West 52nd Theatre Co. v. Tyler, 75

• Citation: 178 F.2d 128
• Decision Date: 05 December 1949
• Docket Number: No. 75,Docket 21411.,75
• Parties: WEST 52ND THEATRE CO., Inc. v. TYLER.
• Court: U.S. Court of Appeals — Second Circuit

178 F.2d 128 (1949)

WEST 52ND THEATRE CO., Inc. v. TYLER.

No. 75, Docket 21411.

United States Court of Appeals, Second Circuit.

Argued November 11, 1949.

Decided December 5, 1949.

George Stephen Leonard and Philip Handelman, both of New York City (Cravath, Swaine & Moore, Handelman & Ives, Douglas M. Moffat, and Colin C. Ives, all of New York City, on the brief), for appellants.

Edgar E. Harrison, of New York City (Van Vorst, Siegel & Smith, of New York City, on the brief), for appellee.

Before AUGUSTUS N. HAND, CHASE, and CLARK, Circuit Judges.

CLARK, Circuit Judge.

The debtor in this proceeding in reorganization owns the Guild Theatre in New York City, originally occupied by the Theatre Guild, but now leased to a broadcasting system for use of the theatre proper and to another tenant for use of the offices. It was erected in 1924 at a total cost for land and building of $1,172,441.04. The premises are now assessed by the city for tax purposes at $600,000 and the trustee has procured an appraisal from a competent real estate broker showing their present fair market value as $400,000. The theatre has a seating capacity of 956 and is designed only for plays, having no orchestra pit or facilities making it available for musical shows. Debtor's principal liability is a first mortgage of $557,500, originally made to a savings bank, but sold by the latter for approximately $380,000 in 1946 to Dorsar Enterprises, Inc., a subsidiary of what are here termed "Shubert Theatre interests." The trustee received through the office for Dorsar's attorneys an offer to purchase the property subject to the first mortgage for $50,000 and a waiver of unpaid interest of $9,991.14, or a total of $617,491.14. The trustee's plan, as ultimately amended and approved by the court, provides for a public sale with this offer as an upset price, to be accepted if no higher bid is received. Such a plan leaves a small amount to be paid to bondholders with a junior lien, and allows no equity for the stockholders.

When the plan was filed, objections were made by the Debtor, a bondholders' committee, and a bondholder — the present appellants — who asserted that the actions of Dorsar were a part of the Shubert domination of the theatre business in violation of the antitrust laws and who asked that Dorsar's first mortgage claim be cancelled or subordinated to other claims, that Dorsar and its affiliates be examined in support of the objections, and that the Debtor be required to sue Dorsar, its officers, directors, and affiliates for treble damages for such violations. The court denied these motions, and first approved the plan and then, after the required acceptances by more than the necessary number of claimants were received, confirmed it. This appeal followed.

Appellants' contentions are based upon the asserted facts that the Shuberts own or control most of the first-class legitimate theatres in the major cities of the United States other than New York and that they own or control approximately half of all such theatres in New York. They assert further that the earning power of the Guild Theatre has been diminished by Shubert domination of the theatrical business, and that the actions of Dorsar in first acquiring the mortgage at a discount and then arranging for the purchase of the premises are steps in more fully effectuating the illegal monopoly. Appellants rely principally on In re American Fuel & Power Co., 6 Cir., 122 F.2d 223, and Columbia Gas & Elec. Corp. v. United States, 6 Cir., 151 F.2d 461; Id., 153 F.2d 101, certiorari denied 329 U.S. 737, 67 S.Ct. 48, 91 L.Ed. 636, which they read as holding that any claim purchased in violation of the antitrust laws must be subordinated in...