In re James Butler Grocery Co., 31619.
| Decision Date | 21 March 1938 |
| Docket Number | No. 31619.,31619. |
| Citation | 22 F. Supp. 993 |
| Parties | In re JAMES BUTLER GROCERY CO. |
| Court | U.S. District Court — Eastern District of New York |
Rabenold, Scribner & Miller, of New York City (Charles E. Scribner, of New York City, of counsel), for Harry Zalkin, trustee.
Milo R. Kniffen, of Cobleskill, N. Y. (Louis S. Wallach, of Brooklyn, N. Y., of counsel), for the Department of Agriculture and Markets.
James Butler Grocery Company was duly adjudged a bankrupt, and a proof of claim was duly filed on behalf of the Department of Agriculture and Markets of the state of New York in the sum of $1,238.43. A motion was thereafter made by the trustee in bankruptcy to disallow the claim on the theory that it represented a penalty or forfeiture without any pecuniary loss within the meaning of section 57j of the Bankruptcy Act, 11 U.S.C.A. § 93(j), which provides as follows: "Debts owing to the United States, a State, a county, a district, or a municipality as a penalty or forfeiture shall not be allowed, except for the amount of the pecuniary loss sustained by the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby and such interest as may have accrued thereon according to law."
The motion to disallow and expunge the claim was granted by the referee, and this matter comes before the court upon a petition by the Department of Agriculture and Markets to review and vacate the order and decision of the referee.
The facts upon which the claim for $1,238.43 arose are not disputed. The bankrupt purchased milk from Dairy Sealed, Inc., and received an unlawful discount or rebate in the sum of $2,738.43. Thereafter, the bankrupt, being a licensed milk dealer under the Milk Control Law of the state of New York, N. Y. Agriculture and Markets Law (Consol.Laws, c. 69), § 252 et seq., received notice of a hearing from the Department of Agriculture and Markets to consider the revocation of its milk dealers' licenses. An interchange of letters followed in which the bankrupt announced its decision to pay to the state the amount of the discount or rebate referred to above, and requested the privilege of paying the sum in installments, since it had just been discharged from proceedings under section 77B of the Bankruptcy Act, 11 U.S. C.A. § 207 and note. The Department acquiesced in this mode of payment, and stated that the proposed hearing would be indefinitely postponed and would not be held provided the payments were made as agreed. The sum of $1,500 had been paid under this arrangement when bankruptcy occasioned the present problem as to the remaining $1,238.43.
Without determining at this time whether the Milk Control Law gave the Commissioner of Agriculture and Markets the power to demand payment to the state of the amount of any unlawful discount...
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