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IN RE AMERICAN ZYLOPTIC CO.

February 3, 1960

In the Matter of AMERICAN ZYLOPTIC CO., Inc., Bankrupt


The opinion of the court was delivered by: BYERS

This petition to review the decision of Referee Castellano of December 31, 1959 is addressed solely to the order of priority to govern the distribution by the trustee in bankruptcy of $ 13,057.53 now in his hands.

The involuntary petition in bankruptcy was filed February 2, 1959, about seven months after the dates referred to below.

 The question arises under Section 67, sub. c of the Bankruptcy Act (11 U.S.C.A. § 107, sub. c), the presently material provision of which is:

 
'Where not enforced by sale before the filing of a petition initiating a proceeding under this Act and except where the estate of the bankrupt is solvent: (1) though valid against the trustee under subdivision b of this section, statutory liens, including liens for taxes or debts owing to the United States or to any State or any subdivision thereof, on personal property not accompanied by possession of such property, and liens, whether statutory or not, of distress for rent shall be postponed in payment to the debts specified in clauses (1) and (2) of subdivision a of section 64 of this Act.'

 Also Section 64, 11 U.S.C.A. § 104, sub. a(1, 2) which ordains priority as follows:

 
'Debts Which Have Priority. a. The debts to have priority, in advance of the payment of dividends to creditors, and to be paid in full out of bankrupt estates, and the order of payment, shall be (1) the actual and necessary costs and expenses of preserving the estate subsequent to filing the petition; * * * (2) wages and commissions, not to exceed $ 600 to each claimant, which have been earned within three months before the date of the commencement of the proceeding * * *.'

 The said decision provides on this subject:

 
'1. Administration expenses including fees due referees' salary and expense funds, amounts to be fixed, to be paid in full.
 
'2. Thirty six claims for wages to be paid in full, wage claims total $ 2389.60.
 
'3. Tax lien of the District Director of Internal Revenue, District of Lower Manhattan $ 6007.30 to be paid in full.
 
'4. The balance then remaining to be paid to Otarion Listener Corp. on account of its chattel mortgage lien of $ 5000.00 and interest.'

 The petitioner is Otarion Listener Corporation (Otarion) the holder of a chattel mortgage in the sum of $ 5,000 given to secure promissory notes amounting to that sum.

 The filing date was June 20, 1958 and the validity of the mortgage is not in question.

 Eight days earlier (June 12, 1958) the Director of Internal Revenue duly filed a notice of tax lien in the sum of $ 6,007.30 against the bankrupt, the priority of which, as a matter of law, ...


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