#### F. E. Smith and E. F. Geeen v. Sioux City Nursery & Seed Company *et al.,*Defendants, C. C. Morse & Company *et al.,*Interveners, Appellants, and Sioux National Bank *et al.,*Interveners, Appellees.

Injunction: sale in violation of: *Title.*Pending the appointment of a receiver at the suit of stockholders, an injunction restraining the defendant corporation from transferring its property was issued. At the same time, and before the appointment of the receiver, certain creditors levied attachments upon the property of the defendant corporation, and its officers, in violation of the injunction, transferred certain property to secure its debts. Thereafter the stockholders who had procured the issuance of the 4 injunction and who had instituted the suit, the attaching creditors, and the creditors to whom the property had been transferred agreed that a receiver should be appointed, and that they would return the property attached and transferred to them to the receiver, and that he should pay their claims out of the administration of the estate in preference to the creditors. This agreement was confirmed by the court, and an order made directing the receiver tc¡ *52perform W.’ * *jheld,*{hat unsecured creditors could ñol'unáér sucl? ". ’ ’cirourhstahoea,' insist’ that the1 tibié to the property ássigned'in1 viola-’ 0,'.típp,pí t4@i,pj«pijfion'fIi^.n,Q,t pass tij,er,eby.

Application,.for Receiver,: ,effect,oij..AMEfíA’ríQjn „ 'The,,pep,d,en'cyr,o,f l, an application for tjhe appointment of a receiver does not suspend the rights of a debtor to alienate his property, or that offcreditors *5*tdAmch;'if't'heya'Ct in'g01od'faith:l'"'""',,"r, *-r'n,\*

XTefereiice:'"by'’CRéa'í’íon"olí1 Rte'cteiVER. *’"A*üóurt”iá' áÜ't'hüfiKéd''to o,,|diiject-,a,rrecei>vér to, pay Attaching1 preferred veiled,i tors -the’ amount of their .claims in preference, to..general creditors out of 1 the proceeds of property on which'they have secured a lien prior' "," tíó’tli'e ’áp^'diUtme'ilt'of a‘i?é’céivér,"and Wh'ich'théy"hhvé't'if!rn'é'd‘ldV!ef S,.‘it0r'fcHe¡feeeiver ,uhder, An, agreement that" their-iclaims shall, belaid’ , in preference to, the .general creditors; but such order should, be 6’ vacated to the extent that it provides for the preference of such 7,''’é'féüi'tó'i,s'’''claiffi'á'from'<the'"p’i4ocee'd's .oi”p'roper'ty''dfh'éi' th'áu ttiftt' *irr,*on, which, theirlietf 'has, attached'.,..,',,,'1 ,,1 *iu%¡r*

Ilraiídiilp'n’t‘Conveyances’ *atícacei-^Gr'edit&ns without lien.*' ,A<’creditor* I__vsrhlo,jha^,n0t.^edu5sed’liis-qlaitn t.O/judgmcut^pr othe^y^e.^efipye,^ a lien therefor on the property of the debtor, cannot attack ap, 2 attachment levied on the property of his debtor, or th *4'Bona'fides*of the appointment of a receiver therefor.

Same. A creditor cannot, before judgment and return of execution 2 unsatisfied, maintain a creditor’s bill for the sequestration of the 8 debtor’s property and the appointment of a receiver.

AttafcliniCnt’:^ books' or 'Accoutre: *'Aócounts ¿Aafgéd.*"A’Tévy-óf an 8, attaeirffientAon’books ,of ^ccpupt is nqt a^ev^y-on. tjia’debts, charged v^rmn./Vl

*Appeal from Wol'dbury 'íiisÉrict'*Hów. ^eastic E.. ,<n‘\m’n’onnn */ l>-*■<>r:A-.GrAyíí(0'R,.'tXllclge,/,. iyy,y m *yj/,^**mi!’••urti-it'*

*Saturday,*May 27, 1899.

