Petition for Writ of Certiorari — Patsis v. Immigration & Naturalization Service

OificeSupreme Court, UR

FILED

JAN 27 1965

"OWN F. DAVIS, CLERK

IN THE

Supreme Court of the Rnited States

Ocroser Term, A.D. 1965

No. 8 6() |

IN THE MATTER OF THE WOODMAR

REALTY COMPANY, a Corporation,

Debtor,

MAR In Proceedings for

woe REALTY COMPANY, the Reorganization

Petitioner. of a Corporation.

Vs.

WALTER A. McLEAN, Trustee, ET AL.,

Respondents.

* * * * *

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH Ciaxcuit

(Orders And Opinions Of The United States

District Court Are Appended.)

- OWEN W. CRUMPACKER,

HAROLD ABRAHAMSON,

RICHARD P. KOMYATTE,

5217 Hohman Avenue,

Hammond, Indiana,

MILTON K. JOSEPH,

120 S. LaSalle Street,

Chicago, Illinois,

Attorneys fer Petitioner.

—

—

Midwest Law Printing Co., 326 N. Michigan Ave., Chicago

Telephone: Financial 6-3988

INDEX TO PETITION.

I TRIE cn scicccscrenceendies ee nh tirana ok eoaret Es

Grounds for Invoking This Court’s Jurisdiction -......

Questions Presented for Review ..............-.-.:-::1ee ee

Constitutional Provisions, Rules, ete. Involved .........

Conseies Statomont of the Case’ ......:..........--20...0..2...0....

PRE UIINOINE aaa ern cagesnsnncenctectbsnin agree geensnseerscannacdoneconsvniatene

Confronted with a simple situation where no ground

for dismissal of your Petitioner’s timely appeal ex-

isted, the Court of Appeals accepted a statement by

the District Court in an opinion accompanying the

order appealed fromi as reason for refusing to per-

form its statutory judicial function and denying your

Petitioner its right of appeal as granted by Congress ..

4

A. The District Court had no right to render

a final, unappealable, decision on a question of

RS SAE BPG Seopa Ak LR DAR PMS OR AE EL A ER

RB. The order and opinion of Aprii 28, 1964,

constituted an erroneous decision of law. No

evidence was offered or heard. The District

Court’s views on inatters of law could not and

cannot preclude a review of that decision on

i AM + SAMO SEE Ser Sa ee Sn See ACNERO Mag abe epee Baer oes mises

15

ii

C. The Court of Appeals for the Seventh

Cireuit has placed an unwarranted interpreta-

tion on the right to be heard on appeal granted

hy the 1938 Chandler Act, 11 U.S.C. 47(a) and

606. in conflict with decisions of other cireuits .... 19

Il

The case of In Re: V.I.D., Ine., 7 C.A. 1955, 226

Fed. (2d) 113, is not authority for denying your peti-

tioner its statutory right of appeal -............-.-.-.------- 20

Ixpex To APPENDIX

District Court’s Opinion on Vacating Settlements -... la

District Court’s Order Vacating Settlements -..........-.- 16a

District Court’s Opinion on Reimbursement for Costs .. l7a

District Court’s Order Reimbursing Lien Claimants .. 19a

Tapir or Cases

Albin v. Cowing Pressure Relieving Joint Co., et al,

(1942) 317 U.S. 211, 212, 63 S. Ct. 170, 171 -.....-- 17

Gleason v. Carr, (9 Cir. 1955) 219 F. 2d 64 -........ uke 20

Horowitz y. Kaplan, (1 Cir. 1951) 193 F. 2d 64 —....... 20

In the Matter of the Woodmar Realty Company (7

ie OU OR OE UN ieee 8,

In re Hupkins. (D.C.R.1. 1926) 15 F. 2d 206 -.............. H

In re Povill, (2 Cir. 1939) 105 F. 2d 157 .............-----.----- 1]

In re South State Street Bldg. Cerp.. (7 Cir. i944)

re eT cei avecedeesn nin wereesasovneenpenwvennstneracenneceves 20

In Re: V.LD.., Inc., (7 Cir. 1955) 226 F. 2d 113 _...... 3, 20

In re Witherbee, (i Cir. 1913) 202 F. 896 .................-.-.--- 11

ili

In re Woodmar Realty Company, (7 Cir. 1960) 284

RS | RAR REARS ene Rise dr. er i eee ec 5, 12

Luteher & Moore Lumber Co. v. Knight, (1910) 217

ck Me OS AS eerie on 5 eRe a ae a 17

Parissi v. Telechron, Inc. and General Electric, (1955)

A es Se, gisheaa Seta Rea nticiee aes aan See 17

Societe Internationale ete. v. Rogers, (1958) 357 U.S.

ae ie Mi I ie cai cettsem speentrcnlahiniasianp ponies 18

Syracuse Broadcasting Corporation v. Newhouse, (2

CUR, Te ee, Bc Re OO picreecccntesernion rence 18

Young v. Higbee Co., (1945) 324 U.S. 204, 65°55. Ct.

Eee ne edt PRG aN ae RCN Se Doe Aan ROL BaD 19

ConstTiITUTION, Statutes, RULEs.

ag eS net FPR GR” jg ia aaa A cone e oer rene 6,17

ie a aia cin cena ekreeremee dormer pteeobecotnoin am 6

SI a iceeicalatd 3

et I cacanmaghetackccdaiec panpenanssss Someone 7, 17

rs I a scan pssepencede nc ninenoesens 8

Bis ot Cot Deane emunnn anu ern ao ere 4, 7. 17, 19, 20

eit Se 2} | ——— 5 Oe I MICHA AEN Pend LTH Me 8

TExTs.

1GA C.LS.. Constitutional Law. 6 567, p. 541 2... 18

IN THE

Supreme Canrt of the United States

Octoser Term, A.D. 1965

No.

IN THE MATTER OF THE WOODMAR >

TY COMPANY, a Corporation,

Debtor,

In Proceedings for

. the Reorganization

of a Corporation.

WOODMAR REALTY COMPANY,

Petitioner,

VS.

WALTER A. McLEAN, Trustee, ET AL.,

Respondents. |

*

PETITION FOR WRIT OF CERTIORAR! TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

(Orders And Opinions Of The United States

District Court Are Appended.)

To The Honorable, The Chiet Justice and Associate Jus-

tices of The Supreme Court of the United States:

-The above named Petitioner, as the Debtor Corporation

ina 24 year old Chapter X reorganization, respectfully

allise

petitions this Court to issue its writ of certiorari to said

Court of Appeals to review that Court's judgment and

order dismissing an appeal from orders of the United

States District Court for the Northern Dist-cict of Indi-

ana. Hammond Division, vacating settlement stipuiations

between vour Petitioner and 102 separate lien claimants

and reimbursing 2 lien claimants for substantia! costs

adjudicated against them in a prior appeal. The dismissal

of the appeal occurred without a hearing on the merits

although all procedural steps were taken within the time

provided for by law.

