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IN RE ALLIED OWNERS' CORP.

November 8, 1933

In re ALLIED OWNERS' CORPORATION


The opinion of the court was delivered by: BYERS

BYERS, District Judge.

This motion was argued on November 2, 1933, and the papers and briefs were received on the 6th at 4:30 p.m.

A review is sought of an order made by the Referee in Bankruptcy having this case in charge, dated October 26, 1933, in which he denied a motion to dismiss the petition of a creditor to remove William M. Greve as one of the trustees in bankruptcy herein.

 The motion was addressed to the sufficiency of the petition as a matter of law, and for present purposes, therefore, the material allegations must be treated as true.

 In substance they aver: That the said trustee is the president and a director of New York Investors, Inc., the parent corporation of the bankrupt, i.e., the owner of all of its stock; that he is a member of the loan committee of that corporation, which made loans to this bankrupt some of which are unpaid, i.e., that he is the president, etc., of a creditor of this bankrupt; that this bankrupt was organized by the parent company to build theatres, pursuant to an agreement between it and Paramount, etc., Corporation and Thompson-Starrett Co.; that this bankrupt has filed a claim in the sum of $6,000,000.00 as a creditor of said Paramount, etc., Corporation, now in bankruptcy, which sum was advanced to it by said New York Investors, Inc.; that such claim is sought to be defeated or diminished in that proceeding by a protective committee, one member of which is the partner of another member of the same loan committee of New York Investors, Inc., of which Mr. Greve is a member; that Mr. Greve received from "a secret special payroll account" of the New York Investors, Inc., during the five years ended in 1930, $494,977.16, in payment of services rendered to that company and its subsidiaries, of which the bankrupt is one.

 Finally, that the group of corporations comprising the said parent corporation and others including the bankrupt, were treated as one in the consolidated balance sheet of New York Investors, Inc., and that the latter guaranteed a $20,000,000.00 loan by the Reconstruction Finance Corporation to the Prudence Company, Inc. (one of the group) and pledged all of its stock in the various corporations so owned (including that of this bankrupt) to secure the payment of that loan.

 The objections to the legal sufficiency of the petition are five in number. The first four go to the petition, and the fifth is directed to the status of the petitioner, i.e., that "he is not a creditor entitling him to institute this proceeding, and no proof of claim has been filed by him or on his behalf."

 Paragraph Second of the petition alleges: "That your petitioner is a creditor of the above named bankrupt corporation."

 Like other averments in the petition, this must be deemed to be true for the purposes of this motion.

 It is natural to suppose that, if the matter were to proceed to a hearing on the merits, the petitioner's status would require determination in limine.

 The first two objections are such as would be appropriate to a demurrer, if that convenient vehicle of objection were presently available, namely, that the facts alleged do not constitute a cause for removal, and that their insufficiency is apparent as a matter of law.

 The third objection is that none of the facts arose subsequent to the appointment of the trustee. Manifestly there can be no such requirement, because antecedent incidents, unknown and perhaps unascertainable at the time of election, might well constitute sufficient reason for the Court or the Referee to exercise the duties imposed by Rule XIII of the General Orders in Bankruptcy of the Supreme Court.

 The fourth objection is that the matters comprised in the petition constitute issues which have been passed upon by Judge Moscowitz ...


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