Title: Pearson v. First National Bank

State: arkansas

Issuer: Arkansas Supreme Court

Document:

Max H. PEARSON v. FIRST NATIONAL BANK of
DeWitt

95-1084                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered June 24, 1996


1.   Civil procedure -- intervention -- three requirements for
     intervention as matter of right. -- There are three
     requirements that an applicant must meet in order to intervene
     as a matter of right:  (1) he has a recognized interest in the
     subject matter of the primary litigation; (2) his interest
     might be impaired by the disposition of the suit; and (3) his
     interest is not adequately represented by existing parties;
     intervention as a matter of right cannot be denied; however,
     if a party seeking intervention will be left with his right to
     pursue his own independent remedy against the parties in the
     primary proceeding, regardless of the outcome of the pending
     case, then he has no interest that needs protecting by
     intervention of right.

2.   Bankruptcy -- appointment of receivers -- when appointment
     proper. -- The cases in which receivers ordinarily will be
     appointed are confined to those in which it can be established
     to the satisfaction of a court that the appointment of a
     receiver is necessary to save the property from injury or
     threatened loss or destruction, or that the claimants in
     possession are excluding another party from rights which the
     latter has in the land; a receiver is a fiduciary representing
     the court and all parties in interest and an embodiment of the
     creditors standing as an agent for them.
 
3.   Civil procedure -- intervention as matter of right should have
     been allowed -- trial court's order of receivership affected
     appellant's claim. -- Where appellee did not seek receivership
     so it could represent all interested parties, but instead the
     primary purpose of the receivership was to augment appellee's
     own position in the proceedings before the FCC, the appellate
     court concluded that the trial court's order affected
     appellant's claim to the FCC that he was entitled to a radio
     license; appellant should have been allowed to contest the
     appointment of appellee as receiver; the trial court erred in
     refusing to allow appellant to intervene as a matter of right.
     

     Appeal from Arkansas Chancery Court, Southern District;
Russell Rogers, Chancellor; reversed and remanded.
     Hoofman & Pike, P.A., by:  George E. Pike, Jr., for appellant.
     Russell D. Berry, for appellee.

     Bradley D. Jesson, Chief Justice.June 24, 1996   *ADVREP*SC4*







MAX H. PEARSON,
                    APPELLANT,

V.

FIRST NATIONAL BANK OF DEWITT,
                    APPELLEE,





95-1084


APPEAL FROM THE ARKANSAS COUNTY
CHANCERY COURT, SOUTHERN
DISTRICT (E94-53)


HONORABLE RUSSELL ROGERS
CHANCERY JUDGE




REVERSED AND REMANDED.


                BRADLEY D. JESSON, CHIEF JUSTICE

     
     This is an intervention case.  Appellee First National Bank of
DeWitt ("First National"), a secured creditor of a company that
owned and operated a federally licensed radio station, successfully
sought an ex parte order appointing it receiver for purposes of
furthering its claim before the Federal Communications Commission
("FCC") that it was entitled to the radio license.  In this appeal,
appellant Max H. Pearson, who also claims he is entitled to the
license, contends that he should have been allowed to intervene in
the cause of action as a matter of right.  We agree and reverse and
remand.
     On April 5, 1994, First National initiated a receivership
action against Quadras Corporation, which owned and operated KDEW,
an AM/FM radio station in DeWitt.  According to First National's
petition, it was a creditor of Quadras, whose stockholders
personally guaranteed the debt.  The debt was secured by a pledge
of all outstanding common shares.  First National had perfected its
security by taking actual possession of the stock certificates. 
When Quadras defaulted, First National in a separate action sought
and obtained a judgment in Lonoke County Circuit Court against
Quadras and its sole stockholder, Willie R. Harris.  First National
was awarded all outstanding common stock of Quadras.   
     Thereafter, Quadras filed applications with the FCC to sell
and transfer the license to operate the station.  According to
First National, the FCC failed to recognize its interest as
creditor and owner of Quadras's stock, yet indicated that it would
recognize its status if it were appointed receiver.  The bank thus
petitioned for the appointment "to make appropriate appearances
before the FCC for the purpose of preserving assets and licenses in
connection with Quadras and to ultimately liquidate same in an
orderly fashion."  Pearson was not given notice of the proceeding. 
     On April 6, 1994, the day after First National filed its
petition, the trial court entered an ex parte order appointing the
bank as receiver.  The order expressly provided that First National
"is authorized to prepare, execute and file with the Federal
Communications Commission the forms necessary, including FCC form
316, to effect the involuntary transfer of control and assignment
of license and/or construction permits held by Quadras, Inc., to
the receiver, and to undertake any other action with the Federal
Communications Commission as it deems fit and proper."  
     Pearson filed a motion to intervene on June 20, 1994, which is
the subject of the present appeal.  He claimed that, in July of
1993, he had entered into a contract, subject to FCC approval, to
purchase the Quadras license and other property.  Claiming that
First National had a vested interest in the outcome of any
receivership proceeding and that it had obtained the ex parte order
for the exclusive purpose to interfere with his attempt to perfect
an assignment of the radio license, Pearson requested to intervene
for the purpose of setting aside the order.
     In its response to Pearson's motion, First National asserted
that Pearson's contract was void because it had not been authorized
or approved by Quadras officers; rather, it had been signed by
Lucille Harris, the wife of Willie R. Harris, whom the bank
maintained had no authority to act on behalf of the corporation.  
The trial court denied Pearson's motion to intervene.  When Pearson
asked the court to reconsider its ruling, the trial court conducted
a hearing and again denied intervention.  In so ruling, the trial
court reasoned that Pearson had not shown that First National's
appointment as receiver would damage him, and that Pearson's
contract claim could be litigated in a separate action.  It is from
this order denying intervention that Pearson appeals. 
    The rule governing intervention as a matter of right in a civil
case is Arkansas Civil Procedure Rule 24(a).  It reads: 
     (a) Intervention of Right. Upon timely application anyone
     shall be permitted to intervene in an action: (1) when a
     statute of this state confers an unconditional right to
     intervene; or (2) when the applicant claims an interest
     relating to the property or transaction which is the
     subject of the action and he is so situated that the
     disposition of the action may as a practical matter
     impair or impede his ability to protect that interest,
     unless the applicant's interest is adequately represented
     by existing parties. 

We have articulated three requirements that an applicant must meet
in order to intervene as a matter of right:  (1) that he has a
recognized interest in the subject matter of the primary
litigation; (2) that his interest might be impaired by the
disposition of the suit; and (3) that his interest is not
adequately represented by existing parties.  Billabong Prods., Inc.
v. Orange City Bank, 278 Ark. 206,