The opinion of the court was delivered by: RAYFIEL
The following is the opinion by Referee, CASTELLANO:
The petition for relief under Chapter XI of the Bankruptcy Act, 11 U.S.C.A. 701 et seq., was filed by the debtor on March 15, 1952.
The debtor's third amended plan of arrangement dated June 23, 1952, provides for the payment of administration claims and priority claims in full and for payment to general unsecured creditors 100% of their claims without interest, payable 75% in cash upon confirmation and the balance 25% out of the remaining assets. I find that the assets are more than sufficient to pay the general unsecured creditors 100% of their claims without interest, and to pay priority and administration expenses in full, which payments total about.$ 146,000.
There will be a surplus in the hands of the debtor after the aforesaid payments are made under the plan. The debtor moves on notice to the parties above, and pursuant to stipulation between them dated and filed May 21, 1952, for an order determining the question of priority of payment of their claims out of the balance of funds of the debtor after payments are made pursuant to the plan of general unsecured creditors of 100% of their claims without interest, and administration expenses and priority claims in full.
The third amended plan dated June 23, 1952 filed pursuant to order of June 24, 1952, provides in Sub. (d) thereof:
(d) Upon payment in full to all unsecured creditors of 100% of their claims, without interest, any sums remaining thereafter will be paid to the subordinate creditors, Lester Krieger and Sam Rosen, or to Abraham Ulano, Benjamin Pomerantz, William Pomerantz and Lean Pomerantz, as may be determined by the Court, and entered in said schedule of distribution, or in any further order entered by the Court.
Upon the record of the hearing held on May 28, 1952, (pp. 29-42), the debtor's petition filed May 26, 1952, the affidavit of creditors Lester Krieger and Sam Rosen, the stipulation of the parties filed May 21, 1952 and the claims of the parties filed herein, I find that the creditors Krieger and Rosen held a contract of employment with the debtor which commenced 1945 and terminated December 1950. During the period of their employment which existed prior to this contract they became minority stockholders of the debtor, and served as officers and directors thereof. On June 18, 1946, Abraham Ulano and Benjamin Pomerantz as trustees under the Will of Morris Pomerantz, deceased, creditors herein, controlled this debtor and the common stock of the debtor. A meeting of officers, directors and stockholders was held June 18, 1946, at which meeting a resolution was adopted (Creditors' Ex. A) authorizing the redemption of preferred stock as follows:
'Resolved, that out of surplus, each year for the next consecutive five (5) years the corporation shall apply $ 3,000. out of the said surplus to redeem 30 shares of the issued and outstanding preferred shares of stock of the corporation each year at the redemption price of $ 100. All of the stockholders of record owning preferred stock shall present their pro rata share of said 30 shares (in case of fractional shares the nearest entire number shall be presented) to the Treasurer of the corporation, duly endorsed for transfer and with stock transfer stamps affixed, if required by law, on the 1st day of December, 1946 and on the 1st day of December of each consecutive year thereafter for a total of (5) years. Upon such presentation of stock for payment to the Treasurer of the corporation, if a sufficient surplus shall then exist, he shall pay the redemption price for same and the presenting stockholder shall surrender the said shares presented. Upon such surrender and payment, the stockholder shall cease to have any interest in or claim against the corporation of any kind with respect to said shares of stock.'
I find that there was due and payable by the debtor to the following creditors on December 1, 1950 and prior to the filing of the petition under Chapter XI, the total sum of $ 3390. (Creditor's Ex. B p. 4, and Ex. C p. 1) The debtor had a surplus on hand at this time, sufficient to pay such amount.
In accordance with the resolution of the Board of Directors dated June 18, 1946, the corporation redeemed 30 shares of preferred stock on December 1, 1950 at $ 100.00 per share plus accumulated dividends at the rate of 3% per annum from August 1, 1946 to December 1, 1950. The corporation is accordingly liable to the following individuals as indicated:
Stock Redeemed Accumulated
No. Shares Amount Dividends Total
Morris Pomerantz 22 $ 2,200.00 $ 286.00 $ 2,486.00
Sam Rosen 5 500.00 65.00 565.00
Lester Krieger 3 300.00 39.00 339.00
/-- /-- /-- /--
Totals 30 $ 3,000.00 $ 390.00 $ 3,390.00
The foregoing three creditors filed claims for the foregoing amounts as moneys due them on redemption of preferred stock owned and surrendered by them.
Creditors William Pomerantz and Lena Pomerantz each holding 1 share of preferred stock upon which they have each filed a claim for $ 100 did not surrender their stock for redemption and the books of the debtor does not show any sum due them for preferred stock redemption.
Lester Krieger has filed a separate claim for $ 30,098.99, and Sam Rosen has filed a separate claim for $ 21,186.82. I find that both of these claims are based upon an award made by the American Arbitration Association dated April 21, 1952, and each award was confirmed by order and judgment of the Supreme Court, New York County dated May 5, 1952. The award in each case arises by reason of a breach of contract of employment and represents the value as fixed by arbitration pursuant to the contract, of the stock holdings of these two creditors, (excepting for the redeemed preferred shares of Krieger and Rosen.) Proceedings in arbitration, stayed upon filing of the petition, were permitted to continue before the arbitrators pursuant to order of this court and the claims were liquidated and determined.
It is not disputed here, and the record clearly establishes that the creditors Krieger and Rosen knew of the existence of the stock redemption resolution of June 18, 1946, and that the trustees of the estate of Morris Pomerantz knew the terms of the contract of ...