Superior Oil Corporation v. Matlock

• Decision Date: 12 March 1931
• Docket Number: No. 408.,408.
• Citation: 47 F.2d 993
• Parties: SUPERIOR OIL CORPORATION et al. v. MATLOCK et al.
• Court: U.S. Court of Appeals — Tenth Circuit

47 F.2d 993 (1931)

SUPERIOR OIL CORPORATION et al. v. MATLOCK et al.

No. 408.

Circuit Court of Appeals, Tenth Circuit.

March 12, 1931.

Charles A. Steele and N. A. Gibson, both of Tulsa, Okl. (Charles E. Bush, of Tulsa, Okl., on the brief), for appellants.

Charles B. Stuart, of Tulsa, Okl. (Stuart, Coakley & Doerner, Eben L. Taylor, and F. A. Bodovitz, all of Tulsa, Okl., on the brief), for appellees.

Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges.

McDERMOTT, Circuit Judge.

On July 30, 1930, a state court appointed a receiver for the Superior Oil Corporation, in response to a petition filed that day. The receiver immediately took charge of the properties within the jurisdiction of the court, and has been in possession and control ever since.

On July 31, 1930, the plaintiff in this case filed his bill of complaint, asking for the appointment of a receiver for the same corporation. The plaintiff is a stockholder of the corporation; he avers various acts of mismanagement by the corporate officers and also that the corporation is without available assets for the payment of its debts; the action is brought on behalf of all stockholders and creditors who may choose to join in its prosecution. The relief sought is that ordinarily incident to a stockholders' and creditors' bill, to wit, the appointment of a receiver; an order enjoining the corporation and its officers from paying certain indebtedness claimed to be invalid; that all creditors and stockholders be enjoined from instituting any proceedings against the corporation; and for an eventual sale of the property. The bill disclosed the proceedings in the state court, which plaintiff alleged were collusive and fraudulent. Among the defendants in the federal court action are Mr. John Rogers, the receiver appointed by the state court, and the Exchange National Bank and the Exchange National Company, the plaintiffs in the state court.

All of the defendants filed motions to dismiss the bill for want of equity, which were denied. On August 18, 1930, evidence was heard on a motion for temporary injunction and appointment of receiver, which evidence supported the allegations of the bill. On October 14, 1930, the court made findings of fact and appointed one J. L. Essley receiver of the properties then in the possession of Mr. Rogers, the state court receiver. Mr. Essley was directed to apply to the state court for possession of the properties and to institute and defend all litigation to which the corporation was a party. He was directed not to interfere with the possession of the state court receiver until the state court directed a surrender of the properties to him or until the further order of the court, power thereover being expressly reserved. The state court denied Mr. Essley's application for a surrender of the properties.

The defendants, after summons to and severance from three subsidiary codefendants, appeal from these two orders, one declining to dismiss the bill of complaint, and the other appointing the receiver.

The action in the state court was filed, and the state court receiver was in actual possession of the property, before the suit was filed in the United States court. It is of course well settled that if the state court had jurisdiction, its receiver is entitled to retain the possession and control of the properties, and the order of the United States court appointing a receiver is erroneous. Harkin v. Brundage, 276 U. S. 36, 43, 48 S. Ct. 268, 72 L. Ed. 457; Employers' Reinsurance Corp. v. Boston Mut. Life Ins. Co. (C. C. A. 5) 45 F.(2d) 593; Barnett v. Mayes (C. C. A. 10) 43 F.(2d) 521, and cases therein cited. The eminent counsel appearing for the appellees readily concede the rule stated, but forcefully present several reasons why, in their opinion, it is not here applicable. We will discuss the principal grounds urged.

