Chesapeake & Ohio Railway Co. v. Atlantic Transportation Co.

47 A. 28, 62 N.J. Eq. 369, 1901 N.J. Ch. LEXIS 10

• Court: New Jersey Court of Chancery
• Decided: November 1, 1901
• Status: Published

Opinion

Pitney, V. 0.

(orally).

My view of this case has been very briefly and accurately stated by the receiver in his argument. The receiver has no partisan views in this case, except to get the property for the benefit of the creditors. He is a quasi judge in the matter, and the court always listens to his views, because they should be impartial; and I mention that not because I adopt his views on that ground, but because they were judicious and struck me as such as he was stating them.

The case stands in this wise: The Atlantic Transportation Company, on the 2d day of January, 1899, was possessed of a number of sea-going vessels; some of them were barges which were towed, but they were sea-going vessels as I understand it; there is no dispute about that. The business of the Atlantic Transportation Company, as shown by the papers, was that of transporting coal from the terminus of the Chesapeake and Ohio railway, at Newport News, near Port Monroe, Virginia, to different ports to the north and east of that port, and two of the vessels happened at the date named to be in Virginia waters. The}' went there in the regular course of business. So far as appears they had no situs whatever in the State of Virginia any more than any other vessel that was trading at one of the ports of Virginia had a situs there. On the contrary, the indications are, although there is no specific direct proof to that effect, that their situs or home port, or place of registry, was either in New Jersey or in New York. The two vessels were, prior to January 2d, 1899, seized at Newport News by an attachment, issued at the instance of a creditor of the Atlantic Transportation Company, the Knickerbocker Steam Stowage Company. It had issued an attachment for a debt against the Atlantic Transportation Company and seized those two vessels, and they were in the hands of the sergeant of Newport News, an officer of that Virginia court.

On the 2d of January, 1899, the Chesapeake and Ohio Railway Company, a corporation of the State of Virginia, I believe, filed its bill in the court of chancery of New Jersey, praying the appointment of a receiver of the Atlantic Transportation Company, on the ground that it was insolvent. Two gentlemen, named by the Chesapeake and Ohio Railway Company, were appointed receivers—General Meaney and Mr. Ingalls, a son of the president of the Chesapeake and Ohio Railway Company. The Atlantic Transportation Company, by a proper bill of sale, immediately made a deed of those two vessels, with others, to* the receivers, whereby their title, in my judgment, was perfected and did not require the aid of any court of any othet state to perfect it; precisely as if the ships had been lying at a dock here in New Jersey. But such title was subject to the attachment in Virginia, and of course the receivers could not get the possession of the vessels from the sergeant, or marshal, the officer of the court, who had possession of them, without taking some proceeding. It was thought proper, therefore, that the receivers so appointed should be appointed ancillary receivers by the Virginia court. There may have been other assets in the shape of rights and credits in Virginia—I know nothing of that—there may have been many reasons why they should have been appointed ancillary receivers in Virginia, besides the peculiar situation of these two vessels; because to reach rights and credits which had a situs in Virginia it was necessary to have ancillary receivers appointed there. The Chesapeake and Ohio Railway Company filed a bill in a Virginia court January 5th, 1899, of the same general character as that previously filed in this court, and upon its application the same gentlemen were appointed by that court ancillary receivers, and by the order of appointment they were declared to be mere assistants to the receivership in New Jersey where the corporation belonged.

Subsequently the receivers obtained an order of this court to continue the business of the Atlantic Transportation Company and to carry it on precisely as if there had been no receivership, and for that purpose they desired the possession of these two vessels, and in order to get them from the sergeant, who had them in possession, and for that purpose only, they gave a bond to the plaintiff in that attachment suit, or to somebody to answer for those vessels, and took possession of them and brought them from Virginia and had them in New Jersey waters, and used them as if they had never been attached.

Now, in my judgment, their title to those vessels arose primarily and principally, and, I may say, entirely out of the fact that they were appointed receivers by the State of New Jersey, and got a bill of sale from the insolvent debtor. The only aid to their title which arose out of the ancillary receivership was simply to enable them to get the bare possession of the vessels, but did not strengthen their title a particle, for the reason— and I repeat it—that there did not appear to have been any situs in Virginia, except the incidental one of their being attached there, as they were lying in the public waters of the United States, in the limits of the State of Virginia.

