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IN RE HOT SPRINGS BROADCASTING

November 28, 1962

IN THE MATTER OF HOT SPRINGS BROADCASTING, INC., BANKRUPT.


The opinion of the court was delivered by: John E. Miller, Chief Judge.

The petitioner, World Broadcasting System, Inc., on October 15, 1962, in accordance with order of the Referee extending the time for filing, filed its petition for review of an order entered by the Referee in Bankruptcy on October 1, 1962, disallowing the claim of petitioner.

On October 24, 1962, the Referee filed his Certificate containing the entire record, including the transcript of the testimony material to the claim of petitioner against the bankrupt. Also, briefs have been received from the attorneys for the respective parties and considered along with the record.

A complete history of the proceedings and orders entered by the Referee on other petitions and motions filed by other parties may be obtained by reading In The Matter of the Hot Springs Broadcasting Company, Inc., Bankrupt, No. 59, (D.C., 1962) 207 F. Supp. 303.

On April 26, 1960, upon the petition of creditors of the bankrupt, Hot Springs Broadcasting, Inc., was adjudged a bankrupt by default.

On May 17, 1960, the first meeting of creditors was held. On May 26, 1960, the petitioner herein filed its alleged proof of claim, using official Form No. 29, appearing as Form No. 503 in 5 Collier on Bankruptcy, 14th Ed., p. 3327.

On June 13, 1960, the bankrupt filed its schedules, and in Schedule A, Statement of All Debts of Bankrupt, the name of petitioner appears as "World Broadcasting System" but no amount is stated.

On May 28, 1960, one C.J. (Gus) Dickson filed a petition for an order to vacate the default adjudication and to dismiss the involuntary petition and discharge the Referee. The attorney for the petitioning creditors filed a motion to strike the petition to vacate the default adjudication, and on September 28, 1960, the Referee entered an order sustaining the motion to strike. A petition for review was filed, and on April 13, 1961, this court entered an order adopting and conforming the order of the Referee adjudicating the corporation a bankrupt.

On November 2, 1960, an order directing the Trustee to sell the assets of the bankrupt free and clear of liens was entered. The sale was held on November 17, 1960, with the purchaser having the burden to obtain the transfer by the F.C.C. of license to operate Radio Station KBLO. Confirmation of the sale was to await the transfer of the license, but the purchaser deposited the amount of its bid, $17,000.00, with the Trustee. The purchaser failed to obtain transfer of the license.

An order was entered August 29, 1961, canceling the sale of November 17, 1960, and the assets of the bankrupt were subsequently sold to another purchaser at a private sale.

On December 22, 1961, the Referee by order surcharged the deposit made by the first purchaser in the sum of approximately $9,000.00, and the first purchaser filed a petition for review of said order, which was disposed of by this court on July 26, 1962. See In the Matter of Hot Springs Broadcasting, Inc., Bankrupt, No. 59, (W.D.Ark. 1962) 207 F. Supp. 303.

On March 30, 1962, the petitioner filed a motion for an order allowing the claim. On April 3, 1962, the attorney for the Trustee wrote the attorney for the petitioner and stated:

    "* * * I am now in receipt of your letter of
  March 23, enclosing Motion to Allow the Claim of
  World Broadcasting System, Inc., together with
  copy of a proposed order allowing the claim. I
  believe I have heretofore stated to Mr. Shults it
  cannot be determined at this time whether there
  will be anything*fn1 in the bankrupt estate to
  distribute in the way of dividends and for that
  reason claims filed against the bankrupt estate
  would not be challenged nor would anything be
  done with reference thereto until other phases of
  the bankrupt estate have been concluded. I have
  also stated that insofar as the Trustee is
  concerned, World Broadcasting System, Inc., could
  have and should have obtained its album long ago.
  If there are small parts, such as heads and arms
  or other pieces of equipment, they should have
  and could have been picked up by the
  representative of World Broadcasting System
  months ago. * * * The World Broadcasting discs
  and equipment have been packed and in storage
  many months and so far as I know are still in
  storage in the building occupied by the
  broadcasting station. Your client was notified to
  this effect. With reference to the Motion to
  Allow Claim, your attention is invited to Section
  57 of the Bankruptcy Act (11 USCA) and General
  Order 21. Until such time as it is determined
  whether or not there will be assets in the
  bankrupt estate available for distribution to
  common creditors, I do not consider it proper to
  take the time of the Court to investigate the
  merits or demerits of any particular claim filed
  against the bankrupt estate, however, I will say
  in connection

  with the claim asserted by your client, I am
  advised it is based upon a contract, that it is a
  contingent claim and insofar as I know has not
  been liquidated in accordance with the provisions
  of the Bankruptcy Act. If I am in error in this
  connection, I still reserve the right of the
  Trustee in Bankruptcy to object to the allowance
  of the claim at the proper time."

