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In re Unishops Inc.

decided: April 19, 1977.

IN THE MATTER OF UNISHOPS, INC., DEBTOR. JEROME ZELIN, CLAIMANT-APPELLANT,
v.
UNISHOPS, INC., DEBTOR-APPELLEE



Appeal from a judgment of the United States District Court for the Southern District of New York, Thomas P. Griesa, Judge. Jerome Zelin appeals from a judgment of the District Court reversing a decision of the Bankruptcy Judge and reducing the status of his claim against the debtor in possession in a Chapter XI proceeding, 11 U.S.C. Sections 701 et seq., from a first priority to that of a general unsecured creditor. Reversed. Opinion below Medina, Anderson and Timbers, Circuit Judges.

Author: Medina

MEDINA, Circuit Judge:

Jerome Zelin appeals from a judgment in the Southern District of New York by Judge Thomas P. Griesa reversing an order of Bankruptcy Judge Roy Babitt which had allowed Zelin's claim for $100,000 as an expense of administration of Unishops, Inc., a debtor in possession in a Chapter XI arrangement proceeding, thereby giving the claim first priority under Section 64(a)(1) of the Bankruptcy Act, 11 U.S.C. Section 104(a)(1), and permitting payment of the claim in full. The District Court held that Zelin's claim is not entitled to priority. 417 F. Supp. 405 (S.D.N.Y. 1976).

The claim in issue arises from the following letter agreement entered into by Unishops and Zelin on March 19, 1973:

Dear Mr. Zelin:

We refer to the discussions with you concerning the payment to be made to you by Unishops, Inc. (the "Company") in the event of the termination of your employment with the Company under the circumstances referred to in the following paragraph.

In this regard and in consideration of your agreeing to continue at this time as Chief Operating Officer, we confirm that, if your employment with the Company is terminated at any time for any reason other than

(a) your death, or

(b) your voluntary resignation,

the Company will pay to you, on a monthly basis commencing on the first day of the month following the month in which such termination occurs, $50,000 a year for a period of two years, aggregating $100,000. * * *

If you should voluntarily resign, either because of a diminution or material change in the character of your duties as Chief Operating Officer or a diminution of your responsibilities or salary, or because the location at which your services are to be rendered is changed to a location outside of the New York metropolitan area, such resignation shall not be deemed to be a voluntary resignation for the purpose of this agreement with the consequence that you will, under such circumstances, be entitled to the payments provided for hereunder.

Very truly yours,

UNISHOPS, INC.

At the time of this agreement, Zelin had been employed for some eleven years as the principal executive officer of Unishops and owned about one-half of 1% of its shares. This was the ...


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