United States v. Knight (336 U.S. 505)
U.S. Supreme Court · decided April 4, 1949 · Supreme Court Database (Spaeth)
- Citation
- 336 U.S. 505 · 69 S. Ct. 704
- Decided
- April 4, 1949
- Term
- October Term 1948
- Vote
- 5–1
- Majority author
- Justice Douglas
- Issue area
- Economic Activity
- Disposition
- Reversed
- Outcome
- Petitioning party won
- Ideological direction
- Liberal
Opinion excerpt
Mr. Justice Douglas delivered the opinion of the Court. Robert Michael was trustee in bankruptcy of the Central Forging Co. and Donald Reifsnyder was his counsel. Maxi Manufacturing Co. was a competitor of Central and one of its creditors. George Fenner and respondent Harry S. Knight were attorneys for Maxi. After negotiations which it is unnecessary to relate here, a plan of reorganization under ch. X of the Bankruptcy Act, 52 Stat. 883, 11 U. S. C. § 501 et seq., was approved by the court and accepted by more than two-thirds of the creditors. Under this plan Maxi was to acquire all the assets of Central; the stockholders of Central were to receive nothing; the secured creditors of Central were to receive 20 per cent and its unsecured creditors 5 per cent of their claims in bonds of Maxi; and all taxes, costs, and expenses of the reorganization were to be paid in full in cash by the trustee. The cash requirements of the plan were to be furnished by Maxi. The amount of those requirements and the nature of Maxi’s commitment are sources of the present controversy. Michael and Reifsnyder concededly obtained funds in connection with the reorganization for which they did not account. It is the theory of the prosecution that those funds were part of the bankruptcy estate. It is the theory of the defense that they were gifts by Maxi of its own property. There was evidence (including…
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