Opinion
10-13-1933
MARTINI v. PASSAIC MEN'S SHOP, Inc.
Vincent J. Patierno, of Passaic, for complainant. Thomas E. Duffy, of Passaic, for City of Passaic. Benedict Krleger, of Passaic, for defendant and wage claimants.
Syllabus by the Court.
In distributing an estate in the hands of a receiver of an insolvent corporation, the expenses of administration of receivership have priority over wage claims and those for taxes.
Suit by Michael Martini against the Passaic Men's Shop, Incorporated, wherein a receiver was appointed for the defendant. The City of Passaic and others filed objections to the account of the receiver.
Decree in accordance with opinion.
Vincent J. Patierno, of Passaic, for complainant.
Thomas E. Duffy, of Passaic, for City of Passaic.
Benedict Krleger, of Passaic, for defendant and wage claimants.
LEWIS, Vice Chancellor.
The account of a receiver for the defendant is now before this court for confirmation. The funds in the hands of the receiver are insufficient to pay the expenses of administration and a tax claim of the city of Passaic, together with those of two wage claimants. The city of Passaic claims that the taxes due to it are payable out of the funds in the hands of the receiver next after the payment of valid wage claims and in priority to the expenses of administration.
This contention is wholly untenable. It has been the uniform and recognized practice of this court to make distribution among creditors, in accordance with the priorities established by law of the sums remaining in the hands of the receiver, after payment of expenses of administration. Distribution of assets is governed by sections 85 and 86 of the Corporation Act (2 Comp. St. 1910, p. 1652, §§ 85, 86). In Albert & Kernahan v. Franklin Arms, 107 N. J. Eq. 468, 153 A. 598, 599, the Court of Errors and Appeals says that the rule is settled, and that "the receivers' expenses and allowances should be paid first "from the funds in the receivers' hands; then the claims in their order." This practice has been followed in the two recent cases of Spark v. La Reine Hotel Corporation, 112 N. J. Eq. 398, 164 A. 589, and Philadelphia Dairy Products Co. v. Summit Sweets Shoppe, 113 N. J. Eq. 458, 167 A. 667.
As to the validity of the wage claims, these claims were passed upon and allowed by the receiver and no exception was filed thereto, so that they stand as being valid claims.
The account will be passed and settled with a provision for the payment: First, of the expenses of the receiver together with fees and allowances to himself and his solicitor; second, to the payment of the wage claimants; and, third, to the payment of the tax claim of the city of Passaic.