# Petition for a Writ of Certiorari — United States v. Key

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for a Writ of Certiorari
- **Published:** January 1, 1970
- **Citation:** 397 U.S. 322

## Text

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CITATIONS

Case v. Los Angeles Lumber Co., 308 U.S. 106, re-
hearing denied, 308 U.S. 637. .............--.--.- 8
Cherry Valley Homes, Inc., In re, 255 F. 2d 706, cer-
tiorari denied sub nom. DuBois v. United States,
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Illinois v. Campbell, 329 U.S. 362__-.....-.-..-----.
Marine Properties v. Trust Co., 317 U.S. 78......---.-
Massachusetts v. United States, 333 U.S. 611...______-
Northern Pacific Ry. v. Boyd, 228 U.S. 482__..._______
Price v. United States, 269 U.S. 492___.._.__________-
Protective Committee v. Anderson, 390 U.S. 414_______-
Spokane County v. United States, 279 U.S. 80__.____--
United States v. Anderson, 334 F. 2d 111, certiorari
gS See re 5, 6,7
United States v. Butterworth Corp., 269 U.S. 504. ______ 5
5
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United States v. Emory, 314 U.S. 423__...------
United States v. Marzen, 307 U.S. 200. ________._____.

(1)

858-179—69——_1

Statutes:
Bankruptcy Act, c. 541, 30 Stat. 544, as amended: he
Bi ae eee SR Sc ncccaccesecccuatignunel 5
Seg., 77 B (11, U,8.0. 205).. 4 ------2+-a-u2-.. 8
Sec. 199 (11 U.S.C. iP sentesansceqwhas rr
ee nara 17
Sec. 216(7) (11 U.S.C. 616(7))....---.-.--.... 7,9, 17%
en ee Ce SE int ccccnccasccsscncannn _™
Sec. 221(2) (11 U.S.C. 621(2)).......-..--222. , 188

Revised Statutes, Sec. 3466 (31 U.S.C. 191)... 4, 5, + pq

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?

4 the Supreme Gout ofthe Waited States

OcropeR TERM, 1969

No. —

Untrep StaTes OF AMERICA, PETITIONER
v.
SHELDON A. KEY, TRUSTEE

PETITION FOR A WRIT OF CERTIORARI TO THE UNITED
STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

The Solicitor General, on behalf of the United
States, petitions for a writ of certiorari to review the
judgment of the United States Oourt of Appeals for
the Seventh Circuit in this case.

OPINIONS BELOW

The order of the district court confirming the plan
of reorganization (Appendix C, infra, pp. 10a-15a) is
not officially reported. The opinion of the court of
appeals (Appendix A, infra, pp. la-8a) is reported at
407 F’. 2d 635.

JURISDICTION

The judgment of the court of appeals (Appendix B,
infra, p. 9a) was entered on February 27, 1969. On
May 20, 1969, Mr. Justice Marshall extended the time
for filing a petition for a writ of certiorari to and

(1)

2

including July 27 (a Sunday). The jurisdiction of
this Court is conferred by 28 U.S.C. 1254(1).

4! tt (: © QURSTIONG PRESENTED |, nf
1. Whether the Secretary of the Treasury's rejee-
tion of a debtor’s proposed plan of’ voluntary corpo-
rate reorganization under Chapter X of the Bank.
ruptey Act entitles the United States to have its un-
paid tax claims first satisfied under Section 3466 of
us Revised Statutes.
. If the United States is not entitled to absolute
for of payment, whether it must accept payment
later in time than junior ‘ereditors and without pee.

“vision for interest thiring the period gf délay“° ""*"

The pertinent provisions of Revised Statates, Sec-
tion 3466 and of. Seetions 199, 216 and 221 -of the

a a ae a
pendix D, infra, pp. 16a-18a-

On May 3, 1954, Hancock Trucking, Inc. (the
debtor) filed a voluntary petition for corporate reor-
ganization under Chapter X of the Bankruptey Act,
as amended, m which it alleged that it was unable to
meet its debts as they became due and requested the
appointment of a trustee to operate its business and
manage its property. The United States filed proofs
of claim for unpaid withholding of federal income,
employment and excise taxes in the amount of $377,
648.79. (Appendix A, txfra, p. la.)

An initial reorganization plan was confirmed by the

3

district court in 1957 but, for reasons not relevant
here, Was never consummated.’ Subsequently,. with
district court approval, the debtor agreed with Hennis
Freight Limes, Inc. that Hennis would purchase its
major asset, Interstate Commerce Commission operat-
ing rights for truck freight services. The agreement pro-
vided that Hennis would pay not more than $935,000
for the rights—$300,000. within 90 days of the Commis-
sion’s approval of the sale and the balance in 78
monthly installments. The Commission approved the
sale, with modifications, in March of 1965 (App. A,
infra, p. 2a).

