224 F. 289 | 6th Cir. | 1915
(after stating the facts as above).
*294 “The receiver was authorized to carry on the business, and, for the purpose of doing so, was expressly authorized to borrow a sum of money; (and) this was not only a limitation of the-amount of money he might borrow for the purpose but was a negation of any authority to involve the receiver, as such, in any expense in running the business greater than the amount authorized to be borrowed for that purpose.”
A naked order of court requiring affirmative action of any kind by a receiver carries with it, by implication, the power to do whatever is reasonably necessary in its performance. But, in a plainly doubtful case, involving transactions of magnitude and not matters of minor detail, authority to act cannot be predicated upon mere inference or uncertain implication, because, in such case, it is not only the right but the duty of the receiver to inform the court fully as to the facts and to ask for instructions. As was said in Re Angell, 131 Mich. 345, 350, 351, 91 N. W. 611, 612:
“A receiver is an officer of court, and amenable to it for a proper discharge of the trust confided to him. When he is in doubt as to what he ought to do, hé should take the advice of the court.”
By so doing he can at all times protect himself, and if he neglects or refuses to avail himself of the ample and effective shield which the law thus provides and places in his hands, he acts upon his own responsibility and at his own risk and peril.
In the instant case, the receiver, in his petition for authority to continue the business and to borrow money for that purpose, did not inform the court that it would be necessary to buy additional material. On the contrary, the language used fairly imports that the material on hand, stated to be of the value of between forty and fifty thousand dollars, was all that would be needed at least until moneys could bei realized from the sales of finished buggies. His statement was that it would be for the best interests of the estate to reopen the factory and manufacture the stock and material on hand into finished product, and his prayer-was for authority to continue the business and for that purpose to borrow not to exceed $3,000 in the first instance and later an additional $2,000. The order of the court was:
“That said receiver be and be is hereby authorized and empowered to borrow money for the purpose of continuing Said business in a sum not to exceed $3,000.”
If the purchase of additional material was necessary, it was an essential part of the continuance of the business for which the receiver had been authorized to. borrow money. Buying goods on credit is the equivalent of borrowing money to pay for such goods. There is no legal difference or distinction between an indebtedness for merchandise purchased and one for money borrowed. In either case, if the receiver acts within his authority, the receivership property is in effect pledged for the payment of the debt. The record shows that the receiver’s outstanding indebtedness for goods purchased has at all times been more than $5,000, and at the end of the active operation of the factory was more than $13,000. During the seven or eight months while he was creating this larg-e indebtedness, he made no mention thereof to the court. His first report, was filed in April, 1910, after he had con
We conclude that the original order of the court, construed and interpreted in connection with the petition upon which it was based and viewed in the light of the subsequent conduct of the receiver, did not authorize him to make purchases on credit and to bind the estate in his hands for the payment of the debts so created. The language of the order is quite certain and definite. He was authorized to borrow a fixed sum of money for the specific purpose of continuing the business. In other words, with a working capital consisting at most of the money borrowed from the bank and the funds of the estate derived from the sale of its products or otherwise, he was required to do a cash business.
There are few, if any, reported decisions of the courts' upon the precise question here presented. Analogous cases brought to our attention support and sustain, directly or indirectly, the findings and decree of the District Court. State Central Savings Bank v. Fanning Ball-Bearing Chain Co., 118 Iowa, 698, 92 N. W. 712; Kirker v. Owings; 98 Fed. 499, 39 C. C. A. 132, and cases there cited; Gutterson & Gould v. Lebanon Iron & Steel Co. (C. C.) 151 Fed. 72; Hitner v. Diamond State Steel Co. (D. C.) 207 Fed. 616. No case to the contrary has been cited, and, so far as we are aware, none has been found.
The case of Cake v. Mohun, 164 U. S. 311, 17 Sup. Ct. 100, 41 L. Ed. 447, cited and relied upon by appellant, is not an authority in his favor. There the receiver was expressly authorized by the order of the court “to carry on and manage the business of keeping said hotel in substantially the same manner as it has heretofore been carried on.” No other restriction or limitation was placed upon his power do in
“Under such circumstances, the power of the receiver to incur obligations for supplies and materials incidental to the business follows as a necessary incident to the receivership.”
In the instant case, the authority of the receiver to incur debts in continuing the .business was positively and specifically limited and restricted. The difference between the two cases is marked and vital. In the one the authority conferred was general and practically unlimited, in the other special and definitely restricted.
“It is elementary that the court appointing a receiver or assignee in insolvency proceedings has and retains exclusive jurisdiction over the proceedings and the receiver or assignee for all purposes, settling and adjusting, in the same proceeding, all conflicting interests, all controversies, and all matters arising out of or connected with the trust, all questions respecting the accounts of the receiver, allowances for his compensation, the compensation of his attorneys, agents, and necessary clerics.”
See, also, the cases hereinbefore cited.
Upon principle, as well as authority, this must be so. It is unthinkable that a court of equity can be powerless either to protect the integrity of its own faith and credit or to grant relief to those, who, without active fault on their part, have been wronged by its accredited officer, by surcharging his account with the loss so occasioned.
The case will be remanded to the District Court, with directions to modify and to recast its decree so- as to require the receiver: (1) To repay and restore to the trust fund the sum of $2,000 heretofore allowed to him as compensation. (2) To pay from the fund then in his hands the expenses of the receivérship, including the costs and expenses of the former suit' with the bank, as the same shall be fixed and adjusted by the court, but not including the expenses of the present proceeding. (3) To pay to the bank the balance of the fund in his hands, or so much thereof as may be necessary to satisfy its claim with interest. (4) Personally to pay into court a sum of money equal to the aggregate amount of the claims of his merchandise creditors with interest thereon at the legal rate. (5) To .pay from the fund so created the expenses (other than taxable costs) of the Buckeye Wheel Company in this proceeding, including fair and reasonable compensation to its attorneys, as the same shall be fixed and determined by the court. And (6) To distribute the balance of the fund ratably among his merchandise creditors in satisfaction of their claims.
So modified, the decree of the District Court is affirmed, with costs of both courts to be taxed against appellant personally.