Morlan v. Lucey Mfg. Corporation
| Decision Date | 01 August 1925 |
| Docket Number | No. 1914.,1914. |
| Citation | 7 F.2d 494 |
| Court | U.S. District Court — Southern District of California |
| Parties | MORLAN v. LUCEY MFG. CORPORATION. |
Lawler & Degnan, of Los Angeles, Cal., for plaintiff.
Gibson, Dunn & Crutcher, of Los Angeles, Cal. (Godfrey Goldmark, of New York City, and Henry F. Prince, of Los Angeles, Cal., of counsel), for defendant.
The plaintiff, as assignee of approximately $215,000 of claims of California creditors of the Lucey Manufacturing Company, a New York corporation, brought this action in the superior court of California in the ordinary form of assumpsit with ancillary attachment. Levy and garnishment thereunder were made of defendant's assets in California, under Code Cal. § 537.
Defendant removed the case to this jurisdiction in due course, and answered, after denying the validity of the assignments as to part of the cause of action, that defendant company was in receivership by appointment of the United States District Court for the Southern District of New York on a creditor's bill, to which defendant, by its answer there, had assented; that said receivers were invested since August, 1923, with the custody and control of the property and assets of defendant, of every kind, wheresoever situate, said order appointing the receivers carrying the usual injunction against interference; that several of the claims comprising plaintiff's cause of action had before been assigned to a creditors' committee of New York, organized after receivership to preserve the assets and to work out a reorganization of the company, looking to time acceptances by the creditors generally, and ultimately to the liquidation in full of the corporation's indebtedness; that the Farmers' & Merchants' National Bank of Los Angeles, the largest single creditor, had through its representative, Rossetti, collaborated with the purposes of the creditors' committee, organized as an adjunct of the equity suit, and he had agreed with the committee that, as to future deposits of the receipts of the company in California, the bank would "treat same as receivership funds"; that because of these and other such overtures on the part of the bank's officers, plaintiff in this action, as assignee of the claims, is estopped by election of his assignors from attaching the assets of defendant situated in California. Such, briefly, are the defenses made here.
A jury being waived, the case was tried to the court. The evidence submitted tended to show that receivers for the property of the defendant were appointed in the Southern district of New York on the usual creditors' bill, not charging insolvency, but admittedly for the purpose of conserving the assets. In August, 1923, the defendant answered the bill in the New York court as proper and submitted to the relief sought in that bill. Soon after a creditors' agreement was stipulated in New York between certain creditors, agreeing to accept time notes of the company. It was intended to obtain extensions for two years from creditors throughout the world; the company doing extensive business in several of the states and in foreign countries. The California claims approximated in amount a quarter of a million dollars, and a majority of the claims were filed with the creditors' committee organized in New York. The evidence further disclosed that the receivers took steps through the resident agent of the company to inform California creditors that the former did not recognize the claims of local creditors as having priority over the general creditors.
The plans of the creditors' committee in New York for liquidation and reorganization for sundry reasons not necessary to this recital, did not mature, and Rossetti, an officer of the Merchants' & Farmers' National Bank, and recognized spokesman of the California creditors in the negotiations with the New York committee, was notified that the reorganization scheme was abandoned and that the "credits of the receivers in California would be withdrawn." Then it was the bank by its officers assigned to a subordinate officer of the bank the plaintiff's claims, which had been handled by Rossetti in his conferences with the committee — inter alia, the negotiable bills of the company held by the bank for $150,000. It was shown at the trial that Rossetti, the representative of the bank and of other claims, had attended the creditors' meetings in New York with the view of co-operating with the New York receivers, and in correspondence represented to the committee that the California creditors would "Withhold hostile proceedings" in California, provided no action was taken by receivers "which would be adverse to the interests of California creditors." It was agreed that the receivers would not undertake to remove the corporation's assets from California, except on a basis satisfactory to such creditors.
Everett, who had been in control of the company's business in California, was continued in authority by the receivers, with directions to transact future business in the name of the receivers, with assurances from Rossetti that the bank would not disturb any funds deposited with it. Everett circularized the California creditors, to allay any apprehension, that the assets in California would remain in the state, subject to the claims of local creditors. The receivers disclaimed authority for this assurance given out by Everett, instructing him to advise creditors that no preferences whatever could be recognized, and that the assets of the company in California would be applicable to claims of all creditors alike. This pronunciamento was brought to the attention of Rossetti, the acknowledged representative of the local creditors. It may be accepted that the California creditors understood that the hope of the creditors' committee was to conserve the assets everywhere for a distribution ratably. There is likewise evidence that the filing of the claims with the New York committee was upon condition that the assets in California should not be withdrawn without notice and consent of California creditors.
It is contended that, upon this course of conduct, the assignment to the creditors' committee amounted to a submission to the equity suit pending in New York, and was equivalent to an irrevocable election by the California creditors of the remedy they would pursue. There was objection by the defendant to the admission in evidence of the notes payable to the bank, and by the latter through its officers assigned to the plaintiff, on the ground that such assignments were without authority of directors and were therefore conduct ultra vires. Passing from the summary of the pleadings and evidence to legal questions evolved: It may be assumed that this transaction was incidental to the bank's general business, and a necessary measure for the collection of debts due the bank. At any rate, it is not subject to collateral attack by the payor.
The evidence showed that the indorsements were made in course of collection for the bank, and, if open to question by defendants, upon reason and expediency, the practice is approved as one of the implied powers of banks. United States Nat. Bank v. First Nat. Bank, 79 F. 296, 24 C. C. A. 597; Bank of Belleville v. Manufacturers' Bank of Chicago, 101 U. S. 181, 25 L. Ed. 907; Stone v. Gray, 10 Cal. App. 609, 103 P. 155; Dollar v. Int. Banking Association, 13 Cal. App. 331, 109 P. 499. It...
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Banner Mfg. Co. v. United States
...or other inequities are apparent. Consequently, the court have exercised wide discretion where the rule has been invoked, Morlan v. Lucey Mfg. Corp., 9 Cir., 7 F.2d 494, and the facts of the particular case are regarded as important to the conclusion reached. United States v. Oregon Lumber ......