The opinion of the court was delivered by: BYERS
This is a motion for leave to intervene, made by the "Reorganization Committee of Lehrenkrauss Corporation," consisting of five individuals holding powers of attorney from preferred stockholders of the defendant and many of that class who have sought to rescind their several purchases of the preferred stock in the hope of thereby becoming creditors.
Holders of 10,700 of a total outstanding of 16,123 shares of preferred stock are said to have executed powers of attorney to this committee; and the petition recites that the committee is supported by attorneys representing other claimants and preferred stockholders to whom were issued 1,500 shares.
The pending cause was initiated by nonresident creditors who sought the aid of this court to preserve the assets of the corporation, and to cause the same to be administered in an equity receivership, the object of which was to prevent the waste of assets. The receivers were appointed on December 7, 1933, and have been active and industrious in the performance of their duties.
During the process of the administration several applications made by the receivers have been heard in open court on notice to the reorganization committee, and the attorneys for the latter have appeared in all such matters and given the court the benefit of their advice.
A petition for reorganization under section 77B of the Bankruptcy Act (11 USCA § 207) was filed June 11, 1934, and thereafter a supplemental petition was also filed, and the latter was brought on for hearing in open court on February 5, 1934, and that petition was filed by the said reorganization committee.
This petition recites that the latter committee desires to intervene in this proceeding as parties complainant for these reasons:
To have a proper and due legal standing in this receivership proceeding, and to receive notice of any major applications that may be made "affecting its rights."
In furtherance of the cooperation hitherto had between this committee and the receivers in working out the various problems "for the protection and enhancement of the interests of all claimants and stockholders."
Further, that "such intervention will be conducive to greater coordination of the efforts of this Committee and the sympathetic cooperation of the Receivers toward reorganization under a feasible plan, under 77B or otherwise."
Again: "That even in the event of an ultimate liquidation in this proceeding, such intervention, the petitioners are informed and believe, will be conducive to a smooth, orderly and efficient administration of the assets."
Intervention is regulated by Equity Rule 37 (28 USCA § 723), and a general observation concerning the appropriate circumstances under which it may be granted appears, for instance, in the case of Guaranty Trust Co. of New York v. Minneapolis & St. L.R. Co. (C.C.A.) 52 F.2d 418, at page 422, where it is said: "The right to intervene must be exercised in subordination to and in recognition of the propriety of the main proceeding. It is a matter of right only where the petitioner, not being already fairly represented, is asserting a right which would be lost or substantially affected if intervention were denied."
The subject is discussed in many cases, among which may be cited: Pennsylvania Steel Co. v. New York City Ry. Co. (C.C.) 181 F. 285; Whittaker v. Brictson Mfg. Co. (C.C.A.) 43 F.2d 485; Acme White Lead & Color Works v. Republic Motor Truck Co., Inc. (D.C.) 284 F. 580, 581.
In the last, the following appears in the opinion: "Where, however, as in the present case, it does not appear that the petitioner has a real, legal interest in the bubject-matter of the suit, nor that the receiver of this court, which is in possession of all of the property of the corporation involved, is improperly administering it, nor that petitioner, if claiming rights as a stockholder in said corporation, has unsuccessfully tried to obtain from the corporate officers and directors such relief as he desires, as required by Equity Rule 27 [28 USCA § 723], nor that it is ...