Opinion
No. 1038.
October 29, 1936.
Venables, Graham Howe and Geo. C.. C. Guttormsen, all of Seattle, Wash., for Fisher Flouring Mills Co.
W.F. Fisher, of Bellingham, Wash., Assoc. Counsel, for Fisher Flouring Mills Co.
A.E. Blair, of Tacoma, Wash., for intervening creditors, Sperry Flour Mills Co.
Brown Millhouse, of Bellingham, Wash., for petitioning creditors.
In Bankruptcy. Proceeding in the matter of the Golden Rule Trading Company, bankrupt, wherein three parties asserting qualification filed a petition for involuntary adjudication, charging insolvency and commission of an act of bankruptcy within four months, which was opposed by two principal creditors.
Petition dismissed.
Three parties asserting qualification seek involuntary adjudication of debtor, charging insolvency and commission of an act of bankruptcy within four months.
The petition was filed August 5, 1936. It is charged that on the 6th day of April, 1936, the debtor suffered a judgment to be entered against it, and "appointment of a receiver because of its inability to pay its obligations; and on August 4, 1936, admitting its inability to pay its obligation, and consent to the adjudication."
Two principal creditors challenge the court's jurisdiction on the ground: "(a) That less than three creditors with provable claims have joined in the involuntary petition; (b) That no act of bankruptcy has been committed by said corporation within four months immediately preceding the involuntary petition."
Upon trial it is shown that on December 10, 1936, all stockholders and trustees of the debtor corporation on waiver of notice "met and * * * resolved that Russell Millhouse and A. Aurdal be and are hereby designated as trustees to conduct the winding up of the affairs of the dissolution of said Golden Rule Trading Company out of court." Copies were filed with the county auditor and secretary of state.
On December 5, 1935, one of the objecting creditors commenced an action in the state court against the debtor, praying "(a) judgment for $42,405.40; (b) for appointment of a receiver to take possession of the assets * * * with power to dispose of the same, and with the usual powers. * * *"
On December 10, 1935, pursuant to order to show cause issued by the court and served on the debtor, the plaintiff and the debtor appeared, and after being fully advised, the court continued the hearing until December 12th, at which time the court appointed a "temporary custodian and receiver for the safe keeping of the assets of the defendant corporation until the 17th day of December, 1935," on which date the court found the debtor had preferred certain creditors and the assets "had been dissipated," and therefore "appointed a receiver pendente lite of and for said Golden Rule Trading Company to take possession and care for all assets, books, accounts, notes, etc. The receiver duly qualified took possession of all available assets." The assets consisted largely of accounts, notes, "* * * which may be difficult of collection."
Issue was joined on claim of plaintiff and on the 31st day of March, 1936, judgment was entered on the verdict of the jury returned March 19th, in favor of the plaintiff for the sum prayed.
On March 31, 1936, after "show cause order" duly made and served, all parties being present, the court appointed "a permanent liquidating receiver" to possess all assets and to liquidate said corporation generally as the court may order. The receiver qualified and took possession of the available assets and is administering the same. The receiver has in his possession approximately $1,400, and claims are filed in excess of $50,000.
The claim of one of the petitioning creditors is for legal services rendered upon the trial on March 17, 1936, for which employment was made "a few days before trial" by a former member, stockholder, and trustee of the debtor.
The adoption of the resolution in the "voluntary proceedings for dissolution (section 3803 — 49 [par. 2(a)] R.R.S. of Wash., section 49, par. 2(a), Law of Wash. 1933 [p. 807]) out of court," and the appointment of trustees to "conduct a winding up" of the said business (section 3803 — 56, par. 2(a), vol. 5, R.R.S. of Wash., section 56, par. 2(a), p. 811, 1933 Laws of Wash.), withdrew all power of corporate function from the officers and directors of the debtor corporation, except as may be necessary to preserve the corporate assets. The employment of the lawyer claimant long subsequent to the named resolution and appointment of the trustees was not a corporate act, and did not create a corporate liability. The employment was not necessary to preserve the corporate assets, which were custodia legis. Under no view point of approach can the claim of debtor to the claimant as creditor be sustained.
With this conclusion it is unnecessary to discuss any of the other points raised at bar. The petition must be dismissed. An order may on notice be presented.