In re Hancock Trucking, Incorporated, 16857.
Citation | 407 F.2d 635 |
Decision Date | 27 February 1969 |
Docket Number | No. 16857.,16857. |
Parties | In the Matter of HANCOCK TRUCKING, INCORPORATED, Debtor. UNITED STATES of America, Appellant, v. Sheldon A. KEY, Trustee, Appellee. |
Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
K. Edwin Applegate, U. S. Atty., Indianapolis, Ind., Mitchell Rogovin, Asst. Atty. Gen., Karl Schmeidler, Attorney, Tax Division, Washington, D. C., Department of Justice, Lee A. Jackson, Crombie J. D. Garrett, Attorneys, Department of Justice, Washington, D. C., for appellant.
R. Stanley Lawton, Sigmund J. Beck, Edward B. Hopper, II, Indianapolis, Ind., Bamberger & Feibleman, Indianapolis, Ind., of counsel, for appellee.
Before FAIRCHILD and KERNER, Circuit Judges, and GORDON, District Judge.1
This appeal by the United States involves an unpaid federal tax claim in the stipulated amount of $375,386.55 and is taken from the order of the district court confirming an amended plan of reorganization under Chapter X of the Bankruptcy Act.
On May 3, 1954, the debtor filed a voluntary petition for reorganization in the district court in which it alleged its inability to meet its debts as they became due, and in which it requested the appointment of a trustee to operate its business and manage its property. The United States filed proofs of claim for federal withholding, excise and employment taxes.
The trustee filed an amended plan of reorganization on June 23, 1967. The plan provided that the tax claims were to be satisfied by payment of 10% of the amount of the claims in cash within six months from confirmation, and by payment of the balance, without interest, in 78 equal monthly installments. The installment payments were to be secured by an assignment of the note and chattel mortgage on the debtor's operating rights, which documents were signed by Hennis Freight Lines, Inc., the purchaser of said operating rights. The amount of the note is substantially in excess of the amount owed in connection with the federal tax claims. The unsecured creditors were to be paid 20% of their claims in cash within six months of confirmation; certain wage claimants and also certain state and local taxes were to be paid in full. This amended plan did not contemplate the continued existence of the debtor.
Previously, the district court had approved the agreement between the debtor and Hennis Freight Lines, Inc., whereby Hennis agreed to purchase all of the debtor's operating rights for an amount not to exceed $935,000, payable $300,000 within 90 days of approval of the sale by the Interstate Commerce Commission, and the balance payable in 78 equal monthly installments. The I.C.C. hearing examiner recommended that the transaction be approved, subject, however, to certain modifications in the operating rights. The I.C.C. issued its order on March 11, 1965 approving the hearing examiner's findings.
The United States filed a timely notice of rejection of the amended plan on November 20, 1967. Following a hearing, the district court issued an order confirming the plan; it found that the debtor was insolvent; the plan was fair, equitable and feasible; and that the plan afforded adequate protection to the United States and to the state and local tax creditors by the assignment of the note and chattel mortgage executed by Hennis. The United States now appeals from the order of confirmation.
The issue presented on this appeal may be stated as follows: In a corporate reorganization under Chapter X, is a plan which provides for payment of the government's tax claims by installment payments without interest "fair and equitable", or is the government, in addition to such payments, entitled to receive its funds prior to the time payment is made to lesser ranking creditors?
Section 216(7) (11 U.S.C. § 616), provides in part as follows:
In addition, it is stated in § 221 (11 U.S.C. § 621) that the judge shall confirm a plan "if satisfied" that the provisions of § 199 have been complied with and the plan is "fair and equitable, and feasible".
The government contends that these sections, when read together, support the position that a plan which requires the government to wait 6½ years without interest for full payment and which permits, in the interim, payment to lesser ranking creditors, is not fair and equitable. The trustee maintains that the plan involved here adequately assures payment in full of the government's tax claim in a fair and equitable manner and urges that this is all that the applicable statutes require.
Section 199 does not prescribe a particular method of payment. It merely states that the district court shall not confirm a plan "which does not provide for the payment" of the government's tax claim, unless the government accepts a lesser amount. Nor do §§ 216(7) (d) or 221 adopt a specific method of payment; rather, they are couched in terms of "equity" and "fairness". As stated in 6A Collier, Bankruptcy, ¶ 10.17, pp. 490-491 (14th Ed. 1965), in speaking of § 216(7) (d):
"It has been said that these methods, properly speaking, are not `methods\' at all, but merely empower the judge, who must approve and confirm the plan, to approve any means of treatment which under the particular circumstances `equitably and fairly\' affords adequate protection to the dissenters."
Unlike the foregoing statutes, other chapters of the Bankruptcy Act do expressly provide that the government shall be paid in cash. For example, see § 64(a) (4) 11 U.S.C. § 104(a).
The government urges that § 3466 applies in Chapter X matters, which are not...
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