Nelkin v. Carencon, Inc.

BACKES, Vice Chancellor

A receiver in insolvency is chargeable, during his occupancy, for the use and occupation of leased premises, as part of the administration expenses.

An employee of an insolvent corporation, working on a commission basis, is entitled to priority for his commissions as wages under the eighty-third section of the Corporation Act (2 Comp. St. 1910, p. 1650).

The preferential wage claim of an employee who was regularly paid his weekly wage is not revived by his use of the wages to pay company debts.

A claim for wages is properly offset by moneys of the insolvent company unlawfully withdrawn by the employee.

The receiver of an insolvent company cannot disallow a claim for professional services, the value of which was agreed upon in good faith by the insolvent company.

Security posted for the payment of rent of an apparatus for a term not yet expired, must be credited to rent accrued at the time of the appointment of a receiver of an insolvent corporation.

Suit by Jacob S. Nelkin against Carencon, Inc. On exceptions to receiver's report.

Exceptions overruled in part, and sustained in part.

Joseph Kahrs, of Newark, for Carencon, Inc.

Nicholas LaVecehia, of Newark, for Al Sanders.

Joseph Bigel, of North Arlington, for Benjamin F. Isaacs and Michael Mindlin.

Samuel M. Hollander, of Newark, for New Jersey Claude Neon Corporation.

Julius Stein, of Newark, pro se.

BACKES, Vice Chancellor.

The receiver reports $9,708.24 for distribution. The receiver's allowance is fixed at $1,750 and his actual costs. The solicitor of the complainant is allowed $250 and his taxed costs.

The landlord's claim: The insolvent company's moving picture business was conducted in a theater owned by the 982 Broad Street Company at that address in Newark, upon which it had a long-term lease at $1,500 a month rental. The furnishings of the theater belonged to the insolvent company. On November 8th last, the landlord distrained for rent for the months of August, October, and November. The receiver allowed the claim for the first two months and for seventeen days in November, $3,850, because on November 18th, the tenant surrendered the leasehold including the theater contents to the landlord and it went into possession. The receiver was appointed December 3d with orders to "refrain from interfering with the landlord's possession, but to investigate the landlord's status and report to the court." Thereupon counsel for the landlord requested the court to direct the receiver to sell the leasehold and theater contents, the rent lien to attach to the proceeds. He was persuaded to this by the court's intimation that the surrender of the leasehold and the transfer of the furnishings were a fraud on creditors, and because the theater was idle and he was anxious to clear the way for a new tenancy then being arranged. To accommodate him to a speedy conclusion, an order to show cause on the creditors was taken, and on the return day he consented to the sale, and the property was sold, fetching $10,000. The landlord now claims for use and occupation by the receiver to the date of the sale; counsel's argument being that, inasmuch as his client accepted the court's hint as law, that its position was vulnerable, and surrendered its right of title to the receiver without litigating the mooted question of fraud, the surrender should relate to the date of the receiver's appointment, though all the while the landlord was in actual possession, hostile, and adverse to the receiver until counsel consented to the order of sale. Up until the order for sale there was no irrevocable surrender; the "housing" of the furnishings to that time was by the landlord under its title and for its own advantage. To compensate the landlord during its own occupancy would be to reward it for its contumacy. From the date of the order for sale, the receiver may be regarded as constructively in possession, and for that period he will be charged with the use and occupation at the rental rate. The report will be modified accordingly. The exception is overruled.

Al Sanders' claim for $917.04 wages was disallowed priority. He was engaged by the company and agreed to devote his entire time and efforts for one year, six days a week, eight hours a day, in the services it required as manager of benefit and organization affairs, for which he was to be remunerated at a stipulated rate on all tickets sold to organization and benefit performances in the theater. This was the claimant's sole occupation, carried on daily in and about the theater from 10 in the morning until midnight. Section 83 of the Corporation Act (2 Comp. St. 1910, p. 1650) provides that all persons doing labor or services of whatsoever character in the regular employ of such corporation shall have a first and prior lien upon the assets thereof for the amount of wages due to them for all labor, work, and services done within two months of the receivership proceedings. The claimant's services were as essential to the business and his compensation was as truly wages as were the ticket seller's at the door of the theater; and the services were kindred, only he sold to groups while the latter sold to individuals, his compensation was fixed but uncertain, while the latter's was fixed and certain, but the uncertainty of enjoyment does not distinguish the one from the other as wages. He may appropriately be likened to what in factories is called a pieceworker. He served the company and earned the commissions within the last two months of the company's existence, and his claim is clearly within the protection of the Corporation Act. Watson v. Watson Mfg. Co., 30 N. J. Eq. 588. Exception sustained.

Benjamin Mindlin's claim for $600 wages as assistant manager for six weeks next preceding the closing of the theater was disallowed. The claimant admits he received regularly, weekly, $100 during the period of his employment, but he asserts that the proceeds of the weekly checks for the last six weeks were again paid out by him for other employees' wages and for expenses of the company, the particulars of which he does not give. The checks paid his wages. If he again disbursed the money for the company, his extinguished preferential claim was not thereby revived. The claim was not presented in the alternative for money expended, and there is no satisfactory proof that the check moneys were again spent for the use of the company. The receiver properly disallowed the claim in toto. Exception overruled.

Michael Mindlin's claim for $750 wages, as general manager was correctly disallowed. He was president of the insolvent company,and, assuming that he was entitled to his salary, it appears that he took from the treasury of the company $751.51 and charged it to the account of another company which owed him money. That, of course, he had no right to do. The withdrawal of the funds was a proper set-off against his claim. Exception overruled.

The claim of Benjamin P. Isaacs for $1,250 is allowed. It is for professional services, the value of which had been agreed upon at $2,500 by the company before insolvency, of which one-half was paid. The receiver allowed $500. The account was stated. It was not up to the receiver to disregard it except for fraud, and that is not shown. Exception sustained.

New Jersey Claude Neon Corporation claim $889.10 for rent of an electrical display and repairs to the same were allowed for $264.10. The lease was for sixty months at $125. The apparatus was to remain the property of the lessor and to be removed by it when the lease ended. At the time of the lease $625 was paid which was to be credited on the last five months' rent. In the meanwhile it was held as security. The rent having ceased upon the appointment of the receiver in insolvency (Stockton v. Mechanics' & Laborers' Savings Bank, 32 N. J. Eq. 163, Klein v. Gavenesch, 64 N. J. Eq. 50, 53 A. 196), the security must be applied to the rent due (Butler v. Commonwealth Tobacco Co., 74 N. J. Eq. 423, 70 A. 319). Exception overruled.