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IN RE VANDERGRIFT

June 4, 1964

In the Matter of J. Jay VANDERGRIFT, a Bankrupt


The opinion of the court was delivered by: WILLSON

This bankruptcy case comes before me on three petitions for review. (11 U.S.C.A. § 67). The first two are 'Petitions For Review Of Referee's Order Allowing The Claim Of Marjorie Holmes Vandergrift To Be Filed.' These petitions were filed by Clyde H. Snider, Successor Receiver for Moon Motor Car Company, a creditor of the said bankrupt's estate, whose claim was filed and allowed within the statutory period for the filing of claims. The second was filed by the Trustee in Bankruptcy, Augustus E. Evans, and he complains also of the Referee's order allowing the claim of Marjorie Holmes Vandergrift to be filed. The third 'Petition For Review Of Order' was filed by Marjorie Holmes Vandergrift. In that order the Referee sustained objections filed to the interrogatories by the receiver of Moon Motor Car Company and by the Trustee. These interrogatories attack the Moon Motor Car claim which had been allowed by the Referee.

Attached hereto is a copy of the Referee's Certificate On Petitions For Review Of Order and also attached is a copy of the Referee's Memorandum Opinion, Findings of Fact, Conclusions of Law, and Order. These documents are attached for convenience because they very carefully set out the controversy which this Court has to decide. The Referee's Findings are explicit and are taken to be correct as are his legal conclusions unless this Court decides that he is clearly erroneous. (General Order 47.)

 As indicated in the Referee's Opinion, J. Jay Vandergrift filed his voluntary petition in bankruptcy on April 20, 1938, and was adjudicated a bankrupt on the same day. This was more than twenty-five years ago. In his schedule he listed five unsecured creditors. One was the Moon Motor Car Company whose debt was reduced to judgment. This claim was allowed by the Referee in the sum of $ 55,928.95. The bankrupt listed also the claim of Marjorie H. Vandergrift, Towanda, Pennsylvania, as a creditor representing a debt covered by a note dated May 28, 1928, in the sum of $ 20,000.00. The note was payable to Mrs. Vandergrift one day after the death of Mrs. Thomas Edward Murphy. Mrs. Murphy died July 3, 1959. The records indicate that the first meeting of the creditors was duly held and a Trustee appointed. The Moon Motor Car Company claim was filed and allowed. No claim was filed on behalf of Mrs. Vandergrift until January 11, 1961. From the outset in this case, it was apparent that the only possible asset of the bankrupt was his remainder interest, if any, in the estate of his Grandfather Jacob J. Vandergrift. This, however, could not be reduced to an asset subject to distribution in the bankruptcy estate until after the death of the life tenant, Mrs. Thomas Edward Murphy, who in fact died on July 3, 1959, as indicated. The Referee found and this Court accepts the validity of the Marjorie H. Vandergrift indebtedness. She was a former wife of the bankrupt and had loaned monies to him out of the proceeds of a mortgage which she had placed on her own property situate in Bryn Mawr, Pennsylvania. During the married life of this couple he became indebted to her in large sums of money for support for Mrs. Vandergrift and their two children. The bankrupt died on October 15, 1959. After extensive litigation in the Orphans' Court of Allegheny County, Pennsylvania, and the Supreme Court of Pennsylvania, it was decided that the bankrupt owned a transmissible remainder interest in the trust estate which in turn passed to his Trustee in Bankruptcy on the date of the adjudication on April 20, 1938. See Vandergrift Estate, 406 Pa. 14, 177 A.2d 432 (1962), wherein the Supreme Court of Pennsylvania's decision affirmed the Orphans' Court of Allegheny County. In the state litigation Mrs. Vandergrift had sought by attachment execution to collect on her judgments by attaching her husband's interest in his grandfather's estate. However, when the Orphans' Court of Allegheny County decided that the interest passed to the Trustee in Bankruptcy, Mrs. Vandergrift then for the first time filed a claim with the Referee in Bankruptcy.

 The Referee in his Certificate posed the problem as follows:

 'Should a claim be allowed to be filed after six months from the date of adjudication (bar date now is six months after the first meeting of creditors) and participate in the estate when said estate has not been closed or terminated and wherein the closing was delayed pending the death of a life tenant?'

