329 F.Supp. 647 (W.D.Okl. 1971), BK-70-1008, In re Four Seasons Nursing Centers of America, Inc.

Docket Nº:BK-70-1008.
Citation:329 F.Supp. 647
Case Date:July 14, 1971
Court:United States District Courts, 10th Circuit, Western District of Oklahoma

Page 647

329 F.Supp. 647 (W.D.Okl. 1971)


No. BK-70-1008.

United States District Court, W.D. Oklahoma.

July 14, 1971

Page 648

Harold C. Heiss, Gen. Counsel, State of Ohio, Charles S. Rawlings and Richard B. Igo, Asst. Attys. Gen., Columbus, Ohio, for petitioner, State of Ohio.

Grant Guthrie, and Donald Dreyfus, Chicago, Ill., Attys. for Securities and Exchange Comm.

James R. Tolbert, III, Trustee, Loyd Benefield and Robert E. Manchester, Oklahoma City, Okl., Attys. for Four Seasons Nursing Centers of America, Inc., debtor corporation in Bankruptcy Chapter X Reorganization.

Arthur Matthews and Michael R. Klein, Washington, D.C., Attys. for Jack L. Clark, former president of the debtor corporation.


BOHANON, Chief Judge.

In this reorganization bankruptcy case under Chapter X, the State of Ohio has filed a claim or Petition for Reclamation for the sum of $4,000,000.

The petitioner hereinafter referred to as 'Ohio' claims preference right to the sum of $4,000,000 which it alleges is due it because of certain loans made by petitioner to Four Seasons Nursing Centers of America, Inc., the debtor corporation, on March 9, 1970, and March 23, 1970, upon unsecured promissory notes executed by the debtor corporation to the State of Ohio.

Petitioner asserts:

A. That the debtor corporation intentionally and fraudulently made material misrepresentations in order to procure the money from petitioner in that the debtor corporation overstated its sales and assets for the period ending December 31, 1969, in order to procure from National Credit Office, New York, a division of Dun & Bradstreet, a 'prime' rating on the debtor corporation's notes for commercial paper;

B. That the debtor corporation through its agents made false and misleading statements and furnished false and misleading information to National Credit Office concerning its financial condition;

C. That in reliance upon this false information, National Credit Office did issue the debtor corporation a prime rating for commercial paper and that the petitioner received this information from National Credit Office through Crofters, Inc;

D. That in reliance thereon the petitioner did lend to the debtor corporation the sum of $4,000,000 upon the debtor corporation's promissory notes; and

E. Petitioner also contends that the loan of $4,000,000 to the debtor corporation was in violation of a statute of the State of Ohio, was therefore void and that consequently the money should be returned to the Ohio State Treasurer.

Page 649

On March 9, 1970, the debtor corporation made, executed and delivered to petitioner two promissory notes, the first in the sum of $2,000,000 and the second in the sum of $1,000,000, and on March 23, 1970, issued a similar note to petitioner for $1,000,000, making a total of $4,000,000, each bearing interest at 9 1/2 percent.

Petitioner alleges that this money was loaned to the debtor corporation as a result of the fraudulent misrepresentations aforesaid and that but for said false misrepresentations petitioner would not have loaned the money, and the debtor corporation is a converter without title or right of possession and, therefore, the debtor corporation had no title to pass to the Trustee.

The Trustee has filed a general denial thus casting upon the petitioner the burden to prove the allegations of its Petition for Reclamation.

The Court has heard the testimony of witnesses sworn and examined in open court, has read carefully the voluminous testimony in deposition form by various witnesses and has carefully studied the pleadings and briefs filed by the parties, and from a careful study of the depositions, all papers, documents, briefs and arguments before the Court, the...

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