Now, in that state of things, the business of the corporation was continued, and it turned out that there was a claim advanced by the Western National Bank that it held a mortgage, registered in the city of New York, upon these and other vessels, and the United States Trust Company held some mortgages, and the chancellor, on the application of these receivers and of the creditors who held the mortgages, made an order substantially that the vessels should be delivered up to the mortgagees upon pavrment of some trifling sum, or no sum—I forget how that was.

Mr. Corbin.'—Finally no sum.

The Court—Finally no sum; but the difficulty was that'if the receivers delivered up to the mortgagees those two vessels that had been subject to the Virginia attachment they might be liable on their bond that they had given in the attachment suit in Virginia to get possession of them. Therefore the chancellor ordered that they might, and should, in ease of their bond and to relieve them from its effect, if possible, re-deliver those vessels to the sergeant-in Virginia, and they did so. At the same time they got an order of the Virginia court which states distinctly on its face that they were delivered to that sergeant simply for the purposes of that attachment. It was no relinquishment of title whatever, except, it may be, between them and the mortgagees. As between them and the mortgagees, it having been done in pursuance of the order of the chancellor for that purpose, it may hereafter be claimed by the mortgagees that that delivery was for their benefit; but, for present purposes, I will put the mortgagees out of view. And if you put the mortgagees out of view, then that delivery did not at all affect the receivers’ title. It simply helped them, as a defence to any action of the bond they had given, to get possession.

Things remained in that shape until the 26th of August, when the Chesapeake and Ohio Railway Company, the complainant in this suit, filed an attachment bill in the Virginia court, on the equity side, attaching these ships, on a claim of debt that it held against the Atlantic Transportation Company.

Now, right here, that conduct was entirely contrary to first principles, in my judgment. It had no right to do it. It was a contempt of this court. It was flying in the face of this court. It had come here and asked this court to appoint receivers to take these vessels and administer them for the equal benefit of all creditors, and it tons around in the face of that and attempts to get a lien for its own individual benefit. Now, I repeat, that conduct was contrary to fundamental principles on which the courts deal with such cases. So held by all the authorities. Mr. McCarter handed me up the other day a list of cases on the subject, and among them is the one in Vermont, decided by Chancellor Royce (Vermont and Canada Railroad Co. v. Vermont Central Railroad Co. et al., 46 Vt. 792), which contains a very able and complete review of all the authorities, citing some in various states and in England; and there is also the Rhode Island case. Chafee v. Quidnick, 13 R. I. 442. I shall not go into them, except to merely refer to the Vermont case, which is so exhaustive that it really leaves nothing to be desired in the way of discussion. The bringing of that action by the Chesapeake and Ohio Railway Company was a contempt of this court, in my judgment, and if this proceeding were one to adjudge the Chesapeake and Ohio Railway Company in contempt, I should do it.

Then the mortgagee, the Western National Bank, filed a petition in this court for leave to take possession, I believe, and for an injunction against the Chesapeake and Ohio Railway Company.

Mr. McCarter—That petition was only for an injunction.

The Court—Oh, yes; but after you had filed a petition for leave to take possession the Chesapeake and Ohio Railway Company filed an amendment to the original insolvency'bill filed on the 5th of January in the Virginia court, and in that amendment it set up that the mortgage of the Western National Bank is void, without, as I understand, stating on what ground it is void. Then, by that' bill, it prays that it may be declared void, and in effect prays that it may have the proceeds of the sale of these vessels for its own benefit. It is now said by counsel that that amendment has been amended, so that the bill is filed for the benefit of all of the creditors. And he says they have jurisdiction of those vessels because they are in Virginia waters, as against the mortgagee, the Western National Bank; which compels the Western National Bank to go down there and litigate that question.

Now I very much doubt whether it, or the Virginia court, has any such possession as will give it such jurisdiction, and it is very desirable that that question should be raised where the court will have undoubted jurisdiction. As I understand, the Western National Bank has declined to accede to that jurisdiction; has not appeared in that court. I don’t know whether it is made a party or not, or whether process has been issued against it, or whether there has been any publication, or anything of that kind.

Mr. Swayze—I think there is an order of publication, or something like that, but I am not sure; there is no process-—no appearance.