'W 'W1 !wtp /i ff*’^ <■»;** 4A .Vkipí; v^omO®'*>lM9,5ír,6Ji.jlf8í),6,'',two sto®fch©ld'e»S',<>>f,:fr}i©i'S,i«<Ri»,>0ity 2íRi%eiy:&'S0ed: ©BlíipáMy1 áppli'é'd:ifo¥"fli‘é kjíp'ó'iiitÍR&ñ'^óí a f§"¿eiver•tíiexeior.’,’r *tfliat"nígKt"i£&*}§iopx3faSmár^aaí^and oiJ3,piBi@ieiditQr^,.sii@d(,®ptn'wri't'S>!0f,attechri3jeHty.RiMlfiOa'US8dr:tiEem tcn-Rg, déívred'^W'á ]p0ítí8'ñ'"óf' ítS"p'r8|jéf1%' ‘áHd “tHe'r6f)m-m,n,n b’riowj vni'* .♦ni1.'* ‘irT.’wln’nflCB ’i'toi'h tivw c .'bl'i *W>v**tcJlirfy Ü\eiftSSHMl!,d.Q]JaA!s m> the, fao©*'vain© 'of (£tc6fiauits.«»dGto<tKe folfewing* dayyliy 'Ofkiriagr'é'gtíidfi't‘'df' kTl ’BttPWcf‘?íf tÍLé,',á>t,t’ach-Ü* ‘■'«R *\<!*Viiw» lg cieuitois, the assignees oí tjie aceonnts, and. tp.e oincers *53.of the.company, a receiver was. a-pgointed. A written stipulation was entered into that all the property be turned over to ,v’ ' , *.«i .»ii 11 *i*k i .» »«< 1 • ■ ■ >- i . , fS i < *t" i •*■ i > . i» i *if*in * i «.i the receiver, and be conveyed to him by the company, and t I» < / v» I *x i \ f*i , ,7,< “ " ♦ ' ■ ■ ■ . »*■, , ,, /- ■ *.***, , i *> i'\ )*x,ii . J .V) # that each i lienprocured by, attachment or assignment, of ..account be, first satisfied .out of the property;, and this was confirmed. by the court, and an order entered directing the 1 receiver to carry out the agreement. On the first day ,of June tjie unsecured, creditors moved for the váca- , tionof the above order,and on the same dáy filed their petition of intervention, averring that the application for and the appointment of a receiver, together with the levy of the writs'and the transfer of‘accounts, amounted t'o a , general assignment with preferences, and was the result of a con-*■i,-,*p/.i'» *)*ii .. ,,»/»»,, *i mn/ju. ai .spiracy -between .the officers of thé company, and certain cred- . itprs tp accomplish that object. Other issues were' also raised, ^he court directed payrhent of the secured debts as previously ordered, and the unsecured creditors

*Modified and affirmed.*

*'Mar'áfi <8 'Hé'rtde'rS'oiii, B:E:*‘Bro-Wti*and *‘fialtov•<&'‘Stev-'eA'soñ'fov"ín^péíí&iiiÉ'., ...*,v..

*"Baylor .<&■• Burgess, ■.George, Gwryway., Mright,,,G,all,,&*. *Eubbardj • Quick ■ & Garter, ■ .W.. ,E.. Farnsworth.,,*and *Murks <■&*Mould"fomappelleesi"' . ....... ...

Ladd, J.

