Colorado Corp., Matter of

• Citation: 531 F.2d 463
• Decision Date: 20 February 1976
• Docket Number: No. 75--1062,75--1062
• Parties: In the Matter of The COLORADO CORPORATION, Bankrupt. IIT, an International Investment Trust, et al., Petitioners-Appellants, v. William C. LAM, Trustee in Bankruptcy of the Colorado Corporation, Bankrupt, Respondent-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 463

531 F.2d 463

In the Matter of The COLORADO CORPORATION, Bankrupt.

IIT, an International Investment Trust, et al., Petitioners-Appellants, v. William C. LAM, Trustee in Bankruptcy of the Colorado

Corporation, Bankrupt, Respondent-Appellee.

No. 75--1062.

United States Court of Appeals, Tenth Circuit.

Argued May 19, 1975.

Decided Feb. 20, 1976.

Neal J. Morse, New York City (Weinshienk, Miller, Goldburg & Borus, Denver, Colo., on the brief for IIT and Georges Baden, Jacques Delvaux and Ernest Lecuit as Liquidators of IIT; Forsyth, Decker, Murray & Broderick, New York City, and Charles W. Ennis, Denver, Colo., on the brief for Venture Fund (International) N.V., and Jacob A. Schiltkamp and C. G. Hartog as Trustees of Venture Fund (International) N.V.), for petitioners-appellants.

Robert D. Inman, Denver, Colo., for respondent-appellee William C. Lam, Trustee in Bankruptcy of The Colorado Corp., Bankrupt.

Robert J. Kapelke, Denver, Colo. (John S. Pfeiffer, Denver, Colo., on the brief), for intervenor Charles A. Baer, Trustee of King Resources Co.

Before HILL, HOLLOWAY and BARRETT, Circuit Judges.

HILL, Circuit Judge.

Appellant presents only one matter to this Court: the legality of the election of the trustee in bankruptcy for The Colorado Corporation, a bankrupt.

The claims which are involved in this dispute are ones held on behalf of IIT, an International Investment Trust (hereinafter IIT) and Venture Fund (International) N.V. (hereinafter Venture Fund). IIT and Venture Fund were part of the IOS complex which was taken over by Robert Vesco. The interrelationships of the IOS operations and the finer points of IOS' contacts with John King and his corporations, including the bankrupt, are not relevant to our present matter and are beyond the record. An involuntary petition in bankruptcy was filed against The Colorado Corporation on April 20, 1971. Venture Fund filed a claim totaling $9,900,000, and IIT filed a claim amounting to $12,450,000.

On December 18, 1973, IIT was declared to be in liquidation by a court of the Grand Duchy of Luxembourg. Georges Baden, Jacques Delvaux and Ernest Lecuit were appointed as liquidators and given authority to take all steps to recover IIT's assets anywhere in the world. On February 14, 1974, a Netherlands Antilles court declared Venture Fund to be in bankruptcy; on April 4, 1974, the same court dissolved Venture Fund. J. A. Schiltkamp and C. G. Hartog were appointed trustees to recover Venture Fund's assets.

Prior to these foreign liquidations, the SEC filed a suit in the United States District Court for the Southern District of New York against Vesco and forty-one other defendants including IIT and Venture Fund. Subsequently, very similar consent orders were entered in that action by Judge Charles Stewart on April 4, 1974 (IIT), and July 12, 1974 (Venture Fund). In the orders a Special Receiver, John K. Schemmer, was appointed to assist the liquidators and trustees in the recovery and realization of claims in the United States held by IIT and Venture Fund. The orders provided, inter alia, that the powers and duties of the liquidators and trustees were not limited by the special receiver's appointment. The orders stated that '(t)he basic responsibility for the recovery, realization, administration and liquidation of the assets of IIT (the Fund) is recognized to rest in the Liquidators (Trustees).'

At the first meeting of creditors of The Colorado Corporation on October 28, 1974, an appearance was entered by Joseph Borus and Neal Morse on behalf of IIT and its liquidators; Charles Ennis entered an appearance on behalf of Venture Fund's trustees. Mr. Lam, then the receiver and now the trustee, was nominated for trustee in bankruptcy by Mr. Pfeiffer, attorney for Charles A. Baer, Trustee of King Resources Company and International Resources, Inc. Mr. Davis was nominated for trustee in bankruptcy by an attorney representing Natural Resources, Inc., a creditor subsequently denied the right to vote based on the existence of an interest materially adverse to the estate. Pfeiffer objected to the rights of IIV and Venture Fund to vote their claims.

