In re WHET, Inc., Bankruptcy No. 80-1542-HL.
| Citation | 12 BR 743 |
| Decision Date | 01 July 1981 |
| Docket Number | Bankruptcy No. 80-1542-HL. |
| Court | United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts |
| Parties | In re WHET, INC., Debtor. |
David Ferrari, S. Natick, Mass., trustee.
Jon D. Schneider, Goodwin, Proctor & Hoar, Boston, Mass., for trustee, Ferrari.
Jan Ira Gellis, Gellis & Melinger, New York City, for WHET, Inc.
Gerald T. Weiner, Weinstein & Weiner, P.C., Bridgepost, Conn., for Anthony Martin-Trigona.
Richard Belford, Belford, Belford & Coan, New Haven, Conn., trustee.
MEMORANDUM ON SALE AND RELATED MATTERS
WHET, Inc. originally filed a Chapter 11 in the Bankruptcy Court of the Southern District of New York along with at least one other Chapter 11 involving a Connecticut radio station. In both Chapter 11's, Anthony Martin-Trigona was the alleged sole stockholder and controlling factor. Venue was challenged and Judge Galgay determined that venue of the Connecticut station Chapter 11 belonged in Connecticut and that the WHET, Inc. Chapter 11 belonged in Massachusetts and, after an unperfected appeal, both cases were so transferred on September 3, 1981. Further arguments at which Mr. Trigona was always represented on the matter of venue, took place before me and that matter, as well as Anthony Martin-Trigona's capacity to operate these stations from federal prison, where he was incarcerated for felonies involving moral turpitude, and the separate consideration of his previous questionable, if not actual, mismanagement of the station were laid to rest with the appointment of a trustee on September 18, 1980. See Memorandum, Findings and Order for Appointment of Trustee, .
This case, with all of its complications and ramifications, has been administered by the Trustee under the supervision of the U.S. Trustee and, when appropriate, by hearing in this Court for the past nine-and-one-half months.
No plan was proposed nor has even the remote possibility of a plan been suggested by any of the parties in interest, including Anthony Martin-Trigona, the Trustee, or the creditors, who consist of the Shawmut Community Bank, N.A. (a secured creditor in the amount of $87,774), the Internal Revenue Service (with a priority claim of $72,742), WCRB ($342,000), unsecured creditors ($272,280), four creditors with undisputed claims in the amount of $350,000, and Anthony Martin-Trigona, as a creditor, asserting five claims totaling $2,571,882, (claims how held by Martin-Trigona's trustee).
It was apparent from the beginning that a boot strap internal reorganization was impossible. Martin-Trigona's two years of operation had left the station depleted of any liquid assets. Tax returns for the years 1978 and 1979 showed losses of $235,917 and $222,569, respectively. The station's very operational ability was in jeopardy. It operated in leased facilities and the Lessor, the original owner, was claiming defaults and termination. In fact, one of the first acts of the Trustee was to institute actions against the Lessor to try to prevent the termination. Adverse results in this dispute with the Landlord and Lessor were avoided by an arrangement to pay the Lessor out of a proposed sale. The station, according to the Trustee, needed a minimum of $150,000 of outside capital for operation, plus what it would take to pay the creditors under any plan. Anthony Martin-Trigona offered no source of outside capital. In fact, he, himself, filed in Connecticut a Chapter 11. Incidentally, although a trustee has been appointed in that case, the Trustee has taken no active part in these proceedings other than to file a written objection, somewhat belatedly, to the sale. It should be obvious that any outside investors would be unlikely to invest as long as there could not be a complete change of ownership since the F.C.C. requirements on the station's renewals, which are now in process, consider the stockholders' moral fitness, and Anthony Martin-Trigona's conviction of a felony involving moral turpitude would present a substantial obstacle to any reorganization other than a reorganization that involved a complete change of ownership, i.e., a sale.
While sales (monthly billings) under the Trustee had risen from $15,000 to $30,000, earnings were only a modest $8,249.75 for the period August 15, 1980 to March 31, 1981, hardly enough to finance a plan internally. In this posture, the Trustee early determined that a sale on a going-station basis was the only feasible salvage route and proceeded on a two-pronged simultaneous approach: first, to keep the station operating and to improve the station as much as possible, so that it could produce the best possible price and, secondly, to merchandise the station. In pursuit of the merchandising of the station, the Trustee prepared a brochure describing the station, its operation and its finances, which he distributed to 40-50 potential purchasers. The brochure was subsequently revised and remailed to a now increased list of 60-70 potential buyers.
