Inter Ocean Oil Co. v. Sugar Products Co.

Odian-, Judge, delivered the following opinion':1 The litigation between the Inter Ocean Oil Company and the Sugar Products Company originated in the United States district court of the southern district of Rew York. It appearing that the defendant had certain assets in the Island of Porto Rico, application was made to this court for the appointment of an ancillary receiver, which application was granted by this court, and thereafter, to wit: On the 11th day of December, 1922, the said ancillary receiver filed his petition under oath, setting forth a previous order by this court that he had been directed to deposit with the clerk of this court the sum of $25,000 before executing any instrument of sale covering the properties in Porto Rico belonging to the defendant, the said Sugar Products Company, said properties having been sold by the said ancillary receiver to a corporation known as the Old Time Molasses Company, or such assignee of the latter as it might designate. Said petition goes on to recite that there arc* [531] no local creditors in Porto Pico except a mortgage for $20,000, which mortgage is to remain a lien upon the said property after the said sale shall he completed; but with the possible exception of a claim filed by the American Railroad Company of Porto Pico alleged to be a lien on certain molasses owned by the said Sugar Products Company at the time of the appointment of the said ancillary receiver. It further appears that in accordance with an order previously entered by this court there has been deposited in the registry of this court the sum of $660 to provide for the payment of such claim on behalf of the American Railroad Company of Porto Pico, if this court shall hold that the latter is entitled thereto. The prayer of the petition is that this sum of $660 should be transferred to the account of the receiver appointed by the United States district court for the southern district of Pew York, who happens to be the same person named by this court as ancillary receiver. There has been no appearance in this case whatever by the said defendant, the Sugar Products Company, although due service has been made, and the only issue to be determined by this court at this time is with regard to the said sum of $660, which counsel for the American Pailroad Company claims should be ordei*ed paid by tbis court to the last-named company and not transmitted to Pew York. The court has examined the authorities cited by counsel for the claimant and all that they establish is that the local court possesses the right, but not necessarily the obligation, to retain local funds to pay tbc liens or claims of local creditors; in other words, that there is a discretion which may lawfully be exercised by this court to hold the said sum of $660 here and direct [532] that it be applied to tbe payment of tbe claim of tbe said American Railroad Company. But when we come to examine tbe elaborate brief filed by counsel for tlie receiver, we find many decisions of important courts iu accordance with tbe ruling made by United States Circuit Judge Simonton in tbe case of Central R. & Bkg. Co. v. Farmers’ Loan & T. Co. decided in 1902, reported in 113 Fed. 405. Judge Simonton there says, at page 412: “The conclusion drawn from all the cases is that it is tbe duty of tbo ancillary receiver, after paying tbe expenses of bis receivership, to account with and remit to tbe receivers in tbe original juris-' diction all funds and assets in his bands.” This decision was affirmed by tbe circuit court of appeals for the fourth circuit, as reported in,the 60 C. C. A. 400, 125 Fed. page 1001. Similar rulings have been made by United States Judges in the eighth circuit and in tbe second circuit. The decision reached by me in this matter is also based largely upon the language', used by Mr. Justice liarían, who delivered tbe important opinion of the Supreme Court of the United States iu 1898 in tbe case of Blake v. McClung, reported in 172 U. S. 239, 43 L. ed. 432, 19 Sup. Ct. Rep. 165. There was an English corporation doing business in Tennessee and a receiver was appointed in Tennessee who took charge of the assets there of said corporation. Meantime tbe corporation went into liquidation in England.- It seems that there was a statute which had been passed by tbe Tennessee legislature seeking to give priority to Tennessee creditors as against citizens of other States. The Supreme Court held that this Tennessee statute, violated the Constitution of the United States. This same case in 1900 reached the Supreme Court of the [533] Tinted States for a second time. Once more the opinion was rendered by Mr. Justice Harlan, and is reported in 176 U. S. 59, 44 L. ed. 371, 20 Sup. Ct. Rep. 307. Of course the exact point decided by the highest court of our nation in Blake v. McOIung is not identical with the issue before me in the present case; but the philosophy and reasoning of Mr. Justice Harlan is extremely persuasive, and it seems to me that were I to hold this sum of $660 hero in San Juan, it might he construed, not by the parties to this proceeding or their eonnsel, but by third parties who might read this decision, that this court was seeking to protect the American Railroad Company against a possible injustice which it might suffer on the part of the Federal court of Hew York city. Any thought of this kind I wish to avoid. I think this court should show the same spirit of comity toward the Hew York court as I would expect from the Hew York court if I were to name a receiver here and there should he an ancillary receiver appointed there. Convinced as I am that the claim of the American Railroad Company will receive full consideration and protection by the Federal court in Hew York, the petition of the American Railroad Company is hereby denied; the ancillary receiver to transmit to himself as receiver, in Hew York all funds in his hands in the registry of this court (less all necessary expenses). To this ruling counsel for the American Railroad Co. excepts.