Document: 391 U.S. 471 88 S.Ct. 1759 20 L.Ed.2d 751 READING COMPANY, Petitioner,v.Francis Shunk BROWN, 3d, etc., et al. No. 127. Argued March 4 and 5, 1968. Decided June 3, [Syllabus from pages 471-472 intentionally omitted] Thomas Raeburn White, Jr., Philadelphia, Pa., for petitioner. Owen B. rhoads, Richard M. Roberts, Washington, D.C., respondents. Mr. Justice HARLAN delivered the opinion of Court. 1 On November 16, 1962, I. J. Knight Realty Corporation filed a petition an arrangement under Chapter XI Bankruptcy Act, 11 U.S.C. §§ 701—799. The same day, District Court appointed receiver, Francis Brown, respondent here. receiver was authorized to conduct debtor's business, which consisted principally leasing only significant asset, eight-story industrial structure located in Philadelphia. 2 January 1, 1963, building totally destroyed by fire spread adjoining premises real personal property petitioner Reading Company others. April claim $559,730.83 arrangement, based on asserted negligence receiver. It styled 'administrative expenses' arrangement. Other loss claimants 146 additional claims similar nature. total all such excess $3,500,000, substantially more than assets debtor. 3 May 14, voluntarily adjudicated bankrupt subsequently elected trustee bankruptcy. others thus became administration expenses bankruptcy are given first priority § 64a(1) 104(a)(1).1 moved expunge ground that they were not administration. agreed decision whether petitioner's is provable as expense would establish status other claims. further that, purposes deciding provable, it be assumed damage resulted workman he employed.2 United States, holding unpaid prearrangement taxes admittedly superior general creditors inferior expenses, entered case side trustee. referee disallowed expenses. He also ruled against estate, ruling challenged neither side.3 review, upheld appeal, Appeals Third Circuit, sitting en banc, affirmed 4—3 vote. We granted certiorari, 389 U.S 895, because issue important laws one impression this For reasons follow, we reverse. 5 Section 64a Act provides part follows: 6 'The debts have priority, advance payment dividends creditors, paid full out estates, order payment, shall (1) costs administration, including actual necessary preserving estate subsequent filing * *.' 7 section, applicable its terms straight bankruptcies, governs arrangements. Furthermore, purpose applying section arrangements, words 'subsequent petition' refer period petition,4 'preserving estate' include larger objective, common operating business with view rehabilitating it.5 8 question administering gives rise 'actual necessary' cost business. does define necessary,' nor has any directly point been brought our attention.6 must, therefore, look 64a, XI, whole. 9 contends relevant statutory objectives facilitate rehabilitation insolvent businesses (2) preserve maximum distribution among should fail. therefore argues 'necessary' those expenditures without could carried on. example, allow contracts into suppliers, employees, landlords, like enter dealings debtor possession or unless allowed. exclude claims, theory them encourage third parties deal reduce amount available discourage accepting 10 In overlooked important, here decisive, objective: fairness persons having insolvent. Petitioner suffered grave financial injury what workman. conceded principle, right recover their 'employer,' upon rule respondeat superior.7 Respondents contend, however, no different position anyone else injured person scant assets: exists but enforceable practice. That, adequate description position. At moment when sought, Its existing hope partial complete postponement will, through successful rehabilitation, eventually either proportion immediate Hence present did merely suffer at hands business: had thrust operation law. That event, unable pay full. But subordinated to, share equally with, collect ahead whose benefit continued (which unfortunately led instead hoped-for rehabilitation) 12 Recognizing ought some means asserting fire, respondents suggested various theories alternatives 'administration expense' treatment. None these support, seem us unsatisfactory. 13 Several need pursued detail. if survive shell. suggests may able personally, bond posted. Without possible avenues indeed open,8 note do serve purpose. 'master,' liable 'servant' rehabilitation. worthy objectives. inconsistent both principle seek excluding tort assets, subordinating whom imposed instituted. 