UNIVERSITY 
 
 OF CALIFORNIA 
 
 LOS ANGELES 
 
 SCHOOL OF LAW 
 LIBRARY
 
 How to Conduct a 
 Receivership 
 
 Modern American Law Lecture 
 
 Blackstone Inttitute, Chicago
 

 
 HOW TO CONDUCT A 
 RECEIVERSHIP 
 
 BY 
 
 GEORGE F. TUCKER, Ph.D., LL.B. 
 
 One of a Series of Lectures Especially Prepared 
 for the Blackstone Institute 
 
 BLACKSTONE INSTITUTE 
 CHICAGO 
 
 Copyright, 1919, by Blackstone Institute
 
 r 
 
 Steh 
 
 GEORGE FOX TUCKER 
 
 The author of this Lecture has been a member 
 of the bar for about forty years. In this period 
 of extensive experience before the courts and in 
 the practice of law he has acquired a fund of knowl- 
 edge, unusual in its richness to those interested in 
 legal problems. 
 
 Mr. Tucker was born at New Bedford, Massa- 
 chusetts, on January 19, 1852. He received the 
 degree of Bachelor of Arts from Brown Univer- 
 sity at Providence, Rhode Island, in 1873, and his 
 degree of Bachelor of Laws at Boston University 
 in 1875. Subsequently, the degree of Doctor of 
 Philosophy was conferred upon him. He practiced 
 law in New Bedford from 1876 to 1882 and then 
 removed his law office to Boston where he is in 
 practice today. 
 
 From 1890 to 1892, Mr. Tucker was a member 
 of the Legislature of the Commonwealth of Massa- 
 chusetts. In 1892, he was appointed the Official 
 Reporter of the Decisions of the Supreme Court of 
 Massachusetts. He served in this position until the 
 year 1900. 
 
 Mr. Tucker is the author of numerous treatises 
 and articles relating to the law. Among the im- 
 portant are "Testamentary Forms and Notes on 
 Wills," and "Manual of Massachusetts Corpora- 
 tions." He is joint author of Gould and Tucker's 
 "Notes on United States Statutes," and with Dr. 
 Wilson of Harvard on "International Law." 
 
 Judge, attorney and layman will find time sav- 
 ing information in these interesting and profitable 
 pages.
 
 
 HOW TO CONDUCT A 
 RECEIVERSHIP 
 
 By 
 GEORGE F. TUCKER, PH.D., LL.B. 
 
 INTRODUCTION 
 
 Receiverships have long been common, and, in the 
 case of commercial embarrassments, the tendency 
 seems to be more and more to resort to them. A re- 
 ceiver is a disinterested person appointed by the 
 court to hold and manage the property in liquidation. 
 While there are many occasions for the appointment 
 of receivers, as in the case of partnerships, railroads, 
 banks, etc., yet, for the purposes of illustration, the 
 treatment of receivers of business or industrial cor- 
 porations alone is deemed advisable in this article. 
 
 CAUSE FOR APPOINTMENT OF RECEIVER 
 
 It is apparent that the general cause for resort 
 to a receivership is the unsound condition of a cor- 
 poration or, in other words, its inability to meet its 
 obligations. The corporation, if all the creditors 
 concurred, might make a general assignment for the 
 benefit of creditors, without the intervention of a 
 court, and this is sometimes done. Or it might go 
 into or be put into bankruptcy, and its affairs be 
 
 5
 
 6 MODERN AMERICAN LAW LECTURE 
 
 liquidated and absolutely -wound up. A receiver- 
 ship, however, is a more elastic proceeding ; and the 
 affairs of the corporation under the protection and 
 direction of the court are more likely, than in the 
 case of bankruptcy proceedings, to be satisfactorily 
 managed in the interests of creditors, and also in the 
 interests of the corporation itself, if it is to continue 
 in business after the receivership is terminated. 
 
 Receivers are appointed by Courts of Chancery 
 or Equity. While it has been held that a mere cred- 
 itor of a corporation cannot as a rule apply for a 
 receiver, and while it is customary for a judgment 
 creditor, after execution is returned unsatisfied, so 
 to apply, yet the tendency is to appoint a receiver of 
 an insolvent corporation on the petition of a cred- 
 itor and sometimes of a stockholder. Sometimes the 
 petitioning creditor is an individual or a partner- 
 ship ; frequently a bank or a trust company. In many 
 cases a number of creditors confer and agree upon 
 one or more to take the initiative. 
 
