In re FP Newport Corp., 25308.

• Decision Date: 12 November 1954
• Docket Number: No. 25308.,25308.
• Citation: 123 F. Supp. 95
• Court: U.S. District Court — Southern District of California
• Parties: In re F. P. NEWPORT CORP., Limited.

123 F. Supp. 95

In re F. P. NEWPORT CORP., Limited.

No. 25308.

United States District Court, S. D. California, Central Division.

July 6, 1954.

Appeal Dismissed November 12, 1954.

Bailie, Turner, Lake & Sprague, Norman A. Bailie, George Bouchard, Los Angeles, Cal., for trustee.

Lawrence M. Cahill, Los Angeles, Cal., for bankrupt and creditors D. Day and others.

Wm. H. Neblett, Los Angeles, Cal., for respondents R. T. and Robbie Colter.

Eugene Harpole, Sp. Asst. U. S. Atty., Bureau of Internal Revenue, Los Angeles, Cal., for creditor United States.

Edmund Nelson, Los Angeles, Cal., for creditor, Bank of America N. T. & S. A.

Appeal Dismissed November 12, 1954. See 216 F.2d 344.

YANKWICH, Chief Judge.

The bankrupt and certain unsecured creditors seek to review an Order of the Referee dated May 3, 1954, confirming a sale of all the assets of the bankrupt, except certain cash, to R. T. Colter and Robbie E. Colter, his wife, as joint tenants for the sum of $407,000. Involved were 25 pieces of real property and some personal property and interests in a leasehold, deed of trust and promissory notes. The estate has been in court for over nineteen years. It began as an involuntary proceeding filed on March 19, 1935. An adjudication was made on January 12, 1937. Throughout the proceedings, it has been the attitude of the bankrupt that, if given long enough time, its difficulties could be worked out.

This review must be considered in the light of this attitude and against the background of a "protracted" administration, —as the Judge who handled it for many years characterized it. For it was the contention of the bankrupt at the conclusion of the hearing before the Referee on the Petition to Sell that, at all times, matters could have been worked out differently. But the Referee correctly stated:

"A bankrupt case is a lot different than where the property is in private hands. If the man has property in his own hands not subject to legal process or creditors' claims, he can wait indefinitely. But a bankrupt estate can't. It is the creditors' funds and they are entitled to get paid sometime. The only question here is haven't we come to the end of the trail? How much longer are we going to put the creditors off, how much longer are they going to be put off before they get their money? If I had any evidence before me to show that you could within a reasonably short time — any definite evidence — get a better buyer, that would be an entirely different situation." (Page 586) (Emphasis added.)

Significantly, the two most recent acts in the bankruptcy proceeding, which occurred before the present Order of Sale, were opposed upon the same nebulous ground that, as the condition of the estate is improving, additional time might bring better results.

So we find that when there came before the Court the question of compromising a claim of Security First National Bank of Los Angeles, one of its largest creditors, the Court delayed confirmation from April 30, 1951, to October 2, 1951, in the hope that a better offer or a different solution would be found. To the Order confirming the Compromise, dated October 22, 1951, the Honorable Paul J. McCormick, a Judge of this court of long experience, who, despite retirement, undertook the laborious task of continuing to act in this case, appended a statement to this effect:

"It is to be observed that the court has since the submission of this review deferred decision for almost four months to accord all parties interested in this bankrupt estate to submit for consideration a plan or method that is more beneficial and equitable to the estate than the compromise under review. None such has been presented or offered." (Emphasis added.)

A similar situation arose when the Court was confronted with the review of an Order of the Referee, dated May 26, 1952, ordering liquidation. Bankruptcy Act, § 2, sub. a(7), 11 U.S.C.A. § 11, sub. a(7). Judge McCormick kept the matter under submission from July 24, 1952, to November 28, 1952. His Order confirming the Order of Liquidation, which has now become final, contained the following statement:

"Although thoroughly argued by the respective parties on the hearing and it appearing at that time to be warranted by the record and files of this protracted bankruptcy proceeding, it was believed by the Judge that if decision on the Referee's order of liquidation were deferred for a reasonable period, some other lawfully-authorized equitable method of settlement would be forthcoming and duly proposed. Such other proceeding now seems to be unavailable." (Emphasis added.)

The present sale goes back to an Order of the Referee, dated December 9, 1953. On review being taken from it, the Court returned the matter to the Referee on January 29, 1954, with direction that he hold further proceedings towards making the conditions of the sale more definite. His direction was that

"* * * counsel for Trustee, Norman Bailie, Esq. prepare, serve on other counsel, and present to the Court for approval and signature Order referring this matter to the Referee for the purposes of conducting a hearing and if possible obtaining a definite and positive and certain bid for the property; and if the present bidder desires to withdraw his deposit within ten days, he may do so, and if he does not, his bid may be considered when further proceedings are had before the referee." (Minute Order of January 19, 1954)

A formal Order was entered on February 9, 1954, which read:

"It Is Hereby Ordered: That the proceeding for the sale of the assets of said bankrupt estate before the Court on review of the Order of the Referee in Bankruptcy, signed and filed on December 9, 1953, be and it is hereby re-referred to the Honorable Hugh L. Dickson, Referee in Bankruptcy, for the purpose of conducting a further formal hearing in court pursuant to the Bankruptcy Act, and in such manner as his judgment and discretion shall warrant, and, if possible, obtaining a firm, definite, positive, certain bid for the property of the bankrupt estate." (Emphasis added.)

An amended and supplemental petition for authority to sell was filed on March 15, 1954. New notices were given. Objections were filed by the petitioners. Further proceedings were had, and, after bidding in open court, the property was sold to the Colters for the sum of $407,000. The hearing of objections before the Referee was extensive and the transcript covering 588 pages is before me. The Referee, on May 3, 1954, filed full Findings and confirmed the sale. In addition, the Referee set forth in a 37-page opinion the reasons why, in his opinion, the sale should be made in the particular manner and at the stated price. In it the objections of the bankrupt and certain unsecured creditors, who prosecute this review, are considered fully and answered.

We start with the accepted principle that even before the adoption of the Federal Rules of Civil Procedure and their application to bankruptcy, it was the law of this Circuit that the Findings of a Referee on conflicting evidence would not be disturbed. See, Weisstein Bros. & Survol v. Laugharn, 9 Cir., 1936, 84 F.2d 419, 420. The Federal Rules of Civil Procedure and the General Bankruptcy Orders, 11 U.S.C.A. following section 53, now provide that the Findings of a Referee shall not be overturned unless they are "clearly erroneous". Federal Rules of Civil Procedure, Rules 52 (a), 53(c) (2), 28 U.S.C.A.; General Bankruptcy Orders 36, 47; Diamond Laundry Corp. v. California Empl. Stab. Comm., 9 Cir., 1947, 162 F.2d 398, 401; Ashton v. Sentney, 9 Cir., 1944, 145 F.2d 719, 720; McInnes v. Publishers Service Co., 2 Cir., 1949, 174 F.2d 647, 648; Knetzer v. Larkin, 2 Cir., 1949, 178 F.2d 532, 534. And see the writer's opinion in Re Christ's Church of the Golden Rule, D.C.Cal.1948, 79 F.Supp. 42.

The chief grounds urged are that the sale is below the official appraisal, and that the Referee ordered the sale of all the estate in bulk rather than segregating the properties and selling them separately. The Referee heard evidence as to the present value of the property. And we know of no rule or practice that would warrant the Court in...