Evening star. [volume] (Washington, D.C.) 1854-1972, 1955-08-21
Receiyership Studied
In Event Settlement
Doesn't Work Well
~ PHIL YEAGER and
JOHN STARK

o
fore Congress adjourned. re-
csivership was suggested by .
member Of the Senate District
Committee, Senator Gordon
Allott, Republican Of Colo
RADIO, as q means Of liquidating
CTC operations.
Since then the idea has
been tossed back and forth
By various parties concerned
with the transit strike. but
there has been no concrete
Indication as yet that the Dis
trict Government Is prepared
to ask for 1t.
Is receivership a possibility
in cases Of this kind? Is It
q weapon that can be en-.
ployed by the District COM
lIiissioners. or anyone else, II
after settlement Is reached.
the picture should again de-
teriorate? Could receiyership
be sought now. In view Of the
fact that Congress did not pro-
vide for 1t In the act revoking
Capital Transit's franchise3
Difficult Answers
These are tough questions.
and as with most difficult le-
raj problems, there are no
sure-lire answers.
However. o quick survey Of
District statutes and Il mod
ern case law points 10 these
conclusions:
o Capital Transit could be
thrown into receiyership
whether or not Congress epe-
ciflcally provided for II In the
event that operations prove
unsatisfactory during the re-
naming year Of the fran
chise. But
o At present. the odds appear
10 be against q Capital Tran
sit receivership.
TraditiOnally rece worship
involves q remedy for credi-
tors. When q business goes
broke. the creditors 90 to
court and ask that the COM
pany be placed in the hands
Of q receiver and liquidated.
It's assets are then distributed
among the creditors.
II anytl1iag is left over. that
goes to the owners. The pro-
cedure Is under close court
supervision and the receiver is
answerable TO the court as
q kind Of trustee.
In recent years courts and
legislatures have made this
remedy available in cases
other than bankruptcy. Still.
the action is discretionary
with the courts. and those
asking for receivership have
to make out a pretty strong
case before the courts win
shelye the corporate officers
and replace them with trustees
to operate or liquidatA the
business.
District Code
The District code on re-
ownership Is fairly broad.
Among other things, 1t says
that corporate charters may
be Cancelled and receivers ap-
pointed If:
THE court shall be of the
opinion that legal cause Of
forfeiture be shown and the
public interests require that
said forfeiture shall be de-
clared :"
In other words, q special
law authorizing receivership
does not appear necessary.
Who could ask for receiver
ship?
The District Government,
represented by the District
Commissioners, would be the
most likely petitioner. II the
District could make a strong
case showing that etc Tor its
successor) was not making a
sincere effort to resume and
maintain satisfactory opera
tons, receivership might re-
suit. Since the District could
use the public interests" ar
gument with considerable au-
thority. its case might con-
vince the court.
The Stockholders can ask
for a receivership. Ordinarily
q stockholder action results
when q majority feels that It's
funds are being misused by
Che corporate directors or
when their investment APP
pears to be In jeopardy due
to management policies.
In some cases minority
stockholders have succeeded
in obtaining a receivership
where they could show that
irreparable harm was being
done to them by an insensi-
tive management. But this is
hard TO do, and there seems
to be no precedent in the
case Of q strike bound public
utility.
Outsiders" who make use
Of the company's services
might be able to request re-
ceivership. While the chances
are remote that Capital Tran
sit riders or downtown BUSH
nessmen acting individually
would be able to show sufd-
Gent equity in the case to get
into court, such a possibility
may exist.
The public interest" argu-
ment has been available for
some time as a basis for put
ting a public utility into re-
ownership. As far back as
1875 the courts decreed re-
ceivership for the Illinois
Mississippi Telegraph Co. for
this reason.