Source: https://www.legalcrystal.com/case/94638/united-states-vs-butterworth-judson-corp
Timestamp: 2019-04-19 04:53:25+00:00

Document:
Where the answer of an insolvent corporation, in a suit brought by a simple contract creditor for the conservation and disposition of its property for the benefit of it creditors, admitted the allegations of the bill and consented to a decree appointing receiver, held that this amounted to the handing over of all the property and business to be administered a a trust fund to pay debts, and was in substance a voluntary assignment within the meaning of Rev.Stats. § 3466, entitling the United States to priority in payment of it claim. P. 269 U. S. 513 .
Certiorari to a judgment of the circuit court of appeals affirming an order of the district court which dismissed a petition in intervention filed by the United States, seeking preferred payment of its claim in a suit to administer and dispose of the assets of a corporation, through receivers, for the settlement of its debts. See also Price v. United States, ante, p. 269 U. S. 492 .
The question is whether § 3466 applies. That section and § 3467, in pari materia, are quoted in Bramwell v. United States Fidelity & Guaranty Co., ante, p. 269 U. S. 483 . The intervening petition shows that respondent was insolvent when the creditor's suit was begun, and the question of priority is to be determined on that basis, notwithstanding the complaint alleged and the answer admitted that respondent was solvent. Respondent's answer admitting the allegations of the complaint and its consent to the court's order constituted a necessary step in the proceedings for the appointment of receivers. Re Metropolitan Railway Receivership, 208 U. S. 90 , 208 U. S. 109 -110; Pusey & Jones Co. v. Hanessen, 261 U. S. 491 , 261 U. S. 500 . So, with the consent and cooperation of the insolvent debtor, the possession and control of all its property were handed over to be administered by the court, through the receivers, for the benefit of those whom the court found entitled to it. Porter v. Sabin, 149 U. S. 473 , 149 U. S. 479 . To induce the action taken by the court, the complaint represented that, if respondent's property was not dealt with as a trust fund for the payment of creditors, they would suffer great loss. It is established that, when a court of equity takes into its possession the assets of an insolvent corporation, it will administer them on the theory that, in equity, they belong to the creditors and shareholders, rather than to the corporation itself. See Hollins v. Brierfield Coal & Iron Co., 150 U. S. 371 , 150 U. S. 383 ; Graham v. Railroad Co., 102 U. S. 148 , 102 U. S. 161 . Here, the fund being less than the debts, the creditors are entitled to have all of it distributed among them according to their rights and priorities.

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