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Laudan v. ABC Travel System Inc.

Decided: November 23, 1960.

PHILIP LAUDAN, EMMY C. LAUDAN AND MARLENE LAUDAN, PLAINTIFFS,
v.
ABC TRAVEL SYSTEM, INC., A CORPORATION OF NEW JERSEY, AND MARY PASSANNANTE, ANTHONY PASSANNANTE AND CARMELA PASSANNANTE, DEFENDANTS



Mintz, J.s.c.

Mintz

[64 NJSuper Page 205] The receiver of the defendant insolvent corporation seeks the allowance of his final report, confirmation

of his determination and classification of claims filed, an allowance as compensation for his services, and an allowance as compensation to plaintiffs' attorney for his services rendered. The receiver further asks for a pro rata apportionment of the administration expenses between the funds arising out of trust agreements and the general funds in this estate.

British Overseas Airways Corporation (herein referred to as "BOAC") moves for an order directing the receiver to pay it $1,155.06 which the receiver holds as a trust fund, without any deductions for administration expenses. The individual defendants, stockholders in the defendant corporation, urge that the amounts due each of the airlines and ship lines listed in Schedule "C" of the receiver's report constitute trust funds, and should be turned over intact to the respective companies without any deduction for administration expenses.

Defendant ABC Travel System, Inc. was engaged in the travel agency business. It made various conference or sales agency agreements with airlines, hotels and shipping lines which specifically provided:

"All moneys collected by the Agent for transportation sold hereunder * * * are the property of the Carrier and shall be retained by the Agent as the property of the Carrier until satisfactorily accounted for to the Carrier."

The parties agree the funds so collected constitute trust funds. The receiver presently has on hand the sum of $10,868.81, of which $8,708.86 constitutes trust funds due BOAC and 12 other airlines and ship lines.

It is settled that the general expenses of a receivership may be paid out of the funds in a receiver's hands before the payment of debts whether the latter be secured or unsecured. Albert & Kernahan v. Franklin Arms , 107 N.J. Eq. 468, 470 (E. & A. 1931). Such expenses are entitled to priority not only by virtue of the statute, N.J.S.A. 14:14-22, but under general principles of equity even where

a lienholder is not benefited by the receivership. As a matter of policy, to hold otherwise would deprive the courts of the services in many cases of competent administrators and be subversive of the administration of this important branch of equity jurisdiction. Seidler v. Branford Restaurant , 97 N.J. Eq. 531 (E. & A. 1925); Bankers Trust Co. v. Maxson , 100 N.J. Eq. 1, 14 (Ch. 1926). In Attorney-General ex rel. Bliss v. Linden Cemetery Association , 90 N.J. Eq. 404, 408 (Ch. 1919), affirmed 91 N.J. Eq. 329 (E. & A. 1920), the court stated:

"The rule is thoroughly settled that when a court of equity takes possession of property for the purpose of protecting and preserving it for the benefit of the parties interested, the costs of administration are entitled to priority of payment regardless of the nature of the liens and claims thereon of the litigants * * *."

N.J.S.A. 14:14-22 provides:

"Before distribution of the assets of an insolvent corporation among the creditors or stockholders, the Superior Court shall allow a reasonable compensation to the receiver for his services and the costs and expenses of the administration of his trust, and the costs ...


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