Central States Life Ins. Co. v. Koplar Co.

• Decision Date: 05 February 1936
• Docket Number: No. 10381.,10381.
• Citation: Central States Life Ins. Co. v. Koplar Co., 80 F.2d 754 (8th Cir. 1936)
• Parties: CENTRAL STATES LIFE INS. CO. v. KOPLAR CO.
• Court: U.S. Court of Appeals — Eighth Circuit

80 F.2d 754 (1935)

CENTRAL STATES LIFE INS. CO. v. KOPLAR CO.

No. 10381.

Circuit Court of Appeals, Eighth Circuit.

December 17, 1935.

Rehearing Denied February 5, 1936.

R. H. McRoberts, of St. Louis, Mo. (Frank Y. Gladney, Jones, Hocker, Gladney & Jones, and Bryan, Williams, Cave & McPheeters, all of St. Louis, Mo., on the brief), for appellant.

B. L. Liberman, of St. Louis, Mo. (Robert Burnett, Henry H. Stern, and Burnett, Stern & Liberman, all of St. Louis, Mo., on the brief), for appellee.

Before GARDNER, WOODROUGH, and FARIS, Circuit Judges.

FARIS, Circuit Judge.

The controversy involved in this appeal arose out of a proceeding under section 77B of the Bankruptcy Act, Section 207, title 11, U.S.C.A. This section deals with the reorganization of business corporations, except such railroads as are dealt with under the provisions of section 205, title 11, U.S.C.A.

The appellee, the Koplar Company (hereinafter for brevity's sake called appellee, simply), is a corporation under the laws of the state of Delaware, duly licensed to do business in the state of Missouri, wherein at St. Louis it constructed (and now holds the title of record to certain parcels of land and the four certain buildings thereon, called in the instant record) the Park Plaza Hotel, the Congress Hotel, the Senate Apartments, and the Embassy Apartments. Other properties are likewise so held by appellee, but these cut only a negligible figure in the case, and so need no particular mention.

On June 29, 1934, appellee duly filed its amended voluntary petition as a corporate debtor under the provisions of section 77B, supra. No trustee was appointed, but the debtor remained in possession, pursuant to the provisions of subdivision (c) of section 77B, supra. This possession was constructively that of a trustee duly appointed by the court, and was actual, except as is hereinafter noted.

Thereafter, and on March 5, 1935, a plan and an amended plan of reorganization were filed by the debtor, and on the same day an order was entered classifying the creditors. A motion to modify the classification of creditors was filed by appellant, and this motion was pending when this appeal was taken.

Appellant, a life insurance company, organized as a corporation under the laws of the state of Missouri, on April 5, 1935, filed its intervening petition in this proceeding and in the bankruptcy court, in which it set up among other things that it is the owner of $3,070,000, par value of 6 per cent. gold bonds series A, out of a total issue of $3,100,000 par value of said series; that said bonds are secured by a deed of trust, executed by the debtor, which deed of trust also secures an issue of $550,000 par value 7 per cent. bonds of series B, junior in lien to series A; that said deed of trust was a lien on the land and buildings known as the Park Plaza Hotel, and the furniture, fixtures, and furnishings situate therein (the latter by virtue of a chattel deed of trust); that said series A bonds were and long had been in default; that the corporate trustee in said issues of bonds had refused to longer act as such and had resigned; that said properties embraced in the trust deed were subject to a second deed of trust securing an issue of $1,250,000, 7 per cent. bonds, of which $1,090,000 were outstanding; that the debtor does not have, and does not claim to have, any equity in said mortgaged property over and above the first and second mortgage indebtedness; that it is admitted by the plan of reorganization filed herein by the debtor that the holders of the second mortgage bonds have a claim against the debtor in excess of the value of their security; that the net operating income from the mortgaged properties is insufficient to make the payments required to be made on series A of said bonds; that lacking any equity in said mortgaged properties for the creditor, the properties are a burden upon the estate, and as a conclusion of law the proposed intervener, appellant herein, is entitled to have any deficit over and above the value of its security liquidated and allowed as a general claim.

It is further averred by appellant, also as a conclusion of law, that upon the facts set up in its intervening petition, it is entitled to have the amount of such deficit, over and above the value of the security held by it, determined by a sale of the mortgaged properties pursuant to the terms of the deed of trust which secures the bonds held by it, to the end that it may have established the sum due it as a general creditor.

