United States v. King

Decision Date13 September 1962
Docket NumberCiv. A. No. 749-58.
Citation208 F. Supp. 697
PartiesUNITED STATES of America, Plaintiff, v. Elizabeth Simonson KING, Executrix of the Estate of George Stewart King, deceased, and National Surety Corp., a corporation of the State of New York, Defendants.
CourtU.S. District Court — District of New Jersey

David M. Satz, Jr., U. S. Atty., By James D. Butler, Asst. U. S. Atty., for the Government.

Boyd, Dodd, Keer & Booth, By David S. Bate, Montclair, N. J., for defendant King.

Crummy, Gibbons & O'Neill, By Paul T. Murphy, Newark, N. J., for defendant National Surety Corp.

WORTENDYKE, District Judge.

This action is against the executrix of a deceased Distributing Agent for a bankrupt in a Chapter XI proceeding, under 11 U.S.C.A. § 701 et seq., to recover the amount of a debt due from the Debtor to the United States, and also against the surety upon the Agent's bond (to the extent of the penalty of $10,000 thereof). Plaintiff bases its alleged right to recover upon the provisions of 31 U.S.C.A. § 192.1 Plaintiff asserts the priority (31 U.S.C.A. § 191) of its claim against cash assets of Debtor in the hands of the Agent which were disbursed by the Agent to non-priority creditors of the Debtor. The Agent died testate, after the commencement of this action, and his executrix was substituted as a defendant in his stead. The case has been submitted to the Court, sitting without a jury, upon the following stipulation of facts:

"This stipulation is entered into by and between the United States of America as plaintiff and Elizabeth Simonson King as personal representative of George Stewart King, defendant, deceased, and National Surety Corporation.
"Paul T. Murphy, Esquire, is appearing for National Surety Corporation, and has been authorized by David S. Bate, Esquire, of Boyd, Dodd, Keer & Booth, Esquires, to appear on behalf of the defendant Elizabeth Simonson King for the purpose of making the within stipulation.
"This stipulation is made pursuant to the direction of the Court contained in the pretrial order dated January 3, 1961.
"It is stipulated by and between the parties hereto that the following facts shall constitute the record in the trial of this cause without testimony or proof on behalf of any party, subject to objections, if any, as to materiality and relevancy, and subject to the right of any party to introduce at the trial of the cause any evidence not inconsistent herewith upon five days notice prior thereto to all parties:
"1. There is jurisdiction in this court by virtue of the status of the plaintiff, the United States of America. This action was commenced on July 3, 1958.
"2. On October 1st, 1946, Seeley Tube and Box Company, Inc., a corporation of the State of New Jersey, filed a petition for reorganization under Chapter XI of the Bankruptcy Act (11 U.S.C.). Pursuant to an order of Referee Cahill entered on March 17, 1947, and filed on March 22, 1947, the deceased George Stewart King was appointed distributing agent and entered into performance of the duties of that office. On the same date the deceased George Stewart King filed a bond of the Defendant National Surety Corporation in the amount of $10,000 for the faithful performance of the duties of George Stewart King. On March 21, 1952, by order of Referee Cahill the bond was reduced to $4,000.
"3. The claim of Plaintiff United States of America arose out of default of Seeley Tube and Box Company, Inc., under contracts dated June 13 and 24, 1946, with the United States, and represents the excess costs incurred by the United States in completing the contracts. Two letters dated October 11, 1946, were addressed to the debtor by the Ordinance Department, Dover, New Jersey, advising of an intention to terminate the contracts because of default, and on November 18 and 19, 1946, debtor was notified by the Ordinance Department of the termination of the contracts and of the intention to hold the debtor liable for any excess costs.
"4. The Plaintiff United States of America was not scheduled as a creditor in the petition filed by the debtor corporation. The contract between the plaintiff and debtor corporation was listed as an executory contract on the schedules annexed to the petition.
"5. An amended plan of arrangement was confirmed following a hearing on March 21, 1947.
"6. The debtor corporation deposited with the distributing agent the sum of $160,193.68 in order to consummate the plan of arrangement. This sum was distributed pursuant to orders of the Court by checks signed by the distributing agent and countersigned by the referee. No written provision was contained in the plan of arrangement for payment of plaintiff's claim.
"7. Part of the statement made on the record on March 21, 1947, by the Referee and the attorney for the debtor was as follows:
"`THE REFEREE: Is there a claim of the Picatinny Arsenal?
"`MR. FREEMAN: The Picatinny Arsenal may have some claim.
"`THE REFEREE: Have we put up enough money to meet it?
"`MR. FREEMAN: No.
"`THE REFEREE: Is there a problem there?
"`MR. FREEMAN: We do not owe them any money, and we want to bring them in. I want to state to your Honor further that the debtor company will deposit any sum of money that is represented by any claim that the Picatinny Arsenal may file in these proceedings within a time that your Honor directs them to file it.
"`THE REFEREE: Have you any notion of what they might claim?
"`MR. FREEMAN: We think they may claim $20,000.
"`THE REFEREE: Have you $20,000 available?
"`MR. FREEMAN: We have $94,000 available to pay them if necessary, and we represent to your Honor that there will be at all times $20,000 or more available to dispose of that claim, in cash * * *
* * * * * *
"`MR. FREEMAN: I have a further application to limit the time of the United States of America to file a claim in this proceeding. And I am now handing your Honor a petition and order to show cause.
"`THE REFEREE: There is a provision in the statute
"`MR. FREEMAN: Yes, there is.
"`THE REFEREE: I want to see it.
"`MR. FREEMAN: It is Section 369.
"`THE REFEREE: Section 369 says under proved debts:
"`"1. Have been proved but not allowed or disallowed, prior to the date of confirmation; or `unliquidated debts.'
"`"2. Are disputed or unliquidated, have been scheduled by the debtor, and are proved within such time as the Court may direct; or `Arising from rejection of executory contracts.'
"`"3. Arise from the rejection of executory contracts by the debtor and are proved within such time as the Court may direct."'
"`This comes within the last category.
"`MR. FREEMAN: Yes, that is the last category.
"`THE REFEREE: Well, I will sign this order and let Miss Robinson fix the date. * * *'"
"The records of the Clerk of the Bankruptcy Court reflect the appearance of `G. Stewart King', distributing agent and president of the debtor corporation, in court on that date.
"8. On April 14, 1947, an order was entered directing the United States of America to file its claim on or before May 9, 1947.
"9. On May 9, 1947, the United States of America filed its preliminary contingent proof of claim in the amount of $26,818.82. The aforesaid claim alleged that the United States of America was a priority creditor.
"10. On May 9, 1947, the distributing agent had in his hands the sum of $6,085.01, which was subsequently distributed as follows:
                United States of America      $3,620.39
                Creditors having a priority
                  to United States of
                  America                      1,057.55
                Creditors not having a
                  priority                     1,407.07
                                              _________
                                              $6,085.01
                
