Jandel v. Precision Colors, Inc.
| Decision Date | 13 April 1982 |
| Docket Number | Adv. No. 3-80-0659,Bankruptcy No. 3-80-02832. |
| Citation | 19 BR 415 |
| Parties | Walfred T. JANDEL, Patricia R. Jandel, Plaintiff, v. PRECISION COLORS, INC. et al., Defendants. In the Matter of Walfred T. JANDEL, Patricia R. Jandel, Debtors. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
George Ledford, Englewood, Ohio, trustee.
Charles W. Slicer, Sr., Dayton, Ohio, for defendants.
Thomas R. Noland, Dayton, Ohio, for plaintiffs.
DECISION AND ORDER
Debtors, Walfred T. Jandel and Patricia R. Jandel filed for relief on 12 September 1980 pursuant to Chapter 13 of Title 11. At the time Debtor, Walfred T. Jandel, was President of Precision Colors, Inc. (hereinafter P.C.I.), earning $850.00 per week which was to be part of the funding under the proposed Plan.
The proposed Plan offers to creditors (secured $175,000.00 ± and unsecured $100,000.00 ±) 100% payment of all allowed claims over a period of 60 months, or until paid prior to sixty months, to be funded by payments to the Trustee from income, and by a sale of Debtors' stock in Precision Colors, Inc., to the extent that the monthly payments are insufficient to pay all claims in full. The First National Bank of Dayton would be paid first from the proceeds "in order to release Debtors' stock in said Corporation from the pledge of such shares to said creditors."
After the Bankruptcy Court jurisdiction attached, Joseph E. Lyons, Edwin Fite, Everett C. Karas, C.J. Hoying, and Donald Hochwalt, the minority shareholders of Precision Colors, Inc., obtained an assignment of Jandels' stock, which had been pledged to The First National Bank of Dayton as collateral for a loan in the amount of $38,841.40, and an assignment of the promissory note held by the Bank by advancing payment of the loan. The value of the stock interest, however, was then valued as high as in excess of $600,000.00.
The Debtors (as holders of a majority interest of the voting stock of the Corporation), called a shareholders meeting for 23 October 1980 to re-elect a Board of Directors. Before such a meeting could be held, the minority Class A shareholders on 22 October 1980 caused an assignment of the shares of the Jandel stock and note held by First National Bank of Dayton to themselves (or the voting rights, of which the evidence is not clear). At the shareholders meeting on October 23, the minority shareholders then asserted the right to vote Debtors' shares and this meeting was closed without any action. The corporate minute book does not reflect this meeting. The corporation records indicate that Mr. Jandel's "personal business problems" were discussed at a meeting of the Board of Directors on December 21, 1979, in his absence. At a special meeting of the Board on October 7, 1980, the "chief topic for discussion had to do with the filing by Mr. and Mrs. Jandel of a voluntary case in the Federal District Court of a Debtor's Joint Petition. . . ." The notice of this special meeting had not been served on the Debtors. There ensued an extensive discussion concerning a course of action to be pursued by the corporation, the valuation of P.C.I. stock in the name of the Debtors and a transfer of the stock pledged by Debtors to First National Bank and the legal ramifications of stock transfer restrictions.
By this maneuver the minority stockholders gained control of the corporation by a nominal investment and proceeded by a vote of a reconstituted Board of Directors to dispose of Walfred Jandel as President and Chief Executive Officer of the Corporation and as a member of the Board of Directors, rendering him thereby unemployed and having no income to fund the proposed Chapter 13 Plan. At the time that the Chapter 13 case was instituted, the stock owned by the Jandels represented 54.4% of the voting control in the corporation. The Jandels were at that time shareholders holding 300 Class A Shares and 800 Class B Shares and, even though both Jandels were on the Board of Directors of P.C.I. at the filing of the Chapter 13 Petition, they never had notice of any action to remove them from the Board. Mr. Jandel was advised that he had been removed as President of P.C.I. on or about 8 October 1980.
