
    In the Matter of PREMIER MILL CORPORATION, Debtor.
    No. 40559.
    United States District Court W. D. New York.
    April 24, 1956.
    
      Victor G. Mount, Seneca Falls, N. Y., trustee.
    John O. Henderson, U. S. Atty., Buffalo, N. Y., for the Government, Donald F. Potter, Asst. U. S. Atty., Rochester, N. Y., of counsel.
    Theodore C. Bonney, Waterloo, N Y., for Auburn Machine & Tool Co., Inc., and other creditors.
   BURKE, Chief Judge.

Under Section 197 of the Bankruptcy Act, 11 U.S.C.A. § 597, I determine on the evidence at the hearing held under that section, that the value of the land and chattels held as security for the mortgage debt is $85,000. The excess of the Government’s claim based on the mortgage debt, over and above $85,000, is hereby classified as an unsecured claim under Section 197. Therefore the question of the right to priority of the Government’s unsecured claim for the excess is presented for determination.

The loan was made under the authority of Section 302 of the Defense Production Act of 1950, 50 U.S.C.A.Appendix, § 2092. Under the authority conferred on the President by Section 304 (50 U.S.C. A.Appendix, § 2094) the Reconstruction Finance Corporation was directed and authorized by Executive Order, as an agency of the government, to make loans as authorized by Section 302. Accordingly, the loan was not one made under the corporation’s regular lending operations, and therefore is not governed by 15 U.S.C.A. § 603(a) as to priority. At the time of the filing of the petition for reorganization the claim was owned by the Secretary of the Treasury on behalf of the United States. It represented a debt due the United States and is entitled to the priority in this proceeding provided under Section 64, sub. a(5) of the Bankruptcy Act, 11 U.S.C.A. § 104, sub. a(5) by virtue of 31 U.S.C.A. § 191.

Since this determination may result in changes or modifications of the proposed plan, the question of confirming the plan should be deferred.  