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of the action, from doing the acts against which an injunction was prayed for in the complaint. Upon these papers an order to show cause was granted upon March 26, 1907, returnable March 29, 1907, forbidding the defendant, or any of the officers, members, employés, and agents of the union, from doing any of the acts named, until the further order of the court. Upon the return day of the motion a long adjournment was had, in order that the defendant might have an opportunity to prepare for argument, and subsequent time was given for the submission of affidavits and for other purposes, until the time approximated that of the termination of the original contract.
As finally submitted, the defendant asks to have the motion for an injunction pendente lite denied, substantially upon three grounds: First. That the original bill of complaint and the affidavit upon which the order to show cause was granted were not verified before an officer authorized to take an oath by the provisions of any United States statute, or by the practice of the United States courts in equity cases. Second. That the action is in reality against the various members of the union, many of whom were citizens of New Jersey, and that there is no diversity of citizenship, and hence no jurisdiction in the federal court. Third. That the contract originally entered into did not contain any binding option; that the union had a right to, and did, reject the proposition to continue the contract for another period of five years; and that the complainant has no right to an enforcement of the option, it being alleged that if it has suffered any actionable damages it can be protected by an action at law.
Under the circumstances it is extremely difficult to determine, from the standpoint of attempting to preserve the interests and rights of the parties, whether a temporary injunction should issue. The complainant will apparently suffer much monetary loss if the contract is taken away from it and another paper is published from the 1st of June, 1907. On the other hand, if the complainant does not make out a prima facie case of breach of contract, and an apparent irreparable injury with no remedy at law, it does not seem proper to give it an injunction pendente lite upon affidavits. The real situation, as far as can be gathered from the affidavits, would seem to indicate that, even if the complainant did perform its contract to the expressed satisfaction of the union for the greater portion of the period for which the contract was to run, yet in the last year those officers and members friendly to the contract have ceased to be in control, and that the union, at least so far as its official representatives can now speak for it, is hostile to a renewal of the contract, and expresses dissatisfaction therewith. It is charged that this dissatisfaction is not well founded, and is merely enmity or personal bias, and that the complainant can show upon a trial that it has performed its contract to the reasonable satisfaction of the union, and in such a manner that it is entitled to an opportunity to make a further contract, under the wordsthat the said party of the first part shall have first right to obtain said contract, provided that said party of the first part shall have carried out the terms of this agreement to the satisfaction of the party of the second part."
It is impossible upon affidavits, and upon a motion for a preliminary injunction, to finally determine whether this alleged option carried with
it any right whatever, or whether upon the trial the complainant can show unwarranted and unreasonable action by the union, to the extent of an arbitrary expression of dissatisfaction, which if the complainant has a right to first consider the proposition for a new contract, would not be within its power.
It is possible under the first ground of objection, viz., that the pleadings and affidavits are not properly verified, to arrive at the same conclusion. The complaint and the affidavit referred to were verified before a commissioner of deeds of the city of New York, and while the complainant, by the obtaining of a subpoena and the filing of a complaint, which need not necessarily be verified, may have properly started its suit, and while the verification, if necessary, could be filed upon a motion to amend, nevertheless, for the purpose of an injunction, the complaint must be considered as an affidavit, and neither it nor the affidavit of Young, above referred to, can be recognized in the United States courts unless verified by an officer authorized to take an oath. Section 1778, Rev. St. (U. S. Comp. St. 1901, p. 1211], is as follows:
"In all cases in which, under the laws of the United States, oaths or acknowledgments may now be taken or made before any justice of the peace of any state or territory, or in the District of Columbia, they may hereafter be also taken or made by or before any notary public duly appointed in any state, district, or territory, or any of the commissioners of the Circuit Courts, and, when certified under the hand and official seal of such notary or commissioner, shall have the same force and effect as if taken or made by or before such justice of the peace.”
By section 917, Rev. St. [U. S. Comp. St. 1901, p. 684), power to regulate practice in equity is given to the Supreme Court, but no provision seems to have been made requiring the verification of a bill of complaint, nor allowing the taking of an oath before any officers other than those provided for in section 1778. For this reason the pleadings and papers upon which the motion is made are insufficient.
