The opinion of the court was delivered by: Robert D. Morgan, District Judge.
The pending issue arises on petition of a voluntary bankrupt to
review an order of the Referee in Bankruptcy dated April 17,
1967, holding the bulk of some $1,273.71 of "Separation
Allowance," otherwise becoming payable to the bankrupt upon
termination of employment subsequent to adjudication, to be the
property of the trustee under Section 70(a) of the Bankruptcy Act
(Title 11 U.S.C. § 110(a)).
The bankrupt contends that these funds, being subject to a
"spendthrift trust" provision of the union contract and being
"contingent" until paid, were not wages and did not pass to the
trustee under Section 70(a). The trustee contends that these
funds were "wages" earned under the union contract; that the
"spendthrift" provision was self-serving and void under state
law; but that even if not so, they were Section 70(a)(5)
property passing to the trustee because the employee could, at
least with the cooperation of the employer, effect a transfer
thereof to his family.
The Referee found that the basic right to receive the
separation pay was a right of action arising under the union
contract and therefore passed to the trustee under Section 70(a)
(6). He found, however, because the separation pay was earned at
the rate of $1.81 per week, and four of the weeks involved were
worked by the bankrupt subsequent to bankruptcy, that the trustee
should pay him the sum of $7.24 out of the total fund; and the
matter is here on Certificate of Review.
It is agreed by all concerned that the whole question is
whether title to this separation pay (or most of it) was in the
trustee or whether it is to be considered after-acquired property
belonging to the bankrupt.
Mitchell Durham, the bankrupt, had been employed by Armour and
Company, a Corporation, at its Peoria, Illinois, plant for
approximately 13 1/2 years. He is a member of The Amalgamated
Meat Cutters and Butcher Workmen of North America, AFL-CIO, and
the terms of his employment were specified in a Master Agreement
entered into between the union and the company. The material
provisions of that agreement in regard to separation pay are as
19.1 Separation Allowance — To Whom Paid.
Separation allowances, determined in accordance
with Section 19.3, shall be paid to employees having
one or more years of continuous service, as defined
in the vacation provisions, who are permanently
dropped from the service because of a reduction in
forces arising out of the closing of a department or
unit of the business, or as a result of technological
changes and when it is not expected that they will be
re-employed. * * *
Separation allowances shall not be paid:
(a) To employees with less than one year's
(b) To employees laid off in gang reductions;
except as provided in the second ...