In re Southern Land Title Corporation, 67-135.

Citation301 F. Supp. 379
Decision Date25 November 1968
Docket NumberNo. 67-135.,67-135.
PartiesIn the Matter of SOUTHERN LAND TITLE CORPORATION, Debtor, in Proceedings for the Reorganization of a Corporation.
CourtU.S. District Court — Eastern District of Louisiana




Cicero C. Sessions, Sessions, Fishman, Rosenson, Snellings & Boisfontaine, J. B. Kiefer, Graham & Graham, New Orleans, La., for Leonard R. Spangenberg, Jr., and other petitioning creditors.

James J. Morrison, New Orleans, La., for bankrupt debtor corp.

Jerry A. Brown, Monroe & Lemann, New Orleans, La., for National Bank of North America (formerly Meadow Brook National Bank).

Donald Zuber, Seale, Smith, Baine & Phelps, Baton Rouge, La., for National American Life Insurance Co.

Tom H. Matheny, Pittman & Matheny, Hammond, La., for Bowl-Opp, Inc. and American Machine & Foundry Co.

W. Ford Reese, Adams & Reese, Harold J. Zeringer, Jr., Zeringer & Zeringer, New Orleans, La., for Gulf South Realty Corporation and Leon Poirier.

Harry T. Howard, III, Chaffe, McCall, Phillips, Burke, Toler & Hopkins, New Orleans, La., for Dr. Francis E. LeJeune.

Clem H. Sehrt, Peter J. Butler, Sehrt, Boyle & Wheeler, New Orleans, La., for National American Bank of New Orleans and Bankers Union Life Insurance Company of Denver, Colorado.

Meyer L. Dresner, Dresner & Dresner, New Orleans, La., for H-Tide Realty Corp.

Moise S. Steeg, Jr., Rader Jackson, Steeg & Shushan, New Orleans, La., for Douglas L. Black and Estate, Inc.

Leo S. Roos, Roos & Roos, New Orleans, La., for Exchange National Bank of Chicago and Finger Contract Supply.

Joseph E. Friend, Dodge & Friend, New Orleans, La., for American Acceptance Corp.

J. Barnwell Phelps, Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for Albert A. List and Hibernia National Bank.

Frank L. Micholet, Bernard, Micholet & Cassisa, New Orleans, La., for Sun Life Assurance Company of Canada and Mrs. Virginia Raspanti Ajubita.

Clifton S. Carl, Garrett & Carl, New Orleans, La., for National Cash Register Co.

HEEBE, District Judge:

This matter came on for hearing on August 4, 5 and 8, 1967, pursuant to Section 144 of the Bankruptcy Act, 11 U.S.C. § 544. On October 16, 1967, we issued an order sustaining the involuntary petition for reorganization under § 144 and indicated that we would issue written reasons at a later date. We now issue the following opinion to serve as findings of fact and conclusions of law in this matter.

In order to properly understand the various issues involved, a rather detailed statement of the factual situation is necessary. Southern Land Title Corporation (Southern Land) is a Louisiana corporation domiciled in New Orleans, Louisiana, engaging in the business of developing real property, land, hotels, apartments, etc. It has engaged in such business directly and through corporate subsidiaries. These subsidiaries, all Louisiana corporations domiciled in New Orleans, are Puritan Oil & Gas of New England, Inc. (Puritan), Place Vendome, Inc. (Place Vendome), Sotan, Inc. (Sotan), Bourbon Kings Hotel Corporation (Bourbon Kings), Lakeview Properties, Inc. (Lakeview), and the Five Flags Building, Inc. (Five Flags). Southern Land and its subsidiaries own a large number of properties, most of which are located in and around the City of New Orleans. The dominant force behind Southern Land and its subsidiaries, as well as several other related corporations, is Sam Recile, a dynamic and aggressive real estate promoter. These corporate holdings have been referred to by divers sources as "Recile's Empire." Recile's top assistant in the acquisition and operation of real estate is Frank Spalitta, and their legal advice is chiefly rendered by the law firm of Henican, James & Cleveland, particularly C. Ellis Henican who, along with Recile, Spalitta and others, holds stock and various offices in the corporations.