The hearing on the motion of petitioner for allowance of the claim was held on September 21, 1962, approximately six months subsequent to the filing of the motion. In the meantime, objections were filed by the Trustee on August 31, 1962. The objections, omitting the formal parts, are as follows:

    "World Broadcasting System, Inc. has filed a
  claim herein in the amount of $5,017.00, being
  Claim No. 7, upon the docket of the Referee in
  Bankruptcy; that said claim should be disallowed
  for the following reasons:
    "(A) The Proof of Claim does not conform to the
  requirements of Section 57 of the Bankruptcy Act
  in that said claim is unliquidated and the amount
  thereof is not estimated in the manner or within
  a time directed by the Court; that said claim is
  not capable of liquidation or of reasonable
  estimation and that such liquidation or
  estimation would unduly delay the administration
  of the bankrupt estate and the closing thereof.
    "(B) That the greater portion of said claim is
  based upon albums of records turned over to the
  bankrupt prior to bankruptcy and that subsequent
  thereto the claimant was authorized to pick up
  said albums of records and the trustee disclaimed
  any further interest therein.
    "WHEREFORE, petitioner prays that the claim of
  the said World Broadcasting System, Inc. be
  disallowed in its entirety and for all other
  relief to which petitioner may be entitled."

The proof of claim, omitting the formal parts, is as follows:

  "STATE OF PENNSYLVANIA} ss
  COUNTY OF PHILADELPHIA}
    "Lawrence D. Biele, of Philadelphia, in the
  County of Philadelphia, State of Pennsylvania,
  being duly sworn, deposes and says:
    "That he is the Treasurer of World Broadcasting
  System, Inc., a corporation organized and
  existing under the Laws of the State of
  Pennsylvania, and carrying on business at No.
  252 Suburban Station Building Street, County of
  Philadelphia, State of Pennsylvania, and is duly
  authorized to make this proof of claim on its
  behalf;
    "1. That Hot Springs Broadcasting Inc., the
  above-named bankrupt, was at and before the
  filing by (or against) __________ of the petition
  for adjudication of bankruptcy, and still is,
  justly and truly indebted (or liable) to said
  __________ in the sum of Five Thousand Seventeen
  ($5,017.00) dollars.
    "2. That the consideration of said debt (or
  liability) is as follows: radio programming
  service.
    "3. That no part of said debt (or liability)
  has been paid, except NONE.
    "4. That there are no set-offs or counterclaims
  to said debt (or liability) except NONE.
    "5. That said __________ does not hold, and has
  not, nor has any person by __________ order, or
  to deponent's knowledge or belief, for __________
  use, had or received, any security or securities
  for said debt (or liability) except NONE."

Following the hearing, the Referee, on October 1, 1962, filed his Findings of Fact and Conclusions of Law, and upon such findings and conclusions entered an order disallowing in toto the claim of the petitioner.

The Findings of Fact and Conclusions of Law of the Referee are set forth below, but the court does not deem it necessary to discuss all of the Findings of Fact.

"1.

    "That the claimant, World Broadcasting System,
  Inc. filed its Proof of Claim herein on May 26,
  1960, alleging a debt in the sum of $5,017.00 for
  programming services; that claimant did not
  attach to said Proof of Claim copy of any
  contract upon which it predicated its claim, nor
  did it attach an itemized statement purporting to
  show the amount claimed, from all of which it
  appears that the said Proof of Claim does not
  conform to the provisions of Section 57-b of the
  Bankruptcy Act; that no Amendment to said claim
  has been filed but that on September 21, 1962,
  the date of the hearing hereon, claimant offered
  in evidence a copy of a contract dated October 7,
  1959, being contract No. WRW-BLO-59 purporting to
  have been executed by Hot Springs Broadcasting,
  Inc., operating Station KBLO, and by the said
  claimant; that said contract contains a typed
  Addenda appearing on Page 4 thereof which changes
  the rates as prescribed and also contains the
  following:
    "`all other terms and conditions remain in full
    force and effect'.

"2.

    "From the testimony offered on behalf of the
  claimant it appears claimant forwarded to the
  bankrupt a cabinet containing record albums which
  were received and for which the bankrupt paid
  transportation but apparently no other charges.
  The evidence further reflects that claimant
  delivered to the bankrupt certain vertical
  assemblies and not further identified except that
  they were used in playing the records furnished
  by claimant after the records had been placed
  upon a turntable. There was no effort on the part
  of the claimant to furnish an itemized statement
  of the albums furnished although at the pre-trial
  conference held in the office of the Referee the
  attorney for the Trustee had asked for such a
  statement.

"3.

    "It is undenied that no further shipment of
  albums was made by claimant to the bankrupt
  subsequent to the first shipment.

"4.

    "The Trustee introduced into evidence as
  Exhibit No. 1 an executed copy of a contract
  dated July 9, 1959, which also bears the contract
  number `WRW-BLO-59'; this contract having been
  signed by Modern Broadcasting, Inc. On Page 4
  thereof, the contract has a typed Addenda which
  reads in part as follows:
    "`This contract is contingent upon F.C.C.
    approval of change of ownership to Modern
    Broadcasting, Inc. (filed June 9, 1959, with
    approval expected momentarily) and is to become
    null and void unless this F.C.C. approval is
    granted on or before October 1, 1959.'
    "The Addenda also provides that the claimant
  was to loan the radio station three (3) RMC
  vertical assemblies at no cost except
  transportation; the station agreeing to return
  the assemblies at the expiration of the contract
  in accordance with the provisions thereof, and
  ...

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