equivalent to the commencement of an action for the appointment of a receiver; the court in that case saying: "It is insisted, however, that the superior court of the state had taken control of the property, because, upon an amendment to the bill therein pending, alleging that the officers were permitting a use of the corporation funds for private purposes, it had granted a restraining order enjoining the officers of the road from permitting the use of its funds for other than the purposes of the corporation. This, however, was nothing more than an order to restrain actual or threatened malfeasance of an officer of officers of the property itself. It indeed was a distinct recognition of the fact that the officers were yet in control. Otherwise, no injunction would have been issued against them."
Finally, the fact that neither the secretary of banking nor the Attorney General regarded the hearing held June 5, 1931, in any sense as a commencement of possession proceedings by his department, would seem to be almost conclusively established by the fact that when the secretary of banking finally did determine to move for possession of the defendant, he instituted entirely new proceedings by notifying defendant's officers and directors and the receivers to appear before him at a hearing to be held on Friday, February 17th, at the Philadelphia office of the secretary of banking to show cause why possession should not be taken of defendant's business and property because it was insolvent, in an unsafe and unsound condition to continue business, and in the hands of receivers.
The best that can be said from the viewpoint of the petitioner is that his proceedings cannot in any event be held to relate back to a date prior to February 14, 1933. That date is subsequent to the date on which the federal court receivers were appointed. In thus commenting, the court does not mean to rule that the mere issuing of a notice by the secretary of banking to show cause why possession of an institution subject to his supervision should not be taken, is equivalent to the commencement of court proceedings and therefore the date upon which the question of priority of proceedings rests. The decision of that question is unnecessary in this case, for even that date is subsequent to the filing of the bill.
3. Finally, it is urged upon us by the Deputy Attorney General that we are bound by section 22 of the act (7 PS § 22), which provides that the secretary, after filing his certificate of possession, shall supersede a receiver appointed by any court. The prtinent portions of section 22 of the act of 1923 read as follows:
"When the secretary shall have duly taken possession of the business and property of a corporation or person as provided in section twenty-one of this act, he shall forthwith make, under his hand and official seal, a certificate setting forth that he has so taken possession, and shall file such certificate in his office, and cause a certified copy thereof to be filed in the office of the prothonotary, who shall index the same in the judgment index under the name of the corporation or person as defendant and the name of the secretary as plaintiff.
"From and after the filing of such certified copy in the office of the prothonotary, the secretary shall supersede any receiver previously appointed by any court for, or any assignee or trustee for creditors appointed by, such corporation or person.
"Such superseded receiver, assignee, or trustee shall forthwith file his account in the court having jurisdiction thereof, and pay over and deliver to the secretary all moneys, securities, assets, and property of such corporation or person in his custody, possession, or control. Said court shall allow credit for expenses and for the disbursements properly incurred or made prior to the taking possession by the secretary, and shall allow proper compensation to said receiver, assignee, or trustee, and his counsel, which, when datermined, shall be paid out of the funds of said corporation or person in the hands of the secretary."
This court does not believe that the term "any Receiver by any court" can be fairly interpreted to apply to the federal court, because it is to be noted that the word "court" as used in the act, following the modern method of drafting acts, is defined in section 2 of the act (7 PS § 2) covering general definitions to mean the court of common pleas (i.e., the state court). Consequently, when section 22 uses the word "court," it means common pleas court. Such interpretation is fortified by reference to the annotations of the commissioners who codified and revised the laws in their report of the Banking Department Act, which was enacted and became the Banking Department Act of 1919 (Act of May 21, 1919, P.L. 209).
From this annotation it appears that the second and third paragraphs of this section were from the prior Act of April 23, 1909, P.L. 167. Reference to such act discloses that it reads the same as the second paragraph of section 22 with the exception of using the words "Court of this Commonwealth" instead of "court." It is clear, therefore, that the words "Common Pleas" were omitted by the commissioners who drafted the Banking Department Code of 1919 in the interest of brevity, they having already defined the meaning of the word "court" to be "Court of Common Pleas." But whether this be the correct interpretation of the term "court" as used in section 22, it is clear that the Legislature has no power to limit the jurisdiction of the federal courts, for that is the exclusive prerogative of Congress and of Congress alone. Leadville Coal Co. v. McCreery, 141 U.S. 475, 12 S. Ct. 28, 35 L. Ed. 824, supra.
