IN RE MILWAUKEE CORPORATION

• Decision Date: 29 November 1938
• Docket Number: No. 6476.,6476.
• Citation: 99 F.2d 686
• Parties: In re 1688 MILWAUKEE CORPORATION. LEVY et al. v. 1688 MILWAUKEE CORPORATION et al.
• Court: U.S. Court of Appeals — Seventh Circuit

99 F.2d 686 (1938)

In re 1688 MILWAUKEE CORPORATION LEVY et al. v. 1688 MILWAUKEE CORPORATION et al.

No. 6476.

Circuit Court of Appeals, Seventh Circuit.

October 20, 1938.

Rehearing Denied November 29, 1938.

S. B. Rosenzweig, of Chicago, Ill., for appellants.

I. E. Ferguson, Ben I. Greenebaum, Jr., Homer Kripke, and Donald J. DeWolfe, all of Chicago, Ill., for appellees.

Before EVANS, SPARKS, and MAJOR, Circuit Judges.

MAJOR, Circuit Judge.

This is an appeal from an order of November 8, 1937, confirming a proposed plan of reorganization under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207.

Richard Tennerstedt was the owner of certain real estate on which was located a gasoline station and garage. In May, 1933, a mortgage foreclosure was instituted in the State Court of Cook County upon the property in question in the amount of $30,000, and on March 18, 1937, a decree of foreclosure and sale was entered finding the debt due on said mortgage to be $39,007.97, together with interest and costs of suit in the amount of $1,315.55. The unpaid taxes, exclusive of penalties from the year 1928 to 1935 aggregated $5,200, which, together with interest and penalties to the date of the order appealed from amounted to practically $9,000. It will thus be seen that the total liens were approximately $50,000. The property was rented and according to appellant, produced a net income of $462 per year. Appellee, however, arrives at a figure of $600 per annum as the minimum net income. The property had an appraised value of $20,285, but $15,000 was the best offer obtainable. On June 15, 1937, the debtor herein was incorporated for the express purpose of seeking benefits provided by Section 77B.

The instant proceedings were filed on July 22, 1937 and title to the real estate conveyed to the recently organized corporation. At about the same time the plan of reorganization under attack was proposed. The plan provides that the debtor shall be authorized to issue 330 shares of common stock; three hundred shares (or 91%) to the First Mortgage Bondholders on the basis of one share of each $100 per par value of bonds and 30 shares or (9%) to Tennerstedt, the original debtor.

The accrued taxes, the expenses of the foreclosure proceedings and the reorganization are to be paid from a loan to be obtained by the reorganized corporation. The proposed plan was consented to by more than 66 2/3% of the First Mortgage Bondholders through a committee authorized to act. Appellants who objected to the proposed plan were owners of First Mortgage Bonds in the sum of $1,500.

While there are other assignments of error, there is only one necessary for us to consider and that is, was the plan feasible and filed in good faith? If this question is answered in the negative, it should not have been confirmed. The duty of the District Court in such a situation is discussed in Tennessee Publishing Company v. American National Bank et al., 299 U.S. 18, 57 S.Ct. 85, 81 L.Ed. 13, wherein it is said on page 22, 57 S.Ct. on page 87:

"Nor do we need to inquire as to the precise limits of the concept of `good faith' as required by section 77B 11 U.S.C.A. § 207. Whatever these limits may be, the statute clearly contemplates the submission of a plan of...