Sterrett v. Stoddard Lumber Co.

• Citation: 150 Or. 491,46 P.2d 1023
• Parties: STERRETT v. STODDARD LUMBER CO.
• Decision Date: 18 June 1935
• Court: Supreme Court of Oregon

46 P.2d 1023

150 Or. 491

STERRETT v. STODDARD LUMBER CO.

Supreme Court of Oregon

June 18, 1935

In Banc.

Appeal from Circuit Court, Baker County; C. H. McColloch, Judge.

Action brought by Floyd B. Sterrett, as receiver of the C. C Woodall Company, an insolvent corporation, against the Stoddard Lumber Company, an Oregon corporation, to recover $450, with interest, paid by the corporation to defendant one of its creditors, after it became insolvent. The cause was tried by the court without the intervention of a jury and a judgment was rendered in favor of defendant. Plaintiff appeals.

Affirmed.

Harold Banta, of Baker (Hallock, Donald & Banta, of Baker, on the brief), for appellant.

A. A. Smith, of Baker (Heilner, Smith, Grant & Fuchs, of Baker, on the brief), for respondent.

BEAN Justice.

The Stoddard Lumber Company, an Oregon corporation, was engaged in manufacturing and selling lumber at Baker, Or., in the year 1930. Its principal office was at Baker, Or., and its credit manager resided there; the bookkeeping and accounting department was at Ogden, Utah. During that year it accepted, at its Baker office, orders for the sale of lumber in the sum of $1,908.70 to the C. C. Woodall Company, Inc., a Washington corporation, which was engaged in business at Yakima, Wash. Application for appointment of a receiver for the corporation was made on October 7, 1931. On October 13, 1931, Floyd B. Sterrett was appointed receiver by order of the superior court of the state of Washington for Yakima county. Therefore plaintiff states that the company became insolvent on October 13, 1931. This case was commenced April 12, 1932, more than six months after the application was filed. That company issued its trade acceptance, due January 3, 1931. Prior to the due date an extension was granted to March 3, 1931. On March 6, 1931, the Stoddard Lumber Company received at its office at Baker, Or., a check from the C. C. Woodall Company in the sum of $250, drawn on the First National Bank at Zillah, Wash. The check was deposited by the Stoddard Lumber Company to its credit in the First National Bank of Ogden, Utah. In due course, and on March 10, 1931, the check reached the First National Bank at Zillah, Wash., and that bank then stamped by perforation the check as paid. At the time the check was received by the defendant, a new trade acceptance was prepared and executed by the C. C. Woodall Company covering the balance of the account. On June 5, 1931, the Stoddard Lumber Company received at its Baker office another check in the sum of $200 from the C. C. Woodall Company. That check was likewise deposited in the First National Bank of Ogden, Utah, and in due course, and on June 16, 1931, reached the First National Bank at Zillah, Wash., and on that date that bank stamped the check by perforations as paid.

Plaintiff asserts that the trade acceptances were payable in Washington. Defendant contends that the evidence does not support this statement. Plaintiff was unable to produce the first original trade acceptance, and defendant was unable to produce the last one. A copy of one of the trade acceptances was, however, produced by plaintiff, and this showed the place of payment blank.

There is no allegation in the plaintiff's complaint, nor any evidence in the case, that at the time the payments were received by defendant at its office at Baker, Or., it had any knowledge or reason to believe that the C. C. Woodall Company was insolvent, nor is there any claim on the part of plaintiff that this defendant had any such knowledge at the time such payments were made. After the first payment, the first trade acceptance was taken up and a new acceptance issued. It is alleged and asserted by plaintiff that these two payments were made to the Stoddard Lumber Company on the account while the C. C. Woodall Company was insolvent. Plaintiff, as receiver of the insolvent corporation, brings this action to recover back the payments as preferences under the Washington trust fund doctrine. The trust fund doctrine of the state of Washington, as interpreted by the courts of that state, declares all payments made by a corporation, in fact insolvent, preferences, even though the recipient has no knowledge or cause to believe the corporation is insolvent.

