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In re Tube

January 11, 1955

IN THE MATTER OF SEELEY TUBE AND BOX COMPANY, DEBTOR. APPEAL OF THE UNITED STATES OF AMERICA.


Author: Maris

Before MARIS, McLAUGHLIN and KALODNER, Circuit Judges.

MARIS, Circuit Judge.

On October 1, 1946, the debtor, Seeley Tube and Box Company, filed its petition in the District Court for the District of New Jersey for an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C.A. § 701 et seq. and on the same day the court approved the petition. With the petition the debtor filed the statement of executory contracts and the schedules and statement of affairs required by section 324 of the Act. Included in the statement of executory contracts were six government contracts with the Picatinny Arsenal which had not then been declared in default. On October 1, 1946 the United States gave notice to the debtor of its intention to terminate two of these contracts because of the debtor's default in performance. On November 18, and 19, 1946 the contracts were terminated, the Government reserving the right in accordance with their terms to hold the debtor liable for damages. In reletting these contracts the Government was forced to pay a price in excess of that for which the debtor had promised delivery. This excess is the basis for the Government's claim here in controversy.

On February 28, 1947 the debtor filed an amended plan of arrangement which provided for the payment in cash of all unsecured debts without any reduction in amount or extension of the time for payment. A hearing on the confirmation of this amended plan was held by a referee on March 21, 1947, following which an order was entered confirming it. At that hearing counsel for the debtor stated that the Government might have a claim with respect to the Picatinny Arsenal contracts which might amount to $20,000 and he presented a petition for an order fixing the time within which the United States should file its claim growing out of said contracts. Such an order was entered fixing May 9, 1947 as the time. On May 9, 1947 the Government filed its proof of claim, amended March 30, 1949, for $34,125.03. On February 17, 1950 the debtor filed a petition seeking, inter alia, to have the claim re-examined and barred. The referee rejected the petition but on review he was reversed by the district court which held that the claim was not timely filed, and entered an order barring it. 120 F.Supp. 269. This appeal by the United States followed.

The following are the pertinent provisions of Chapter XI of the Bankruptcy Act:

"Sec. 367. Upon confirmation of an arrangement -

"(4) except as otherwise provided in sections 369 and 370 of this Act, the case shall be dismissed.

"Sec. 368. The court shall retain jurisdiction, if so provided in the arrangement.

"Sec. 369. The court shall in any event retain jurisdiction until the final allowance or disallowance of all debts affected by the arrangement which -

"(1) have been proved, but not allowed or disallowed, prior to the date of confirmation; or

"(2) are disputed or unliquidated, have been scheduled by the debtor, and are proved within such time as the court may direct; or

"(3) arise from the rejection of executory contracts by the debtor and are proved within such time as the court may direct." 11 U.S.C.A. §§ 767, 768, 769.

The debtor's contention, which the district court adopted, is that under section 367(4) of the Bankruptcy Act the court did not have jurisdiction after the confirmation of the plan of arrangement to allow the Government's claim since the claim did not come within any one of the three saving clauses of section 369. It is obvious that the claim did not come within clause (3) of that section since the debtor had not rejected the contracts involved. We may also assume that it did not come within clause (1) as a claim proved prior to the date of confirmation, although the Government urges otherwise. We think, however, that the Government's claim did come within clause (2) of section 369 and that the district court accordingly erred in holding that it did not have jurisdiction to allow it after confirmation of the plan.

The claim was clearly a disputed or unliquidated one. Likewise it was proved within the time specifically directed by the court. Was it scheduled by the debtor before the confirmation of the plan? We think it must be held that ...


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