Reading Co. v. Brown
United States Supreme Court
391 U.S. 471 (1968)
- Written by Rose VanHofwegen, JD
Facts
When I.J. Knight Realty Corporation (Knight) (debtor) filed for reorganization under Chapter 11, receiver Francis Brown (defendant) operated Knight’s business leasing an industrial building. A fire destroyed the building, spread to neighboring buildings, and destroyed properties belonging to Reading Company and many others (plaintiffs). Reading filed a claim for $559,731 based on negligence as a claim for administrative expenses. Other fire-loss claimants filed 146 similar claims, bringing the total to over $3.5 million, far more than Knight’s assets. Knight was voluntarily adjudicated bankrupt, and Brown was appointed trustee. Brown moved to disallow the fire-loss claims as administration expenses. The parties agreed that deciding whether Reading’s claim qualified would determine the status of the others. The United States intervened with a claim for unpaid taxes inferior to administration expenses and supported Brown’s position. The referee disallowed the claim for administration expenses and ruled that Reading’s claim did not qualify as a general claim against the estate. The district court and Third Circuit affirmed. The Supreme Court granted review.
Rule of Law
Issue
Holding and Reasoning (Harlan, J.)
Dissent (Warren, J.)
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