The appellants are not in a situation to attack the proceedings in which the receiver was appointed, the attachments sued out, and the assignments of accounts as fraudulent, either when taken together as constituting a general *2***assignment with preferences or when separately considered. They have not recovered judgment their claims, and have no liens whatever on the property, nor interest therein, other than that every creditor has in the estate of his debtor. That a third party, who has not reduced his claim to judgment, and has no interest in or lien on the property affected, cannot question, the validity of an *54attachment levied thereon, or the *bona, fides*of its transfer, is too well settled in this state to' admit of argument. *Shoe Co. v. Mercer,*84 Iowa, 537; *Hill v. Denneny,*106 Iowa, 720; *Goode v. Garrity,*75 Iowa 713; *Faivre v. Gillman,*84 Iowa, 573. Even were a general assignment with preferences proven, the appellants are not in a position to derive any advantage from such a conclusion. In that event the receivership would necessarily fall, and, with it, the allowance 3 of the claims filed subject to* the determination of this controversy; and on their naked indebtedness they could not base an application for the sequestration of the property to its payment, nor for the appointment of another receiver, through whom to reach it. Code, section 3822; *Clark v.*Raymond, 84 Iowa, 251; *Dickerson v. Bank,*95 Iowa, 392. Whether an appointment of a receiver may be construed as a part of a fraudulent assignment, we do not find it necessary to determine.

II. On the same evening of the application for the appointment of a receiver, an amendment to the petition, averring that the company was about to dispose of its property and assign its account to secure preferred creditors, was filed, and a writ of injunction issued, enjoining the company from so doing. Service was acknowledged by the general manager, though he denies having knowledge of the contents of the writ, and he put in the entire night scheduling the accounts, and assigned about thirty thousand dollars of them 4 to secure debts of the corporation. It is said the .transfer of the accounts was in violation of the writ of injunction prohibiting their assignment. If this be true, the parties suing out the writ waived its violation prior to' the appointment of the receiver, and joined in a stipulation that the debts secured theréby should be paid from the proceeds of their collection. The company had the right, but for the writ, to transfer its accounts as security to' its creditors, and any advantage derived from the prohibition of this act might be waived. Spelling Extraordinary Belief, *55section 1116. Tbc rights of tbo unsecured creditors under tbe receivership did not attach until the appointment, and at that time the only parties interested in the writ 'had agreed it should be disregarded. Under these circumstances we think the appellants may not insist that title to the accounts did not pass by virtue of their assignment.

III. The fact that the proceedings were begun for the appointment of a receiver did not suspend the right of creditors to attach, nor that of the company to assign its accounts 5 as security for the payment of its debts, if in doing so it acted in good faith. While there is some conflict in the authorities as to whether property of the debtor passes in *custodia legis*at the time the receiver is appointed, or when he assumes possession, all agree that the *jus dis-ponendi*is not affected by the application, and continues, at least, till the making of the order of appointment. *Cook v. Cole,*55 Iowa, 72; *Van Alstyne v. Cook,*25 N. Y. 489; Thompson Corporations, section 6919; 20 Am. & Eng. Enc. Law, 132.

IV. The receiver takes the debtor’s property subject to the payment, of all valid prior liens. Code, section 3825; *Union Bank of Chicago v. Kansas City Bank,*136 U. S. 6 223 (10 Sup. Ct. Rep. 1013); *Kneeland v. Trust Co.,*136 U. S. 89 (10 Sup. Ct. Rep. 950); *Van Alstyne v. Cook,*25 N. Y. 489. We have so held in the case of an assignee for the benefit of creditors, and there is no reason why the same rule should not obtain to’ a receiver. *Meyer v. Evans,*66 Iowa, 184. Such incum-brances are entitled to, protection, and to payment from the property which they cover. *State v. Superior Court of Chehalis County,*8 Wash. 210 (35 Pac. Rep. 1087); *Walling v. Miller,*108 N. Y. 173 (15 N. E. Rep. 65); *Ellis v. Water Co.,*4 Tex. Civ. App. 66 (23 S. W. Rep. 856). As the liens of the attachment levies and assignments of accounts must, in any event, have been paid from the incumbered property, there is no ground for assailing the order to that effect, *56It was not only in the interest of those immediately, concerned, but beneficial to the general creditors, as it tended to conserved the estate. We have approved of a similar course by the assignee for the benefit of creditors, and there exists no reason for adopting a different rule with respect to property held by the reciever fo the liquidation of the indebtedness *of*a *corporation. Bryant v. Fink, 75 Iowa, 516; Plow Co. v.*Brees, *83 Iowa,*553; Cressy v. Manufacturing Co., 91 Iowa, 444. See In re Windhorst, 107 Iowa, 58.

