*1
HUTCHESON,
Chiеf
Before
RUSSELL,
BORAH,
HOLMES,
RIVES,
Judges.
Circuit
HUTCHESON,
Judge.
Chief
appearance of this case
the former
On
here,
law
controlling questions of
all the
presented
appeal were considered
on this
determined,
write
respect
be but a re-
this time will
them
so,
threshing
Because this
of old straw.
ap-
judgment
particularly
because
sup-
pealed
given in
the reasons
1
port
judge’s
run
in the trial
to, indeed,
effect would
counter
rewrite,
as we have
law of the case
it, a brief résumé
declared and established
also,
See
forced persists in sub- effecting the commission purpose of with the declared through reorganization' mitting foreclosure reorganization through a companies, over equity re- two equity, the return direct bondholders, the percent objection properties of ceivership which the re- August leadership commission must administered debtor had been dis- proceeding jected, 31, 1931, January receiver- missed, equity long dormant the basis formed In the reactivated, in- and an ship *4 revived order, him- judge declared of his acceptable plan reorganization, ternal expressed in with the agreement self to be bondholders, the under the must be effected court, that opinion Sibley and this Judge leadership judge. the district was public interest of the the determination that, the between We are in no doubt exclu- court but not for the district was judge, the one of the trial on determination Nevertheless, commission. sively for the hand, reorganization an the must be own, of his findings upon the basis therefore, one, rejection, internal -andhis not be reorganization would an internal was merger finding commission’s that a public interest and contrary to the public determination and the in support the com- was evidence to there no commission, with, and in accordance pro- merger finding that the mission’s of, record, full consideration posed public interest and by it in the was Line in merger a with the Coast was by reorganizatiоn as an internal reorganiza- public internal interest and an not, rejected and he the bondholders was not, impasse has been reached. tion an was finding. the commission’s refused follow however, so, all de- not at That this is is addition, findings own on he made of his question presented terminative directly contrary the issue .valuation appeal. is the this is whose findings the commission. again err in Did commission fault. findings, the basis of these On plan reporting a for a formulating and went on to declare in that it was effect: Line, did the trial with Coast or per- intended evident that commission plan disapproving a judge err in such presenting plan in its for approving sist his dismissing proceedings, because of that, merger; trial not a he could public opinion in both the effect: in plan; and would not such private reorganiza- an internal interest resulted; impasse had therefore per- demanded; that because of the tion is that, had, pro- reorganization .because on insisting commission sistence of the reorgan- ceedings must.be dismissed neces- merger, for a it' become has its leadеrship ization effected under the sary court to wrest for the district receivership. equity district court leadership from the commission in order order, Appealing from this Atlantic Coast reorganiza- effect an internal foreclosure to vigorously complaining Line here of it. is tion. complaints that, One in rejecting of its is commission, If is with then the fault public findings the commission’s as to the turning judge justified in elsewhere was valuations, interest and toas and in sub- step resorting and in as the first therefor, his stituting own and thus providing the statute in that direction to failing refusing to аccord to the find- proceed- dismissal of the the. ings of commission these two re- If, however, on ings. the shoe is the other authority spects weight accorded impasse foot and the fault was the statute, judge trial them fol- erroneous refusal of the grievously erred. the commission when that the lead of low law, that, leadership Another in addition to the error was in accordance with supported refusing weight findings its to accord due when were that is evidence, findings, justi- then the court commission’s has the dismissing grievous a further and committed mоre er- fied that, holding proceedings. in effect since the ror that the law- commission could answer Turning, the correct fully propose proper plan forced now stands be- as it the record question, to that, rejection any did not base his us, doubt fore ground (b) (5) Judge of new on the on which of subsection plain terms Sibley his, Act, power had based the want of Sec. U.S.C.A. § propose plan. plan “may include the commission such a provides that put Fie finding or control of commis- interest his any transfer sion’s finding public as to part prоperty of interest was all or corporations, support without evidence corporation it. to another the debtor merger or consolidation have, therefore, again carefully We ex- corporations corporation or with another amined the record in this made * * * precisely ”, au- former hearing, and found: have that there and recommend a thorized to formulate abundant evidence to does, providing, as fourth for. was, interest finding; trial judge Coast Line. East Coast and *5 therefore, dismissing pro- error in ceedings ground; on that and that unless think, finding quite plain, that we It shows, an examination of the record as did, record, which includes he that this we thought it did on the hearing, former it, additions to former record with all that the bondholders will not receive under supporting the com- no evidence contains equivalent this in value what to finding and recommendation as mission’s with, part they will must be public went reversed and the cause remanded to the of the to the decision trial contrary both district court with directions hearing and to that of judge on the former рlan. - appeal. court the former this on comparison present A careful of the rec- opinion, Judge Sibley did