In re Wentworth Lunch Co.

U.S. Court of Appeals for the Second Circuit November 13, 1911

In re Wentworth Lunch Co., 191 F. 821 (2d Cir. 1911)

112 C.C.A. 335; 1911 U.S. App. LEXIS 4998

Opinion of the Court

NOYES, Circuit Judge

(after stating the-facts as above). The District Court had jurisdiction to hear and determine the issue of law and fact raised upon the bankruptcy petition. .As this court said in Altonwood Park Company v. Gwynne, 160 Fed. 448, 87 C. C. A. 409:

“The District Court liad jurisdiction of the parties and of the subject-matter. It was for it to determine whether the business of the corporation was such as to bring it within that class of corporations subject to adjudication in bankruptcy. Its judgment was erroneous, but it had power to make it.”

*822And as a corollary to the conclusion that the District Court had jurisdiction of the controversy, it follows that it had power to appoint the receiver. But it does not follow that the expenses of the bankruptcy receivership should be paid out of the property of the corporation, which was not subject to the bankruptcy act, rather than by the defeated parties who instituted the proceedings and obtained the appointment of the receiver. There is nothing in the record to show that it was “absolutely necessary” for the preservation of the estate that a receiver should be appointed. The property was already in the custody of an assignee under state laws and presumably he would do his duty. Nothing is shown to justify the appointment of a receiver within the principles recently laid down by this court in Matter of Oakland Lumber Company, 174 Fed. 634, 98 C. C. A. 388. Moreover, the question whether this corporation was subject to the bankruptcy law was obviously a doubtful one when the petition was filed and it was immediately raised. It was peculiarly a case in which a receiver should not have been appointed unless imperatively required. We find no such imperative necessity and think that the creditors who rushed in and insisted upon an unnecessary receivership should pay the expenses rather than that they should be charged upon the corporation which, as the event proved and as it always insisted, should not have been haled into the bankruptcy court at all.

The order of the District Court is reversed, with costs.

Reference

Full Case Name: In re WENTWORTH LUNCH CO.
Cited By: 7 cases
Status: Published
Syllabus: Bankruptcy (§ 474*) — Receivers—Expenses ok Receivership Where Appointment was Erroneous. A District Court had jurisdiction to appoint a receiver for the property of a corporation on the filing of a petition in bankruptcy against it by creditors; but where it was subsequently determined that the corporation was not of the class subject, to adjudication as a bankrupt, and its property was already in the custody of an assignee under stale laws, so that it did not appear that the appointment was “absolutely necessary” to the preservation of the estate, the appointment was not authorized, and the expenses of the receivership should be charged upon the petitioning creditors, who procured it, and not upon the estate. [Ed. Note. — For other cases, see Bankruptcy, Dee. Dig. § 474.*]