 Receiverships are not regarded with favor by some 
 State courts, and a common practice in such cases 
 and especially, if the assets and interests of the cor- 
 poration are located in several jurisdictions, is for a 
 foreign creditor to apply to the United States Cir- 
 cuit Court. In Falmouth Bank v. Cape Cod Ship 
 Co., 166 Mass. 550, 568, the Court said: 
 
 " Generally the appointment of a receiver rests in 
 the sound discretion of the court. But in order to 
 justify the appointment of one on the application of 
 a creditor, it should at least appear that he has a 
 valid claim against the corporation, that there are
 
 HOW TO CONDUCT A RECEIVERSHIP 7 
 
 assets applicable to its payment, and that he has 
 exhausted his legal remedies, or that the circum- 
 stances are such that to deny the application would 
 lead to a wasting and loss of property which other- 
 wise might be made available for the payment of the 
 debts of the corporation, and which could not be 
 availed of in any other manner so satisfactorily as 
 by the appointment of a receiver. " 
 
 The effect of the appointment of a receiver is to 
 vest in him the title to the property. The great 
 weight of authority favors the rule that the court 
 having appointed a receiver, and he having taken 
 possession of the property, no other court of co-ordi- 
 nate jurisdiction can interfere with or remove him. 
 The general doctrine is that the powers of a receiver 
 over the property are co-extensive only with the jur- 
 isdiction of the court making the appointment, but 
 courts are inclined to allow suits to be brought by a 
 foreign receiver, when they do not affect rights of 
 citizens of the locality. 
 
 While a receiver is an officer of court, he also is the 
 trustee of the parties in interest. As already stated 
 he must be entirely independent, and a shareholder 
 or one in any way interested in the corporation 
 directly or indirectly should not be appointed re- 
 ceiver. 
 
 II 
 PETITION FOR APPOINTMENT 
 
 Upon bringing of the petition the corporation is 
 entitled to notice and a hearing. The appointment 
 of a receiver ex parte is unusual. At such hearing
 
 8 MODERN AMERICAN LAW LECTURE 
 
 the corporation by its attorney will oppose the ap- 
 pointment of a receiver. However, for the purposes 
 of this article we will assume that the corporation 
 acquiesces in the appointment of a receiver as best 
 for all concerned. The petition given below is 
 brought by a Savings Bank located in a State other 
 than that in which the corporation was organized. 
 This gives jurisdiction in a United States Court, the 
 amount of the debt exceeding that required to bring 
 an action in the Federal Court. The petition must 
 cover all essential points as in the following form : 
 
 DISTRICT COURT OF THE UNITED STATES 
 District of In Equity. 
 
 People's Savings Bank 
 
 v 
 The Fairfield Manufacturing Company. 
 
 BILL OP COMPLAINT 
 
 To the Honorable the Justices of the District Court of the 
 
 United States for the District of , sitting in 
 
 Equity : 
 
 The People's Saving Bank complains and says as follows: 
 
 FIRST: That it, the plaintiff, is and was at the date of 
 the commencement of this suit, a corporation duly established 
 
 under the laws of the State of , that it has 
 
 and has had its principal office at . . . . , in said 
 
 State, that it is a citizen and resident thereof, and that in behalf 
 of itself, and all other creditors and stockholders of the defend- 
 ant, The Fairfield Manufacturing Company, a corporation duly 
 
 established under the laws of the State of , 
 
 and a citizen thereof, who may hereafter join in this suit as 
 parties and contribute to the expenses thereof, it brings this 
 bill of complaint against the defendant.
 
 HOW TO CONDUCT A RECEIVERSHIP 9 
 
 SECOND : That the defendant was before and at the time 
 of the commencement of this suit and is now a citizen and 
 
 resident of the State of , engaged in the 
 
 manufacturing of cotton cloth and in the spinning of yarn in 
 , in said State. 
 
 THIRD: That the defendant has a capital stock of one 
 million dollars ($1,000,000), divided into ten thousand (10,000) 
 shares of the par value of one hundred dollars ($100) each, of 
 which two hundred thousand dollars ($200,000) consists of 
 two thousand (2,000) shares of preferred stock of the par value 
 of one hundred dollars ($100) each, issued conformably to, etc., 
 and the balance' of eight hundred thousand dollars ($800,000) 
 consists of eight thousand (8,000) shares of common stock of 
 the par value of one hundred dollars ($100) each. 
 
 FOURTH: That the defendant is indebted to the plaintiff 
 in the sum of over two thousand dollars ($2,000), namely, in 
 the sum of eight thousand four hundred dollars ($8,400), evi- 
 denced by the promissory note of the defendant for that amount, 
 dated August 20, 1905, payable to the plaintiff on demand, 
 payment of which has been demanded by the plaintiff of the 
 defendant and refused by it, the reason therefor being, as the 
 plaintiff is informed and believes, insufficient funds in its pos- 
 session to pay said note and also several other obligations which 
 have matured and upon which demand has been made and 
 refused, copies of which notes and obligations are hereto annexed 
 marked "A." 
 
 FIFTH: That the plaintiff alleges upon information and 
 belief that the defendant has outstanding many more promis- 
 sory notes aggregating at least three hundred thousand dollars 
 ($300,000), which will soon be due and payable, and that upon 
 their maturity it will be unable to pay the same, in that it 
 has no money and no assets readily controvertible into cash ; and 
 that the defendant is indebted for merchandise purchased for 
 an amount exceeding fifty thousand dollars ($50,000). 
 
 SIXTH: That the defendant is insolvent and has no funds 
 with which to carry on its ordinary business. 
 
