IN RE v. Loewer's Gambrinus Brewery Co., No. 188

CourtU.S. Court of Appeals — Second Circuit
Writing for the CourtL. HAND, SWAN and FRANK, Circuit
Citation167 F.2d 318
PartiesIn re V. LOEWER'S GAMBRINUS BREWERY CO. FLYNN v. LOEWER REALTY CO.
Docket NumberNo. 188,Docket 20891.
Decision Date31 March 1948

167 F.2d 318 (1948)

In re V. LOEWER'S GAMBRINUS BREWERY CO.
FLYNN
v.
LOEWER REALTY CO.

No. 188, Docket 20891.

Circuit Court of Appeals, Second Circuit.

March 31, 1948.


Finke & Jacobs, of New York City (Marcy Finke, of New York City, of counsel), for claimant-appellant.

Glass & Lynch, of New York City (Leslie Kirsch, Bernard Alpert and Sidney Freiberg, all of New York City, of counsel), for trustee-appellee.

Before L. HAND, SWAN and FRANK, Circuit Judges.

FRANK, Circuit Judge.

The opinion of the district court, reported in 74 F.Supp. 909, sets forth the Referee's findings and conclusions. Neither the Referee nor the Judge found fraud; nor did either of them find that the debt was a sham (although their opinions perhaps so imply). The Referee, however, explicitly found as a fact that, at all pertinent times to the date of bankruptcy, appellant, the Realty Company, and the bankrupt, the Brewery Company, had the same stockholders, officers and directors.

167 F.2d 319
We accept that finding as true, since, as the district judge stated (74 F.Supp. at 913), appellant, in its petition to review, did not except to, or question, any of the Referee's findings. There is some evidence, not printed in appellant's Appendix to its brief, that the stock in the two companies was not held in precisely the same proportions by the common stockholders. As, however, appellant made nothing of that fact below or in its brief in this court, the case must be treated as if the proportions were identical, and there is no need to consider whether and to what extent differences in such proportions would compel a different conclusion from that reached here

With identical stockholders, we may regard the situation as if there had been no Realty Company and as if the Brewery Company were indebted directly to its stockholders. The question here thus boils down to this: If stockholders, acting in concert, make loans to their corporation in amounts directly proportionate to their stockholdings, may they assert unsubordinated claims, for such loans, against their corporation when it becomes bankrupt? In the light of recent Supreme Court decisions,1 the answer would seem to be No. The test does "not turn on the existence or non-existence of the debt" nor on the existence of an "instrumentality" or the like; the test is whether the failure to subordinate will "work injustice," will not "be fair and equitable to other creditors," will result "in the violation of rules of fair play and good conscience."2 If that test be applied to a case where stockholders deal with their corporation in the manner above described, it would seem that the potential injustice to other creditors is so great as to require subordination. For, in such circumstances, unfairness can easily occur and yet be so easily concealed that no scrutiny by the bankruptcy court, however rigid, will uncover it; accordingly, merely to put on the stockholders a heavy burden of proof as to fairness would be insufficient; therefore, as a matter of public policy the stockholders will not be heard to deny unfairness.

Up to this point the case has been approached as if there were...

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26 practice notes
  • Tigrett v. Pointer, No. 19601
    • United States
    • Texas Court of Civil Appeals
    • 29 Diciembre 1978
    ...to those of other creditors in a division of corporate assets. Pepper v. Litton, supra; In re U. Loewer's Gambrinus Brewery Co., 167 F.2d 318 (2d Cir. 1948); Boyum v. Johnson, 127 F.2d 491, 494 (8th Cir. 1942); S. G. V. Co. v. S. G. V. Co., 264 Pa. 265, 107 A. 721, 722 (1919); Dix, Supra, a......
  • Kraft Foods Company v. Commissioner of Internal Rev., No. 7
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • 2 Abril 1956
    ...729, 29 A.L.R. 2d 1161, where we interpreted and qualified statements appearing in In re V. Loewer's Gambrinus Brewery Co., 2 Cir., 1948, 167 F.2d 318, upon which the Commissioner We conclude that the transaction here involved cannot be disregarded for tax purposes merely because of the pre......
  • Mader's Store for Men, Inc., In re, No. 75-32
    • United States
    • United States State Supreme Court of Wisconsin
    • 17 Mayo 1977
    ...be borne by the proprietary interest. As Judge LEARNED HAND said, concurring in In re V. Loewer's [77 Wis.2d 607] Gambrinus Brewery Co., 167 F.2d 318, 320 (2d Cir. "Both the shareholders and the creditors in any enterprise assume some risk of its failure, but their risks are different.......
  • In re Bellucci, Bankruptcy No. 4-80-00213-G.
    • United States
    • United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts
    • 9 Noviembre 1982
    ...Cir.1946); Corley v. Cozart, 115 F.2d 119 (5th Cir.1940); and In re Loewer's Gambrinus Brewery Co., 74 F.Supp. 909 (S.D.N.Y.1947), aff'd, 167 F.2d 318 Traditionally, it has been held that absent some showing of fraud or inequitable conduct on the part of the claimant injurious to other cred......
  • Request a trial to view additional results
26 cases
  • Tigrett v. Pointer, No. 19601
    • United States
    • Texas Court of Civil Appeals
    • 29 Diciembre 1978
    ...to those of other creditors in a division of corporate assets. Pepper v. Litton, supra; In re U. Loewer's Gambrinus Brewery Co., 167 F.2d 318 (2d Cir. 1948); Boyum v. Johnson, 127 F.2d 491, 494 (8th Cir. 1942); S. G. V. Co. v. S. G. V. Co., 264 Pa. 265, 107 A. 721, 722 (1919); Dix, Supra, a......
  • Kraft Foods Company v. Commissioner of Internal Rev., No. 7
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • 2 Abril 1956
    ...729, 29 A.L.R. 2d 1161, where we interpreted and qualified statements appearing in In re V. Loewer's Gambrinus Brewery Co., 2 Cir., 1948, 167 F.2d 318, upon which the Commissioner We conclude that the transaction here involved cannot be disregarded for tax purposes merely because of the pre......
  • Mader's Store for Men, Inc., In re, No. 75-32
    • United States
    • United States State Supreme Court of Wisconsin
    • 17 Mayo 1977
    ...be borne by the proprietary interest. As Judge LEARNED HAND said, concurring in In re V. Loewer's [77 Wis.2d 607] Gambrinus Brewery Co., 167 F.2d 318, 320 (2d Cir. "Both the shareholders and the creditors in any enterprise assume some risk of its failure, but their risks are different.......
  • In re Bellucci, Bankruptcy No. 4-80-00213-G.
    • United States
    • United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts
    • 9 Noviembre 1982
    ...Cir.1946); Corley v. Cozart, 115 F.2d 119 (5th Cir.1940); and In re Loewer's Gambrinus Brewery Co., 74 F.Supp. 909 (S.D.N.Y.1947), aff'd, 167 F.2d 318 Traditionally, it has been held that absent some showing of fraud or inequitable conduct on the part of the claimant injurious to other cred......
  • Request a trial to view additional results

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