Court Opinion

ID: 6438708
Source: CourtListenerOpinion
Date Created: 2022-06-25 12:14:55.632598+00
Date Added: 2024-06-11T15:52:29.827847
License: Public Domain

Carroll, J.
This case is before us on a report. By a decree of the Superior Court in receivership proceedings the receiver of the James E. Nelson Company, a Massachusetts corporation (hereinafter called the company), was directed to pay its creditors as set forth in schedule A a dividend of one hundred per cent, these creditors being entitled to priority. The E. T. Ryan Iron Works Inc., an unsecured creditor, objected to the decree.
. The receiver in his petition for instructions alleged that an involuntary petition in bankruptcy was filed against the company and one Butler was appointed receiver; that he conducted the contracting business of the bankrupt and bought certain merchandise; that the bankrupt filed an offer of composition which, on January 2, 1924, was duly confirmed; that the receiver instead of "relinquishing possession of the assets of the . . . Company . . . remained in possession” until April 2, 1924; that certain creditors claiming priority sold and delivered merchandise either to the company or to Butler between January 2, 1924, and April 2, 1924, when Butler "was running the business”; that certain creditors who had sold merchandise to Butler previous to January 2, 1924, filed petitions in the United States District Court asking that Butler be ordered to pay their claims, "and orders to that effect were made, but said orders have never been paid”; that said creditors “who have received orders for payment . . . and all other creditors who sold . . . merchandise to Butler” as receiver "claim priority of payment out of this estate, claiming a lien.”
In the bill in equity praying that a receiver be appointed, it appeared that Frederick S. Antoine obtained judgment against the company; that execution issued and was returned unsatisfied, and for thirty days after demand the company neglected to pay the amount due on the execution. *217John C. Pirie was appointed receiver by a decree dated July 25, 1924.
The judge states in his report: "after hearing the parties, I entered an interlocutory decree on the 21st day of February, 1927, authorizing the payment in full of the claims of certain creditors set forth in said decree.” No evidence is reported and there is nothing, in the schedule of creditors given priority, showing when the merchandise was furnished, and there is nothing to show that these creditors were not the creditors who filed petitions in the United States District Court, whose claims the receiver was ordered to pay, which "orders have never been paid.”
The receiver’s petition for instructions, upon which the decree in question was entered, states that on motion of the receiver the account filed by Butler was surcharged in the amount of $8,552.22; that on November 6, 1925, the receiver brought an action against Butler’s surety; that the surety "is willing to settle your petitioner’s action” and to pay $3,500, "but desires, before said payment is made, to receive some protection against any suits by creditors of the class set forth” in the schedule; that the petitioner is willing to settle the litigation with the surety for the sum of $3,500; that the surety and the creditors named in the schedule suggest that the surety pay to the receiver this sum of $3,500, and that the receiver “allow priority to the creditors” of this class.
The record does not show what evidence was introduced at the hearing before the judge and we have no way of knowing, from the record before us, that any of the creditors named in the schedule sold any merchandise to the receiver after the offer of composition was confirmed. It is asserted in the brief of the receiver that at the hearing on the petition for instructions the creditors “were claiming a hen on the property” in his possession; that if it became necessary "to try out the question of the various claimants and the claims” against the surety "there would be a great amount of litigation”; that it was agreed by "all persons, with the exception of the appellant,” that it was for the best interests of all *218that a compromise and settlement be made at once; that the decree allowed no priority to any creditor "whose claim against the receiver accrued subsequently to January 2, 1924.” It is also stated in the receiver’s brief that "All parties further agreed that the unsecured creditors would obtain more by the settlement than by protracted litigation.”
On the record in this case there was no error in giving a preference to the thirty-eight creditors named in the schedule annexed. While the assets of the company were in the hands of Butler, who was appointed receiver by the United States District Court, he carried on the business of the bankrupt company, and in so doing was supplied with materials by certain creditors. By order of the United States District Court he was directed to pay these creditors. As they furnished supplies for the continuation of the company’s business they were entitled to priority, and the decree directing that the receiver appointed by the Superior Court give priority to these creditors was right. Expenses incurred by a receiver in continuing a business that cannot be discontinued without loss may, in equity, be considered expenses of preservation which should be paid in priority to general creditors. See Palmer v. Texas, 212 U. S. 118; City Bank of Wheeling v. Bryan, 76 W. Va. 481; Farmers’ Loan & Trust Co. v. Bankers & Merchants’ Telegraph Co. 148 N. Y. 315. There is nothing in Jones v. Arena Publishing Co. 171 Mass. 22, and Old Colony Trust Co. v. Medfield & Medway Street Railway, 215 Mass. 156, inconsistent with this. In Commonwealth v. Commissioner of Banks, 240 Mass. 244, the court was dealing with an insolvent trust company. G. L. c. 167, § 22. There is nothing in G. L. c. 155, §§ 52, 53, nor in G. L. c. 156, § 51, which deprived the court of its power to order the distribution of the assets of the company according to equitable principles.
It is alleged that the creditors, whose claims the United States District Court ordered Butler to pay, claim “a lien on the assets that revested to the bankrupt.” If there were liens on the property when the receiver Pirie came into possession, he held the property subject to these existing liens. Kittredge v. Osgood, 161 Mass. 384.
*219The fact that the claims given priority arose while the receiver appointed by the United States District Court was in control did not deprive the Superior Court of the power to order these claims to be.paid in preference to the general creditors. We must assume that these claims accrued before January 2, 1924.

Decree affirmed.