 SEVENTH : That the defendant has valuable assets in the 
 shape of plant, real estate, machinery, materials, accounts
 
 10 MODERN AMERICAN LAW LECTURE 
 
 receivable, etc., the forced sale of which will prove very disas- 
 trous; that it has valuable outstanding contracts, the failure 
 to fulfil which will cause great loss to the defendant, its cred- 
 itors, and stockholders, and that great loss will also follow 
 the placing of attachments upon the property of the defendant, 
 and that competent persons should be authorized to take charge 
 of the property and business of the defendant, and, if they deem 
 it advisable, to carry on the same, subject to the order of this 
 court. 
 
 EIGHTH: That while the real estate and machinery and 
 much of the merchandise of the defendant are within the 
 jurisdiction of the court, a good part of the personal property 
 is situated in other States, and that the same and the property 
 here are liable to attachment unless receivers are appointed for 
 the equal protection of all creditors. 
 
 The plaintiff therefore prays: 
 
 First: That this honorable court will appoint proper and 
 competent persons receivers of the defendant corporation to 
 collect all outstanding debts and moneys due to the defendant 
 and also to take possession of all the property, both real and 
 personal, of the defendant. 
 
 Second: That the defendant, its officers, agents, and servants, 
 may be directed by order or injunction to deliver up to said 
 receivers all the property, real and personal, of the defendant, 
 including the stock in trade ; and also all moneys, drafts, notes, 
 checks, and other evidences of indebtedness belonging to or 
 due the defendant, together with all books of account, accounts, 
 vouchers, receipts, documents, and papers of the defendant; 
 that the stock in trade and other personal property of the 
 defendant may be sold and turned into money, but only under 
 the direction of this court, and that they be authorized, if they 
 deem best, to carry on the business of the defendant corporation 
 until the further orders of this court. 
 
 Third: That an injunction be issued by this honorable court 
 restraining each and all of the creditors of the defendant cor- 
 poration from attaching on mesne process or otherwise the 
 property of the defendant corporation till further order of 
 this court.
 
 HOW TO CONDUCT A RECEIVERSHIP 11 
 
 Fourth: That proper subpoena may issue to the defendant 
 summoning it to appear before this court and make answer to 
 this bill of complaint. 
 
 Fifth: That such further relief may be granted in the prem- 
 ises as justice and equity may require. 
 
 People's Savings Bank, 
 
 By A. B., President. 
 C. D., Counsel for Plaintiff. 
 
 September 8, 1905. 
 
 (Jurat of president of plaintiff also jurat of president of 
 defendant to the effect that allegations of bill are correct and 
 that the defendant cannot raise money to meet its obligations 
 as they may mature.) 
 
 SCHEDULE A. 
 (Copies of Notes.) 
 
 In the following forms the court headings are 
 omitted : 
 
 APPEARANCE AND ANSWER 
 
 And now appears E. F., as counsel for the defendant, The 
 Fairfield Manufacturing Company, and, conformably to the 
 vote of its directors, a copy of which is hereto annexed, con- 
 sents that receivers may be appointed and that the decree may 
 be made as prayed for in the bill. E. F. 
 
 VOTE OF DEFENDANT'S DIRECTORS AUTHORIZING 
 E. F. TO APPEAR FOR DEFENDANT 
 
 Voted that E. F., of , be and he is hereby 
 
 authorized to appear as counsel in the proceedings begun on 
 the 8th day of September, 1905, in the United States Circuit 
 
 Court for the District of , for the appointment 
 
 of receivers of this corporation, and to assent to the decree 
 prayed for.
 
 12 MODERN AMERICAN LAW LECTURE 
 
 III 
 DECREE APPOINTING RECEIVERS 
 
 The above petition will be brought up before the 
 Court and, there being in this case no opposition, the 
 Judge will enter an order or decree. This order or 
 decree invests the receivers with title to all the prop- 
 erty of the corporation, authorizes them to take pos- 
 session of the same and to operate the plants and con- 
 tinue the business. The officers are required to turn 
 over to the receivers all books, moneys, and property 
 under their control and to deliver to them deeds of 
 all real estate. The receivers are authorized to prose- 
 cute and defend suits, and they are directed to pay 
 all amounts due to employees. Each receiver is 
 required to give a bond. The creditors of the Com- 
 pany are enjoined from attaching or intermeddling 
 with the property, and also the officers of the Com- 
 pany, except to turn over the property to the re- 
 ceivers. 
 
 Jackson, J. Upon reading and filing the verified bill of com- 
 plaint in this cause, together with the verified affidavit of the 
 president of The Fairfield Manufacturing Company, and, on 
 motion of C. D., counsel for complainant, E. F., counsel for 
 defendant, appearing and consenting thereto, it is ordered by 
 
 the tiourt that G. H., I. J., and K. L., all of , 
 
 in said district, be and they are hereby appointed receivers 
 of the court of all and singular the property of The Fairfield 
 Manufacturing Company of every description, and all moneys, 
 merchandise, manufactured goods, material and supplies, claims 
 in action, credits, bonds, stocks, leasehold interests, or operating 
 contracts, and other" assets of every kind, and all other property, 
 real, personal, or mixed, held or possessed by said corporation,
 
 13 
 
 to have and to hold the same as the officers of and under the 
 direction of the court. 
 
