Court Opinion

ID: 9643889
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:42:56.247739+00
Date Added: 2024-06-11T18:11:05.396909
License: Public Domain

SCOTT, District Judge
(dissenting).
I am constrained to dissent from the conelu-* sion of the majority in this case. In my conception, the record does not merely present “the question of authority of a receiver without the order, direction, or knowledge of the court, whose instrumentality he was, to borrow the money to pay the liability he incurs as receiver, and to pledge the choses in action or other property of the corporation which he holds for its creditors and stockholders to secure the repayment of the money he borrows.” I think the question presented is rather “whether a court of equity may not ratify the unauthorized act of its receiver (where his good faith is not questioned) in temporarily borrowing money to pay valid current bills, when to deny ratification ■ would unjustly enrich the trust at the expense of an outsider.”
The receiver had been appointed and authorized to “operate and run all mills, stores, logging roads, railroads, and other proper*981ty of tlie company.” In operating the business, which was extensive and varied, he had incurred certain current bills. Without special authority he borrowed $2,000 to meet these bills. It is stipulated in the reeord that the money borrowed “was deposited in the account of the receiver, and.was used for the purchase of supplies and the payment of labor and bills and other expenses of the operation of the receivership.” No question is raised as to tho validity of any of these supply bills or labor bills or receiver’s expenses. Had the receiver collected the sum due him from the Fisher Body Company, I think it clear that he might have applied tho same to the payment of these bills. Ho did not make the collection, however, but, without special authority, temporarily borrowed $2,000 and attempted to pledge the Fisher Body Company account. Now it may bo conceded in the circumstances that the bank from whom Rotzien borrowed the money at tho instance of and for the receiver made the advance at its peril, and, in an action at law against the receiver, had it been permitted to sue, could not have recovered. It may be further conceded that upon application to the court having jurisdiction of the receivership, that court might in its discretion have denied relief, although it would in my opinion be tho exercise of a hard discretion. But to say that a court of equity may not in its discretion ratify such act of the receiver is quite another question. The money borrowed clearly went to enrich the trust of tho receiver; it liquidated valid claims at the expense of the bank, and in no way to the disadvantage of tho receiver’s trust. I cannot see that the fact that the court authorized the issue of receiver’s certificates is at all material here. There is nothing in the reeord asserting or implying that tho receiver at the time he borrowed the $2,000 exceeded the authorized limit of indebtedness, except as to the form of the transaction. But, even had he done so, he paid valid bills with the money, and performed an act which the court had ample power to authorize, had application been made in the’ first instance. The order of the court appealed from does not rest merely upon the petition of intervention of the bank, but rests also upon the petition of the receiver for instruction and direction in the matter. I think the District Court might well have made the order which it did sua aponte.
For the reasons I have stated, the judgment of the trial court should be affirmed.