OPINIONS BELOW.

The Court of Appeals did not render an opinion. Its

per curiam order of September 25, 1964, dismissing your

Petitioner's appeal, is as follows:

“This matter comes before the Court on the veri-

fied motion of Walter A. McLean, Trustee, appellee

in this matter, to dismiss appeal, together with brief

in support thereof: answer of Woodmar Realty Com-

pany. a vorporation, to seid motion, with brief in

support of said answer: and the appellee’s reply to

appellant’s answer to appellee’s motion te dismiss,

with brief in support thereof.

On consideration whereof, It Is Ordered and ad-

judged by this Court that this appeal from orders of

the United States District Court for the Northern Dis-

triet of Indiana, Hammond Division, entered therein

on April 28, 1964, be, and the same is hereby Dis-

missed, with costs. it appearing to the Court that

"

——.)

the appellant is no longer a party in in.erest and

lacks standing to appeal. (Jn Re: VAD. Inc.. 7 CLA.

1955, 226 Fed. (2d) 115).

All other pending motions filed in this appeal

are thus rendered moot and need not be decided.”

The opinion and order of the District Court, dated

April 28, 1964, vacating the settlement stipulations be-

tween vour Petitioner and the 102 lien claimants is set

out as Appendix “A”, infra, at pages la through i6a.

The opinion and order reimbursing the 2 lien claimants

for appeal costs adjudicated against them, also entered

under date of April 28, 1964, is set out as Appendix “B”,

infra, at pages 17a through Za.

GROUNDS FOR INVOKING THIS

COURT'S JURISDICTION.

This Court's general jurisdiction to review final judg-

ments of the Courts of Appeals in reorganization and

bankruptey cases is involved.

The Court of Appeals fof the Seventh Circuit rendered

its order and judgment dismissing the appeal on Septem-

ber 23, 1964, following which a timely Petition for Re-

hearing by this Petitioner-Debtor was filed. The Petition

for Rehearing was denied by an order entered on October

14, 1964. Within the 90 days allowed for the filing of a

Petition for Writ of Certiorari, and on January 11, 1965,

the time was extended by order entered by Mr. Justice

Tom C. Clark to and including January 27, *965.

This Court’s jurisdiction is based upon 11 U.S.C.

(Bankruptey), § 47 (¢), and 28 U.S.C. 1254 (1)

par ete

QUESTIONS PRESENTED FOR REVIEW.

(1) Whether or not the appellant Woodmar Realty

Company, as the corporate debtor in a 24 yeer-old reorgani-

zation, is entitled to a hearimg on the merits in the Court

of Appeais for the Seventh Circuit on an appeal from an

order entered by a District Court vacating and setting aside

102 settlement stipulations entered imto, with prior court

authority and prior court approval] under mandate of the

Court of Appeals, by the Woodmar Realty Company and

102 lien claimants.

(2) Whether or not the statutory right of a debtor

corporation in a corporate reorganization to be heard in

the District Court ineludes a right to be heard on the merits

on appeal. Section 206 of the Bankruptey Act, 11 U.S.C.A.

6606, provides that “The debtor * * * shall have the right

to be heard on all matters arising in a proceeding under

this chapter.” Your petitioner, the Debtor corporation, was

heard in the District Court as a party on the matter of the

racating of 102 settlement stipulations between it and 102

iien claimants. Being a party to the 102 settlement stipula-

tions in the Distriet Court, it has the right of appeal from

an order vacating its settlement stipulations. The order of

dismissal denied this right.

(3) Whether the law of the ease, as established by the

Court of Appeals in two earlier appeals in the same pro-

ceedings, is Dinding upon the Court of Appeals in subsequent

proceedings in the same case on the same subject matter.

The Trustee’s identical motion te dismiss on the ground

that the Woodmar Realty Company was not a “party im

int rest” was Gcnied by the Court of Appeals in an earlier

appeal. In the Matter of the Woodmar Realty Company

(1957), 241 F. 24 768. The right of the Debtor, Woodmar

Realty Company, to either litigate or settle lien claims

was established as the law of the case in a second appeal.

In the Matter of the Woodmar Realty Company /1960), 284

F. 2d 315. The mandate of the Court of Appeals, directed

the lower court to approve the 102 settlement stipulations.

() Whether or not the Court of Appeals for the

Seventh Circuit has authority, either by statute or case law,

to dismiss an appeal without a hearing on the merics,

where the appeal ts taken by a party whose rights have

been materially affected in a direct peeuniary way by the

order complained of on appeal and waere the party seeking

to appeal has complied with all of the procedural statutes

and rules governing its appeal. The only parties imterested

in the debtor's assets, consisting only of $465,290 in eash,

are special improvement bond (lien) elaimants and_ the

Woodmar Realty Company and its stockholders. 102 of

the 300 lien claimants settled for a combined total sum of

$40,272.50. The Trustee proposes to distribute $116,762.59

to the 102 claimants. The total proposed by the Truste> to

pay all 300 lien claimants is $867,469.39. By vacating the

102 settiements the estate and, ultimately, the Woodmar

Realty Company, loses $76,489.89.

—

CONSTITUTIONAL PROVISIONS, RULES,

ETC., INVOLVED.

Congress has established the jurisdiction and duty of

the Court of Appeals to review decisions of the District

Courts in bankruptey matters by express provision of

the Bankruptey Act, Section Twenty-Four, 11 U.S.C.A.

§ 47:

**§ 47. Jurisdiction of appellate courts.

(a) The United States courts of appeals, in vaca-

tion, in chambers, and during their respective terms.

as now or as they may be hereafter held, are in-

vested with appellate jurisdiction from the several

eourts of bankruntey in their respective jurisdictions

in proceedings in bankruptcy, either interlocutory or

final, and in controversies arising in proceedings in

bankruptcy, to review, affirin, revise, or reverse, both

in matters of law and in matters of fact: Provided,

however, that the jurisdiction upon appeal from a

judgment on a verdict rendered by a jury. shall

extend to matters of law only: And provided, further,

that when any order, decree, or judgment involves

less than $500, an appeal therefrom may be taken

only upon allowance of the appellate court.

(b) Such appellate jurisdiction shall be exercised

by appeal and in the form and manner of an appeal.

