Haile v. Henderson Nat. Bank

• Decision Date: 13 August 1981
• Docket Number: No. 79-1296,79-1296
• Citation: 657 F.2d 816
• Parties: W. Henry HAILE, Receiver-Appellant, v. HENDERSON NATIONAL BANK, Cleveland J. Bridges and Betty Bridges, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 816

657 F.2d 816

W. Henry HAILE, Receiver-Appellant, v. HENDERSON NATIONAL BANK, Cleveland J. Bridges and Betty

Bridges, Defendants-Appellees.

No. 79-1296.

United States Court of Appeals, Sixth Circuit.

Argued Feb. 6, 1981.

Decided Aug. 13, 1981.

W. Henry Haile, Haile & Martin, Nashville, Tenn., for receiver-appellant.

John M. Heacock, Jr., Lanier, Shaver & Herring, Huntsville, Ala., Richard Dance, Nashville, Tenn., for Henderson Nat. Bank.

George R. Stuart III, James S. Ward, Charles Dauphin, Birmingham, Ala., Thomas K. Jefferson, Huntsville, Ala., for defendants-appellees.

Cleveland J. Bridges, Betty Bridges, pro se.

Before WEICK, KEITH and MARTIN, Circuit Judges.

WEICK, Circuit Judge.

W. Henry Haile, Receiver of Apostolic Faith Church of God Live Forever, Inc., appellant, has appealed from an order of the United States District Court for the Middle District of Tennessee dismissing certain ancillary actions and proceedings against Cleveland J. and Betty Bridges and the Henderson National Bank for lack of in personam jurisdiction. The sole question presented for review is whether the minimum contacts analysis of International Shoe v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and its progeny properly applies to ancillary actions and proceedings brought by a federal receiver appointed pursuant to Fed.R.Civ.P. 66 and 28 U.S.C. §§ 754 and 1692.

I

The place of incorporation for the Apostolic Faith Church of God Live Forever, Inc. was a matter of some dispute below. The Church was founded in Louisville, Kentucky, sometime in the early 1960's. It was later chartered as a non-profit religious corporation under the laws of the State of Kentucky. John W. Barber, the self-appointed Bishop of the Church, was an itinerant evangelist. In 1970, the Church's headquarters were moved to Decatur, Alabama, and it was later incorporated in Colbert County, Alabama. In 1971, the Church obtained a certificate to do business in the State of Georgia. This began a period of growth and expansion for the Church in terms of activity, though not in terms of membership.

The Church began to operate and acquire assets in Kentucky, Alabama, Georgia, Michigan, Florida, Tennessee, Connecticut and in other (some as yet undetermined) locales as well. The growth was the result of a fraudulent and mismanaged bond issuance scheme engineered by Barber, Henry Atkeison, Woodrow Boggs, Jr. (the Church's attorney), and Thomas L. Hill (a Church officer). This fraudulent bond scheme resulted in the criminal conviction of Atkeison and in debts owed to the Williamson County Bank and the Third National Bank of Nashville. These debts precipitated the receivership and the instant litigation.

In the course of the Church's wheeling and dealing, the Third National Bank became the holder of approximately $186,400.00 in notes secured by bonds in the face amount of $186,250.00 issued by Apostolic. These notes had been discounted by Apostolic to the Christian Credit Corporation, which in turn had pledged the notes and bonds as collateral for a loan at Third National Bank. The debt to the Williamson County Bank was undisputed.

In September and October of 1975, the two banks filed separate suits in the United States District Court for the Middle District of Tennessee against Apostolic to collect the debts owed them. On December 10, 1975, the two cases were consolidated. Judgment was entered in favor of the banks, and on February 11, 1976, at the request of the banks, Haile was appointed receiver of Apostolic and its assets.

As Haile began to investigate Apostolic, it became apparent that the Church and its officers had seen the writing on the walls as early as 1974 and had begun to transfer its assets to various newly-formed corporations with the intent to protect its remaining assets from pending judgments and to defraud creditors. Some transfers were made after the appointment of the receiver. In its Memorandum of April 4, 1978, the district court found that:

Miracle Deliverance Revivals, Inc., Thomas L. Hill, Barber Enterprises, Inc., Apostolic Rescue Home and Apostolic Faith Church of God Live Forever, Inc., an Alabama corporation, are all alter egos of John H. Barber and Apostolic Faith Church of God Live Forever, Inc., a Kentucky corporation, and that all of these corporations were so completely under the dominion and control of John W. Barber as to exist only on paper.

