Shannon v. Shepard Mfg. Co.

• Decision Date: 25 May 1918
• Parties: SHANNON v. SHEPARD MFG. CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

230 Mass. 224

119 N.E. 768

SHANNON

v.SHEPARD MFG. CO. et al.

Supreme Judicial Court of Massachusetts, Middlesex.

May 25, 1918.

Report from Superior Court, Middlesex County; James H. Sisk, Judge.

Suit by Thomas J. Shannon against the Shepard Manufacturing Company and others, resulting in final decree settling the accounts of Arthur F. Whalen as receiver of defendant corporation, Edward C. Mason, its trustee in bankruptcy, petitioning for an order to the receiver, such petition being denied. On report to the Supreme Judicial Court. Order denying the petition of the trustee in bankruptcy for order to receiver affirmed, and final decree affirmed.

John T. Hughes and Philip Mansfield, both of Boston, for receiver.

Harold Williams, Jr., and John R. Lazenby, both of Boston (Barker & Wood, of Boston, of counsel), for trustee in bankruptcy.

RUGG, C. J.

The plaintiff, a stockholder in the defendant corporation, in behalf of himself and all other stockholders and creditors who might wish to join, filed against it in the superior court this suit in equity with appropriate allegations to the effect that under the management of its officers the debts of the corporation were not being paid although its assets were sufficient, and praying for the appointment of a receiver to carry on its business. There were no allegations of insolvency, but the contrary. On May 4, 1915, Arthur F. Whalen was appointed receiver to conserve the assets and to conduct the business of the corporation. He qualified, gave a large bond and took possession of the property. He operated the business of the corporation from May 4, 1915, until December 9, 1915, employing from 35 to 70 men. The business was that of a wholesale manufacturer and jobber of silverware, and has been in existence about 30 years. For a considerable period it was the purpose and effort of the receiver, with the concurrence of all parties in interest, to put the business in such condition that it might be sold as a going concern. On June 11, 1915, a petition in bankruptcy was filed in the federal court against the corporation by some of its creditors. This petition was somewhat contested and the corporation was not adjudicated a bankrupt until November 24, [230 Mass. 227]1915, when Edward C. Mason was appointed receiver in bankruptcy by the federal court. On December 17, 1915, he was elected and qualified as trustee in bankruptcy. Whalen, as receiver, operated the business of the corporation with the knowledge and consent of Mason--

‘during the period from November 24, 1915, to December 9, 1915, the date when the property of the bankrupt (except bills receivable and cash) was turned over to Mason as receiver. Pursuant to an oral agreement with Mason, Whalen, as receiver, continued to operate the business of the corporation for a period from December 9, 1915, until about the middle of January, 1916, when it was closed. Whalen made no charge for any services rendered by him during that period (December 9, 1915, to the middle of January, 1916).’

