Matter of REA Holding Corp., 75-B-0251

• Decision Date: 25 January 1978
• Docket Number: 75-B-0252,75-B-0253 and 75-B-0254 (JJG).,No. 75-B-0251,75-B-0251
• Citation: 447 F. Supp. 167
• Parties: In the Matter of REA HOLDING CORPORATION the Express Company, Inc., REA Express, Inc., f/k/a Railway Express Agency, Inc. and Rexco Supply Corporation, Bankrupts.
• Court: U.S. District Court — Southern District of New York

447 F. Supp. 167

In the Matter of REA HOLDING CORPORATION the Express Company, Inc., REA Express, Inc., f/k/a Railway Express Agency, Inc. and Rexco Supply Corporation, Bankrupts.

Nos. 75-B-0251, 75-B-0252, 75-B-0253 and 75-B-0254 (JJG).

United States District Court, S. D. New York.

January 25, 1978.

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Wisehart, Friou & Koch, New York City by Arthur M. Wisehart, New York City, for appellant.

Whitman & Ransom and Marcus & Angel, New York City by William M. Kahn and Joshua J. Angel, New York City, of counsel, for appellee-trustee.

WERKER, District Judge.

These are consolidated appeals from an opinion and order entered by the Honorable John J. Galgay, Bankruptcy Judge, on July 16, 1976 authorizing sale of the Bankrupt's authorities to Alltrans Express — U.S.A. ("Alltrans") and an order entered on August 19, 1976 granting the trustee's motion to strike certain items from the record on appeal. Reaemco, Inc. ("Reaemco"), the appellant, was an unsuccessful bidder for the assets offered for sale.

BACKGROUND

The opinion and order dated July 16, 1976 was rendered by Judge Galgay after hearings held on June 23, 24, 25 and 30 and July 1, 8 and 9, 1976 and found the following:

1. That the offer of Alltrans as amended on the record during the hearings, represents a fair and reasonable value for the Property;

2. That the Alltrans offer is the best offer which was submitted to the Court for consideration at such hearing;

3. That the acceptance of the Alltrans offer is in the best interests of the bankrupt estate;

4. That the Alltrans offer provides the probability of the greatest realization to the bankrupt estate from the sale of the property;

5. That the attorneys for the Trustee and the attorneys for Reaemco have stipulated that if a proper petition for reorganization under Chapter X of the Bankruptcy Act was or is properly filed before this Court, that the entire record made of these hearings, including but not limited to the order fixing the hearing, the application for such order and exhibits annexed, the stenographic transcript of all hearings and the exhibits introduced by all parties, the memorandum decision of this court and this order, shall constitute the entire record in support of such petition by such petitioning creditors; and

6. That it would be adverse to the interests of the bankrupt estate that any assets of the bankrupt presently in the hands of the Trustee be put at risk to enable the trustee to continue to expand an express business, other than the continued operation of the REXCO division by the Trustee pending the final disposition of the Property.

Reaemco's proposal was rejected by the Bankruptcy Judge in favor of a proposal made by Alltrans. Nevertheless, unless it can be shown that there is some evidence of fraud, deceit, mistake of fact or other inequitable overreaching, Reaemco, as an unsuccessful bidder, has no standing to bring this appeal. In re Harwald Company, 497 F.2d 443, 444 (7th Cir. 1974). In this connection section 39(c) of the Bankruptcy Act limits the right of appeal from a decision of the Bankruptcy Court to aggrieved persons, which does not include unsuccessful bidders. See In re Realty Foundation, Inc., 75 F.2d 286, 287-88 (2d Cir. 1935).

DISCUSSION

The statement of issues presented on this appeal is as follows:

1. Whether the Bankruptcy Judge erred in failing to make findings as to the value of claims for services performed by employees from February 18, 1975 through November 5, 1975, when the Bankrupt was operated as a debtor-in-possession under Chapter XI of the Bankruptcy Act.

2. Whether disposition of the Bankrupt's operating rights on the terms of the Alltrans proposal is fair and equitable to the creditors of the Bankrupt.

3. Whether Finding 6 of the Bankruptcy Judge is arbitrary and capricious, in view of the undisputed testimony that the Bankrupt's operating rights, if made permanent, would be worth $50 to $100 million.

4. Whether the Bankruptcy Judge erred in failing to accept the petition under Chapter X of the Bankruptcy Act tendered during the proceeding herein, and failing to make findings with respect to the propriety and desirability thereof.

5. Whether Finding 5 of the Bankruptcy Judge is not clearly erroneous.

6. Whether the notice of the hearing was adequate.

7. Whether the Trustee's recommendation was given undue weight, in view of the circumstances.

8. Whether a prior determination on notice to all creditors should not have been made by the Bankruptcy Judge with respect to the issue of conflict of interest.

9. Whether the Bankruptcy Judge erred in not making findings with respect to the motion to strike and the issues posed therein, in the context of this proceeding.

Taking these issues seriatim, I make the following findings:

1. Failure to determine value of employee claims. Upon the record of hearings the Bankruptcy Judge did not err in failing to make findings as to the value of claims by employees during the period February 18 through November 5, 1975. These claims and the surrender of them were part of the Reaemco proposal. The Bankruptcy Judge in considering that proposal had to consider whether it was as a whole the best offer. In this regard it is apparent from the record that it was based upon projections which were more "pie in the sky" than realistic. Consequently no matter what the value of the claims involved might have been found to be, whether the correct amount was $12 million or $34 million or something in between, making the additional findings sought by Reaemco would not in any way have increased the availability of the startup money (for which Reaemco apparently did not have commitments), the viability of the Reaemco proposal or the likelihood that the trustee would have been able to transfer at the end of...