Court Opinion

ID: 8825288
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:45:32.272453+00
Date Added: 2024-06-11T17:04:45.512194
License: Public Domain

KING, Circuit Judge.
The Ranger Refining & Pipe Line Company is a corporation chartered under the laws of Delaware, with its prm-*258cipal office in Wilmington, Del. The by-laws provide that the corporation might also have an office in Dallas, Tex., and at such other places as the board of directoi's might appoint, or the business of the corporation might require; that the directors might hold their meetings, and keep the books of the corporation, other than the original or duplicate stock ledger, outside of Delaware.
On April 20, 1920, the directors by resolution established the general offices of the corporation at Kansas City, Mo. It was ordered that all stockholders’ and directors’ meetings should be held there, and all records, except where otherwise required by law, should be kept there. Previously an auditor’s office, covering all business of the company, had been at Dallas, Tex. This was moved to Kansas City.
The business which the corporation was carrying on was the producing and refining of oil and gasoline and its sale to the public; also Ifie using and sometimes leasing of tank cars which it owned, and the maintenance and use of certain racks, pipe lines, and water lines. While its charter authorized other business, no others had been, or were being, conducted.
The corpoi'ation owned one refinery and seven filling stations (on leased ground) in Kansas City. It owned in Texas two refineries, certain pipe lines, loading racks, six miles of water lines, and considerable other property. The chief seat of its production of oil and gas, and where it sold the greater part thereof, was at Ranger, in the Noilhern District of Texas.
The court found that the value of its property in Texas was at least five times as much as that in Missouri. The only property of the alleged bankrupt in Oklahoma was stock in another corporation owning certain oil leases not producing. The alleged bankrupt owned some small oil wells in Kansas. During the preceding six months, the income fi'om these wells was $8,197.46. The production of oil and gasoline by said corporation in Texas was not less than 10 times as great as in Missouri. The gross revenue was approximately 4% times as great, excluding the production from the oil and gas wells in Texas. The indebtedness against the coi'poration is $1,558,318.17. That held in Texas is $616,719.47, in Missouri $199,945.39, and outside of Missouri and Texas $741,653.31.
At Kansas City were kept the general books of the corporation. These, so far as the Texas business was concerned, were compiled from reports made from Ranger and Wichita Ralls. At Ranger were kept books showing all activities of the two refineries there. At Ranger were initiated and closed all contracts for sales of the product of the two refineries, except for a small quantity of' residuum sold to the Warren Oil Company. On large contracts the Ranger office consulted with, and made its contracts on the assent of the Kansas City office. That office had nothing to do with obtaining, closing, or filling the contracts, and all money thereon was collected at Ranger, though ultimately remitted to Kansas City. The traffic manager was located at Ranger, and handled there all the tank cars wherever they might be. The Wichita Falls business and production were small.
On April 27, 1921, certain creditors filed a petition in involuntary *259bankruptcy against said corporation, alleging that for the greater part of the preceding six months it had had its principal place of business at Ranger, Tex. On May 5th receivers were appointed on a petition filed in said proceedings. On April 29, 1921, a like petition in involuntary bankruptcy was filed against said corporation at Kansas City, Mo., alleging that to be its principal place oí business, and receivers were appointed in said proceedings on May 2d.
By proper pleadings the jurisdiction of the court was attacked in the Texas proceedings, on the sole ground that the principal place of business was at Kansas City, Mo. A reference to a special master was ordered, who took evidence in Texas and Missouri, and reported his findings of fact and conclusions of law, and, as his ultimate finding, that the principal place of business was at Ranger, Tex.
On exceptions, the District Court adopted in the main the master’s special findings of fact, but held thereon, as an ultimate conclusion of fact, that Kansas City was such principal place of business, dismissed said bankruptcy proceedings in Texas for want of jurisdiction, and revoked the order appointing receivers, directing that application for allowances for services rendered by the receivers or their attorneys should be filed within 10 days, taxing costs against the petitioning creditors, with the right to them to move to retax said costs, and retained jurisdiction for the purpose of enforcing the administrative orders made.
This appeal was taken which raises the points: (1) That on the facts found by said court the principal place of business of said corporation was at Ranger, Tex. (2) That, if the court had no jurisdiction, it had no authority to retain the case for any purpose, or to tax costs against the appellants.
Bankruptcy Act, § 2, provides that the District Courts shall have power—
“to adjudge persons bankrupt who have had their principal place of business, resided, or had their domicile within their territorial jurisdiction for the preceding six months, or the greater portion thereof,” etc. 30 Stat. 545, U. S. Comp. St. § 9586.
The residence and domicile of the bankrupt in this case, a corporation chartered under the laws of ’.Delaware, is at Wilmington, Del. Southern Pacific Co. v. Denton, 146 U. S. 202, 205, 13 Sup. Ct. 44, 36 L. Ed. 942; Shaw v. Quincy Mining Co., 145 U. S. 444, 449, 12 Sup. Ct. 935, 36 L. Ed. 768. Jurisdiction, therefore, in either Texas or Missouri, must rest on the location of the principal place of business in said state. The act does not confer jurisdiction on the district in which, the principal office of the company is located. The principal place of business of a natural person, equally with that of an artificial one, will confer jurisdiction.
