In re Electric Power & Light Corporation

• Decision Date: 09 August 1949
• Docket Number: No. 281,Docket 21374.,281
• Parties: In re ELECTRIC POWER & LIGHT CORPORATION et al.
• Court: U.S. Court of Appeals — Second Circuit

176 F.2d 687 (1949)

In re ELECTRIC POWER & LIGHT CORPORATION et al.

No. 281, Docket 21374.

United States Court of Appeals Second Circuit.

Argued June 14, 1949

Decided August 9, 1949.

Becker, Berman & Odell, New York City, and Burns, Blake & Rich, Boston, Mass. (Samuel Becker, New York City, and John F. Rich, Boston, Mass., of counsel), for appellants Johnson and Biewend.

Nathan B. Kogan, New York City (Samuel M. Koenigsberg and Victor Brudney, New York City, of counsel), for appellant Sincoff.

Israel Beckhardt, New York City, for appellant Liner.

Roger S. Foster, General Counsel, Harry G. Slater, Chief Counsel, Division of Public Utilities, Washington, D. C., and W. Victor Rodin, Philadelphia, Pa., and Marvin S. Fink, Washington, D. C., for appellee Securities & Exchange Commission.

Cahill, Gordon, Zachry & Reindel, New York City (Daniel James and Robert Krones, New York City, of counsel), for appellee Electric Power & Light Corporation.

Reid & Priest, New York City (James L. Boone and B. H. Dewey, Jr., New York City, of counsel), and Simpson, Thacher & Bartlett, New York City (John F. MacLane and Benjamin C. Milner, New York City, of counsel), for appellee Electric Bond & Share Company.

Before SWAN and CHASE, Circuit Judges, and SMITH, District Judge.

SWAN, Circuit Judge.

These are appeals from an order of the district court entered on April 22, 1949 which granted an application of the Securities and Exchange Commission, pursuant to sections 11(e) and 18(f) of the Public Utility Act of 1935, 15 U.S.C.A. §§ 79K(e), 79r(f), for enforcement of the Commission's order of March 7, 1949 approving a plan of dissolution of Electric Power & Light Corporation (hereafter called Electric). The appellants are two committees of Electric's common stockholders (hereafter referred to respectively as the Johnson committee and the Sincoff committee) and a holder of $7 preferred stock of Electric.

Electric, a Maine corporation organized in 1925, is a registered holding company and a subsidiary of Electric Bond and Share Company (hereafter called Bond and Share), which is also a registered holding company. The plan of dissolution is the culmination of proceedings originally instituted against Bond and Share, Electric and other companies in the Bond and Share system.¹ In August 1942 the Commission issued an order directing that a plan for Electric's dissolution be submitted.² After several unsuccessful attempts to formulate a feasible plan, on March 25, 1948 Electric filed with the Commission an amended plan of dissolution under § 11(e) of the Act. Public hearings thereon were held, in which various stockholder groups including the appellants appeared and participated, and on March 1, 1949, the Commission issued its Findings and Opinion, expressing its approval of the plan if certain modifications were made therein.³ Electric promptly filed the suggested amendments, and on March 7, 1949 the Commission entered its approval order. On the same date, in accordance with Electric's request, it filed in the district court its application for an enforcement order. The appellants and all other interested persons were given an opportunity to file objections and briefs in support thereof, and after oral argument Judge Clancy delivered his opinion approving the plan and granting the Commission's application. The order which these appeals bring before us was thereafter entered.⁴

A detailed description of the capital structure of Electric and of the plan of dissolution is given in the Findings and Opinion of the Commission (Release No. 8889). It is too long to be here repeated. In brief, the plan contains four interdependent parts: Part I provides for the formation of a new holding company, Middle South Utilities, Inc. (hereafter called Middle South), to which Electric will transfer its holdings in certain of its utility subsidiaries in exchange for common stock of Middle South; Part II provides for the settlement of all claims by Electric and its subsidiaries against Bond and Share and its subsidiaries for the sum of $2,200,000 to be paid to Electric by Bond and Share; Part III provides for the retirement of Electric's preferred stocks by distribution to the holders thereof of stated amounts of the common stock of Middle South and of United Gas Corporation, the remaining major subsidiary of Electric; Part IV provides for the distribution, following consummation of Parts I, II and III, of the remaining assets of Electric to its common stockholders and option warrant holders, and for the dissolution of Electric. The plan requires the consummation date for Parts I, II and III to be the same and to be fixed by Electric as soon as practicable after the entry of an order approving the plan by a court of competent jurisdiction. The consummation date for Part IV is to be fixed at a date not more than 60 days after the consummation date of the other parts.⁵