As to the second ground, that the real parties defendant in this action are the members of the union, it seems needless to consider the question at the present time. The complainant, depending upon section 1919 of the Code of Civil Procedure of New York, which provides that an action may be maintained against the president or treasurer of an unincorporated association, consisting of seven or more individuals, upon any cause of action, for or upon which the plaintiff may obtain such an action against all of the associates, has sued Matt Comerford, as general president of the International Union of Steam Engineers. The action being in equity, and all the parties affected being, possibly, proper parties thereto, it is difficult to determine whether the provisions of the New York Code can apply, and whether this action can be maintained so as to control the entire union through its president. But that question can be left until the defendant has answered or pleaded in the suit, and should not be disposed of upon this preliminary motion.
As to the third ground, it is apparent from the discussion already had that, upon affidavits and such superficial examination as can be given upon a motion for a temporary injunction, it is impossible to
decide the issue which may be raised, as to whether the complainant has any relief because of the alleged unwarranted and unjustifiable breach with reference to giving the complainant an extension of the contract now expiring. The complainant charges that the dissatisfaction expressed is merely a subterfuge on the part of a faction now in control of the defendant. But, nevertheless, it seems to be the lawfully expressed action of the union, in convention assembled, and until a trial is had and evidence taken no decision can be made. Upon the record the alleged option would seem to give the union the right to decide whether the contract has been fulfilled to its satisfaction. So far as is shown by the affidavits, the union has made such a decision, and expressed its dissatisfaction, and the defendant, as president of this union, presumptively is bound to carry into effect and to obey the orders of the convention of the union, at which he was chosen an official for the period covering the time under consideration,
The complainant may be able to prove its case, and as to the merits, or as to the possible issue that can be raised, no decision can now be made. It is sufficient to say that the complainant does not make out a case upon which injunctive relief should be granted pending the trial of the action. At the most the complainant, if it has an enforceable option, and its contract rights have been violated, would seem to be entitled to damages for the breach of its contract. It is debatable whether it can put itself in such a position as to show that it is entitled to enforce specific performance and to restrain the union from refusing to make a new contract with it. A court of equity could hardly accomplish by an injunction the agreement of the parties upon the terms of a contract, or the compelling of any act the terms of which are to be arranged in the future, and based upon the satisfaction of the parties with respect to a matter about which they have already disagreed.
The granting of an injunction pendente lite is in the discretion of the court, and such an extraordinary remedy cannot be given upon the state of facts here shown.
In re DAVIS.
(District Court, E. D. New York. July 16, 1907.)
1. CHATTEL MORTGAGES-RIGHTS OF CREDITORS-DISPOSITION OF PROCEEDS OF
A chattel mortgage on a stock of goods, though valid when made, there being no evidence that the mortgagor was then insolvent, or that it was given to hinder, delay, or defraud creditors, or to create a preference, is invalid as to subsequent creditors; it appearing the mortgagor was allowed to sell from the stock, without accounting for the proceeds, and it not appearing that the part so sold did not equal the mortgage debt.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 9, Chattel Mortgages,
§ 412.] 2. SAME.
Though the lien of a chattel mortgage is lost as to a stock of goods, as against subsequent creditors of the mortgagor, because the mortgagee allowed the mortgagor to sell therefrom, without accounting for the pro
ceeds, it is not on this account lost as to teams also covered by the mortgage and which the mortgagor retained.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 9, Chattel Mortgages,
$ 376.] 3. BANKRUPTCY-EXPENSES OF RECEIVER-KEEPING MORTGAGED PROPERTY.
Where the mortgagee having a valid lien attempted to foreclose his chattel mortgage on horses of a bankrupt, but was prevented from doing so by the possession of the receiver, only such part of the expenses of keeping the horses as would necessarily have been incurred by him during foreclosure will be chargeable to the mortgagee, and the balance will be paid out of the bankrupt estate. Thomas J. Ritch, for trustee. Elmer P. Smith, for mortgagee.