[1] The Bankruptcy Act is one intended to deal with failures in business of those who are entitled to its benefits or subject to its administration. The business of a corporation is its activities in the acquisition or production of that which its charter authorizes it to produce or acquire, and its dealings with its customers, not its relations with its own employees or officers in its internal government, or in *260applying to them the checks it may have devised in carrying on its business as security against the improvidence or negligence of agents.
For example, if a corporation had its sole place of manufacturing a product, and where it dealt with the public, at a given place, and a general office, where it produced and sold nothing, at another, but from which it gave directions to its employees at the first place, would the fact that it required its manager at the first place to submit all large transactions made by him to the approval of such office, and to remit the proceeds of his sales to it, prevent the place where the stock and manufacture was had, where its contracts were negotiated, and finally concluded, and its bills paid, from being its principal place of business? Can it alter the fact that a small part of its business of production and dealing with tire public is done at the place where the general office is located, at which its internal management is carried on, when the bulk of its property, production, and business dealings, are elsewhere? We think not.'
[2] Here creditors, in reliance on the fact that the chief production of this corporation takes place at Ranger, that the great majority of its dealings of all sorts with the public are carried on and closed there, and that its bills arising from this business are there paid, have instituted proceedings in bankruptcy in the district in which Ranger is located. The,question is: Shall'their proceeding be dismissed, on the ground that Ranger is not the principal place of business? That the fact that directors and stockholders meet at a place does not fix that location as the principal place of business is well settled. Continental Coal Corporation v. Roszelle Bros., 242 Fed. 243, 155 C. C. A. 83; In re Elmira Steel Co. (D. C.) 109 Fed. 456.
The appellants insist that the present case falls under the decision in Continental Coal Corporation v. Roszelle Bros., 242 Fed. 243, 155 C. C. A. 83, which affirms 235 Fed. 343. In that case a mining company, chartered under the laws of Wyoming, owned coal mining property in Kentucky and Tennessee. Its only operated coal mines were in Bell county, in the Eastern district of Kentucky. It had a retail yard for the sale of coal in Kouisville, in the Western district of Kentucky. The mining and shipment of coal and sales of merchandise, timber, and lands, and purchases of supplies and equipment for the mine, were conducted in Bell county; large purchases being required to be first submitted to the Chattanooga, Term., office. The maps and original deeds to its Kentucky property were kept in Bell county. A vice president and general manager lived there, and had charge of the mining and its other activities there.
“The corporation’s principal office has all the time been in Chattanooga, ■which is in the Eastern district oí Tennessee, and its principal stockholders and all its directors and offieers->-except the vice president and general manager, the chairman, and another member of the executive committee — have lived there. In this Chattanooga office the president, secretary and treasurer, and sales manager gave their entire time to the company’s business, exercising a gen.eral direction and supervision over the business, and communicating daily, by mail and telephone, with those in charge at the mines and of the various operations connected therewith, and from whom, as well as from those in charge of the timber, secret service, and legal departments, reports were regularly received. The financial management was exercised at the Chatta*261nooga office, including the borrowing oi! money, the rcmiítíince of funds to moat the pay rolls (made out at the mines), the payments for purchases (by elects drawn ac the mines and countersigned at tho ()«att«mooga office), and the wales of co.U (some of which was bought by tho company from other producers) on orders (partially at least: through traveling salesmen) received and passed on at the Chattanooga office, copies of the orders being sent to the office at the mines for filling. Remittances for co.il sold were also received at tho Chattanooga eii'iee, oik! deposited in the comp.¡my’?, account at the bank in that city, where Us principal banking business was done. The only bookkeeping done at the Chattanooga office seems to have related to the ‘general accounts.’ The company had no property in Chattanooga, aside from its office furniture and equipments, books, flies, and records. v ~ * ”
Involuntary proceedings in bankruptcy were filed in the Eastern district of Kentucky, and subsequently the corporation filed a voluntary petition in the Eastern district of Tennessee. The question raised was in which district was the principal place of business.
“In a well considered opinion Judge Cochran has discussed the pertinent features of the caso, and has stated reasons for his conclusion that ihe Eastern district of; Kentucky was the bankrupt’s principal place of business. We agree with the conclusión and with the reasoning on which it is based. * * > vVe aro impressed that the dominating feature of the bankrupt's business — -that which gave it distinctive character — was tho mining of coal. As ivas well said by Judge Cochran: Tt is the production end of his [the mine operator’s] business that is the prominent feature and is expressed in his name. No one ever speaks of a manufacturer or mine operator as a merchant or seller c£ goods, but always as a uuiimícetnrer or mine operator.’ Talc-ing into account the entire situation, we are better content with the view that the cl; btor's principal place of business was the place where these extensive mining operations, as well as tho other business mentioned, were carried on, where the maps and original deeds of the company’s property were kept in a vault prepared for that purpose, where this large number of company houses and the important commissary stores were maintained (a. village oc themselves), where ihe bulk of tho bankrupt’s property was situated, and where suits and liens against it would naturally be enforced (in fact, several personal injury suits were pending when the testimony below was taken), and where its superintendent and manager actually resided, rather than the office in Chattanooga, in vshieh the books were kept, the general guidance of its business effected, and from which the selling' was conducted.” Continental Coal Corporation v. Roszelle Bros., 242 Fed. 243, 245, 247, 155 C. C. A. 83, 87.
