Orinoco Iron Co. v. Metzel

• Decision Date: 11 February 1916
• Docket Number: 2837.
• Citation: 230 F. 40
• Parties: ORINOCO IRON CO. v. METZEL.
• Court: U.S. Court of Appeals — Sixth Circuit

230 F. 40

ORINOCO IRON CO. v. METZEL.

No. 2837.

United States Court of Appeals, Sixth Circuit.

February 11, 1916

William R. Harr and Edward S. Duvall, Jr., both of Washington, D.C and Milner, Miller & Searl, of Portsmouth, Ohio, for petitioner and appellant.

W. S Little, of Cincinnati, Ohio (T. B. Paxton, Jr., of Cincinnati, Ohio, of counsel), for respondent and appellee.

Before KNAPPEN and DENISON, Circuit Judges, and COCHRAN, District judge.

KNAPPEN Circuit Judge.

This review involves the validity of an order made by the court below, sitting in bankruptcy, upon the petition of the trustee in bankruptcy of the Orinoco Corporation, enjoining the Orinoco Iron Company (hereafter called the Iron Company) from prosecuting a suit instituted by it in the Supreme Court of the District of Columbia, to enforce its alleged rights in the so-called Orinoco indemnity fund in the Treasury of the United States.

In the year 1883 the government of the republic of Venezuela gave to one Fitzgerald a 99-year lease of a large tract of land for mining and other purposes. This concession was afterwards assigned by Fitzgerald to the Manoa Company, Limited, by the latter to the Orinoco Company, by that company to the Orinoco Company, Limited, and by the last-named company to the Orinoco Corporation. In 1897 the Orinoco Company, Limited made a contract with the Iron Company for mining on the concession. After the latter had operated to some extent the government of Venezuela declared a forfeiture of the contract, and caused the concession to be annulled, the Orinoco Company, Limited, to be ousted therefrom, and caused or permitted certain property used in operations upon the concession to be confiscated. Through the government of the United States the claims of the Orinoco Corporation and its three predecessors in interest (viz., the Manoa Company, Limited, the Orinoco Company, and the Orinoco Company, Limited), were presented to the government of Venezuela, with the result that that government, on September 9, 1909, made an agreement of settlement with the United States whereby Venezuela was to pay to the latter $385,000 in eight annual payments of $48,125 each, for the benefit of the Orinoco Corporation and its three predecessors, in satisfaction of all claims of those four corporations, including the alleged seizure and destruction of a certain steamer by the military forces of Venezuela.

The first payment under this settlement was made by Venezuela into the Treasury of the United States in September, 1909, and on January 13th following the Department of State gave notice to all persons interested of the fact of the payment, that the Department would take up as soon as possible the question of the distribution of the award to those prima facie entitled thereto, and that prima facie the four corporations named were entitled to be heard in deciding upon such disposition. The second payment under the settlement was made by Venezuela in September, 1910, and likewise paid into the Treasury of the United States. On December 20, 1910, the Orinoco Corporation was adjudicated bankrupt by the District Court below; and the Manoa Company, Limited, and the Orinoco Company having assigned to the Orinoco Corporation their claims to the indemnity fund, its distribution was by agreement between the receiver of the Orinoco Company, Limited, and the trustee in bankruptcy of the Orinoco Corporation (with the approval of the District Court below, in bankruptcy, in the case of the Orinoco Corporation, and of the Minnesota court having charge of the insolvency proceedings of the Orinoco Company, Limited), and other interested parties, so arranged as that the Orinoco Company, Limited, was to receive $75,000 and the remainder of the indemnity fund (after paying $8,000 to certain attorneys and deducting upwards of $6,000 on account of expenses incurred by the government of the United States in the settlement of the claims), was to be paid to the trustee in bankruptcy of the Orinoco Corporation. Notice of this disposition and distribution was given by the Department of State to all claimants June 20, 1911; and on July 27th following the United States Treasurer's warrant for $70,263.97 (the amount so payable to the trustee in bankruptcy on account of the installments thus far paid) was paid by the Treasurer, and was by the trustee distributed in the administration of the estate.

