Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


December 6, 1944


The opinion of the court was delivered by: BRIGHT

BRIGHT, District Judge.

The interesting question presented is whether or not, under the circumstances shown in this proceeding conducted under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq., a plan of reorganization, which is essentially a liquidation and distribution pro rata to certain classes of creditors, is possible under the statutory provisions of that chapter.

These facts undisputedly appear. The debtor was the owner of a brewery and prior to the bankruptcy was engaged in the manufacture of beer and malt beverages. An involuntary petition was filed on January 8, 1943, and the present trustee was appointed receiver. On February 24, 1943, application was made under Chapter X, that application was approved as made in good faith, and the receiver was appointed as trustee. On May 13, 1943 an order was made authorizing the sale of the brewery property and all other assets, with the exception of accounts receivable, claims and choses in action for the sum of $100,000, subject to a mortgage of $75,000. On an appeal by one of the stockholders that order was affirmed, V. Loewer's Gambrinus Brewery Co., 2 Cir., 141 F.2d 747, and on August 10, 1944, the sale was consummated.

 The only assets of the debtor now remaining in the trustee's possession are cash in bank and whatever may be realized from the accounts receivable, claims and choses in action.

 The trustee has reported that, in his opinion, a plan of reorganization cannot be formulated and effected herein, and recommends that, pursuant to Sections 236 and 238 of Chapter X, an order be entered dismissing the reorganization proceeding and directing that bankruptcy be proceeded with.

 A number of creditors oppose, claiming that a plan is feasible, and that to direct the dismissal of this proceeding and its further conduct in straight bankruptcy would result in a double expense and consequent depletion of assets to the detriment of creditors.

 Patent Cereals, a creditor, presents a plan, concurred in by a number of other creditors, which in its essence, after reciting that its purpose is to expedite the administration of the estate and to avoid unnecessary duplication of expenses, proposes the following:

 I, a division of creditors and stockholders into eight classes -- (1) the United States for taxes, (2) the State of New York for unemployment franchise and other taxes, (3) the City of New York for sales and business taxes, (4) the State of New Jersey for possible beverage tax, (5) claims arising during the receivership and trusteeship, (6) unsecured creditors, (7) claims of former officers, directors and stockholders, and (8) stockholders.

 II, all assets of the debtor, which include cash, and whatever may be due from Newmont Factors, accounts receivable, and claims and choses in action, shall be reduced to cash.

 III, creditors in classes (1) to (5), inclusive, shall not be affected by the plan, and are to be paid in full. No provision is made for the stockholders in class (8), in view of the fact that the debtor is insolvent, and they need not file acceptances of the plan. Creditors in classes (6) and (7) shall share pro rata in the assets legally available for their payment, after satisfaction of administration, reorganization, operating, and wage claims.

 Sections IV and V provide for the determination of claims to which objections are filed, as well as the payment of administration and organization expenses; and VI to the approval, acceptance, confirmation and consummation of the plan, distribution of assets, and the binding effect upon the debtor and all others of whatever may be accomplished.

 Section 216 of Chapter X, Tile 11 U.S.C.A. § 616, in substance, provides that a plan of reorganization (1) shall include provisions altering or modifying rights of creditors and stockholders jointly "or some class of them" either through the issuance of new securities "or otherwise"; (2) may deal with all or any part of the property of the debtor; (3) shall provide for the payment of all costs and expenses of administration and allowances; (4) may provide for the rejection of any executory contracts except those in the public authority; (5) shall specify what claims are to be paid in cash in full; (6) shall specify the creditors or stockholders not to be affected by the plan; (7) shall provide, for the creditors affected by and who do not accept the plan, adequate protection for the realization of the value of their claims; (8) shall provide for stockholders who do not accept, "provided, however, That such protection shall not be required if the judge shall determine that the debtor is insolvent"; (9) shall provide for the retirement of any indebtedness created or extended under the plan; (10) shall provide adequate means for the execution of the plan which may include, among others, the sale of all or any part of the corporate property, and the distribution of all or any assets, or the proceeds derived from the sale thereof, among those having an interest therein; (11) shall include provisions with reference to the selection of directors, officers or voting trustees, if any; (12) shall provide for inclusion in the charter of the debtor of clauses with reference to stock, the privileges of the several classes of securities to be issued and the making of reports; (13) may include provisions for the settlement of claims and their retention and enforcement where not settled; and (14) may include other appropriate provisions not inconsistent with the other portions of the Chapter.

 The plan proposed by the creditors would seem to comply with subdivisions 1, 2, 3, 5, 6, 10, 13 and 14 above, except that no provision for a sale of any asset is included. The other provisions, in view of the fact that the debtor is insolvent and only priority and general creditors are to share in the liquidation, do not appear to be applicable or necessary.

 A plan of liquidation in a Chapter X proceeding was confirmed by Judge Leibell in Matter of Cenwest Corporation, Bankruptcy No. 80,504, and by Judge Campbell in Re Lorraine Castle Apartments Building Corporation, D.C., 53 F.Supp. 994-996. In each of those cases, however, the liquidation was to be preceded by a sale of the principal asset. There is no such sale proposed here, and no altering or modification of the rights of general creditors except a reduction pro rata to fit the amount of cash to be ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.