 The Referee decided the question in the affirmative. The records in the case show that a first meeting of the creditors was held, and that notices were sent in accordance with the statute, but Mrs. Vandergrift in 1961, and thereafter made the contention that she never received notice of the first meeting of creditors. The Referee discusses that issue. I do not think it controlling. As I understand it, in the Referee's conclusion he simply holds that the equities in the case favor Mrs. Vandergrift, and that because there was no property whatsoever in the estate to be liquidated at the time the Trustee was appointed and for years thereafter, and because the estate was not closed or terminated the late filing should be permitted. As this Court understands it, there will be in the neighborhood of $ 85,000.00 for distribution. The Moon Motor Car Company claim is the only claim sharing in that sum. The amount of the Moon claim with interest and costs, and attorney's fees may no doubt exhaust the fund, as the attorney for the Trustee was involved in the litigation in the state courts, which in turn resulted in the fund being brought into the bankruptcy estate, and the attorney's fees will be substantial.

 In 1938, under Section 57 of the Bankruptcy Act, a creditor had six months from the date of the adjudication in which to file a claim. The time limit is now fixed at six months from the date of the first meeting of creditors. Several decisions in this circuit have laid down the rule that the time in which to file a claim is not to be extended except as provided in the statute. 11 U.S.C.A. § 93, sub. n. The following opinions are all to that effect: In Re Supernit, 3 Cir., 186 F.2d 130; In Re Super Electric Products Corporation, 3 Cir., 200 F.2d 790; and In Re Mellen Manufacturing Company, 3 Cir., 287 F.2d 37 (1961). The time limitation under Section 57, sub. n of the statute is thoroughly discussed in 3 Collier on Bankruptcy on page 373, et seq. Counsel for the claimant cite decisions in the Fourth Circuit which are contrary to the decisions in the Third Circuit herein cited, notably a decision by Judge Parker in Fyne v. Atlas Supply Company, 4 Cir., 245 F.2d 107. Also see Wheeling Valley Coal Corporation v. Mead, 4 Cir., 171 F.2d 916. However, this Court is bound by the decisions of this circuit. If the rule is to be changed then it is a matter for the Court of Appeals and not for this Court. On the merits of the controversy, this Court's sympathy lies with Mrs. Vandergrift. However, no escape is provided her in the statute. In this particular instance if the general rule could be applied that interest is only to be allowed to the time of bankruptcy, then there would be no doubt a distribution available for Mrs. Vandergrift under the section which permits late filing and claim on the funds where there is a surplus after all the other creditors have been paid in full. But in this case applying that rule then there likely will be no surplus for Mrs. Vandergrift to participate in, as the Moon Motor Car claim is entitled to interest because of the monies available; and it is the only claim filed within the statutory period. See Castaner v. Mora, 1 Cir., 234 F.2d 710. General Order 47, 11 U.S.C.A. foll. Sec. 53.

 This Court regretfully has come to the conclusion that the Referee erred in permitting the claim of Marjorie Holmes Vandergrift to be filed in the instant case. The Referee's Conclusions of Law in respect to the Vandergrift claim are rejected as clearly erroneous. See General Order 47.

 ORDER OF COURT

 And Now, June 4, 1964, this bankruptcy matter is recommitted to the Referee with instructions to disallow the claim of Marjorie Holmes Vandergrift and proceed to and direct the administration of the Estate as provided by the statute.

 REFEREE'S CERTIFICATE ON PETITION FOR REVIEW OF ORDER

 I, Stephen P. Laffey, one of the Referees of said Court in Bankruptcy, do hereby certify that in the courts of the proceedings in said cause before me the following questions arose pertinent to the said proceedings:

 '1. Should a claim be allowed to be filed after six months from the date of adjudication (bar date now is six months after the first meeting of creditors) and participate in the estate when said estate has not been closed or terminated and wherein the closing was delayed pending the death of a life tenant?

 I decided this question in the affirmative.

 Claimant a State Court Receiver of a former creditor of bankrupt and the Trustee in the present estate deeming themselves aggrieved, through their counsel on March 13, 1964, filed petitions for review.

 2. Should Marjorie Holmes Vandergrift be permitted leave to file Interrogatories, relating to questions pertaining to a claim filed on time and allowed some twenty-five years ago?

 I answered this question in the negative and dismissed the Interrogatories.

 This petitioner also deemed herself aggrieved and through her counsel on March 13, 1964 filed a petition for review.

 Herewith transmitted are:

 1. Referee's Memorandum Opinion, Findings of Fact and Conclusions of Law filed March 4, 1964.

 2. Petition For Review by State Court Receiver for a former creditor of bankrupt, filed March 13, 1964.

 3. Trustee's Petition For Review filed March 13, 1964.

 4. Petition For Review by Marjorie Holmes Vandergrift filed March 13, 1964.

 5. Petition and Schedules of J. Jay Vandergrift, bankrupt filed ...


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