Johnson Fare Box Company v. Doyle
| Decision Date | 06 January 1958 |
| Docket Number | No. 100,Docket 24731.,100 |
| Citation | 250 F.2d 656 |
| Parties | JOHNSON FARE BOX COMPANY, Claimant-Appellant, v. Lester T. DOYLE, Trustee in Reorganization of Third Avenue Transit Corporation, Debtor, Respondent-Appellee. In the Matters of THIRD AVENUE TRANSIT CORPORATION et al., Debtors. |
| Court | U.S. Court of Appeals — Second Circuit |
Joseph Lorenz, New York City (Lorenz, Finn & Giardino, John F. X. Finn, Jr., New York City, on the brief), for claimant-appellant, Johnson Fare Box Company.
John A. Kiser, New York City (Saxe, Bacon & O'Shea, Edward D. Burns, New York City, on the brief), for Lester T. Doyle, Reorganization Trustee-Appellee.
Before CLARK, Chief Judge, MOORE, Circuit Judge, and SMITH, District Judge.
Between February 7, 1949 and June 10, 1949 Johnson Fare Box Company (referred to as "Johnson") sold and delivered to the debtors 225 new fare boxes for use on their buses. The purchase prices of these fare boxes totaled $43,533.84. On June 21, 1949 trustees in bankruptcy were appointed for the debtors. Thereafter Johnson filed with the trustees claims for the purchase prices of these fare boxes, and sought a priority over bondholders and general creditors (except those in similar position to Johnson) under the so-called six months' priority rule, i. e., priority given to certain types of debts incurred within the six months preceding the appointment of trustees. These new fare boxes were required because of an increase in fare from five to seven cents. The old boxes would not register the new fare correctly if a nickel and two pennies were deposited because they were designed to record a nickel as one fare and a dime as two fares. Unfortunately a penny reacted in the box in the same manner as a dime so that the bus operator was confronted with the problem of trying to prevent the passengers from putting pennies in the box or, if unsuccessful, having more fares recorded and charged against him than passengers carried. Delay, confusion and dissatisfaction resulted.
The reason or motive, however, prompting the debtors to purchase the new boxes does not supply the answer to the legal question as to whether Johnson should be entitled to priority over secured and general creditors.
The so-called six months' priority rule is an invasion of the established contract rights of lienholders. As an invasion the rule should be strictly contained within narrow confines and limited to the purposes which brought it into being. In summary, the rule assumes that debts contracted during a short period, usually fixed at six months before a receivership, for labor, supplies or repairs necessary for a company's operation so redound to the benefit of the lienholders and other creditors that they should receive preferred treatment. On the other hand, new equipment...
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Boston and Maine Corp., In re
...not sufficient to secure the preference it should be extended to the company's unmortgaged assets. 216 F. at 471. Johnson Fare Box Co. v. Doyle, 250 F.2d 656, 657 (2d Cir.), cert. denied, 357 U.S. 938, 78 S.Ct. 1385, 2 L.Ed.2d 1551 (1958), paraphrased with apparent approval, a district cour......
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In re New York, New Haven and Hartford Railroad Co.
...should be strictly contained within narrow confines and limited to the purposes which brought it into being." Johnson Fare Box Company v. Doyle, 250 F.2d 656, 657 (2 Cir.), cert. denied 357 U.S. 938, 78 S.Ct. 1385, 2 L.Ed.2d 1551 In broad terms the six months rule provides that claims for l......
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In re Chicago Express, Incorporated
...purposes which brought it into being," since it is an "invasion of the established contract rights of lienholders." Johnson Fare Box Co. v. Doyle, 250 F.2d 656, 657 (2 Cir.), cert. denied, 357 U.S. 938, 78 S.Ct. 1385, 2 L. Ed.2d 1551 (1958). Thus, in a recent case, Judge Bryan, noting the a......
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In re Michigan Interstate Ry. Co., Inc.
...same way as fuel expenses, Burnham v. Bowen, 111 U.S. 776, 4 S.Ct. 675, 28 L.Ed. 596 (1884), or repair expenses, Johnson Fare Box Co. v. Doyle, 250 F.2d 656 (2d Cir.1958), cert. denied, 357 U.S. 938, 78 S.Ct. 1385, 2 L.Ed.2d 1551 (1958). See also Miltenberger v. Logansport C. & S.W. Ry. Co.......