Kenneth Robert Frederick v. Kal W. Lines, Clarence Harris v. Kal W. Lines

Does title to a bankrupt wage earner’s accrued and unpaid vacation pay pass to the trustee in bankruptcy under section 70a(5) of the Bankruptcy Act ? We hold that it does not, disapproving the contrary views expressed in In re Cohen (N.D.Cal.1967) 276 F.Supp. 889 and In re Kuether (N.D.Cal.1962) 203 F.Supp. 223 .

The respective trustees of the bankrupt estates of appellants Frederick and Harris secured turnover orders from the referee directing that each of them pay over his vacation pay to the trustee at such future time as each received that pay. The district court affirmed the orders, and these appeals followed.

The facts in both cases were stipulated. The two bankrupts are California residents; each filed a voluntary bankruptcy petition; and each derives his support from wages. The differences between the two cases lie in the manner in which their respective employers handle vacations. Mr. Frederick’s employer, a large manufacturer, closes its plant for a week twice each year, once during the summer and again at year’s end. All employees are given a “vacation” with full pay during the plant closings. Employees cannot draw vacation pay until the plant closes unless the…