In Re Inland Gas Corporation

Decision Date27 January 1960
Docket Number13955.,No. 13911,13911
PartiesIn the Matters of INLAND GAS CORPORATION, Kentucky Fuel Gas Corporation, American Fuel & Power Company, Debtors.
CourtU.S. Court of Appeals — Sixth Circuit

Murray Seasongood and Robert P. Goldman, Cincinnati, Ohio, George Zolotar, New York City, Leo T. Wolford, Louisville, Ky., Charles Landrum, Jr., Lexington, Ky., for appellants Kern and others.

Thomas G. Meeker, Arthur Blasberg, Jr., David Ferber, Richard B. Pearl, Washington, D. C., Charles J. Odenweller, Jr., Cleveland, Ohio, for Securities and Exchange Commission.

Selden S. McNeer, Robert K. Emerson, Campbell, McNeer, Woods & Bafley, Huntington, W. Va., for Ben Williamson, Jr., trustee.

Edward S. Pinney, John F. Hunt, Jr., David Melamed, Cravath, Swaine & Moore, New York City, for Columbia Gas System, Inc.

Robert S. Spilman, Jr., Charleston, W. Va., for Allen Committee.

George W. Jaques of Milbank, Tweed, Hope & Hadley, New York City, for Vanston Committee.

Walter H. Brown, Jr., Kenneth J. Bialkin, New York City, and John L. Smith, Catlettsburg, Ky., for Committee for Holders of Kentucky Fuel Gas Corp. 6½ Debentures.

Before MARTIN, MILLER and CECIL, Circuit Judges.

MARTIN, Circuit Judge.

We would need go to fiction rather than to the case books to find an appropriate parallel to this prolonged litigation. See Jarndyce v. Jarndyce, reported in "Bleak House" by Charles Dickens. The controversy presented by the present appeals evolves from an equity receivership instituted in late 1930, followed by proceedings under section 77B of the Bankruptcy Act and finally by corporate reorganization proceedings under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq. The two separate appeals which bring the case to us again at this late date are from an order entered by the United States District Court confirming a plan of reorganization.

For an understanding of the history and background of the case in all phases, we refer to our previous decisions, as follows: In re Inland Gas Corporation Columbia Gas v. Lockhart 6 Cir., 1937, 91 F.2d 113; Hamilton Gas Co. v. Inland Gas Corporation (Piney Oil & Gas v. Inland Gas Corp.), 6 Cir., 1939, 102 F.2d 131; In re American Fuel & Power Co., 6 Cir., 1941, 122 F.2d 223; Columbia Gas & Electric Corporation v. United States, 6 Cir., 1945, 151 F.2d 461; Columbia Gas & Electric Corporation v. United States, 6 Cir., 1946, 153 F.2d 101; In re Inland Gas Corporation, 6 Cir., 1951, 187 F.2d 813; In re Inland Gas Corporation, 6 Cir., 1953, 208 F.2d 13; In re Inland Gas Corporation, 6 Cir., 1954, 211 F.2d 381; In re Inland Gas Corporation, 6 Cir., 1954, 217 F.2d 207; In re Inland Gas Corporation, 6 Cir., 1957, 241 F.2d 374; In re Inland Gas Corporation, 6 Cir., 1959, 262 F.2d 510. The first two above-listed opinions have no relevancy now.

Our opinion reported at 1945, 151 F.2d 461, discloses the historical background; and our last two opinions, entitled "In re Inland Gas Corporation", reported respectively in 1957, 241 F.2d 374 and in 1959, 262 F.2d 510 relate to, and we think control, the issues directly presented by the present appeals.

At the conclusion of our latest opinion (decided January 15, 1959), reported at 262 F.2d 510, certiorari denied April 27, 1959, Kern v. Columbia Gas System, 359 U.S. 979, 79 S.Ct. 979, 3 L.Ed.2d 928, we stated that United States District Judge Ford had appropriately applied our adjudication set out in 241 F.2d 374, with respect to post-bankruptcy interest and to all other issues before him. The appeals were accordingly dismissed and the judgment of the district court, confirming the plan of reorganization, was affirmed. In that portion of our opinion written by Judge Miller, in which the writer concurred, we held directly that post-bankruptcy interest should not be allowed the public holders of bonds and debentures of the Kentucky Gas and Fuel Corporation.