find In his presented ord with that ap- on the former support there no evidence that peal us subsequent that on its convinces public finding interest. as to commission’s hearings, gave lip serv- contrary, expressly he declared that On merely fealty ice but whole hearted to the respect finding was not its with thereto sub- opinion. and admonitions directions of our ject to him. His difference review Instead, therefore, failing, as we found upon the commission was not based before, it did show that the commission support finding its want of evidence to but consideration, given adequate independ- had upon refunding the fact that bondhold- public ently question, interest to mak- overwhelming ers refused ing sure would in the that bondholders view, merger consent his “I to the and equivalent in exchange receive the value Congress do not think intended a to force surrendered, they the securities record merger by majority undesired in amount appeal quite presented оn this shows dif- .a parties by the affected a permitting It most ferent situation. shows a careful * * * plan. part to be of a part painstaking effort on * * * plan.” conclusion ends this [81 properly, adequately, in- commission to F.Supp. 932.] dependently value both the securities held rejection not, His there- to be by the bondholders those received fore, upon based a want of evidence as to by exchange and that its finding them in public entirely but interest his equitable plan was fair finds pow- view that the commission was without full in the evidence. propose er under the statutes Indeed, of all an examination the testi- what he called “forced” that is mony touching now available on and deal- security nolens volens the holders. ing with the valuations which under the make, statute it was the commission hearing, recog- this nizing demonstrates, think, beyond' any per- case to be that law public of what was the commission’s findings interest adventure was for the commission respective and not for estimates of the future earn- say, of Line did ad- Line and not. Neither will it and Coast ings East Coast the testi- vantage the securi- us to consider and discuss values and future present mony witnesses, exchange each other of the various witness given to be ties testimony by testimony, to com- witness to the bondholders was most favorable pare judge’s conclusions as East Coast. them with those of the commission. careful examination shows The same apparently already Too much fact, domi- has been written
but contention, Enough this case. bondholders of con- most of the and controls nates flict, they primarily already of name calling gоne controversy, on without obtaining adding received our more. will suffice value It concerned not fo,r that, say for us to bearing mind the con- but with conversion their securities trolling East decisions and the law the case into title their bonds appeal, they will own as determined on the former properties, railroad, considering .be light them would all of record manage the primacy will receive undoubted to be to the fact agree bound to findings commission, will be of we are under the for their bonds than, clear opinion: findings to, that оf their of the trial equal more value judge, rejecting findings the commission’s bonds. valuation, toas interest and as to will, therefore, purpose no serve useful It and declaring unfair and one, appel- up one us take *6 inequitable, are themselves without done, and appellees have to dissect lants and fact; in or in and law that his them, findings made and reasons discuss approve refusing to dismissing and hand, commission, on given by the the one proceedings may not opinion lengthy in of those and set stand. other, to determine thereforе, appealed will, order agreement disagreement or with each our be reversed and the cause remanded Particularly will it of them in turn. district court with directions to issue, value us resolve plan, and take further and not incon- parties of which the trial and proceedings respect sistent it. whether, much, in determin- have made capitalizations, We think that ing permissible commis- our views on the multipliers, ap- arbitrary as the sion used so-called cram down section of the did, pellees judge say sufficiently presented or statute9 and the trial have been 7 whether, pp. 545, and the 'Coast our former 544 as the commission at and and capitalizations 1384, 1400; 7. are not de 90 L.Ed. & Ex “Permissible Securities by solely, petition change Comm., Central us as these v. Ill. Securities termined by capitalizing apparently assume, Corp., 96, 110, 111, 113, 127, ers 338 U.S. percentages. 1377, earnings at 93 L.Ed. stated 69 S.Ct. assumed capital structures The determinations 205, (e) Title Subdiv. Sec. 11 U.S.C. reorganized railroads are not such for simple mittedly hearing by approval A. “Court after computations ad matters. Such Commission; accеptance plan by cred- important steps are or checks stockholders; and itors confirmation of determinations, but a careful final court; plan by property”, valuation of reading supplemental report our fifth provides if which that has not many clearly show that other factors will accepted the creditors been holders, and stock- taken into consideration deter were may nevertheless con- capitalization mining permissible firm the if he is satisfied and finds hypothetical under a reor adequate hearing after makes compensation ganization and the equitable provision for fair and treatment pay line should the debt- for the interests claims of those re- properties.” 