Before FRANK and MEDINA, Circuit Judges, and BRENNAN, District Judge.
1. In the light of Comstock v. Group of Institutional Investors, etc., 335 U.S. 211, 229, 68 S. Ct. 1454, 92 L. Ed. 1911, we think the strict rule of In re V. Loewer's Gambrinus Brewery Co., 2 Cir., 167 F.2d 318, cannot stand.*fn1
2. Judge Burke, however, rested his decision on the alternative ground that Gannett Co., Inc. - controlling the Berwin Paper Manufacturing Company - had pursued solely its own interests in its management of Berwin. The Referee, who heard and saw Williams while he testified, made no finding the that respect. Judge Burke did not see and hear Williams; but taking Williams' testimony as true, and coupling it with the stipulated facts, we think Judge Burke's finding is correct, and that it supports his decision.
In Comstock v. Group of Institutional Investors, etc., supra, the parent company dominated the subsidiary of which it owned from 58 to 83% during the period in question; in that period, the parent advanced funds to the subsidiary. The Court held that the parent must be allowed to share as a creditor of the subsidiary on a plane equal to the other creditors. In Comstock, however, there is a specific finding that the parent's management was beneficial to the subsidiary's creditors. Here we have the opposite facts. At the date of the acquisition of Berwin by Gannett, Berwin was in a position to pay all of its creditors, and is now no longer able to do so. Gannett argues that although, in retrospect, mistakes of management were made, they were business errors made in good faith. Assuming this to be true, the fact remains that the losses suffered by Berwin were suffered, not in an attempt by Gannett primarily to make the subsidiary a financially profitable proposition, but to turn it into a source of newsprint, of no interest to the other creditors - unless financially profitable - but of distinct interest to Gannett, whether or not financially profitable, because of Gannett's newsprint shortage. It is because of this factor, totally absent ...