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UNITED STATES v. KING

September 13, 1962

UNITED 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



The opinion of the court was delivered by: WORTENDYKE

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. *fn1" 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 in 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 ...


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