On June 23, 1967, the trustees filed an amended
plan of reorganization, the terms of which reflected
this underlying sale. The $300,000 down payment was
to be exhausted by paying certain wage and local and
state tax claims in full, 20 percent of the claims of
the unsecured creditors, and 10 percent of the United
States’ tax claims and other local and state tax claims.
The remainder of the amount due to the United States
and to local and state tax authorities was to be paid
in 78 monthly installments, secured by an assignment
of the note and chattel mortgage Hennis had executed
on its purchase of the debtor’s operating rights. No
interest was to be paid in connection with the install-
ment payments; the plan did not contemplate the

‘Under this plan, the United States and certain states were
to be paid 25 percent of their tax claims in cash upon confirma-
tion, and the balance in four quarterly installments, with six
percent interest on the unpaid balance. The plan also provided
an acceleration clause in favor of the United States in the
event of default. The United States had indicated that it would
accept this plan.

—_---

4

continued existence of the debtor (App. A, infra,
p. 2a). -

The Secretary of the Treasury filed a timely notigg
that he rejected the amended plan but, following
hearing, the district court nonetheless confirmed it
(App. C, tnfra, p. 15a). Upon the United States’ ap.
peal from the order of confirmation, the court of ap-
peals affirmed (App. A, infra, p. 8a).

REASONS FOR GRANTING THE WRIT

The court of appeals has erroneously decided an
important question in the administration of the bank-
ruptey and federal tax laws, denying to the United
States in Chapter X reorganizations of insolvent
corporations the absolute priority of payment to which
Section 3466 of the Revised Statutes, 31 U.S.C. 191,
entitles it with respect to all debts, whether for taxes
or not. The court’s interpretation of Section 3466
deviates from this Court’s interpretation in equity
receivership proceedings, the forerunners of Chapter
X reorganizations, and conflicts with the interpre
tation given that section by other courts of appeals in
Chapter X proceedings. Moreover, even if Section 3466
were not applicable, the terms of the installment pay-
ments of the debtor’s tax obligations approved below
would deprive the United States of the “full payment”
of taxes to which it is independently entitled by Section
199 of the Bankruptcy Act, 11 U.S.C. 599.

1. Since virtually the beginning of the Republic,
Section 3466 and its predecessors have guaranteed an
unqualified priority of payment for all ‘‘debts due to
the United States’’ by an insolvent debtor. The gov-

5

ernment’s absolute priority under Section 3466 has been
uniformly held to apply to equity receivership proceed-
ings, the forerunner of Chapter X corporate reorganiza-
tions. Price v. United States, 269 U.S. 492, 502-503;
United States v. Butterworth Corp., 269 U.S. 504, 513;
Spokane County v. United States, 279 U.S. 80; United
States v. Emory, 314 U.S. 423, 426-429. And with equal
uniformity it has been held that the term “debts due to
the United States’’, as used in the statute, includes fed-
eral taxes.” Price v. United States, supra, p. 499;
Spokane County v. United States, supra, pp. 92-93;
Illinois v. Campbell, 329 U.S. 362, 366-367 ; Massachu-
setts v. United States, 333 U.S. 611, 625-626.

Other courts of appeals have applied the unequivo-
eal language of Section 3466 to give the United States
first access to insolvents’ assets in Chapter X reorga-
nizations. United States v. Anderson, 334 F. 2d 111
(C.A. 5), certiorari denied, 379 U.S. 879; In re
Cherry Valley Homes, Inc., 255 F. 2d 706 (C.A. 3),
certiorari denied sub nom. DuBois v. United States,
358 U.S. 864. To be sure, these cases involved non-tax
debts owed to the government. But there is nothing
in the simple language of Section 3466 that would
provide any basis for distinguishing between tax debts
and other kinds of debt. The court below argued that
Section 3466 cannot be applied to tax obligations un-
der Chapter X in view of the provisions of Section

*With respect to liquidating bankruptcies, the Act prescribes
in Section 64, 11 U.S.C. 104, a complete system of priorities that
supersedes Section 3466. See United States v. Marxen, 307 U.S.
200. But, as we shall show, there is no comparable superseding
provision in Chapter X.

6

199 of the Bankruptcy Act, which authorizes the
Seeretary of the Treasury to aecept or reject @ Chap.
ter X plan of reorganization in respect to the claims
of the United States, and provides that a reorganizg.
fion court may not confirm a plan which does not pro.
vide for the payment of the tax and customs claims
of the United States unless the Secretary agrees to
accept a lesser amount. The court reasoned that if
Section 3466 were applicable there would be “little
need’’ for Section 199 and that Section 199 must be read
as displacing “the more general and conflicting direetion
of § 3466” (App. A, p. 7a). But there is no ineonsisteney
or anomaly in applying both sections in a Chapter X re
organization. Seetion 199 applies to both solvent and in-
solvent corporations, and provides simply that the
United States eannot be compelled to accept less than
full payment of its taxes unless the Secretary of the
Treasury consents. If, as here, the Secretary insists
upon payment, the question of priority for that pay-
ment then arises, Section 199 does not purport to answer
the priority question ; in the case of an insolvent corpo-
ration like the debtor here, the general provision of Sec-
tion 3466 does answer it, stating that the United States
is entitled to payment first if it insists upon it. Thus, far
from being inconsistent, the two statutes dovetail per-
feetly in the situation presented by this case.

