In re Davis Mfg., Inc.

• Decision Date: 23 January 1951
• Docket Number: No. 94-B-2.,94-B-2.
• Citation: 95 F. Supp. 200
• Parties: In re DAVIS MFG., Inc.
• Court: U.S. District Court — District of Kansas

95 F. Supp. 200

In re DAVIS MFG., Inc.

No. 94-B-2.

United States District Court, D. Kansas.

January 23, 1951.

Fred Hinkle, Wichita, Kan., for Berry Bros., Inc., E. F. Houghton & Co., and Tubular Service Corporation.

Paul R. Kitch, Wichita, Kan., and Elmer B. Hodges, Kansas City, Mo., for Ellfeldt Machinery & Supply Co.

George Siefkin, Wichita, Kan., and F. D. Schnacke, Dayton, Ohio, for The Skyline Corporation (Reorganized Debtor).

MELLOTT, Chief Judge.

Plan of Reorganization of the above Debtor Corporation was duly confirmed by order of this court on January 23, 1950 and thereafter modified by order entered on or about March 10, 1950. Since the last mentioned date the Amended Plan, as confirmed and modified, has been in full force and effect and substantially carried out.

On April 20, 1950, Berry Brothers, Inc., of Detroit, a Michigan corporation, filed a "Petition to Set Aside Confirmation of Plan of Reorganization and for Other Relief," asking, inter alia, that an order be made: (a) assigning a time and place for the hearing of its petition; (b) setting aside the order of confirmation of the plan and opening the cause for consideration of petitioner's claim; and (c) permitting it to establish its claim in the sum of Seven Thousand Three Hundred Seventy-two and 46/100 Dollars as a claim against the assets of the debtor as reorganized and to subject the assets to the payment of twenty-five percent of the indebtedness (as provided in the amended Plan of Reorganization in connection with duly established, proven and allowed claims).

The motion came on for hearing at Wichita on May 11, 1950, the petitioning creditor appearing by its attorney, Fred Hinkle, Esq., and by E. H. Penberthy, and the reorganized corporation, The Skyline Corporation, appearing by its attorneys, George Siefkin and F. D. Schnacke. The motion was taken under advisement upon the evidence adduced and the parties were granted leave to file briefs within designated times.

While the motion was pending, counsel for the reorganized company, The Skyline Corporation, filed a motion to strike from the files the petition of Berry Brothers, Inc., above referred to, on the grounds:

(1) That it was filed without permission of court and without compliance with the requirements of Rule 24 of the Federal Rules;

(2) That even if the court has jurisdiction to hear and determine the petition, which it does not have, petitioner has not brought before the court all necessary parties required for an adjudication of the matter; and

(3) That the court is without jurisdiction to hear and determine the petition.

At the hearing before the court on May 11, 1950 — transcript of the hearing has not been filed — the representatives of the claimant failed to establish any equities in its favor, the evidence clearly indicating it had actual, as well as constructive, notice of all proceedings in the court, including the plan of reorganization and its rights thereunder; so the question evolving is purely one of law. It will be referred to in more detail later.

Prior to the filing of the petition and the hearing thereon, as above related, the reorganized corporation had filed its report with the court, showing compliance with the plan and that it, inter alia, had issued its stock, as provided in the plan, had deposited in a special account $265,000 for the benefit of "general unsecured creditors of the debtor whose claims had been filed, proven and allowed (and who under the provisions of the Plan were entitled to receive cash)" — petitioner being a general unsecured creditor which had not filed, proven and had its claim allowed in the time and manner required by the court's order — and that checks in the aggregate amount stated had been mailed to such creditors. The "First Report of The Skyline Corporation," filed April 18, 1950, is incorporated herein by reference. "Final Decree and Order Discharging the Trustee of the Debtor and Closing the Estate" — also incorporated herein by reference — was entered April 24, 1950.

On July 10, 1950, a verified "Petition to (1) Modify Order Approving Petition and Appointing Trustee; (2) Vacate Order Confirming Amended Plan of Reorganization and Directing Its Consummation; and (3) Vacate Final Decree, Order Discharging Trustee of Debtor and Closing the Estate," was filed by Ellfeldt Machinery & Supply Company. It states Four Thousand Five Hundred Eighty-two and 41/100 Dollars was due to it at the time the proceedings for reorganization of the Debtor were instituted; that no part has been paid; that there are no set-offs or counterclaims to the debt; and that the claimant does not hold, and has not had or received any security for the debt. No order of court was sought, or entered, permitting the filing of the petition and no hearing has been had thereon.