 The said receivers are hereby authorized and directed to take 
 immediate possession of all and singular the property above 
 described, and to take possession of the factories of said corpo- 
 ration in the District of , and to operate the 
 
 same and continue the business of said corporation. 
 
 Each and every of the officers, directors, agents, and servants 
 of the said The Fairfield Manufacturing Company are hereby 
 required and commanded forthwith upon demand of the said 
 receivers to turn over and deliver to such receivers all books, 
 moneys, deeds, property, or vouchers for property under their 
 control. The said Fairfield Manufacturing Company and its 
 officers are hereby directed immediately to execute and deliver 
 to the said receivers deeds of all real estate now owned or 
 possessed by said corporation, and transfers and assignments 
 of all its property. 
 
 Said receivers are hereby fully authorized to institute and 
 prosecute all such suits as they may deem necessary, and to 
 defend all such actions instituted against them as such receivers, 
 and also to appear in and conduct the prosecution or defense 
 of any* suits by or against said The Fairfield Manufacturing 
 Company. The said receivers are hereby authorized and 
 directed to pay and discharge, out of the moneys coming into 
 their hands, all amounts due to employees. 
 
 Each of said receivers is required to file with the clerk of 
 the court, within ten days from date, a proper bond with surety 
 to be approved by the clerk of this court in the penal sum of 
 twenty thousand dollars ($20,000) for the faithful performance 
 of his duty herein. Said security may be in the form of separate 
 bonds and the surety or sureties are to be approved by the 
 court. 
 
 All creditors of said The Fairfield Manufacturing Company 
 are hereby enjoined from making any attachments of or in 
 any way meddling with the property to be turned over to said 
 receivers, and all officers, directors, agents, and servants of said 
 The Fairfield Manufacturing Company are hereby enjoined and 
 restrained from interfering with or disposing of said property 
 in any way except to transfer, convey, and turn over the same 
 to said receivers.
 
 14 MODERN AMERICAN LAW LECTURE 
 
 And it is further ordered, adjudged and decreed that the 
 plaintiff herein is hereby authorized to apply to any other 
 United States Circuit Court of competent jurisdiction within 
 whose jurisdiction there may be situated any assets of the said 
 The Fairfield Manufacturing Company, and which may take 
 ancillary jurisdiction of said cause, for such order or orders 
 in aid of the primary jurisdiction vested in said United States 
 Circuit Court for the District of 
 
 By the Court. 
 James Brown, Clerk. 
 September 14, 1905. 
 
 ACCEPTANCE OF RECEIVERS 
 
 And now come G. H., I. J., and K. L., and hereby accept their 
 appointment by this honorable court as receivers of the property 
 and assets of The Fairfield Manufacturing Company. 
 
 (Signatures.) 
 September 18, 1905. 
 
 IV 
 GENERAL POWERS, DUTIES, ETC., OF RECEIVERS 
 
 The above decree having been made and the re- 
 ceiver being ready to enter on his duties, we will now 
 briefly consider what those duties are, by what obli- 
 gations he is bound and to what restraints he is sub- 
 ject. 
 
 The powers of a receiver, under the direction of 
 the court, are generally to borrow money, compro- 
 mise debts, employ counsel, bring actions, make re- 
 pairs, purchase supplies, employ labor, perform ex- 
 isting contracts, pay taxes, continue the business, etc.
 
 HOW TO CONDUCT A RECEIVERSHIP 15 
 
 It is to be remembered that, in the absence of 
 statute, suits cannot be brought against a receiver 
 without the permission of the court which appointed 
 him. There are a few exceptions, notably that of a 
 Federal Statute, which provides that every receiver 
 appointed by a United States Court may be sued 
 without the previous leave of court. The same 
 statute also provides that a receiver appointed by a 
 United States Court shall manage the property ac- 
 cording to the requirements of the valid laws of the 
 State in which it is situated. It is to be noted that 
 an action against a receiver is in reality an action 
 against the receivership, or the funds in the receiver's 
 hands, and judgments against him as receiver are 
 payable only from the funds in his hands. 
 
 The date of the appointment of the receiver is gen- 
 erally adopted as the time when the rights of the 
 parties should be adjusted, but there is no fixed rule, 
 and in some cases the date of the filing of the bill has 
 been taken as the date of adjustment. 
 
 An important matter is priority of payment of 
 claims. These are determined in some jurisdictions 
 by statutes, which recite that debts due to the United 
 States are to be first paid, then taxes and then wages 
 to an amount, say not to exceed one hundred dollars. 
 Courts of Equity generally place creditors on an 
 equality, so far as possible. This subject is treated 
 
 in MODERN AMERICAN LAW, RECEIVERS. 
 
 In the case of railroads, receivers are authorized 
 to issue certificates which are a first lien upon the 
 property, but these are rare in the case of business 
 corporations.
 
