In re Brewster
| Decision Date | 29 May 1937 |
| Docket Number | No. 5570.,5570. |
| Citation | 20 F. Supp. 789 |
| Parties | In re BREWSTER et al. |
| Court | U.S. District Court — Western District of Louisiana |
Albert P. Garland and Harry V. Booth, both of Shreveport, La., for debtor.
Blanchard, Goldstein, Walker & O'Quin, of Shreveport, La., for creditor First Nat. Bank of Shreveport.
E. W. Browne, Conciliation Commissioner, of Shreveport, La., and C. T. Munholland, Supervising Conciliation Commissioner, of Monroe, La., for conciliation commissioner.
This is a proceeding under section 75 of the Bankruptcy Law, as amended, known as the farmers' bankruptcy section (11 U.S.C.A. § 203).
On October 22, 1935, a petition, praying that the debtors be allowed to offer a proposal for an extension or composition of their debts, was presented to and approved by the court as properly filed. The attached schedule showed assets valued by the debtors at $7,209 and debts aggregating $42,746.73, as follows:
Secured debts....................$26,824.69
Unsecured debts..................$11,922.04
Indorsements ....................$ 4,000.00
______________
Total $42,746.73
At the same time, it having been made to appear that certain property of the debtors was under seizure in the state court of Caddo parish, and about to be sold in foreclosure of mortgages thereon, it was ordered that those proceedings be stayed until the further orders of the court. The cause was then referred to the conciliation commissioner for Caddo parish. Hearing was had on January 16, 1936, at which the debtors "proposed to the creditors that they be granted an extension on their debts of three years, they to pay legal interest on the secured obligations at the end of the first and second years, from date, the entire debts with remaining interest to be payable three years from date, or on January 16, 1939."
The debtors were examined and it appeared that one of them, Curtis Brewster, had moved on and commenced farming one of the tracts, consisting of 70 acres, in 1927, and has continued to do so since that time; that W. O. Brewster had assisted in the farming of the same tract during the "past several years" except for two years, when he was employed by the city of Shreveport; and that Brew-Nell, Inc., was a "holding company" for the other two debtors.
Certain proofs of claims were filed and the hearing was adjourned until January 30, 1936, at which time the commissioner was to "consider confirmation of the extension"; but that this hearing was later postponed by consent until February 20, 1936. On the date last mentioned, sixty-three of the creditors, whose claims had been allowed, and aggregating $28,079, voted in favor of the extension, and the meeting was again adjourned until March 5, 1936, at the request of the First National Bank, largest secured creditor. On the last-mentioned date there was voted against the proposal claims of said bank amounting to $24,439.72. On March 16, 1936, the commissioner, having found that $28,029 in amount and a majority in number had voted in favor of the proposal, and only $24,459.72 had voted against it, entered an order in which he decreed that "the application to confirm said composition or extension proposal must be, and is hereby granted, and, accordingly said proposal is hereby confirmed."
Counsel for the First National Bank filed exceptions to the report, and at the same time asked that the cause be remanded to the commissioner. The court referred the matter to the supervising conciliation commissioner for this district, who held a hearing thereon at Shreveport, at which the parties appeared, testimony was taken and thereafter recommended that the case be remanded to the conciliation commissioner for Caddo parish. No objection having been made to this report, after the lapse of more than ten days and notice to the debtors, the entire case was reopened and remanded.
A hearing upon the remanded proceeding was had on October 5, 1936, at which the debtors amended their proposal by offering "to pay all unsecured creditors 5% interest on the principal amount of their claims within one year from the date on which the proposal is confirmed by the court, with interest at a like rate at the end of the second year, the entire claims to be paid in full at the end of the third year, with 5% interest thereon; and to pay the secured creditors 8% interest on the principal amounts of their claims at the end of one year; with like interest at the end of two years, and payment in full at the end of three years, with interest at the same rate." On the motion of the debtors the meeting was then adjourned until October 14, 1936, and on the latter date, some of the creditors not being ready to vote, it was again adjourned until October 27th.
