Jones Company (the original corporation) was organized in 1879 under a special act of the state of Delaware for the purpose, generally, of building steam and sail vessels and of manufacturing engines, boilers, and machinery. From the time of its incorporation up to 1917, when it consolidated with other corporations as hereinafter stated, it carried on a business of a twofold character at Wilmington, Del., operating on the one hand a shipyard and on the other a plant for the manufacture of sugar-making and paper-making machinery. It had no other plant. The corporation took out a license to do business in New York in 1896, but nothing appears as to the extent of the business carried on here, nor as to how long it continued. In 1917, the secretary of the corporation drafted an instrument canceling the New York license and sent it to Wilmington for execution, stating that, as the corporation was not doing business in New York, it ought to take such step in order to avoid possible taxation. The revocation, however, was not filed.

'(2) The charter of the Pusey & Jones Company was amended in 1915 and the amended certificate of incorporation provided that 'the location of its principal office in the state of Delaware' should be in the city of Wilmington. Other clauses of the certificate provided for the publication of notices concerning the redemption of preferred stock in Wilmington newspapers and for

deposits in connection with such matter in a Wilmington Trust Company. The certificate also provided that the corporation might 'have one or more offices in addition to the principal office in Delaware.' In 1917, the charter of said corporation was again amended, and the amended certificate contained provisions as to publication and deposit similar to those stated. This amount increased the authorized capital stock of the corporation from $1,200,000 to $20,000,000.

'(3) About March, 1916, Christoffer Hannevig purchased practically all the outstanding stock of the Pusey & Jones Company. Early in 1917, said Hannevig also acquired the stock of the New Jersey Shipbuilding Company, which had its only plant at Gloucester, N.J. This was a Delaware corporation, but its business activities were all in New Jersey. Early in 1917, said Hannevig likewise acquired the stock of the Pennsylvania Shipbuilding Company, which also had its only plant at Gloucester, N.J. This, too, was a Delaware corporation, with its business activities in New Jersey.

'(4) In December, 1917, a consolidation agreement was entered into between the three corporations above named, the Pusey & Jones Company, the Pennsylvania Shipbuilding Company, and the New Jersey Shipbuilding Company, merging the latter two corporations into the Pusey & Jones Company as a consolidated corporation. The agreement provided: 'The location of the principal office of the said corporation in the state of Delaware is in the city of Wilmington.' The consolidation agreement also contained similar provisions to those above stated covering the redemption of stock, and also provided that the corporation might 'have one or more offices in addition to the principal office in Delaware.'

'(5) The consolidated corporation adopted the by-laws of the old Pusey & Jones Company, which provided that the principal office of the corporation in Delaware should be in the city of Wilmington; that the seal should have inscribed on it the words 'The Pusey & Jones Company, Incorporated, Jan. 28, 1879, Wilmington, Delaware'; that the stockholders' meeting should be held in Wilmington, and that regular meetings of the directors should be held at the office of the company at Wilmington, or at such other place as might be fixed by the directors. The seal in use by the corporation is in the form stated.

'(6) The consolidated corporation had three plants, the old Pusey & Jones plant at Wilmington, consisting of a shipyard and manufacturing establishment, the shipyard of the Pennsylvania Company at Gloucester, N.J., and that of the New Jersey Company at the same place. The latter shipyards were new, being in process of construction when said Hannevig acquired the corporations owning the same. These shipyards had, however, contracts for the construction of large vessels, acquired after said Hannevig obtained control. The Pusey & Jones Company, before the consolidation, had also made contracts for the building of 14 ships. These contracts had been made with or through Hannevig, who charged commission thereon.

'(9) The capital invested in the Gloucester yards was more than twice the amount invested in the plants in Wilmington, and the ships constructed in the Gloucester yards from August, 1917, to August, 1920, cost over $38,000,000, as compared with a cost of less than $13,000,000 for the ships constructed in the Wilmington yard. The employees in the Gloucester yards numbered approximately 8,000, while the employees in the Wilmington yard were less than half that number. The Gloucester yards were much larger than the Wilmington yard.

'(10) In August, 1918, the directors of the Pusey & Jones Company voted to separate the operations of the Wilmington plant and the Gloucester plants. They also passed a resolution providing that contracts for the building of vessels should be signed by the president, and that other contracts involving liability above a stated amount should have the signatures of two officers, none of whom at such time resided or had their office in Delaware, although Mr. Coxe, who resided and had his office in Wilmington, later became vice president and general manager. It had previously been voted that checks on bank accounts should have the signatures of two officers, none of whom at that time had a residence or office in Delaware. These requirements were made at the instance of the Emergency Fleet Corporation.

'(11) On March 11, 1918, the Pusey & Jones Company opened a deposit account with the National Bank of North America in Philadelphia, and made the above arrangement as to the signatures upon checks drawn upon such account.

'(12) Said Hannevig, who had acquired all the stock of the original Pusey & Jones Company, and likewise controlled the consolidated corporation, was elected president of the former in May, 1916, and continued to hold such office until the consolidation. He was president of the consolidated corporation from the time of its organization until...