Upon the above facts and others, which will be set forth in course of the discussion, if they shall become pertinent, appellant in its intervening petition prayed that it might be permitted to intervene, and therein for orders —

"First, your petitioner to appoint a Successor Corporate Trustee in accordance with the terms and provisions of said first mortgage deed of trust as supplemented by said chattel mortgage, if it shall elect to do so;

"Second, your petitioner, at its option, to either cause the said Successor Individual Trustee, and such Successor Corporate Trustee, to sell at public auction the aforesaid mortgaged property in accordance with the power of sale contained in said first mortgage deed of trust, as supplemented by said chattel mortgage, or to cause said Trustees to institute a proceeding or proceedings at law or in equity for the foreclosure of the lien of said first mortgage deed of trust, as supplemented by said chattel mortgage, or, after giving notice in writing to the said Trustee or Trustees as provided in said deed of trust, as supplemented by said chattel mortgage, to itself institute a proceeding at law or in equity for the foreclosure there of;

"Third, said Trustees or your petitioner to join as a party defendant in any suit at law or in equity which may be instituted for the foreclosure of the lien of said first deed of trust, in addition to all other necessary or proper parties, the debtor herein and any Trustee or Trustees of the debtor's estate who may be hereafter appointed by this Court in this proceeding, and any Trustee or Trustees in bankruptcy who may hereafter be appointed, as provided in section 44 of said General Bankruptcy Act of 1898, as Amended, if an order of liquidation shall hereafter be entered herein; and for such further order or orders as may be meet and proper in the premises."

The debtor, appellee herein, opposed the intervention, a hearing was had, and evidence heard which tended to prove that the debtor held the record title to six certain parcels of land on which valuable improvements existed. Four of these are those already mentioned. In addition, it held title to certain two residences on Lindell avenue in the city of St. Louis. It also owned all of the capital stock of a realty company, which had a contract to purchase, from a wholly owned subsidiary of appellant, some seven other apartment buildings. But this contract seems to cut no figure in this case, and so may be eliminated from the discussion.

The Park Plaza Hotel is called in the record a monumental structure, built in 1929, at a cost, including site, furniture, and fixtures, of $4,656,508, exclusive of architect's fees and commissions. It is encumbered by a first deed of trust in which one George Graham, substituted individual trustee, is now the only remaining trustee, the corporate trustee, having as already stated resigned, and no successor to it having been appointed. This deed of trust secures a bond issue in the sum of $3,070,000, of series A bonds as already said, all owned by appellant, of which said George Graham is president. All of series B bonds have been canceled of record. Series A bonds are further secured by a mortgage on the furniture and fixtures, as already indicated.

The above-named properties are also encumbered by a second deed of trust securing a further issue of bonds, of which $1,090,000 par value 7 per cent. bonds are outstanding.

All of the above bonds are in default, and Graham, as trustee in the deed of trust, is now, and since at least the 5th day of March, 1934, has been, in possession of the Park Plaza Hotel properties, pursuant to the following resolution of debtor's board of directors, to wit: "Resolved, that in order to save expense it is for the best interests of The Koplar Company to have George Graham as Successor Individual Trustee remain in sole possession of the Park Plaza property as Trustee under the first deed of trust of The Koplar Company dated February 1, 1930, without having a Corporate Trustee appointed under said deed of trust to take joint possession with him, and the officers of this corporation are hereby authorized and instructed to request the Central States Life Insurance Company not to appoint or apply for the appointment of a Successor Corporate Trustee under said deed of trust unless and until the Central States Life Insurance Company shall deem it necessary or advisable so to do."

The Congress and Senate properties are encumbered by a deed of trust, securing an issue of bonds, of which $1,795,000 par value 6½ per cent. bonds are outstanding. These bonds are also in default, and the trustees in the deed of trust are likewise in possession of the Congress and Senate properties.

The Embassy properties are encumbered by a deed of trust securing an issue of bonds of the par value of $544,000, and the trustees in the deed of trust are in possession.

The two residences above mentioned are encumbered by a mortgage in the sum of $85,000. In addition to the secured debts above set out, the debtor has claims against it in favor of general and unsecured creditors in the aggregate sum of about $200,000.

In the debtor's voluntary petition filed herein, it averred that it had a substantial equity in each of the above-mentioned properties. In its plan of reorganization, it deals alone specifically with the Embassy, and the Congress and Senate properties. It says as to the...