1. It is claimed that the state court was without jurisdiction in that the petition therein filed did not state a cause of action. It must be remembered that we are only concerned with the jurisdiction of the state court and not the proper exercise thereof; it is not for us to pass upon the petition filed in the state court, if it is sufficient to invoke the equity powers of that court as conferred either by state statute or the usual practices in equity. The district court of Tulsa county is a court of general jurisdiction, and it had jurisdiction of the parties and the subject matter. The statutes of Oklahoma confer upon that court the power to appoint a receiver for a corporation which is "insolvent, or in imminent danger of insolvency * * * and in all cases where receivers have heretofore been appointed by the usages of the courts of equity." C. O. S. 1921, § 518. The statute declares a debtor to be insolvent "when he is unable to pay his debts from his own means as they become due." C. O. S. 1921, § 4068. In Oklahoma, a creditor without a judgment may maintain an action for a receiver. Illinois Ref. Co. v. Illinois Coal Co., 130 Okl. 27, 264 P. 904. That a creditor has not reduced his claim to judgment does not go to jurisdiction, in any event, and the objection may be waived. Pusey & Jones Co. v. Hanssen, 261 U. S. 491, 43 S. Ct. 454, 67 L. Ed. 763; Harkin v. Brundage, supra; Southern Pacific R. Co. v. United States, 200 U. S. 341, 349, 26 S. Ct. 296, 50 L. Ed. 507; Brown, B. & Co. v. Lake Superior Iron Co., 134 U. S. 530, 535, 10 S. Ct. 604, 33 L. Ed. 1021.

Does the petition, in the state court suit, disclose that the subject matter of the suit is of a class of which a court of equity has jurisdiction, under the Oklahoma statutes or decisions? There can be but one answer to the question. One of the plaintiffs in that suit is a contract creditor, the other a stockholder. It is alleged that the corporation is controlled by one man, who has conducted its affairs for his personal benefit to the detriment of the corporation; that the corporation is heavily indebted, and many suits by creditors are threatened which, if brought, will so diminish the value of the corporate properties that its assets will be insufficient to pay its debts. It is alleged that the corporation is unable to meet its payroll, and that if its employees quit, many of its oil wells will be permanently ruined by salt water. It is alleged that the officers of the corporation are selling its oil to persons unable to pay therefor; that unless its properties are conserved and orderly administered, they will be dissipated. The facts so alleged are ample to invoke the jurisdiction of the state court. In fact, the allegations of that petition present substantially the same situation, as far as the propriety of a receivership is concerned, as does the plaintiff's own bill in the federal court. It is claimed that the general allegations of fraud in the state court petition are insufficient to justify the appointment of a receiver. We have no concern with the allegations of that petition other than to determine whether its "subject-matter is of a class over which a court of equity has jurisdiction." Southern Pacific R. Co. v. United States, 200 U. S. 341, 349, 26 S. Ct. 296, 297, 50 L. Ed. 507.

2. It is urged that a receivership is not an independent remedy, but is purely ancillary to other relief sought. This is sound law. Pusey & Jones Co. v. Hanssen, 261 U. S. 491, 497, 43 S. Ct. 454, 67 L. Ed. 763; Martin v. Harnage, 26 Okl. 790, 110 P. 781, 38 L. R. A. (N. S.) 228; Wagoner Oil & Gas Co. v. Marlow, 137 Okl. 116, 278 P. 294; Hottenstein v. Conrad, 9 Kan. 435; City of Parsons v. Parsons Water Supply & Power Co., 104 Kan. 294, 178 P. 438; Vila v. Grand Island Electric Light, Ice & Cold Storage Co., 68 Neb. 222, 94 N. W. 136, 97 N. W. 613, 63 L. R. A. 791, 110 Am. St. Rep. 400, 4 Ann. Cas. 59; Grays Harbor Commercial Co. v. Fifer, 97 Wash. 380, 166 P. 770; French v. C. F. & T. Co., 124 Or. 686, 265 P. 443; Hoiles v. Watkins, 117 Ohio St. 165, 157 N. E. 557, 61 A. L. R. 1203; Bancroft Code Practice & Remedy, vol. 3, p. 5418, § 4121. It is claimed that the prayer of the state court petition is only for a receiver. But in Oklahoma, the prayer of the petition "does not determine the relief to which a party may be entitled, nor the measure of relief to be applied." Owens v. Purdy, 90 Okl. 257, 217 P. 425, 429; Myler v. Fidelity Mutual Life Ins. Co., 64 Okl. 293, 167 P. 601. However, the prayer of the petition in the state court is not limited to the appointment of a receiver. The primary prayer is that the court administer the properties of the corporation, and "enforce and adjust the rights, liens and equities of all creditors and stockholders." An injunction is prayed against the...