Jacobs v. Mexican Sugar Co.
| Decision Date | 31 May 1904 |
| Citation | 130 F. 589 |
| Parties | JACOBS et al v. MEXICAN SUGAR CO. |
| Court | U.S. District Court — District of New Jersey |
James E. Howell and Nathan Bijur, for complainants.
Lindley M. Garrison, for defendant.
The defendant, the Mexican Sugar Company, is a corporation organized under the laws of New Jersey with a capital stock of $600,000, all of which has been issued; and the complainants Arthur Jacobs and Solomon R. Jacobs are stockholders, being joint owners of 495 shares of the par value of $49,500, and several owners of 2 and 3 shares respectively. They are the further owners of voting trust certificates representing 1,500 shares issued to Henry J Braker and Solomon R. Jacobs as voting trustees, such certificates standing in the name of Arthur Jacobs. Solomon R. Jacobs is also a creditor of the company to the extent of over $10,000. The two complainants, with Henry J. Braker James B. Craven, and Arthur E. Dowler are the directors Henry J. Braker being president and manager, Arthur E. Dowler secretary, and Solomon R. Jacobs treasurer. The business of the company is the raising and manufacture of sugar molasses, and their by-products; its capital being chiefly invested in a lease from the Mexican Sugar Refining Company of a sugar plantation in the state of Vera Cruz, Mexico, having a sugar refinery in course of construction thereon, with the usual stock, implements, and appliances. The bill charges that the company is insolvent, and does not intend to and cannot carry on its business for want of funds; that, unless the court intervenes for the protection of its stockholders and creditors, its assets will be totally lost and dissipated; and that on April 25, 1904-- two days before the filing of the bill-- at a meeting of the directors, and by the votes of Braker, Craven, and Dowler against the votes of the two complainants, all the available assets of the company were turned over to one James W. Cunningham, a representative of Braker, to secure an indebtedness of $45,537,69; and an indebtedness of $4,956.06 confessed for insurance to the Mexican Sugar Refining Company, from whom the lease of the plantation in Mexico was obtained, which it is claimed was not in fact due. There are other matters set forth in the bill, but this will suffice to indicate its general trend. The prayers are: (1) That the defendant be declared to be insolvent, and be restrained by injunction from exercising its franchise or collecting, transferring, or disposing of any of its property; (2) that a receiver be appointed on behalf of creditors and stockholders, with all the ordinary powers; (3) that the rights of the complainant Solomon R. Jacobs and all other creditors by ascertained, and the assets of the defendant company be administered, to the end that the rights, liens, and equities of such creditors be established and enforced against the same.
The insolvency of the company is admitted, and the other charges not denied; but the jurisdiction of the court in the premises is contested, and that is the question to be disposed of. The bill is based on section 65 of the general corporation act of 1896 of the state of New Jersey (P. L. p. 298), which is as follows:
'Whenever any corporation shall become insolvent or shall suspend its ordinary business for want of funds to carry on the same, any creditor or stockholder may by petition or bill of complaint setting forth the facts and circumstances of the case apply to the Court of Chancery for a writ of injunction and the appointment of a receiver or receivers or trustees and the court being satisfied by affidavits or otherwise of the sufficiency of said application and of the truth of the allegations contained in the petition or bill, and upon such notice if any as the court by order may direct may proceed in a summary way to hear the affidavits proofs and allegations which may be offered on behalf of the parties, and if upon such inquiry it shall appear to the court that the corporation has become insolvent and is not about to resume its business in a short time thereafter with safety to the public and advantage to the stockholders, it may issue an injunction to restrain the corporation and its officers and agents from exercising any of its privileges or franchises and from collecting or receiving any debts or paying out selling assigning or transferring any of its estate moneys funds lands tenements or effects, except to a receiver appointed by the court until the court shall otherwise order.'
A case is undoubtedly stated in the bill which brings it within the provisions of the statute, if the court has authority to assume jurisdiction under it. The general power of the federal courts to take cognizance of and enforce a right created by state law which is essentially equitable in its nature is too well established to call for extended discussion or citation of authorities. Land Title & Trust Co. v. Asphalt Co. (C.C.A.) 127 F. 1. Conceding that such is the case, however, it is contended that a proceeding under the law in question does not involve a money dispute such as is essential to the jurisdiction of this court under the acts of Congress. It is, on the contrary, as decided by Vice Chancellor Stevenson in Gallagher v. Asphalt Co. (N.J.Ch.) 55 A. 259, in the nature of an equitable quo warranto, to determine the right of the corporation to continue its business. But, whatever its character, I cannot accept the view that it does not present a dispute measurable in money, within the meaning of the federal law. The complainant in such a bill, whether as stockholder or creditor, comes into court to protect his pecuniary interest, which is imperiled by the insolvency of the corporation and its inability to further carry out with success its corporate purposes. He seeks the intervention of the court in its affairs, in the manner provided by the statute, to save himself as far as possible from financial loss. No merely benevolent purpose to shield the general public from imposition by reason of its insolvent condition brings him there; nor does he move in behalf of the state, of which the corporation is a creature, as would the attorney general or other representative executive officer of the state government. So far as the defendant is concerned, its continued existence is, of course, involved; but the proceeding is prosecuted by the complainant because of the direct personal interest which he has to subserve. If successful, there will, in the final outcome, when the corporate affairs are wound up, be a money decree establishing his right to a share in what is realized if the assets go far enough, or in favor of others who are necessarily brought into court by the proceeding if they do not. This clearly presents a money controversy, of which, if it exceeds the limit established by Congress, and is between citizens of different states, the Circuit Court has jurisdiction. By some of the federal judges, the value of the assets of the corporation which the court is called upon to administer is regarded as determining the limit (Hill v. Glasgow R. R. (C.C.) 41 F. 610; Towle v. American Building & Loan Society (C.C.) 60 F. 131; Taylor v. Decatur Mineral Land Co. (C.C.) 112 F. 449; Jones v....
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Kessler v. William Necker, Inc.
...court under authority of section 65 of the New Jersey Corporation Act. Judge Archbald, on the contrary in the case of Jacobs et al. v. Mexican Sugar Co., supra, held Jacobs, as a simple contract creditor whose claim had not been reduced to judgment, could not maintain a bill in the federal ......
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... ... 554, 33 L.Ed ... 909; Land Title & Trust Co. v. Asphalt Co., 127 F ... 1, 62 C.C.A. 23; Jacobs and others v. Mexican Sugar Co ... (C.C.) 130 F. 589); but this does not seem to affect the ... ...
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