(c) The Supreme Court of the United States is

vested with jurisdiction to review judgments, de-

crees, and orders of the United States courts of

appeals in proceeding under this title in accordance

with the provisions of the laws of the United States

now in foree or such as may hereafter be enacted.

As amended May 27, 1926, c. 406, § 9, 44 Stat. 664;

June 7, 1934, c. 426. 48 Stat. 926; June 22, 1938, c.

575, § 1, 52 Stat. 854; June 25, 1948, c. 646, § 32, 62

Stat. 991; July 7, 1952; ¢. 579, § 9, 66 Stat. 424.”

(Our emphasis).

11 U.S.C. 47

=

As the Debtor in a Chapter X reorganization your

Petitioner’s standing to appeal is derived from Section

206 of the Benkruptey Act, 11 U.S.C.A. ¢ 606, whieh pro-

vides that:

‘**Sec. 606. The debtor, the indenture trustees, and

any ereditor or stockholder of the debtor shall have

the right to be heard on all matters arising in a

proceeding under this chapter. The judge may, for

cause shown, permit a labor union or emplovees’

association, representative of employees of the debtor.

to be heard on the economic soundness of the plan

affecting the interests of the emplovees.”

The right granted by Congress is an unqualified right.

The right to be heard in the Distriet Court ineludes the

right to be heard on appeal on the merits. The. Distriet

Court does not have the right to render final determina-

tions of law in rendering orders and judgments.

Congress, in passing the Chandler Aet. made certain

inat the right of appeal was preserved by Section 121,

11 U.S.C.A., § 521:

‘*$ 521. Appellate Jurisdiction.

Where not inconsistent with the provisions of this

chapter, the jurisdiction of appellate courts shall be

the same as in a bankruptey proceeding. July 1, 1898.

e. S41, § 121. as added June 22, 1938, C. 575, ¢ 1, 52

Stat. 885.”

11 U.S.C. 521

sielibiee

CONCISE STATEMENT OF CASE.

A concise statement for a 24 year old reorganization ts

most difficult.

The jurisdiction of the District Court for the Northern

District of Indiana, Hammond Divisicn, was invoked on

January 13, 1941, by the filing of a creditor’s petition under

the Chandler Act (Chapter X of the Bankruptey Act) for

the purpose of the reorganization of your petitioner, an

Indiana corporation, engaged in the real estate business

in Hammond, Indiana (11 U.S.C.A. §526-533).

The creditor’s petition was filed by four holders of City

of Hammond municipal improvement bonds representetive

ot alleged statutory lien rights upon certain of -the real

estate ownec in fee simple by your petitioner, the Wood-

mar Realty Company. Your petitioner, the Woodmar Realty

Company, as Debtor, appeared on January 24, 1941 and

filed an answer consenting to reorganization under Chapter

XA.

A trustee in reorganization, Charles L. Surprise, was

appointed by the District Court on January 21, 1941. An

amended plan of reorganization was adopted on July 3,

1941, consented to by tlie six classes of reorganizafion

creditors (ineluding the stockholders) and confirmed by

order of the District Court entered on November 22, 1941.

The amended plan of reorganization, providing for the

issuance of corporate stock in the reorganized corporation,

was never consummated. By order entered on February 16,

1953, the amended plan of reorganization was discarded

and an order entered pursuant to Section 636(2) of the

Bankruptey Act, 11 U.S.C.A. $636(2), adjudging vour peti-

siaiiions

tioner bankrupt and directing that bankruptey be proceeded

with pursuant to the provisions of the Bankruptey Act.

On January 13, 1941, your petitioner’s assets consisted of

104014 iots (both business and residential, improved with

streeis, sewers, sidewalks, and water mains) in Hammond,

Indianx. The real estate was valued at $2,350,000 in the

Trustce’s Financial Report filed on March 20, 1941. During

the first 10 years that the reorganization proceedings were

pending, Trustee Charles L. Surprise sold ail of the real

estate in separate sales for the gross sum of $695,945.01.

Real estate commissions, title costs, administrative ex-

penses, including preliminary fees, ‘otaled $216,993.58,

leaving a cash balance on hand on Mareh 22, 1951 of $491,

988.96. That sum has now been reduced to $465,290.00.

During the first vear that these proceedings were pend-

ing, the class one claims (general delinquent real estate

taxes) and the elass three claims ($300,000 in mortgage

bonds secured by a trust deed) were compromised and paid

pursuant to the terms of the reorganization plan through

the conveyance to the indenture trustee of a portion of the

Debtor’s real estate. Your petitioner’s assets were used

for this purpose. In subsequent vears, the class four claims

(judgmeut creditors) and class five (unsecured creditors)

were disposed of through the efforts of the Woodmar

Realty Company. The only problem which is and has been

eonfronting the District Court since at least April of 1951

has been the disposition of the class (2) two, or City of

Hammond special improvement bond claims. There are

300 of these _undisposed of.

The improvement bonds were not and are not the contrae-

tural obligations of the Woodmar Realty Company, but orig-

inally represented alleged statriory lien rights in its land

\

|

ee

(and other lands). When the land of the Woodmar Realty

Company was sold by the Trustee, free and clear of the

liens, the liens, if any, represented by the voctstanding

municipal honds were transferred to the proceeds of the

sale. The trustee commingled the proceeds of the sales.

During the 24 years that these proceeding: have been

pending, approximately 300 separate Class 2 claims had

been filed by the alleged owners and/or holders of various

defaulted City of Hammond special improvement bonds

issued prior to 1930. On November 22, 1941, the District

Court ordered Trustee Surprise to file objections to the

“Class 2” claims and cause hearings to be had on the issues

thus formed. No objections to the “Class 2” claims were

ever prepared or filed by the then Trustee, Charles L. Sur-

prise, or his successor, respondent Walter A. MeLean,

Trustee, or any hearings had thereon.

Trustee Surprise, his then attorney, and other fiduciaries,

secretly and pendente lite, purchased. either directly or

indirectly. large numbers of the defaulted municipal im-

provement bonds which they then attempted te recover on

from the cash assets in the possession of Trustee Surprise.

In Anril of 1951, the Woodmar Realty Company filed

extensive objections and other pleadings in opposition te

the distribution program of Trustee Surprise and the pe-

titions of the fiduciaries seeking an allowance of $296,000

in fees out of the then net $491,988.56 cash balance. None

of the fiduciaries objected to either the distribution plan or

the fee”petitions of each other. Following prolonged hear-

ings, and on October 29, 1952, the District Court ruled in

favor of the Debtor, the Woodmar Realty Company.