 16 MODERN AMERICAN LAW LECTURE 
 
 It is not possible to treat here all phases of the 
 subject, so we will present the more important con- 
 siderations. The receivers will first file an inventory 
 and the following is offered as a form : 
 
 RECEIVER'S INVENTORY 
 
 (Names), receivers of The Fairfield Manufacturing Company, 
 present this report as an inventory of the value of the property 
 and assets of said company. 
 
 (Signatures.) Receivers. 
 September 19, 1905. 
 
 (Jurat.) 
 Manufacturing plant and fixtures $303,804.10 
 
 QUICK ASSETS 
 
 Raw material, stock in process, mer- 
 
 merchandise on hand and on road. .$290,802.04 
 
 Cash 4,304.02 
 
 Accounts receivable 135,713.25 430,819.31 
 
 $734,623.41 
 
 In many cases a more elaborate statement may be 
 desirable. 
 
 We will now assume that there are certain bills 
 incurred before the receivership which ought to be 
 paid: 
 
 PETITION FOR AUTHORITY TO PAY BILLS INCURRED 
 BEFORE RECEIVERSHIP 
 
 To the Honorable the Justices, etc. : 
 
 Respectfully represents G. H., I. J., and K. L., appointed by 
 decree of this honorable court entered September 14, 1905, 
 receivers of the defendant corporation, that they have qualified
 
 HOW TO CONDUCT A RECEIVERSHIP 17 
 
 by filing bonds as therein directed and have assumed their duties 
 as such; 
 
 That, it having been discovered on September 1, 1905, that 
 the defendant corporation was financially embarrassed, the 
 directors on the following day employed U. V., an expert 
 machinist and manufacturer of cotton, to examine the entire 
 plant, cotton in stock and in process, finished goods, waste, etc., 
 and ascertain the value and amount thereof, and also "W. X., an 
 expert accountant, to examine the books of the corporation and 
 ascertain the items and amount of bills and notes and bills 
 payable and receivable; 
 
 That, on September 8, 1905, a bill was filed in this court for 
 the appointment of receivers, and thereafter receivers were 
 appointed by decree of September 14, 1905; that on September 
 16, 1905, the said U. V. and W. X. made their reports, which 
 were availed of by the receivers and have proved of great 
 assistance to them, providing a serviceable basis for a receiver's 
 inventory; and the amount of the bills are as follows: U. V., 
 $203.04; W. X., $190.17; which amounts cannot be paid by 
 the corporation, as its property passed into the hands of re- 
 ceivers before the completion of the work of said U. V. and 
 W. X. 
 
 Wherefore the said receivers pray that this court will author- 
 ize them to pay said amounts of $203.04 to U. V. and $190.17 
 to W. X. from the funds in their possession. 
 
 C. D., of Counsel for the Receivers. 
 
 September 19, 1905. 
 
 ORDER OF COURT 
 
 Jackson, J. This matter coming on to be heard on petition 
 of (names), receivers of The Fairfield Manufacturing Company, 
 appointed in the above entitled action, and on reading and filing 
 the said petition, 
 
 It is hereby ordered that the prayer thereof be granted, and 
 that said receivers be and they hereby are authorized and 
 empowered to pay the following persons the amounts set against 
 their names respectively for services rendered in the matters 
 set forth in the petition, viz.: U. V., $203.04, and W. X., 
 $190.17. By the Court, 
 
 September 19, 1905. James Brown, Clerk.
 
 18 MODERN AMERICAN LAW LECTURE 
 
 Now follow petitions and decrees common in most cases: 
 
 PETITION BY RECEIVERS FOR AUTHORITY TO SELL 
 RAW MATERIAL 
 
 To the Honorable the Justices, Etc.: 
 
 Respectfully represent (names), receivers of the defendant 
 corporation, that they find among the assets thereof a quantity 
 of raw material, which, in their judgment, it is inexpedient to 
 manufacture, that the same should be sold in its present condi- 
 tion, that they have received from the firm of Johnson & Jones, 
 
 of , an offer therefor, which they believe to 
 
 be reasonable, a copy of which is hereto annexed, and that unless 
 said offer is accepted it will be impossible for your petitioners 
 to realize on the raw material so large a price as is contained in 
 said offer, and the conversion of the same into cash will cause 
 delay and will be attended by expense. 
 
 Wherefore your petitioners pray that they may be authorized 
 to accept said offer and enter into a contract with said Johnson 
 & Jones embodying the provisions thereof. 
 
 C. D., of Counsel for the Receivers. 
 September 20, 1905. 
 
 (Annex original copy.) 
 
 ORDER OF NOTICE 
 
 Jackson, J. Upon the petition of (Names) receivers of The 
 Fair-field Manufacturing Company, filed September 20, 1905, 
 praying for authority to accept an offer of Johnson & Jones 
 
 of for the purpose of certain raw material in 
 
 their lands, and to enter into a contract with said Johnson & 
 Jones embodying the provisions of said offer. 
 
