In re Frank Fehr Brewing Co.
| Decision Date | 16 June 1959 |
| Docket Number | No. 13876.,13876. |
| Citation | 268 F.2d 170 |
| Parties | In the Matter of FRANK FEHR BREWING CO., a Corporation, Debtor. Fehr KREMER, Appellant, v. Oldham CLARKE, Trustee, Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
COPYRIGHT MATERIAL OMITTED
Myron N. Krotinger, Cleveland, Ohio, Louis Lusky and Marvin H. Morse, Louisville, Ky., for appellant.
Oldham Clarke, Louisville, Ky., for trustee appellee.
Thomas G. Meeker, David Ferber, Washington, D. C., J. Kirk Windle, Chicago, Ill., for Securities and Exchange Commission.
Samuel L. Greenebaum, Louisville, Ky., for Kopmeyer Group.
Blakey Helm, Louisville, Ky., Edward Slovick, Chicago, Ill., John T. Ballantine, Louisville, Ky., for preferred stockholders.
J. Leonard Walker, U. S. Atty., Louisville, Ky., for United States.
James C. Paradise, Cincinnati, Ohio, for Union.
T. Kennedy Helm, Jr., Louisville, Ky., for creditors.
Charles W. Dobbins, Louisville, Ky., for general creditors committee.
C. E. Schindler, Louisville, Ky., for C. I. T. Corp.
Before MARTIN, Chief Judge, MILLER, Circuit Judge, and BROOKS, District Judge.
On August 13, 1957, the Frank Fehr Brewing Company, incorporated under the laws of Delaware, filed its voluntary petition in the United States District Court for corporate reorganization under the provisions of Chapter X of the Bankruptcy Act. Sec. 501 et seq., Title 11 U.S.C.A. The appellant Fehr Kremer is the President of the corporation and individually and as trustee owns the majority of the common stock. He appeals from an order of the District Court confirming a proposed plan of reorganization. The appellee, Oldham Clarke, was appointed Trustee on August 14, 1957. On September 30, 1957, he was authorized and directed to operate the business of the debtor until further order, which he has done. He seeks to have the order of confirmation affirmed.
On September 30, 1958, the Trustee tendered his report under Sec. 167 of the Act, Sec. 567, Title 11 U.S.C.A. The following facts stated in this report give some of the background of the case. The Frank Fehr Brewing Company and its predecessors have been engaged in the business of manufacturing, bottling and selling draft and package beer from its present location at 412 Fehr Avenue, Louisville, Kentucky, since 1872. The business was founded by Frank Fehr, a native of Germany, who operated the brewery until his death in 1891. After his death the business was carried on by his son, Frank Fehr, Jr. (known as Colonel Fehr), and later by his grandson Fehr Kremer, the present appellant. The present corporation was organized after the repeal of prohibition in 1933. It owns a modern plant which is in good repair and capable of producing 400,000 barrels of beer per annum. The one product, Fehr's XL Beer, is now generally regarded as excellent in taste and flavor, acceptable by consumers, and as good as any beer that is sold in this market area. It is a local or popular priced beer, with distribution largely restricted to cities in Kentucky and southern Indiana. The corporation has approximately 150 employees who are well experienced. The majority of the employees are unionized and their contract specifies a union shop.
The business of the corporation expanded from 1933 to 1940, although considerable difficulties were experienced due to inadequate working capital and inability to capture a sufficient share of the available market. From 1941 through 1949 the business enjoyed its prosperous years. In 1950 a consistent sales decline began, with the inevitable result of profits turning into losses. From 1949 to 1957 there was a sales decline from $9,223,000.00 to $2,987,000.00 and a profit before taxes of $1,224,000.00 in 1949 to a loss of $192,000.00 in 1957. The company has suffered substantial losses each year since 1952.
The record discloses that in 1955 the loss was approximately $571,000.00, although it is contended by appellant that this was the result of an involuntary temporary change of management and book-keeping entries which did not truly reflect the usual operation of the company. In 1957 the loss was approximately $189,000.00. In 1958 the loss was approximately $223,000.00. Trustee has been operating at a comparable substantial loss during his operation of the company. In the last six and one-third years losses have totaled approximately $1,722,000.00.