"11. Each check was issued pursuant to an order of the Court and countersigned by the Referee in Bankruptcy.
"12. On March 30, 1949, the plaintiff amended its claim to $34,125.03, the final amount of the claim as allowed.
"13. On December 8, 1953, Referee Cahill determined that the claim of the United States was filed in time and that the amended plan of the bankrupt corporation had been confirmed upon the condition that adequate provision had been made for payment of the Government's claim in the event it was determined to be allowable in an amount not in excess of $94,000.
"14. On April 2, 1954, Referee Cahill's determination was reversed by the United States District Court for the District of New Jersey by Order of the Honorable Alfred E. Modarelli, United States District Court Judge.
"15. An appeal was taken from the District Court's ruling, and on January 1, 1955, the Court of Appeals for the Third Circuit reversed and held, `The disclosure by the debtor at the referee's hearing on confirmation of the plan that the Government had become a creditor was therefore in performance of its duty under the Act and amounted to an informal amendment of the list of creditors included in the debtor's schedules.' Rehearing was denied on February 9, 1955. Certiorari was denied on October 1, 1955, by the United States Supreme Court.
"16. On May 3, 1956, the distributing agent filed his final report and account with the clerk of the bankruptcy court.
"17. On August 2, 1956, the final report and account was allowed, the distributing agent was discharged and the surety bond was discharged.
"18. The Defendant National Surety Corporation received its first notice of any claim under its bond by letter dated May 7, 1958, from the plaintiff demanding payment of the sum of $4,000, being the reduced amount of its bond.
"In addition to the foregoing it is stipulated that any party may offer all or any part of any pleading or other record on file in the matter of Seeley Tube and Box Company, Inc., Debtor, subject to objections as to materiality and relevancy.
"It is further stipulated that the foregoing stipulation shall be filed with the court by the attorney for Defendant National Surety Corporation within one week of the date that copies of the foregoing stipulation are mailed to the attorneys for the respective parties, and that in the event any
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3 cases
  • King v. United States, 16
    • United States
    • U.S. Supreme Court
    • December 14, 1964
    ...specifically in the statute, is not a personal representative of the debtor but an arm and a representative of the bankruptcy court. 208 F.Supp. 697. The decision was reversed on appeal, 322 F.2d 317, and, because of a conflict among the circuits on the proper interpretation of § 192,5 we g......
  • United States v. King
    • United States
    • U.S. Court of Appeals — Third Circuit
    • September 13, 1963
    ...King's final petition and report, filed May 3, 1956, attached to the complaint of the United States as exhibit "A". 6 United States v. King, 208 F.Supp. 697 (D.N.J.1962). 7 The fiduciary must, in addition, have notice of the claim in favor of the United States before making the distribution......
  • United States v. Sachs, Civ. A. No. 14233.
    • United States
    • U.S. District Court — District of Maryland
    • May 29, 1963
    ...held to be included within R.S. § 3467, 31 U.S. C.A. § 192, United States v. Kaplan, 74 F.2d 664 (2 Cir.1935), cf. United States v. King, 208 F.Supp. 697 (D.C.N.J.1962). The court in Crocker also rejected ejusdem generis, because it held that the debts paid by a liquidating receiver, like t......

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