Encountering difficulties with its creditors and being confronted with a number of foreclosure and other suits by some of its creditors, Southern Land filed a voluntary petition for its own corporate reorganization pursuant to Chapter X of the Bankruptcy Act on December 7, 1966, in this district. That petition, entitled "In the Matter of Southern Land Title Corporation, Debtor Corporation" and numbered Bankruptcy No. 66-1015, was allotted to Section F, Honorable Lansing L. Mitchell. Judge Mitchell never approved the petition but entered various stay orders, pursuant to his powers under § 113 of the Bankruptcy Act, 11 U.S.C. § 513, and appointed a temporary trustee for the debtor's property. A hearing on the approval of the petition was set for January 12, 1967. Prior to the hearing, counsel for the debtor corporation and the major secured and unsecured creditors entered into a stipulation which was dictated into the record and which generally provided for a twenty-day period in which the status quo of the debtor would be maintained with the understanding that if, during the twenty-day period, the debtor was unable to produce a commitment for financing, the proceeding would be dismissed with prejudice. In accordance with the stipulation, the hearing before Judge Mitchell was continued until February 3, 1967. No commitment for financing was obtained, and at the hearing on February 3, 1967, counsel for the debtor corporation and counsel for the creditors who filed the present petition for reorganization attempted to repudiate the stipulation. Considerable discussion ensued at the hearing concerning the validity of the stipulation. Without ruling on the validity of the stipulation, Judge Mitchell dismissed the voluntary petition for lack of good faith at the conclusion of the hearing on February 3, 1967.

Approximately an hour later, a group of ten creditors of Southern Land and its subsidiaries filed an involuntary petition for the reorganization of Southern Land and its six subsidiaries. That petition was allotted to us and was the initiation of the instant proceeding. Subsequent to the filing of that petition, on Sunday, February 5, 1967, counsel for Southern Land applied to the United States Court of Appeals for the Fifth Circuit for a Writ of Mandamus directed to Judge Mitchell, and the Honorable David W. Dyer of that court directed that Judge Mitchell vacate the order dismissing the proceedings and maintain in full force and effect all prior orders, including stay orders. The next day, in compliance with Judge Dyer's order, Judge Mitchell stayed the minute entry of dismissal, and ordered that all his previous orders remain in full force and effect.

Upon the filing of the instant petition, we contacted all counsel and arranged for an informal conference on Monday, February 6, 1967, intending to discuss the steps to be taken by this Court. At that conference, however, the chief topic of conversation was, of course, Judge Dyer's order, and it was generally agreed that, pending the outcome of Judge Mitchell's proceeding, this Court should take no action. However, on that same day, counsel for the petitioning creditors herein filed a Notice of Voluntary Dismissal Without Prejudice pursuant to F.R.Civ. P. 41(a) (1) (i) on the ground that Judge Dyer's order reinstated the proceedings in Judge Mitchell's court.1

The instant proceeding remained in limbo while the Fifth Circuit conducted the mandamus proceeding. On February 20, 1967, Judge Mitchell filed his findings of fact and conclusions of law. The Fifth Circuit heard oral argument on the petition for a mandamus on April 3, 1967, and on April 6, 1967, denied the application for the Writ of Mandamus and vacated and set aside Judge Dyer's order. Thereupon, Judge Mitchell proceeded to wind up the proceedings before him, and on April 26, 1967, entered a judgment of dismissal of the voluntary petition of Southern Land and dissolved all restraining orders and injunctions rendered in that proceeding.

Immediately upon the denial of the mandamus on April 6, 1967, counsel for the petitioning creditors in the instant proceeding moved to withdraw his Notice of Voluntary Dismissal Without Prejudice and his alternative Motion for Entry of Order of Voluntary Dismissal Without Prejudice on the ground that neither the Clerk of Court nor the Court had acted on either of the above motions and that there was no longer any impediment to the involuntary petition and the persistence of the present proceeding. We met with all counsel and decided to take no action as Judge Mitchell's stay orders were still in effect and thus no immediate action was necessary. Later, when Judge Mitchell entered judgment in his proceeding on April 26, 1967, and dissolved all stay orders, we met with all interested counsel that same evening to discuss the issues and problems raised in our proceeding. On that day Southern Land and its six subsidiaries filed an answer to the creditors' petition, admitting each allegation in the petition, except the exact amount of the creditors' claims, although admitting that they aggregated over $5,000, and joined in the prayer for reorganization. Early the next morning we entered an order permitting the withdrawal of the Notice of Voluntary Dismissal Without Prejudice and the Alternative Motion for Entry of Order of Voluntary Dismissal Without Prejudice. We then entered a so-called preliminary approval of the petition under § 141 of the Bankruptcy Act, 11 U.S. C. § 541, appointed a trustee for the debtor, and stayed all suits against the debtor and any of its six subsidiaries.

A deluge of motions was then filed by some fifteen creditors opposing reorganization.2 In essence, the various motions seeking dismissal of the entire proceeding urged that the petition herein was improperly filed under § 126 of the Bankruptcy Act for the reason that at the time it was filed the petition before Judge Mitchell was still pending and that principles of res judicata and estoppel should bar the petitioning creditors herein...

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    ...In re Marine Harbor Properties, 125 F.2d 296 (2d Cir. 1942); In re Lela & Co., Inc., 551 F.2d 399 (D.C.Cir. 1977); Southern Land Title Corp., 301 F.Supp. 379 (E.D.La.1969); Metropolitan Realty Corp., 433 F.2d 676 (5th Cir. The judge was authorized to confirm the plan of arrangement if: (3) ......
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