The objections were scattered but can be summarized as follows: (1) the persons before the court did not have authority to represent IIT and Venture Fund; (2) IIT and Venture Fund have no legal existence and hence no standing; and (3) the court should not give comity to the orders of the courts of Luxembourg and Netherlands Antilles because, inter alia, orders of the bankruptcy court in Colorado have not been recognized in Canada and the United Kingdom. To support these objections, Pfeiffer pointed to an order of Bankruptcy Referee Matsch (now district judge and hereinafter referred to as Judge Matsch), dated February 24, 1972. The relevant portion of that order is as follows:

The Colorado Corporation has challenged the capacity of IIT to intervene as any kind of a legal entity. While no particulars were alleged in its response, it is difficult to preceive (sic) what could have been alleged because counsel for this intervenor have themselves had apparent difficulty in describing their client as any kind of legal entity. They assert that IIT has sufficient standing to sue in this Court because trusts and unincorporated associations may do so under 1963 C.R.S. 76--1--6 and F.R.C.P. 17(b). That contention overlooks the fact that this Court has nothing in the record which can be identified as a recognizable entity or quasi entity. If a 'unit investment trust' has definite characteristics under some body of laws, those laws have not been brought to this Court's attention . . .. Accordingly, under the present proof, IIT, an International Investment Trust and IIT Management Company, S.A. are denied standing as intervening creditors in this proceeding.

Numerous oral representations were made by counsel on both sides to support their contentions. The documentary proof made available by attorneys for IIT's liquidators and Venture Fund's trustees included: (1) Venture Fund's proof of claim and powers of attorney; (2) IIT's proof of claim and power of attorney; (3) copies of the orders of the Netherlands Antilles court pertaining to Venture Fund; and (4) a copy of the consent order pertaining to IIT signed by Judge Stewart on April 4, 1974.

Based on this record, Bankruptcy Judge McGrath determined that IIT's and Venture Fund's claims would be provisionally disallowed and they, therefore, could not vote for the trustee. The election was held and Lam was elected by the single vote cast by the trustee for King Resources Company and International Resources, Inc. Both IIT and Venture Fund sought review in the district court. Judge Stewart was contacted concerning the matter and issued orders on October 29, 1974 (one day after the election). Those orders stated that pursuant to the April 4, 1974 (July 12, 1974) consent order, IIT and its liquidators (Venture Fund and its trustees) 'are authorized to participate fully in any federal or other bankruptcy . . . proceeding' and that IIT and the liquidators (Venture Fund and the trustees) 'have all rights and powers as creditor' including voting for trustees. Counsel for appellants also swore out three affidavits.

District Judge Finesilver heard oral arguments and held that Judge McGrath had not complied with the rule of specificity of findings of fact and conclusions of law. The case was remanded for Judge McGrath to prepare findings of fact and conclusions of law with specificity. Judge McGrath was to consider Judge Matsch's prior order, Judge Stewart's orders, and the appointments by the courts of Netherlands Antilles and Luxembourg. Judge Finesilver stated he did not envision any additional evidence would be presented; the remand order does not indicate, contrary to appellants' argument, that the first meeting was to be reconvened.

In his findings and conclusions following remand, Judge McGrath discussed the portion of Judge Matsch's order reprinted above. Judge McGrath said Judge Matsch had found it '. . . difficult to determine the type of legal entity IIT is, and denied standing to IIT as an intervening creditor in the involuntary proceedings.' In relation to Judge Stewart's April 4, 1974, order, Judge McGrath found the following:

(T)he United States District Court for the Southern District of New York appointed John K. Schemmer as a Special Receiver for the Liquidators of IIT. It allowed the said Receiver to collect the assets of IIT and to recover said assets of IIT in the United States. At paragraph 2 the Court stated: 'The Special Receiver shall function only with respect to any asset, claim or matter, or any aspect thereof, responsibility for the handling of which is delegated to him by the Liquidators . . .. The Special Receiver may request delegation of authority pursuant thereto from the Liquidators and failing a grant from them may make such a request to the Committee.' ¹ There is nothing which allows the Special Receiver of the Liquidators of IIT to vote a claim for the election of a Trustee.

Judge McGrath found that Judge Stewart's order of July 12, 1974, applying to Venture Fund appointed a special receiver in the same manner. He further refused to consider Judge Stewart's orders of October 29, 1974, which were entered after the first meeting of creditors had adjourned. Judge McGrath believed that Judge Stewart had given limited effect to the orders of the Luxembourg and Netherlands Antilles courts concerning IIT and Venture Fund.

On the issue of comity, Judge McGrath noted that the trustees of King Resources had been denied access to the Canadian courts because those courts refused to recognize the jurisdiction of our courts. Judge McGrath found that the Canadian government and its representatives played a large part in the orders of April 4, 1974, as to IIT and of July 12, 1974, as to Venture Fund. He further stated '(t)here is no allegation or proof that the...