At the time of the filing of the petition herein on August 13, 1957, the debtor corporation had outstanding 379,917 shares of 6% preferred stock of a par value of $1.00 per share and 469,086 shares of common stock of a par value of $0.50 per share. There were approximately 1700 holders of preferred stock and approximately 180 holders of common stock. No dividends had been paid on the preferred stock since December, 1954. Unpaid dividends were cumulative. In the event of liquidation the preferred stock was entitled to receive the sum of $1.50 per share plus an amount equal to all unpaid cumulative dividends.
The Trustee recommended that the debtor corporation be reorganized if it could be done on a sound basis. The District Court entered an order that parties in interest be given until October 27, 1958, within which to submit to the Trustee suggestions and proposals for a plan of reorganization; and that prior to November 10, 1958, the Trustee report a plan of reorganization which he deemed to be fair and feasible, or a report of his reasons why a plan could not be perfected. At a hearing on November 10, 1958, the Trustee reported that he had no plan which he could recommend but that he expected to receive a proposed plan from a new group. The Court extended the time for submitting plans to December 1, 1958, and thereafter to December 26, 1958. On December 26, 1958, the Trustee submitted a proposed plan of reorganization, the details of which will be stated later, based upon an offer made by M. R. Kopmeyer and others, hereinafter referred to as the Kopmeyer Group. This group was composed of some seventeen businessmen in the Louisville area who offered to put $400,000.00 in new money into the reorganized company. The Trustee stated that this was the best plan which had been received by him and that it met the requirements of the statute. He recommended that the Court enter an order approving the plan and fix a time limit within which it could be accepted. The Court entered an order fixing January 13, 1959, for a hearing.
On January 13, 1959, there was an extended hearing with the introduction of proof dealing with the financial condition of the debtor and the valuation of its assets. The proposed plan was amended and as amended was approved by the Court by order of January 16, 1959. The order stated that the common stock of the corporation had no value, either on the basis of the value of corporate assets or on a fair capitalization of the estimated earning power of the reorganized corporation, and fixed February 17, 1959, as the last day on which creditors and preferred stockholders affected by the plan might accept the same in writing. Thereafter, the Trustee made his written report with respect to acceptances of the plan, as follows:
1. Preferred Stockholders. Acceptance of Plan
Of $379,917.00 outstanding .... $260,799.00
(Percentage accepting plan 68.6%)
(In number 1,132 of 1,703 owners)
2. Creditors. Acceptance of Plan
Of $299,442.09 due ............. $162,719.34
(In number 163 of 195 creditors)
The report requested confirmation of the plan.
On February 19, 1959, the Court entered an order which read in part as follows:
be designated as the time and place for a hearing on the application for confirmation.
At the hearing on March 17, 1959, evidence was introduced with respect to the current assets and current liabilities of the debtor as of January 31, 1959, and the amount and relative rank of claims against the debtor and Trustee as of January 31, 1959. After further amendments suggested by the Securities and Exchange Commission, which were agreed to by the Trustee, the Court entered its order of March 17, 1959, which overruled the objections of certain creditors and objections of certain preferred stockholders, and confirmed the plan. This order contained findings of the Court that the plan provided for all unsecured creditors adequate protection for the realization by them of the full value of their claims; that a sufficient number of preferred stockholders had filed their written acceptances of the plan; that as found in the order of January 26, 1959, the old common stock of the debtor was of no value; and that the plan was fair, equitable and feasible.
It appears from the record that by letter of October 23, 1958, Fehr Kremer's then counsel withdrew from further representation of him in this matter. It seems to be agreed that from October 23, 1958, until shortly before April 24, 1959, Fehr Kremer was without representation by counsel in this case although he attended and participated in the hearings and represented himself. He was not a lawyer. On April 24, 1959, Mr. Louis Lusky and Mr. Marvin H. Morse, two of his present counsel, made entry of appearance and statement of attorneys as counsel for Fehr Kremer, the appellant herein, under Sec. 210 of the Act. This statement stated that Fehr Kremer...
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