Leonard Levin Co. v. Star Jewelry Co., Inc., 1226.

• Court: Rhode Island Supreme Court
• Writing for the Court: STEARNS, Chief Justice
• Citation: Leonard Levin Co. v. Star Jewelry Co., Inc., 54 R.I. 465, 175 A. 651 (R.I. 1934)
• Decision Date: 03 December 1934
• Docket Number: No. 1226.,1226.
• Parties: LEONARD LEVIN CO. v. STAR JEWELRY CO., Inc.

175 A. 651

LEONARD LEVIN CO.

v. STAR JEWELRY CO., Inc.

No. 1226.

Supreme Court of Rhode Island.

Dec. 3, 1934.

Case Certified from Superior Court, Providence and Bristol Counties.

Petition by the Leonard Levin Company against the Star Jewelry Company, Inc. Certified from superior court under Gen. Laws 1923, c. 339, § 36.

Decree in accordance with opinion.

Samuel H. Workman, of Providence, for petitioner.

Dana M. Swan, Frederick W. O'Connell, and Swan, Keeney & Smith, all of Providence, for respondents Pezzullo.

LeRoy G. Pilling and George Ajootian, both of Providence, for a wage claimant.

Francis A. Manzi, of Providence, for other wage claimants.

STEARNS, Chief Justice.

This cause arises on a creditor's petition in equity for the appointment of a permanent receiver of the respondent, a Rhode Island manufacturing corporation, with a prayer for an injunction restraining the alienation of the property of the corporation.

The petition recites that respondent is insolvent and there is grave danger that the creditors will commence suits and attach the corporate property and that it is for the best interests of the numerous creditors and the stockholders of the corporation that a permanent receiver be appointed to take charge of the estate of the corporation and to wind up its business.

On May 2, 1934, after a hearing, by decree of the superior court, a receiver was appointed and directed to take possession of the corporate property, to collect all debts, to bring and defend in the name of the corporation all necessary actions; the institution or prosecution of any action at law or in equity or the levy of any legal process on the corporate property was enjoined.

By the decree all creditors to be entitled to be paid from the corporate assets were required to file with the receiver on or before June 15, 1934, a statement of their claims and of any security or liens or claims for preference; the receiver was required on or before June 29 to file with the court a report allowing or disallowing said claims. On May 29, the receiver was authorized to sell at private sale the stock, machinery, and equipment of the corporation. He sold these assets for $4,557.50, which sum of money constitutes all the assets in his hands.

The indebtedness of the corporation, which is all unsecured, is over $16,000. Included therein are claims for wages by thirteen of defendant's employees, a total of $996.56. They claimed priority in the payment of the corporate debts. There are no other claims of priority.

After a hearing on petition of the receiver for instructions, the following question was certified by the superior court to this court (Gen. Laws 1923, c. 339, § 36): "In the distribution of the net estate by the receiver, have the wage claims set forth in Exhibit A of receiver's petition priority over the general creditors of the respondent corporation; and if so, in what amount and for what period of time prior to the appointment of the receiver?"

By the decree the assets were to be applied not for the payment of all debts alike but only of such as were presented before June 15 and allowed by the receiver. This proceeding was instituted by certain creditors to avoid the expense and delay incident to bankruptcy. The individual claims of the wage creditors were small; none could invoke the jurisdiction of the Bankruptcy Act (11 USCA) without the co-operation of other creditors.

The purpose of the petitioning creditor was to secure equality of distribution and to avoid diminution of the fund by the payment of preferred claims. But such equality should not be secured at the expense of the wage-earners only, nor determined by a creditor's selection of the forum and the procedure. If the creditors and the debtor consent, an insolvent estate can be administered...