 It is ordered that the petitioners give notice to all creditors 
 of said The Fairfield Manufacturing Company to appear before 
 this court on Wednesday, the tenth day of November, 1905, at 
 ten o'clock in the forenoon, to show cause, if any they have, 
 why the prayer of the petition should not be granted, by pub- 
 lishing an attested copy of this order three times, the last pub- 
 lication to be one week before the day of hearing, in the 
 Daily Telegraph, a newspaper published in the
 
 HOW TO CONDUCT A RECEIVERSHIP 19 
 
 city of , and by mailing forthwith to all known 
 
 creditors of said corporation a printed copy of this order. 
 
 By the Court, 
 James Brown, Clerk. 
 September 21, 1905. 
 
 AFFIDAVIT OF SERVICE OF NOTICE 
 
 The order of notice, a copy of which is annexed hereto, has 
 been served as therein ordered by mailing a printed copy of 
 the order to all known creditors of The Fairfield Manufactur- 
 ing Company, on September 22, 1905, and by publishing an 
 attested copy of the order in the Daily Tele- 
 graph upon October 20, October 27, and November 3, 1905. 
 
 C. D., Of counsel for the Receivers. 
 
 (Jurat.) 
 (Annex copy of order of notice.) 
 
 DECREE 
 November 10, 1905 
 
 Jackson, J. This cause came on to be heard this day upon 
 the petition of (names), receivers of The Fairfield Manufactur- 
 ing Company, filed September 20, 1905, praying for authority 
 
 to accept an offer of Johnson & Jones of , which 
 
 offer is annexed to the said petition, and it appearing to the 
 court that due and sufficient notice of the filing of said petition 
 and the hearing to be held thereon has been given to all known 
 creditors of said The Fairfield Manufacturing Company, and 
 after hearing the evidence in support of the allegations in said 
 petition, and after hearing counsel for the petitioners in sup- 
 port thereof, and no one appearing and objecting thereto, and 
 it appearing to the court that it is for the best interests of all 
 creditors of said The Fairfield Manufacturing Company and all 
 parties interested in said cause upon motion of C. D., counsel 
 for the petitioners: 
 
 It is hereby ordered, adjudged, and decreed that (names), 
 as said receivers of The Fairfield Manufacturing Company, be 
 authorized to accept the offer of said Johnson & Jones, which 
 appears annexed to the petition of the said receivers, filed 
 September 20, 1905, and to enter into a contract with the said
 
 20 
 
 Johnson & Jones as such receivers to carry out the provisions 
 of such offer, and to do and perform all things required upon 
 their part for the performance and fulfilment of said accepted 
 offer and contract made under authority of this decree. 
 
 By the Court, 
 James Brown, Clerk. 
 
 PETITION OF RECEIVERS FOR AUTHORITY TO PAY 
 INTEREST ON MORTGAGE 
 
 To the Honorable the Justices, Etc.: 
 
 Respectfully represent (names), receivers of the defendant 
 corporation, that a portion of the land and buildings owned 
 and used by The Fairfield Manufacturing Company, of which 
 your petitioners have taken possession as receivers under the 
 decree of the court dated September 14, 1905, for the manu- 
 facturing of cotton cloth and for the spinning of yarn, for- 
 merly belonging to one Henry Jacobs of , who sold 
 
 and conveyed the same to said The Fairfield Manufacturing 
 Company, July 19, 1904, the deed being recorded with 
 
 , Registry of Deeds, Book 19,000, Page 91 ; that 
 
 there has been a mortgage upon said land and buildings given 
 
 by said Jacobs to the Thurman Savings Bank of , 
 
 a corporation duly established by law, upon which there was 
 due the sum of One Hundred Thousand Dollars ($100,000) ; 
 that the debt so secured by the said mortgage was assumed by 
 said The Fairfield Manufacturing Company at the time of the 
 sale and conveyance from the said Jacobs, and that said The 
 Fairfield Manufacturing Company has ever since paid the in- 
 terest upon said debt as it has fallen due ; that the debt secured 
 by the mortgage is evidenced by a promissory note, dated March 
 20, 1902, payable to the Thurman Savings Bank or order on 
 demand with interest after six months at the rate of five per 
 cent, per annum; that upon said note the said savings bank 
 has always demanded and received interest for a period of six 
 months in advance; that upon September 20, 1905, since the 
 appointment of your petitioners as receivers, the period for 
 which the interest upon said note had been prepaid expired, 
 and the said savings bank has made a demand upon your peti- 
 tioners as receivers either to pay the principal of said note or
 
 HOW TO CONDUCT A RECEIVERSHIP 21 
 
 to pay the sum of Twenty-five Hundred Dollars ($2,500), being 
 six months' interest in advance from said September 20, 1905; 
 that the said savings bank intends, as your petitioners are 
 informed and believe, to apply to this honorable court for leave 
 to foreclose its said mortgage unless interest is paid in advance 
 as aforesaid, or unless the amount of the principal and overdue 
 interest is paid upon demand; that in the judgment of your 
 petitioners it is expedient and for the best interests of all the 
 creditors of said The Fairfield Manufacturing Company that 
 that portion of the plant, being the land and buildings afore- 
 said, should be operated for six months and perhaps for a longer 
 period to the end that your petitioners may dispose of the same 
 and the rest of the property of the company at a more advan- 
 tageous figure, the trade and customers of the company be 
 retained and the same of the entire plant and assets as a going 
 concern be made possible. 
 
