Court Opinion

ID: 6913917
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:34:17.119932+00
Date Added: 2024-06-11T16:06:35.880662
License: Public Domain

HUXMAN, Circuit Judge
(dissenting).
*294It is the law of long standing that an unsecured contract creditor who has not reduced his claim to judgment and has not exhausted his legal remedies has no standing to go into a court of equity and ask for the appointment of a receiver when objected to by his debtor absent a statute conferring such right. It is also well settled that his inability to go into a federal court because of the absence of a federal statute is not cured by the fact that he could under state law have a receiver appointed in the state courts. It is conceded there is no federal statute conferring such right.
When under the facts outlined above an application is made to a federal court for the appointment of a receiver, it is without jurisdiction or power to appoint one over the objections of the defendant. It has no discretion in the matter. It may only dismiss the application. This is the clear mandate of Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 43 S.Ct. 454, 67 L.Ed. 763. The Court there said such a creditor “ * * * has no right whatsoever in equity until he has exhausted his legal remedy.” 261 U.S. at page 497, 43 S.Ct. at page 456. This pronouncement by the Supreme Court in my opinion stands unimpeaehed in any subsequent decision by the Court. Nowhere has the Court held that the trial court is vested with the exercise of discretion in such a case.
The Pusey case draws a distinction between general jurisdiction based upon a diversity of citizenship, jurisdictional amount, and the subject matter of a controversy and equity jurisdiction. Thus the Court said: “But, unlike lack of jurisdiction as a federal court, * * * lack of equity jurisdiction (if not objected to by the defendant) may be ignored by the court, in cases where the subject-matter of the suit is of a class of which a court of equity has jurisdiction.” 261 U.S. at page 500, 43 S.Ct. at page 457.
I can read nothing into the opinions in Commonwealth of Pennsylvania v. Williams, 294 U.S. 176, 55 S.Ct. 380, 79 L. Ed. 841; Penn General Casualty Co. v. Commonwealth of Pennsylvania, 294 U.S. 189, 55 S.Ct. 386, 79 L.Ed. 850, or Kelleam v. Maryland Casualty Company, 312 U.S. 377, 61 S.Ct. 595, 85 L.Ed. 899, relied upon by the majority, which has overruled or weakened this positive declaration in the Pusey case. The Pusey case was reversed on the ground there was no consent to the appointment of a receiver. In Commonwealth of Pennsylvania v. Williams, supra, there was a waiver of a right to object to the court’s exercise of its equity jurisdiction and the exercise of discretion discussed in the opinion was whether under those facts the federal court should have surrendered its jurisdiction to the state court.
Penn General Casualty Co. v. Commonwealth of Pennsylvania, supra, concerned itself solely with the concurrent exercise of jurisdiction by a suit in a federal court and whether under the facts as they are set out the federal court should forego its jurisdiction. The principle involved here apparently was not in the case because nowhere is it discussed in the opinion. The same is also true of Kelleam v. Maryland Casualty Company, supra.
That brings us then to the facts of this case and the decisive fact to me is, did Mr. Bagley have authority to file the answers he did file for the Directors and the Company in which he resisted the appointment of a receiver ? The required answer would seem to be in the affirmative. At the time he presented his answers in the court below, the court inquired whether oral testimony was necessary to establish his right to file the answers and, being- informed it was not, the answers were permitted to be filed. His right to appeal is also recognized. Otherwise a dismissal of the appeal would be required.
We then come to this single question. May the federal district court appoint a receiver at the behest of a common contract creditor who has not exhausted his legal remedies over the objection of the defendant ? I would hold that he may not and would reverse with directions to dismiss.