U.S. Supreme Court ALEXANDER v. HILLMAN, 296 U.S. 222 (1935)

[Page 296 U.S. 222, 231]

presented claims. Petitioners oppose their demands and by counterclaims ask affirmative relief.

The questions, as put by them, are:

1. When a claimant appears before a master in a federal receivership proceeding and proves a claim to share in the distribution of the receivership res, does he submit himself to the jurisdiction of the receivership court for the adjudication of his liability to the res, when the counterclaim asserted against him by the receiver is of a nature cognizable in equity and its adjudication is essential to a final disposition of the receivership proceeding?

2. Is not the adjudication of the counterclaim against the claimant and the determination of the whole controversy within the purpose and intendment of Equity Rule 30?

The Tower Hill Connellsville Coke Company, a Pennsylvania corporation, operated coal mines and coke plants. [Footnote 1] The West Virginia Tower Hill, by issue of its stock to the stockholders of the Pennsylvania Tower Hill, acquired all the share capital of the latter and until January 8, 1930, was merely a holding company owning only that stock. In April, 1920, Thompson Connellsville Coke Company, a Pennsylvania corporation, purchased a majority, about 28,000 shares, of the common stock of the West Virginia Tower Hill. Respondent Hillman, an inhabitant of Pennsylvania, was president of and controlled the purchasing company. Respondents Sheets and Watson of that state were also its officers. Hillman became president and Sheets and Watson became officers of both Tower Hill Companies. In June, 1920, the Eastern Coke

[Page 296 U.S. 222, 243]

pelled to go to another court to recover the rest. The splitting required extends even to separate items that go to make up a single cause of action; e.g., the items constituting the claim based upon respondents' apportionment of expenses. And if the receivership court has jurisdiction of respondents in respect of only so much of the receivers' counterclaims as are strictly defensive, then its determinations as to those parts would not be binding as to the rest. Portland Wood Pipe Co. v. Slick Bros. Const. Co. (D.C.) 222 F. 528. The decision may be construed to direct the receivership court to stay all proceedings on respondents' claims until final judgment may be obtained in suits brought elsewhere upon the causes of action asserted by the receivers. That would introduce additional elements of uncertainty and would involve unnecessary delay, work, and expense. As the individual respondents dominated the defendant and the other corporations used to effect the alleged misappropriations and also directed defendant's part in this litigation, it would seem that necessarily most of the issues in respect of the counterclaims will be quite similar to those litigated in the main suit. Unquestionably, all matters in the controversies between the parties may be tried and determined more conveniently and promptly in the receivership court than elsewhere.

It is clear that, under the circumstances disclosed, the restrictions laid by the Circuit Court of Appeals upon the receivership court are not consistent with that freedom as to procedure that necessarily belongs to courts of equity administering receiverships. See Portland Wood Pipe Co. v. Slick Bros. Const. Co., supra. Its decree will be reversed and the case remanded to the District Court, with directions to proceed in accordance with this opinion.

It is so ordered. Footnotes

Footnote 1 The facts prior to the appointment of the special master are derived from the records of earlier litigation in this suit that were filed in this court with petitions for certiorari. Tower Hill Connellsville Coke Co. v. Piedmont Coal Co., 280 U.S. 607, 50 S.Ct. 157; Id., 290 U.S. 675, 54 S.Ct. 93. We take judicial notice of them. National Fire Ins. Co. v. Thompson, 281 U.S. 331, 336, 50 S.Ct. 288, and cases cited.