 Wherefore your petitioners pray that they may be author- 
 ized to pay forthwith out of the funds now in their hands, being 
 the assets of said The Fairfield Manufacturing Company 
 derived from the collection of its debts and the sale of its 
 products, the sum of Twenty-Five Hundred Dollars ($2,500) 
 to the said Thurman Savings Bank, being six months' interest 
 in advance upon a note of One Hundred Thousand Dollars 
 ($100,000) from September 20, 1905, and to secure from said 
 Thurman Savings Bank some stipulation which will give to 
 your petitioners as receivers the right to continue to occupy 
 and operate the said portion of the plant subject to the mort- 
 gage of the said Savings Bank without interference by demand 
 for payment and by foreclosure of the said Savings Bank, for 
 said period of six months. 
 
 C. D., Of counsel for the Receivers. 
 
 September 25, 1905. 
 
 (Order of notice and affidavit of service.) 
 
 DECREE ON PETITION OF RECEIVERS TO PAY INTER- 
 EST ON MORTGAGE 
 
 November 13, 1905 
 
 Jackson, J. This cause came on to be heard upon November 
 13, 1905, upon the petition of (names), receivers for The Fair-
 
 22 MODERN AMERICAN LAW LECTURE 
 
 field Manufacturing Company, filed September 25, 1905, pray- 
 ing for authority to pay to the Thurman Savings Bank, out of 
 funds of the defendant corporation now in their hands, the sum 
 of Twenty-five Hundred Dollars ($2,500) for interest for six 
 (6) months from September 20, 1905, upon a debt secured by 
 a mortgage upon certain land and buildings, property of the 
 defendant corporation, and it appearing that the notice of the 
 hearing upon this petition has been given to all creditors of 
 said The Fairfield Manufacturing Company, as appears from 
 the return of an order of notice filed, and no one appearing to 
 object thereto, and after hearing evidence in support of the 
 allegations in said petition, it appearing to the court that the 
 allegations in said petition are true, and that it is expedient 
 and for the best interests of all parties concerned that the prayei 
 of the petition be granted, upon motion of C. D., counsel for the 
 petitioners : 
 
 It is hereby ordered, adjudged and decreed that (names), 
 receivers of The Fairfield Manufacturing Company, pay out 
 of funds now in their hands or coming into their hands belong- 
 ing to the said defendant company the sum of Twenty-Five 
 Hundred Dollars ($2,500), interest for six months from Sep- 
 tember 20, 1905, upon a debt from said defendant company to 
 said Thurman Savings Bank, secured by a mortgage upon a 
 certain portion of land and buildings the property of the de- 
 fendant company, upon receiving from the said savings bank 
 due and sufficient authority to continue the occupation of said 
 premises covered by the mortgage, without interference by fore- 
 closure or otherwise, during the period for which said interest 
 is paid. 
 
 By the Court, 
 James Brown, Clerk. 
 
 PETITION FOR DECREE FOR PROOF OF CLAIMS 
 
 To the Honorable the Justices, Etc. : 
 
 Respectfully represent (names), receivers of the property 
 and assets of The Fairfield Manufacturing Company, that, hav- 
 ing taken possession of said property and assets, and having 
 proceeded to collect the assets and reduce the same to cash, they 
 find it necessary that this honorable court should order and
 
 HOW TO CONDUCT A RECEIVERSHIP 23 
 
 direct all creditors of said company to present and prove their 
 claims ; 
 
 Wherefore they pray that the court will issue its order direct- 
 ing all creditors of said company to present their claims against 
 its assets, verified by affidavit, to your petitioners, as receivers, 
 or to any one or more of them, on or before May 1, 1906, and 
 that all creditors who do not file their claims within said time 
 specified shall be barred from participating in the distribution 
 of the assets of said company under the directions of this court, 
 unless the court for good cause shown shall otherwise order ; and 
 that your petitioners as receivers be authorized and empowered 
 to make such general rules and directions as to the manner and 
 form of proving claims as they shall deem expedient and proper. 
 
 By their attorney, 
 
 November 14, 1905. C. D. 
 
 DECREE ON PETITION TO PROVE CLAIMS 
 November 14, 1905 
 
 Jackson, J. This cause came on to be heard on November 14, 
 1905, upon the petition of (names), receivers of the property 
 and assets of The Fairfield Manufacturing Company, filed this 
 day, praying that the court enter a decree ordering and direct- 
 ing all creditors of said company to prove their claims in such 
 manner and within such time as to the court shall seem proper ; 
 and it appearing to the court that such a decree is expedient 
 and necessary, and upon motion of C. D., counsel for the 
 receivers : 
 
 It is ordered, adjudged, and decreed that all creditors of and 
 claimants against said The Fairfield Manufacturing Company 
 present their claims against said corporation, verified by an 
 affidavit, to said receivers, or to any one or more of them, in 
 such form and subject to such general directions as said re- 
 ceivers may determine, on or before the first day of May, 1906 ; 
 and that all persons or corporations whose claims are not pre- 
 sented in the manner and within the time prescribed shall be 
 barred from participation in the distribution of the assets in 
 *he hands of the said receivers under the directions of this court, 
 onless the court for good cause shown shall otherwise order.
 
