Chicago Title & Trust Co. v. Fox Theatres Corporation

• Decision Date: 01 March 1960
• Citation: 182 F. Supp. 18
• Parties: CHICAGO TITLE & TRUST COMPANY, Complainant, v. FOX THEATRES CORPORATION, Defendant. Application of Kenneth STEINREICH and Leopold Porrino, as Trustees of Assets which were of Fox Theatres Corporation, and on behalf of beneficiaries of their Trust, comprising creditors and stockholders of Fox Theatres Corporation, now known respectively as Preferred Participants and Participants of said Trust, Petitioners, v. CHASE NATIONAL BANK OF CITY OF NEW YORK et al., Respondents.
• Court: U.S. District Court — Southern District of New York

182 F. Supp. 18

CHICAGO TITLE & TRUST COMPANY, Complainant, v. FOX THEATRES CORPORATION, Defendant.

Application of Kenneth STEINREICH and Leopold Porrino, as Trustees of Assets which were of Fox Theatres Corporation, and on behalf of beneficiaries of their Trust, comprising creditors and stockholders of Fox Theatres Corporation, now known respectively as Preferred Participants and Participants of said Trust, Petitioners, v. CHASE NATIONAL BANK OF CITY OF NEW YORK et al., Respondents.

United States District Court S. D. New York.

March 1, 1960.

COPYRIGHT MATERIAL OMITTED

Hirson & Bertini, New York City, for petitioners; Jay Leo Rothschild, David G. Haskins, Arnold A. Hackmyer, New York City, of counsel.

Robert Aronstein, New York City, for First Nat. Bank of Georgia, as Trustee, etc., a creditor.

Milbank, Tweed, Hope & Hadley, New York City, for respondents Chase Nat. Bank of City of New York and others, appearing specially for the purpose of making this motion; A. Donald MacKinnon, Janet P. Kane, New York City, of counsel.

Mudge, Stern, Baldwin & Todd, New York City, for respondents American Express Co., General Precision Equipment Corp. and National-Simplex-Bludworth, Inc.; Paul D. Miller, Leonard Garment, Bernard Nemtzow, New York City, of counsel.

Telsey & Lowenthal, New York City, for respondents Randforce Amusement Corp., Samuel Rinzler and Emanuel Frisch, as Executors under the Last Will and Testament of Louis Frisch, Deceased, and Rinfriss Corporation and Samuel Rinzler; Leon G. Telsey, New York City, of counsel.

Sherpick, Regan & Davis, New York City, for respondent Skouras Theatres Corp., appearing specially for the purpose of making this motion; William C. Woodson, New York City, of counsel.

FREDERICK van PELT BRYAN, District Judge.

This application is in the nature of a summary proceeding in an equity receivership commenced in this court in early 1932. It is before me on motions by various of the respondents to dismiss the petition on a variety of grounds.

The first objective of the proceeding is to vacate and set aside an order made in the equity receivership on November 17, 1933 by the late Martin Manton, then the Senior Circuit Judge of the Circuit Court of Appeals of this Circuit, sitting in the District Court. That order authorized the then equity receivers, William E. Atkinson and John F. Sherman, to make a settlement of claims against various of the respondents named in the petition, and others, for the recovery of assets alleged to have been unlawfully transferred from the defendant Fox Theatres Corporation prior to the receivership, said to amount to more than $20,000,00. Many of these claims were the subject of a plenary action brought by the receivers against Fox Film Corporation, certain of the respondents, and others, in the New York State courts.

Petitioners charge that the order of November 17, 1933 approving the settlement was "tainted with fraud and corruption" and that Judge Manton was corruptly induced to sign it to cover up extensive frauds which it is claimed that respondents had perpetrated upon Fox Theatres Corporation, its creditors and stockholders. Petitioners seek to have the order vacated and set aside and to have all steps and proceedings taken under it nullified. They also seek other far-reaching relief to which I will refer later.

Parties

On January 30, 1939 an order of Judge Manton was entered in this receivership confirming a plan proposed by the then equity receivers for the realization upon and liquidation of the assets of defendant Fox Theatres Corporation. The plan contemplated the creation of a trust to be administered and enforced by the Supreme Court, New York County, which was analogous in its functions to a corporation set up to realize upon and distribute the assets of a receivership estate. The realization plan was described by the court as one "which would terminate the equity receivership, but which contemplates continuous liquidation of the corporate assets".