On December 9th Whalen, as receiver of the superior court, surrendered to Mason, then receiver in the bankruptcy court, the business, plant, machinery, equipment, and list of accounts receivable of the corporation, retaining his own accounts receivable as receiver, together with cash in hand, for the purpose of covering his disbursements, expenses, and compensation. A decree of the superior court was entered on June 3, 1916, as of December 9, 1915, whereby said Whalen, as receiver, was authorized to deliver to said Mason, as receiver, or as trustee in bankruptcy, of said defendant corporation, ‘the real estate, machinery, merchandise, equipment and all the other assets of the defendant corporation in his hands and possession, excepting only cash, the bills receivable, due said Whalen as receiver, and such other assets, such as sample accounts, as by agreement by said Whalen and said Mason may be more conveniently handled or turned into cash by said Whalen.’ This decree was assented to by the attorney for Mason, as trustee. On June 3, 1916, an interlocutory decree was entered as of May 1, 1916, which recited that Whalen, receiver, had turned over to Mason all of the assets of the defendant corporation in his possession, excepting certain cash and property now converted into cash, in all amounting to less than $9,000. It was thereupon ordered that the bond of Whalen as receiver be reduced from $100,000 to $10,000, with sureties. This decree was assented to by the attorney for Mason as trustee. On June 16, 1916, Whalen filed his petition for the allowance of his final account and report as receiver. An order of notice was issued thereon to Mason, trustee in bankruptcy, returnable June 19, 1916. Service of this order was accepted by the attorney for the trustee. At the hearing on this petition, the trustee appeared by his attorney and the only objection raised was to the amount claimed by the receiver for his services. A decree entitled ‘final’ was entered on July 20, 1916, settling the receiver's accounts, approving payments made by him both before and after the filing of the petition in bankruptcy, but before December 8, 1916, approving bills for services of counsel rendered to him as receiver during the period of his receivership, and ordering them paid, determining his own compensation for the period between May 4th and December 9th, fixing the amount to be paid to the surety on his official bond, and directing him to transfer and deliver to the trustee all property of the bankrupt in his hands remaining after making these payments. On June 16, 1916, Whalen as receiver filed in the superior court a suggestion of the adjudication in bankruptcy and the appointment of Mason as trustee. So far as appears of record, this was the first time that the bankruptcy proceedings were called to the attention of the state court although the bankruptcy was recited in the decree entered on June 3, 1916. Mason did not file any appearance in the superior court, or ask to intervene or petition for transfer to him of the property in the hands of the receiver until August 9, 1916, when he filed a petition for leave to intervene. In that petition he set forth the filing of the petition in bankruptcy, the adjudication, and his appointment and qualification as trustee, the filing of the report of the receiver asking for the fixing of his compensation and for allowance to his attorneys, the entry of the decree of July 20, 1916, and prayed for leave to appeal from that decree on the ground that the allowance of the sums as compensation to the receiver and his attorneys was beyond the jurisdiction of the court. That petition does not appear from the record to have been allowed specifically, but since the trustee was permitted to appeal from the decree of July 20th, it may be treated as allowed. On January 23, 1917, Mason as trustee filed in the superior court a petition entitled ‘Petition for Order to Receiver,’ which recited briefly the previous proceedings and alleged that the allowance of the account of Whalen as receiver was beyond the jurisdiction of the court and praying that the decree of July 20, 1916, be vacated, and that the receiver be ordered to account to the bankruptcy court for all assets and property of the corporation on June 11, 1916, the date of the filing of the petition in bankruptcy. No evidence was introduced on this petition and it was denied and the case was reported, if the decree of July 20, 1916, was not a final decree.

We are of opinion that that was a final decree. It was final at least to the extent of permitting an interested party to appeal from it. Gerrish v. Black, 109 Mass. 474, 477;Forbes v. Tuckerman, 115 Mass. 115, 119;Hill v. Chicago, 140 U. S. 52, 11 Sup. Ct. 690, 35 L. Ed. 331; opinion of Chief Justice Fuller in Hoffman v. Knox, 50 Fed. 484, at 489, 1 C. C. A. 535. If it be a final decree, then the superior court had no right further to deal with it except upon a bill of review. White v. Gove, 183 Mass. 333, 340, 67 N. E. 359;Lakin v. Lawrence, 195 Mass. 27, 28, 80 N. E. 578;Fairbanks v. Newhall, 222 Mass. 598, 111 N. E. 385.

Nothing in the account appears to turn on the period elapsing between the date of adjudication of bankruptcy and of the actual turning over of assets by the receiver to the trustee. No argument has been made on that point and it is laid on one side.

It has not been contended that the services of Whalen as the receiver were not of value in preserving and managing the estate of the bankrupt. Indeed, the only suggestion made by the trustee at the hearing in the superior court was that the amount claimed for his services in that connection was too large, not that the receiver ought not to be paid.

The question presented for decision is whether the superior court had jurisdiction to enter the decree of July 20th allowing the accounts of the receiver, fixing his compensation and ordering payment of the fee for the surety upon his bond. Although this question was not raised at the time that decree was entered, it will be considered because it is the duty of the court to consider whether it has jurisdiction at whatever stage the objection may be presented, or of its own motion if not raised by a party. Boston Bar Association v. Casey, 227 Mass. 46, and cases collected at page 50, 116 N. E. 541.

The contention that the superior court was without jurisdiction to enter the decree of July 20th is founded on the proposition that the adjudication of bankruptcy made on November 24th related back to the time of filing the petition in bankruptcyon June 11 and divested the receiver appointed by the superior court of all jurisdiction in the premises and drew into the jurisdiction of the bankruptcy court all matters pertaining to the administration of the property.

The appointment of the receiver was lawfully made by the superior court. It was not an act of bankruptcy as to the corporation, for the reason...