Primos Chemical Co. v. Fulton Steel Corporation

• Decision Date: 02 December 1918
• Citation: 254 F. 454
• Parties: PRIMOS CHEMICAL CO. v. FULTON STEEL CORPORATION.
• Court: U.S. District Court — Northern District of New York

254 F. 454

PRIMOS CHEMICAL CO. v. FULTON STEEL CORPORATION.

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

December 2, 1918

This is an application by the Primos Chemical Company, the above-named complainant, a creditor of defendant, for the appointment of the three receivers named by the United States District Court in the Southern District of New York of all the property of defendant as ancillary receivers of the property of the defendant in the Northern District of New York. The application is based on an ancillary bill filed in the Northern District, which sets out the pendency of the action and the action of the court in the Southern District and which allegations the plaintiff refuses, on request so to do, to eliminate from such bill filed in the Northern District.

Another creditor of the defendant has appeared herein by intervention, and has filed an answer denying all allegations of the ancillary bill filed in the Northern District which would give the District Court in the Southern District jurisdiction of the subject-matter of the suit, and denies jurisdiction in that court to entertain the suit and appoint receivers, and of this court to recognize that action or take any proceedings ancillary thereto, so far as property of the defendant in the Northern District of New York is concerned. The intervening creditor does not object to the court in the Northern District taking jurisdiction of an independent bill filed in that district by a proper party complainant asking for receivers, or to the appointment of receivers by this court in such an independent and primary action in the Northern District.

In the action commenced in the Southern District, as well as in the ancillary action brought in the Northern District, the defendant appears in person by its president, not by attorney, and files an answer as follows: 'The defendant above named herein admits each and every allegation contained in the said bill of complaint and submits its right in the premises to the protection of the court. Fulton Steel Corporation, by Harry C. Beaver, President. Attest: Wm. M Bailey, Vice President.'

The answer of the intervener also sets up facts showing that the principal place of business of the defendant corporation is and always has been at Fulton, in the Northern District of New York, where all of its real estate and all of its property of a fixed nature or character is situated, and that it had none and has none in the Southern District.

The intervening creditor in the Northern District also files opposing affidavits, showing, if the allegations be true that the Fulton Steel Corporation is a corporation of the state of New York, organized and doing business as a manufacturing corporation at the city of Fulton, Oswego county, N.Y., in the Northern District of New York, and that in its articles of incorporation its principal place of business is stated to be at Fulton aforesaid, and that in fact its principal place of business is and always has been at the city of Fulton, Northern District of New York, and that all its real property and all its property of a fixed nature or character and the greater part of its personal property was when the suit in the Southern District was instituted, and now is, in the Northern District of New York and that such corporation had and has no real estate or property of a fixed character or nature in the Southern District of New York.

Wm. S. Elder, of Auburn, N.Y., for complainant.

Costello, Burden, Cooney & Walters and Chas. V. Byrne, all of Syracuse, N.Y., for intervening creditor.

RAY, District Judge (after stating the facts as above).

The facts in this case are that a few years since the Fulton Steel Corporation was duly organized and incorporated under and pursuant to the laws of the state of New York as a manufacturing corporation for the purpose of manufacturing and selling certain steel products. Its articles of incorporation stated that its principal place of business was to be at Fulton, in Oswego county, N.Y., and at that city its principal place of business, active operations, and bookkeeping and offices have always been located and carried on. It became the owner of certain real estate at Fulton, on which was and is its principal and only plant, being its manufacturing plant and offices and storage rooms. This plant, with buildings and machinery thereon, was and is worth from $350,000 to $500,000. In New York City there were, it is said, rented three small rooms in one of the large office buildings in that city, furnished with desks and chairs, and at which offices stock in the corporation was sold. The corporation kept a bank account in one of the banks of the city of New York, in which was deposited about $4,000 when the bill in the Southern District was filed.

This was and is the only property of the defendant corporation in the Southern District of New York when the bill was filed there. That was the only business of the corporation being carried on there. It was incidental and collateral to the business of the corporation, which it was organized to carry on and which it was conducting, and constituted no part of its manufacturing business or operations. The bill filed in the Southern District alleged the involved financial condition and difficulties of the corporation; its large indebtedness, which it was unable to meet; that a suit had been brought against it, and that others were threatened; and various other facts showing a necessity for the appointment of a receiver, not of the assets and small rented offices in the city of New York, but of the corporation and all its assets and property, of every name, everywhere, and the taking thereof by such receiver for the purpose of protecting and conserving such assets and property. It was not an action in personam, or to recover a personal judgment against the defendant, and did not purport to be such, but was and is what is known as an action to conserve assets, and one looking to the sale of all the property. This was the object of the action and such was the subject-matter involved. That bill was silent as to the location or situs of the property of the defendant corporation, except it stated that the defendant had an office in the city of New York.

Later, when the question of jurisdiction was raised, an amendment to that bill was filed, alleging that the bank account mentioned was in the city of New York, and that defendant had a lease for a term of years of the three offices mentioned. Another creditor intervened in that suit specially to raise the question of jurisdiction, and did raise it, and moved to dismiss on the ground of want of jurisdiction in the District Court of the Southern District of New York of the subjectmatter of the suit. That motion has been denied on the grounds, as I read the memorandum of opinion, that an intervening creditor cannot raise the question, as defendant appeared and submitted to the jurisdiction, and that there was some property in the Southern District, to wit, the lease of the three rooms and the bank account, when the bill was filed, over which that court had and has jurisdiction, and hence that it has jurisdiction, not only of the defendant, but of the subject-matter of the suit. The learned judge who heard and decided the motion, and who wrote the memorandum referred to, seems to concede that the court in the Southern District had and has no jurisdiction over the property in the Northern District, but contends that by ancillary proceedings and the appointment of ancillary receivers in the Northern District the whole property and subject-matter should, can, and will be brought in and acted upon in the Southern District. If this be so, then actions of a local nature and character occupy the same position, as to jurisdiction, as do actions in personam, substantially.

Questions of jurisdiction in the United States courts are not free from perplexities. Article 3, Sec. 1, of the Constitution provides that--

'The judicial power of the United States shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish.'

Section 2 of the same article provides that--

'The judicial power shall extend to all cases, in law and equity * * * between citizens of different states,' etc.

These are limitations on the judicial power. Pursuant to the authority thus conferred, Congress has established in each of the states of the United States one or more judicial districts (Judicial Code (Act March 3, 1911, c. 231) c. 5, Secs. 69-115, 36 Stat. 1105-1130 (Comp. St. 1916, Secs. 1051-1106)), and has also divided the United States into judicial circuits. The boundaries of these districts and circuits are defined. The Congress has also provided for the appointment of one or more District Judges in each of such judicial districts (chapter 1, Sec. 1, Judicial Code (Comp. St. 1916, Sec. 968)), and for the appointment of Circuit Judges in each of the judicial circuits. Each District Judge must be an actual bona fide resident of the district in and for which appointed. The jurisdiction of each of these District Courts is coextensive with the boundaries of the judicial district in and for which it is established or created, and extends no further, except in those cases where the Congress has expressly extended it. The Judicial Code points out these cases.

The District Judges so appointed cannot act as such and exercise their judicial powers and functions outside their respective districts, except in those cases specially provided for by acts of Congress, and these cases are pointed out in the Judicial Code. 'The circuit court (now District Court) of each judicial district sits within and for that district, and its jurisdiction as a general...