King v. United States (379 U.S. 329)/Concurrence White

by Byron White

United States Supreme Court

379 U.S. 329

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

 Argued: Oct. 19, 1964. --- Decided: Dec 14, 1964

Mr. Justice WHITE, concurring.

In the typical Chapter XI case initiated by the debtor under § 322 it is the debtor that remains in possession and that has prepared and filed the petition and schedules and that proposes the arrangement. It is only after the arrangement has been approved by the creditors that a distributing agent is appointed and charged with the distribution to specified recipients of the deposit required by the Act. The agent, qua agent, has no reason or duty to know or to learn of unscheduled debts, priority or otherwise, and lacking such knowledge from some other source such as his prior or current position with the debtor I would think he would be beyond the reach of 31 U.S.C. § 192 (1958 ed.) if a government priority claim is unscheduled and unpaid.

But the agent does have the task of distributing the deposit and the deposit is required to include a sufficient sum to pay all priority claims (with some exceptions), even those which are scheduled as disputed and unliquidated. Bankruptcy Act, § 337(2), 11 U.S.C. § 737(2) (1958 ed.); 8 Collier on Bankruptcy, 5.33(2), at 696 (14th ed. 1963). His responsibility under Chapter XI and under 31 U.S.C. §§ 191 and 192 extends far enough to impose the obligation to ascertain that the deposit he is handling is ample to pay the claims specified in the statute and is disbursed as required by law. And as to scheduled claims, liquidated or not, disputed or undisputed, the distributing agent is furnished with sufficient knowledge to fasten upon him the responsibility of not paying out the deposit so as to defeat the priority of the Government under § 191, at least without a court determination that he should do so.

There remains, however, a difficulty in this case. Although the papers filed with the petition revealed the debtor had certain contracts with the Government, the schedules did not list the United States as a creditor. However, the Government later terminated the contracts and at the confirmation hearing the existence of a claim of the United States was made known. The referee himself brought up the question of providing for payment of the Government's claim and was told, as I read the testimony, that the deposit did not include any sum to defray any part of this claim but that the debtor would have ample sums available to satisfy the claim and would make any deposit for this purpose which it was directed to make. The debtor's attorney, however, made it clear that the debtor was disputing the claim of the United States. In effect, the situation at that point was as though a disputed and unliquidated claim had been scheduled. In re Seeley Tube & Box Co., 219 F.2d 389, cert. denied, 350 U.S. 821, 76 S.Ct. 46, 100 L.Ed. 734. An arrangement may not be confirmed if a deposit does not include an amount to take care of all scheduled priority claims including those which are unliquidated. 8 Collier on Bankruptcy, 5.32(8). If the referee, as he apparently did here, confirmed the arrangement without having in hand a deposit to pay the debt to the Government if proved and allowed, it could well be argued that a distributing agent should not be required to have remonstrated with the referee or to bear the burden of the referee's unauthorized act, for the distributing agent's 'control and possession' are limited to the deposit.

We need not pursue this phase of the matter further, however, since other facts justify holding the distributing agent accountable in this particular case. As the Court points out, the agent was an officer of the debtor, was undoubtedly familiar with its affairs and took no exception to the attorney's statement that there would be ample funds to pay the government claim. This petitioner was not an uninformed distributing agent doing only what he was told to do but was both a distributing agent and an officer of the debtor, with ample notice of the Government's claim and of the referee's expectation that when proved and allowed it would be paid. In paying out the deposit without provision for the claim of the United States he acted at his own risk and became personally liable under § 192 when the Government's claim became liquidated.

Notes