Meanwhile, on June 30, 1911, one Safford, claiming to be a stockholder and creditor of the Manoa Company, Limited, filed his bill in the Supreme Court of the District of Columbia, claiming an equitable lien upon the indemnity fund and asking a receivership over the installments already paid into the Treasury; and the trustee in bankruptcy of the Orinoco Corporation, having already received the Treasurer's warrant mentioned, was appointed receiver in the Safford case and enjoined from disposing of any of the funds, except by paying the same to himself as receiver; and the Secretary of the Treasury and the Treasurer of the United States were enjoined from delivering outside of the District of Columbia any warrant on the fund. Fitzgerald, who was made defendant by cross-bill, also set up an equitable lien to the fund, claiming that certain of the properties had been reconveyed to him by the Manoa Company, Limited, and excepted from subsequent conveyances. On December 14th following (1911), the Orinoco Iron Company sent to the trustee in bankruptcy of the Orinoco Corporation, at his office in Cincinnati, its claim against that corporation for $1,173,500, as the value of its lease from the Orinoco Company, Limited, plus alleged expenditures of the Iron Company in developing and exploiting the property, including money spent in defense of the title in the Venezuela litigation, alleging that the Orinoco Corporation had acquired all the assets and assumed all the liabilities of the limited company. Motion to expunge the claim was made by certain creditors, for the reason, among others, that the claim was not filed within a year. The motion and the claim are still pending.

On November 6, 1914, the District Court, in bankruptcy, authorized a settlement of the Safford and Fitzgerald litigation in the Supreme Court of the District of Columbia, upon the payment to those parties of the aggregate sum of $35,000. On November 13, 1914, the Iron Company filed an original bill in the Supreme Court of the District of Columbia against the Secretary of the Treasury, the Treasurer of the United States, the Orinoco Corporation, and others, asking that a trust ex maleficio in the fund be declared in its favor as against all adverse claimants; and on the next day an order was made restraining Safford, Fitzgerald, and the Orinoco Corporation and its predecessors in interest, including the representatives of the Orinoco corporation and the Orinoco Company, Limited (as well as other defendants), from interfering with the prosecution of the Iron Company's suit. On November 17th the injunction orders obtained by Safford and Fitzgerald against the Orinoco Corporation in the Safford suit were dissolved by the court; the settlement, however, seems not to have been yet carried out.

On November 17, 1914, the trustee in bankruptcy of the Orinoco Corporation obtained an order from the District Court below, in bankruptcy, restraining the prosecution of the Iron Company's suit in the District of Columbia. Judge Hollister, upon careful consideration, overruled the Iron Company's motion to vacate this restraining order, and entered decree enjoining the Iron Company, during the pendency of the bankruptcy proceedings, from prosecuting suit in the District of Columbia or any suit elsewhere against the trustee of the Orinoco Corporation, and from interfering with the action of the trustee in bankruptcy in receiving, and bringing into the bankruptcy court, the installments of the indemnity fund which he would otherwise receive through the United States Treasury, to await the bankruptcy court's adjudication of the rights of the respective parties. The Iron Company was also ordered to dismiss its suit in the District of Columbia as against the Secretary of the Treasury and the Treasurer of the United States and the Orinoco Corporation and its trustee. This is the decree sought to be reviewed.

The trustee in bankruptcy contends that the District Court for the Southern District of Ohio, sitting in bankruptcy, has exclusive jurisdiction to try and determine the claim asserted by the Iron Company under its bill in the Supreme Court of the District of Columbia. The correctness of this contention is here the ultimately decisive question. As the order adjudicating the Orinoco Corporation bankrupt has not been appealed from (and, indeed, was consented to), we must assume, in the absence of assignment of error or argument challenging the fact, that the District Court had jurisdiction to so adjudicate and to administer the bankrupt's estate generally.

Passing for the present the question of extraterritorial jurisdiction, it is clear that as to property within the custody of the bankruptcy court its exclusive jurisdiction over the general administration of the bankrupt's estate (Acme Co. v. Beekman Co., 222 U.S. 300, 32 Sup.Ct 96, 56 L.Ed. 208; In re Yaryan Naval Stores Co. (C.C.A.6th Cir.) 214 F. 563, 565, 131 C.C.A. 15) carried with it exclusive authority to determine, not only the claims of creditors, but also adverse claims, whether by way of ownership or paramount liens (Whitney v. Wenman, 198 U.S. 539, 25 Sup.Ct. 778, 49 L.Ed. 1157; Wabash Ry. Co. v. Adelbert College, 208 U.S. 38, 54, 28 Sup.Ct. 182, 52 L.Ed. 379; Murphy v. John Hofman Co., 211 U.S. 562, 568, 29 Sup.Ct. 154, 53 L.Ed. 327; Babbitt v. Dutcher, 216 U.S. 102, 30...