From time to time by various devices and in various manners the Legislatures of some of the states have endeavored to limit or curtail the jurisdiction of the federal courts, but such encroachment is not permitted either by the United States Supreme Court authorities or those of the Circuit Court of Appeals. Illustrative cases are Lappe v. Wilcox (D.C.) 14 F.2d 861, 864, where it was held the state statute compelling arbitration between two parties and directing stay of proceedings could not be made binding upon federal courts, the court saying: "It is the duty of the federal courts to exercise their powers in every case to which their jurisdiction extends. Hyde v. Stone [20 How. 170, 15 L. Ed. 874], supra; Kline v. Burke Construction Co., 260 U.S. 226, 234, 43 S. Ct. 79, 67 L. Ed. 226, 24 A.L.R. 1077," and the reason therefor being well stated in the following language: "But statutes of the state of New York cannot affect nonresidents of the state, who have the right, denied to inhabitants of the state, to invoke the jurisdiction of the federal court. From early times it has been consistently held that state statutes which have the effect of impairing the rights and remedies of nonresident suitors entitled to resort to the federal courts for redress are invalid and ineffective as to such nonresident suitors." See, also, Farrell v. Stoddard, Supt. of Insurance of New York (D.C.) 1 F.2d 802, in which it was expressly held that the statute, even if it intended to supersede existing equitable and common-law rights of the federal courts, could not do so where the jurisdiction of the court is invoked by a nonresident. See, also, Morrill v. American Reserve Bond Co. (C.C.) 151 F. 307; Allen, Bank Commissioner, v. U.S. 285 F. 678 (C.C.A.); Leadville Coal Co. v. McCreery, 141 U.S. 475, 12 S. Ct. 28, 35 L. Ed. 824; and see, also, Turner's Estate, 277 Pa. 110, 120 A. 701.
In concluding the court deems it not amiss to answer the suggestion of the Deputy Attorney General in his argument that on the broad grounds of public policy the federal courts should exercise a wise discretion and refuse jurisdiction in cases relating to corporations under the supervision of a state department. Without entering into a discussion of whether so doing would be or would not be a wise exercise of discretion, it is sufficient to say that the federal court has no such discretion in the matter. It has no right to refuse to take jurisdiction in a proper case where a nonresident plaintiff within his legal rights invokes the jurisdiction of the court. To hold otherwise would be to strip a nonresident plaintiff of every vestige of his rights under the Constitution and make him subject entirely to the political, economic, and financial policies of the state in which the defendant might reside. Such a theory, if carried to its logical conclusion, would destroy the union of the states and make our nation consist, eventually, of 48 states bristling with antagonisms, conflicting policies, and jealousies. The public policy underlying the principles in this case referred to by the Deputy Attorney General cannot be construed in such a provincial manner. The Supreme Court has stated so most emphatically in the case of Willcox v. Consolidated Gas Co., 212 U.S. 19, 29 S. Ct. 192, 195, 53 L. Ed. 382, 48 L.R.A. (N.S.) 1134, 15 Ann. Cas. 1034, where Mr. Justice Peckam said: "When a Federal court is properly appealed to in a case over which it has by law jurisdiction, it is its duty to take such jurisdiction ( Cohens v. Virginia, 6 Wheat. 264, 404, 5 L. Ed. 257, 291), and, in taking it, that court cannot be truthfully spoken of as precipitate in its conduct. That the case may be one of local interest only is entirely immaterial, so long as the parties are citizens of different states or a question is involved which, by law, brings the case within the jurisdiction of the Federal court. The right of a party plaintiff to choose a Federal court where there is a choice cannot be properly denied. Re Metropolitan Ry. Receivership, 208 U.S. 90-110, 28 S. Ct. 219, 52 L. Ed. 403-412."
In this case there is no suggestion that Mr. Elson, the plaintiff, is not a bona fide nonresident of the state of Pennsylvania, nor is there the slightest doubt that he was amply justified in invoking the jurisdiction of this court in view of the fact that there was reasonable ground for fear that a stockholder of similar class was not only in the position to, but was actually taking steps to, proceed on a judgment which would result in a preference to the detriment of not only the plaintiff but of other stockholders similarly situated, and, indeed, of general creditors, whose prior rights by the law of the state of Pennsylvania are beyond question.
While, of course, like others in interest, he might have requested the secretary of banking to act rather than to have filed a bill in the federal court, the fact is that he was not bound to do so. He had a right to invoke the jurisdiction of this court, a right which could not be denied to him.
Upon consideration of the whole record, we are of the opinion that no sufficient grounds have been shown to vacate the court's appointment of the receivership, and since this is the only purpose for which the petition to intervene has been filed, the petition filed by the Attorney General is dismissed.
Let an appropriate decree be prepared.
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