BONNEY, JR., Bankruptcy Judge
A court has the power under Section 2a (7) of the Bankruptcy Act to subordinate the claim of the chief stockholder of a dinner theater for funds voluntarily provided, while the venture was insolvent, to the claims of the general creditors.
The court found the stockholder to be an "adventurer," not an investor, as the "loans" were made while the theater was insolvent, they were voluntary, there were no notes or indications of indebtness for the sums provided nor corporate records reflecting these sums as loans, and the checks to the individuals or businesses who had rendered the venture services were drawn on the spot as crises arose, and not at arm's length. Further, the testimony of the stockholder indicated that she was involved "for the thrill, glamour and culture of it all, and not as the investor expecting return."
The court held that it could and "should apply equitable principles to distribution of an estate to creditors to adjust the order of creditors' payments to equitable levels of comparative claim positions." Section 2 a(7) of the Bankruptcy Act gives the bankruptcy court the power to determine and adjust all such matters in the course of distributing the estate and fixing the order of distribution. The fact that the "loans" were not properly recorded supports the finding that these were not arm's length transactions.
It was held that the claim of the "adventurer" in a "risky business" is, by the application of the equitable principle of distribution, allowable but subordinated to the claims of general creditors. See Sec. 2a (7) at ¶ 2041.