Combined Metals Reduction Co., Matter of
| Decision Date | 06 June 1977 |
| Docket Number | 73-2907,73-2330,73-3143,73-2155,74-1298,74-1606,72-2882,Nos. 72-2755,74-1776 and 74-2375,s. 72-2755 |
| Citation | 557 F.2d 179 |
| Parties | In the Matter of COMBINED METALS REDUCTION COMPANY, Debtor (ten cases). Irving BENNETT, Appellant, v. Paul GEMMILL, Trustee, Appellee (four cases). Irving BENNETT, Appellant, v. W. LaMonte ROBISON, Trustee, Appellee (four cases). Irving BENNETT, Appellant, v. Paul GEMMILL, Trustee, Jeremiah Milbank, and Milbank & Co., Appellees. Irving BENNETT, Entrada Industries, Inc. (Wasatch Chemical Division), Charles A. Steen, Individually, Charles A. Steen, as custodian for his sons and heirs, and Charles A. Steen on behalf of the Steen Foundation, Appellants, v. Paul GEMMILL, Trustee, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
D. Ray Owen, Jr., Salt Lake City, Utah, argued for appellant.
William G. Fowler, Salt Lake City, Utah, argued for appellees.
Appeal from the United States District Court for the District of Nevada.
Before BROWNING and TRASK, Circuit Judges, and SWEIGERT, * District Judge.
This proceeding is concerned with the financial frustrations of Combined Metals Reduction Company (CMRCO), a Utah corporation which was doing business principally in Utah and Nevada. Presently before us are ten separate appeals from orders of the District Court for the District of Nevada, regarding the reorganization of CMRCO pursuant to Chapter X of the Bankruptcy Act, 11 U.S.C. § 501 et seq.
CMRCO was organized October 5, 1923, as a Utah company with authorized capital stock of 4,000,000 shares. Currently, the corporation has 3,076,000 shares of common stock outstanding in the hands of 26 individuals. During most of its existence, CMRCO was principally engaged in the development of flotation processing for complex lead-zinc ores of the Pioche Mining District in the vicinity of Pioche, Nevada. By 1958 the company had acquired extensive mining properties in Nevada and Utah with a mill at Bauer, Utah with a capacity of 1,000 tons per day, and a mill at Caselton, Nevada with a capacity of 1,600 tons a day. More than 7,000,000 tons of ore had been milled through 1958, from which concentrate sales totaled $120,000,000 and net operating profit totaled $12,500,000. A drop in metal prices over a long period of time, together with a smelter strike which closed the smelters available to the venture, left the company with notes totaling $800,000 secured by mortgages and current liabilities exceeding current assets by over $130,000. A part of the operation was then shut down, but the portion remaining in operation failed to generate sufficient revenue to ease its financial burden. Creditors became aggressive and attachments of corporate assets resulted until June 25, 1968, when a receiver was appointed by the District Court for Nevada.
While CMRCO was in receivership, United States Smelting Refining & Mining At the beginning of the reorganization proceedings, CMRCO's books reflected assets having a book value of $2,525,574, and liabilities of $2,604,486, according to recitals in the amended reorganization plan proposed by the trustee in November 1972. However, the actual market value of CMRCO's assets was much higher. For example, the Caselton Mill had been fully depreciated on the books, but was estimated by the trustee to have an actual value of $2,500,000 as of November 1972. In March of 1973, the trustee estimated the fair market value of CMRCO's assets to be $5,408,250; according to the accountant, CMRCO's liabilities at that time totaled only $2,715,169. Thus, there is no question as to CMRCO's solvency; its only problem was an inability to meet current liabilities.