There is thus no basis for distinguishing away the
conflict between the decision below and the decisions
of the Fifth and Third Circuits in Anderson and
_ Cherry Valley Homes, supra. Indeed, examination of
the Anderson opinion reveals that the Fifth Circuit

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7

feasoned from the assumption that the government
would have Chapter X priority in tax debt cases to
its conclusion on the only disputed point, whether it
also had priority as to non-tax debts. The govern-
ment’s claims in the Chapter X proceedings in Ander-
son included tax as well as non-tax debts; the district
court accorded the tax debts priority and denied
it only as to the non-tax debts. 334 F. 2d at 113,
n, 2. Then it was argued in the court of appeals
that this differentiation was proper, because Section
199 specifically provided for tax debt priority in
Chapter X proceedings, but there was no similar
statement regarding other government debts. The
Fifth Cireuit refused to draw that inference in
light of the long history of undifferentiated govern-
ment priority under Section 3466 of the Revised Stat-
utes and the distinct functions of Section 199 in cases
not involving insolvency. Id. at 116-117.

The court of appeals considered that giving the
United States an absolute priority under Section
3466 would conflict with Sections 216(7)(d) and
221(2) of the Bankruptcy Act, which require that
a plan of reorganization under Chapter X must, in
substance, be fair, equitable, and feasible. In its
construction of the fair and equitable rule, however,
the court in effect eliminated the well established
distinetions between senior and junior creditors, hold-
ing the government entitled to nothing more than
reasonable protection. This construction of the rule
is contrary to the decisions of this Court first enun-
ciated in equity receiverships (Northern Pacific Ry.
v. Boyd, 228 U.S. 482) and subsequently under

358-179—69——-2

8

Section 77B of the Bankruptcy Act, 11 U.S.C, 29
(Case v. Los Angeles Lumber Co., 308 U.S. 106, re.
hearing denied, 308 U.S. 637; Consolidated Rock Co.y,
DuBois, 312 U.S. 510) and under Chapter X (Marine
Properties, Ine. v. Trust Co., 317 U.S. 78; Proteetive
Committee, etc. v. Anderson, 390 U.S. 414, 441). As these
eases held, the fair and equitable rule is applicable
initially to the senior claims, and each class of claims
must be satisfied in full for the rights surrendered,
in deseending order, before the next junior clags
may properly be paid in the distribution. If junior
creditors receive something of value at the expense
of the senior creditors, the requirements of the fair
and equitable rule are not met and thus the plan
‘‘comes within judicial denunciation.’’ Consolidated
Rock Co. v. DuBois, supra, p. 529. That in effect was
the result of the plan approved below. Far from being
required by the fair and equitable rule, the court of
appeals’ decision was actually inconsistent with that
rule.

2. The plan of reorganization confirmed by the dis-
trict court and approved by the court of appeals pro-
vides that the government’s tax claims are to be satis-
fied by payment of 10% of the amount of the claims in
cash within six months from confirmation and by the
payment of the balance, without interest, in 78 equal
monthly installments. The government is thus re-
quired to wait for more than 614 years for payment
and until after payment of lower ranking creditors, in
contrast to general unsecured creditors who are paid the

— Soy — — — —

9

entire amount of their recovery within six months of
confirmation. In view of the significantly discounted
present value of the installment payments to be made to
the government, it can scarcely be said that the govern-
ment is being paid in full, as is required by Section 199
of the Bankruptcy Act even if Section 3466 does not
apply. Thus, at the very least, interest would be required
to compensate the United States for the delay imposed
upon its receipt of the amount dut it.’ Moreover, the
delay of 644 years in payment of the Government’s tax
claims imposes upon it the risks of non-consummation of
the plan ; the government will not in fact receive its pay-
ments unless the purchaser remains solvent during the
78 months. In light of these factors, it is plain that even
apart from the obsolute priority conferred by Section
3466 the plan approved below does not provide for the
“payment” of the tax obligations guaranteed by Sec-
tion 199. Finally, independent even of Section 199, the
requirement that the United States accept discounted
value so that junior creditors may be paid is something
of value the junior creditors receive at the senior cred-
itors’ expense and thus “comes within judicial denunci-
ation,’’ Consolidated Rock Co. v. DuBois, supra, p. 529,
and the rule of Section 216(7) (d) and 221(2).

*The court of appeals’ observation (App. A, p. 7a) that the
United States is not entitled to post-petition interest is irrele-
vant here. The government’s contention was and is not that it
should receive interest on the amount of the tax obligation, but
rather that interest is required to give it eventual payment of
the full principal amount of the obligation by compensating for
the discount inherent in the installment plan.

