Court Opinion

ID: 8828805
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:56:24.420377+00
Date Added: 2024-06-11T17:04:51.587182
License: Public Domain

MAYER, Circuit Judge
(after stating the facts as above). Section 2 (1) of the Bankruptcy Act confers upon the District Courts of the United States jurisdiction to “adjudge persons bankrupt who have had their principal place of business, resided, or had their domicile within their respective territorial jurisdictions for the preceding six months, or of the greater proportion thereof. * * * ” The six months here relevant are from January 19, 1921, to July 19, 1921, and may be logically divided into three periods; i. e.: (1) January 19 to March 18; (2) March 18 to June 9; and (3) June 9 to July 19. The third period may be eliminated at once, because during that time the business was conducted by the Delaware receivers at Wilmington, and there can be *96no question that during that period the principal place of business was not in New York City, nor in any other part of the Southern district of New York.
The theory upon which appellants urge that the principal place of business of the company was in New York during the first period is that Hannevig controlled the affairs and destiny of the corporation during that time, and that reports were made to him from time to time by the officers of the company. From the report of the special master, it appears that all the manufacturing business during "the first period was carried on at Wilmington, and an examination of the testimony shows that during this period there was but one directors’ meeting held in the city of New York, and that occurred on February 14, 1921, at the apartment of Hannevig, who was ill at the time. Two days previous — i. e., February 12, 1921 — Hannevig had been thrown into bankruptcy. At the meeting referred to one matter was taken up for consideration, and the meeting was then adjourned until February 18, at which time there was not a quorum, and the meeting adjourned sine die.
On February 22, receivers for Hannevig were appointed, and during this period it became plain that not only was Hannevig insolvent, hut that a similar fate had been met by various enterprises promoted or acquired by him. As well pointed out by the special master, Hannevig during this period and during the nonrelevant period antecedent thereto had it in his power to make New York the principal place of business of the company; but he did not do so, and, on the contrary, the evidence is overwhelming that the principal place of business was at Wilmington.
Much is made in argument by appellants of the fact that the business of the company was considerably less than that which it had done previously as a result of war-manufacturing activities. There is no merit in this point. Such has been the result in the case of many plants whose manufacturing ability and output have greatly decreased since the war, for' one reason or another. It is difficult to understand an argument which fails to recognize that a business which employs 450 men and during the period in question had on hand work to the approximate amount of $2,300,000, collected approximately $1,100,000 cash and $200,000 in notes, and made a profit of approximately $38,-000, with a reconstructed and well-equipped plant, is a substantial and not a petty business.
The statute is not concerned with the size of the business, as compared with its previous and temporary business, but is solely concerned with the principal locus of the business. From the foregoing it will already appear that during more than half of the period under consideration, the principal place of business was unquestionably not in the city of New York.
This might dispose of the case, but, as much is made by appellants of th.e second period, it is desirable to consider the facts relating thereto. When Hannevig became bankrupt, it was found that his affairs were in a greatly involved state. In addition to his shipbuilding enterprises, he had acquired three marine insurance companies, which he *97had brought to disaster. The Pusey & Jones Company had made a contract with Baltimore Dry Docks Company to sell the Gloucester plant for $4,200,000, and Hannevig had appropriated to his own uses the down payment of $75,000. The United States Shipping Board and Pusey & Jones Company were making claims against each other running into millions of dollars.
The stock of the Pusey & Jones Company was the chief asset of Hannevig and Hannevig, Inc. Obviously, it was to the interest of creditors to act unitedly, if- possible, in the effort to settle the claims against the United States, the United States Shipping Board, and the Emergency Fleet Corporation.
An agreement, dated March 18, 1921, was entered into by various interests, all the details of which need not be recited; but its principal features were (1) that a new board of directors was to be elected consisting of Mr. Wise, receiver of Hannevig, Mr. Cabell, representing the insurance departments of New York and Pennsylvania, Mr, Williams, representing the Baltimore Dry Docks Company, Mr. Eeonard, representing the.Shipping Board, and Mr. Coxe, the manager of the Wilmington plant; (2) that there should be an executive committee consisting of Mr. Wise, chairman, Mr. Cabell, and Mr. Williams; (3) that the election of a trustee in bankruptcy of the Hannevig estates was to be postponed and the enforcement of any judgment in favor of Baltimore Dry Docks Company suspended until November 1, 1921; and (4) that the then New York counsel of the company in its government litigations and the local Washington counsel should be continued, subject to. the approval of Messrs. Wise and Williams as to negotiations and settlements.
It was plain that the- adjudication in bankruptcy against Hannevig could not be stayed without an order of the District Court for the Southern District of New York and, upon application of the parties, that court, under date of March 22, 1921, made an order approving the agreement and staying the adjudication for six months, with leave to apply for adjudication within a shorter time, if so advised.
The novel argument is now advanced that the agreement and order supra created a receivership of Pusey & Jones Company, ancillary to the Plannevig and Hannevig, Inc., receiverships. The mere statement of the proposition carries its own refutation. But the argument is pressed upon the theory that, in some manner unknown to the law, the court’s order could change Wilmington as the principal place of business, and create a new principal place of business in New York, because most of the directors and the executive committee lived in New York, and there much discussion and consideration of the questions relative to the litigations took place.
If it be conceded, solely for purposes of argument, that where a corporation is not otherwise doing business, and the only activities are litigation or reorganization, then that the principal place of business is where such affairs are conducted, yet the case at bar does not fall under this classification for two reasons: (1) That part of these litigation or negotiation activities were carried on in Washington, several suits having been brought there; and (2) that the business, inter alia, *98for which the corporation was organized and functioned, was during the six months period continuously carried on in Wilmington.
Numerous cases are cited. We need consider only a few. In the case of In re Guanacevi Tunnel Co., 201 Fed. 316, 119 C. C. A. 554, the bankrupt was an Arizona corporation, which never had any property and never did any mining in Arizona, and, as stated by the court:
“Its activities have been principally connected with the sale of its stock and the payment of its running expenses, and that the only place in which the business has been conducted has been at 55 liberty street [New York City].”
In the case’ of In re Matthews Consolidated Slate Co. (D. C.) 144 Fed. 724, and Id., 144 Fed. 737, 75 C C. A. 603, the facts (described in detail in the opinion of the District Court at pages 729 and 730) show activities in Boston quite different from and much more important and varied than those in New York in the case at bar.
Cases like In re Munger Vehicle Tire Co., 159 Fed. 901, 87 C. C. A. 81, and In re Pennsylvania Consolidated Coal Co. (D. C.) 163 Fed. 579, are so far from applicable to the case at bar that further comment is unnecessary. It is sufficient to support the order below to refer to Roszell Bros. v. Continental Coal-Corporation (D. C.) 235 Fed. 343, affirmed 242 Fed. 243, 155 C. C. A. 83; In re Tennessee Construction Co., 207 Fed. 203, affirmed 213 Fed. 33;1 In re Elmira Steel Co. (D. C.) 109 Fed. 456; In re Monarch Oil Corporation (D. C.) 272 Fed. 524; and Dryden v. Ranger Refining & Pine Dine Co. (C. C. A.) 280 Fed. 257.
. Finally, it is merely necessary to state that the litigation arising out of the Delaware equity receivership does not in any manner affect the controversy here. .
Order affirmed, with costs.

 129 C. C. A. 627.