Company (subsequently renamed U.V. Industries) made secured loans to CMRCO, taking mortgages on the concentrating mills and on a resin plant in Bauer, Utah. Subsequently, U.V. Industries attempted to foreclose on the properties and in order to block the foreclosures, an involuntary Chapter X petition was filed on September 30, 1970. 1 Paul Gemmill, who was acting as equity receiver, continued in that capacity until the petition was approved on February 3, 1971, when he was appointed trustee and W. LaMonte Robison, a certified public accountant, was appointed to assist the trustee in accounting matters
The reorganization presently before us has proceeded in general accordance with the provisions of Chapter X. The district judge did not refer the matter to a bankruptcy judge, electing to retain control of the matter personally. 2 During the course of the Chapter X proceedings, several plans of reorganization were proposed by the trustee; however, the first three plans were either rejected by the creditors or withdrawn. On November 22, 1972, the trustee's fourth plan was submitted for the district court's approval, which was granted in an order dated and entered March 19, 1973. Basically, the plan provided for the orderly liquidation of an unspecified portion of the debtor's assets, in order to raise sufficient funds to pay all creditors in full, together with all allowable administrative expenses. The plan also set forth the priority of creditors, dividing them into six classes, and providing for their payment in strict accordance with that priority. The remaining assets were then to be turned over to the shareholders. Creditor and shareholder approval was solicited by the trustee. While a majority of the shareholders accepted the plan, two classes of creditors did not. Concluding that creditor acceptance from these two classes was unnecessary, due to the nature of the plan which provided for their payment in full, the district court confirmed the plan in an order signed June 4, 1973. (Appeal No. 73-2155, C.T. at 2379).
Prior to the court's confirmation of the plan, the trustee sought and obtained the court's permission to sell a certain parcel of real estate in Colorado. Pursuant to the court's order permitting the sale, the trustee sold the property. On the same day as the reorganization plan was confirmed, the district court also approved leases, options and sales respecting three additional parcels of real property. Subsequently, other transactions disposing of the debtor's property were approved or confirmed by the district court. In all cases, a noticed hearing was held prior to the court's approval and confirmation of the particular transaction, and in every case except one, the The procedural history of this case is rather complex as at least twenty appeals have been filed challenging the actions of the trustee since the initiation of the Chapter X proceedings. U.V. Industries and United States Fuel Company brought a number of separate appeals against the trustee (Paul Gemmill or his replacement, W. LaMonte Robison), as well as joining several of the appeals presently before us. Pursuant to a stipulation of voluntary dismissal, this court dismissed U.V. Industries and United States Fuel as co-parties with Irving Bennett (see infra ) to Appeals No. 73-2155, 73-2330, and 73-2907, and dismissed altogether Appeals No. 71-2176, 71-2220, 71-2221, 71-2992, 73-3144, 74-1303, 74-1304, and 74-1605, as to which U.V. Industries and United States Fuel were the only appellants.
trustee proceeded to dispose of the various properties in accord with the district court's orders. 3 The funds thereby obtained were disbursed to creditors or utilized for administrative expenses
Except for one party who has not filed briefs, the sole proponent of the ten appeals presently under consideration is Irving Bennett, a minor shareholder and creditor. 4 His appeals were argued to this panel on November 14, 1975; however, submission of the case was deferred pending disposition of a motion made by the trustee shortly before oral argument. The motion urged that eight of the appeals should be dismissed as moot. We have decided to resolve all of the issues involved in this case in one opinion. We will first dispose of the questions raised by the motion to dismiss, and will then reach the merits of the issues that remain viable, concluding with the two appeals unaffected by the trustee's motion.
The basis for the trustee's motion is that the trustee has taken irreversible steps pursuant to the district court's orders. Those steps consist of sales, leases, options and other transactions of similar character. Because of those actions, argues the trustee, this court cannot render any effective relief to the appellant even if the appeals were decided in his favor. In broad terms appellee's contentions of mootness seem to be well founded and must be considered. The appeals having to do with these property dispositions are as follows:
1) Appeal No. 72-2755, from an order entered June 29, 1972, approving the trustee's settlement of a claim filed by David L. Gemmill, brother of the trustee;
2) Appeal No. 73-2155, from orders entered June 5, 1973:
i. Confirming the amended plan of reorganization;
ii. Approving and confirming a lease and option of the Lone Mountain mining property in Eureka County, Nevada;
iii. Authorizing the trustee to sell a resin processing plant at Bauer, Utah;
iv. Authorizing an option agreement respecting the sale of iron manganese tailings at Caselton, Nevada;
3) Appeal No. 73-2330, from an order entered March 19, 1973, authorizing the sale of the debtor's interest in real property located in Gunnison County, Colorado (also known as the "Crested-Butte property");
4) Appeal No. 73-2907, from orders entered August 1, 1973:
i. Authorizing the trustee to sell various parcels of real property located in Lincoln County, Nevada; and
ii. Authorizing the trustee to sell real property located at Bauer, Utah 5) Appeal No. 73-3143, from an order entered August 29, 1973, approving and confirming a lease of the debtor's Caselton Mill facilities in Lincoln County, Nevada;
6) Appeal No. 74-1298, from orders entered October 24, 1973 and November 8, 1973...
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