Before DUFFY, PARKINSON*fn1 and CASTLE, Circuit Judges.
The petitioner-appellant, Terre Haute First National Bank, Trustee of Merchants Distilling Corporation in proceedings for reorganization under Chap. X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq. filed a petition in the District Court for an order clarifying the provisions of the plan of reorganization of the debtor corporation, and of the Court's order approving consummation of the plan. The Trustee requested clarification so as to show that the lien of the United States of America, respondent appellee, for excess profits taxes was discharged by the plan, and that the claim of the United States for the balance of excess profits taxes is contractual in nature and to be paid as provided in the plan.
Trustee's petition was heard by a special master on the record in the reorganization proceeding. No additional evidence was offered by either party. The special master in his report concluded that the provisions of the amended reorganization plan, which the court had approved, did not release the government's lien and that the trustee's petition should be dismissed. The District Court overruled the trustee's exceptions to the report, concluded that the provisions of the amended plan did not release the lien and entered an order dismissing the petition. The trustee appealed.
Prior to the filing of the petition for reorganization by Merchants the Commissioner of Internal Revenue had assessed against it excess profits taxes for the years 1945 and 1946 in the sum of $779,253.84, plus interest of $486,411.34. In addition, the United States had a claim for withholding taxes, interest and penalties in the sum of $56,740.86 and excise taxes in the sum of $7,323.70. The United States had duly filed notice of tax liens against all of Merchants' properties and rights to properties.
The Trustee's amended plan of reorganization was based upon a commitment which the Trustee had obtained from Schenley Industry, Inc. The Schenley commitment set forth the conditions upon which it would purchase the common stock of Merchants upon its reorganization. It required that as of the date of closing the assets and property of Merchants be:
"subject to no liens, encumbrances or title retention or similar agreements which will not be released or discharged in the pending reorganization proceeding, except the lien for real and personal property taxes assessed in Vigo and Knox Counties, Indiana for the year 1957 due and payable in 1958".
The Schenley proposal and commitment, including the condition with respect to the release and discharge of liens, was by an amendment proposed by the trustee, included as a part of the amended plan of reorganization and incorporated therein.
The District Court in its order approving the amended plan of reorganization specifically approved the amended plan "as amended by the amendments proposed by the trustee."
The amended plan of reorganization as approved provided that Schenley would pay over to the trustee approximately $1,000,000 out of which certain payments would be made pursuant to the plan and that upon consummation thereof Merchants and its property shall be free and clear of all claims "except as otherwise provided in the plan".
The amended plan contained the following provisions altering and modifying the tax claims of the United States:
"1. The United States of America shall receive payment in cash in full of the unpaid balance of the withholding F.I.C.A. and excise taxes, together with interest at the rate of 6% per annum to date of payment and with penalties thereon as set forth in the proof of claim, and, in addition, shall receive the amount of principal and interest to date of payment due under the conditional sales contract covering the dry house, within ninety days after the date of the confirmation of the plan.
"2. The claims of the United States for excess profits taxes (including interest and penalties, if any), shall be allowed in the amount of $779,253.84 and shall be fully satisfied by payment in accordance with the following provisions:
"(a) The sum of $300,000.00 in cash will be paid to the District Director of Internal Revenue, Indianapolis, Indiana, within ninety days after the ...