In re Albert-Harris, Inc.

• Decision Date: 15 February 1963
• Docket Number: No. 14806.,14806.
• Parties: In the Matter of ALBERT-HARRIS, INC., Bankrupt. MACHINERY TERMINALS, INC., et al., Appellants, v. Kent W. WOODWARD, Frank H. Harvey, Jr., and Jerome Holub, Trustees, Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

313 F.2d 447 (1963)

In the Matter of ALBERT-HARRIS, INC., Bankrupt.

MACHINERY TERMINALS, INC., et al., Appellants, v. Kent W. WOODWARD, Frank H. Harvey, Jr., and Jerome Holub, Trustees, Appellees.

No. 14806.

United States Court of Appeals Sixth Circuit.

February 15, 1963.

Saul L. Nadler, Cleveland, Ohio (Nadler & Neben, Cleveland, Ohio, on brief), for appellants.

Clair E. Whitmer, Akron, Ohio, for appellees.

Before CECIL, Chief Judge, and MILLER and O'SULLIVAN, Circuit Judges.

PER CURIAM.

The appellants herein seek a reversal of an order of the United States District Court for the Northern District of Ohio affirming an order of the Referee in Bankruptcy which authorized the compromise of creditors' claims in the bankrupt estate of Albert-Harris, Inc.

Sydney L. Albert and Edward J. Harris each owned fifty percent of the stock of the bankrupt corporation and the controversy involved here is largely one between them directly and through their various firms and assignees. There are ten appellants, seven of which are companies controlled by Albert. Their claims are substantial but unsecured. Harris has secured and priority claims against the assets held by the trustees in bankruptcy. In addition he owns or controls certain patent rights which Albert claims belong to the bankrupt estate.

At the time of the compromise there was pending some litigation involving the ownership of the patents claimed by Harris and the validity of the judgment liens of Harris and the Goodrite Tire Co., an Ohio corporation owned or controlled by Harris. The potential of this litigation constituted the only unliquidated assets of the bankrupt.

In essence the compromise terminated the litigation, settled Harris' judgment liens for less than their face value, required Harris to surrender his stock in Albert-Harris, Inc., made some distribution to other creditors and provided that fifteen percent of the income from the patents in question be paid to the trustees in bankruptcy or their assigns for credit on Albert's claims.

The three trustees approved the compromise and made application to the Referee for its acceptance. In appointing the trustees, the Referee permitted Albert and Harris each to suggest one and he named an independent lawyer as the third.

The Referee by order authorized the trustees to consummate the offer in compromise, in accordance with the application. The District Judge in his opinion found that the appellants had failed to show that the compromise was not in the best interests of the estate or that the Referee's findings of fact were clearly erroneous. He therefore affirmed the order of the Referee, authorizing and directing the trustees to compromise the disputes.

The substance of Albert's objection to the compromise is that he has not been permitted to carry on the pending litigation, particularly that pertaining to the patents, until it is finally terminated by adjudication.

The facts, the terms of the compromise offer, the objections of the appellants and the reasons for approval are fully set forth in the opinion of the Trial Judge and the Referee's Certificate of Petition and Review, reported at 213 F.Supp. 602.

Section 27 of the Bankruptcy Act (Section 50, Title 11, U.S.C.) provides, "The receiver or trustee may, with the approval of the court, compromise any controversy arising in the...