The suit arose upon the usual creditors’ bill, filed by a simple creditor upon behalf of itself and all others, alleging that, though the defendant company was not insolvent, its assets were exposed to waste through a multiplicity of actions by its creditors. It prayed the appointment of receivers to take over the assets and distribute them ratably among all those entitled. The defendant filed an answer to the bill, consenting to the relief prayed, upon which on January 14, 1922, the District Court passed a decree appointing the appellees receivers, directing all creditors to file their claims within 60 days, and foreclosing such as defaulted. There were provisions in the decree designed to give notice to the creditors. Later the time to file was extended to April 15,1922.
On October 5,1923, the appellant procured á rule nisi, supported by a petition, requiring the appellees to show cause why it should not be allowed to file its proof of claim for certain refunds alleged to be due the appellant from the defendant company. These arose out of transactions during the Great War upon contracts between the United States and the defendant, and another company which had been merged with it. The receivers opposed the application alleging that the United States before April 15, 1922, had had notice of the order and had filed a claim for taxes, that a reorganization of the company was under way which would be prejudiced, dnd that the receivers had borrowed over $1,000,000 from certain banks during their conduct of the business. On this showing the District Court discharged the rule nisi and dismissed the petition on December 31, 1923.
Later the proceeding was reheard upon new affidavits, which showed that the Finance Office of the United States Army had first received intimation of the existence of the appellant’s claims in the early part of August, 1922, after which the investigations had proceeded continuously until the petition was filed. The District Court adhered to its former decision and dismissed the second application on February 26, 1924. The appeal was taken from both orders. The questions involved are two: First, whether the *946 decree of limitation may bar tbe appellant at all; and, second, if so, whether under the circumstances the default should have been reopened.
We find it unnecessary to decide how-far such a decree as that of January 14, 1922, can conclude the sovereign. In Re Menist Co., Inc. (C. C. A.)
Orders of foreclosure are primarily intended for no more than safety in distribution. In this regard.they are like the early orders of the same kind of the English Court of Chancery in the administration of a decedent’s estate. Gillespi v. Alexander, 3 Russell, 130, 136. They enable the receivers to dispose of the property, but not to forfeit the rights even of dilatory creditors. That delay may be enough we do not deny, but certainly not unless the result of allowing the claim is to destroy intermediate interests, arising on the faith of creditors’ inaction. In the ease at bar we find none such. The appellees put forward two; i. e., the advances of the banks to the receivers, and the progress of the reorganization. Each is asserted in too vague terms to justify the harsh remedy imposed.
The banks have financed the receivers’ purchase by letters of credit, which, in the absence of any contrary evidence, we must assume to have been secured by the goods bought. The affidavits do not even suggest that the security- is inadequate, and, if it be, the claims have priority over all debts of the company, even including what may be due the United States. Equitable Trust Co. v. Connecticut Brass Co.,
The affidavits are no stronger as respects the reorganization. On October 24, 1923, the plan had not even been presented to the court. If the appellant has been dilatory, certainly the creditors have not been expeditious. We are not told a single detail as to what was done during the 18 months whieh elapsed that would not have been done in any case, nor how the claim would any more upset a reorganization in October, 1923, than in April, 1922. The affiants only say that the claim will prevent any reorganization “in the near future.” In his second affidavit McMahon does go further and say that a “forced liquidation” will follow the allowance of the claim. If so, we should suppose it would have had the same result in April, 1922. We cannot exclude it for that reason; we must find some prejudice, not from the claim, but from the delay in presenting it. The affiants tell us nothing as to that. They do not say that the assets have been reduced by continuing the business, or that the creditors have bought up claims, or spent money in preparing for the reorganization. Nor do they say anything which leads us to infer more than that it will be" disastrous to their plans to allow a claim on ‘which they had not reckoned. That will not justify the exclusion of a claimant, if he can prove that his claim is real.
Nor can we see that the appellant was under any duty to advise the receivers upon the first intimation in August, 1922, that it might have a claim. The transactions were manifold and complicated; first, suspicions might prove groundless. Possibly it would have been wiser to file a caveat, but that *947 ■would hardly have affected the result. It seems to us altogether strained to suppose that the receivers would have shut down the business, or the creditors stopped all efforts at reorganization. In any case, the majority may not on such slight grounds forfeit what may be a valid debt.
Order reversed, and cause remanded, with instructions to accept the claim, if filed on or before June 15, 1925.