Arizona Land Title & Trust Co. v. Rigg

467 F.2d 220

Opinion

PER CURIAM:

General Electric contends that its claim is, under the terms of a trust indenture, entitled to the status of “senior indebtedness” to which the claims of debenture holders are subordinated. The District Court held that the compromise agreement between General Electric and the trustee, in relegating General Electric’s claim to the status of “unsecured claim,” forecloses this contention.

In our judgment this was error. “Unsecured claim” could encompass senior indebtedness as well as other indebtedness.¹ (Indeed, the parties seem deliberately to have fixed on language that would reserve their differences upon the question of the right of General Electric to claim “senior indebtedness” status and thus to avoid the necessity of either party conceding the position of the other.) Accordingly, the phrase is ambiguous and requires construction.²

Two issues appear to require attention:

1. Whether it was the intent of the parties that General Electric’s claim (absent its security) should have the same status (as senior indebtedness or not) that it occupied before compromise.

2. If so, what that status was.

Reversed and remanded for further proceedings.

1

. A compromise agreement may preserve or adjust the priorities of the claimant who obtains the substituted claim. 6A Collier on Bankruptcy, at 220, 262, and 625.

2

. See § 242, Restatement of the Law of Contracts, and Comment A.