In proceedings in the United States District Court following remand, Paul Kern filed what he called "Alterations and Modifications" of the Plan of Reorganization which had been confirmed. Kern was not an original investor in the Kentucky bonds and debentures but began buying them in 1941 and continued to increase his holdings until he owned thirty-four percent of the outstanding issue of bonds and debentures. Throughout these lengthy proceedings, this speculator has filed six appeals from the district court's orders and judgments. At the conclusion of the hearing, the district judge announced his denial and rejection of the proposed petition for alterations and modifications and granted the petition of the Inland Gas Corporation for an order consummating the plan. The present appeals are from that order, which was entered on June 1, 1959.

We are of opinion that the United States District Court correctly and faithfully followed the mandate of this court. A comparison of the proposed alterations and modifications of the Plan of Reorganization with the Plan, which we have heretofore affirmed, clearly reveals that the alterations and modifications under consideration are not merely such, but in totality constitute an altogether new and different proposed plan of reorganization.

At the outset, the so-termed "Alterations and Modifications" entirely eliminate Article I, which discloses the directions of the district court to the Trustee as to the method of drawing the plan and states the principles upon which the reorganization is grounded. Indeed, nothing appears to be left of the confirmed Plan, except the partial description of the reorganization and history of the debtor. Many changes demonstrate that an entirely new plan is presented under the guise of "Alterations and Modifications." Notation should be made of the following important changes:

(1) The alteration suggested by Kern would forbid the Trustee of Inland Gas Corporation from paying claims and reorganization expenses and fees, and would impel the transfer of all physical properties and cash to the reorganized corporation which would assume the obligation of making such payments;

(2) Article V of the confirmed plan has eliminated therefrom the reorganization value of $10,538,800 upon which the plan is predicated;

(3) The classification of the creditors as set forth in Article VI is so changed that the public creditors of Kentucky, rather than those of Columbia, would receive all stock of the reorganized corporation;

(4) The capitalization of the reorganized corporation is completely changed from 500,000 authorized shares of common stock and a short-term unsecured bank loan not to exceed $4,000,000 to a wholly different capital structure. The proposed complex capital structure consists of $2,530,000 of Series "A" five-and-one-half percent bonds, due October 1, 1971; $470,000 of Series "B" five-and-one-half percent convertible bonds, due October 1, 1971; a $1,250,000 Series "C" five percent first mortgage note, due October 1, 1962; and new stock of the reorganized corporation to be issued in the amount of $4,765,160 par value.

The three above-listed series of new bonds and the mortgage note would be secured by a first-mortgage on all the debtor's properties and, presumably, would be purchased by the insurance companies and the banks named in the so-called "Alterations". New stock of the par value $3,265,160 would be issued to public holders of Kentucky bonds and debentures. There would be offered for sale on subscription rights to public holders of Kentucky bonds and debentures $694,650 par value of the new stock and $805,350 par value of that stock would presumably be sold to underwriters Dempsey & Company and Byllesby & Company who proposed, subject to specified conditions, to purchase at par all the new common stock which Kentucky creditors receive and desire to sell and all the new stock which Kentucky creditors would be entitled to purchase under the right to subscribe but did not desire to purchase;

(5) The proceeds from the sale of bonds and new stock, together with the cash balances of the Trustee, would be used to pay reorganization fees and other expenses and certain priority claims; to pay the American Fuel & Power Company notes with post-bankruptcy interest; to pay the secured claims of Columbia against Inland Gas Corporation, with post-bankruptcy interest; and to pay the unsecured claims of Columbia against Inland Gas Corporation without post-bankruptcy interest;

(6) Finally, the so-called "Alterations and Modifications" provide further that two insurance companies and a banking institution would supply the debt financing for which Kidder, Peabody and Company would be paid a fee of $45,000 for services. All the financing proposals, however, were made subject to contingencies. For example, the Home Life Insurance Company proposal letter states that the proposed financing by Kidder, Peabody and Company is in principle satisfactory to it, but that any binding commitment on its part would be subject to execution of a purchase agreement and indenture satisfactory to it and to its counsel. Moreover, the commitment of Dempsey & Company and Byllesby & Company to purchase at par all stock of the reorganized corporation which the public holders of Kentucky securities desired to sell or for which they refused to subscribe is hedged with a time limitation of August 31, 1959, which has already expired.

The statute with which the appellants contend the district court failed to comply is section 222 of the Bankruptcy Act 11 U.S.C.A. § 622, 52 Stat. 898: "A plan may be altered or modified, with the approval of the judge, after its submission for acceptance and before or after its confirmation if, in the opinion of the judge, the alteration or modification does not materially and adversely affect the interests of creditors or stockholders. If the judge finds that the proposed alteration or modification, filed with his approval, does materially and adversely affect the interests of creditors or...

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4 cases
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  • IN RE INLAND GAS CORPORATION, 14682.
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