Shannon v. Shepard Mfg. Co., Inc.

• Citation: 230 Mass. 224
• Court: United States State Supreme Judicial Court of Massachusetts
• Decision Date: 24 May 1918
• Parties: THOMAS J. SHANNON v. SHEPARD MANUFACTURING COMPANY, INCORPORATED, & another.

230 Mass. 224

THOMAS J. SHANNON v. SHEPARD MANUFACTURING COMPANY, INCORPORATED, & another.

Supreme Judicial Court of Massachusetts, Middlesex.

May 24, 1918

December 6, 1917.

Present: RUGG, C J., BRALEY, CROSBY, PIERCE, & CARROLL, JJ.

Receiver. Bankruptcy.

Jurisdiction. Attorney at Law, Counsel fees.

Where at the time of the filing of a petition in bankruptcy the property of the bankrupt was in the hands of a receiver appointed by the Superior

Court, that court has jurisdiction to settle the accounts of its receiver relating to his charge of the property up to the time of the adjudication in bankruptcy some months after the filing of the petition.

Upon a petition to the Superior Court, alleging that the debts of a certain corporation carrying on an established manufacturing business were not being paid although its assets were sufficient for that purpose and containing no allegation of insolvency, that court appointed a receiver to conserve the assets and conduct the business of the corporation.

About a month later a petition in bankruptcy was filed in a federal court against the corporation. About five months after that the corporation was adjudicated a bankrupt and a trustee in bankruptcy was appointed. Thereupon the receiver appointed by the Superior Court, who up to that time had operated the business of the corporation with the knowledge and consent of all persons interested, turned over to the trustee in bankruptcy all the assets of the bankrupt in his hands, excepting cash and bills receivable due to the receiver and such other assets as by agreement between the trustee and the receiver could be handled and turned into cash more advantageously by the receiver. A decree of the Superior Court was made recognizing and confirming this arrangement and this decree was assented to expressly by the trustee.

Another decree of the Superior Court reciting these facts and by reason of them reducing the bond of the receiver also was assented to by the trustee. Upon a petition in the Superior Court for the allowance of the final account of the receiver, the trustee in bankruptcy appeared by counsel and the only objection raised was in regard to the amount charged by the receiver for his services. A decree was entered, entitled a final decree, settling the receiver's accounts approving the payments made by him both before and after the filing of the petition in bankruptcy but before the appointment of the trustee in bankruptcy, approving bills for services of counsel rendered to the receiver and ordering them paid, determining the amount of the receiver's compensation, 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 remaining in his hands after making these payments. The trustee in bankruptcy appealed from this decree on the ground that the allowance of the sums to be paid as compensation to the receiver and his attorneys was beyond the jurisdiction of the court.

Held, that the Superior Court, which rightly appointed the receiver, had jurisdiction of all questions relating to his accounting and final discharge, including the fixind of the amounts of compensation for him and his attorneys.

In the case above described, in which the evidence was not reported, it was held that, in the absence of any evidence, the charges for compensation could not be pronounced to be excessive and that the finding of the

Superior Court on that question of fact could not be set aside.

In fixing the amount to be allowed to the receiver for expenses incurred for counsel fees it was held to have been proper to allow the amount of compensation paid to counsel for services rendered for the common benefit of the persons interested in bringing the original bill in equity upon which the receiver was appointed.

APPEAL, by the trustee in bankruptcy of the estate of the Shepard Manufacturing Company, Incorporated, a corporation, from a decree of the Superior Court dated July 20, 1916, allowing the account of Arthur F. Whalen, Esquire, as the receiver of the property of that corporation.

The appeal was heard by Sisk, J., who filed a finding of facts relating to the decree appealed from, which contained the facts that are stated in the opinion. The judge reported the case for determination by this court in the following report:

"In the above entitled case, by my direction, a decree entitled `Final Decree' was entered on July 20, 1916. On January 23 1917, Edward C. Mason, Esquire, as trustee in bankruptcy of said defendant corporation, filed a petition in said case entitled `Petition for Order to Receiver,' in substance contending that this court was without jurisdiction to allow the account of Arthur F. Whalen, Esquire, its receiver in said case, and praying that said decree of July 20, 1916 entitled `Final Decree' may be vacated; that said Whalen, the receiver in this court, be ordered to deliver to said petitioner, as trustee in bankruptcy of the defendant corporation, all the assets and property of said defendant corporation, and that said receiver be ordered to account in the United States District Court for the District of Massachusetts sitting in bankruptcy, to said petitioner, trustee as aforesaid, for all assets and property of said defendant corporation on June 11, 1915, the day when a petition in bankruptcy was filed against said defendant corporation. This petition was duly heard by me, and was argued by counsel. No evidence was introduced by either party, and I thereupon caused to be entered an order denying the petition.

"I have this day filed a finding of all the material facts found by me in connection with said decree filed July 20, 1916.

"Inasmuch as it may be claimed that said decree entered July 20, 1916, was in fact an interlocutory decree, and being of the opinion that said decree so affects the merits of the controversy that the matters involved therein ought, before further proceedings, to be determined by the full court, I now report all questions arising under said decree under the provisions of R.L.c. 159, Section 27, and under any other statutes authorizing me to reserve and report the case."

H. Williams, Jr., for the trustee in bankruptcy.

J. T. Hughes, (P.

Mansfield with him,) for the receiver.

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 thirty-five to seventy men. The business was that of a wholesale manufacturer and jobber of silverware, and had been in existence about thirty 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,

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 9, 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 the 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 between 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...