In re Wm. S. Butler & Co., Inc.

• Decision Date: 10 September 1913
• Docket Number: 1,021.,1,020
• Citation: 207 F. 705
• Parties: In re WM. S. BUTLER & CO., Inc.
• Court: U.S. Court of Appeals — First Circuit

207 F. 705

In re WM. S. BUTLER & CO., Inc.

Nos. 1,020, 1,021.

United States Court of Appeals, First Circuit.

September 10, 1913

[Copyrighted Material Omitted]

Boyd B Jones, of Boston, Mass. (Charles F. Choate, Jr., Frederick H Nash, and William M. Morgan, all of Boston, Mass., on the brief), for appellants.

Lee M. Friedman and Burton E. Eames, both of Boston, Mass. (Tyler, Corneau & Eames, Friedman & Atherton, Jacobs & Jacobs, Warren, Garfield, Whiteside & Lamson, Harvey H. Pratt, and Julius Nelson, all of Boston, Mass., of counsel), for appellees.

Before PUTNAM and BINGHAM, Circuit Judges, and ALDRICH, District judge.

BINGHAM Circuit Judge.

This is a petition in bankruptcy filed November 9, 1912, in the United States District Court for the District of Massachusetts, by three creditors praying that William S. Butler & Co., Incorporated, be adjudged a bankrupt. The grounds stated in the petition upon which it is claimed that the defendant should be adjudged a bankrupt are the following:

'(1) That said William S. Butler & Co., Incorporated, is insolvent, and that within four months next preceding the date of this petition * * * committed an act of bankruptcy in that it did * * * on the 7th day of November, 1912, because of insolvency, have put in charge of its property two receivers, * * * under the laws of the United States, by virtue of proceedings in equity in the United States District Court for the District of Massachusetts; and

'(2) Committed an act of bankruptcy in that it did * * * on the 7th day of November, 1912, * * * being insolvent, apply to the United States District Court for the District of Massachusetts, sitting in equity, for the appointment of a receiver, by virtue of which proceedings two receivers * * * were appointed.'

On the date alleged in the petition, a bill in equity was filed in the District Court for the District of Massachusetts, in which Isaac McLean Sons Company appeared as plaintiff and William S. Butler & Co., Incorporated, as defendant. It was in form a creditors' bill, and after setting out the debt due the plaintiff it alleged in substance:

(1) That the defendant is otherwise indebted to an amount approximating $700,000, a large amount of which is now due.

(2) That the defendant is unable to meet its liabilities as they mature in the ordinary course of business, and that it would be unjust and inequitable for the plaintiff or other creditors to attempt to gain a preference in the time or manner of settlement of their claims.

(3) That the defendant is engaged in the retail dry goods business in Boston; has invested more than $250,000 in stocks of new merchandise which are immediately available for sale at a profit if the business can be carried on without interruption; and that the store occupied by it has recently been refitted with expensive fixtures, which are of great value to a going concern.

(4) That it holds a lease of the premises it occupies, which is of great value, and would be of great value to any purchaser of its business as a going concern, but that if attachments should be placed upon its property, and the defendant should be adjudicated a bankrupt, the value of its lease would be wholly lost.

(5) That the defendant and its predecessors during many years of continuous business have built up a good will of great value which would be almost wholly lost if the business should be closed up.

(6) That, unless a receiver is appointed and empowered to borrow money upon receiver's certificates, the store will have to be closed and its assets sacrificed because of its lack of quick assets and its inability to raise money needed for carrying on its business.

(7) That for these reasons the plaintiff is without adequate remedy for the collection of its indebtedness without the intervention of a court of equity and the appointment of a receiver to continue the business of the defendant and protect the value of its assets until sufficient sums can be realized, either from the continuance of the business or the sale of its assets, to discharge the defendant's indebtedness or to distribute its assets ratably among its creditors.

The bill contained two prayers:

'(1) That receivers be forthwith appointed to take possession of and administer the assets of the defendant with power to manage and operate the property, to continue its business, employ agents and employes, and with the approval of the court to borrow money and issue receiver's certificates therefor; and

'(2) That the debt of the plaintiff and the debts of all other creditors who join in the proceedings be established, and that the assets of the defendant be equitably applied as the court may direct in satisfaction thereof.'