 24 MODERN AMERICAN LAW LECTURE 
 
 It is further ordered, adjudged, and decreed that the receivers 
 give notice of this order by publishing an attested copy thereof 
 
 in the Daily Telegraph, a newspaper published 
 
 in , at least once a week for six successive weeks, 
 
 and by rifailing forthwith to all known creditors of said com- 
 pany a printed copy of this order. 
 
 By the Court, 
 James Brown, Clerk. 
 
 (Order of notice and affidavit of service.) 
 
 PETITION TO PAY SMALL CLAIMS 
 
 To the Honorable the Justices, Etc. : 
 
 Respectfully represent (names), the receivers of The Fair- 
 field Manufacturing Company, that the condition of the assets 
 and property is such that it would seem that the debts of the 
 company will be ultimately paid in full, and that the surplus 
 will be sufficient for a dividend upon the preferred stock of 
 said company; that among its creditors is a large class to the 
 number of 114 whose claims do not amount to the sum of ten 
 dollars each, and the aggregate of said claims does not exceed 
 the sum of seven hundred dollars; that it will greatly aid the 
 settlement of the estate if the receivers are authorized to pay 
 and discharge said claims at once and that said action will also 
 inure to the Denefit of the other creditors and the preferred 
 stockholders. 
 
 Wherefore the receivers pray that the court will authorize 
 them to pay and discharge all claims against said corporation 
 which do not exceed the amount of ten dollars each. 
 
 (Signatures.) 
 November 15, 1905. 
 
 (Jurat.) 
 
 If there are only a few owners of preferred shares, 
 they may sign a paper like the following : 
 
 We, the undersigned owners of all the shares of the preferred 
 stock of The Fairfield Manufacturing Company, hereby consent
 
 HOW TO CONDUCT A RECEIVERSHIP 25 
 
 to the granting of the petition of the receivers for the payment 
 of claims not exceeding ten dollars each. 
 
 (Signatures with amount of shares owned set against respect- 
 ive names.) 
 
 DECREE ON PETITION TO PAY CLAIMS NOT EXCEED- 
 ING TEN DOLLARS EACH 
 
 November 15, 1905 
 
 Jackson, J. Upon petition of (names), receivers of The Fair- 
 field Manufacturing Company, praying for authority to pay 
 claims not exceeding Ten Dollars ($10) each in value, it appear- 
 ing to the court that the allegations in said petition are true, 
 and that it is for the best interests of all parties concerned that 
 the prayer of the petition be granted, it is hereby ordered, ad- 
 judged, and decreed that said receivers pay out of the funds 
 now in their hands or coming into their hands belonging to the 
 said defendant company all claims against said company which 
 may be proved to the satisfaction of said receivers not exceed- 
 ing in amount the sum of ten dollars each, and the whole sum 
 to be paid under this order by the receivers not to exceed the 
 sum of seven hundred dollars, without further order of the 
 court. 
 
 By the Court, 
 James Brown, Clerk. 
 
 Other matters treated by petition, order of notice, 
 affidavit of service, decree, etc., are compromise of 
 claims, report of receivers upon collection of assets 
 and conversion into cash, application for allowance 
 of receivers' compensation and counsel fees, payment 
 of dividends, report upon proof of claims and as to 
 savings bank mortgage and decree thereon, ancillary 
 proceedings in another jurisdiction, and reference 
 in that jurisdiction to and report by master, allow- 
 ance of account, etc.
 
 26 MODERN AMERICAN LAW LECTURE 
 
 VI 
 
 TERMINATION OF RECEIVERSHIP AND DISCHARGE 
 OF RECEIVERS 
 
 Upon the termination of the duties of the receivers 
 they will obtain their discharge, after petition to the 
 court, order of notice, affidavit of service, etc. 
 
 The above proceedings are largely taken from an 
 actual case. It will be noticed that in the petition to 
 pay small claims, it is stated that the debts would 
 ultimately be paid in full, and that the surplus would 
 be sufficient for a dividend upon the preferred shares. 
 In thise case an arrangement was made for the re- 
 habilitation of the corporation. This was accom- 
 plished by the reduction of capital equivalent to the 
 loss causing its insolvent condition, and then the 
 increase of capital to an amount equal or nearly equal 
 to the loss. A petition was presented to the Court 
 which concluded as follows: 
 
 "Wherefore said receivers submit herewith the account of 
 their doings and pray that the same may be approved and for 
 their discharge; and that due transfer of assets by them to the 
 said corporation may be authorized, and that these proceedings 
 may be discontinued." 


 
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