Opinion
03-31-1904
PORCH v. AGNEW CO.
Thomas E. French, in pro. per. Ell H. Chandler, for a creditor.
Petition by Wesley B. Porch against the Agnew Company for Instructions as to the payment of expenses for the preservation of the property pending an appeal from an order denying the confirmation of a sale. Granted.
Thomas E. French, in pro. per.
Ell H. Chandler, for a creditor.
GREY, V. C. (orally). The situation is this: The Agnew Hotel, a large and valuable frame boarding house or hotel property at Atlantic City, usable mostly in the summer time (but, if in the hands of an owner who could carry it along, probably usable to an extent in the spring time), is now in the hands of the receiver. It is situated on the board walk, in close adjacency to the sea itself. Such property is always subject to danger of destruction by fire from carelessness within or without. In this case there is additional danger from its immediate adjacency to the sea, because the hotel may be reached by the waves of any great storm. The receiver, though doing the best he can, has not as yet (owing to the presentation of several legal questions) been able to get the property into any profitable shape. It is his duty to preserve and care for it. He now comes to the court, and shows that he has no funds out of which to perform that duty, and asks the aid of the court, having given notice to the parties interested.
It appears that there are over $200,000 outstanding bonds, and something more than $3,000 on mechanics' liens, which were charged on this property. Upon the petition of the receiver showing to the court that there were disputes touching these liens, an order was made under section 81 of the corporation act of 1896 (P. L. p. 303), that the property be sold free from these liens, and the purchase money paid into court to abide its order. In making that sale the receiver accepted for both the real and personal property of the hotel a bid of $33,000 in total. At that time the creditors, some of whom are bondholders and some of them other claimants, challenged the confirmation of the sale on the ground that the receiver had accepted a bid for a sum less than the fair value at which the premises should have been sold. The opponents of the confirmation of the sale did not charge the receiver with any dereliction of duty. They thought it was a misjudgment on his part that he should have accepted so low a bid. It was shown that the lot of land on which the hotel stands cost more than $75,000 before any building was erected; that the contract for the erection of a hotel on the premises called for about $120,000, and additional money was expended in furnishing, etc., so that the actual apparent expenditures on the premises was something over $200,000. This improvement was all made within a period of three years last past. This court was of opinion, on the question of confirming the receiver's sale, that he had made a mistake in accepting so low a bid, and the sale was set aside upon the terms that the applicant should file a sufficient bond conditioned that, if the property should be put up again and sold by the receiver, it should bring at the resale at least $60,000 for both the real estate and personal property. The opponents of the receiver's sale succeeded in getting the security as indicated. The receiver then called the attention of the court to the fact that the amount of money which he had received from the rentals of the property had been so entirely used up in caring for the property that he had but a very small sum left—nothing like sufficient to carry the property, with its expenses of watchman and insurance, during the pendency of the litigation which would necessarily attend upon an appeal from the court's order refusing confirmation of the receiver's sale. The parties who had tendered themselves ready to give the bond were at once recalled, and an additional condition was added that they should not only secure the $60,000 to be bid at the resale, but that they would respond, if required, to the order of the court to pay the incidental expenses of the property if receiver's certificates should not be issued to carry this additional expense.
The question now to be settled is whether or not these parties, who have challenged the receiver's sale, and obtained an order for a resale, should pay the expenses of the preservation and caretaking of the property pending the appeal from that decision, or whether receiver's certificates should be issued for these expenses, which are absolutely necessary for the preservation of the property itself. The hotel property is a large frame building. A great quantity of personal property in the way of furnishing and equipment is within the hotel. This might easily be carried away or stolen. The building, if un-watched, might readily be destroyed by the carelessness or design of some tramp who might happen to get in the building. So, also, there is danger from flooding by a great storm from the ocean, as the hotel stands at the sea edge. The place needs a watchman to preserve it from these dangers. Another necessary expense is fire insurance. Atlantic City is a place where insurance must be carried out of plain prudence. Nearly the whole town consists of frame houses. This hotel is a frame structure, liable to rapid destruction by fire. The appeal will probably be heard at the next ensuing term, and may not be decided until next June. During this period of more than four months this property must be cared for against the dangers above noted. The company is hopelessly insolvent. The present indications are that the bondholders and lien claimants will absorb all the values, and unsecured claims may get nothing. The counsel for the bidder atthe receiver's sale is also of counsel for most of the bondholders. He opposes the issue of receiver's certificates to raise the moneys necessary to protect the property, and insists, if such expenses should be incurred, the parties who have given bond for the higher price should pay them. The bondholders are all proportionately interested in the preservation of the property in charge of the receiver. The delay is not the fault of the parties opposing confirmation of the receiver's sale. I can see no reason why they should not only secure the bondholders a better price, but also take care of the property in the meanwhile. It may be that the receiver and all the parties may come together and agree upon some plan by which the hotel may be leased to produce an income. If that could be done, the income should be first used for the preservation of the property and the payment of the expenses of the watchman and insurance. Unless counsel suggest some better plan, I will make an order that the receiver shall issue receiver's certificates to an amount necessary to meet the expenses of a watchman and fire insurance pending decision of the Court of Appeals. A memorandum may be inserted in the order to the effect that if, under any circumstances, the receiver shall get in any income from the property, such income shall be first applied in payment of the receiver's certificates. If counsel have any suggestions of any better plan, I would like to hear from them on the subject.
Mr. Chandler: It is entirely satisfactory to me.
THE VICE CHANCELLOR: The receiver may prepare an order.