The Court—In the meantime the two receivers who had acted in this case (and the evidence before the court shows that they were acting all the time entirely in the interest of the Chesapeake and Ohio Eailway Company—I am justified in saying that) were proceeded against, in this court, for their removal, and when the order to show cause why they should not be removed came on for argument they resigned without waiting for an inquiry into the merits, and promised to resign as ancillary receivers in Virginia and did do so, and were relieved by both courts. The court of chancery of New Jersey then appointed Mr. Swayze, the present receiver, in their place. In the meantime, however, Mr. McCarter, on behalf of the Western National Bank, had filed a petition for an injunction against the Chesapeake and Ohio Eailway Company to restrain it from proceeding with those suits in Virginia. When the new receiver was appointed he came in and took the case up himself, and filed a petition on his own account, which the Chesapeake and Ohio Eailway Company has answered under protest, denying the jurisdiction of this court; and the matter is now before me on that petition.-

I shall not at present take any notice of, or deal with, Mr. McCarter’s petition on behalf of the Western National Bank. The question now is whether the court of chancery can permit the Chesapeake and Ohio Eailway Company to do anything whatever to prevent the receiver it has appointed from getting possession of these vessels; and I am decidedly of the opinion, notwithstanding the very able argument that has' been made by Mr. Corbin, for which I am certainly very much obliged—I am decidedly of the opinion that this court should take prompt and thorough action as far as it can to prevent that proceeding on the part of the Chesapeake and Ohio Eailway Company. The only ground on which I can see that the Virginia court can hold those vessels, with any kind of respect for propriety in judicial proceeding, is on behalf of the Knickerbocker Steam Towage Company. Now it was stated here by respectable counsel from Virginia that he, on behalf of that steam towage company, had given a consent to the sergeant or marshal to let these vessels go; that there was no reason, so far as the steam towage company went, why the marshal should not be permitted to deliver possession of them; and that, being so, the only thing in the way of the receiver getting possession is the action of the Chesa-. peake and Ohio Eailway Company.

The question of jurisdiction of the Virginia court does not arise here, because, whatever jurisdiction it may have, it can exercise only at the suit of somebody. There- must be somebody there asking for its exercise, and the only person asking for it, so far as this court at this time perceives, is the Chesapeake and Ohio Eailway Company; and this court will forbid the Chesapeake and Ohio Eailway Company to- ask the Virginia court to retain those boats.

Of course, the receiver has to deal as best he may with the steam towage company, the original plaintiffs in attachment there. That we have nothing to say about. The Chesapeake and Ohio Eailway Company is not responsible for that.

Objection is made to any action by this court' against the Chesapeake and Ohio Eailway Company, on the ground that it has no jurisdiction of that company. I think the objection is without merit. The.very point is covered by the Ehode Island case above cited. There a distinguished counsel from New York and a distinguished counsel from Boston united in making application, as counsel merely, in favor of a client, to the Ehode Island court to appoint a receiver of an insolvent company, and after such receiver was appointed on their application one of the gentlemen assigned to the other his claim against the insolvent company for services, and the assignee issued an attachment in New York and levied upon certain funds belonging to the insolvent company in the hands of a merchant there. The matter being brought to the attention of the Ehode Island court, it adjudged that counsel in contempt, on the ground that, though not within the jurisdiction of.the court, he had, by merely acting as counsel, and not as solicitor or attorney, for the plaintiff, submittcd himself to the jurisdiction of the court. That case goes much farther than the present.

Rut there is another line of cases in the federal courts which J think is of significance here. It is a settled rule in those courts that if a party comes from one circuit into another circuit and brings an action there, and appears only for the purpose of bringing that action, the defendant in that action may file a bill on the equity side as a defence to that action, and acquire jurisdiction of the person by service upon his solicitor, or service out of the jurisdiction, which he could not otherwise acquire. I will give you an illustration of it. One Trotter, who lived in Brooklyn, New York, brought an action of trespass in the United Stales circuit court for the district of New Jersey, against the old New J erscy Zinc Company, based upon the title to a strip of land in the zinc district in Sussex county. He obtained a large verdict before Judge Nixon, sitting in the circuit court; and after the refusal of a new trial, I was brought in as counsel by the zinc company. ■ The plaintiffs title rested upon a mistake—as the defendants alleged—in the description of a deed; and I filed a bill in equity, on behalf of the zinc company, in the circuit court of the United States for the eastern district of New York, to reform that deed and to stay the execution on the judgment. I obtained a preliminary injunction or order, ex parte, from Judge Benedict in the United States circuit court. The judge went abroad, and the order to show cause, answer, &e., came on before Judge Blatchford. I had supposed that I must, of necessity, go into the district where Trotter lived, and that I could not get jurisdiction of him in the New Jersey district; but Judge Blatchford, without going into the merits, dismissed my bill by a short opinion that never was published, in which he pointed out the decisions in the United States circuit court to the effect that in such a ease the federal court of New Jersey had jurisdiction, and that the appearance of Mr. Trotter there in his action compelled him to submit to the jurisdiction of that court by a service on his solicitor, without service on him within the jurisdiction, as to all matters arising out of or pertaining to the subject-matter of the suit brought there by him. On the same bill and affidavits I immediately applied to Judge Nixon in the New Jersey district, and obtained an injunction. In the present case the proposed action against the Chesapeake and Ohio Railway Company pertains to the subject-matter-of its suit in this court.

