In the Matter of Tucson Yellow Cab Company, Inc., Debtor, Teamsters Local No. 310 v. Mary K. Ingrum

Mary K. Ingrum, the principal creditor of the bankrupt Tucson Yellow Cab Company, appeals from an order of the district court giving priority to severance pay to members of Teamsters Local No. 310. The bankruptcy court denied such priority. Finding a clear error of law, the district court reversed. The case has been ably and vigorously argued by both sides. Equitable considerations crowd against the established rules but do not prevail over the clear law. We affirm the district court.

1. Events. On September 1, 1978, Mary K. Ingrum lost the lower part of one leg in a collision between a taxicab and a motorcycle on which she was a passenger. She sued the taxi company for negligence and received a judgment of $437,016. The judgment was upheld. Ingrum v. Tucson Yellow Cab Co., 131 Ariz. 523 , 642 P.2d 868 (1981). The Arizona Supreme Court denied further review February 23, 1982. Because the company carried the bare minimum of insurance, Ingrurn received only $100,000 of her award, and the company on January 27, 1981 entered proceedings under Chapter 11 of the Bankruptcy Code.

As debtor-in-possession, the company continued to operate its business. A collective bargaining agreement…