Instead of filing objections to the Class 2 claims, and on

September 7, 1955, the present Trustee, Walter A. McLean,

pe), mee

filed a document entitied “Trustec’s Final Report; Petition

For the Determination of Amounts Due on Special As-

sessment Bonds and Coupons Constituting Secured Clains

as Against Funds in This Matter and For an Order Di-

reeting Payment Thereof, Ete.” Thereupon, the Debtor,

Woodmar Realty Company filed written objections to the

Trustee's Final Report, etc.” and, with leave granted by the

District Court, filed 274 separate sets of objections to 274

out of the 300 odd claims. (Subsequently, objections were

filed to the remaining Class 2 claims.) The issues formed

on ‘‘The Amended Trustee’s Final Report, etc.’’ have not

been determined.

Respondent trustee, Walter A. MeLean, and certain of

the lien claimants filed motiens to str.ke out™he Woodimar

Realty Company’s objections on the ground that the Wood-

mar Realty Company wes not a “party in interest”. The Dis-

trict Court’s order sustainmg the motions was reversed on

appeal to the Court of Appeals for the Seventh Cireuit. In

the Matter of the Woodmar Realty Company, Debtor

(1957), 241 F..2d 768. A motion to dismiss, identical to

the motion granted by the Court of Appeals on September

23, 1964, was denied. the Court of Appeals stating, in per-

tinent part, as follows:

“The bankrupt has been permitted to object to al-

lowance of claims in cases where in the event of dis-

allowance there would be a surplus left for the bank-

rupt. In re Povill, 2 Cir., 105 F. 2d 157; In re Hopkins,

D.C.R.L, 15 F. 2d 206 (on petition to review); ef., Jn

re Witherbee, 1 Cir., 202 F. 896. The bankrupt here has

brought itself within this exception to the general rule.

The bankrupt’s interest in having claims in excess of

$300,000 disallowed, in which event a_ substantial

surplus would be available for the bankrupt, is obvious-

ly real, and the conclusion is inescapable that under

~

eniias

these circumstances the bankrupt is a ‘party in inter-

est’.’’ (241 F. 2d 768, page 771)

On remand, one of the lien claims, Claim No. 441, was

set down for trial. The Trustee neither filed pleadings nor

did he attend the trial. Claim No. 441 and the Woodmar

Reaity Company’s objections thereto, tried in July of 1957,

is the only claim ever tried. The District Court handed

down findings 4 vears later, in 1961.

At the suggestion of the then Judge of the District

Court, the Woodmar Realty Company filed a petition for

authority to negotiate settlements. An order was entered

on July 22, 1957. granting the Woodmar Realty Company

and special improvement bondholders authority to enter

into compromise negotiations, any compromise agreements

to be subject te the approval of the court. This order wa-

reconfirmed on August 30, 1957.

Pursuant to the orders so entered, the Woodmar Realty

Company entered into settlement stipulations, filed of rec-

ord, with 102 lien claimants. The Trustee fled a petition

for instructions in connection therewith. Hearings were

heid in 1958 on the question of approval of the 102 settle-

ment stipulations. Written notice was given all parties of

record. No objections to the approval of the 102 settlement

stipulations were filed or made. Notwithstanding the lack

of objections, the District Judge, on January 16, 1960, en-

tered an order denying approval of the 102 settlement stip-

ulations. The Woodmar Realty Company, Debtor, appealed

from this order. The order was reversed. In re Woodmar

Realty Company (1960) 284 F. 2d 815. The Court Of Ap-

peals established the law of the case, in pertinent paft, as

follows :

“The balance of this depleted fund would become

the property of Woodmar. The more that was allowed

= we

the lien claimants, the less Woodmar would recover

from its property. The less that the claimants would

receive, the more Woodmar would recover.’’

>. * * oe e

‘*The pending litigation was in reality between Wood-

mar and the lien holders. Whether it was litigated to

a finish or settled, they were the ones whe would

ultimately be affected thereby. Such: litigation was

really an ordinary civil controversy. The parties,

whether in litigating in the courtroom or in settling

outside the courtroom, were “ngaged in an adversary

activity and dealing at arms’ length.” (284 F. 2d 810,

page 817) _

.

Following remand, and on July 21, 1961, the District

Coart entered an order approving the 102 settlement stipu-

lations. Notwithstanding the fact that the settlement stipula-

tions so approved expressly provided the dismissal of the

claim and immediate disbursement of the proceedings of

the settlement to each of the 102 lien claimants, the Trustee

failed and refused to carry out the settlement stipulations.

On September 6, 1962, 3 out of 102 lien claimants who had

settled. serve? and filed a “Petition to Re-doecket Three

Claims.” Following notice to the Woodmar Realty Company

and oral argument held on February 28, 1964, the District

Court, on April 28, 1964, entered orders with opinions va-

cating the 102 settlement stipulations and ordermg ¢

Trustee to reimburse Gardner and Phrommer for their ap

le

—

peal costs. The opinions and orders are printed m the ap-

pendix, infra.

Your petitioner, the Woodmar Realty Company, filed its

notice of appeal in tae District Court on May 28, 1964,

paying the requisite “Designation of Contents of Record

on Appeal”. The record on appeal was duly filed on August

17, 1964 and the docket fee paid. The record was filed in

pe eee

the Court of Appeals within the time allowed by the rules,

as extended by order of the District Court. On or about

August 22, 1964, Walter A. MeLean, Trustee, filed a “Ver-

ified Motion to Dismiss on Appeal” on the sole ground

that the Woodmar Realty Company was not a “party in

interest”. The Woodmar Realty Company, appellant, served

and filed its verified answer. Appellee-trustee filed a reply.

The appea! was dismissed on motion of the Trustee Walter

A. McLean, on the sole ground that the Woodmar Realty

Company was not a “party in interest”.

Confronted With A Simple Situation Where No Ground

For Dismissal Of Your Petitioner’s Timely Appeal Exist-

ed, The Court Of Appeals Accepted A Statement By The

District Court In An Opinion Accompanying The Order

Appealed From As Reason For Refusing To Perform Its

Statutory Judicial Function And Denying Your Petitioner

Its Right Of Appeal As Granted By Congress.

A.

The District Court Had No Right To Render A Final,

Unappealable, Decision On A Question Of Law.

It will be observed that the Woodmar Realty Company,

as the Corporate Debtor, is a party to each of the 102

settlerhent stipulations. Eaeh of the 102 contracting claim-

ants is the only other party to the settlement stipulations.

There were and are no ‘‘parties in interest” in the 24

vear-old reorganization other than Woodmar Realty Com-

pany and lien claimants.

