The opinion of the court was delivered by: KALODNER
The "law's delays" are strikingly and most unhappily apparent in the case at issue.
Pusey-Maynes-Breish Company, a corporation, was adjudicated bankrupt on August 13, 1936. The referee to whom the matter was referred held ten hearings, drawn out over almost a year, commencing February 8, 1937, and terminating January 24, 1938. The referee then permitted two and one-half years to elapse before making any disposition of the matter. It was not until June 15, 1940, that he made his order. No explanation is apparent for the delay in the referee's disposition.
Reasonable promptness in disposition is one of the essences of justice. Public policy, too, is thwarted by procrastination, so glaringly apparent in this matter.
A reading of the record, whihc comprised 481 typewritten pages, in addition to 115 pages of exhibits, sustains the contention of the petitioner for review that it should have been possible for the parties to have stipulated the facts, or at least all but a few controverted items.
I have been compelled to spend more than 100 hours in the review and analysis of the bulky record, since the petition for review is premised on the contention that the referee erred in his conclusions of law as well as in his findings of fact.
The following facts are undisputed:
The Pusey-Maynes-Breish Company was engaged in business in Philadelphia, Pennsylvania, as a slaughter-house, and was duly adjudicated a bankrupt on August 13, 1936.
The proceedings were referred to L. Leroy Deininger as referee, and shortly thereafter John P. Herr was elected trustee of the bankrupt estate.
On January 6, 1937, the trustee filed a petition praying for an order on the Philadelphia National Bank to show cause why it should not turn over to the trustee the sum of $17,659.12, representing proceeds of certain accounts receivable which had been assigned by the bankrupt company to the bank.
Pursuant to this petition, the referee held the hearings above referred to, which terminated January 24, 1938, and on June 15, 1940, made an order on the bank to turn over to the trustee in bankruptcy all of the assigned accounts and the proceeds thereof.
Prior to March, 1935, the bankrupt had been indebted to the Philadelphia National Bank in the sum of $20,000. The loan was unsecured. The $20,000 indebtedness had existed from June 30, 1932, and was carried on a renewal basis until March 6, 1935, at which time it was renewed by another note for $20,000 still unsecured.
On March 12, 1935, the unsecured note for $20,000 was paid off by the substitution of a new collateral demand note in the same amount, secured by the assignment of accounts receivable of the bankrupt company totalling $21,995.25. The new note was actually "put on" by the bank on March 18, 1935. The intervening days between March 12 and March 18 were utilized to arrange for the deposit with the bank of the $21,995.25 accounts receivable of the bankrupt as collateral.
On May 3, 1935, the bankrupt company and the bank executed a loan agreement which specified the practice to be followed with respect to the assigned accounts receivable. Parenthetically it may be stated that between March 12, 1935, and May 3, 1935, the accounts were handled in the same manner in which they were subsequently handled under the agreement of May 3, 1935.
The May 3 loan agreement contained the following pertinent provisions:
That the bankrupt should make suitable endorsement on its books disclosing the assignment of the accounts to the bank.
That with respect to the original and subsequently pledged accounts receivable, duplicate and triplicate invoices were to be delivered by the bankrupt to the bank. The duplicate invoice was to be marked: "For value received we hereby sell, assign, transfer and set over this account to the Philadelphia National Bank, Philadelphia, Pennsylvania." The triplicate invoice was to be marked: "This account has been assigned to the Philadelphia National Bank, 1416 Chestnut Street, Philadelphia, Pennsylvania, to whom remittance should be made. Payment to any other party will be at your risk."
That unless otherwise desired by the bank, the bank was not to notify debtors of the assignment of their accounts, and that bankrupt should be permitted to collect the said accounts directly from the debtors. The privilege of collection was to terminate automatically upon the appointment of a receiver or bankruptcy proceedings.
That the bankrupt company should report to the bank daily, or as often as collections were made, all payments which had been received in liquidation of the accounts which had been assigned; the bankrupt simultaneously to deliver to the bank all cash, checks, etc., received in payment; said remittances to be deposited not in the general checking account of the bankrupt, but in a special account entitled "Pusey-Maynes-Breish Company, Inc., Account Number Two."
That account number two was to be designated as a trust fund, appropriated exclusively to the security for the debt, and as payment for future obligations of the bankrupt company to the bank.
That no withdrawals could be made from account number two except by check countersigned by an employee of the bank.
That if the company had new accounts which were satisfactory to the bank as security, it could offer to the bank an assignment of the new accounts in substitution for the release of monies on deposit in the special account, and that "after" the assignment of the new accounts had been made the bankrupt would be entitled to receive cash from the special account.
That all such new or substituted accounts receivable and their proceeds were to become subject to the agreement of May 3, 1935, as if originally assigned to the bank.
That as to returned merchandise covering which an account had been assigned, the bank was given a lien on said merchandise with the right to sell it.
There is no dispute that account number two as set up by the agreement of May 3, 1935, was intended to provide for a revolving fund in order that the bank would at all times be secured ...