Seidler v. Branford Rest., Inc.
Citation | 127 A. 36 |
Parties | SEIDLER v. BRANFORD RESTAURANT, Inc. |
Decision Date | 10 December 1924 |
Court | New Jersey Court of Chancery |
Suit by Charles I. Seidler against Branford Restaurant, Inc., in which a receiver was appointed. Order made allowing receiver compensation out of proceeds of sale before distribution.
Harry Green, of Newark, for receiver.
McCarter & English, of Newark, for defendant.
The receiver in this case, duly appointed by the court, applied to confirm a public auction sale of the defendant corporation to one Thomas P. Argyris for $9,000. Argyris also held a chattel mortgage on the assets, the validity of which was challenged by the receiver. The receiver applied to the court for leave to sell the assets free and clear of the lien of the chattel mortgage; the lien, if any, to attach to the proceeds. On the return of the rule, the mortgagee offered no objection, but asked the court to pass upon the validity of the mortgage, first, so he would know how to bid at the sale. The court adjudged the mortgage valid, and the mortgagee consented to the sale of the assets free and clear of the lien of his chattel mortgage; the lien to attach to the proceeds. The court approved the terms and conditions of the sale, which provided, among other things, that the purchaser should pay a deposit of 25 per cent. at the time of the sale and the balance upon the delivery of the goods, and that the sale was subject to the confirmation of the court. The assets were sold to Argyris for $9,000. The receiver did not have funds with which to pay administration expenses, including receiver's allowances, and for the use and occupation of the premises during the receivership, and applies to the court to have the said mortgagee, and successful bidder at the auction, pay reasonable allowances to him, his counsel, appraisers' fees, and for rent, instead of the $9,000 bid at the sale.
It should be noted that the receiver has conducted the restaurant business since the time of his appointment, on July 3, 1924, by order of the court, and with the knowledge and consent of the mortgagee. It was agreed by all parties that the closing of the business would destroy its value and the value of the mortgagee's security. The receiver conducted the business carefully and to the great advantage of the estate. When he took it over, it was a losing proposition. By his constant and careful attention he made it a going concern so that it finally became an earning proposition of approximately $150 or $200 a week. On July 14 the court made a rule, with interim restraint, restraining the mortgagee from foreclosing the chattel mortgage without the consent of the court. The mortgagee did not apply to the court for leave to foreclose or for leave to modify, thereby acquiescing in the rule. The receiver was allowed $1,800 by the court for himself and counsel, $50 each for appraisers, said mortgagee to pay or assume the payment for the use and occupation of the premises during the receivership, and to pay auctioneer's expenses.
The question before the court now is: Are the expenses of administration entitled to priority in payment over the chattel mortgage? Sections 85 and 86 of the Corporation Act (2 Comp. St. 1910, p. 1652) provide as follows:
In Attorney General v. Linden Cemetery Association, 90 N. J. Eq. 404, 107 A. 594, the receiver did not have enough money to pay allowances to himself and counsel. Vice Chancellor Backes permitted him to use funds derived from the sale of lands to defray his allowances and the allowances of his counsel, even though the vendor of said lands claimed an unpaid vendor's lien. He says:
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