11 F.2d 680 | 2d Cir. | 1926
(after stating the facts as above).
The consolidation of the causes was merely procedural and affected no substantial interest. It was certainly justified.. Toledo, etc., R. R. v. Continental Trust Co., 95 F. 497, 505, 506, 36 C. C. A. 155 (C. C. A. 6). The general creditors might, of course, have insisted upon a sale of the incumbered assets separately, had they chosen, but it would have been a foolish course, for obvious reasons. There can be no question that they had the power to consent to a single sale. This, of course, involves the necessity of apportioning the purchase price in some other way than by valuations established by auction sales. The National Surety Company does not, however, as we understand it, complain of that, but insists that the apportionment should have been made after a judicial determination, based upon evidence, for which no guesses, however honest, were a proper substitute. In principle we quite agree. A court may not dispose of the interests of suitors without evidence, or cut a Gordian knot, because it takes time and money to untie it. But we are not prepared to say that a majority of the general creditors may not themselves come to a composition with lienors upon the apportionment of the purchase price, which will bind a minority. It may be that in such a composition the lienors ought not to be allowed to vote as general creditors at all; that would appear essential, since they have self-contradictory interests. It must be that a single creditor may show anything which easts any doubt upon the good faith of his fellows. It may again be that claims may not vote which have been assigned to a reorganization committee having a possible interest in preferring the lienors. In any case, a court ought to look at such votes with a suspicious eye. But if it appears that a majority of the general creditors, actuated only by their own interest, prefer an honest settlement to a tedious and expensive litigation, we do not hold that a minority may gainsay them.
We leave the point open, because we think it unnecessary to decide whether, if the majority has such a power, it was properly exercised here. Had the appeal come up before the sale, we might indeed have felt bound to decide that question, but after the sale the situation has changed. What might be a doubtful or untenable principle abstractly, may effect a reasonable enough result in a given ease. In the case at bar it seems to us that the $600,000, which constitutes the free assets, is so nearly the utmost that the general creditors could get on any showing, that no possible good can come of a long trial, appraising the assets under form of law.
We say this because the estimate of the National Surety Company, made after a full disclosure of the facts, was only $625,000. It cannot be supposed that this was not at fuE values, and it was surely represented adequately by the $600,000 obtained at an auction sale. Again, the estimate of the defendant put the free assets at only one-elevcnth of the whole property. We do not ignore the claim against the United States for $250,000, which is in litigation. Plainly no appraisal of that would be of any value. It seems to us a wanton waste of the property of aE concerned to direct a general appraisal — for that would be necessary — on the chance that the recovery in the suit against the United States would raise the free assets to a greater proportion of the purchase price than $600,000. This is especiaEy true, in view of the bondholders’ power to prove in equity for the fuE face of • their bonds, regardless of their security.
WhEe, therefore, we are not disposed to assent to the method taken, or even to say that the consent of the general creditors, when purged of all question, would have been conclusive, we think that the National Surety Company has made no case for imposing so onerous a burden in the pursuit of so re-, mote and uncertain an advantage. As to the defendant, we cannot see how it is concerned in any way with the division of the creditors’ spoE.
There remains, as we view it, only the question of confirming the sale. Various objections are raised: First, the decree in substance provided that the buyer should guarantee any dissatisfied creditor 10 per cent., or at his option as much as he could show his share would be above one-seventh of the bid. This, it is said, dulled the bidding. We think that it might, and that it was an undesirable term of sale to introduce. In general, it is a safe ruje that the bidder must know his liabEities, at least within easEy ascertainable limits. This clause left open an altogether vague liabEity, on which he must gamble, and he would certainly make sure, out of the face of his bid, that the odds were not against him. Once more, except for the result, we might find it impossible to affirm the decree, and we wish expressly to withhold assent to this provision. But we can hardly see how it could have done any harm, as things turned out. The successful bidder was driven to his last bid by the reorganization managers. Their bid represented the value of the prop
Besides, the last bid of the managers represented the full value to them of the property, and was an appraisal of it by those entitled to make their opinion valid. In letting the property go for more, they, the enormous majority of those interested, in effect parted with it to an outsider. It would take a strong showing to persuade us that the sum agreeable to them was inadequate. As for the defendant, we are disposed to give it the shortest shrift possible. It had had five years or near it to prepare to redeem, and, having failed, it must go the way of others who borrow and cannot pay.
Lastly, the sale of the cash, while, so far as we can see, it was a meaningless provision, could have done no harm. One hand washes the other, and the bidder need merely deduct it from his bid and leave it in the receiver’s hands. Although it was improper to insert it in the decree, just because it was meaningless, the result purges that original fault. We assume that it was put in against the possibility that the managers should buy in the property. Had they done so, it might have caused trouble.
Decrees affirmed.
