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In re High Point Seating Co.

decided.: May 2, 1950.


Author: Hand

Before AUGUSTUS N. HAND, CLARK and FRANK, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

Saltser & Weinsier, Inc., filed its petition before Referee Warner of the United States District Court for the Eastern District of New York praying for an order directing the debtor and its assignee, London Art Furniture Corporation, to pay to the petitioner 20% of its claim of $2,213.57 in accordance with an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C.A. ยง 701 et seq., and for any other necessary orders.

Petitions for an arrangement were filed by the above-named debtors, and thereafter an order was made consolidating their various assets as the assets of High Point Seating Co., Inc. and providing that all claims filed against any of them be deemed filed in the proceeding as consolidated.

The claimant Saltser & Weinsier, Inc., had sold merchandise to High Point Seating Co., Inc., at the price of $2,213.57, which is the amount of the claim which it asserts herein.

Simonoff, Peyser & Citrin, public accountants, were retained by the debtor pursuant to an order made and entered in this proceeding on March 31, 1947. The accountants addressed a letter to claimant dated April 17, 1947, which is set forth in the margin,*fn1 requesting that a letter be sent to them stating the indebtedness of the debtor to it. This request was complied with on the day after its receipt by letter showing $2,213.57 as due from the debtor for goods sold and delivered to the latter by Saltser & Weinsier, Inc. On August 22, 1947 the accountants filed their report in the referee's office, setting forth the balance of $2,213.57 as due to Saltser & Weinsier, Inc.

The claimant asserts that it had no knowledge of the debtors' proceeding to effect an arrangement with creditors until June, 1948, when it happened to be told by another creditor that the latter had received a 20% payment from High Point. Upon inquiry, the claimant received a letter from the debtor Stanley R. Taylor saying: "I suggest that you immediately contact Mr. Max Schwartz, Attorney, 26 Court Street, Brooklyn, New York, who prepared the schedules for me. Your claim should have been entered in the original petition, and if it was left out, it was done so through error. I am sure that you will have no difficulty in establishing your claim because you can prove delivery according to your records, and I, of course, will assist you in any way possible. Mr. Schwartz may have some records in his office."

The amended plan of the debtor had been confirmed on January 23, 1948. The schedules filed by the debtor contained no mention of the petitioner's claim, which was apparently omitted through negligent oversight and not any bad faith. The claimant filed no formal, verified proof of claim until August 5, 1948, some months after confirmation of the arrangement, but in support of its claim relies on the fact that it gave a written statement of claim to the auditors who were acting for the debtor under an order of the court; that the auditors reported this debtor's indebtedness to Saltser & Weinsier, Inc., as $2,213.57; that the correctness of that amount is apparently not questioned; and that the report containing the statement of the claim was filed in the referee's office.

The arrangement provided that general unsecured creditors of High Point Seating Company, Inc., against which the claimant Saltser & Weinsier, Inc. is asserting its claim, should receive a payment of 20% in cash upon entry of the order confirming the plant of arrangement. An additional payment of 20% was to be made from a portion of the earnings of London Art Furniture Corporation, a successor to the business of the debtors.

Section 367*fn2 of the Bankruptcy Act provides:

"Upon confirmation of an arrangement -

"(3) the consideration deposited, if any, shall be distributed and the rights provided by the arrangement shall inure to the creditors affected by the arrangement whose claims are not barred by the provisions of section 354 of this Act, and (a) have been proved prior to the date of confirmation and are allowed, or (b) whether or not proved, have been scheduled by the debtor as fixed liabilities, liquidated in amount, and are not disputed; and

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

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