Each of the 102 settlement stipulations established a

contract right belonging te the Woodmar Realty Com-

pany. Each of the 102 lien claimants has a contract right

to have immediate disbursement out of the $465,290.00 in

cash assets upon the dismissal of its claim. The 198

remaining lien claimants, who chose to have their lien

claims adjudicated, did not object to immediate distri-

bution in 1958 or at any time thereafter.

The settlement stipulations were furmally approved by

the District Judge on July 21, 1961, in obedience to the

a=

express mandate of the Court of Appeals rendered on

oo

November 23, 1960, in the following language:

**On Consideration Whereof, it is ordered and ad-

judged by this Court that the erder of the said

District Court filed therein on January 19, 1969, be,

and the same is hereby, Reversed, with costs, and

that this cause be, and the same is hereby, Remanded

to the said District Court with instructions to enter

an order approving the settlements and compromise

agreements referred to in said order of January

19, 1960, for the reasons expressed in the opinion

of this Court filed this day.” (Mandate: /n the

Matter of the Woodmar Realty Company, 1960, 284

F, 2d. 815).

Beeause of the reversal, however, the District Judge

made mere token compliance with the mandate by enter-

ing a short order of “approval”. Both the District Judge

and respondent trustee, Walter A. McLean, simply failed

and refused to consummate the settlement stipulations

in accordance with their express terms.

Because the settlement stipulations were not consum-

mated, (through no fault of the Woodmar Realty Com-

pany or the lien claimants), 5 of the lien elaimants, on

September 6, 1962. filed a Petition te Redocket Their

Claims. On January 22, 1964, 5 additional lien claimants

served and filed « “Petition To Vaeate And Set Aside

Their Compromise Settlements Or Their Claims And To

Redocket And Approve” their claims. Your Petitioner,

the Woodmar Realty Company, was the adverse party

noticed in. No evidence was offered or heard on Feb-

ruary 28, 1964. Thereafter, and on April 28, 1964, the

District Court: vacated and set aside the 102 settlement

stipulations rendering an opinion setting forth its alleged

reasons for this unusual and unprecedented action. (Page

la of the Appendix, infra.) The Woodmar Realty Com-

pany’s appeal was dismissed.

— a

The Order And Opinion Of April 28, 1964, Constituted

An Ervoneous Decision Of Lav. No Evidence Was Offered

Or Heard. The District Court’s Views On Matters Of Law

Could Not And Cannot Precluce A Review Of That “Deci-

sion On The Merits.

Congress, by express terms in the Bankruptey Act,

(11 U.S.C.A. 606, 11 U.S.C.A. 47, and 1! U.S.C.A. 521,

heretofore quoted), granted vour Petitioner, the Wood-

mar Realty Company, a valuable right of appeal.

The Supreme Court will and does grant certiorari to

protect a party litigant in its right to a “Davy in Court”:

‘*Applying this doctrine to the faets and cireum-

stances which we have previously stated, we are of

opinion that it inevitably results that the effect of

tix action of the cireuit court of appeals was sub-

stantially to deny to the plaintiffs in error in that

court, petitioners here, thetr day in court; in other

words, was equivalent to condemning them without

affording them an opportunity to be heard.

** * As it is patent from the statement we have

made that the only ground upon which the power to

issue certiorari could have heen exerted was the

failure of the court below to consider the case before

it, we think this record presents an exception to, the

general rule of procedure above referred to. In other

words, in a case like this we think the judgment of

the cireuit court of appeals must be reversed, and

the case he remanded to that court, to the end that

the duty to hear and decide it may be performed.”

(Onr emphasis).

Lutcher & Moore Lumber Co. v. Kniaht (1910)

217 U.S. 257, 30 S. Ct. 505, 509-510

See also Albin v. Cowina Pressure Relieving Joint Co.,

et al, (1942) 317 U.S. 211, 212, 63 S. Ct. 170, 171; Pariss:

v. Telechron, Inc. and General Electric, (1955) 349 U.S.

46, 75 S. Ct. 577.

=

Dismissal, without a hearing on the merits, is rarely

justified by any Court:

“* * * Dismissal with prejudice is a drastic sanc-

tion to be applied only in extreme situations. Gill v.

Stolow, 2 Cir., 1957, 240 F. 2d 669; Producers Re-

leasing Carp. de Cuba v. PRC Pictures, 2 Cir., 1949,

176 F. 2d 93, and here the preclusion order seems

an ample penalty for any lack of cooperation on

plaintiff’s part.

We hold that dismissal was improper.” (Our em-

phasis).

Syracuse Broadcasting Corporation v. Newhouse,

(2 Cir. 1958) 271 F. 2d 910, 914.

As this Court has aptly stated:

“* * * These decisions establish that there are

constitutional limitations upon the power of courts,

even in aid of their own valid processes, to dismiss

an action without affording a party the opportunity

for a hearing on the merits of his cause. * * *”

(Our emphasis).

Societe Internationale etc. v. Rogers (1958) 78 S.

Ct. 1087, 1094.

Viewing this peculiar, unnatural, abortive dismissal

and its unnecessary and unjust results, it seems to fall

far short of the basic requirements of ‘‘due process of

law” under the Fifth Amendment:

“In judicial proceedings, due process of law means

law in its reqular course of administration through

courts of justice, in accordance with the fundamental

principles of free government. * * * (our emphasis).

16A C.J.S., Constitutional Law, Sec. 567, p. 541.

To permit a Dictrict Court to violate a mandate of a

Court of Appeals results in an obvious denial of the

rights of the party who has been compelled to appeal in

aa ae

order to obtain the mandate. The subsequent vacating

of the approval of the 102 settlement stipulations de-

stroyed the rights granted the parties under the 1960

mandate of the Court of Appeals. The fact that the

District Court delayed action under the mandate for 4

vears and then vacated the stipulations which it had

previously approved under mandate but refused to con-

summate certainly is a matter upon which the Woodmar

Reality Company is entitled to its ‘Dav in Court” in the

Court of Anpeals.

C.

The Court Of Appeals For The Seventh Circuit Has

Placed An Unwarranted Interpretation Or. The Right To

Be Heard On Appeal Granted By The 1938 Chandler Act,

11 U.S.C. 47(a) And 606, In Conflict With Decisions Of

Other Circuits.

This Court, in Young v. Higbee Co. (1945) 324 U.S.

204, at page 210, leld in pertinent part as follows:

“Furthermore, the right of appeal granted by a

statute should not be interpreted in such wav as to

defeat rights clearly granted in other parts of the

same Act. Peck v. Jennes et al., 7 How. 612, 623, 12

L.Ed. 24i. Potts and Boag appealed under See. 206

of the Chandler Act, which, contrary to the general

bankruptcy procedure, grants any stockholder or

creditor the right to be heard on all matters relating

to corporate reorganizations. Courts have liberally

construed this language as authorizing appeals.”

