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In re Interstate Stores Inc.

decided: October 5, 1987.

IN RE INTERSTATE STORES, INC., FORMERLY KNOWN AS INTERSTATE DEPARTMENT STORES, INC., ET AL., DEBTORS. CAPITAL TRACING COMPANY, INC., PLAINTIFF-APPELLANT,
v.
INTERSTATE STORES, INC., DEFENDANT-APPELLEE



Appeal by Capital Tracing Company, Inc., from order of the United States District Court for the Southern District of New York, Miriam Goldman Cedarbaum, J., affirming order of the United States Bankruptcy Court for the Southern District of New York granting a motion for declaratory judgment that unclaimed shares of stock of a reorganized company remaining with the transfer agent beyond the bar date fixed in the final bankruptcy decree had reverted to the company. Affirmed.

Feinberg, Chief Judge, Pierce and Altimari, Circuit Judges.

Author: Feinberg

FEINBERG, Chief Judge

Capital Tracing Company, Inc. ("Capital") appeals from an order of the United States District Court for the Southern District of New York, Miriam Goldman Cedarbaum, J., affirming an order of the United States Bankruptcy Court for the Southern District of New York granting a motion by Interstate Stores, Inc. ("Interstate"), now known as Toys "R" Us, for declaratory judgment that unclaimed shares of Toys "R" Us stock remaining with the transfer agent beyond the bar date fixed in the final bankruptcy decree had reverted to Toys "R" Us. For the reasons indicated below, we affirm the district court's order.

Background

There is no dispute as to the basic facts of the case as stated by the district court. In 1974, Interstate and its various subsidiaries filed for reorganization under Chapter X of the Bankruptcy Act. A modified plan of reorganization (the "Plan") was confirmed by the bankruptcy court in March 1978. Under the Plan, each former Interstate General Unsecured Unsubordinated Creditor (a "General Creditor") was entitled to receive cash equal to 5.7 % of its claim and shares of stock in Toys "R" Us, the reorganized company, equal to 94.3 % of its claim on the basis of one share for each $10 of claim. Paragraph 15.8 of the Plan provided, however, that:

Any person who fails to collect any cash or securities within six years from the date such cash or securities is distributable to such person shall forfeit all rights thereto and the cash or securities shall be surrendered to the Reorganized Company.

Notice of confirmation of the Plan was mailed to the General Creditors and published in The New York Times and The Wall Street Journal.

Following confirmation of the Plan, Toys "R" Us commenced distribution, through its transfer agent, of the shares distributable to the General Creditors. The names of the General Creditors were printed on stock certificates which were mailed by the transfer agent to each General Creditor. Some of the certificates, however, were returned as undeliverable. The transfer agent maintained possession of the returned certificates in accounts identified by the names of the individual General Creditors.

On June 3, 1980, the final bankruptcy decree (the "Final Decree") was entered by the bankruptcy court. The Final Decree established a five-year bar date for claims on Toys "R" Us shares. Paragraph 3 of the Final Decree provided:

That all holders of allowed claims, other than holders of securities, shall release their claims, and the holders of securities shall present or surrender their securities within five (5) years after the date of entry of this final decree after which date no such claim or stock shall participate in the distribution under the Plan; the securities or cash remaining unclaimed at the expiration of the time herein fixed shall be deemed the property of the Reorganized Corporation, free and clear of any and all claims and interests.

The Final Decree provided for notice of the entry of the decree by mail and by publication in The New York Times.

Toys "R" Us declared several stock dividends in the period following the Final Decree and the transfer agent mailed the stock dividend certificates to the General Creditors. Again, a number of certificates were returned as undeliverable.

Beginning in 1984, appellant Capital, a company engaged in the business of finding unclaimed property, set tout to locate the General Creditors who had not yet received their stock certificates. Prior to the June 3, 1985 bar date, Capital obtained approximately 90,000 shares of Toys "R" Us stock on behalf of General Creditors. Subsequent to the bar date, Capital was able to obtain shares on behalf of Ford ...


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