EMPLOYERS'LIABILITY ASSUR. CORP. v. Astoria Mahogany Co.
| Decision Date | 11 May 1925 |
| Docket Number | No. 319.,319. |
| Parties | EMPLOYERS' LIABILITY ASSUR. CORPORATION, Limited, v. ASTORIA MAHOGANY CO., Inc. Appeal of UNITED STATES. |
| Court | U.S. Court of Appeals — Second Circuit |
Ralph C. Greene, U. S. Atty., of Brooklyn, N. Y., John G. Sargent, Atty. Gen., Harlan F. Stone, former Atty. Gen., and Jerome Michael, Paul Shipman Andrews, John Vance Hewitt, Alfred N. Heuston, and Henry Gale, Sp. Asst. Attys. Gen., for the United States.
Shearman & Sterling, of New York City (John A. Garver, Chauncey B. Garver, and James A. Stevenson, Jr., all of New York City, of counsel), for appellees.
Before ROGERS, MANTON, and HAND, Circuit Judges.
The suit arose upon the usual creditors' bill, filed by a simple creditor upon behalf of itself and all others, alleging that, though the defendant company was not insolvent, its assets were exposed to waste through a multiplicity of actions by its creditors. It prayed the appointment of receivers to take over the assets and distribute them ratably among all those entitled. The defendant filed an answer to the bill, consenting to the relief prayed, upon which on January 14, 1922, the District Court passed a decree appointing the appellees receivers, directing all creditors to file their claims within 60 days, and foreclosing such as defaulted. There were provisions in the decree designed to give notice to the creditors. Later the time to file was extended to April 15, 1922.
On October 5, 1923, the appellant procured a rule nisi, supported by a petition, requiring the appellees to show cause why it should not be allowed to file its proof of claim for certain refunds alleged to be due the appellant from the defendant company. These arose out of transactions during the Great War upon contracts between the United States and the defendant, and another company which had been merged with it. The receivers opposed the application alleging that the United States before April 15, 1922, had had notice of the order and had filed a claim for taxes, that a reorganization of the company was under way which would be prejudiced, and that the receivers had borrowed over $1,000,000 from certain banks during their conduct of the business. On this showing the District Court discharged the rule nisi and dismissed the petition on December 31, 1923.
Later the proceeding was reheard upon new affidavits, which showed that the Finance Office of the United States Army had first received intimation of the existence of the appellant's claims in the early part of August, 1922, after which the investigations had proceeded continuously until the petition was filed. The District Court adhered to its former decision and dismissed the second application on February 26, 1924. The appeal was taken from both orders. The questions involved are two: First, whether the decree of limitation may bar the appellant at all; and, second, if so, whether under the circumstances the default should have been reopened.
We find it unnecessary to decide how far such a decree as that of January 14, 1922, can conclude the sovereign. In Re Menist Co., Inc. (C. C. A.) 290 F. 532, we held that section 57n of the Bankruptcy Act (Comp. St. § 9641) did not bar the United States, but that the trustee must have recourse to the procedure which we approved in Re Anderson, 279 F. 525. We should scarcely expect that a decree would be more effective than a statute. Possibly the same course is open to receivers under a creditors' bill as to trustees in bankruptcy; but, even so, there is an obvious difference between that and a decree for general limitation. We notice the point only to pass it, because we think that in the case at bar the petition should have been granted, had the appellant been a private person.
Orders of foreclosure are primarily intended for no more than safety in distribution. In this regard they are like the early orders of the same kind of the English Court of Chancery in the administration of a decedent's estate. Gillespi v. Alexander, 3 Russell, 130, 136. They enable the receivers to dispose of the property, but not to forfeit...
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