Hoover v. Mortgage Co. for America

HUNT, Circuit Judge (after stating the facts as above). The question of jurisdiction of the District Court in Oregon to make the order appointing the receiver of the properties not included in the security held by the appellee must be decided adversely to the appellants. The complaint in the foreclosure suit was of wider scope than appellants contend for. It alleged insolvency of the defendant corporations, default in payments due hy them, that the collateral securities were in plaintiff’s hands in Oregon; that maintenance and operation of the irrigation system was necessary: that the lands affected and covered by collateral mortgages assigned to plaintiff were all in Oregon and were depéndent upon water for production-of crops; that unless water could be had the' lands would be of little value and great loss and suffering would be caused to the settlers, and the value of the collateral securities would be depreciated; that maintenance of the system was necessary both for agricultural operations and the conservation of plaintiff’s security, and that a receiver was necessary. Plaintiff also asked for such other and further relief as should seem meet and equitable. Summons was served on both defendants, and upon an order to show cause why a receiver should not be appointed to take charge of the properties of the defendant corporations, the court, after reciting that it was necessary to preserve the properties mortgaged and that to that end it was necessary to operate the irrigation system owned by the Jordan Valley Rand & Water Company, appointed a recéiver for the two corporations, with directions to maintain the irrigation system and to operate the same to the end, that the mortgagors settlers referred to in the complaint might have the water to which they were entitled, and that the securities named in the complaint might be preserved and protected from destruction in value. The receiver was directed to take possession of all of the assets of the two corporations and proceed to liquidate the same, keeping accurate and segregated accounts. Thereafter defendants answered the complaint, and as the record fails to disclose that objection was made by either to the jurisdiction of the court to make the order appointing a receiver, and inasmuch as the subject-matter of the suit was of a class of which the court had jurisdiction, defendants, by their appearances and failure to object, waived any possible objection on the ground of lack of jurisdiction. No appeal from the order appointing a receiver was taken, and it is not now to be disturbed. Doubtless the District Court regarded the suit as one against an insolvent corporation wherein a receiver was sought to conserve assets which, though not directly included in the mortgage security, were so. related to the value of the mortgage se [895] curity as to justify conservation through the orders of a court of equity. Interior Const. Co. v. Gibney, 160 U. S. 217, 16 Sup. Ct. 272, 40 L. Ed. 401; Camp v. Gress, 250 U. S. 308; Pusey v. Hanssen Co., 43 Sup. Ct. 454, 67 L. Ed. -, decided April 9, 1923; Lehigh Valley Coal Co. v. Yensavage, 218 Fed. 547, 134 C. C. A. 275. Next we consider the order of July 14th, making allowances to the receiver and to his counsel. As set forth in the statement, the order was made pursuant to an “agreement” of the “parties.” At the hearing upon the petition for the order the trustees in bankruptcy and the receiver, respectively, were represented by counsel. The order expressly recites that the court .was “fully advised” in the premises. No challenge appears to have been interposed to the jurisdiction of the court. Apparently in good faith an agreement was made concerning the allowances to be made to the receiver for himself and his counsel. So explicit was the order made pursuant to the agreement that the specific sums allowed were included, and that the agreement between the parties might be executed, the order authorized the receiver, without expense to the estates, “to arrange with an irrigation district known as the Jordan Valley irrigation project for the care of the system without surrender by the receiver,” etc. The attitude of the trustees in bankruptcy was considered, for the order required the receiver to turn over to the respective trustees in bankruptcy the assets of the defendants when the charges provided for in the order were paid in full. It was nearly six months after the appointment of a receiver in Oregon that petitions for adjudications in bankruptcy were filed in the United States'court in Idaho. Under such circumstances the District Court in Oregon, having jurisdiction of the subject-matter, or of the tiling in litigation, had the right to keep its control over all assets until the charges and allowances were paid. In Metcalf v. Barker, 187 U. S. 165, 23 Sup. Ct. 67, 47 L. Ed. 122, the Supreme Court, in considering section 67f of the Bankruptcy Act (Comp. St. § 9651), held that, where a lien is obtained more than four months prior to the filing of a petition in bankruptcy, it is not only not to be deemed to be null and void, but its validity should be recognized. In Blair v. Brailey, 221 Fed. 1, 136 C. C. A. 524, it was held that, by the appointment of a receiver and possession taken by the receiver of the property of the bankrupt, such action having been had more than four months prior to the bankruptcy, the court and the receiver acquired the custody and control of the property for the purposes soúght to be accomplished by the suit, and the property so taken into the possession of the court is withdrawn from the jurisdiction of all other courts, though that court is not one of bankruptcy and although the property so in its possession is part of the estate of one who has been adjudged a bankrupt on a petition filed in a court of bankruptcy after the first-mentioned court’s possession was acquired. The principle applicable was recognized, though conversely, in Murphy v. John Hofman Co., 211 U. S. 562, 29 Sup. Ct. 154, 53 L. Ed. 327; Griffen v. Lenhart (C. C. A.) 266 Fed. 671. [896] The Jordan Valley irrigation district was not a party to the litigation, but that fact in no way affects the agreement between the parties to the proceedings whereby that district was to care for the property. Hoover, trustee, is an appellant; but, as he made no motion to vacate the order of the court made July 14th, he cannot ask this court for relief on appeal. But, if we could consider him as an appellant trustee, he is not entitled to relief. Both he and Wegener, as trustees, voluntarily submitted themselves to the jurisdiction of the court prior to the hearing, which preceded the making of the order of July 14th. Their action with respect to the matter of the allowances and the payment thereof, and with respect to the agreement referred to in the order of July 14th, must be presumed to have been taken under appropriate authority, and they should not now be heard to say that they lacked authority in consenting to the order made. The affidavits in support of the motion to vacate the order are insufficient to justify this court in holding that the order of the District Court made July 14th was not in full accord with the understanding of the parties as represented by counsel in court. That the action of the trustees never has been approved by the bankruptcy court in Idaho is not herein material. Questions pertaining to matters within the jurisdiction and discretion of the District Court for Oregon were appropriately for the consideration of that court, and under the situation of the case it was for that court to make such allowances to the receiver as were fair, and to impress a lien if it saw fit to do so. Pac. R. Co. v. Ketchum, 101 U. S. 289, 296, 25 L. Ed. 932; Lion Bonding & Surety Co. v. Karatz, 43 Sup. Ct. 480, 67 L. Ed.-, decided April 23, 1923. The orders appealed from are affirmed.