Pursuant to the plan a deed of trust was executed as of February 24, 1939 for the benefit of the creditors and stockholders of defendant Fox Theatres. Trustees were duly designated by Judge Manton and the deed was duly filed with the County Clerk of New York County. All of the property and assets of the equity receivership and of Fox Theatres Corporation were transferred to and vested in the trustees under the deed of trust. Participating certificates were issued to the Fox creditors and stockholders entitled to share in the assets. Duly designated trustees have been carrying out the terms of the trust under the supervision of the New York Supreme Court ever since.

The petitioners in this proceeding are the present trustees under this deed of trust. They derive whatever status they may have to maintain the proceeding solely from their capacity as such trustees.

The more than thirty parties named in the petition as respondents include a banking corporation, eight other corporations, fifteen individuals, the erstwhile equity receiver in the Delaware Chancery Court of one of the corporations named, three persons named individually and as co-partners, and the executors of two decedents. A number of the respondents are the successors in interest of persons alleged to have participated in the transactions complained of.

The Relief Sought

The petition consists of fifty printed legal-sized pages containing ninety-seven separately numbered allegations, many of which are in turn sub-numbered. It is more than a little difficult to summarize its allegations. It is petitioners' theory that beginning in 1930 various of the named respondents, the predecessors in interest of other respondents, and many others named and unnamed, engaged in a vast and far-reaching conspiracy to milk Fox Theatres Corporation of assets worth many millions of dollars,' in derogation of the rights of its creditors and stockholders. The conspiracy is said to have culminated in this equity receivership and in the allegedly corrupt order of November 17, 1933 approving the settlement by the equity receivers of the claims to recover fraudulently transferred assets. It is claimed that the equity receivership was collusive, that the settlement made by the receivers was grossly and unconscionably inadquate and insufficient and that the order authorizing the settlement and its consummation was made as the result of the corruption of Judge Manton. Petitioners' counsel summarizes their position as follows:

"The conspiracy alleged was to denude Fox Theatres of its assets; to transfer them to the Respondents, and then, by a Court order authorizing the settlement, to regularize the despoliation."

In addition to vacating and setting aside the order of November 17, 1933 authorizing the settlement and its consummation the petition also seeks (1) a declaration that all "proceedings, transfers, releases, covenants not to sue, and other instruments and assurances of title", pursuant to or under the authority of such order, be declared void; (2) a decree requiring that the respondents, "their assignees and transferees" account to petitioners for "all properties, monies and other assets of Fox Theatres * * * received by them or on their behalf or for their account or coming into their possession, and to return, reassign, retransfer and redeliver same * * * or if same are no longer in their possession or susceptible of physical retransfer and redelivery * * *, then and in that event to pay to petitioners the fair monetary value thereof, together with the accumulations, profits and receipts therefrom"; (3) a judgment for "such sums, damages, profits, interest, costs, disbursements and counsel fees" as are appropriate; (4) a judgment that all the respondents are guilty of contempt of this court and providing punishment therefor; and (5) items of ancillary relief.

The Issues Now Before the Court

This proceeding was commenced by the service on various of the respondents of an order to show cause made on December 9, 1954 and the accompanying petition. Respondents Chase National Bank, Bender, Van Kleeck and Aumack, individually and as co-partners doing business as Bender & Co., American Express Company, General Precision Equipment Corporation, National-Simplex-Bludworth Corporation, Inc., Skouras Theatres Corporation, Randforce Amusement Corporation, Rinfriss Corporation, Samuel Rinzler, and the executors under the will of Louis Frisch, deceased, appeared specially for the purpose of moving to dismiss the portions of the petition and order to show cause which sought to set aside the settlement order of Judge Manton of November 17, 1933. After conference with Chief Judge Knox before whom all remaining matters in this receivership were then pending, a stipulation was entered into with the approval of the court, permitting the special appearance of these respondents for this limited purpose and reserving to them the right to answer the petition or to make other motions directed, among other things, (1) to the sufficiency of the petition generally, (2) the right of petitioners to proceed summarily rather than by plenary action, (3) the capacity of the petitioners to institute and maintain the proceeding, and (4) the jurisdiction of the court over the trust res. These respondents then made motions to dismiss the petition upon the grounds (1) that it failed to state facts upon which the order of November 17, 1933 could be set aside and declared void or facts showing that the order of any proceedings had pursuant thereto was the result of any fraud or misconduct on the part of officers of the court; (2) that the petition was barred by the time limitations of Rule 60(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A., since it was not made within a reasonable time and no facts were set forth justifying delay; (3) that petitioners were guilty of gross laches to the great prejudice of respondents; (4) as to some of the respondents that petitio...