In the Matter of Joseph S. And Joyce C. Pawling, Debtors. Jon W. And Patricia Brown and John E. Shepard v. William H. Hyer, Referee

These proceedings in bankruptcy relate to a petition filed on July 19, 1966, by the debtors, Joseph S. and Joyce C. Pawling, pursuant to section 422 of the Bankruptcy Act (Act), 11 U.S.C. § 822 (1964), for a real property arrangement under Chapter XII of the Act. The real property in question, consisting of fifty-five acres of land and various improvements, is known as Pawling’s Lakeside Inn.

Commencement of the proceeding was motivated both by the threatened foreclosure of the property by the Small Business Administration which held a deed of trust and a chattel mortgage to secure an indebtedness of $132,236.54, and by the prospect that, if given a reasonable opportunity, the Pawlings could sell the property for $700,000. The appellants in this court are three creditors of the Pawlings, John W. and Patricia Brown and John E. Shepard, referred to herein as the creditors.

For present purposes it is unnecessary to recount the proceedings which took place between the date of filing of the petition and July 13, 1967. On the latter date, and without prior notice to any creditor or other party, the referee in bankruptcy entered an order dismissing the proceedings. Notice of the entry…