The opinion of the court was delivered by: BARD
This case arises on a petition for review of an order of the Referee denying priorities to petitioners' wage claims and allowing them as general claims only.
The bankrupt had been in business for many years. In 1931, operations being unprofitable and the indebtedness large, the enterprise was turned over to Moskowitz & Herbach, who received an assignment of the stock of the Company. The claimants herein, Frank Houghkirk, Ludwig O. Liese and Samuel S. Polin, had been employees of the bankrupt both prior and subsequent to this transfer. In October, 1934, Moskowitz & Herbach, finding their operation unsuccessful, turned the business and its assets over to the claimants who received, without giving any consideration therefor, the entire issued outstanding stock, as follows: To Houghkirk, 40%; to Liese, 20%; and to Polin, 40%. These three operated the business until December 28, 1938, when the landlord distrained for rent. On January 5, 1939, the corporation made an assignment for the benefit of its creditors at which the claimants signed the following writing:
"We and each of us, being the Stockholders, Officers and Directors of the Marshall E. Smith & Bro. Inc., for and in consideration of the sum of $1.00 and other good and valuable consideration, do hereby for ourselves, our heirs, executive (sic), administrators and assigns, waive any and all claim or claims for any preference, for wages or salary which may be due us or any of us, and do further agree that our claims for such wages or salary shall be subordinated to the claims of all Creditors.
"Ludwig O. Liese, Vice Pres.
On January 12, 1939, a petition for an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C.A. § 701 et seq., was filed, which was followed on April 1, ...