1. The first question we face is whether or not the action of Bisgeier and Cohen in purchasing certificates for the purpose of securing the approval of the plan was in “good faith,” for a finding that these purchases were in “good faith” would preclude the consideratiоn of any other questions. The mere fact that a purchase of creditors’ interests is for the purpose of securing the approval or rejection of a plan does not of itself amount to “bad faith.” When that purchase is in aid of an interest other than an interest as a creditor, such purchases may amount to “bad faith” under section 203 of the Bankruptcy Act, 11 U.S.C.A. § 603. Cf. Town of Bellaire, Fla. v. Groves, 5 Cir.,
2. Section 203 of the Bankruptcy Act provides for a hearing before a finding of lack of “good faith.” But Bisgeier and Cohen admitted the facts on which the disqualification rests. The appellant complains about lack of hearing, but since the purchased certificates were not counted in the voting, it is difficult to see what results could be achieved by a further hearing.
3. The appellant argues thаt since the certificates purchased by Bisgeier and Cohen were not purchased in “good faith”, not only are they not to be voted, but the negative votes of the previous holders of the certificates are to be reinstated. Should we accept this contention, thеre would not have been a sufficient number of votes to approve the plan. But we do not accept that argument. The statute (§ 203) рrovides for the “disqualification” of creditors’ interests which have not been purchased in good faith. The court below carried out the mаndate of the statute by refusing to accredit the certificates voted by Bisgeier and Cohen. To permit the votes of former certificаte holders to be counted would be to permit those with no interest in the plan to control its acceptance. It would mean disregard of the approval of two-thirds of the certificate holders who have retained an interest, in the enterprise. We hold that the neсessary number of votes for approval of the plan by the creditors was secured.
4. It is contended that the creditors never had a сhance to vote on the modified plan. But the District Court need not submit for approval such modifications as necessarily benefit the сreditors. Bankruptcy Act, § 222, 11 U.S.C.A. §§ 622.
5. It is argued that since the purchase of the certificates resulted in discrimination in favor of those creditors who sоld to Bisgeier and Cohen, the plan must be rejected as not “fair and equitable.” We find ourselves pulled in two directions here. We agree thаt the purchases by Bisgeier and Cohen resulted in an inequity among the creditors, since those who sold to Bisgeier and Cohen received 50 cеnts in cash, while the plan provided for payment of 50 cents on the dollar, partly in cash and largely in mortgage securities. At the same time, we are convinced that the confirmation was in the best interests of the certificate holders. If it were possible to protect the interests of the other certificate holders and at the same time eliminate the discrimination, our path would be an easy one. 2 But it appears that the original offer of Bisgeier and Cohen was the best available. Subsequently, the offer was made even more attractive to the creditors by the cancellation of participation of $147,798 worth of certificates and the resulting increase in cash distribution pеr share and decrease in the mortgage. We cannot recreate the status quo ante. 3 We agree with the S.E.C.’s assertion that “when confronted with acts of discrimination, the powers of a court of equity are not confined to a mechanical denial of confirmatiоn.” It is the duty of the court to choose the path most advantageous to the remaining creditors.
*899 It is urged that we should “preserve the integrity of thе reorganization process.” We should indeed. But the basic purpose of Chapter X is to procure a plan which will best serve the рarties legitimately interested; and a reversal here, on the facts before us, would defeat that purpose. Justice will not be achiеved by a decision purporting to vindicate a principle which injures those whom the principle was designed to protect. Principlеs are what principles do.
6. The appellant asserts that Bisgeier and Cohen should have reported the fees paid to Newburger, Lоeb & Co. for acting as broker in the purchase of the certificates. It is true that § 221, subd. 4, 11 U.S.C.A. § 621, subd. 4, requires that all compensation for services rendered in the reorganization proceeding or in connection with the plan be submitted to judicial scrutiny. This section aimed to eliminate the practice of fixing reorganization fees and expenses by private arrangement, thereby decreasing the effective amount of recovery of the creditors. But it obviously was not intended to require the approval by the court of matters like the commissions paid а broker for the purchase of creditors’ certificates.
Affirmed.
Notes
“The Choice of Hercules, of which the Greek myth makes so much, has always seemed to me too obvious. Anybody knows how to choose between Virtue and Vice. What worries us is the constant necessity of deciding betwеen two nearly right courses of action. Such a decision may well cause agonized hours of hesitation before it is made.” Chafee, Book Review, 56 Harv.L.Rev. 833, 836 (1943).
Should we send the plan back for reconsideration and find that as a result Bisgeier and Cohen’withdraw their offer, the certifiсateholders would be faced with a choice of accepting one of the less advantageous offers or a sale at public auction. Neither of these promises much hope to the certificateholders of a return equal to the one they receive under the plan as it now stands.