Manufacturers’ Finance Co. v. McKey, 294 U.S. 442 (1935)
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Manufacturers’ Finance Co. v. McKey
No. 522
Argued February 13, 14, 1935
Decided March 4, 1935
294 U.S. 442
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Syllabus
1. The appointment of a receiver upon the application of a creditor is not an act of bankruptcy, except in cases of insolvency. P. 447.
2. A contract by which a corporation, in consideration of moneys to be advanced and services to be rendered, assigned designated accounts receivable and agreed to collect them, turn over the proceeds, as collected, to the assignee, and pay the assignee, as compensation for the advances and services, a specified percentage rate on the net face of the accounts, remains binding on receivers appointed by a federal court to carry on the corporation and its business as a going concern if it was valid and binding on the corporation. P. 447.
3. The fact that such a contract seems hard and oppressive because of the heavy interest rate exacted of the corporation will not authorize the federal court of equity to ignore it or modify its terms if the contract is free from mistake or fraud and valid by state law, and if the party claiming under it intervened in the receivership case not to seek equity but merely for the protection of his legal rights under the contract. P. 448.
4. The maxim "He who seeks equity must do equity" presupposes that equitable, as distinguished from legal, rights have arisen from the subject matter in favor of each of the parties, and it requires that such rights shall not be enforced in favor of one who affirmatively seeks their enforcement, except upon condition that he accord to the other his correlative equitable rights. P. 449.
5. The maxim "He who comes into equity must come with clean hands" does not apply to one who comes in perforce to secure the fruits of a perfectly valid, albeit a hard, contract. P. 451.
6. This maxim, when applicable, requires that the party affected shall be denied relief in toto. P. 451.
7. Where, because of an error in limine, the merits and measure of a claim on the facts and law applicable have not been inquired into by the two lower federal courts, this Court may reverse the decrees of both and remand to the District Court for further proceedings in accordance with the opinion. P. 453.
72 F.2d 471 reversed.
Certiorari, 293 U.S. 552, to review the affirmance of a decree of the District Court which allowed only in part a demand made by the present petitioner on the receivers of a corporation. The corporation became bankrupt while the case was pending in the court below, and the trustee in bankruptcy was substituted for the receivers.