In re Tech Consolidated, Inc.

• Decision Date: 22 June 1971
• Docket Number: No. BK-70-14.,BK-70-14.
• Citation: 329 F. Supp. 27
• Parties: In the Matter of TECH CONSOLIDATED, INC.
• Court: U.S. District Court — District of New Hampshire

329 F. Supp. 27

In the Matter of TECH CONSOLIDATED, INC.

No. BK-70-14.

United States District Court, D. New Hampshire.

June 22, 1971.

William Young, Bingham, Dana & Gould, Boston, Mass., and John Barto, Orr & Reno, Concord, N. H., for Randy Manufacturing Co., Inc.

Frederick G. Fisher, Jr., Hale & Dorr, Boston, Mass., and Norman Stahl, Devine, Millimet, McDonough, Stahl & Branch, Manchester, N. H., for the Trustee of Tech Consolidated, Inc., Gerald Cabitt.

BOWNES, District Judge.

This is a petition for review of a decision of the Referee in Bankruptcy. The trustee of Tech Consolidated, Inc., (hereinafter Tech) filed a "turnover" petition against Randy Manufacturing Co., Inc., (hereinafter Randy) for recovery of the value of Tech's property, and a petition to require Randy to assume the duties of the bankrupt. Randy brought motions to quash service of process and to dismiss for lack of jurisdiction and/or venue. The Referee denied these motions and Randy brought this petition for review.

On January 19, 1970, an involuntary petition for bankruptcy was filed in this district against Tech, a New Hampshire corporation doing business in Derry, New Hampshire. It was adjudicated bankrupt on February 5, 1970, and Gerald Cabitt, Esq., was appointed trustee at a meeting of creditors March 13, 1970. Tech was a wholly owned subsidiary of Randolph Manufacturing Co., Inc., (hereinafter Randolph) a Delaware corporation with its principal place of business in Randolph, Massachusetts. On October 14, 1969, the First National Bank of Boston, the holder of a security interest in some of Tech's receivables and inventory, obtained a security interest in all the general intangibles, machinery, equipment, inventory, and receivables of Tech to secure all past and future indebtedness of Randolph. On January 28, 1970, ten days after the involuntary bankruptcy petition was filed, the First National Bank of Boston sold all of the assets of Randolph (including all of the assets of Tech) to Randy, a Massachusetts corporation which had been formed December 29, 1969.

On April 2, 1970, the trustee of Tech filed a petition against Randy for "turnover" of the value of the property converted and a petition to have it designated as the proper party to prepare bankruptcy schedules and to perform the duties of the bankrupt. On April 4, 1970, service of process was made in Derry, New Hampshire, on Peter Mackin, allegedly the person in charge of Randy's operations in New Hampshire. When service was made, Randy was in the process of disassembling the equipment of the plant in Derry, New Hampshire (formerly occupied by Tech), and was transporting the equipment to a plant in Saco, Maine. This plant was subsequently occupied by Randy Tech, Inc., which was incorporated on April 15, 1970, as a wholly-owned subsidiary of Randy.

The Referee found that the activities of Randy in Derry, New Hampshire, between January 28, 1970, and May 15, 1970, the date when the Derry plant was completely vacated, were sufficient to meet the jurisdictional requirements of "doing business" in New Hampshire. He also found that service and venue were proper.

RULINGS

The district courts, sitting as bankruptcy courts, are given broad jurisdiction over the estates of bankrupts by Section 2(a) of the Bankruptcy Act, 11 U.S.C. § 11(a) (1964). The issue here is whether there is proper jurisdiction, service and venue as to Randy in this district. It should be made clear at the outset that the question of whether this action falls within the summary jurisdiction of the bankruptcy court or whether a plenary action is required is not at issue here.

Tech was incorporated and did business in New Hampshire, and petitioner is a Massachusetts corporation. "The amenability of a foreign corporation to suit in a federal court in a diversity action, under Federal Rule 4(d) (7), is determined in accordance with the law of the forum state." Seymour v. Parke, Davis & Co., 294 F.Supp. 1257, 1259 (D.N.H.1969), aff'd. 423 F.2d 584 (1st Cir. 1970).

Jurisdiction will lie in a particular forum state if the nonresident defendant has sufficient minimum contacts with the state to insure that maintenance of the suit will not offend traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). This test has been realistically and reasonably applied in New Hampshire on a case by case basis with the objective of exercising jurisdiction to the full constitutional limits. Sanders Associates, Inc. v. Galion Iron Works & Mfg. Co., 304 F.2d 915 (1st Cir. 1962); Roy v. North American Newspaper Alliance, Inc., 106 N.H. 92, 205 A.2d 844 (1964); Benson v. Brattleboro Retreat, 103 N.H. 28, 164 A.2d 560 (1960); LaBonte v. American Mercury Magazine, Inc., 98 N.H. 163, 96 A. 2d 200 (1953).

