In re Crown Cabinets, Inc.

• Decision Date: 04 December 1973
• Docket Number: No. 73-2817. Summary Calendar.,73-2817. Summary Calendar.
• Citation: 488 F.2d 91
• Parties: In the Matter of CROWN CABINETS, INC., Bankrupt. J. L. LEACH, Trustee, Appellant, v. SMALL BUSINESS ADMINISTRATION, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

488 F.2d 91 (1973)

In the Matter of CROWN CABINETS, INC., Bankrupt.

J. L. LEACH, Trustee, Appellant, v. SMALL BUSINESS ADMINISTRATION, Appellee.

No. 73-2817. Summary Calendar.^*

United States Court of Appeals, Fifth Circuit.

December 4, 1973.

E. Louis Adams, Donald D. Rentz, Albany, Ga., for appellant.

William J. Schloth, U.S. Atty., C. Nathan Davis, Asst. U.S. Atty., Macon, Ga., for appellee.

Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.

PER CURIAM:

Appellant Leach, the trustee in bankruptcy, appeals from an order of the district court allowing the claim of the Small Business Administration as a priority claim under 11 U.S.C.A. § 104(a)(5) and 31 U.S.C.A. § 191. The referee in bankruptcy had upheld the trustee's petition to disallow the priority, since the original claim did not clearly show that the claim was entitled to it and the attempted amendment was not timely offered. We affirm the district court's order permitting the amendment and allowing priority for the claim.

On February 6, 1969, Crown Cabinets negotiated a loan from the S.B.A. and the National Bank of Albany, Georgia, for $55,000. The S.B.A. supplied seventy-five percent of the loan funds and the bank supplied the other twenty-five percent. Thus, it was an "immediate participation" loan, since the S.B.A. actually advanced funds at the outset rather than merely acting as guarantor. If properly proved, it was entitled to its statutory priority under the rule of Small Business Administration v. McClellan, 1960, 364 U.S. 446, 81 S.Ct. 191, 5 L.Ed.2d 200. The sole issue is whether the S.B.A. satisfactorily proved the claim.

Crown Cabinets, Inc. was adjudicated a bankrupt on April 26, 1971. The S.B. A. filed its original proof of claim on May 25, 1971, one day before the first meeting of creditors. In pertinent part, the proof of claim stated that

this claim is filed as a secured claim up to the value of the above-listed security and as a priority claim (11 U.S.C. § 104a(5) and 31 U.S.C. § 191) as to the deficiency between the amount due on the claim and the value of the security . . . . (emphasis added)

It may well be true, as Leach asserts, that fully sufficient documentary proof of the nature of the S.B.A. claim was not offered until the attempted second amended proof of claim on December 22, 1972, well after the six month statutory deadline for the filing of claims.¹ Still, the quoted portion of the original proof of claim was enough to put the referee on notice that the S.B.A. was asserting a claim that was entitled to priority.

A bankruptcy court, in the person of the referee in bankruptcy, sits as a court of equity, duty bound to examine each claim to see that injustice is not done and that all claims are fairly considered. Pepper v. Litton, 1939, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281. We agree with the District Court that, had the referee handled the matter equitably, once put on notice by the original claim, he would have inquired into the basis for the asserted priority and determined its validity. Had he done so, the claim could have been properly established well within the six month period, obviating the necessity of the late amendment. At the least, the referee would have been in a position to recognize the late amendment as a proper amendment supplying more fully the proof of the original claim rather than a belated assertion of an entirely new claim.

Appellant Leach relies on three cases disallowing late amendments as support for the referee's action here. None of the cases is in point, however, since they involved original claims that...