In re Flatbush Ave.-Nevins St. Corporation, 150.

• Decision Date: 08 January 1943
• Docket Number: No. 150.,150.
• Citation: 133 F.2d 760
• Parties: In re FLATBUSH AVE.-NEVINS ST. CORPORATION. Appeal of FARTHING et al.
• Court: U.S. Court of Appeals — Second Circuit

133 F.2d 760 (1943)

In re FLATBUSH AVE.-NEVINS ST. CORPORATION. Appeal of FARTHING et al.

No. 150.

Circuit Court of Appeals, Second Circuit.

January 8, 1943.

Garey, Desvernine & Garey, of New York City (Eugene L. Garey, William Helfer, William Francis Corson, and William J. Reinhart, Jr., all of New York City, of counsel), for petitioners-appellants.

Blecheisen & Whelan, of New York City (Edward A. Kole and Jacob Blecheisen, both of New York City, of counsel), for respondent-appellee.

Before AUGUSTUS N. HAND, CLARK, and FRANK, Circuit Judges.

FRANK, Circuit Judge.

A plan of reorganization under Chapter X of the Bankruptcy Act for the Flatbush Avenue-Nevins Street Corporation was approved by the United States District Court for the Southern District of New York on April 16, 1937. In an order of consummation of this reorganization plan, dated July 28, 1938, the court reserved "full right and jurisdiction to make from time to time such other and further orders in the proceedings as it may deem proper."

Pursuant to the plan of reorganization, the properties of the debtor were transferred to the Brooklyn Fox Corporation, which was organized for that purpose. All of the capital stock of this new corporation was deposited under a voting trust, dated July 30, 1937, which was approved by the court and was part of the reorganization plan. The unique character of the property, and the large number of small bondholders, were largely responsible for the formation of this voting trust which made possible the placing of the bondholders' property in the hands of an experienced management.

The voting trust agreement, which was of five years duration, was by its terms to be "automatically extended for a further five-year period upon the vote or written consent of the holders of certificates representing at least 51% of the stock then outstanding." Under § 130-c, subd. 2, of the Real Property Law of New York, Consol. Laws, c. 50, no voting trust is valid for a longer term than five years, "unless it has been submitted to and approved by the court and no trustees appointed by such agreement shall continue to act thereunder after the expiration of its term, unless and until a new or an extension agreement has been entered into and received the affirmative approval of the holders of at least fifty-one percentum of the stock."

Unless extended pursuant to its terms, the voting trust here would have expired on July 30, 1942. On June 10, 1942, the trustees solicited "consents" to the extension of the voting trust agreement from all holders of voting trust certificates. Meanwhile, on June 16, 1942, the appellee, a certificate-holder, served a request upon the trustees for a list of the certificate-holders. At a conference with the trustees' counsel on June 18, 1942, appellee refused to state why he sought the list. The trustees denied the appellee's request, and he thereupon instituted mandamus proceedings in the New York Supreme Court, and served an order on the trustees on June 23, 1942, requiring them to show cause why the list should not be furnished him. It was in the course of these proceedings, that the appellee for the first time revealed his purpose in seeking the list, and the trustees then consented on June 26, 1942, the return day of the motion, to the entry of an order directing that he be given access to the list.

On June 29, 1942, three days after that order was entered, the list was made available to the appellee. By this date, the trustees had received "consents" representing 27,149 shares out of a total of 56,500 shares outstanding, 51% of which would be 28,815.¹ The appellee, on July 30, 1942, had procured revocations representing 10,923 shares, but the trustees had already announced the extension of the voting trust agreement on July 1, 1942. Inasmuch as no revocations were received by the trustees prior to July 2, 1942, the trustees claimed that these came too late.

In the lower court, the voting trustees sought an order construing the provisions of the voting trust agreement in regard to its extension, approving the procedure by which the trustees had sought to effectuate such extension, and declaring the agreement extended for five years. The court below held that the voting trust agreement had not been legally extended and...