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IN RE MID STATE WOOD PRODUCTS COMPANY

February 19, 1971

IN THE MATTER OF MID STATE WOOD PRODUCTS COMPANY, BANKRUPT.


The opinion of the court was delivered by: Campbell, Senior District Judge.

MEMORANDUM AND ORDER

This matter comes before the Court on petitions filed by Daniel D. Doyle, Trustee of the Bankrupt Estate, ("Trustee"), Breece Plywood, Inc., ("Breece") and National Acceptance Company of America, ("NAC") to review an order entered by the Referee in Bankruptcy establishing the order of priority to an account or accounts receivable owed to the Bankrupt in which each of the petitioners claimed an interest.

The facts are stated in the briefs submitted by the parties and the Referee's Certificate As To The Record, which includes 35 enumerated documents, including the Bankrupt's petition and schedules and the pleadings. The Bankrupt was engaged in the manufacture of wooden cabinets in the city of Rockford, Illinois. Among the Bankrupt's customers was Ampex Corporation to which it had sold and delivered a quantity of cabinets for which Ampex was indebted at the date of bankruptcy in an amount claimed to be the sum of $47,265.22.

The Referee's order provides:

That from the proceeds realized from Ampex Corporation there shall be paid to the following parties the stated amounts in the order of priority listed:

    1. To BREECE PLYWOOD, INC., the sum of $14,265.05
  prior to the two parties hereinafter named.
    2. To NATIONAL ACCEPTANCE COMPANY OF AMERICA, the
  sum of $13,745.65 prior to the Trustee hereinafter
  named.
    3. To DANIEL D. DOYLE, Trustee the sum of
  $19,254.52.
  All three parties have petitioned for review of the
  order.

A stipulation between Breece, the Trustee and NAC as to certain of the facts was filed on July 30, 1969. The Referee made certain findings which are dated September 15, 1969. Petitions for rehearing were filed by all three parties and on June 19, 1970 the Referee entered his Findings on Reconsideration.

In essence, the respective positions taken by the three claimants are as follows:

BREECE

In December, 1966 the Bankrupt entered into a security agreement with Breece to secure payment for plywood to be sold and delivered by Breece to the Bankrupt which would use it in the construction of cabinets for sale to the Bankrupt's customers. In October, 1968 the Bankrupt owed Breece $49,555.99 for plywood delivered up to that time. A new procedure was thereupon adopted whereby the Bankrupt upon receiving an order from its customer Ampex would immediately assign a portion of the order to Breece. Breece would then ship the plywood to the Bankrupt to construct the cabinets ordered by Ampex and the Bankrupt would notify Ampex to make payment at Breece's bank in New Albany (Union National Bank of New Albany, Indiana). The bank would deduct the amount assigned to Breece and forward the balance to the Bankrupt.

At the date of bankruptcy Ampex owed the Bankrupt $47,265.22 on nine orders for cabinets which the Bankrupt had constructed from plywood furnished by Breece. Breece filed an application to reclaim the nine accounts receivable, but the Referee held that Breece was entitled only to $14,265.05 and that the remaining $33,000.17 was an asset of the Bankrupt Estate, subject only to the lien of NAC (hereinafter discussed). Breece requests that it be ...


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