14 respondent, arising during are, properly preserved, 63a 193(a). reads 15 'Debts proved allowed his founded (7) damages action instituted prior pending time 16 will avail who, appears, file suit proper. This, States argues, own fault: after tort, before bankruptcy, preserved claim. 17 This 302 Chapters I VII (including 63 64) arrangements well contains following provision: 18 'For application date taken original 722 title (§ 322 722, petitions arrangements) 19 278(2) 778(2), dealing procedure ensues 'in title, proceeding conducted, so far possible, manner effect voluntary adjudication decree day chapter (i.e., arrangement) 21 two sections superseded deemed 22 From fact, concluded, now negligently course never 63a. requires and, applied petition. 23 response, notes 378(2) qualified 'so possible.' Government 'possible' treat critical present, antedates tort. theory, purposes, 63a's reference 24 find acceptable alternative. thing renders follow scheme meld Government's insistence must held proper steps. There nothing 'impossible' about construing involved mean say: proper, 25 reading literally case. place, States' suggestion work where ensue then there later can used cutoff 63a(7) case, hold itself, limit long remains Nothing qualifying language grants permission read limitation Act. 26 An even greater difficulty presented fact refers bankrupt, distinguishes estate. word 'bankrupts' relate 'debtors.' Thus natural 63a, might argue limitation: preferable deem 'debts bankrupt' up proper.' argument open, objections limitations: strained statute makes allowance occasions ensue. 27 see reason indulge construction provisions, persuaded theoretically sounder, linguistically comfortable, rather bankrupt. considering of, on, latter seems just. Existing sure, dilemma making, obvious why attempt escape risk imposing innocent. 28 More possibility insurance. provide suitable coverage, court below recognized insurance administrative payable creditors.9 premiums obtained; encouraged obtain amounts, obtained potentially argued, incredible magnitude probably event foolish; true, true still recovery fraction damages. usual within insurable limits, torts demonstrably sounder. 29 Although appear cases proceedings, decisions analogous suggest costs' ordinarily incident limited impossible. equity receiverships receivership create itself;10 involved, explicit recognition extended weighs heavily favor category 30 all. state federal accruing arrangement.11 recognizing supporting holdings, agrees form 'an integral essential element continuation business' though member public—a invitee—who while completely problem qualify priority)' although needed invitees premises. 31 each 'must analyzed context.' Apart throughout 147 equal footing very helpful lessees, invitees, neighbors rights, perceive distinction. No law aware offers guidance distinguishing, class committed receivers acting furtherance between 'integral' not.12 32 resulting scope authority give 33 judgment reversed, remanded proceedings consistent opinion. 34 ordered. 35 Judgment reversed remanded. 36 MARSHALL took consideration 37 Chief WARREN, DOUGLAS joins, dissenting. 38 my opinion, misinterpreted term 'costs administration' intended s deviating meaning words, unwarranted application. wipe classes public private creditors. believe Congress accord preference. Accordingly, affirm below. 39 occasions, observed '(t)he theme 'equality distribution' *; claimant preferred over others, clear statute.' Nathanson v. NLRB, 344 25, 29, 73 80, 83, 97 L.Ed. (1952); Sampsell Imperial Paper Corp., 313 215, 219, 61 904, 907, 85 1293 (1941). particularly, expressly directs eligible unsecured pro rata nonexempt assets. 63a(7), 65a, 103(a)(7), 105(a). Departing scheme, today singles special After today's decision, depends entirely fortunate enough appointed. And select class, permitted exhaust exclusion wage government tax shown unmistakable preference.1 view, result frustrates serves underlying proceeding, reach indication intended. 40 enacted alternative individuals small successfully rehabilitated being subjected economically wasteful liquidation. success largely factors: first, take chance permitting arrangement; second, continue distressed With respect considerations, undoubtedly subjects unpredictable uninsurable liability. interpretation. construe second mentioned above. line congressional intent generally regarding required smooth viewed guaranty who employed him goods services. Any broader interpretation use rehabilitative machinery tend force 41 equitable, believes, (and claimants) bear 'thrust' benefit. respectfully submit most unfair characterization businessman seeks creditors' benefit.2 Of successful, just benefited resorting enterprise conducted mutual prosperity owners, earners Realistically, difference administered prosperous. If benefit; not, injured. Thus, distinguish none responsible catastrophe sustain loss. Instead, adhere Act's basic equality distribution. 