The court further found that:

(b)ased on the above finding, the assets of Thomas L. Hill, Miracle Deliverance Revivals, Inc., Barber Enterprises, Inc., and Apostolic Faith Rescue Home, Inc., are properly subject to the receivership, because they are, in fact, the assets of Barber and Apostolic.

In commenting upon the conduct of the defendants both prior and subsequent to the institution of proceedings in the Middle District of Tennessee, the court stated as follows: "Never in the legal experience of this court, which spans 41 years as a lawyer and judge, has there ever been such a display of fraud, evasion and deceit."

The factual background delineated above is relevant to the issue presented herein only in so far as it sets the background against which the ancillary proceedings challenged on appeal may be viewed in perspective. The primary action in which Haile was appointed receiver is not challenged on this appeal. The propriety and validity of his appointment are conceded. It is the power of the receiver and the appointment court in the ancillary proceedings which is questioned.

II

In appointing Haile federal equity receiver pursuant to Fed.R.Civ.P. 66, ¹ and 28 U.S.C. §§ 754 ² and 1692, ³ the district court ordered, inter alia :

3. That until the further order of this Court the said receiver be and hereby is authorized forthwith to take and have complete and exclusive control, possession and custody of all the assets and property of the defendants.

4. That the said defendants and any persons holding property of the defendants shall, upon presentation of a certified copy of this order, deliver to the receiver any and all properties of the defendants, Apostolic Faith Church of God Live Forever, Inc. and John W. Barber, real or personal, in their possession or under their control; and that all persons are enjoined from in any way disturbing the possession of the receiver and from prosecuting any actions which affect the property of said defendants;

5. That said receiver be and he hereby is authorized to receive and collect any and all sums of money due or owing to the defendants in any manner whatsoever, whether the same is now due or shall hereafter become due and payable.

7. It is further ORDERED that all creditors of the defendants are restrained from prosecuting any action which affects the property of the defendants, or interferes with the use of properties in the hands of the receiver under the terms of this order.

IT IS FURTHER ORDERED:

8. That the defendants, Apostolic Faith Church of God Live Forever, Inc. and John W. Barber and their respective officers, agents, servants, employees, attorneys and those persons in active concert or participation with them, except the receiver, are enjoined from directly or indirectly:

a. transferring, receiving, changing, encumbering, selling, removing, assigning or otherwise disposing of any assets and property owned, controlled or in possession of Apostolic Faith Church of God Live Forever, Inc. or John W. Barber;

b. destroying, altering or otherwise disposing of any books and records of accounts, titles, documents and other papers of any kind belonging to the defendants or containing information about the defendants' activities, except that the defendants and their agents shall, upon demand, surrender said books and records to the receiver;

9. No property or assets of the defendants may be sold, abandoned or disposed of pending further orders of this Court.

Acting pursuant to the court's order of February 11, and in accordance with 28 U.S.C. § 754, Haile filed certified copies of the complaint and order appointing him receiver with the clerk of the United States District Court for the Northern District of Alabama on February 12, 1976.

Cleveland J. Bridges is pastor of the New Jerusalem Apostolic Faith Church in Decatur, Alabama. This is the mother church of the Apostolic Faith Church of God Live Forever, Inc. Bridges and his wife Betty are citizens and residents of Huntsville, Alabama. Huntsville is located in the Northern District of Alabama. On or about October 4, 1974, the Bridges executed and delivered to the debtor, John W. Barber, a promissory note in the amount of $3,800.00. The note was secured by a mortgage on real property located in Huntsville, Alabama, executed and delivered to Barber on or about October 4, 1974. A few payments were made and then the Bridges defaulted on the note. Pursuant to his duties as receiver, Haile brought suit on the note against the Bridges on August 29, 1977 in the court of his appointment. Service was attempted by United States Marshals on several occasions but was evaded by the Bridges. Service was also attempted by attachment of the real estate located in Alabama. Upon the Bridges' failure to answer, default judgment was entered in favor of the receiver on March 28, 1978.

On April 5, 1978, the Bridges made a "special appearance" in the appointment court for the purpose of challenging the court's jurisdiction over their persons or property. ⁴ The basis of their challenge was a lack of minimum contacts with the State of Tennessee and a lack of effective service of process.

By Memorandum and Order of February 26, 1979, the appointment court dismissed the action against the Bridges finding that the court did not have jurisdiction to entertain the suit. Significantly, the Memorandum cites no cases in support of the dismissal. The court reasoned as follows:

The defendants are non-residents of the State of Tennessee. They have no minimal contacts with...