In the Matter of Shakesteers Coffee Shops, a Partnership Composed of Milton Kaffen John M. England, Trustee v. United States of America

The United States, the California Department of Benefit Payments, and the California Board of Equalization have appealed from the district court’s decision that funds deposited in a special tax account pursuant to an arrangement proceeding under Chapter XI of the Bankruptcy Act ( 11 U.S.C. § 701 et seq.) should be considered a general asset of the bankrupt’s estate and subject to costs and expenses of administration. Appellants contend that a trust fund in their favor was created by the arrangement court’s order. In light of United States v. Randall, 401 U.S. 513 , 91 S.Ct. 991 , 28 L.Ed.2d 273 (1971), and In re Tamasha Town and Country Club, 483 F.2d 1377 (9th Cir. 1973), we find appellants’ contentions to be without merit and affirm the decision below.

Shakesteers Coffee Shops, the debtor in these proceedings, petitioned for an arrangement under Chapter XI in January of 1971. Thereafter the arrangement court entered an order for payment of state and federal taxes, directing the debtor to segregate and hold apart from all other funds the taxes accruing on debtor’s business operations. The court required the debtor to open a special tax account and to make regular deposits…