Buss Mach. Works v. Watsontown Door & Sash Co., 674.

• Decision Date: 27 January 1933
• Docket Number: No. 674.,674.
• Citation: 2 F. Supp. 757
• Parties: BUSS MACH. WORKS et al. v. WATSONTOWN DOOR & SASH CO.
• Court: U.S. District Court — Western District of Pennsylvania

2 F. Supp. 757

BUSS MACH. WORKS et al. v. WATSONTOWN DOOR & SASH CO.

No. 674.

District Court, M. D. Pennsylvania.

January 27, 1933.

Knight & Kivko, of Sunbury, Pa., for petitioners.

Frederick V. Follmer and Harry W. Chamberlin, both of Milton, Pa., and John G. Reading, of Williamsport, Pa., for respondent.

JOHNSON, District Judge.

On June 24, 1930, upon application of the complainant, this court appointed receivers in equity of the Watsontown Door & Sash Company. Pursuant to an order of this court, the receivers operated the plant for about two years, but, owing to the abnormal industrial conditions, they were unable to continue the operation because of a lack of working capital. On September 21, 1932, the receivers petitioned this court for leave to sell the assets of the company freed and divested from the lien of the mortgage in favor of the Lycoming Trust Company, substituted trustee, for the bondholders, and free and clear of all other liens and incumbrances.

After hearing and argument on the petition of the receivers and answers filed thereto by the trustee under the mortgage and creditors, the court, on December 28, 1932, being of the opinion that a sale free and divested of the lien of the mortgage could not be legally made, entered a decree directing the receivers to sell the property in question at public sale on January 28, 1933, under and subject to the lien of the mortgage.

On January 16, 1933, the Kendall Lumber Company and the W. R. Willett Lumber Company, Inc., creditors of the receivership, filed a petition to vacate the decree of sale on the ground that the decree entered December 28, 1932, was not in conformity with the prayer of the petition of the receivers, in that the petition prayed for a sale of the assets free and clear of incumbrances while the decree ordered a sale under and subject to the mortgage.

There is no merit in the petitioners' contention. Under the broad equity powers of the court, it can, under proper circumstances, order a sale of property free and divested of liens by transferring the liens to the fund derived from the sale; but, where there is no reasonable prospect that a surplus will be left for general creditors, a court of equity will not exercise this power. Seaboard National Bank v. Rogers Milk Products Co. (C. C. A.) 21 F.(2d) 414. In the present case the property will not bring an amount sufficient to pay the mortgage.

All creditors and parties in interest had notice of the presentation of the...