Your Petitioner, as the Debtor, was summoned in and

“heard” in the District Court on the subjeet of vacating

its 102 settlement stipulations. Having been “heard” in

the District Court, it is entitled to be ‘theard” on the

merits in the Court of Appeals. Te?’deny the right of

appea! is to engraft # qualification upon 11 U.S.C. 606

aie.

not intended by Congress and in violation of the ex-

pressed intention of Congress.

The above misconstruction of 11 U.S.C. 606 by the

decision below likewise conflicts with decisions of the

Courts of Appeals of the First, Second, Third and Ninth

Cireuits which construe this seetion as does the Supreme

Court. Gleason v. Carr (9 Cir. 1955) 219 F. 2d 64, 67,

and cases cited, Horowit: vy. Kaplan (1 Cir. 1951) 193 F.

2d 64, 66, (in which the Securities & Exehange Commis-

sion filed an amicus curiae brief opposing narrow con-

struction of the statute and opposing motion to dismiss

the appeal, pp. 65-66). The decision below also conflicts

with an earlier one in the Seventh Cireuit whieh was

in accord with the above cases. In re: South State St.

Bldg. Corp. (7 Cir. 1944) 140 F. 2d, 363. 366-367.

II.

The Case Of I» Re: V.I.D., Inc., 7 C.A. 1955 226 Fed.

(2d) 113, Is Not Authority For Denying Your Petitioner

Its Statutory Right Of Appeal.

The Court of Appeals, in its order of dismissal, cites

the VID. ease, supra, as authority.

In the T.L.D. case, the appellant was given a full hear-

ing on the merits and the dismissal occurred following

briefing and a full hearing in the Court of Appeals.

The V.I.D. ease did not involve an appeal by a Corpo-

rate Debtcz. Further, in the instant case, that the Wood-

mar Realty Company is, in facet, a “party in interest” is

established by the undisputed facts appearing in the

record as well as under the law of the ease as established

in two earlier appellate decisions.

To permit the dismissal by the Court of Appeals to

stand will not only deny your Petitioner its day in Court

as granted by Congress, but will authorize a most unwise

departure from the orderly rules of procedure to the

detriment of other future appellants in the Seventh

Circuit.

Wherefore, Petitioner respectfully prays that this

Court may issue its Writ of Certiorari to bring up and

review this case, whereupon the judgment of the Court

of Appeals may be reversed and your Petitioner given its

day in court on the merits in the Court of Appeals for

the Seventh Cireuit.

Respectfully submitted,

Owen W. Crempacker,

Harotp ABRAHAMSON,

Ricuarp P. Komyarte,

Mitton K. Joseru,

Attorneys for Petitioner.

—la—

APPENDIX ‘a’

_—

UNITED STATES DISTRICT COURT

Northern District Of Indiana

Hammond Division

In the Matter of

WOODMAR REALTY COMPANY, No. 3151

a corporation,

Bankrupt.

OPINION AND ORDER,

On July 21, 1961, pursuant to the direction of the

Court of Appeals, this court entered an order approving

compromise settlements arrived at by the bankrupt, Wood-

mar Realty Company, and the holders of 102 Class 2 claims

and % gereral claims. At that time the validity of the

bankrupt’s objections to the remaining Class 2 claims,

excepting the test elain, Claim No. 441, had not been

decided. Since that date the court has held that all of

the bankrupt’s objections to the remaining Class 2 claims

are withdut’ merit and 179 uncompromised claims have

been allowed in the amounts allocated to them in the

trustee’s final report. (See the court’s opinions of May

20, 1963 and Sentember 23, 1963 and orders entered pur-

suant to those opinions.) The orders allowing those claims

in specific amounis all provided that they were entered

without prejudice to the rights of the claimants to claim

and prove their rights to additional amounts should the

settlements approved in 1961 have made additional funds

—

(Appendix A)

available for payment of lien claims in the rolls involved

in their claims.

After the court had ruled on Claim No. 441 and the

bankrupt’s objections thereto, and on September 6, 1962,

a petition was filed on behalf of the claimants in Claims

Nos. 539, 521 and 414, settled claims, to redocket those

claims. On January 11, 1564, after the court had allowed

the 179 uncompromised Class 2 claims, the trustee filed

a petition for instructions regarding certain problems

created in the administration of this estate by reason of

the 102 settlements. Thereafter, on January 22, 1964, a

petition was filed on behalf of the claimants in Claims

Nos. 398, 399, 400, 455 and 456 to vacate and set aside

approva! of their cc ~ promise settlements of those claims

and to redocket and approve those claims. A hearing on

those petitions was scheduled for and held on February

28, 1964. Notices of hearing were sent to all parties in

interest and to the bankrupt, which is not a party in

interest,“) together with copies of the trustee’s petition.

When the petitions filed September 6. 1962 and Janu-

ary 22, 1964 came on for hearing, counsel for the trustee

informed the court that he had received letters from two

attorneys representing ten other settling claimants, the

claimants in Claims Nos. 387, 345, 468, 465, 467, 460, 459,

470, 100 and 150, asking that the settlement agreements

made by their clients be set aside. Copies of those letters

were filed with the court. Counsel for the trustee further

—

| See order of September 23. 1963.

iin

(Appendix A)

informed the court that the holders of the eighteen set-

tled claims affirmatively seeking relief from their settle-

ments held in excess of 40% in amount of the total claims

compromised.

-

Counsel for the claimants in Claims Nos. 539. 521 and

414, in the petitior filed September 6, 1962. stated that

the settlement agreements with those claimants had been

rescinded with the consent of Woodmar. and attached

correspondence indicating that those claimants agreed to

the settlements in the belief that they would be paid im-

mediately and indicating further that Woodmar agreed

to a recission of the settlements if the claimants agreed

to try their claims. No objection to the petition was filed

by any party in interest. Neither was any objection filed

by the bankrupt, but at the hearing on February 28,

1964 counsel for the bankrupt stated that he othpoted

thereto on substantially the same grounds as he objected

to the petition of January 22, 1964 which srqunds we

shall hereinafter discuss. i

Counsel for the claimants in Claims Nos. 398, 399, 400,

455 and 456, in his petition filed January 22, 1964, stated

that under the terms of their agreements with the bank-

rupt, his clients were to be paid the amount of their set-

tlements within thirty days from the date the settlements

were approved, that the bankrupt had no right or au-

thority to represent that the settling claimants would be

paid by the trustee within thirty days from the date of

approval, and that the compromises were obtained under

& misapprehension of law as to when they would be paid.