The essence of the contention made by Ellfeldt may be gleaned from Paragraph 3 of its petition. It is: that the court's orders, depriving petitioner and other general creditors similarly situated of "benefits and provisions of the plan to which they were entitled," because they failed to comply with the orders of the court with reference to filing, proving and having the claims allowed, are "invalid and should be set aside."

On July 15, 1950, a petition similar to those filed by Ellfeldt Machinery and Supply Company and Berry Brothers, Inc., was filed by E. F. Houghton & Company, the amount of its claim being Seven Hundred Ninety-five and 37/100 Dollars. This petition states that the issues are "substantially the same as those presented by * * * Berry Brothers * * * and that petitioner * * * consents * * it be consolidated with the Petition of Berry Brothers Inc. and that the decision and judicial determination of the issues * * * be decisive and conclusive of the issues presented in this petition." This petitioner filed a "Motion for Leave to Intervene."

Copies of all documents above referred to having been served upon Whitney Drake, the Trustee heretofore appointed by the Court, he, although long prior thereto Final Decree had been entered discharging him and closing the estate, filed an application with the court that he be authorized to employ and appoint an attorney "to represent him as Trustee in connection with" the petitions to which reference has been made.

On September 11, 1950, Tubular Service Corporation filed a petition similar to that filed by E. F. Houghton & Company, the amount of its claim being Two Thousand Four Hundred Eighty-seven and 34/100 ($2,487.34) Dollars. At the same time it filed a "Motion for Leave to Intervene," asking that it be permitted to "present to the court the issues represented in its petition." It likewise alleges that the issues are the same as those presented in the Berry Brothers petition and consents to disposition of them in the same language as set out above in the petition of E. F. Houghton & Company.

The reorganized debtor, The Skyline Corporation, has also filed a "Motion to Strike From Files the Intervening Petition of Ellfeldt Machinery and Supply Co." Briefs have now been filed by counsel representing all the parties, except the former trustee. His motion for authority to employ counsel has not heretofore been passed upon; but the court is of the opinion it need not be granted.

The court, of course, takes notice of the various orders made by it during the course of, and preceding, the reorganization of the corporate debtor and it would serve no useful purpose to summarize them. The court and its attaches, including the Referee in Bankruptcy, counsel for the petitioning creditors, the trustee appointed by the court and his counsel, strove diligently to comply with the letter and the spirit of all applicable statutes. The issue before the court is primarily whether it erred in failing to protect creditors who manifested no interest in the proceeding pending before it, but chose rather to ignore the various orders made for their protection. It is pointed up by quoting briefly from the statements made by counsel presently representing the petitioning creditors.

On behalf of Ellfeldt it is said: "On June 25, 1949, this court approved the petition for reorganization proceedings, appointed a trustee herein, and ordered that all creditors' claims should be filed on or before September 1, 1949, and unless so filed no such claimant could participate in any plan of reorganization or in the assets of the debtor. Although no proof of Ellfeldt's claim was filed with the court, the claim was nevertheless scheduled as a liability in these proceedings as a fixed claim, liquidated in amount and undisputed. On January 23, 1950, an amended plan of reorganization was confirmed and its consummation directed. In such amended plan, no provision was made for Ellfeldt's claim." (Its petition, as shown above, was filed July 10, 1950).

On behalf of Berry Brothers it is said: "We counsel did state in our petition that the Petitioner did not know of the proceedings in this cause and did not have notice and by reason of such misfortune did not file its claim. We now believe from the evidence and, as indicated above, so does the court that the Petitioner had in its file information sufficient to have informed it that important proceedings were being had in this cause and we make no effort to excuse the Petitioner or absolve it from doing in its own behalf any act it was commanded by the Acts of Congress to do in order to save its rights."

Since the other creditors rest their right to recover on the same basis, the court assumes they are in the same situation.

The petitioners place their sole reliance upon subparagraph (4) (b) of Title 11 U.S.C.A. § 624, which reads as follows:

"§ 624. Effect of confirmation

"Upon confirmation of a plan —

"(1) the plan and its provisions shall be binding upon the debtor, upon every other corporation issuing securities or acquiring property under the plan, and upon all creditors and stockholders, whether...