Another objection made is that the vessels should be kept within the jurisdiction of the Virginia court, because the receivers gave bond in that court as such, and may be liable to prosecution there in respect to their possession of the vessels. I think there is nothing in that objection. Those receivers, by the order of this court, and also by the order of the Virginia courtj delivered those vessels to the marshal or sergeant, and afterwards, by the order of this court, conveyed them to the new receiver. They have been discharged from further duty as receivers, by both courts, and I am unable to imagine that they can be charged, as ancillary receivers, with any breach of their bonds given in the Virginia court. But if such a breach should be averred, it seems to me that this court has complete power to protect them in the premises.

I will advise an order, made as strong and as searching as counsel can draw it, forbidding and restraining the Chesapeake and Ohio Railway Company from doing anything in any suit, or taking any measures whatever, either directly or indirectly, to prevent the receiver, Mr. Swayze, from taking possession of those vessels. I don’t see that 1 can go any further to-day.

'After an order made in pursuance of the foregoing opinion, Mr. Corbin, on behalf of the Chesapeake and Ohio Railway Company, asked for a stay of the order pending an appeal, which the vice-chancellor declined, saying:

It seems to me that it comes out just where I stated before you proceeded with your argument; that the preservation of the status quo. so far as regards the rights of all parties—and that is the thing to look at—will be preserved; the status quo will be preserved by letting the receiver have those vessels and selling them and turning them into money, to prevent them from deteriorating by the action of the water. I believe it was stated by you, or admitted by your answer yesterday, that those vessels are deteriorating in value all the time.

Mr. Corbin—They ought to be sold, there is no doubt about that.

The Court—If so, what better could be done to preserve the rights of everybody, the status quo—to use, I suppose, the substance of the language of the late chief-justice in his opinion which has caused so much criticism—what could be done better than to sell those vessels and impound the proceeds? Here is the subject-matter—tire proceeds of the sale of the vessels. This court gets the money proceeds here in the hands of its receiver. The court of errors and appeals decides that it ought to go to somebody down in Virginia—to a new receiver 'to be appointed there. This court will obey the order of the court of errors and appeals and send tire money back to Virginia. The thing is preserved. The right of the Virginia court is also preserved. Because if it appears that the Chesapeake and Ohio Bailway Company has a right to prosecute that suit in Virginia, as soon as the court of errors and appeals so decides, this receiver is ordered to return the fund and the court of errors and appeals will direct the court of chancery to restore the corpus to the Virginia courts.

I think it eminently a case where the whole spirit of the law, which has been exemplified in New Jersey by the National Docks Case, and which has been attempted to be—I desire to compliment the gentleman on his draft of that act—has been attempted to bo put in writing, but which is beyond the power of mortal man to do, precisely as it is beyond the power of mortal man to codify the laws of any progressive country— requires that the order I have advised should be executed by bringing the property in question into this state and turning it into money. And what have we got here? The subject-matter of dispute is two vessels—two sea-going barges—and the question is who is to dispose of those barges—the courts of New Jersey or the courts of Virginia? It is admitted on all hands that the barges should be taken care of by being sold and turned into money. This court is of the opinion that it is the business of this court to do it, and not the business of the Virginia courts. This court so decides; and in the meantime let the barges be sold, and if the money is in the hands of this court, and the court of errors and appeals shall be of opinion that this court is wrong, the money will be returned. The subject-matter will be there-—saved—and preserved as thoroughly as it possibly can be. Now that is the situation. And for these reasons I decline to stay the operation of the order in any way pending the appeal.