Pfahler v. McCrum-Howell Co.

GEIGER, District Judge (after stating the facts as above). There is little, if any, dispute between the parties respecting the discretionary power of the court to refer to the court of primary jurisdiction' applications arising in ancillary proceedings which may affect the orderly administration and just distribution of the fund in court. The rule seems well settled that, where parties petition in the ancillary proceedings for a distribution which might conflict with the ultimate distribution to be made after hearing all parties, such application should be referred to the court of primary jurisdiction. In other words, to secure an orderly and just distribution, claims and assets are both referred to the primary court for the purpose of distribution. From this it does not follow that the ancillary court should not entertain a petition by a creditor within the jurisdiction, seeking merely the allowance and adjudication of his claims. Whatever discretion there may be upon this, as compared with the situation where a fund is sought to be incumbered with a preferential claim, ought to be exercised in view of what is disclosed by the bill and the proceedings thus far taken. Such bill by a stockholder alleges that the defendant company is not insolvent, but that it is embarrassed, and that, in order to conserve the assets for the benefit of the shareholders and creditors, the court should take possession through receivers. It charges the probable loss which will ensue attacks by creditors to obtain satisfaction of their claims. The object of the proceeding is not necessarily to wind up the company’s affairs, but is either a liquidation or a reorganization under such plan as may be agreed upon. Upon this bill the receivers are appointed in both primary and ancillary proceedings. Therefore a person claiming to be a creditor of the defendant is through such proceedings practically deprived of his right to invoke the jurisdiction of any court other than the primary or ancillary jurisdictions. That is, by placing the property and affairs of the defendant corporation in the hands of receivers, resort to other jurisdictions is rendered impossible at least where, by reason of nonresidence, jurisdiction would depend upon acquisition of a lien upon property. In any event, where the jurisdiction is exercised in ancillary proceedings to aid in preserving the assets in order that the ultimate purpose disclosed by the bill may be accomplished, those claiming to be creditors and who are thus deprived of the right to proceed in the usual way ought to have some benefit of the proceedings; and the right to appear in the district of their residence and establish their status as creditors .should be accorded, unless likely to cause confusion or to embarrass the orderly and harmonious administration or distribution of the estate. The determination of the single question whether 686 the defendant corporation is indebted to the petitioner as alleged involves, no, considerations affecting the present administration of the property; and, there being no claim for lien or preference, an adjudication of the claim by the court would not affect the ultimate distribution differently than if heard or allowed in another jurisdiction. As above indicated, these proceedings were instituted by a stockholder suing on behalf of all similarly situated. Nothing appears to have been done to afford creditors an opportunity to come in; and the court could hardly, by ordering a removal of the present petition to the district of Pennsylvania, give petitioner any assurance that it will be there entertained. The suggestions as to convenience of witnesses and parties apply to proceedings upon the petition wherever filed. The testimony will have to be taken as in ordinary cases, either upon deposition or before a master. An order may be entered denying the application of the receivers to remove the proceedings to the Eastern District of Pennsylvania, and likewise denying their application to dismiss the same. The receivers are, however, given 20 days from the entry of such order to answer the amended petition of Machette.