The appellants attack the plan on various grounds. The Johnson committee asserts that the court erred in approving the plan without giving it the independent consideration which the Act prescribes, and that the Commission erred in the following respects: (1) In its estimate of the long-range future earnings of Electric's assets; (2) in its allocation of the estimated future earnings as between Electric's preferred and common stockholders and as between common stockholders and warrant holders; (3) in approving the formation of Middle South; and (4) in approving a plan which fails to make adequate provision for the yielding up by Bond and Share of the profits of its misconduct. The Sincoff committee asserts that the court and the Commission erred in approving the compromise settlement set forth in Part II of the plan. Appellant Liner also directs her attack against the compromise settlement.

Before taking up the merits of these contentions, the motions of Electric and of Bond and Share to dismiss the appeal of appellant Liner demand consideration. The motions are based on the fact, presented by affidavit, that after entry of the enforcement order appealed from this appellant surrendered her preferred stock in Electric for exchange under the plan and thereafter received the securities to which the plan entitled her. The rule is well settled that a litigant who accepts the benefits of a judgment cannot attack it on appeal, unless that part of the judgment attacked is separable from the portion under which benefits were accepted. Allen v. Bank of Angelica, 2 Cir., 34 F.2d 658; Altman v. Shopping Center Building Co., 8 Cir., 82 F.2d 521, 527-528 and cases there cited; In re Denney, 7 Cir., 135 F.2d 184, 186, certiorari denied Denney v. Fort Recovery Banking Co., 320 U.S. 747, 64 S.Ct. 50, 88 L.Ed. 444. Although appellant Liner attacks only Part II of the plan, claiming that the settlement is so inadequate in amount as to be unfair and is illusory because more than one-half of the amount of the settlement is to revert to Bond and Share through the distribution of the stock of Middle South, the settlement of claims is an integral and non-separable part of the single plan under which she has voluntarily accepted benefits. Thereby she has estopped herself from urging that the court's enforcement order should be reversed. Her appeal is dismissed.

The first point urged on the appeal of the Johnson committee is that the district court, "misconceiving its duty, failed to appraise the plan and the Commission's findings with the care and independence which Congress prescribed, and thereby erroneously approved the plan and the findings." This contention is based upon the statement in Judge Clancy's opinion that he had not examined the record but relied upon the summary of the testimony contained in the Commission's opinion.⁶ There does not appear to have been any dispute as to the basic facts as summarized in the Commission's opinion. The appellants question the Commission's conclusions based on these facts as to values and relative interests and as to finding the plan fair and equitable and necessary to effectuate the provisions of § 11(b). In these circumstances we see no reason for the judge to examine the record to determine the evidential facts. The scope of the duty of review imposed on the district court in approving a plan filed under § 11(e) has been authoritatively expounded in Securities and Exchange Commission v. Central Illinois Securities Corporation, 69 S.Ct. 1377. We can discover no failure of the district court to fulfill its statutory duty as so construed by the Supreme Court.

Turning to the alleged errors committed by the Commission, it is urged that the Commission's determination of the foreseeable future earnings of Electric's subsidiaries is in violation of the standards of the Act and without support in the record. This contention is based on the premise that in estimating future earnings the Commission relied wholly on the 1948 budget estimates of earnings of the operating companies. This premise is false. In addition to the 1948 budget estimates, the Commission had before it the financial history of the companies for many years prior to 1948, the testimony of the companies' executives as to the rate of earnings expected to be realized after 1948 and their plans for expansion of the facilities of the operating companies during and after 1948, and the evidence submitted by a witness produced by the Johnson committee as to future earnings prospects. The Commission's opinion shows that all of this evidence was carefully considered and that in the light of all the available evidence it determined that the 1948 budget estimate "represents a reasonable approximation of the future earnings power of Middle South applicable to the capital presently invested in the business." There can be no definite formula for determining future earnings; all relevant factors must be considered. The appellants have not convinced us that the Commission failed to consider them, or that its...