On the date of the filing of the bill the defendant answered, admitting that the matters and things stated in the bill were true, and thereupon the following decree was entered:

'On this 7th day of November, 1912, comes the plaintiff in this cause, by its attorney, and upon consideration of the bill of complaint and the answer thereto, and on motion of counsel for the plaintiff, the respondent, by its attorney, consenting thereto, it is ordered, adjudged, and decreed that Charles F. Weed, of Brookline, and Millory H. Gibson, of Boston, both in Massachusetts, be and hereby are appointed receivers of all the assets and property of the respondent, wheresoever situated, and the moneys, contracts, debts, choses in action, books of accounts, deeds, and documents belonging to the respondent or relating to or arising from its property or business; and they are directed to file with the clerk of this court within two days from this date their several bonds, with sureties to be approved by the clerk, in the sum of $50,000 each. Said receivers are hereby authorized and directed to take into their possession forthwith all the assets and property of the respondent wheresoever situated, carrying on the business of the respondent until further order of the court, and for that purpose to purchase such materials and supplies, employ and pay such counsel, servants, and agents, contract for such labor, and, subject to the direction and approval of this court, take such other steps, and enter into such obligations and agreements, as shall be reasonably necessary; to insure any property of the respondent which they may think proper; to collect and receive all sums due or payable to the respondents, or arising from the conduct of its business by the receivers; to pay any accrued rent for the preservation of leases; and under the direction of the court to institute and prosecute all such actions, suits, and proceedings as they may think proper and for the protection and preservation of the respondent's assets or for recovering possession thereof; to defend any and all actions, suits, and proceedings against the respondent or against the receivers in respect of their acts or management as such; and out of the moneys to be received by them, as aforesaid, to pay all taxes and assessments lawfully laid or assessed upon or in respect to the property or business of the respondent, and all expenses and obligations properly incurred by them in carrying on said business, or otherwise in connection with the premises. The said receivers shall deposit all moneys coming into their hands as aforesaid in some suitable bank or trust company in the city of Boston.' The decree also contained an order restraining the respondent, its officers and agents, from interfering with or participating in the management of the business except through and under the receivers.

In the District Court it was found that the proceeding in equity was brought about by Butler & Co., and that, although the bill was in form a creditor's bill, it was in fact an application by the debtor for the appointment of receivers. It was also found that the debtor was insolvent in fact (that is, in the bankruptcy sense of the term) at the time of the filing of the bill and at the time of the filing of the petition in bankruptcy. The company was adjudged a bankrupt on both the grounds set out in the petition, and the receivers and intervening creditors appealed.

The provisions of the statute under which the alleged acts of bankruptcy are sought to be upheld read as follows:

'Or, being insolvent, applied for a receiver or trustee of his property or because of insolvency a receiver or trustee has been put in charge of his property under the laws of a state, or of a territory, or of the United States. ' Section 3a, cl. 4, of the Act of July 1, 1898, c. 541, 30 Stat. 546 (U.S. Comp. St. 1901, p. 3419), as amended by the Act of February 5, 1903, c. 487, Sec. 2, 32 Stat. 797 (U.S. Comp. St. Supp. 1911, p. 1493).

In section 1, cl. 15, of the act, it is provided that:

'A person shall be deemed insolvent within the provisions of this act whenever the aggregate of his property * * * shall not, at a fair valuation, be sufficient in amount to pay his debts.'

This section undoubtedly sets forth the meaning Congress intended should be given to the words 'insolvent' and 'insolvency' as used in section 3a, cl. 4, and seems to be the one either directly or impliedly attributed to them by the courts in considering these provisions of the law. In re Golden Malt Cream Co., 164 F. 326, 90 C.C.A 258; Duncan v. Landis, 106 F. 839, 45 C.C.A. 666; In re Boston & Oaxaca Mining Co. (D.C.) 181 F. 422; In re Perry Aldrich Co. (D.C.) 165 F. 249; Beatty v. Andersen Coal Mining Co., 150 F. 293, 80 C.C.A. 181; Hooks v. Aldridge, 145 F. 865, 76 C.C.A. 409; Blue Mt. Iron & Steel Co. v. Portner, 131 F. 57, 61, 65 C.C.A. 295; In re Edward Ellsworth Co. (D.C.) 173 F. 699. No case has been called to our attention in which a different conclusion has been reached. If any...