V. But the appellants have filed their claims, and these have been allowed. This gave them the right to insist, through their petition of intervention, on the just distribution of the assets of the estate, and that no preferences be given save those fixed by law. The creditors obtained nothing by virtue of their stipulation save the recognition and protection of existing liens, and, if more was attempted, it will be of no avail. It would be a novel practice which would permit creditors, not parties to the action, present in, court, by 7 stipulation to provide for the payment of themselves by the receiver of corporation to the exclusion of others. It may well be doubted whether they yielded anything in surrendering the property, to the receiver, which might nof have been, required of them, as it would seem creditor have no vested rights in methods or remedies. See Gluck & B. Receiver, section 41; *Ellis v. Water Co., supra; Walling v. Miller, supra; Wishall v.*Sampson; 14 How. 52. The conflicting views on this point are well put in the, opinion of the *court in State v. Superior*Court of Chehalis County, supra, and the dissenting opinion of Chief Justice Dunbar. It is not necessarily involved, and *we*do not pass upon the question. In *Hubbell v. Investment*Co., 97 Iowa, 135, the right of the parties to a contract or action to agree on the appointment of a receiver was recognized, Here the creditors were not parties. The very basis of the action was the insolvency of the corporation, the necessity of a receiver protect its property, and the distribution *57of its assets in satisfaction of its debts. All the secured creditors conld do was to insist on the protection of their liens, and this they were entitled to regardless of the appointment. The court was authorized to include provision in its order for the-payment of the valid incumbrances, but, in view of the insolvency of the corporation, that portion directing payment from property on which the specific liens did not exist should have been set aside. The policy of the law is opposed to preferences, and, if a part of the property may be disposed áA'agtéfeíñ'eüt;“^hy ñm'ífibdf''it^’bhayif^U'hf it, JJ.IU .11 1IJUIJI.'/ «W ... U1..K/-H.110 >iUJ ..J.n “» . , jyper^foyg the^pepessity^oii^.^epeiyer^s^^j.iie.^ppij^t yrilgnpt aid ■ -in-creating preferences;,, and -will- only. recognize -thos&■ existing "Wh'eñ’ 'm'dMü'g'”thh-'ófdét"rif ‘ app'diütín,éM.,Vj'‘The‘,reófeÍhér is IlLU'u f../nV',/--.t il J»H. JWt ' IIJ, JMVi i.J’JL ¿JI'/'Y T •» merely the minister of the court, which, through, him,,holds the property for the benefit of those entitled to it. The prop- . erfcy -is .'held - for-’ the- - equal- ''advantage • of- ally And' preference orally agreed upon at the time*of his appointment, not based on existing liens, must be disregarded, as their enforcement would be inequitable1 arid firijfist.1

YI. The receiver collected on the assigned accounts one thousand five hundred thirty-seven dollars and twenty cents more than enough to satisfy the indebtedness secured thereby, and this balance the court directed to be applied in payment of the claims of the attaching creditors. As seen, this could not 8 be done by virtue of the stipulation. But it is said that the levy of the writs of attachment on the books of created an inchoate lien oh the debts minuted therein. In *Pump*Co. *v. Miller, 105*Iowa, *674,*we held that a levy on books of account is not a levy on the debts charged therein. The authorities adjudging such a levy inchoate are based on statutes essentially different from ours. See *Elliott v. Bowman,*17 Mo. App. 698. This balance should have been distributed'to all the creditors. We discover no reason for interfering with the order in *reference*to costs. —*M*o*d*ified and Affirmed.