10
CONCLUSION

The petition for a writ of certiorari ‘should be
granted. — roperll

eats cee

Erwin N. GRISWOLD, 7
. Soliciter General.
JoHNNIE M. WALTERS, ¢
Assistant Attorney General.
CroMBIE J. D. GARRETT,
Kart SCHMEIDLER,
Attorneys.

JuLy 1969.

|

=x ee ee

APPENDIX A

In the United States Court of Appeals for the
Seventh Circuit

September Term, 1968 September Session, 1969
No. 16857

In the Matter of

Hancock TRUCKING, INcCoRPORATED, Debtor,
UNITED STaTEs OF AMERICA, APPELLANT
v.

SHELDON A. Key, TRUSTEE, APPELLEE

Appeal from the Order of the United States District
Court for the Southern District of Indiana

February 27, 1969

Before FatRCHILD and KERNER, Circuit Judges, and
Gorpon, District Judge.’

Gorpon, District Judge. This appeal by the United
States involves an unpaid federal tax claim in the
stipulated amount of $375,386.55 and is taken from the
order of the district court confirming an amended
plan of reorganization under Chapter X of the Bank-
ruptey Act.

On May 3, 1954, the debtor filed a voluntary petition
for reorganization in the district court in which it
alleged its inability to meet its debts as they became

?The writer of this opinion is sitting by designation from the
United States District Court for the Eastern District of
Wisconsin.

(la)

2a

due, and in which it requested the appointment of a
trustee to operate its business and manage its prop.
erty. The United States filed proofs of claim for fed-
eral withholding, excise and employment taxes.

The trustee filed an amended plan of reorganization
on June 23, 1967. The plan provided that the tax
claims were to be satisfied by payment of 10% of the
amount of the claims in cash within six months from
confirmation, and by payment of the balance, without
interest, in 78 equal monthly installments. The install-
ment payments were to be secured by an assignment
of the note and chattel mortgage on the debtor's
operating rights, which documents were signed by
Hennis Freight Lines, Inc., the purchaser of said
operating rights. The amount of the note is substan-
tially in excess of the amount owed in connection with
the federal tax claims. The unsecured creditors were
to be paid 20% of their claims in cash within six
months of confirmation; certain wage claimants and
also certain state and local taxes were to be paid in
full. This amended plan did not contemplate the
continued existence of the debtor.

Previously, the district court had approved the
agreement between the debtor and Hennis Freight
Lines, Inc., whereby Hennis agreed to purchase all
of the debtor’s operating rights for an amount not
to exceed $935,000, payable $300,000 within 90 days
of approval of the sale by the Interstate Commerce
Commission, and the balance payable in 78 equal
monthly installments. The I.C.C. hearing examiner
recommended that the transaction be approved, sub-
ject, however, to certain modifications in the operat-
ing rights. The I.C.C. issued its order on March 1I,
1965 approving the hearing examiner’s findings.

The United States filed a timely notice of rejection
of the amended plan on November 20, 1967. Following

3a

a hearing, the district court issued an order confirm-
ing the plan; it found that the debtor was insolvent;
the plan was fair, equitable and feasible; and that the
plan afforded adequate protection to the United States
and to the state and local tax creditors by the assign-
ment of the note and chattel mortgage executed by
Hennis. The United States now appeals from the
order of confirmation.

The issue presented on this appeal may be stated as
follows: In a corporate reorganization under Chapter
X, is a plan which provides for payment of the gov-
ernment’s tax claims by installment payments with-
out interest “fair and equitable”, or is the govern-
ment, in addition to such payments, entitled to receive
its funds prior to the time payment is made to lesser
ranking creditors ?

Section 199 of the Bankruptcy Act (11 U.S.C.
4599) provides that

“Tf the United States is a secured or unsecured
creditor or stockholder of a debtor, the claims
or stock thereof shall be deemed to be affected
by a plan under this chapter, and the Secretary
of the Treasury is hereby authorized to accept
or reject a plan in respect of the claims or
stock of the United States. If, in any proceed-
ing under this chapter, the United States is a
secured or unsecured creditor on claims for
taxes or customs duties (whether or not the
United States has any interest in, or claim
against the debtor, as secured or unsecured
creditor or stockholder), no plan which does
not provide for the payment thereof shall be
confirmed by the judge except upon the ac-
ceptance of a lesser amount by the Secretary
of the Treasury certified to the court... .’’
{Emphasis added. ]

4a

Section 216(7) (11 U.S.C. § 616), provides in part as
follows:

“A plan of reorganizativn under this ehapter
es

**(7) shall provide for any class of creditors
which is affected by and does not accept the
plan by the two-thirds majority in amount re-
a under this chapter, adequate protection
r the realization by them of the value of their
claims against the property dealt with by the
plan and affected by such claims, either as pro-
vided in the plan or in the order co i
the plan . . . (d)} by such method as will, under
and consistent with the circumstances of the
particular case, equitably and fasrl ovide
such protection. .. .” [Emphasis add J
In addition, it is stated in § 221 (11 U.S.C. § 621) that
the judge shall confirm a plan “if satisfied’’ that the
provisions of § 199 have been complied with and the
plan is ‘‘fair and equitable, and feasible’’.

