First Nat. Bank v. Stewart Fruit Co.

• Decision Date: 19 February 1927
• Docket Number: No. 1642.,1642.
• Parties: FIRST NAT. BANK OF MEDFORD, OR., v. STEWART FRUIT CO.
• Court: U.S. District Court — Northern District of California

17 F.2d 621 (1927)

FIRST NAT. BANK OF MEDFORD, OR., v. STEWART FRUIT CO.

No. 1642.

District Court, N. D. California, S. D.

February 19, 1927.

Irvine P. Aten, of Fresno, Cal., for Hasegawa Co.

Knight, Boland & Christin, of San Francisco, Cal., for receiver.

KERRIGAN, District Judge.

On March 2, 1926, the First National Bank of Medford, Or., a simple contract creditor of the Stewart Fruit Company, filed a bill in equity stating that the Stewart Fruit Company was unable to pay its obligations as they matured, and that its assets were in danger of being dissipated by forced sales, if a receiver were not appointed for the benefit of all creditors. On the same day the Stewart Fruit Company filed its answer, admitting the allegations of the bill, and consenting to the appointment of a receiver. The receiver was appointed by this court.

The Hasegawa Company, also a simple contract creditor, has not participated in any of the proceedings under the receivership, and has at all times refused to accept receiver's certificates, or in any way to take part in the attempts made by the receiver to settle claims against the Stewart Fruit Company. This company instituted an action in the state court to recover the sums due it from the Stewart Fruit Company, and, on December 9, 1926, a judgment was entered in the sum of $2,577.50 and costs. On the same day the Hasegawa Company ordered the sheriff of Fresno county to levy execution on certain property of the Stewart Fruit Company located in that county.

Subsequently a temporary restraining order issued from this court, restraining the sheriff from proceeding further under this levy. The sheriff's return on the order to show cause sets up the defense that the order appointing the receiver was void. The same question has been raised by Hasegawa Company by a motion to revoke the appointment of the receiver.

There are therefore two matters before the court at this time: First, the creditor's motion to revoke the receivership; and, second, the receiver's motion for a preliminary injunction against the sheriff of Fresno county.

The Hasegawa Company urges that the appointment of the receiver was void, because the bill upon which he was appointed lacked equity, being an attempt by a simple contract creditor, without lien on any assets of the Stewart Fruit Company, to enforce a purely legal right arising out of contract in equity. It contends that the consent to the appointment of the receiver by the Stewart Fruit Company in no way enlarged the equity jurisdiction of the court. Assuming that the appointment of the receiver is in fact void, the Hasegawa Company relies upon its right as a judgment creditor to appear and secure the revocation of the appointment of the receiver on motion, and without intervention or other formal appearance in the action in which the receiver was appointed.

It is true that a simple contract creditor cannot have a receiver appointed to take possession of the assets of an individual debtor. 1 Tardy's Smith on Receivers, 649. It is also true that such a creditor cannot have a receiver of corporation assets appointed, when the corporation resists such appointment. Hollins v. Brierfield Coal & Iron Co., 150 U. S. 371, 14 S. Ct. 127, 37 L. Ed. 1113; Pusey & Jones Co. v. Hanssen, 261 U. S. 491, 43 S. Ct. 454, 67 L. Ed. 763. But where a corporation, sued by a bill like that in the present case, answers, admitting the facts pleaded, and consenting to the appointment of the receiver, or otherwise waives the...