This is the adjourned return date of an order to show cause why the validity and priority of claims embodied in the final account as submitted by the receiver of Pearl Metal Products, Inc., an insolvent corporation, should not be approved, and for allowances to the receiver, the attorney for the receiver, the attorney for plaintiff, and the countersigner for the performance of services attendant to the receivership proceedings.
The United States of America, Webster Factors, Inc. and the Township of North Bergen have individually and collectively raised several objections to the substance of the accounting and the amount of the allowances sought.
Because of the complexity of the issues presented by the objections, I think it best that the factual and legal contentions
contained in the affidavits and papers filed to date be set forth in some detail.
Pearl Metal Products, Inc., a corporation of New Jersey (hereafter Pearl Metal) was, on the complaint of Newark Steel Warehouse, Inc., a creditor of Pearl Metal, ordered and adjudged insolvent by this court on October 13, 1961, pursuant to N.J.S.A. 14:14-3. George R. Handler, Esq., was appointed statutory receiver.
Thereafter the receiver proceeded to perform the services required of him under R.S. 14:14-1 et seq. , including, inter alia , the obtaining of orders appointing an appraiser, auctioneer and attorney. The receiver obtained an order to sell the assets, real and personal, at public sale, which sale was effectuated and subsequently approved. Following the consummation of these as well as many other duties, the receiver filed his final account in which he detailed the assets received by him, his disbursements, and the balance remaining in his hands, which all parties agree equals $13,832.69. (Intervening transactions, where relevant, will be discussed infra.)
Among the many papers filed with this court by the receiver was a "Report of Claims" in which the following classifications as to the "proper order of priority" of claims were listed:
Webster Factors (against sums realized on the sale of
personal property only -- claims subject to adjustment
because of credit due on accounts receivable collected) $22,000.00
Director of Internal Revenue 8,345.53
State of New Jersey, Division of Employment Security 2,022.60
Township of North Bergen 944.49
Subsequent to the filing of this report, the petitions for allowances to the receiver, Mr. Handler, the attorney for the receiver, Myron S. Lehman, Esq., the attorney for the plaintiff,
also Mr. Lehman, and the countersigner were submitted. The receiver requested an allowance of $4,000 plus costs and expenses; the attorney for the receiver, who is also the attorney for the plaintiff, asked for $4,000 plus expenses for acting in the former capacity, and $350 plus expenses for acting in the latter capacity; the countersigner asked for $383.89, 1% of the total gross estate of Pearl Metal. It is these preceding reports which form the nub of the present controversy in this case.
The major conflict concerns the priority list submitted by the receiver wherein the claims of the United States and the Township of North Bergen are subordinated to the "secured claim" of Webster Factors. A secondary conflict involves the amount sought by the receiver and the attorneys which exceeds 60% of the balance of the net estate.
Returning to the receiver's classification of priorities, both the United States and Township of North Bergen contend they are prior to the claim of Webster Factors; the township bases its assertion upon a literal reading of N.J.S.A. 54:4-106, and the United States offers as its authority section 3466 of the Revised Statutes , 31 U.S.C.A. , § 191, and federal decisions interpreting it.
Before embarking upon a discussion of the authorities noted by the contestants, it is imperative that certain details relating to the relationships between the insolvent, Pearl Metal, and the disputants, Webster Factors, United States of America and Township of North Bergen, be related more fully.
As appears from the memoranda, affidavits and exhibits submitted on behalf of Webster Factors, this claimant and Pearl Metal ...