The government contends that these sections, when
read together, support the position that a plan which
requires the government to wait 64% years without
interest for full payment and which permits, in the
interim, payment to lesser ranking creditors, is not
fair and equitable. The trustee maintains that the
plan involved here adequately assures payment in
full of the government’s tax claim in a fair and equi-
table manner and urges that this is all that the appli-
cable statutes require.

Section 199 does not prescribe a particular method
of payment. It merely states that the district court
shall not confirm a plan ‘‘which does not provide for
the payment”’ of the government’s tax claim, unless
the government accepts a lesser amount. Nor do
§§ 216(7)(d) or 221 adopt a specific method of pay-
ment; rather, they are couched in terms of ‘‘equity”
and ‘‘fairness’’. As stated in 6A Collier, Bankruptcy,

10.
§.216

Sa

(10.17, pp. 490-491 (14th Ed. 1965), in speaking of

§216(7) (4)
“Tt has been said that these methods, properly
speaking, are not ‘methods’ at all, but merely
empower the judge, who must approve and
confirm the plan, to aeprere any means of
treatment which under the particular circum-
stances ‘equitably and fairly’ affords adequate
protection to the dissenters.’’

Unlike the foregoing statutes, other chapters of the
Bankruptcy Act do expressly provide that the govern-
ment shall be paid in cash. For example, see § 64(a)
(4) [11 U.S.C. § 104(a)].

The government stresses the importance of R. S.
§3466 (31 U.S.C. § 191) and contends that it entitles
the United States to immediate payment. Section 3466
provides that

‘*Whenever any person indebted to the United
States is insolvent, or whenever the estate of
any deceased debtor, in the hands of the execu-
tors or administrators, is insufficient to pay all
the debts due from the deceased, the debts due
to the United States shall be first satisfied; and
the priority hereby established shall extend as
well to cases in which a debtor, not having suffi-
cient property to pay all his debts, makes a
voluntary assignment thereof, or in which the
estate and effects of an absconding, concealed,
or absent debtor are attached by process of law,
as to cases in which an act of kruptey is
committed.’’ [Emphasis added. ]

The government urges that § 3466 applies in Chap-
ter X matters, which are not conventional bankruptcy
proceedings. United States v. Anderson, 334 F. 2d 111
(5th Cir. 1964) ; Lowden v. N. W. National Bank, 298
U.S. 160, 163 (1936). There are a number of cases in
which the government’s priority under § 3466 has been
recognized in equity receivership proceedings, but

6a

such cases did not involve Chapter X. Price v. United
States, 269 U.S. 492, 499 (1926); United States vy,
Butterworth-Judson Corp., 269 U.S. 504, 513 (1926);
Spokane County v. United States, 279 U.S. 80 (1929),
New York v. Maclay, 288 U.S. 290 (1933).

A case in which the court did apply § 3466 to a
Chapter X matter is Untted States v. Anderson, 334
F. 2d 111 (5th Cir. 1964). By a divided court, the
court of appeals for the fifth circuit decided that the
government’s non-tax debts were to have priority,
However, the court did not specify whether such non-
tax claims were entitled to ‘‘payment in full’’ or to
‘first satisfaction’’.

It seems to us that if § 3466 is applied to a Chapter
X plan, the ‘‘fair and equitable’’ provisions of $§ 216
(7)(d) and 221 are effectively contradicted. Section
199 bars the court from confirming a plan ‘‘which does
not provide for the payment” of tax claims—unless
the Secretary of the Treasury assents. Section 216(7)
states that a plan under Chapter X shall ‘‘equitably
and fairly provide’ adequate protection for ‘any
class of creditors which is affected by and does not
accept the plan’’. Section 221 provides that the judge
shall confirm the plan if the requirements of § 199
have been complied with and the plan is “‘fair and
equitable, and feasible’’. In our opinion, these three
latter sections govern tax claims of the United States
in Chapter X proceedings.

The specific provisions of §§ 199, 216(7)(d) and
221 of Chapter X cannot be fairly construed to re-
quire, as a matter of law, that a plan insure the gov-
ernment total satisfaction of its tax claims before
other creditors receive anything, as a condition
precedent to the plans being ‘‘fair and equitable”.

Within Chapter X, §§ 199, 216 and 221 are inter-
related statutes and part of a studied statutory plan.

sn ey

7a

gection 199 outlines the nature of the government’s
tax claim ‘“‘priority’’, and the two other sections
establish an equitable standard to govern the method
of payment. If, as the government would have us
hold, § 3466 creates an absolute right to first payment
in addition to full payment, there would be little need
for §§ 199, 216(7) and 221. These sections apply
specifically to Chapter X proceedings and should
control over the more general and conflicting direc-
tion of § 3466. Baltimore Nat. Bank vy. State Tax
Commission of Maryland, 297 U.S. 209, 215 (1936)
and eases cited therein.