Various challenges have been made in behalf of Debtors to the manner and legality of the conduct of the corporate affairs. The Chapter 13 process does not afford direct jurisdiction, however, over the corporate affairs, notwithstanding a very suspicious maneuver to obtain control over the Corporation by the minority shareholders.
Because of an apparent interference with the Chapter 13 estate, in light of the potential diminution of the scheduled values of the Jandel stock and interference with and impairment of the rights of other claimants to participate in a proper distribution of the estate existing when the case was filed, this Court ordered the minority stockholders to be reimbursed for the $39,000.00 + disbursed to the Bank effecting a release of the Bank security interest on the Jandel stock, and impounded the Jandel stock assigned by the Bank after the jurisdiction had vested, to be held by the standing Chapter 13 Trustee for protection of the estate, until further order, pursuant to 11 U.S.C. § 105(a). Further factual details giving rise to the order to impound the Jandel shares of stock need not now be reiterated. See Jandel v. Precision Colors, Inc. et al., (Matter of Jandel) 8 B.R. 855, 7 B.C.D. 320, CCH ¶ 67946 (Bkrtcy.1981). The redemption of the Jandel stock was then effected by payment to the minority stockholders by funds furnished by Debtors.
The business of the corporation has been conducted by the minority shareholders since Walfred Jandel was deposed as chief executive officer, and there is some indication that, for obvious reasons, the business has suffered since the internecine struggles for control ensued.
After the stock of the Jandels had been impounded with the Chapter 13 Trustee, the corporation internecine controversies continued, with resulting deterence on administration of the Chapter 13 case. The most serious impairment has been a lack of cooperation between the contending shareholders necessary to obtain a worthwhile, disinterested appraisal of the value of the Debtors' stock, including sufficient financial data to solicit feasible offers to purchase either the assets of the corporation or the stock. Charges and countercharges, request for discovery and sanctions, and other procedural ingenuities have been indulged over the inspection of the physical assets of the business and the corporation financial records.
At a special Board of Directors meeting attended by the minority shareholders of P.C.I. on July 30, 1981 (again without notice to the Debtors) this Chapter case again was under consideration, and the legal options for the corporation.
The minutes of a special Board meeting held December 23, 1981, (again without notice to Debtors) reflect that the attorney for Debtors had been apprised of the "Morrison Printing Ink Co. proposal" effect on the Debtors' estate and would "recommend to Mr. Ledford and to the Court . . . approval by the Court, the Trustee and the stockholders. . . ."
The last documented special Board of Directors meeting was held on March 5, 1982 (again without notice to the Debtors) at which the Morrison Printing Ink Co. purchase proposal (of January 26, 1982) was "reapproved" and Charles W. Slicer was authorized to confer with its attorneys "with respect to all aspects of the scheduled hearings," (referring to the March 19, 1982 hearing).
Because the internecine maneuvering seemed interminable, the Chapter 13 Trustee directly interceded by serving notice of sale on February 13, 1982, that he
On 2 March 1982 the Debtors filed objections to the Notice of Sale asserting numerous reasons for disallowance, including a denial that the Trustee has a right to vote the stock or that a valid offer is before the Court; and, that the only valid offer which will benefit the estate and creditors is one by Robert W. Dieffenbach and Stuart Siegel to purchase the Debtors' stock, netting $140,000.00 directly into the estate.
Since the stock was impounded by Court Order, the Debtors have sought purchasers for their shares, without success, until March, 1982, when an offer was tendered by Dieffenbach and Siegel. Notice of an application to sell the Jandel stock free and clear of all liens, encumbrances, and restrictions, was given to all of the creditors of the Debtors and to the shareholders of P.C.I., requiring objections to said sale to be made in writing on or before March 17, 1982. Only one objection was filed, that on 17 March 1982 in behalf of P.C.I. and/or in behalf of Messrs. Lyons, Fite, Karas, Hoying and...
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