CHATFIELD, District-Judge. A petition in bankruptcy was filed herein upon November 22, 1906. At that time the bankrupt had in his possession a stock of groceries, which has since been sold, under an order of this court, and the proceeds held to await a determination as to the validity of a chattel mortgage given by the bankrupt, upon the 25th day of January, 1906, for $500, covering “2 horses, 4 wagons, 2 sleighs, 4 sets of harness, and all the stock and fixtures now in my store at Port Jefferson, L. I., N. Y.” This mortgage was duly filed on February 5, 1906. The $500 for which the mortgage was given was made up of a loan to the bankrupt, amounting to $200, made previous to the execution of the mortgage, and to secure the mortgagee for indorsing a note of $300, made by the bankrupt, which the mortgagee was called upon to pay, and did pay, on the 1st of December, 1906. The trustee in bankruptcy, who now holds the proceeds from the sale, and the mortgagee, have submitted the question as to the validity of the mortgagee's lien, upon an agreed statement of facts. The horses, wagons, sleighs, harness, and fixtures sold for the sum of $418.89. The stork in trade sold for the sum of $500. It is admitted in the statement of facts that portions of said stock in trade, amounting to not less than $200, remained in the store until after the sale by the trustee in bankruptcy, and that the sum of $130 was expended by the receiver for the feeding and care of the horses. No evidence is presented, and no facts shown, to indicate that the bankrupt was insolvent at the time of making of the chattel mortgage, or that the execution and delivery of this mortgage was with intent to hinder, delay, or defraud creditors or to create a preference.
On these facts it would appear that the mortgage was valid at the time of its delivery. In the case of Brackett v. Harvey, 91 N. Y. 214, a chattel mortgage was held to be invalidated by an oral agreement to sell the mortgaged property, and to use the proceeds for the benefit of the mortgagor, either in carrying on business or replenishing a stock of goods. This depended on the doctrine that such an agreement would work to the fraud of subsequent creditors who had a right to suppose that the proceeds of whatever sales had been made had been applied to the payment of the chattel mortgage upon the original stock of goods. On the other hand, the case of Brackett v. Harvey, supra (as also the cases cited upon page 221 of the opinion in that case), held that a chattel mortgage was not void per se, because of the
provision allowing the mortgagor to sell the mortgaged property to pay the proceeds to the mortgagee, to be applied to a reduction of the debt. In the case at bar, the original stock of goods, to the amount of $200, being still in the possession of the mortgagor, the mortgage at the time of the filing of the petition in bankruptcy would have been a valid lien to that extent, if it had been shown that the property originally covered by the mortgage, but previously sold, had not been sufficient to extinguish more than $370, with interest, of the original debt. But no such testimony is presented. The facts show that the mortgagor was allowed to keep the mortgaged property in his possession, and to sell it, and no accounting of the proceeds is made. This would seem, so far as the stock of goods is concerned, to bring the case within the doctrine of Brackett v. Harvey, supra, and to show an understanding or oral agreement, which must be presumed would work to the fraud of creditors subsequent to the mortgagee. It would seem, therefore, that the chattel mortgage, in so far as the stock of groceries is concerned, is invalid.
As to the horses, wagons, etc., no such question arises. The mortgage covered these articles specifically. They were retained by the mortgagor, and were in his possession at the time of filing the petition in bankruptcy, and the mortgagee must be presumed to have retained his lien upon them, even if, as a matter of law, he had lost it as to his other securities. In re Reynolds (D. C.) 153 Fed. 295. The mortgagee was therefore entitled to the possession of the horses and other articles, and to have them sold upon a foreclosure of the chattel mortgage. The proceeds of the sale of these goods, amounting to $418.89, takes the place of the articles, as of the date of the filing of the petition.
As to the expense of the receiver for the care of these horses, amounting to $130, the question is somewhat more difficult. It is evident that, if the mortgagee had a valid lien, the withholding of the property by the receiver, supposedly for the benefit of the creditors, cannot be made to work a loss to the mortgagee. It is considered that the horses should have been viewed in the light of perishable property and disposed of at the most advantageous moment. In the meantime their keep was a legitimate expense of the receiver, payable out of the estate. It does not seem that the entire resulting loss can be charged to the mortgagee, who objected seasonably to the possession of the receiver, and who demanded immediate surrender of the horses to him.
It appears from the record in this proceeding that the mortgagee attempted to foreclose his chattel mortgage, and was prevented from so doing by the possession of the goods in the hands of the receiver. If the receiver could have obtained a revenue from the use of the horses, this revenue might have been used as a set-off; but, inasmuch as nothing of the kind occurred, the mortgagee could only be charged with such portion of the expense, for the care of the horses, as would necessarily have been incurred by him during the process of foreclosing his mortgage. Assuming that this could have been done within the period of 30 days, and that the receiver had the horses in his possession for three months, it is considered that $40 should be deducted to cover the mortgagee's share in the cost of the maintenance of the horses, and