In the case at bar, the approved plan contemplates
that the United States will be paid in full, and the
record supports the trial court’s conclusion that the
plan affords reasonable protection to the government.
The district court had the benefit of its own fact-
finding, as well as that of the L.C.C., with respect to
the value of the operating rights and the ability of
the buyer to make payments under the plan. These
factual determinations have not been specifically
challenged here.

We hold that the trial court did not err in per-
mitting lesser ranking creditors to receive payment
simultaneously. Under the plan, the government does
not surrender its right to full payment.

The government maintains that it is receiving only
a “discounted value’’ of its claim because it does
not receive interest, and it must wait 78 months for
full catisfaction. The absence of interest is not a con-
trolling factor here, for the law is well settled that
the government is not entitled to post-petition interest
on its tax claims in these proceedings. United States
v. Edens, 189 F. 2d 876 (4th Cir. 1951), aff’d per
curiam, 342 U.S. 865 (1952); City of New York v.
Saper, 336 U.S. 328 (1949); In re Kerber Packing
Co., 276 F. 2d 245 (7th Cir. 1960).

8a.

The record sufficiently supports the district judge’s
exercise of the diseretion vested in him under Chapter
X. The order of the district court confirming the
amended plan is affirmed.

A true Copy:

Teste:

Clerk of the Untted States Court of
Appeals for the Seventh Circuit,

APPENDIX B

United States Court of Appeals for the Seventh Circuit
Chicago, Illinois 60604

Thursday, February 27, 1969
Before

Hon. THomas E. Farrcuiup, Circuit Judge
Hon. Orro KERNER, Circuit Judge
Hon. Myron L. Gorpon, District Judge

In the Matter of
Hancock TRUCKING, INCORPORATED, Debtor

Untrep Srates oF AMERICA, APPELLANT
v.
SHELDON A. KeEy, TRUSTEE, APPELLEE

Appeal from the United States District Court for the
Southern District of Indiana
Indianapolis Diviss

This cause came on to be heard on the transcript of
the record from the United States District Court for the
Southern District of Indiana, Indianapolis Division, and
was argued by counsel.

On consideration whereof, it is ordered and adjudged

by this court that the order of the said District Court
confirming the amended plan, in this cause appealed from
be, and the same is hereby, affirmed, in accordance with
the opinion of this Court filed this day.

(9a)

APPENDIX C
[Caption omitted]
OrpER CONFIRMING PLAN

At Indianapolis, in said District, on the 19th day of
December, 1967.

This cause having come on to be heard on the &th
day of December, 1967, pursuant to the orders of this
court of November 22, 1967, and September 21,
1967, for the consideration of the confirmation of the
amended plan of reorganization of Hancock-Trucking,
Incorporated, the above-named debtor, approved by
this court on September 21, 1967, under Section 174
of the Bankruptcy Act, and of such objections as
might be made to the confirmation thereof, and due
deliberation having been had thereon, the

CoURT DOES FIND:

1. That notice of the said hearing has been duly
given as required by Section 179 of the said Act, and
the said order of this court of September 21, 1967.

2. That for the purposes of the said plan and its
acceptance, this court on July 3, 1967, entered an
order fixing the division of creditors and stockholders
of the said debtor into eleven (11) classes, according
to the nature of their respective claims and stock;
namely

(1) Holders of claims for wages earned within
the three months prior to the filing of the petition
commencing these proceedings i.e. March 5, 1962,
not in excess of six hundred dollars ($600.00) per
person.

(2) The United States with respect to all

(10a)

Pg es ae

lla

claims against the debtor inclusive of but not
limited to taxes.

(3) The State of Indiana, Gross Income Tax
Division, for taxes arising under the Gross In-
come Tax Law.

(4) The State of Indiana, County of Vander-
burgh, for personal property taxes.

(5) The State of Ohio, Department of Tax-
ation, for Highway Use Taxes.

(6) The State of Indiana, State of Illinois,
State of Ohio, State of Pennsylvania and any
other state or political subdivision thereof with
respect to claims for all taxes inclusive of real
estate taxes, other than those taxes set forth in
paragraphs 3, 4, and 5 herein.

(7) Holders of claims for damages arising out
of personal injuries.

(8) Holders of claims arising out of cargo loss
and damage, freight and overcharge, exclusive of
claims previously allowed in the plan of reorga-
nization confirmed on January 31, 1957.

(9) Holders of general claims, including goods
sold and delivered, services rendered, independent
contractor freight and steel haulers, interline ac-
counts, trailer interchange, wage claims other
than those included in class (1) herein, inclusive
of claims not fully discharged under the reorga-
nization plan confirmed January 31, 1957, and not
otherwise classified.

(10) Holders of shares of preferred stock now
outstanding.

