Ke-Sun Oil Co. v. Hamilton

• Decision Date: 26 September 1932
• Docket Number: No. 6753.,6753.
• Citation: 85 ALR 204,61 F.2d 215
• Parties: KE-SUN OIL CO. et al. v. HAMILTON et al.
• Court: U.S. Court of Appeals — Ninth Circuit

85 ALR 204, 61 F.2d 215 (1932)

KE-SUN OIL CO. et al. v. HAMILTON et al.^*

No. 6753.

Circuit Court of Appeals, Ninth Circuit.

September 26, 1932.

Donald Campbell, of Great Falls, Mont., and Louis P. Donovan, of Shelby, Mont., for appellants.

George E. Hurd, of Great Falls, Mont., for appellees.

Before WILBUR and SAWTELLE, Circuit Judges, and NORCROSS, District Judge.

WILBUR, Circuit Judge.

The General American Tank Car Corporation brought an action against the Sunburst Oil & Refining Company for the appointment of a receiver for the management of the affairs of the latter corporation. It alleged that the Sunburst Oil & Refining Company, which we will hereinafter refer to as the "oil company," is indebted to it upon an unsecured claim for $76,517.62 for rent of its tank cars. It alleged that the oil company owns and operates an oil refinery at Great Falls, Mont.; that it owns large interests in oil and gas lands, leases, royalties, and oil well drilling equipment, tools, appliances, and a large stock of refined gasoline, fuel oil, road oil, and other petroleum products largely stored at the refinery; that it is the owner of accounts receivable; that the oil company's property is worth approximately $1,726,000; that it has issued stock of the par value of $2,230,605; that its outstanding indebtedness is approximately $811,000; that of this amount $280,000 is secured by a mortgage, and $100,000 represents the taxes due to the United States, to the state of Montana, and diverse counties; that $75,000 of the indebtedness represents judgments against the defendant; that a proceeding for the foreclosure of a mortgage of $150,000 with $14,000 interest due the Rio Grande Oil Company has been instituted; and that this mortgage is upon lands and interests in lands in Toole county, Mont. The plaintiff alleged that actions had been brought in the District Court for the Ninth Judicial District of Montana against the oil company, and that in these cases judgments have been obtained. Two of these judgments were in favor of the Ke-Sun Oil Company, one for $397.48, one for $511.01 (the evidence shows a third one for $385.23 in favor of that company). The judgment in favor of H. G. Syster is alleged to be for $958.92. In other actions attachments have been levied upon the property of the oil company, one by G. E. Wilson to recover $1,670.50; another by Warren Leslie Galbraith for $125; another by E. E. Gibson for $374.40 (it subsequently appears that the amount was $748.80); that E. L. Bell, trustee, has recovered a judgment against the oil company for $64,679.08; that the American National Bank has secured a judgment for $4,518.58; and that Herbert H. Williams has secured a judgment for $1,422.50. The evidence shows that attachments were levied in the said actions for $125, $748.80, $64,679.08, $4,518.58, and for $1,422.50. Upon the filing of the complaint, the oil company forthwith filed an answer November 9, 1931, consenting to the appointment of a receiver as prayed for in the bill. Thereupon, upon the same day, a receiver was appointed and empowered to take charge of all the property of the oil company, and to institute, prosecute, and defend all pending and other necessary litigation. The order appointing the receiver enjoined all creditors, stockholders, and other persons "from levying any attachments, executions, or other processes upon or against any of the properties of the defendant, or from taking or attempting to take into their possession, the property or any part of the property of the defendant."