This petition too was not objected to by any party in

interest, but the bankrupt filed objections on the day of

—

(Appendix A)

the hearing claiming (1) that the attorney filing it was

not a party,@’ (2) that this court could not disturb the

mandate of the Court of Appeals ordering approval of

settlements, and, (3) that since the petitioners had not

appealed from the order of July 21, 1961 approving their

settlement agreements, the court is witheut jurisdiction

to entertain a petition to vacate that order.

Counsel for the claimants in Claims Nos. 387. 345, 468,

465, 467, 460, 459, 470, 100 and 150, whose letters to the

trustee were /cesented to the court on February 28, 1964,

stated in those letters that compromises were entered

into by their clients in the belief that the settlement

amounts would be paid within a reasonable time and,

since no payment within a reasonable time had been made,

those compromises or the order approving those eom-

promises should be set aside.

Tt is unquestionable that the claimants in the afere-

mentioned eiaims, and all claimants who entered into the

settlement agreements with the bankrupt in 1957 and

1958, which were approved on July 21, 1961, settled their

claims with the understanding that the amounts of their

settlements would be paid to them within a reasonable

time. Provisions contained in many of the settlement

agreements themselves evidence this fact. as does the

fellowing quotetion contained in a letter sent by counsel

for the bankrupt to Class 2 claimants as a part of the

©) Since the attorney filed the petition and sought re-

lief on behalf of his clients, claimants herei?, chis objee-

tion is absurd and need not be considered.

weiiiiaies

(Appendix A)

bankrupt’s settlement negotiations: (See "xhibit D at-

tached to the court’s opinion of February 11, 1960)

“The comproinise would take the form of a stipula-

tion between the parties, approved by the Court,

with an order against the Trustee to immediately

disburse to the claimant, by check, the sum agreed

upon. (We are fully aware of the fact that com.

promise negotiations would be futile unless the elaim-

ant were to receive immediate payment of the amount

agreed upon.)”

However, when the settlement agreements were approved

by this court on July 21, 1961, pursuant to the direction

of the Court of Appeals, this eourt was unable to order

payment to the settling claimants of the settlement

amounts, primarily because the bankrupt had failed to

demonstrate that funds were available in this estate out

of which such payment could be made without prejudice

to the rights of others.) The bankrupt thereafter tijed

a petition asking in part that the trustee be @rected to

pay the settling claimants their settlement amounts, which

petition was denied. (See Opinion and Order dated Janu-

ary 10, 1962) Its appeal from that denial was dismissed

by the Conrt of Appeals.

The settling claimants now seeking relief, and all set-

tling claimants, entered into settlement agreements, ap-

—

() The only document then in the record indicating that

settlement amounts could be paid without prejudice to

the rights of anvone was the trustee's amended final re-

port, which the bankrupt challenged as fraudulent.

a

(Appendix A)

proximately six years ago, under the misapprehension

created by the bankrupt that the trustee could be or-

dered to pay their settlement amounts immediately. As

counsel for the bankrupt themselves recognized, prompt

payment was a major consideration for the settlements.

The settling claimants here seeking relief correctly con-

tend that, there being a failure of that consideration, the

settlement agreements should be set aside. That same

reasoning dictates that in equity the settlig claimants

who have not sought relief should be relieved of their

seitlements since a similar failure of consideration ex-

isted as to them. We shall hereinafter discuss the fact

that the nonsettling claimants, who are the only persons

benefitted by the settlements, have no objection to such

relief heing granted.

At the hearing of February 28, 1964, counsel for the

bankrupt which, as we have stated, is not a party in in-

terest, filed a motion to strike the trustee’s petition for

instructions, contending that the petition presented no

issue and was inaccurate and that the court could not

instruct the trustee to act contrary to law. In his argu-

ment, counsel indicated that it was his position that a

trustee could not request instructions of the eourt and

that any trustee who could not perform his duties with-

out seeking instructions should resign. Although the bank-

rupt is not a party in interest in these proceedings and

has no standing to be heard regarding the trustee’s peti-

tion for instructions, we have given consideration to its

motion and the arguments of its counsel and find them

to be without merit. Trustee obviously may seek instruc-

tions from the court where necessary; petitions for in-

—fa—

(Appendix A)

structions are not designed to raise issues: the bankrupt

has pointed to no inaccuracies in the petition; and it is

not this court’s intention tu instruct the trustee to act

contrary to law.

The facts relevant to the trustee’s petition for instrue-

tions are as follows:

1. Asa result of the settlements effected by the bank-

rupt, the 102 settled Class 2 claims would receive approxi-

mately $76,600 less than the amceunts alloeated to them

in the trustee’s amended final report.

2. The 102 settled claims involved bonds and coupons

in 25 ~-'s to which the trustee had recommended alloca-

tions o| funds. Additional claims, which were not settled,

were filed in these proceedings on other bonds and cou-

pons in every one of those 25 rolls. In its opinion ef

September 23, 1963, the court considered all of the bank-

rupt’s objections to those additional claims. and held them

™ or a discussion of the nature of the rights of

holders of these bonds and coupons, issued pursuant to

Indiana’s Barrett Law, see this court’s: opinion of Sep-

tember 23, 196°. :

alice.

(* Jendix A)

to be without merit. the objections which the bankrupt

had raised to the settled claims raise no issue which was

not ruled upon by the court in that opinion. All of

the bankrupt’s objections to settled claims are without

merit and, if no settlement agreements had been approved,

those claims would have been allowed in the amounts al-

located thereto by the trustee.

3. Before this estate can be closed, the $76,000 saved

by the settlements must be paid to the persons entitled

thereto. The bankrupt is not one of those persons. The

only persons who ean benefit by reason of the settlement

agreements and funds saved thereby are other Class 2

claimants with bonds and coupons in the same 25 rolls as

the bonds and coupons held by settling claimants, or

perhaps all Class 2 cli:aants whose claims were not

©) The only exception is one objection te Claim No.

398 in which the bankrupt stated that the ecriginal holder

of the bonds and econpons involved in that elaim was a

fiduciary in these proceedings and that the claimant

must prove that the fiduciary obtaine | the bonds and

coupons prior to his appointment and, no such showing

having been made, the claim must be disallowed. This

objection is without merit for two reasons. First, the

bankrupt raises no issue sinee it does not allege that

the fiduciary aequired the bonds and coupons after his

appointment. Absent such an allegation raising that issue,

the claimant is not put to his proof. Second, an affidavit

has been filed by the claimant es required by $249 of the

Bankruptey Act establishing that bonds involved in Claim

No. 398 were aequired by the fiduciary prior to his ap-

pointment.

oat “Us

(Appendix A)

settled. None of those non-settling claimants have received

payment in full, including interest, of their lien claims

against Woodmar property, and, to the extent that ad-

ditional funds are now available for payment of claims,

they are entitled to additional payment.

