Opinion
No. 3922.
March 12, 1924.
Verne Lacy and Chas. J. Riley, both of St. Louis, Mo., for petitioning creditors.
Joseph Kane, of St. Louis, Mo., for bankrupt.
Stern Burnett, of St. Louis, Mo., for receiver.
In Bankruptcy. In the matter of Samuel Duke and others, partners doing business as the Duke Cap company, and as individuals, bankrupts. On review of order of referee. Affirmed.
Referee Walter D. Coles filed the following opinion on the application of the receiver for allowance of compensation:
"The Bankrupt Act, section 48, paragraphs (d) and (e), being Comp. St. § 9632, specifies three classes of receivers in bankruptcy and fixes the maximum compensation which each class can be allowed. Thus a different maximum compensation is provided for (1) a `mere custodian'; (2) an ordinary receiver; and (3) a receiver who `conducts the business.' In each class of cases the court in its discretion may allow less, but cannot allow more, than the prescribed maximum.
"In the present case the receiver insists that he is a receiver who was authorized to, and did in fact, `conduct the business' of the bankrupts, and that under the facts presented he should be allowed the maximum commission permissible under the statute in such cases; that is to say, twice the commissions of the `ordinary receiver.' It is conceded that, in general, the present receiver performed merely the duties which ordinarily devolve upon a receiver in bankruptcy, but in addition to the usual and ordinary services he was authorized to, and did, complete the manufacture of certain cloth caps in process of manufacture when he took charge, and it is urged that in doing this he was `conducting the business,' within the meaning of the statute, and is properly entitled to the maximum compensation permissible in the case of a receiver who `conducts the business.'
"It must be borne in mind that the provisions of the statute prescribing the maximum compensation of receivers were enacted with a view to securing an economical administration of bankrupt estates, and the statute should be given a fair and reasonable construction in furtherance of the end sought to be accomplished. There is a natural tendency on the part of receivers to obtain maximum compensation, but those charged with the duty of administering the law must construe it fairly, with a view to securing that reasonable economy which it was the intention of Congress to secure. In applying the provision of the statute here in question we are aided but little by reported cases. The statute must be interpreted in accordance with the ordinary canons of construction.
"In this context, I am of the opinion that the `business is conducted by the receiver' where the receiver carries on, at least substantially, the usual, customary, and normal activities of the bankrupt as a going concern. In the case of a manufacturer of caps, the characteristic activities of the business as a going concern are the purchase of the materials, the manufacture of the product, its sale to customers in the usual course of business, the keeping of the essential books and records, and the collection of the accounts. I am not prepared to say that all these activities are in all cases essential in order to justify the conclusion that the business is being `conducted' by the receiver within the meaning of the statute; but, if any of these activities can be dispensed with, it would be in a case where they would under the circumstances be usually omitted by a going concern. For example, if there were ample raw materials on hand, it might not be necessary to purchase materials in order to keep the business going in the customary way.
"In the present case the receiver performed the usual services of an `ordinary receiver,' and he also employed two of the bankrupts and a few other employees, who worked for a short time to finish certain caps in process of manufacture. This was necessary in order that the caps might be sold as finished caps, rather than pieces of cloth. No caps or other property of the bankrupt were sold by the receiver in the ordinary course of trade, but all the bankrupt's property was sold through an auctioneer at a public auction. Of course, `an ordinary receiver' is customarily called upon to engage in some of the activities of a going concern, such as the insuring of the property, the collection of outstanding accounts, etc.; but, if the fact that he does some of the things customarily done by a going concern constitutes `conducting the business,' there remains no scope for the activities of the `ordinary receiver,' and the classes of receivers would be reduced to two, namely, `mere custodians' and a receiver `conducting the business.'
"In the instant case, I do not think the receiver was authorized to, or did in fact, perform such services as entitles him to be treated as a receiver who `conducted the business' of the bankrupts, within the meaning of section 2, clause 5, and section 48, paragraph (e) of the Bankrupt Act (Comp. St. §§ 9586, 9632). The reported cases tend, I think, to support the view here taken. Matter of Shiebler Co., 174 F. 336, 98 C.C.A. 208. In re Knosher Co., 197 F. 136, 116 C.C.A. 560.
"In accordance with these views, I have entered an order allowing the receiver, as compensation for his services, the sum of $254.04, which is the maximum commission permissible in the case of an ordinary receiver."
The petition for review herein is denied, and the order of the referee confirmed, for the reasons given by the referee, which reasons are adopted as the opinion of the court.