In Re Elkins-Dell Manufacturing Company

JOSEPH S. LQRD, III, District Judge.

These cases involve a narrow but important question of bankruptcy law and administration: May and, if so, should a referee in bankruptcy refuse to enforce a security agreement between a creditor and the bankrupt which the referee finds unconscionable ?

I

The factual setting of both cases is similar. In Elkins-Dell, the bankrupt and Fidelity America Financial Corporation entered into a loan agreement in October, 1959. Fidelity was to advance money to the bankrupt against an assignment of accounts receivable. In January, 1960, an involuntary bankruptcy petition…