The opinion of the court was delivered by: Campbell, Senior District Judge.
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
3. To DANIEL D. DOYLE, Trustee the sum of
All three parties have petitioned for review of the
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:
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