Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

IN RE INDUSTRIAL MACH. & SUPPLY CO.

May 15, 1953

In re INDUSTRIAL MACHINE & SUPPLY CO.


The opinion of the court was delivered by: GOURLEY

This matter comes before the court on application for payment of final allowances and reimbursement for various loans granted the debtor corporation.

Divers loans were made to the Debtor by Trustee and his counsel during the reorganization of the debtor corporation. The record fails to disclose any authorization on the part of this court to make said loans as required by the Chandler Act, 11 U.S.C.A. § 516(2). The law is undisputed that a debtor cannot borrow money without authority. Indeed, one lending money to a corporate debtor in corporate reorganization proceeding acts at his peril in accepting receivers' certificates for amounts loaned and must examine and satisfy himself of sufficiency of debtor's or receiver's authority to borrow money. In re Mannington Pottery Co., D.C., 104 F.Supp. 506; Standard Capital Corp. v Sapper, 2 Cir., 115 F.2d 383; Remington on Bankruptcy Sec. 4512.

 To approve such unauthorized loans at this late date, occurring as they did, without following the delineated requisites of notice and court approval, would set a dangerous precedent for future reorganization proceedings, imperiling the vested interest of creditors and shareholders.

 The safeguards provided under Chapter X must be preserved and rigidly obeyed. Even if individuals must suffer the loss of good-intentioned advancements to a corporation wallowing in the mire of financial crisis, the court must not deviate from the strict, protective cloak of the law.

 In a somewhat different light appears the claim of Gerald S. Rogers who advanced certain sums of money pursuant to a plan of reorganization approved August 16, 1950 by the late Judge Owen M. Burns. Certain of the advances were made to compensate the Trustee and his counsel in amounts authorized by order of court when the plan was approved. Other amounts were advanced to keep the debtor's plant in operation as provided by the plan approved by order of this court.

 Nevertheless, since no authorization of this court was secured for the consummation of these latter loans as required under Chapter X, I find no basis to treat them in the priority of expenses for administration.

 It is significant to note that the order approving the plan of reorganization was entered December 12, 1949. The order confirming said plan was entered August 16, 1950.

 Since, however, the debtor corporation proved unable to consummate the plan, the court by order of February 20, 1952 authorized the Trustee to liquidate the debtor corporation.

 Claims of creditors which came into existence after confirmation of a reorganization plan are not entitled to priority as expenses of administration over claims of creditors which existed at time of reorganization. In re Michel, Maksik & Feldman, D.C., 48 F.Supp. 23, affirmed 2 Cir., 132 F.2d 299.

 I see no need to comment on the subject of allowances, as the amounts provided for in the subsequent order are in accord with basic principles of equity and established rules of reorganization procedure.

 An appropriate order is entered.

 Extent of Interest of Government Liens

 In this reorganization proceeding under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq., the question arises as to whether the United States of America is entitled to interest on divers tax liens beyond the date of the filing of the reorganization petition. The tax liens involved were entered against the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.