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In re Hiawatha Do It Yourself Inc.

Decided: February 7, 1964.

IN THE MATTER OF THE GENERAL ASSIGNMENT FOR THE BENEFIT OF CREDITORS OF: HIAWATHA DO IT YOURSELF, INC. (A CORPORATION OF THE STATE OF NEW JERSEY), ASSIGNOR, TO MYRON S. LEHMAN, ASSIGNEE


On motion to determine priorities.

Long, J.c.c.

Long

This matter arises from a general assignment for the benefit of creditors and involves the question of priorities as between (1) two judgment creditors who caused levies to be made on the debtor's property prior to the assignment, and (2) a tax claim of the United States of America on which a notice was filed in the Morris County Clerk's Office before the assignment but after the levies by the judgment creditors.

On July 11, 1961 the creditor Whitlock Corporation obtained a judgment in the Morris County District Court

against Hiawatha Do It Yourself, Inc., in the sum of $901.65 plus costs. On July 14, 1961 execution was issued, and on July 17, 1961 the sergeant-at-arms effected a levy on the assets of the debtor at its place of business.

On August 2, 1961 the creditor Anchor Sales Corporation obtained a judgment in the Morris County District Court against the debtor for $201.60 plus costs. On the same day execution was issued, and on August 3, 1961 the sergeant-at-arms effected a levy on the assets of the debtor at its place of business.

At the direction of the attorney for the judgment creditors, the sergeant-at-arms did not proceed to sale under the executions, but left the assets levied on in the custody of the debtor and it was permitted to continue in business, which necessarily included the selling of some of the stock in trade which was on hand at the time of the levies and, possibly, the replacement of some of the stock sold.

On September 6, 1961 notice of tax claim of the United States was recorded in the Morris County Clerk's Office.

The matter apparently continued in this situation until February 24, 1962, when the debtor made an assignment of its entire estate for the benefit of creditors to Myron S. Lehman as assignee. Following the assignment the attorney for the judgment creditors advised the assignee of the judgments and the levies thereunder and advised that he claimed priority as against the assignee and the rights of any other claimants. The assignee agreed that if the judgment creditors would withhold taking action on the liens which they claimed, he would convert the assets of the estate into cash by public sale and would thereafter bring the matter before the court for a determination as to the priorities. Accordingly, and in reliance thereon, the attorney for the judgment creditors took no further action with respect to the judgments and levies.

The assignee took possession of the physical assets of the debtor, and on March 15, 1962 the assets were sold at public sale for a total sum of $2,413.43. On March 23, 1962 an

order was entered confirming the sale, and the proceeds of sale were promptly received by the assignee.

There the matter rested until July 19, 1963, when the assignee filed his final account. The claim of the United States is listed as a priority claim in the amount of $2,042.72. The account shows total receipts of $2,584.80 and a balance on hand of $1,957.56. Apparently the assignee by inadvertence overlooked his understanding with the attorney for the judgment creditors and filed his final account without either listing the judgment creditors as parties in interest or asking for an adjudication as to their claimed priorities. Upon discovery of this, the judgment creditors filed a notice of motion for a determination as to their priorities. ...


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