Appellees admit that the above case was qorrectly decided on its merits, but insist that while it is true, if the entire production of a mining or other company is located in one district, such district will be considered the location of the principal place of business, notwithstanding the company has a, general office elsewhere, which exercises 'supreme control over'the mining or other operations, and which negotiates the sales of the product of such operations, this is not the case where such company has mines or factories in more than one district, as to which the general office exercises this supervision and activity, regardless of the relative value of the two properties or the quantity of production by each, although the production and business in one district may much predominate. The basis of this distinction is not perceived. If the exercise of control and the making of sales by such office in one case does not constitute an office where the principal business is transacted, how can that office any more become the principal place of business because it deals with four-fifths of its product drawn *262from one source and one-fifth from another source, instead of drawing it all from one source?
Nor can it be seen, if the place of production hy the mines or refinery determined the principal place of business, that the production of only one-fifth of the total production in the same district where such general offices were located would any the less prevent the district of the location of the plant, producing four-fifths of the whole, from being the principal place of business. If, on the other hand, dealing with the public is also to be looked to in determining the location of the principal place of business, then in the case at bar there is not only more than five to'one of property and production in the Texas district, but sales made, in at least the same proportion, and the conduct of all other business with the public is there, as against that conducted by the Kansas City office.
Appellees rely with confidence on the case of Burdick v. Dillon (In re Matthews Consolidated Slate Co.), 144 Fed. 737, 75 C. C. A. 603, as holding that the office which exercises supreme control and direction of the business conducted elsewhere will be considered the principal place of business of the corporation. The facts of this case, however, do not apparently consider' that the süpreme direction of the' other agents of the corporation alone constitutes such office the principal place of business. There the principal dealings with the public were conducted by the Boston office. The case sustains the view that the place where the corporation conducts the greater part of its dealings with the public will be considered the principal place of business of the corporation rather than an office for the general control of its intra-corporate affairs. The Circuit Court of Appeals thus states the contention:
“It is the appellant’s contention that the principal place of business was at the place where the quarries and mills were located, and where the working operations were conducted, rather than at the Boston office, where supreme direction and control were exercised and the hulk of the sales was negotiated.” Burdick v. Dillon, 144 Fed. 737, 738, 75 C. C. A. 603, 604.
In the opinion of the District Court, which is adopted by the Circuit Court of Appeals, speaking of the Boston office, it is said:
“The minutes of the directors and the corporation books of account were kept there. Its correspondence was conducted from there. The great bulk of sales of the product of the quarries and mills was negotiated there or from there; about 1 per cent, only of the total sales being made from Poult-ney. All bills for produce sold were sent out from there, being there made up from shipping slips forwarded there from Poultney. * * * One recu-lar salesman was employed, who was to be found there, except when on the road, and who was never to be found at the quarries or at Poultney. When on the road, his reports were all made to the Boston office, and all orders from him were received there; but only a small proportion of the sales was made by him.” In re Mathews Consolidated Slate Co., 144 Fed. 724, 729.
The court held that under these facts the Boston office was the principal place of business. It might be so held where the bulk of the business of the corporation in dealing with the public — that is, its sales — were, negotiated, concluded, and collections made, at that place.
Where a corporation conducts its business at a number of places, *263no one of which'is plainly the place where its business is principally conducted, one of such places, where a substantial business is transacted, and from which general supervision of all of its business is exercised, may be properly held to be the principal place of business of such corporation.
“It is not easy, nor is it required, to lay down any general rule i'or determining which one of several places at which a corporation does business is its principal place of business.” In re Worcester Footwear Co. (D. C.) 251 Fed. 760, 761.
No general rule is here attempted. In the present case, not only the great excess of property is located in the Texas district, and the great bulk of production there made, but by far the greatest amount of sales, dealing with the public, tlie end for which the production was had, was negotiated and completed at the Ranger office. The very name of the corporation pointed to Ranger as the place where its principal business would be conducted, and, .while by no means conclusive, is a circumstance to be considered. Therefore, whether the place where the bulk of its property is located, where the greatest production of its output occurs, or where its sales and business are conducted, be considered, Ranger was the office of its principal business activities, and the District Court of that district had jurisdiction of the petition filed therein on April 27, 1921.
The decree dismissing said cause for want of jurisdiction is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.