State Ex Rel. Panos v. Superior Court

BLAKE and MAIN, JJ., dissent. During the month of July, 1935, John Lucas and others filed in the superior court for King county their complaint against Peter T. Panos and George N. Tsiakilos, as copartners and as individuals, asking for judgment in a large amount for goods sold. The complaint contained an allegation to the effect that the defendants were unable to pay their debts in the usual course of business and were insolvent, and that a receiver should be appointed. At the same time, an order was issued requiring the defendants to show cause why a receiver should not be appointed. To this order, a demurrer was sustained, the order sustaining the demurrer granting leave "to plaintiffs to renew their application for the appointment of a receiver herein at any time." February 25, 1936, a judgment was entered in plaintiffs' favor for the amount sued for, together with costs. This judgment has never been superseded, although a notice of appeal therefrom, supported by a cost bond, was filed.

March 31, 1936, plaintiffs caused to be filed the affidavit of one of their counsel, stating the recovery of judgment; that the defendants were unable to pay their debts in the usual course of business, were insolvent, and had executed a mortgage covering substantially all of their assets, and that the effect of this mortgage would be to hinder, delay and defraud plaintiffs' unsecured creditors, and particularly plaintiffs; that the assets belonging to defendants were in danger of loss and depreciation; and that the appointment of a receiver was necessary for the preservation thereof. On the same day, an order to show cause was issued, requiring defendants to show cause why a receiver should not be appointed. This order was returnable April 9, 1936, and on that day the sheriff of King county made his return "no property found," certifying that he had received

". . . the annexed writ of execution on the 9th day of April, 1936, and after inquiry I am unable to find any property belonging to the defendants, Peter T. Panos and George N. Tsiakilos, copartners d/b/a Peter Pan Baking Co., in said writ named, subject to execution, sufficient to satisfy the within described judgment, or any part thereof."

It appears that the hearing on the order to show cause was completed April 25, 1936, the court then indicating that the application for the appointment of a receiver would be granted. Thereafter, and before the entry of a formal order, the defendants in the action applied to this court for a writ prohibiting the superior court from appointing a receiver. An order to show cause having been issued therein, full return was made thereto, and the matter is before this court for determination upon the merits, as disclosed by the record.

Relators herein argue that the court has no jurisdiction to appoint a receiver in a simple action at law after the rendition of a money judgment until all strictly legal remedies available to the judgment creditor have been exhausted.

It clearly appears from the record before us that June 18, 1935, relators herein (the judgment debtors) executed and delivered a trust mortgage covering the property used by them in connection with their operation of a bakery, and that thereafter the business has been conducted under the trust. Relators allege that they resisted the application for the appointment of a receiver, relying upon the trust mortgage and the fact that their business had thereunder been operated at a profit, paying all its current obligations and making substantial payments upon other obligations.

[1, 2] It is well settled that a receiver should be appointed only when it clearly appears that a necessity exists for the exercise by the court of that extraordinary remedy.Ridpath v. Sans Poil etc. Co., 26 Wash. 427, 67 P. 229;Bergman Clay Mfg. Co. v. Bergman, 73 Wash. 144, 131 P. 485. In this connection, it must be borne in mind that a different rule applies in an action against a corporation, in such cases the courts more readily exercising their extraordinary powers for the relief of creditors. Of course, however, the jurisdictional question presented is the same, whether a receiver is sought for a corporation, an individual, or a copartnership.

In the recent case of Kreide v. Independence League ofAmerica, ante p. 376, we held that, in a case in which a judgment had been rendered in a law action against a corporation, the superior court had, under an order to show cause similar to that here in question, jurisdiction to appoint a receiver, it appearing that the corporation was insolvent and was possessed of some assets.

This being an application for a writ of prohibition, the only question to be determined is that of the jurisdiction of the superior court, as no question concerning the exercise of the court's discretion will be considered in such a proceeding.

In the case at bar, the plaintiffs in the original action had obtained a judgment at law, and the sheriff's return nulla bona had been filed.

Rem. Rev. Stat., § 741 [P.C. § 8414], provides for the appointment of a receiver in certain specified cases:

"1. In an action by a vendor to vacate a fraudulent purchase of property, or by a creditor to subject any property or fund to his claim; . . .

"6. And in such other cases as may be provided for by law, or when, in the discretion of the court, it may be necessary to secure ample justice to the parties: Provided, that no party or attorney or other person interested in an action shall be appointed receiver therein."

There is no essential difference between the procedure which was followed in the case at bar, which procedure we have approved in the case of Kreide v. Independence League of America, supra, and that outlined by the statute providing for proceedings supplementary to execution.

We are of the opinion that, after proper service of the order to show cause, as made, the court had jurisdiction to proceed to inquire into the merits of the controversy and appoint a receiver, if the facts disclosed at the hearing justified such action.

Of course, a superior court will be, by this court, prohibited from proceeding only when it clearly appears that the court is proceeding without or in excess of its jurisdiction. No question involving the exercise of judgment or discretion will be reviewed on an application for such an extraordinary writ. An order appointing a receiver is appealable, and on such an appeal all questions involving the propriety of an appointment may be reviewed.

It appearing that the superior court was not proceeding without or in excess of its jurisdiction, the application for a writ of prohibition herein is denied.

MILLARD, C.J., TOLMAN, STEINERT, MITCHELL, HOLCOMB, and GERAGHTY, JJ., concur.