King v. United States, 379 U.S. 329 (1964)

King v. United States

No. 16

Argued October 19, 1964
Decided December 14, 1964
379 U.S. 329

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

A company which held certain federal contracts filed a petition for reorganization under Chapter XI of the Bankruptcy Act. The Government announced that it would terminate the contracts for default, relet them, and hold the company liable for any excess costs. The company’s president was appointed by the referee as distributing agent. A plan of arrangement submitted by the company did not list the Government as a creditor, although the contracts were noted on a schedule as executory. The plan was confirmed after a hearing at which the referee was advised by the company attorney that $94,000 was available to pay any federal claim. The Government filed its claim for more than $26,000 within the time directed by the court, but, prior thereto, the distributing agent had paid out by checks countersigned by the referee all but about $6,000 of approximately $160,000 deposited with him, including substantial payments to himself as a company creditor. The agent’s final report was ultimately approved by the court, and he and his surety were discharged. Litigation established that the Government’s claim was timely filed, and the United States brought this suit against the distributing agent (on whose death petitioner executrix was substituted as a defendant) and the surety under 31 U.S.C. § 192 for payment of its claim. The District Court dismissed the case on the theory that a distributing agent is not within § 192 as an "executor, administrator, or assignee or other person," because he is not a personal representative of the debtor, but is an arm of the bankruptcy court. The Court of Appeals reversed.

Held:

1. Both 31 U.S.C. § 191, which establishes priority for any debt owed by an insolvent debtor to the United States, and § 192, which assures that such debt will be paid, are part of a single statutory plan. Bramwell v. U.S. Fidelity Co., 269 U.S. 483, followed. Pp. 334-336.

2. That distributing agents may be acting primarily for the court, rather than for the debtor, does not categorically exclude them from the coverage of § 192. Pp. 337-338.

3. Here, the distributing agent, as the debtor company’s president, must have been aware of the Government’s claim; presumably actively helped formulate the plan of arrangement referring to the federal contracts; was apparently present when the company’s counsel represented that funds were available to pay the claim; and was a major distributee under the plan. Accordingly, the agent possessed sufficient control over the assets in his possession to give rise to a responsibility under § 192, which he did not discharge, for seeing that the federal priority claim was paid. Pp. 338-340.

322 F.2d 317 affirmed.