R. H. Long Co. v. United States

WILLIAMS, Judge. The plaintiff, a Massachusetts Corporation, sues to recover $125,000, the amount paid to the United States government by the receiver in bankruptcy of the corporation in compromise of certain federal income taxes. The basis of the claim is that the receiver in bankruptcy was without legal authority to compromise claims against the bankrupt. It is contended that for that reason the compromise failed, and that the sum of $125,000 paid under its terms should be repaid to the plaintiff. The plaintiff in the brief says that the question presented is: “Did the receiver in bankruptcy of the R. H. Long Company, with the approval of the Bankruptcy Court, have power to compromise the claim of the Government against the R. H. Long Company for taxes?” The facts, about which there is no dispute, disclose that one Guy Murchie was appointed by the United States District Court a receiver in bankruptcy for the plaintiff on December 13, 1923, with authority to take charge of the plaintiff’s assets .and carry on its business until a trustee in bankruptcy was appointed, or until further order of the court; that he continued to act as such until December 8, 1925, when he qualified as trustee, the plaintiff having been adjudged a bankrupt by the, court; that while he was acting as receiver he filed a petition with the District Court stating that a claim had been made by the United States against the plaintiff for additional taxes alleged to be due from it and its related company in a large amount, and asked the court for authority to negotiate a settlement with the Bureau of Internal Revenue for $125,000; the referee in bankruptcy acting on the receiver’s petition, after due notice to creditors, and no one objecting thereto, found the facts as stated in the petition, and on January 12, 1925, entered an order authorizing and instructing the receiver to compromise the claim of the United States for taxes against the alleged bankrupt estate by the payment of a sum not to exceed $125,000; that the receiver thereafter made formal offer to the Bureau of Internal Revenue to pay the sum of $125,-000 as a compromise of the government’s tax claim against the plaintiff; that subsequently the receiver filed a second petition in the district court in which he stated that the Commissioner of Internal Revenue had refused to accept such offer “unless furnished with a general release of any war claims so-called (i. e., claims against the Government arising under contracts, formal or informal, for war supplies) from this alleged bankrupt, namely, the R, H. Long Company, and also a general release from Mr. Richard H. Long, individually, of any claims he may have”; that the referee in bankruptcy, upon consideration of the receiver’s second petition, after due notice to creditors, and no one objecting thereto, on September 28, 1925, entered an order authorizing and instructing the receiver to compromise the claim of the United States for taxes against the alleged bankrupt estate by payment of a sum not to exceed $125,000 and by giving a general release of all so-called war claims by him as receiver of the R. H. Long Company and by Richard H. Long, individually, if such release be furnished to him by Mr. Long; that the receiver thereafter obtained the releases in question, which documents were duly filed by the receiver with the Commissioner of Internal Revenue, together with the order of the referee in bankruptcy, dated September 28, 1925; that on November 10, 1925, the plaintiff was adjudged a bankrupt by the court, and the receiver Murchie was duly appointed trustee of the bankrupt and qualified to act [654] in that capacity on December 8, 1925; that the receiver filed his petition in the District Court on November 25, 1925, asking for approval of the order of the referee of September 28, 1925, and that on the same day the court entered an order approving and ratifying the order of the referee; that the Solicitor of Internal Revenue on December 12, 1925, advised the said Murchie, formerly receiver, then trustee in bankruptcy, that the compromise offer had been accepted, and that on August 24, 1926, the said bankrupt was dúly discharged by the -court. The compromise in question having been approved by the bankruptcy court, is conclusive and cannot be collaterally attacked unless it clearly appears the court was without jurisdiction in the matter. Sabin v. Larkin-Green Logging Co. (D.C.) 218 F. 984; Corbett v. Riddle (C.C.A.) 209 F. 811; Huttig Manufacturing Co. v. Edwards (C.C.A.) 160 F. 619; Edelstein v. United States (C.C.A.) 149 F. 636, 9 L.R.A.(N.S.) 236. The plaintiff concedes this, but contends that because receivers in bankruptcy are without authority to adjust or compromise claims against the bankrupt estate, the order' of the court approving the compromise in'this case was in excess of the jurisdiction of the court and consequently a nullity. It does not follow that because receivers in bankruptcy are without authority to adjust or compromise claims against the alleged bankrupt estate prior to adjudication the court is without authority, after adjudication, to approve and confirm compromises that have been so made. The bankruptcy court under title 11, section 11 (2), U.S.Code (11 U.S.C.A. § 11 (2), is vested with authority to “allow claims, disallow claims, reconsider allowed or disallowed claims, and allow or disallow them against bankrupt estates.” The plaintiff was adjudged a bankrupt prior to the entry of the order of the court on December 8, 1925, approving and confirming the Order of the referee in bankruptcy authorizing the receiver to compromise the claim in question. The order of the court reads: “1. That the order of Referee Robert E. Goodwin entered September 28, 1925, upon the petition of the receiver for leave to compromise claim of the United States for additional income and other taxes, be and the same hereby is approved, ratified, and confirmed. “2. That the compromise negotiated by the Receiver with the Treasury Department of certain tax claims as set forth in the foregoing petition be and the same hereby is approved, ratified, and confirmed.” The act of the receiver in making the offer in compromise was not only approved by the court, but the compromise itself was approved and confirmed. The approval of the compromise was an adjudication of the claim of the government-against the bankrupt estate for additional taxes, and can no more be attacked collaterally than can the adjudication of any other claim. It is entirely immaterial that the negotiations leading up to the compromise were negotiated by the receiver prior to the adjudication of bankruptcy, rather than by the trustee in bankruptcy after the adjudication. -The approval of the compromise settlement in question was clearly a matter within the jurisdiction of the court. The plaintiff therefore cannot recover, and the petition is dismissed. It is so ordered.