De La Vergne Refrigerating Mach. Co. v. Palmetto Brewing Co.

• Decision Date: 27 January 1896
• Parties: DE LA VERGNE REFRIGERATING MACH. CO. v. PALMETTO BREWING CO. et al.
• Court: U.S. Court of Appeals — Fourth Circuit

72 F. 579

DE LA VERGNE REFRIGERATING MACH. CO. v. PALMETTO BREWING CO. et al.

United States Circuit Court, D. South Carolina.

January 27, 1896

Mordecai & Gadsden, for petitioner.

J. N Nathans, James Simons, Mitchell & Smith, and Huger Sinkler for respondents.

SIMONTON Circuit Judge.

On the 6th of January, 1896, the complainant, alleging that it is a creditor of the Palmetto Brewing Company, secured by mortgage of real estate of said company, and also by chattel mortgage filed a bill in this court, in behalf of itself and all other creditors of the Palmetto Brewing Company, against the Palmetto Brewing Company, a body corporate under the laws of the state of South Carolina, making parties codefendant the Security Savings Bank, another corporation of the state of South Carolina, a mortgage creditor, and the Consumers' Coal Company, also a South Carolina corporation, a general creditor of the brewing company. The bill, after alleging that the complainant is a citizen of the state of New York and the defendants all citizens of the state of South Carolina, and alleging the nature and character of its claim against the brewing company, charges that the said company is wholly insolvent and unable to meet its liabilities; that, in addition to this, certain of the stockholders are having serious differences with the directors of the company, which have a disastrous effect upon the affairs of the company. It prays a foreclosure of its mortgages, marshaling of the assets, and a distribution of their proceeds among all the creditors. It also prays the appointment of a receiver. The bill being thus filed by a citizen of the state of New York against citizens of the state of South Carolina, the complainant setting up mortgages of realty and of personalty the insolvency of its debtor being averred, and dissensions between the stockholders alleged, tending to show that this condition of insolvency would continue and the assets of the corporation be exposed to deterioration, and the rights of creditors disregarded, the jurisdiction of the court was unquestionable, and the complainant established its right to the appointment of a receiver. Kountze v. Hotel Co., 107 U.S. 378, 2 Sup.Ct. 911 (Bradley, J.). Hearing the bill and affidavits attached, this court appointed A. F. C. Cramer temporary receiver of the property of the Palmetto Brewing Company, and under its order the said receiver took peaceable possession of the property out of the hands of the brewing company, in whose possession he found it, and now holds the same.

On the 17th of January, 1896, the petitioner, A. Bequest, intervened in the said suit and filed his petition therein. In his petition he shows that he was appointed receiver of the Palmetto Brewing Company by an order of Hon. W. C. Benet, judge of the First judicial circuit of South Carolina, and presiding judge of said circuit, bearing date the 13th of January, 1896, entered in a cause entitled 'Theodore Wenzel and John W. Burmester, Plaintiffs, against the Palmetto Brewing Company, J. E. Doscher, Security Savings Bank, a Body Corporate under the Laws of the State of South Carolina, and the De La Vergne Refrigerating Machine Company, a Body Corporate under the Laws of the State of New York. ' Pending of said action, the proceedings in this court heretofore spoken of were had, and that in the cause in the state court his honor, the presiding judge, had issued an order enjoining the defendants and creditors of the Palmetto Brewing Company, and also a rule to show cause, on a day fixed by him, why a receiver should not be appointed for the Palmetto Brewing Company. The proceedings in the state court began 30th December, 1895. This order of Judge Benet bears date the 31st of December, 1895. The petitioner further states that, at the return of the rule, January 13, 1896, he had been appointed by Judge Benet receiver of the brewing company, and that he had demanded possession of the property, plant, and assets of the Palmetto Brewing Company, in the possession and control of A. F. C. Cramer, the receiver of this court, which demand was refused. The prayer of the petitioner is that his petition may be ordered filed in this cause, and that the said A. F. C. Cramer and the parties to the bill of complaint in this court be required to show cause, before this court, why the order appointing A. F. C. Cramer as receiver by this court should not be rescinded and made of none effect, and why the petitioner, as the lawful receiver of the Palmetto Brewing Company, should not obtain and retain possession of all and singular its property, plant, and assets. Upon the filing of the petition a rule was issued, directed to the parties in the bill of complaint in this case, to show cause why the prayer of the petition should not be granted. The complainant, being a nonresident of the state, substituted service of the order was made on J. N. Nathans, its solicitor. These parties have all answered the rule.

With regard to the right of the state court to entertain the cause filed therein to recognize the right of the plaintiffs minority stockholders, to bring their action, and with regard to the validity of the action and orders of his honor, Judge Benet, therein, this court can make no question. These were the acts of a court of co-ordinate jurisdiction with this upon a matter within its jurisdiction, and this court has not the right to set in review over the propriety and validity of this action. Any errors which may have been committed, if, indeed, there were errors,-- and on this point this court has no right to an opinion,-- can be corrected in the court of last resort to which he is responsible. They cannot be examined in this court. We must treat the case, therefore, as the request of the receiver, bearing the credentials of the state court, which this court cannot gainsay or question. What this court has to decide is this: It having been brought to its attention that certain proceedings were instituted in the state court prior to any action by this court, which proceedings have culminated in the appointment of a receiver for the Palmetto Brewing Company, subsequent to the appointment of a receiver by this court, will this court now reverse its action, dispossess its receiver of the custody and control of the property, plant, and assets of the Palmetto Brewing Company, and order him to turn over his possession to the petitioner as receiver of the state court? It is the established lawof this circuit that, when proceedings have been begun in the state court, and other proceedings are subsequently commenced in this court, if the proceedings in each court present the same controversy, seek the same relief, and are substantially between the same parties, this court will arrest its action, hold its hand, and suspend proceedings, not as a matter of right, but in the exercise of that comity which should exist between two courts established by distinct sovereignties and exercising jurisdiction within the same territory. Howlett v. Improvement Co., 56 F. 161; State Trust Co. of New York v. National Land Imp. & Manuf'g Co. (June 30, 1893) 72 F. 575. If this condition of things exists in this case the same rule will be observed. This necessitates an examination of the proceedings in the parties, and the scope...