The plaintiff alleges that during all the times herein mentioned, and particularly at the time of the sale of the merchandise and the making of the payments mentioned, it was the law of the state of Washington, as evidenced by a long line of decisions of the Supreme Court, and the court of last resort of said state, that an insolvent corporation may not prefer its creditors; that, although an individual creditor may do so, even to the exhaustion of its property, the right does not exist in a corporation; that its property, on insolvency, becomes a trust fund for the benefit of all its creditors, to be equally and ratably distributed among them; that, if a corporation, being insolvent, did prefer one of its creditors over another, the receiver or trustee of said insolvent corporation could recover back such preference for the benefit of the creditors thereof to be later distributed among them ratably; that it is further the law of the state of Washington, as evidenced by said decisions, that, in an action or suit on the part of the receiver to recover such an unlawful preference, it is not necessary that he show that the creditor at the time of receiving the preference had knowledge or reasonable cause to believe that the corporation was insolvent, but it is sufficient, in order to sustain such a recovery, that it be shown that the corporation was insolvent at the time the payment was made.

It is alleged in defendant's answer that on March 9, 1931, the Legislature of the state of Washington duly and regularly passed a law, chapter 47 of the Session Laws of the state of Washington, at its regular session in the year 1931 (page 160), relating to insolvent corporations, defining preferences, and limiting the time in which actions for preferences should be commenced. Said law provides as follows:

"Chapter 47. Preferences of insolvent corporations. An Act relating to insolvent corporations, defining preferences, providing for offsets, and limiting the time in which actions for preferences may be commenced.

"Section 1. Actions in the courts of this state by a trustee, receiver or other liquidating officer of an insolvent corporation, to recover a preference as herein defined may be commenced at any time within six months from the time of the filing of the application for the appointment of such trustee, receiver or other liquidating officer.

"Sec. 2. a. A corporation shall be deemed to have given a preference if, being insolvent, it has, within four months before the filing of an application for the appointment of a trustee, receiver, or other liquidating officer of such corporation, procured or suffered a judgment to be entered against itself in favor of any person, or made a transfer of any of its property, and the effect of the enforcement of such judgment or transfer will be to enable any one of the creditors of said insolvent corporation to obtain a greater percentage of his debt than any other such creditors of the same class."

By section 2, subdivision (b), of chapter 47 (page 160), in order for the receiver to recover a preference for payments made prior to the four-month period from the time of filing an application for the appointment of a receiver, the receiver is required to show that the creditor had knowledge or reason to believe that the corporation was insolvent. By the act, the receiver is also required to commence action for the recovery of any preference within six months from the time the application was filed for his appointment. The substantive law was not changed. What the Supreme Court had previously said was the law of the state of Washington was simply written upon the statute books of the state, with the limitations mentioned. This law went into effect on June 10, 1931. This action was commenced by the plaintiff, without authority of the court of the state of Washington, and without authority or permission from the courts of this state.

The lower court, after holding that the transactions involved were Oregon, and not Washington, transactions, and that, even if governed by the Washington law, the action was not commenced within the limitations imposed by the law of that state, held that the plaintiff was not entitled to recover and dismissed the action.

It is not alleged in the complaint in this case, nor is there any proof, that there is any title in the plaintiff, other than the order of appointment of himself as receiver by the courts of the state of Washington. Plaintiff Floyd B. Sterrett, who was so appointed, is without title to the assets, property or rights of any kind within the state of Oregon belonging to or in which the C. C. Woodall Company, Inc., has or claims an interest, and therefore has no right to maintain the present action. A court appointing a receiver cannot give such receiver authority to act in another state without the assistance of the courts thereof. The receiver's power extends no further than that of the court appointing him, and cannot be asserted as a matter of right beyond the territorial jurisdiction of such court. Clark on Receivers, 431, § 318; 53 C.J. 391, § 637; Olney v. Tanner (D. C.) 10 F. 101, 105; Sterrett v. Second Nat. Bank (C. C. A.) 246 F. 753, 3 A. L. R. 256 (see annot. 3 A. L. R. 263); Hayward v. Leeson, 176 Mass. 310, 57 N.E. 656, 49 L. R. A. 725; Lion Bonding & S. Co. v. Karatz, 262 U.S. 77, 43 S.Ct. 480, 67 L.Ed. 871. This rule is stated in 53 C.J. 391, § 637, as follows: "Although foreign receivers lack the power to...