In re Ambassador Hotel Corporation, 106.

• Decision Date: 07 January 1942
• Docket Number: No. 106.,106.
• Citation: 124 F.2d 435
• Parties: In re AMBASSADOR HOTEL CORPORATION.
• Court: U.S. Court of Appeals — Second Circuit

124 F.2d 435 (1942)

In re AMBASSADOR HOTEL CORPORATION.

No. 106.

Circuit Court of Appeals, Second Circuit.

January 7, 1942.

Rosenberg, Goldmark & Colin, of New York City (Milton M. Bergerman, Herman Jervis, and Joseph Cohen, all of New York City, of counsel), for appellants.

Gerdes & Montgomery, of New York City (John Gerdes, W. Randolph Montgomery, and Irving T. Bush, all of New York City, of counsel), for appellees.

Before L. HAND, SWAN and CHASE, Circuit Judges.

SWAN, Circuit Judge.

The facts are not in dispute. In proceedings instituted in 1934 for reorganization of Ambassador Hotel Corporation, debtor, the district court, by order dated August 1, 1935, confirmed a plan of reorganization pursuant to which the appellant, New York Ambassador, Inc., a new corporation organized under the laws of the State of New York, took over the debtor's hotel in New York City, and all stock of the new corporation was delivered to the appellants Roosevelt, Vought and Merriman as voting trustees under a voting trust agreement dated as of January 2, 1936, and having a term of ten years thereafter. By order dated January 17, 1936, the court approved in form and content said voting trust agreement, and reserved jurisdiction to determine any matters pertaining to the reorganization proceedings or to the consummation of the plan. On June 8, 1936 the so-called Streit Act was enacted. This statute, now known as Article 4-A of the Real Property Law of the State of New York, Consol. Laws, c. 50, provides in section 130-c(2) that "no agreement appointing trustees to vote the stock of any corporation formed or used under a plan of reorganization of property shall be valid for a longer term than five years" — except upon certain conditions which have not been met in the case at bar. Believing this statute to be applicable to the aforesaid voting trust agreement the appellee, Jesse Sharp, who had purchased voting trust certificates issued thereunder, made demand on April 4, 1941 that there be delivered to him the shares of stock represented by his voting trust certificates. This demand being refused, he brought an action in the state court for a judgment declaring said voting trust agreement to have terminated on January 2, 1941, and for other appropriate relief. The defendants in that action (the present appellants) moved to dismiss the complaint for lack of jurisdiction of the subject matter on the ground that any relief granted in said action would constitute an interference with the decree of the bankruptcy court. While disposition of this motion was held in abeyance by the state court justice, Sharp made application to the district court in the reorganization proceedings for permission to continue his state court action; and the appellants, by cross application, moved to enjoin its prosecution. These applications resulted in the order appealed from. It denied the appellants' application for an injunction and granted Sharp's application for a declaration (1) that the district court lacks jurisdiction to determine or enforce the rights asserted by him in his state court action, and (2) that determination by the state court of the issues raised in said action will involve no interference with the district court's decree confirming the plan of reorganization.

The appellants rely upon the principle, exemplified in Julian v. Central Trust Co., 193 U.S. 93, 24 S.Ct. 399, 48 L. Ed. 629, and Local Loan Co. v. Hunt, 292...