In re VID, Inc., Bankr. No. 2850.

• Decision Date: 30 October 1951
• Docket Number: Bankr. No. 2850.
• Citation: 101 F. Supp. 71
• Parties: In re V-I-D, Inc.
• Court: U.S. District Court — Northern District of Indiana

101 F. Supp. 71

In re V-I-D, Inc.

Bankr. No. 2850.

United States District Court N. D. Indiana, Hammond Division.

October 19, 1951.

As Amended October 30, 1951.

Goldberg, Devoe & Brussell, Chicago, Ill., John W. Lyddick, Gary, Ind., Peter L. Evans.

John W. Lyddick, Gary, Ind., Charles J. Kramer.

Jay E. Darlington, Hammond, Ind., Kelley, Glover and Vale, Inc.

Alfred P. Draper, Gary, Ind., Trustee, McM. Coffing.

SWYGERT, District Judge.

Kelley, Glover & Vale, Inc., as trustee under one of the mortgages on the debtor's property, has filed objections to the allowance of all claims based upon a certain trust indenture, under which Peter L. Evans is the successor trustee, and also more specifically to the claim of Charles J. Kramer and his wife on bonds held by them and secured by this trust indenture. The determination of these questions requires a rather extensive consideration of the facts involved.

On December 30, 1927, Charles Baran was the fee owner of the following real estate: Lots Nineteen (19) and Twenty (20) in Block Thirteen (13) in Broadway Addition to Gary, Lake County, Indiana.

On that day, he and Rosie Baran, his wife, mortgaged this property to the Home Bank and Trust Company, a corporation, and Lawrence H. Prybylski, as Trustees. This mortgage was recorded January 17, 1928, in Mortgage Record 309 at page 453 of the records of the Recorder of Lake County, Indiana. Foreclosure proceedings were instituted on December 15, 1930, to foreclose this mortgage in the Lake Superior Court, Gary, Indiana, under cause number 23163. This foreclosure proceeding is still pending in that court.

On June 20, 1928, Baran and his wife conveyed this real estate to Marcello Gerometta, who, with his wife, Maria E. Gerometta, on that date executed a mortgage to claimant Kelley, Glover & Vale, Inc., Trustee. This mortgage was recorded on June 25, 1928, in Mortgage Record 327 at page 325 of the records of the Recorder of Lake County, Indiana.

On March 11, 1932, one Don Hoover became the owner of the fee of said real estate by virtue of a quit claim deed from Samuel Kijowski and Nellie Kijowski, his wife.

On August 7, 1934, the U.S.A. Co. filed a complaint to foreclose a certain special assessment lien on the property involved pursuant to Ind.Stat.Ann. §§ 48-2711, 48-3303, Burns' 1933, in the Lake Superior Court, Gary, Indiana, under cause number 33635. The Home Bank & Trust Company and Lawrence H. Prybylski, as Trustees, and Kelley, Glover & Vale Realty Company, a corporation, were among the defendants named in this action. Notice of the filing of this cause was given the Home Bank & Trust Company and Lawrence H. Prybylski as Trustees by publication and summons was issued and served on Kelley, Glover & Vale Realty Company. A default judgment was rendered against the defendants in the cause and the property was ordered sold. The U.S.A. Company bought the property at the sheriff's sale and the sheriff's certificate of sale was issued to it on April 15, 1935. Within the year after that date this certificate of sale was purchased by Marguerite S. Glover, and on October 27, 1936, she surrendered the certificate and received a sheriff's deed.

On February 25, 1937, the Home Bank and Trust Company and Lawrence H. Prybylski, as Trustees, filed their verified petition pursuant to Ind.Stat.Ann. §§ 2-2601-2, Burns' 1933, for relief under those statutory provisions as nonresident defendants who had been served with notice by publication only, asking that the judgment be opened and they be allowed to defend and tendering their answer to the complaint. Notice of this petition was served on the U.S.A. Co., but no notice was served on Marguerite S. Glover. The U.S.A. Co. failed to appear and on March 19, 1937, the court ordered that the judgment and decree "be and the same are hereby vacated, opened up and set aside." The trustees filed their answer the same day. On April 8, 1941, the mortgage trustees tendered and paid into the clerk the sum of $520, the amount claimed under the special assessment lien, together with the costs of the action.

On February 23, 1939, the said Don Hoover executed a quit claim deed, describing this real estate, to V-I-D., Inc., a corporation. This deed was recorded on April 13, 1943, in the Recorder's office of Lake County, Indiana. On June 24, 1939, V-I-D., Inc. filed in this court a petition for reorganization under the Bankruptcy Act. On December 1, 1939, Marguerite S. Glover filed her intervening petition in this proceeding requesting that she be adjudged the fee-simple owner and be given possession of the real estate in question. Subsequently this court found that the judgment entered in cause number 33635, Lake Superior Court was void as to V-I-D., Inc. and that V-I-D., Inc. was the owner of the fee simple title to this real estate. The court's ruling was predicated upon the ground that Don Hoover, who owned the property at the time the assessment lien foreclosure judgment was rendered, was not served with summons in the action. The denial of the relief asked by Marguerite S. Glover in her intervening petition was affirmed by the Court of Appeals. In re V-I-D., Inc., Debtor, 7 Cir., 1946, 158 F.2d 964, certiorari denied Glover v. Coffing, 1947, 331 U.S. 829, 67 S.Ct. 1352, 91 L.Ed. 1844.

On April 7, 1950, Kelley, Glover & Vale, Inc., Trustee, requested and was granted leave to file its claim upon the mortgage given it by Marcello Gerometta and wife on June 29, 1928, and under a certain decree of foreclosure rendered by the Porter Circuit Court entered February 5, 1931, foreclosing this mortgage. The claim was filed August 19, 1950. On April 13, 1950, Charles J. Kramer and his wife, Helen E. Kramer, requested and were granted leave to file their claim. Their claim filed on that date asserts that they hold a preferred claim because they own bonds and interest coupons issued under the mortgage from Charles Baran and his wife to the Home Bank & Trust Company and Lawrence H. Prybylski, Trustees, of the face amount of $134,860. Some of these bonds were acquired at least as late as 1945.

On July 26, 1950, a creditor of V-I-D., Inc. filed a petition to determine the insolvency of the debtor corporation. Notice of a hearing on this petition and also on the Trustees' petition to classify creditors and stockholders was given to the creditors and stockholders. By order of court, October 27, 1950, was fixed as the last date upon which objections to the allowance of claims could be filed. On September 27, 1950, Kelley, Glover & Vale, Inc., Trustee, filed its objections to the claims filed under the mortgage executed by Baran and wife to Home Bank and Trust Company and Lawrence H. Prybylski, as Trustees.

On November 1, 1950, Peter L. Evans was recognized by an order of court as the successor trustee of this trust indenture. A hearing was had on the objections filed by Kelley, Glover & Vale, Inc., Trustee, and evidence was submitted.

The evidence was to the effect that the Home Bank and Trust Company, an Illinois Corporation, was never licensed to do business in Indiana; that Lawrence H. Prybylski was a vice-president of the bank; that the bank made a number of loans on Indiana property similar to the Baran loan; and that it ceased to exist as a banking institution about 1935. Some of the mortgages were executed in Indiana and others in Chicago. The Baran mortgage was executed in Gary, Indiana. It was the practice of the bank that after the trust indentures were signed and recorded and the mortgage bonds were registered at the bank, the loans were paid out in Chicago and the bank proceeded to sell the bonds. Under these circumstances, it...