On October 27, 1936, a vote was again taken, from which the commissioner found that a total of $28,598.12 voted against the proposal and only $21,467.76 voted in favor of it, which he found had been rejected by a majority of $7,130.36, and which was later increased to $9,716.38, he having failed to allow on the claims of the First National Bank 10 per cent. attorney's fees.
The debtors filed a motion to remand the matter to the supervising conciliation commissioner and that "he be instructed to order a hearing upon the facts alleged upon," and in the alternative, that it be referred back to the commissioner for Caddo parish, "with instructions, first, to serve copy of his report or reports of November 23rd and November 30th, 1936, upon petitioners; second, to permit petitioners to file such proceedings before him as they may be entitled to file under the provisions of subsection (s) of section 75 of the Bankruptcy Law 11 U.S.C.A. § 203(s) and procedure affecting this class of litigation; and, third, that he be instructed to permit your petitioners to file in particular such objection or objections to said report."
This petition recites the proceedings detailed hereinabove as to the first and second hearings before the commissioner for Caddo parish, as well as the reports filed by him; that petitioners had no notice of the decision of the commissioner until December 3, 1936; that they have never been furnished with a copy of the official report; that they have been deprived of due process of law and have been deprived of the benefits of subsection (s) of section 75 of the Bankruptcy Law, as amended, 11 U.S.C.A. § 203(s), by reason of the failure of the commissioner to have officially notified them or their attorneys of his action, and to have furnished them or their attorneys with a copy of the official report and recommendation, and that if remanded other creditors would vote in favor of their proposal sufficient to have it accepted. Further, that at the present time there is only one creditor out of almost sixty that will oppose petitioners' extension of time within which to pay their debts.
The debtors have also filed exceptions to the report, as follows: (1) The commissioner failed to notify the debtors of the filing of his report with the supervising conciliation commissioner; (2) that the supervising conciliation commissioner filed the report with the court without the debtors having had an opportunity to file such "objections, exceptions and pleas" as they would have done had it been served upon them or they been notified thereof; (3) that, at the second hearing before the commissioner for Caddo parish, the debtors objected to the allowance and voting of the claim of the First National Bank on the following grounds: That the notes forming the basis of its claim were payable to City Savings Bank & Trust Company, one of which had never been indorsed and the other had been indorsed over to Reconstruction Finance Corporation, and the First National Bank had not, and could not, show any lawful title in itself to said notes; that these objections were overruled by the commissioner and to which ruling the debtors' counsel had excepted and reserved their right to urge the matter before the court; (4) that the commissioner, in his amended report, had allowed attorneys' fees on the two notes representing the claims permitted to vote against the proposal.
The prayer of the pleading was that the exceptions be sustained, the report be rejected, and the cause again remanded to the commissioner, with instructions to rehear the matter and take a new vote of the creditors on the proposal.
The First National Bank and the Reconstruction Finance Corporation have appeared in a joint motion and moved to dismiss the entire proceeding on the ground that the petition for relief was not filed in good faith, was not feasible, and could not bring about rehabilitation for the debtors; that the total of the two claims of the First National Bank, as shown by the commissioner's report as of November 30, 1936, was $28,446.29; that the Reconstruction Finance Corporation had in August, 1935, instituted foreclosure proceedings against the debtors on notes for $2,508.05 and $17,500, respectively, which were held by it as collateral; that they were entitled to have the property seized and sold to discharge said indebtedness and to purchase the same in satisfaction thereof; that said proceedings were stopped by the original orders of this court, approving the petition of the debtors, since which time no payments have been made, and the First National Bank had been compelled to pay the taxes for several years; that the fair market value of the property has at all times during the present proceedings been less than the amount of the indebtedness due petitioners, and this difference has increased by the accumulation of interest and nonpayment of taxes by the debtors. Further, that petitioners had filed an offer in writing to "accept in full payment of the amount of the indebtedness due them the mortgaged property and to waive any deficiency judgment, if permitted to continue the foreclosures."
On the Motion to Remand.
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