(11) Holders of shares of common stock now
outstanding.

3. That the plan provides that all costs and ex-
penses of administration and other allowances which
may be made by the Judge in this proceeding shall

12a

be paid in cash by Sheldon A. Key,' Trustee of said
debtor, out of the assets in his hands. ;

4, That the plan provides that all claims included in
classes (1) and (6) are to be paid in cash in’ full,

5. That class (2) consists of one creditor, the
United States of America, whose claim has been filed
and allowed in the sum of Three Hundred Seventy.
Seven Thousand Six Hundred Forty-Hight Dollars
and Seventy-Nine Cents ($377,648.79) ; the said plan
of reorganization has been rejected by said claimant
by the filing of a written notice of the General Counsel
for the Department of Treasury of the United States,

6. That class (3) consists of one creditor, the State
of Indiana, Gross Income Tax Division, which has
filed two claims for taxes in the aggregate amount of
Thirty-One Thousand Two Hundred Eighteen Dollars
and Ninety-One Cents ($31,218.91) ; and that the plan
of reorganization has not been accepted by said
creditor.

7. That class (4) consists solely of one creditor, the
Treasurer of Vanderburgh County, State of Indiana,
for taxes in the sum of Seventy-Six Thousand Six
Hundred Fifty Dollars and Fifty-Five Cents ($76,-
650.55) ; and that the plan of reorganization has not
been accepted by said claimant.

8. That class (5) consists solely of the State of
Ohio, Department of Taxation for Highway Use
Taxes, with a claim against the debtor for taxes in the
sum of One Hundred Eighty-Five Thousand Dollars
($185,000.00), allowed herein; and that the plan has
not been accepted by said claimant.

9. That pursuant to the order approving the
amended plan or reorganization, creditors in classes
(7), (8) and (9) have been determined to be holders
of general unsecured claims and consolidated into one
class for the purpose of determining whether said

13a

dass of creditors has accepted the plan; that on Jan-
uary 14, 1966, the court entered an order allowing
the claims of National Leasing Company, Inc. in the
amount of Seven Hundred Seventy-Eight Thousand
Three Hundred Forty-Five Dollars and Sixty-Four
Cents ($778,345.64) and the claim of Wilmark Insur-
ance Agency, Inc. in the amount of One Hundred Six
Thousand Eight Hundred Ninety-Nine Dollars and
Righty-One Cents ($106,899.81), but subordinating
said claims to all other ereditors in the proceeding;
that the aggregate of filed and allowed claims of
classes (7), (8) and (9), exclusive of the subordinated
claims of Wilmark Insurance Agency, Inc. and Na-
tional Ledsing Company, Inc., is Eight Hundred
Kighty-Three Thousand Three Hundred Fifty-Six
Dollars and Seventy-One Cents ($883,356.71); and
that the plan has been duly accepted in writing, filed
in court, by or on behalf of creditors of the said
debtor owing and holding Seven Hundred Five Thou-
sand Nine Hundred Seventy-Five Dollars and Sev-
enty-Three Cents ($705,975.73) of claims of classes
(7), (8) and (9), whose claims have been filed and
allowed, and which claims are at least two-thirds (34)
in amount of the said filed and allowed claims of
classes (7), (8) and (9), exclusive of aforesaid sub-
ordinated claims.

10. That on June 26, 1962, an order was entered
herein fixing September 30, 1962, as the time within
which the proofs of claim of creditors and of the in-
terests of stockholders might be filed and providing
that such claims and interests shall be deemed to be
allowed unless objections are filed ; and the

QCoURT IS SATISFIED:

11, That the provisions of Article VII, Section 199,
and Article X of Chapter X of the said Act have been
complied with.

l4a

12. That the said plan is fair and equitable, and
feasible.

13. That adequate protection for the realization by
the creditors in classes (2), (3), (4), and (5) is pro
vided by the plan by securing the payment of their
claims by an assignment of note and chattel mo
on the operating rights to be transferred to Hennis
Freight Lines, Inc., and that such method safeguards
the interests of such creditors and equitably and
fairly provides the protection for the payment of the
claims of said creditors.

14, That the proposal of the said plan and its ae.
ceptance are in good faith and have not been made
or procured by means of promise forbidden by the
said Act; that all payments made or to be made by
the said debtor or any other person for services and
for costs and expenses in, or in connection with, this
proceeding or in connection with the said plan and
incident to the reorganization, have been or will be
fixed by the Judge.

15. There are no persons who are to be directors or
officers or voting trustees upon the consummation of
the plan; and it is

,

ORDERED, ADJUDGED AND DECREED:

16. That the holders of claims included in classes
(1) and (6) are not affected by the said plan, and that
it is not requisite to the confirmation of such plan
that it be accepted by the holders of such claims.

17. That the debtor is insolvent.

18. That the claims of National Leasing Company,
Ine. and Wilmark Insurance Agency, Inc., as credi-
tors in class (9), being subordinated to all other
creditors, are of no value and that the acceptance
of the said plan by the holders of said claims is nota
prerequisite to the confirmation of such plan.

