140 F.2d 363 (7th Cir. 1943), 8262, In re South State Street Bldg. Corp.

Docket Nº:8262, 8263.
Citation:140 F.2d 363
Case Date:December 15, 1943
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 363

140 F.2d 363 (7th Cir. 1943)




GOLD et al.



McINTEE et al.

Nos. 8262, 8263.

United States Court of Appeals, Seventh Circuit.

December 15, 1943

Rehearing Denied Feb. 17, 1944.

Page 364

Charles R. Johnston and Harold M. Keele, both of Chicago, Ill., for appellant.

Harold C, Woodward, Henry L. Kohn, Joseph Schwartz, John L. McInerney, Samuel B. Epstein, Louis M. Mantynband, Edward Johnston, Richard S. Folsom, Frank Righeimer, E. Douglas Schwantes, Lewis E. Pennish, Norman Crawford, Thomas B. Hart, Ben S. Warren, Jr., G, Gale Roberson, Claude A. Roth, Harry E. Smoot, Edward H. McDermott, I.E. Ferguson, Edward P. Morse, and George L. Siegel, all of Chicago, Ill., and John F. Davis, Milton V. Freeman and W. Victor Rodin, all of Philadelphia, Pa., for appellees.

Before EVANS, MAJOR, and MINTON, Circuit Judges.

MINTON, Circuit Judge.

Reka Goldberg Hofheimer, herein referred to as the appellant, is a stockholder in the Hump Hairpin Manufacturing Company, herein called Hump, which is a holding company that owns all the stock of Chain Store products Corporation, herein referred to as Chain. The latter owns all of the shares of beneficial interest and the debentures issued by Sol H. Goldberg Properties Trust, a common-law trust, herein referred to as the Trust; and this Trust owns all the stock in five building corporations.

Sol Goldberg, who died in 1940, was a brother of the appellant. In his lifetime he owned the controlling interest in all of the above enterprises. He also owned 198 out of 200 shares of the stock of the South State Street Building Corporation, herein referred to as the debtor, which constructed a building upon property on South State Street in Chicago, on which it held a lease from the Chicago School Board. Sol Goldberg was guarantor of the first mortgage bonds of the debtor. The debtor then leased this building to McCrory Stores Corp., herein called McCrory. McCrory went into reorganization in 1933, owing the debtor more than $237, 000 for back rent. A claim was filed in the McCrory bankruptcy proceedings for that amount of back rent, and, also, for the rental due for the remaining period of the lease subsequent to bankruptcy and subsequent to the surrender of the lease by the trustee in bankruptcy.

Sol Goldberg and Chain also had claims against McCrory. Goldberg caused the claim of the debtor and the claims of Chain and himself against McCrory to be sold to Heddon and Company for $250, 000 cash paid to the debtor, $385, 000 cash paid to Chain, and certain very valuable stock options which Goldberg and Chain divided equally between them. The claim of the debtor against McCrory was estimated to be worth $830, 000.

A petition in bankruptcy for the reorganization of the debtor was filed. October 17, 1938, and Ben Gold was appointed trustee. The trustee, being advised of the sale by Goldberg and Chain of the debtor's claim against McCrory, contended that the debtor had not received its fair share of the consideration paid for the sale of its claim against McCrory and threatened suit against Goldberg and Chain to recover $800, 000 which he deemed was due the debtor.

After Goldberg's death in 1940, his legal representatives and the officers of Chain, in order to settle and compromise the claim of the trustee of the debtor above mentioned,

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agreed to assume, on behalf of the estate of Goldberg and the Sol Goldberg Properties Trust, which Chain controlled, certain obligations in the plan of reorganization submitted for the debtor, Hump also assumed to pay certain expenses of the reorganization plan.

While plans for reorganization were being considered, the appellant filed suit in the District Court for the Northern District of Illinois, Eastern Division, based on diversity of citizenship, against: David McIntee, individually, as trustee under Sol H. Goldberg Properties Trust, and as Trustee under Goldberg Securities Trust; Irving Richard Green, individually, and as Trustee under Goldberg Securities Trust; Ruth K. Goldberg, individually, as Trustee under Sol H. Goldberg Properties Trust, and as executrix under the will of Sol H. Goldberg, deceased; Thomas H. Fisher, individually, and as executor under the will of Sol H. Goldberg, deceased; A. J. McKay; Theodor Langer; Sol H. Goldberg, Jr.; James K. Goldberg; June E. Goldberg; Edward W. Goldberg; The Hump Hairpin Manufacturing Company, a West Virginia corporation, and Chain Store products Corporation, a Delaware corporation.

The amended complaint is divided into two counts. In the first count, the appellant alleges that she is the record owner of 20 shares of preferred and 50 shares of common stock of Hump. She alleges facts and conclusions in the first count by which she claims to be the owner of 480 more shares of preferred and 1, 450 more shares of common of Hump. The amount which she owns of record and that which she claims to own equals one-third of the outstanding common and preferred stock of Hump. Without alleging that any of the shares of Hump was transferred by Sol Goldberg to any of the defendants, she alleges that if any of such shares was transferred, the transfer was without consideration and that she is still entitled to her stock and to an accounting therefor. There is no allegation that any of the defendants knew she claimed to be the owner of one-third interest in Hump.

In the second count, as a stockholder of record and alleged owner of other stock of Hump, the top holding company, the appellant seeks an injunction to prevent Hump, Chain, and the trustees of Sol Goldberg Properties Trust, a subsidiary of Chain, and all the other defendants,...

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