Matter of a & J Elastic Mills, Inc.

34 B.R. 977, 1983 U.S. Dist. LEXIS 16605
CourtDistrict Court, S.D. New York
DecidedMay 31, 1983
Docket82 Civ. 6553 (RWS)
StatusPublished
Cited by6 cases

This text of 34 B.R. 977 (Matter of a & J Elastic Mills, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Matter of a & J Elastic Mills, Inc., 34 B.R. 977, 1983 U.S. Dist. LEXIS 16605 (S.D.N.Y. 1983).

Opinion

OPINION

SWEET, District Judge.

This appeal from an order of the Honorable Roy F. Babitt, Bankruptcy Judge, presents three issues: should the appeal be dismissed because of an untimely filing of the brief of appellant Citicorp Industrial Credit, Inc. (“Citicorp”); did the Bankruptcy Judge err in allowing Webbing Industries, Inc. (“Webbing”) to vote its claim based on a default judgment in the election of the Trustee Albert Togut (the “Trustee”); and did the Bankruptcy Judge err in refusing to take evidence in connection with Citicorp’s objection to Webbing’s participation in the Trustee’s election. The appeal is dismissed, and the order of the Bankruptcy Judge is affirmed for the reasons set forth below.

On March 24,1982 a group of creditors of A & J Elastic Mills, Inc. (the “Debtor”) organized a creditor’s committee at the New York Credit Men’s Adjustment Bureau, Inc. (the “Bureau”). On March 31, 1982 the Debtor filed its Voluntary Petition for Bankruptcy under Chapter 7, 11 U.S.C. § 301, listing Webbing among its creditors on the basis of a “disputed” claim of $150,-000. During the morning of the same day, Webbing obtained a default judgment against the Debtor in the Supreme Court of the State of New York, County of New York, in the amount of $807,238.65.

On or about April 1, 1982 the United States Trustee appointed the Trustee as Interim Trustee pursuant to 11 U.S.C. § 15701. On May 10, 1982 the first meeting of creditors pursuant to 11 U.S.C. § 341(a) was held and all present other than Webbing voted to elect the Bureau as trustee. Webbing voted to continue the Trustee. The aggregate amount of claims was $1,035,834.60 if Webbing’s claim is counted as $807,238.65 and $378,595.95 if Webbing’s claim is counted as $150,000. On May 25, 1982 the United States Trustee reported the election controversy resulting from the weight to be given Webbing’s vote either $807,238.65, in which case the Trustee was continued, or $150,000, in which case the Bureau was elected.

By order to show cause dated June 11, 1982, the issue was presented to the Bankruptcy Judge who heard argument on June 21, 1982 and denied Citicorp’s motion to disqualify Webbing’s claim counted at $807,238.65, as well as Citicorp’s request to present evidence of the Debtor that Webbing was not entitled to the amount set forth in the default judgment and in fact owed money to the Debtor. An order was entered on June 25, 1982 certifying the Trustee’s election, and Notice of Appeal was filed on July 1, and the contents of the record on appeal designated on July 12, 1982.

Then, according to Citicorp, the record of the proceedings before the Bankruptcy Judge disappeared. The Clerk of the District Court refused to docket the appeal in the absence of the original transcript. In September, 1982 the missing transcript was finally located. On October 1, 1982 the Notice of Appeal and record were filed in the District Court. According to counsel for Citicorp, the Clerk of the District Court had undertaken to advise the creditor when the appeal was docketed. No such advice was received, and no brief on appeal was filed until January 12, 1983 after Citicorp had been notified of a pretrial conference by this court which was subsequently can-celled.

The briefing was thereafter completed by all parties, and in addition, the United States Trustee submitted a most helpful and useful statement advocating dismissal of the appeal.

Rule 808(1) of the Rules of Bankruptcy Procedure required the appellant’s brief to be served and filed within 15 days of the docketing of the appeal, a provision clearly and concededly violated by Citicorp, though its failure is sought to be justified by the circumstances set forth above. However, Citicorp cannot cast its burden to comply with the stated procedures upon the Clerk of the District Court by way of an alleged *979 undertaking outside the record and without benefit of rule or requirement. A delay of close to three months is unreasonable. Despite the “mechanical difficulties encountered in proceeding with this appeal,” the failure of Citicorp to make inquiry to the court for over two months is inexcusable. In addition, as represented by the United States Trustee, the Trustee is by this time well into the administration of the A & J estate, and to appoint a different trustee at this late date (late in part as a result of the delay in the appeal) is likely to cause dupli-cative efforts and undue financial burden on the estate. Under these circumstances, dismissal is appropriate. See In re New Haven Radio, Inc., 23 B.R. 762, 765 (D.C.S.D.N.Y.1982) (Weinfeld, J.); Sanitation Recycling, Inc. v. Jay Peak Lodging Ass’n, Inc., 428 F.Supp. 1022, 1023 (D.Vt.1977).

Further on the merits, the Bankruptcy Judge correctly resolved the issue presented to him with respect to the section 341(a) meeting. Rule 207(a) of the Rules of Bankruptcy Procedure provides:

Notwithstanding objection to the amount or allowability of a claim for the purpose of voting, the court may temporarily allow it for that purpose in such amount as to the court seems proper.

(emphasis added). The Bankruptcy Judge recognized that “the allowance of claims, for purposes of voting, is not their final allowance, and that upon a determination of their validity for voting purposes, when challenged, the only question for the court is whether there was reasonable ground for the determination made.” Sloan’s Furrier’s v. Bradley, 146 F.2d 757, 758 (6th Cir.1945).

The United States Trustee states that fixing the amount of a creditor’s claim for distribution purposes can be, and often is, time-consuming, and that if Webbing’s claim is improper, the Trustee may object to the claim pursuant to 11 U.S.C. § 502(j) (“Before a case is closed, a claim allowed may be reconsidered for cause and real-lowed or disallowed according to the equities of the case”). He stresses the need for speed and certainty in connection with the selection of a trustee. Indeed, the propriety of provisional allowances or disallowanc-es for the purpose of expeditiously selecting a trustee has long been recognized. See In re Malino, 118 F. 368 (S.D.N.Y.1902); In re Sumner, 101 F. 224, 226 (E.D.N.Y.1900). Judge Babitt explained this as follows:

[Historically it has been the law for purposes of the matter of electing the trustee, a matter of the gravest urgency, claims have traditionally under the old Act been “provisionally allowed.” This means for purposes of electing a trustee a claim is allowed even though when all is said and done in the unfolding of a case that claim may not [sic] later be challenged.

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Bluebook (online)
34 B.R. 977, 1983 U.S. Dist. LEXIS 16605, Counsel Stack Legal Research, https://law.counselstack.com/opinion/matter-of-a-j-elastic-mills-inc-nysd-1983.