In the Matter of Telemart Enterprises, Inc., Bankrupt. Alfred M. Lewis, Inc. v. Lawrence Holzman, Trustee

Telemart Enterprises, Inc., is a California corporation formed to engage in the sale and delivery of retail merchandise — primarily grocery goods — in re- spouse to telephone orders. Telemart opened for business on September 13, 1970, experienced immediate operational difficulties, and petitioned for a Chapter XI arrangement on September 29.

Alfred M. Lewis, Inc. (Lewis), sold frozen foods and groceries worth $61,587.43 on credit to Telemart. Lewis had delivered this merchandise throughout the period from August 27 to September 25. On September 30, having learned of Telemart’s Chapter XI petition, Lewis demanded return of the delivered goods pursuant to section 2-702(2) of the Uniform Commercial Code (Calif.Comm.Code § 2702(2)). The referee in bankruptcy denied Lewis’ petition for reclamation on the ground that Lewis had failed to prove that Telemart was insolvent at any time before September 29. The district court affirmed without opinion. Lewis appeals, claiming not only errors in the referee’s findings, but violations of his procedural rights before the bankruptcy court. We reverse and remand for a new hearing.

Statutory Lien

The trustee asserts at the outset that…