Thereafter, on November 23, 1931, the receiver petitioned the court for an injunction prohibiting litigants who had obtained judgments or attachments upon the property of the oil company from enforcing those judgments or attachments by execution or sale and requiring them to relinquish the aforesaid attachments and levies of execution. The petition of the receiver named the sheriff of Cascade county, Mont., and the sheriff of Toole county, Mont., as respondents, and also set out a list of claims of various creditors upon which actions had been prosecuted to judgment and executions issued and levied, or were about to be issued and levied against the property of the defendant, and actions in which attachments had been levied, including, among others, those hereinbefore mentioned. Included in these claims are those of the appellants. As to the claims of appellant Ke-Sun Oil Company, execution had been levied and sales thereunder had been set for December 4 on two judgments, one for $397.48, the other for $511.01. The same was true in regard to the appellant H. G. Syster for $958.92. The third claim of the Ke-Sun Oil Company for $385.23 had been reduced to judgment August 26, 1931, and an attachment had been levied on that date, but no execution had been levied. Appellant Tenbroeck had a judgment for $290.65 upon which execution had been levied October 17, 1931. Appellant Galbraith had an attachment levied October 9, 1931, for $125, and E. E. Gibson had one for $748.80 levied October 9, 1931. John Krutzfeld had an attachment for $80 levied November 2, 1931. The receiver alleged that the issuance and levy of such attachments and executions on money and property belonging to the oil company had prevented him from taking possession of such property as required by the order of the court, and that, by reason of the levy of such attachments, persons owing money to the oil company had been prevented from paying the same to the receiver, and that, by reason of the issuance and levy of such attachments, the receiver will be embarrassed in the orderly administration of his trust, and unable to proceed with the order of the court appointing him receiver. He called attention to the impending execution sales advertised for December 4, 1931; the petitioner alleged that he is informed and believes that creditors, whose attachments and executions were levied prior to November 9, 1931, are entitled to liens upon the property so levied upon and to a preference in payment of their claims to the extent of such liens, but averred that an orderly administration of his trust requires that all moneys and properties so levied upon be reduced to the petitioner's possession and such liens and preferences be taken care of in the course of his administration. An order to show cause and subpœna were issued upon such petition, and appellants appeared in reply and moved to dismiss the petition upon the ground that the court had no jurisdiction to grant a writ of injunction to stay the proceedings in the state court in which they were parties upon attachments and executions levied before the appointment of the receiver, and that the court had no jurisdiction to remove from the custody of the state courts property levied upon and seized by the appellant O. D. Clark, as sheriff of Toole county, Mont., upon writs of attachment and of execution levied before the appointment of a receiver, and that the petition does not state facts sufficient to entitle petitioner to the relief demanded, or to any relief. The court made a preliminary order restraining the sheriff's sale for a period of sixty days, and thereafter filed a memorandum decision and made an order enjoining the respondent creditors and officers from selling or disposing of any of the property or money of the Sunburst Oil & Refining Company levied upon by them, and that all writs of execution, of attachment, or of any other character, levied upon any of the property of the oil company, "including moneys held under garnishment process, or otherwise, be and the same are hereby released from such attachment, execution, garnishment process or other writ." The respondent sheriffs were directed to forthwith release the same, and the respondents were required to surrender and deliver to the receiver all the property of the Sunburst Oil & Refining Company "so subjected by said defendants, or any of them, to writs of attachment, execution, garnishment process or other writ." It was further ordered that the liens lawfully acquired by the defendants against the property should be protected by the receiver in accordance with the priority to which they are entitled, and that the receiver shall present the same to the court for due administration and adjudication as to their priorities, and the receiver "shall so operate the properties herein involved, so surrendered to him, in such manner as not to affect such liens or any thereof unless otherwise ordered by this court." It appears from the statement that no evidence was introduced in the court below, and that the matter was determined upon the petition and motion to dismiss.

It will be observed that in the petition and order no distinction was made between attachments of personal property of which possession had been taken by the sheriff, attachments of personal property by garnishments, and the attachment of real property by writ of attachment or writ of execution.

In support of this order the appellees rely strongly upon the decision of this court in the case of Pacific Coast Pipe Co. v. Conrad City Water Co., 245 F. 846, wherein Judge Dietrich, speaking for the court, held that the levy of an execution or writ of attachment on land in the state of Montana did not place the real estate in the custody of the federal court issuing the attachment or execution so as to preclude the sale thereof by a receiver of the property subsequently appointed by the state court. In that case the situation of the federal and state courts was the exact reverse of that in the case at bar. There the state court had appointed a receiver after a writ of attachment issuing out of the federal court had been levied on the property. The state court enjoined the litigant in the federal court from proceeding with his attachment and execution. The United States District Court from which the writs of attachment had been issued was asked to ignore the receivership and to proceed...