In re 4145 Broadway Hotel Co., 6696

• Decision Date: 14 December 1938
• Docket Number: No. 6696,6733.,6696
• Parties: In re 4145 BROADWAY HOTEL CO. THOMAS v. ROSENTHAL et al.
• Court: U.S. Court of Appeals — Seventh Circuit

100 F.2d 7 (1938)

In re 4145 BROADWAY HOTEL CO.

THOMAS v. ROSENTHAL et al.

Nos. 6696, 6733.

Circuit Court of Appeals, Seventh Circuit.

October 25, 1938.

Rehearing Denied December 14, 1938.

Raymond A. Kinzie and Marcus A. Colberg, both of Chicago, Ill., for appellant.

Bernard Nath, Arthur M. Cox, and Isaac E. Ferguson, all of Chicago, Ill., for appellees.

Before EVANS, MAJOR, and TREANOR, Circuit Judges.

TREANOR, Circuit Judge.

This is an appeal from an order of the District Court enjoining the appellant, until further order of the court, from "mailing or sending any further communications to the holders of participating certificates of 4145 Broadway Hotel Company, and from soliciting or accepting any powers of attorney from such holders of participating certificates and from using or attempting to use any powers of attorney heretofore obtained by said F. Gerald Thomas from holders of such participating certificates."

The record discloses that the foregoing order was a consent decree. Ordinarily a party to a consent decree cannot question its validity on appeal, if the court had jurisdiction to enter the decree,¹ unless there are facts which nullify the consent. The following statement of facts discloses the situation under which the order was entered.

Reorganization proceedings for 4145 Broadway Hotel Company had been commenced in the District Court in August, 1934. A plan of reorganization was confirmed by the court on March 7, 1935. The plan provided that the capital stock of the reorganized corporation should be held in trust by three trustees to be nominated by the first mortgage bondholders' committee and to be confirmed by the court. The nominees were confirmed as trustees by court order of March 7, 1935. The form of the stock trust agreement was confirmed by the court on May 10, 1935. On July 26, 1935, the final report and account of the receiver was approved and the receiver discharged. By the same order the court allowed certain fees, and continued to September 16, 1935, the hearing on other applications for allowance of fees.

No final order has been entered in the reorganization proceedings and the transcript of record filed in this cause shows no further proceedings in the reorganization case until January 24, 1938, when F. Gerald Thomas, appellant in this cause, presented to the court a motion for leave to file a petition, which prayed that the court suspend its approval of the receiver's final report, that the court remove the present trustees or appoint new trustees under bond, and that the court require the application of certain funds to payment of past due taxes.

On April 1, 1938, an amended petition was substituted for the original petition, and leave to file the amended petition was denied on April 4, 1938. On April 15, 1938, appellant presented a second amended petition.

While appellant's motion for permission to file his second amended petition was pending appellant sent to all certificate holders a copy of a letter dated April 27, 1938, accompanied by a form of power of attorney. On May 5, 1938, the appellees in this cause filed a petition with the court praying for an order restraining appellant from sending any further communications to holders of participating certificates and from soliciting and accepting any powers of attorney from holders of certificates; and also prayed for a rule on appellant to show cause why he should not be held in contempt of court for sending such communications and soliciting proxies. The court entered a temporary restraining order as prayed for in the petition and ordered appellent to show cause why he should not be held in contempt of court for sending the communications referred to in the petition; and ordered a hearing to be held May 23, 1938.

During the hearing on May 23, the court denied permission to file the second amended petition. No appeal was prosecuted from this order; but it is clear from the discussion during the hearing that court and counsel assumed that the appellant in this cause proposed to appeal from the order denying permission to file the second amended petition. Also, it is clear from the remarks of the District Judge at the same hearing that his purpose in continuing the injunction in force was to restrain the defendant in that proceeding, appellant here, from sending out communications, or acting under powers of attorney already obtained, until the disposal of the contemplated appeal from his order denying permission to file the second amended petition.²

The District Judge's remarks at the hearing indicated that he was of the opinion that the communications had been sent out for the purpose of affecting the pending litigation and constituted an improper interference with the proceedings then pending; and he expressed his belief that the conduct in sending out communications was contemptuous. As a result of the discussion at this hearing respecting the injunction order it was agreed that a consent decree of injunction should be issued; and the judge indicated that the question of contempt would be dropped.

The gist of appellant's contention is that the District Court was without injunctive power to issue the order in question. The facts relied upon in support of the foregoing contention are chiefly that the plan of reorganization, including the trust agreement, had been approved by the District Court as a bankruptcy court more than three years before the issuance of the injunctive order, and that the property had been turned over to the corporation. It is true that the plan had been approved, but it was also true that no final order had been entered terminating and finally closing the reorganization cause. Furthermore, the order confirming the plan, including the trust agreement, expressly reserved jurisdiction over the trustees³ for the purpose of supervising the acts and doings of such trustees and for the purpose of protecting and safeguarding the rights of certificate holders. It is not necessary to consider what effect, if any, upon the foregoing reservation the entry of a final...