Court Opinion

ID: 7291264
Source: CourtListenerOpinion
Date Created: 2022-07-25 20:34:15.333047+00
Date Added: 2024-06-11T16:19:20.881608
License: Public Domain

Reed, V. C.
It is manifest that the result of the operation, conducted by the committee, is directly contrary to the letter and spirit of the-agreement by which the committee was to be controlled. That agreement was to secure equality among the unsecured creditors.
The answer of the defendant is that the complainants are estopped from now raising any objection to the manner in which the property was distributed to the creditors. It is said that the complainants knew that property was being distributed, and they then raised no objection; that they had the opportunity to share in such distribution but chose to await the sale-of such property as might remain undistributed and to take their percentage of the product of such sale.
It is clear that some of the complainants knew that property was being distributed. It is not clear that all of the creditors knew this. Indeed, there is no proof that there ever was a regularly-called • creditors’ meeting after that of September 4th, nor is there proof that all of the complainants were present at-•any such meeting when the matter of distribution was discussed:' and approved. And as to those who knew that such distribution was occurring and who interposed no objection at the time,it is to my mind clear that their consent to such distribution was based upon the report of the committee presented at the meeting of September 19th, at which the assets were shown to be about $40,000 and the debts less than. $30,000. None of the-creditors, unless members of the committee for some time at least, were informed that there would not be enough to pay all the debts if the property was not sacrificed, and they undoubtedly thought that the- taking of the property by some of the-creditors at -the valuation fixed was calculated to prevent any sacrifice. It is clear, from the testimony of defendants’ witnesses, that until near the end there was no thought of a deficit and that the property was taken by some of the claimants, and such taking was assented to by other claimants under the impression that there would be enough to pay all. There was a generally-prevalent mistake, which worked a very inequitable-result.
*85In my judgment, this result should now be corrected so far as rit is possible to do so. I don’t find any fraud in the manner in which the distribution was made. True, the members of the .committee took property for their own claims, but at the same time all claimants were permitted to select and take property upon a similar basis of valuation. It is unfortunate that the ■result has been as it is.
In my judgment, there should be an account taken by a master .of the value of the property received by each claimant at the ■time of its reception. This value need not necessarily be upon -the basis of the value at which it was taken, for it may have been taken for more than its value for the purpose of cancelling ■the claimant’s debt. Where the property was taken at invoice prices that should be regarded as its value, but where the valuations were fixed by the committee, the true value at the time ■should be found by the master.
I think also that if any of the property received by a claimant is still in the same condition it was when received, and the ■claimant wishes to return the property and leave his claim upon ■the same footing as the other creditors who have received none, ■to be paid out of the fund which will be finally realized and ■ distributed, he should have the opportunity of returning his property. Any claimant desiring to do so can make his offer to do so to the master in writing within twenty days after the signing of the interlocutory decree, and upon such tender the master •shall inquire whether such property is in substantially the same condition it was in when received by the claimant, and whether .any profit has been received by the claimant from such property .while in his possession. Any property so returned will, of course, be sold by order of this court.
The purpose of the accounting, and the scheme for the returning of property, is to fix the valuation of the entire assets of Elemming, so that a percentage may be declared to all the claimants, and to fix the amount of a call which will have to be made •upon those claimants who have received property unretunied, to pay the difference between the value of such property received and the amount of their dividend to be fixed upon final accounting.
*86Mr. Coles will be entitled to hold the property to which he-had title as collateral security for his debt without contribution, so far as the value of such property does not exceed the amount of the debt.
In case of property taken upon the understanding that it is-to be in consideration of a payment of the attachment lien, of the taxes and other liens, the person making such payment will be subrogated to the right of the lienor whose lien he paid, and will hold the property taken by him in consideration of such payment, without liability to contribution, to the extent that its-value does not exceed the amount of the lien so paid by him.
The necessity of further direction in working out in detail this scheme to make an equal distribution of the assets underthe present circumstances will no doubt occu,r to counsel, and such directions may be embodied in the interlocutory, decree or any future directions as the requirement for the same may occur