S.E.C. v. Lincoln Thrift Ass'n

• Decision Date: 28 June 1978
• Docket Number: No. 77-2633,77-2633
• Citation: 577 F.2d 600
• Parties: SECURITIES & EXCHANGE COMMISSION, Plaintiff-Appellee, v. LINCOLN THRIFT ASSOCIATION et al., Defendants, and Fred Thender et al., Depositors-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 600

577 F.2d 600

SECURITIES & EXCHANGE COMMISSION, Plaintiff-Appellee, v. LINCOLN THRIFT ASSOCIATION et al., Defendants and Fred Thender et al., Depositors-Appellants.

No. 77-2633.

United States Court of Appeals Ninth Circuit.

June 28, 1978.

Jack Levine, Phoenix, Ariz., for depositors-appellants.

George G. Yearsich, Honolulu, Hawaii, for plaintiff-appellee.

Appeal from the United States District Court for the District of Arizona.

Before BARNES and KENNEDY, Circuit Judges, and BARTELS, District Judge. ^*

BARNES, Senior Circuit Judge:

This is an appeal by creditors who are not parties to the proceedings below, from an Order of the United States District Court for the District of Arizona which denied the appellant creditors' motion to wind up a Securities & Exchange Commission initiated receivership, and to transfer the pending proceedings to a bankruptcy court, or in the alternative, to issue an order requiring an election of a new board of trustees and a creditors' committee to carry out the liquidation of the assets of the companies in the existing receivership.

JURISDICTION :

Before discussing the merits of the case we must dispose of two jurisdictional issues. First, whether the appeal in this case is taken from an appealable interlocutory order under 28 U.S.C. § 1292(a)(2) and second, whether the appellants have standing to raise this appeal.

With respect to the first jurisdictional issue, appellees argue that the order appealed from here does not meet the requirements of 28 U.S.C. § 1292(a) (2), and as such, this Court has no jurisdiction to hear an appeal arising therefrom. That section provides in pertinent part that The courts of appeals shall have jurisdiction of appeals from . . . (i) nterlocutory orders appointing receiverships or to take steps to accomplish the purposes thereof . . . .

Appellees argue that the order appealed from here, refusing to transfer the proceedings to a court of bankruptcy or to allow appointment of a creditors' committee and election of a new board of trustees is not a "wind up" order within the meaning of § 1292(a)(2).

However, in Securities & Exchange Commission v. Bartlett, 422 F.2d 475, 477 (8th Cir. 1970), the court stated that it did have jurisdiction to review just such an order. It seems to us that the result reached by the Eighth Circuit is correct either because the order, if granted, would have terminated control of the district court's supervision of the receivership and as such is a "wind up" order under § 1292(a)(2), or because the order appealed from is clearly an order which takes "steps to accomplish the purposes" of the receivership within the meaning of that statute. Consequently, we hold that this Court does have jurisdiction to review the order appealed from here.

In addition, although neither the appellants nor the appellees raise this issue, there appears to be a serious question as to appellants' standing to appeal. As previously stated, the order appealed from here is an order denying the request of certain creditors either to transfer the proceedings to bankruptcy court, or, in the alternative, to allow appointment of a creditors' committee and election of new members to the board of trustees to supervise the liquidation. The appellants were not named parties to the Securities & Exchange Commission's complaint as filed in the district court below, nor did they become parties by intervention. ¹

Generally, a non-party to the proceedings has no right to appeal either an order issued during the action or a final Judgment. Moten v. Bricklayers, Masons and Plasterers International Union of America, 177 U.S.App.D.C. 77, 80, 543 F.2d 224, 227 (1976), United States v. McFaddin Express, Inc., 310 F.2d 790 (2nd Cir. 1962), In re Advocate, 140 F.2d 783, 784 (2nd Cir. 1944). There are, however, certain exceptions. See e. g., United States v. Schiavo, 504 F.2d 1 (3rd Cir. 1974). (Appeal taken from denial of order refusing to vacate oral order enjoining news media representatives from publishing information about murder and conspiracy indictments against accused during perjury trial.), Overby v. United States Fidelity and Guaranty Co., 224 F.2d 158 (5th Cir. 1955). (Acting Secretary of Treasury allowed to appeal from denial of claim of privilege where certain documents had been requested even though not a party to action.), In Re Rose, 86 F.2d 69 (8th Cir. 1936). (Person treated as party to proceeding by court below allowed to appeal.) (dicta).

