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IN RE DURHAM

August 15, 1967

IN THE MATTER OF MITCHELL DURHAM, BANKRUPT.


The opinion of the court was delivered by: Robert D. Morgan, District Judge.

OPINION AND ORDER

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 follows:

ARTICLE XIX

SEPARATION ALLOWANCE

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. * * *

19.2 When not paid.

Separation allowances shall not be paid:

    (a) To employees with less than one year's
  continuous service;
    (b) To employees laid off in gang reductions;
  except as provided in the second ...

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