United States v. Corporation

Decision Date11 January 1926
Docket NumberNo. 503,BUTTERWORTH-JUDSON,503
Citation269 U.S. 504,70 L.Ed. 380,46 S.Ct. 179
PartiesUNITED STATES v. CORPORATION
CourtU.S. Supreme Court

United states.

[Argument of Counsel from pages 504-509 intentionally omitted] Messrs. H. G. Pickering, Eldon Bisbee, and Bertram F. Shipman, all of New York City, for respondent.

[Argument of Counsel from pages 509-511 intentionally omitted] Mr. Justice BUTLER delivered the opinion of the Court.

April 22, 1922, respondent, a New York corporation, was insolvent within the meaning of R. S. § 3466 (Comp St. § 6372), and as defined by the Bankruptcy Act (Comp. St. §§ 9585-9656). Its debts amounted to approximately $3,000,000, and included $1,154,450 due to the United States. The value of its assets was not in excess of $1,500,000. On that day, the Hay Foundry & Iron Works, a simple contract creditor, on behalf of itself and other creditors, brought suit against the respondent in the District Court for the Southern District of New York. Among the facts alleged are these: Respondent owed plaintiff $7,988.43 for labor and materials furnished, and was without money to pay its debts then due. The value of its property, if properly and prudently realized on, would be more than enough to pay its obligations. Some of its creditors were threatening to bring suits on their claims, and resulting forced sales of the property would cause great loss to the creditors. Plaintiff believed that the property could be preserved for equitable distribution among those entitled thereto only upon the granting of equitable relief including the appointment of receivers, and that, unless the court would deal with the property as a trust fund for the payment of creditors, it would be sacrificed to the great loss of creditors. More would be realized from a sale if the business was being carried on. The prayer was for the appointment of receivers, and that when found to be just and proper the properties be sold and the proceeds distributed among those entitled thereto. By its answer filed on the same day, respondent admitted all the allegations of the complaint, and, with its consent, the court thereupon made an order appointing receivers. The order recited that it was necessary for the protection of the respective rights and equities of creditors that the property and business be administered through receives, and gave to them the exclusive possession, custody and control; they were authorized to continue the business until the further order of the court, to make disbursements necessary to preserve the property, and to pay debts entitled to priority.

September 1, 1922, the United States filed proof of the debt due from respondent and claimed priority under section 3466, and later filed its intervening petition, setting forth the facts above stated, and prayed to be adjudged entitled to priority. Respondent moved to dismiss. The District Court granted the motion. Its decree was affirmed by the Circuit Court of Appeals. 9 F.(2d) 1018. The case is here on certiorari under section 240. Judicial Code (Comp. St. § 1217). The question is whether section 3466 applies. That section and section 3467 (Comp. St. § 6373), in pari materia, are quoted in Bramwell v. United States Fidelity & Guaranty Co., 269 U. S. 483, 46 S. Ct. 176, 70 L. Ed. 368, decided this day. The intervening petition shows that respondent was insolvent when the creditor's suit was begun, and the question of priority is to be determined on that basis, notwithstanding the complaint alleged and the answer admitted that respondent was solvent. Respondent's answer admitting the allegations of the complaint and its consent to the court's order constituted a necessary...

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  • BancoKentucky Co.'s Receiver v. National Bank of Kentucky's Receiver
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    ...an assignment, under a liberal construction of the priority act (U.S.C.A. 31, Section 191; R.S. § 3466), gives priority to claims of the United States. Receiver, v. United States, 269 U.S. 492, 46 S.Ct. 180, 70 L.Ed. 373; United States v. Butterworth-Judson Corporation, 269 U.S. 504, 46 S.C......
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