Ultimately, the Trustee negotiated with the Lessors, the right to sell as a package, the tower, the lease, and WHET assets and rights, provided the sale was for at least $700,000., the Lessor would receive $342,000, and that a sale be negotiated and submitted for court approval by June 5, 1981.
The Trustee negotiated a sale of $850,000 and gave notice of the proposed sale as required under 11 U.S.C. § 363(b). In addition to the statutory requirement of notice and hearing for objections, this Court, as a standing practice, requires the notice to also provide for counter-offers and, in the event any are received, that at the hearing, the original offeror and all counter-offerors, after disposing of any differences among the bidders, would be given an opportunity to submit in writing one final bid each. As a result, in every private sale, there is the potential for its becoming, under this two-tier process, a sealed bid auction with a pre-established floor.
In the proceeding at hand, the § 363(b) notice of the proposed sale of assets was mailed to all scheduled creditors more than 20 days prior to the hearing in accordance with Local Interim Rule 2002(b). In addition, the notice was published in the Wall St. Journal on June 1, 1981 (Eastern Edition), June 2, 1981 (Southwestern Edition) and June 3, 1981 (Midwest Edition) and in the June 1, 1981 edition of Broadcasting Magazine. The notice was also mailed to a list of approximately 60 attorneys, brokers and interested parties who were identified by the Trustee as having an interest in radio stations. I find the notice to be in compliance with the Order Approving Notice of Intended Sale and Related Means of Notice, adequate and appropriate to the particular circumstances.
As a result of the notice, three counter-offers were received: $900,000 by Irving H. Busney, $875,000 by Acton Corporation, and $876,000 by Collins/Flatley. Objections to the intended sale were filed by Shawmut Community Bank, N.A., Affiliated International Investors, Inc., Donna L. Wolske, and Anthony Martin-Trigona.
Although Anthony Martin-Trigona had always been represented by counsel and had counsel of record in the person of Jan Ira Gellis, a request came from Gerald T. Weiner of Connecticut, a non-member of the Massachusetts Bar or of the Bar of the Federal Court for the District of Massachusetts, to be admitted to appear before this Court on behalf of Anthony Martin-Trigona. The request was promptly allowed with the caveat that since Martin-Trigona already had counsel of record, the question of Mr. Weiner's authorization would be open at the hearing. Mr. Weiner, in addition to filing an objection on behalf of Anthony Martin-Trigona, also filed a motion seeking to transfer venue to Connecticut and for a Writ of Habeas Corpus Ad Testificandum to have Martin-Trigona brought to court for the hearing.
At the June 19, 1981 hearing on the § 363(b) sale, question was raised as to Attorney Weiner's appearance, since Anthony Martin-Trigona's counsel of record had neither withdrawn nor appeared. Mr. Weiner was allowed to appear for Martin-Trigona on his oral representation that both Anthony Martin-Trigona and counsel of record had authorized his appearance and that if he was not allowed to appear Martin-Trigona would not be represented. Attorney Weiner was allowed to participate on behalf of Anthony Martin-Trigona, although there exists a serious question of Martin-Trigona's standing at these hearings,1 since there was no debtor-in-possession in either the Massachusetts WHET case or the Anthony Martin-Trigona individual case in Connecticut. In both cases, trustees were appointed by the court and, under 11 U.S.C. § 541(a), the estate thereby created is represented by the Trustee as its legal representative, 11 U.S.C. § 323(a). However, since Martin-Trigona allegedly was the sole stockholder (a matter of dispute since all or part of the stock was pledged to secure the original purchase which was now in default) and an alleged creditor for $2,500,000 (a matter vigorously contested by the Trustee) and, as he was in a Chapter 11, not a Chapter 7, in Connecticut and, therefore, might claim a residual interest in the event of a successful reorganization, Mr. Weiner was allowed to participate.
The request for the Writ of Habeas Corpus Ad Testificandum was denied since neither within the request nor in counsel's representations to the Court, were any facts alleged indicating in what way in this § 363(b) hearing, Martin-Trigona's presence would add anything to aid the Court in determining whether or not the sale should be confirmed. As to the adequacy of the price, the Court accepted Martin-Trigona's submission of an appraisal at $1,500,000. As to anything further, there was no offer or proof to indicate that Martin-Trigona would testify as to any source of funds or any suggestion of a possible plan as a feasible alternative to the sale.2
The change of...
To continue reading
Request your trial