The Referee's findings of fact are binding unless they are clearly erroneous. Washington v. Houston Lumber Co., 310 F.2d 881 (10th Cir. 1962). Although Randy had no salesman in the state, made no sales in the state, and was not licensed to do business in the state, these facts do not automatically foreclose jurisdiction in this district. The Referee found that Randy did not simply dismantle the equipment in the plant but from January 28 to May of 1970, continued to manufacture the same products formerly manufactured by Tech. This finding is amply supported by the evidence. Mr. Shulman, president and treasurer of Randy, stated that molds for footwear which had been in process were completed in and shipped from Derry. Deposition of Charles Shulman, pp. 44-45. Gerald Cabitt, the trustee for Tech, testified that on March 15 or 16, 1970, he observed six to ten people engaged in manufacturing molds, two women packing rubber boots and employees dismantling machinery. Transcript of Hearing, pp. 21-22. The evidence also discloses that Randy paid its employees over $32,000 in wages in the first quarter (January-March) of 1970. The majority of these employees were New Hampshire residents. In addition, the company paid numerous bills incurred in New Hampshire, including a $1,330 bill for electricity used from March 25, 1970 to April 24, 1970. These facts fully support the Referee's findings that Randy employed labor and incurred manufacturing expenses "far in excess of what would be required for removal purposes."¹

The opinion of the First Circuit Court of Appeals in Seymour v. Parke, Davis & Co., supra, indicates that two criteria are important in determining whether jurisdiction will lie. One is the plaintiff's interest in the forum, and the second is fairness to the defendant. 423 F.2d 584, 586-87. The plaintiff-bankrupt here is a New Hampshire corporation and has a legitimate interest in having New Hampshire as a forum. There are a number of reasons why it is not unfair to the defendant, i. e., it will not offend traditional notions of fair play and substantial justice, to subject it to this court's jurisdiction. Since Randy was incorporated only one month prior to the acquisition of Tech, the activities of Randy in New Hampshire were, undoubtedly, a major portion of its business, and New Hampshire might fairly be characterized as one of its major places of doing business during the four month period. In any event, its manufacturing activities and dismantling activites were substantial, continuous, and systematic over a four month period. Finally, under N.H.Rev.Stat. Ann. Ch. 300:14, if a "foreign corporation commits a tort in whole or in part in New Hampshire against a resident of New Hampshire, such acts shall be deemed to be doing business in New Hampshire. * * *" The acquisition and removal of Tech's property by Randy is allegedly tortious in nature because it defrauds creditors and, if there was fraud, it was committed, at least in part, in New Hampshire.

For all these reasons, I hold that Randy was doing business in New Hampshire on a level sufficient to satisfy New Hampshire's jurisdictional test. Moreover, it does not impose an unfair burden on Randy to subject it to this court's jurisdiction; in fact, it would be manifestly unfair to the bankrupt and its creditors to hold otherwise.

I now turn to the question of service of process. Peter Mackin was served in hand in Derry, New Hampshire. N.H.Rev.Stat.Ann. Chs. 300:11, 300:12, and 300:13 govern service of process on foreign corporations. Chs. 300:11 and 300:12 provide for service of process on an appointed agent or the Secretary of State. Ch. 300:13 states that service of process on foreign corporations may be made "in any other manner provided by law." Under N.H.Rev. Stat.Ann. Ch. 510:14, service may be made upon "any agent, overseer or other person having the care of any of the property or charge of any business of the corporation" if no director, trustee, clerk, treasurer, cashier or manager is in the state. None of these named persons were in the state, and the deposition of Mr. Shulman makes is clear that Mr. Mackin was in charge of Randy's operations in New Hampshire. Deposition of Charles Shulman, pp. 19-20. Service of process was, therefore, proper. See Taylor v. Klenzade Products, Inc., 97 N. H. 517, 92 A.2d 910 (1952).

The final issue is that of venue. Since Tech was a New Hampshire corporation with its principal place of business here, the bankruptcy proceedings are in the proper district. The word proceedings is given emphasis to distinguish it from controversies. Under the Bankruptcy Act, once it is determined that the bankrupt was a resident of this district, the Referee automatically has venue over the bankruptcy proceedings. See 11 U.S.C. § 11(a) (6) and 1 Collier on Bankruptcy ¶ 2.14. Proceedings may be generally equated with administrative matters, and the petition to have Randy perform the duties of the bankrupt and prepare bankruptcy schedules is directed at administrative matters. See 11 U.S. C. § 25. When a controversy is involved, however, the Referee may or may not...