42 states 'adequate' fairly concedes, 'probably foolish.' knows, 'adequate,' sense reasonable $3,500,000 assumption accidentally cause proportions occurred Moreover, quite apart bar, absolutely insurance.3 basis sound policy become involuntary insurers liability traditional means. 43 relies, mistakenly, analogies receiverships. reorganizations X4 77,5 directed courts apply rules developed equity.6 However, governed strictly priorities fixed 64a. These differ many respects receiverships,7 amended repeatedly narrow participate creditors.8 77 controlling, specifically provided exception treated 77(n), 205(n). narrowly defined claimants. cover claim, infer one. 44 Finally, concludes, reasons, 'linguistically comfortable' proven 63a(7). First, Second, require commenced petition, allowing toll sections. Court's practical distinguishing Had occasioned relied Texas & Pacific R. Co. Bloom, 164 636, 216, 580 (1897). distinction 'debtor' 'estate' meaningful pointed sources Here, allowed, diminish irrespective ordinary argument, 378(2), 778(2). concluding arise until filed, manifestly impossible lawsuit precede Further, know way 'read Act' treating certain 45 subjecting every except caused Consequently, actually necessarily incurred class. set forth 702, provisions chapters 1—7 shall, insofar conflict (XI), chapter.' 64a(1), hence virtue 302, itself where, here, another chapter, 'the ensuing subordinate merits adjudicated, course, intimate views them. See infra, 480. explicitly 302. Compare Collier, 62.15: 'Section 2a(5) empowers authorize bankrupts marshal, Such substance preservation, namely going concern, sometimes *. Expenditure bankrupt's expenditure connection preservation. difference, any, lies variety types (Footnotes omitted.) finds chosely Vass Conron Bros., 59 F.2d 969. dealers cold meats leased space storage plant Conron. confirmed lease, covenants lessor maintain sufficient refrigeration; thereafter, allegedly failed refrigerate properly, damaging stored lessee. lessee attempted sue court, alleging breach covenant negligence. Vass, injunction action; L. Hand. court's jurisdiction maintained, Judge Hand inter alia, fall actions 'any act transaction' carrying connected with' entrusted him. facts, confirming lease matters statu quo, continuing said liquidation lessee's much accountants, custodians assistants.' F.2d, 971. context, quoted little assistance 959(b) 'A trustee, manager possession, manage operate according requirements valid State situated, owner possessor thereof bound thereof.' provision establishes agency law, decide collected. McNulta Lochridge, 141 327, 332, 11, 13, 796, occasion '(a)ctions funds contracts, misfeasances, negligences liabilities official personal, judgments hands.' statement compensable again, indicate receivership. reach, reaffirm implication termination receivership, lie circumstances. As questions, dictum. n. 7, supra. Cir., 370 624, 628. E.g., 580; Bereth Sparks, 51 441; 205(n), particular railroad dissent suggests, chargeable itself. Rather, 'tort reorganization expenses.' Nicholas 384 678, 86 1674, 853. 687—688, page 1682 stated: 'Taxes pre-arrangement content fourth 64a(4) hand, technically 64a(1).' interest 64a(1). Ibid. Boteler Ingels, 308 57, 60 84 78. 'Among conducting allowable payments injuries inflicted rent, insurance, commissions, raw material merchandise purchased manufacturing resale attendant active participation commercial life.' Certain respectively subdivisions 104(a)(2), 104(a)(4). nearly excluded sharing approximately $245,000. Unlike himself XI. 321, 322, 721, 722; 4.02(1). absence strong receiver's usually perfectly adequate. 501—676. 205. 77b, 115, 205(b), 515; re Chicago Express, Inc., 332 276, 278 (C.A.2d Cir. 1964). 102 (11 502), corporate reorganizations, 64 'shall directing proceeded To examples, higher X 199, 599; 6A 9.13(2); 'six-months rule' analogue Dudley Mealey, 268 1945). compare July 1898, c. 541, Stat. 563, 27, 1926, 406, 15(64a), 666; 80 270, 35, 104(a)(4) (1964 ed., Supp. II), 22, 1938, 575, amending 17a(1), 64a(4), 52 851, 874.

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