281 I.C.C. 203. or’s rejection it; jecting that such is not reasonably justified light Angeles Co., Los Lbr. v. 308 U.S. Case 8, rights 1, respective 115, 110; 106, 60 S.Ct. 84 L.Ed. Re interests those Corp., it, rejecting and all the Finance relevant facts. v. Denver & construction Grande, 1282, U.S. 66 Rio 328 S.Ct. by guise that at serving purpose will he served no useful the reason least some bare outline of length here. We discussing them at further quеs- restate, disagreement obligatory. seems Such think, should though, we form present tion this case that sec- opinion: in that stated power Interstate Com- complaints claimed individual tion to do plan of Commission, proposing merce treatment; unequal and unlike bondholders, reorganization provisions of Sec- under the percent refusal Act, require Bankrutpcy tion (e) to subdivision called under when equitable debtor, who are owners of the prefer accept plan merely because plan, opposition united in to sur- to such justify will not reorganization, an internal render effi- going their interests approve it refusing to judge in ciently railroad, operated for undesired provision of down under the so-called cram rights system. in another railroad While the statute. plan, the result of which the say con- It is not meant this approves, may be denominat- now change between now ditions should so “merger”, ed as well said put up for final to be time the enforced, is in non- fact an “[i]t acceptance (e) subdivision L., competitive sale of E. F. C. A. C. fair and rea- longer would no be a corporation, wholly unrelated over the ob- one, could not consider court sonable jections present bondholders 99% accordingly. act It changed facts stake, whose interests at been so often al- say, though, as has is to sell, who do not wish to and over the active by both the trial said in case ready this protest employees jobs of F. E. C. whose judge on the former seniority stake, are also at and stubborn determina- that the set forcibly who do not wish to be transferred by any to with- or all of the creditors tion to Atlantic Coast virtually Line. The approval plan, merely because hold *7 gives power C. L. the of eminent do- A. purpose of they bought for the their bonds C., main over F. E. authority pay, the railroad and will obtaining control of cash, not in but in Coast Line securi- 90% under subsec- agree to other equi- ties of debatable value.” It is these section, may not (e), the “cram down” tion table owners of the property who would be accepted adequate grounds lawful reorganized' entitled to the stock opposition. Florida East Coast Railroad. There is no judgment is reversed cause question here of the relative with directions to remanded is themselves, among creditors nor is this the proceed thereafter to objection by only usual there case where is inconsistently herewith. statute minority proposition interests. The bald majority opinion established is that RUSSELL, Judge, with whom Circuit power in bankruptcy authorizes court’s BORAH, joins, dissenting. Circuit taking, against the wishes of the over- already been written in has So much whelming majority of the refunding bond- appeаrances be- of this matter the several holders, existing rights, of their requiring Commerce Commission the Interstate fore acceptance by them of entirely different temptation pres- the Courts security and unrelated which do not cumbering further the record avoid ent to poses holding a serious con- desire. merely dissent from the noting question as to whether the stitutional court’s letting the matter rest. How- there power bankruptcy could thus extended ever, controlling which is here merger consistent with force a the Fifth upon in the sense its deter- question, However, my Amendment. view of the depends further assumed all au- mination ques- reach the constitutional I do not case proceed thority to details importance here it is clear from the his- matter, reaching far tion because of such 77, protection tory legislation Section fundamental to the rights against invasion under the the Commission undertaken exercise 332 power Congress intended never
to confer on the Commission. This was pointed
well by Judge Sibley in his
decision while sitting Judge District in a former proceeding in In re this matter. Co., Florida East Railway D.C., F.Supp. 926. This view expressly aр
proved .by special the writer in his concur rence appeal former case.
Atlantic Coast Co., Line v. Paper St. Joe Cir., 538, F.2d 545. It is reaffirmed
today. denied;
Rehearing BORAH RUS- dissenting. Judges,
SELL, Circuit Bourne, City,
Edward W. New York Howell, C,, Wilmington, Charles Cook N. Howell, Jr., Jacksonville, Charles Cook Fla., appellant. Walton, Cicero, Acting Miller E. John
City Atty., Miami, Fa., Thom- Clifton S. son, City, Osborne, New York H. P. Jack- Macfarlane, sonville, Fa., Howard F. Cyril Bedell, Tampa, Fla., C. COAST RY. CO. Chester re FLORIDA EAST R. v. ST. ATLANTIC COAST LINE CO. Copp, Patterson, Henry Adair P. Giles J. JOE CO. et al. PAPER Fla,, Ashby, Jacksonville, and Clarence G. No. Russell, C., for Spartanburg, Donald S. appellees. Appeаls, United States .Court of Fla., Butler, Jacksonville, Turner Fifth. Circuit. J. Scott, New P. and Willard Fred N. Oliver Jan. Lynch City, Interests. York Fla., for Jacksonville, Frink,
Russell L. *8 trustees. debtor’s HUTCHESON, Before ’Chief ' RUSSELL, HOLMES, BORAH, RIVES, Judges. Circuit HUTCHESON, Judge. Chief authorizing appeal from order1 property the debtor trustees capital purchase 2464 shares Company Express stock Fruit Growers with, to, ancillary submitted and was for the advanced to have been are authorized and di The Trustees 1. “1. purchase 'holders of the First for and account to subscribe rected Mortgage Refunding capital Florida acquire bonds 2464 shares of stock Railway Company Express Company, who shall a cor Bast Coast Fruit Growers therefor, per par share, and to secure poration, be reimbursed value of $100 said pay holders of said funds such reimbursement out of in their therefor Refunding Mortgage bonds $246,400 sum of First hands Trustees hereby being per cash, shall have $100 share. The title the cash lien be taken name said stock shall .to corporation Railway Company. extent of Florida East Coast $246,400 hereby and ex- so advanced sum of “2. funds authorized purpose pended pur- mentioned expended Trustees be only subject Order, lien shall said in the amount of stock chase securing mortgage expended lien of the $246,400 shall when deemed