15a

19. That the interests in class (10) and (11) are of
no value and that the acceptance of the said plan by
the holders of the interests in class (10) and (11) is
not a prerequisite to the confirmation of such plan.

20. That the amended plan for the reorganization
of the said debtor approved by this court on Septem-
ber 21, 1967, under Section 174 of the said Act, and
as modified herein, a copy of which plan is annexed
hereto and marked Exhibit “A”, be, and it hereby is,
confirmed.

21. That on or before the 20th day of March, 1968,
Sheldon A. Key, Trustee of said debtor, be, and he
hereby is, authorized and directed to consummate the
sale of the operating rights of the debtor to Hennis
Freight Lines, Inc. in accordance with the terms of
the sale heretofore approved by this court pursuant
to orders entered on October 10, 1962, and Septem-
ber 21, 1967.

22. That objections to the allowance of all claims
in classes (1) through (9) not heretofore adjudicated,
may be filed by all interested parties on or before the
2th day of March, 1968, and the court reserves the
right and jurisdiction to adjudicate said claims.

23. That this court reserves the full right and juris-
diction to pass upon the allowance of compensation
for services rendered in accordance with Article XTIT
of the Bankruptcy Act.

24. That this court reserves the full right and juris-
diction to make at any time and from time to time
such orders in aid of the consummation of the said
plan as the court shall deem proper.

(S) Ww. E. StTeckter,
United States District Judge.
[Distribution omitted]

APPENDIX D .

Revised Statutes:

Seo. 3466. Whenever any person indebted to
the United States is insolvent, or whenever the
estate of any deceased debtor, in the hands of
the executors or administrators, is insufficient
to pay all the debts due from the deceased, the
debts due to the United States shall be fint
satisfied; and the priority established shall
extend as well to eases in which a debtor,
not having sufficient property to pay all his
debts, makes a volun assignment thereof, or
in which the estate effects of an abscond-
ing, concealed, or absent debtor are attached by
process of law, as to eases in which an act of
bankruptcy is committed.

(31 U.S.C. 191.)

Bankruptcy Act, c. 541, 30 Stat. 544 [as amended by
Sec. 1, Act of June 22, 1938, ¢. 575, 52 Stat. 840, 893]:

Sec. 199. If the United States is a secured or
unsecured creditor or stockholder of a debtor,
the claims or stock thereof shall be deemed to
be affected by a plan under this chapter, and
the Secretary of Treasury is hereby author-
ized to accept or reject a plan in respect of the
claims or stock of the United States. If, in any

roceeding under this chapter, the United

tates is a secured or unsecured creditor on
claims for taxes or customs duties (whether or
not the United States has any other interest in,
or claim against the debtor, as secured or un-
secured creditor or stockholder), no plan which
does not provide for the payment thereof shall

be Sunnenes Oy Se Dene rae the ac-
ceptance of a lesser amount by e Secretary of
the Treasury certified to the court: Provided,

(16a)

i7a

That if the Seeretary of the omy: shall fail
to or reject a = for more. ninety
days ipt of written notice so to do
from the court to which the plan has been pro-
posed, accompanied by a certified copy o
the plan, his consent shall be conclusively
presumed.
(12 U.S.C. 599.) =
Sec. 216. A plan of reorganization under this
’ (1) shall include in respect, te creditors
. generally or some class of them, secured or
unsecured, and may include in, to stock-
holders generally or sortie class of them, =
visions altering or modifyi their rights,
either through the issuance of new securities
of any character or otherwise;
(2) may deal with all or any part of the

pro of the debtor ;

(3) "shall provide for the payment of all costs
and expenses of administration and other al-
lowances which may be approved or made by

the judge;
* e a * _

(7) shall provide for any class of creditors
which is affected by and does not accept the plan
by the two-thirds majority in amount required
under this chapter, adequate protection for the
realization by them of ‘the value of their claims
— the property dealt with by the plan and

ected by such claims, either as provided in
the plan or in the order confirming the plan,
(a) by the transfer or sale, or by the retention
by the debtor, of such property subject to such
claims; or (b) by a sale of such property free
of such claims, at not less than a fair upset
price, and the transfer of such claims to the
proceeds of such sale; or (¢) by appraisal and
payment in cash of the value of such claims; or
(d) by such method as will, under and consist-
ent with the circumstances of the particular

18a

ease, equitably and fairly provide syd
protection ;
e 2 * _

(11 U.S.C. 616.)

Sec. 221. The judge shall confirm a plan if
satisfied that—

(1) the provisions of article VII, section
199, and article X of this chapter have bee
complied with ; ‘

(2) the plan is fair and equitable, and

feasible;
« e * Sd ®

(11 U.S.C. 621.)

U.S. GOVERNMENT PRINTING OFFICE: t969

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0166%3A2. Public record. Not legal advice.