Perhaps the case which is closest to the instant fact situation is West v. Radio-Keith Orpheum Corp., 70 F.2d 621 (2d Cir. 1934). ² In that case the defendant was a holding company who had been placed in receivership. The receiver gave notice to all creditors that on August 31, 1933, it would apply to the court for instructions. Appellant, a large unsecured creditor, was one of the parties served.

The petition filed by the receiver requested, inter alia, that certain portions of the receivership agreement be modified, and for permission to have the subsidiaries refund certain notes and that payments on the notes be immediately sent back to the subsidiaries.

On the day of the hearing (in West v. Radio-Keith Orpheum Corp., supra ), the appellant appeared to object to the proposed order. Two hearings were held and all creditors who wished to speak were heard. The court then entered the order appealed from.

Judge Learned Hand in holding that a creditor who had appeared to object to the proposed order had standing, stated:

. . . (i)t is indeed well settled that generally speaking no person, not a party to a suit, may appeal. . . . The reason for this is that if not a party, the putative appellant is not concluded by the decree, and is not therefore aggrieved by it. But if the decree affects his interests, he is often allowed to appeal. . . . There are many interlocutory decrees passed in such a sequestration suit as this, on which creditors are not cited; it has been the general understanding of the bar that in the ordinary guidance of a receiver they need not be consulted. . . . The receiver did not take that course; it chose to make them parties pro hac vice in order to protect itself; and though we have found little on the point, it seems to us that by so doing it concluded them against further protest. . . . Indeed were it not so, the receiver could get no protection from the court in any way. But if the creditors are concluded by such an order, the reason for refusing them an appeal ends. . . . Such situations are to be distinguished from that in Newberry v. Davison Chemical Co., 65 F.2d 724, 729 (C.C.A. 4). Here the creditors were brought in in invitum; there, though they had avoided all contact with the suit, they tried to affect its course, striving to be, as it were, at once within and without. It seems to us that the appellant has a standing in this court. Id. at 623-24.

In the instant case the creditors were served with notice of the liquidation hearing and were entitled to present their claims to the court if they so desired. Thus, there was participation by the creditors in the proceedings as there was in West, supra. In addition, it seems clear that appellants were not appealing the order as disinterested persons but as persons with a legitimate interest in whether the case was transferred to a bankruptcy court or in election of trustees or in appointment of a creditors' committee.

The creditors here more properly might have moved to intervene and then appealed from the denial of that motion. Nevertheless, on the authority of the West case we conclude the creditors have standing to raise this appeal in order that we can with finality adjudicate the authority of the receiver to act under the supervision of the district court.

FACTS :

On November 24, 1975, the Securities & Exchange Commission filed a complaint seeking an injunction and appointment of a receiver for Lincoln Thrift Association and U. S. Thrift Association. ³ The basis for the receivership was the alleged violation of the Securities Act of 1933 and the Exchange Act of 1934. The Securities & Exchange Commission further alleged that the companies in question were insolvent. The receivership was initiated by the Securities & Exchange Commission under Section 22(a) of the Securities Act of 1933, as amended (15 U.S.C. § 77v(a)) and Section 27 of the Exchange Act of 1934, as amended (15 U.S.C. § 78aa). The defendants in the action, Lincoln Thrift Association and U. S. Thrift Association, are thrift companies organized under A.R.S. 44-2041, et seq.

On the same day that the complaint was filed, the district court judge issued an ex parte temporary restraining order and scheduled a hearing to determine whether the companies should be placed in receivership. Following the hearing before the district court, Continental Service Corporation was appointed temporary receiver and was required, among other things, to take custody and control of all company assets; to conserve and manage the assets for the benefit of the investors; to inquire into the financial condition of the thrift associations, and to present a report to the court as to the status of the companies.

On March 15, 1976, the temporary receiver filed a report which established that the companies had participated in numerous fraudulent activities. At the same time an auditor's report was filed by Arthur Anderson and Associates, showing that the thrift associations and their subsidiaries had total assets of $33,028,204 and total liabilities of $69,183,983 thus establishing their insolvency. No motion for permission to file a bankruptcy petition was made by the creditors at this time. ⁴

On April 22, 1976, a motion for intervention pursuant to Rule 24 of the Federal Rules of Civil Procedure was filed by certain depositors of the Lincoln Thrift Association. The court denied the motion on May 6, 1976, but did allow participation by the moving parties as amicus curiae...