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In re Gotham Can Co.

April 6, 1931

IN RE GOTHAM CAN CO.; MERCHANTS' TRANSFER & STORAGE CO.
v.
RAFFERTY.



Appeal from the District Court of the United States for the Eastern District of New York.

Author: Hand

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

Merchants' Transfer & Storage Company, hereafter called finance company, advanced money to Gotham Can Company, the bankrupt, prior to its adjudication, upon the security of accounts receivable assigned by the atter. The contract of the parties provided that the finance company should advance in cash 77 per cent. of the face value of the accounts and the remaining 23 per cent. upon collection of the accounts subject to the following charges:

(a) A charge of $5 per thousand on the first $100,000 of accounts assigned during any one year.

(b) A "service charge" of one-thirtieth of 1 per cent. per day upon the outstanding balance of uncollected accounts.

(c) Attorneys' fees and other expenses incurred by the finance company in the collection of accounts not paid in full at maturity.

The bankrupt agreed to collect the accounts and to remit the proceeds in specie to the finance company. On October 3, 1929, when the adjudication in bankruptcy occurred, the finance company held accounts having a face value of $10,674.97 as security for actual cash advances of $8,231.25. After the bankruptcy, the finance company made collections of these assigned accounts to the amount of $8,156.21, and the trustee to the amount of $529.52. On February 28, 1930, the finance company filed a proof of debt against the bankrupt estate, and in March, 1930, it filed a petition praying that the trustee pay over the above collections of $529.52 in his hands, together with any further collection which he had received. As a basis for its petition, the finance company claimed that there was due it the following sums:

Amount advanced by it in excess of collections which it

had received from assigned accounts $75.04

Service charges accrued after adjudication at the rate of one-

thirtieth of 1 per cent. per day on outstanding accounts 384.87

Disbursements after adjudication incurred in collecting

accounts ...


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