In re Barclay Park Corporation

• Decision Date: 07 June 1937
• Docket Number: No. 418.,418.
• Citation: 90 F.2d 595
• Parties: In re BARCLAY PARK CORPORATION. SWANSON v. BARCLAY PARK CORPORATION et al.
• Court: U.S. Court of Appeals — Second Circuit

90 F.2d 595 (1937)

In re BARCLAY PARK CORPORATION.

SWANSON v. BARCLAY PARK CORPORATION et al.

No. 418.

Circuit Court of Appeals, Second Circuit.

June 7, 1937.

Burnstine, Geist & Netter and Netter & Netter, all of New York City (George E. Netter, Isaac Katz, and Morris A. Marks, all of New York City, of counsel), for appellant Fred Swanson.

Simpson, Thacher & Bartlett, of New York City (Robert H. O'Brien, of New York City, of counsel), for debtor-appellee.

Sage, Gray, Todd & Sims, of New York City (Melber Chambers, of New York City, of counsel), for New York Trust Co. as trustee-appellee.

William A. Stern II, of New York City, for John T. Clarke and Lillie Vreeland, first mortgage bondholders, filing brief in objection to plan of reorganization, though not appealing.

Before MANTON, L. HAND, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

This is an appeal by the owner of $19,000 (at par value) first mortgage 6½ per cent. bonds of the Barclay Park Corporation from an order confirming a plan of reorganization proposed by it in a proceeding which it had instituted under section 77B of the Bankruptcy Act (11 U.S.C. A. § 207).

The mortgage securing the bonds was upon a lease from the New York State Realty & Terminal Company to the debtor under which, as of December 31, 1936, the latter had a total liability of $4,111,827.90 for rent, construction advances, and interest. Of this amount approximately $2,130,000 was in arrears at the above date. The bonds secured by the mortgage on the lease-hold amounted to $1,068,500 in addition to interest thereon which has been unpaid since December 1, 1931. The interest amounted to upwards of 32½ per cent. of the principal of the bonds. It also had outstanding an indebtedness of $194,000 upon which there was accrued interest of $18,570.14, running at the rate of 5½ per cent., secured by a chattel mortgage to Central Hanover Bank & Trust Company as trustee upon furniture belonging to a wholly owned subsidiary of the debtor. The debtor likewise had outstanding 7 per cent. unsecured debenture notes amounting to $1,125,000, upon which there was unpaid interest of $479,062.50. Besides these it had certain other unsecured creditors holding what are termed special claims, aggregating $53,900, and general claims, amounting to $27,000, and had outstanding stock consisting of 48,000 shares of common stock of no par value.

The business of the debtor was the operation of the Barclay Hotel on East Forty-Eighth street, New York City. The hotel was built on leased premises through advances made by the landlord to the debtor. These advances were to be repaid by the tenant with interest by means of annual amortizations. The debtor's assets, aside from the leasehold, consisted of the furniture already mentioned belonging to its subsidiary and said to have an estimated market value of $287,000, and a value in the hotel, while operated as a going concern, of about $400,000. This furniture was subject to the chattel mortgage we have referred to held by Central Hanover Bank & Trust Company as trustee to secure the balance of $194,000, with accrued interest at the rate of 5½ per cent. amounting to $18,570.14, making an aggregate of $212,570.14. In addition to this, the debtor had other furniture carried on the balance sheet at $81,562.06, and china, glassware, linen, and silver, carried at $56,970.14. Its remaining assets of cash in bank, accounts receivable, inventories, prepaid expenses, and deferred expenses appear on the balance sheet at approximately $225,000. It is entirely plain that the debtor is in a well-nigh desperate financial condition and that eviction by the landlord for nonpayment of rent would destroy even the slightest hope of rehabilitation.

The plan of reorganization offered by the debtor, and confirmed in the District Court, proposes to require the mortgage bondholders to surrender their bonds, cancel the mortgage, and to accept in lieu thereof first preferred stock of the debtor for three-fourths of the principal of their bonds and second preferred stock for the remaining one-fourth of the principal. They are to receive no securities for accrued and unpaid interest which is more than 32½ per cent. of their claims. The creditors who hold the chattel mortgage on the furniture are allowed to retain their lien. The unsecured creditors are allowed one-fourth of the principal of their claims in first preferred...