4. Under the terms of most of the settlement agree-

ments as corrected,“ bonds and coupons held by settling

claimants are to be or have been turned over to the ¢rus-

tee. Most of these bonds and coupons represent rights to

a portion of a fund presently deposited in the Clerk’s

Office of the Lake County. Indiana. Superior Court, which

fund is referred to as the “John Doe Trust”.©

) In many of its settlements, the bankrapt had _ at-

tempted to provide that the bonds and eoupons held by

settling claimants he turned over to the bankrupt di-

rectly. When this provision was placed in serutiny. how-

ever, its counsel admitted that it was improper for the

bankrupt, using funds from the hankrupt estate. to ae-

quire assets in its own behalf, and agreed that any bonds

and coupons aequired should be transferred to the trustee.

©) Many of these bonds and coupons, as of the com-

mencement of these proceedings, represented lien rights

not only on Woodmar property, but also on property

owned by others. The funds realized in State Court fore-

closure actions on sale of the property owned by others

constitute the “John Doe Trust”. Bondholders can and

will recover in these proceedings only to the extent that

their bonds represent tien rights against Woodmar prop-

erty and must look to the John Doe Trust for payment

to the extent their bonds represent lien rights against

property of others.

—10a—

(Appendix A)

5. Before this estate can be closed the trustee, in

the proper performance of his duties, will have to liqui-

date the bonds and coupons turned over to him pursuant

to settlement agreements, either by awaiting the distribu-

tion of the funds from the ‘‘John Doe Trust” to which he,

as the holder of those bonds and coupons is entitled, or

by disposing of those bonds and coupons for a proper

consideration. The funds thus realized will then have to

be distributed to the persons entitled thereto. As set

forth in ¢caragraph 3, other Class 2 claimants, and not

the bankrupt, are the persons entitled thereto.

In his pewition, the trustee requested instructions as

to the proper e*tion to be taken in regard to the com-

promises, including those compromises which the settling

claimants themselves have asked to be set aside, the dis-

position to be made of bonds and coupons acquired pur-

suant to the compromises, and the necessity of an audit-

ing study to determine who was entitled to the $76,000

saving effected by the compromises.

At the hearing of February 28, 1964, 115 of the 179

non-settling Class 2 claimants, whose claims have heen

allowed and the claimants in Claim No. 441, were repre-

sented by their counsel. In addition, the trustee, counsel

for the trustee, counsel for some of the settling claimants,

and counsel for the bankrupt were present. We have al-

ready discussed the position taken by the bankrupt. Thos:

eounsel who spoke on behalf of any claimants al! took

the position that settlement agreements should be set

aside and the claims of the settling claimants should be

allowed in the amounts allocated thereto in the trustee’s

amended final report. Three considerations dictate that

—lla—

(Appendix A)

this is the proper course, one being the desire to close

these aiready over-ripe proceedings as expeditiously as

possibie, the second being the rights and equities of the

settling claimants, and the third being the wishes of per-

sons benefitted by the settlements.

I.

These proceedings are already over 2% vears old. If the

settlement agreements approved in 1961 are honored, if

will be necessary to recompute the amounts allocated to

claims to determine who is entitled to the $76,000 savings

effected thereby and to the amount reasized on bonds

and coupons turned over to the trustee. (See Paragraphs

“ and 5 above) At the hearing, estimates were given as

to the cost of such a recomputation, ranging from $10,000

to $25,000. No estimate of the time a recomputation would

take was made, but our own knowledge of these proceed-

ings and their complexities convinees us that the time

involved would be substantial and probably would be sev-

eral years. It is also impossible tofpredict how long the

trustee might have to wait to realize any funds out of

the John Doe Trust, should he have to await distribution

of those funds. or the amount of litigation in which

he would have to become involved with respect thereto.

i ;

If the settlement agreements are set aside, on the

other hand, the settled claims ean be allowed in the

amounts allocated to them in the amended final report,

(8) Litigation giving rise to the John Doe Trust has

been pending longer than these proceedings.

—12a—

4

(Appendix A)

since all of the baakrupt’s objections thereto have been

held to be without merit when considered in connection

with substantially identical claims in the court’s opinion

of September 23, 1963, and the bonds received by the

trustee could be returned io the settling claimants. The

amount and validity of al! Class 2 claims will then have

been established and. after a hearing is held on the

amended final report and fees and expenses considered,

this estate can be closed.

At the hearing of February 28, 1964, the only non-

settling claimants expressing an opinion on this point

stated that they would prefe early payment of their

claims in the amounts in which the claims are now allowed

—the amounts allocated te them by the trustee—to await-

ing payment of those claims in a higher amoant until a

recomputation was made allocating to them the funds

made available by the settlement ecreements. They stated

that, in order that this matter might be brought to an

end in the foreseeable future, it was their desire that

the settlement agreements be set aside and the claims of

settling claimants be allowed in the amounts allocated

thereto by the trustee. As stated before, the only persons

who could be adversely affected by such a course of ac-

tion are the non-settling claimants, none of whoui oppose

it.

Il.

The Court of Appeals decision with respect to the

settlement agreements was rendered before the test case,

Claim No. 441, was disposed of, and before orders were

entered allowing the remaining Class 2 claims after the

bankrupt’s objections thereto were held to be without

—13a—

(Appendix A)

merit. The claims of the settling claimants are substan-

tially identical with claims of non-settling claimants, which

latter claims have now been allowed in the full amounts

allocated thereto by trustee, yet the settling claimants,

in the present situation, will receive an average of only

approximately one-third of the amounts allocated to their

claims. The non-settling claimants will reap the benefits

of the settlements by distribution to them of the savings

effected by those settlements in addition to the amounts

in which their claims have presently been allowed.

At the hearing of February 28, 1964. the only non-

settling claimants speaking th-ough counsel to this point

indicated that they believed it would be inequitable for

them to reap the above described benefits at the expense

of settling claimants when all claims had the same merit,

and further indicated that they would prefer to waive

those benefits, have the settlement agreements set aside,

and have the settling claimants’ claims allowed in the

amounts allocated to them by the trustee.

In addition, as stated before, the majority of the settle-

ment agreements provided for prompt payment from es-

tate funds of the «-ttlement amounts to settling claimants,

a provision which, as it later appeared. the bankrupt was

without authority to include. Compliance with this provi-

sion was impossible. and. as a result there has heen a

substantial failure of consideration.

TIT.

No non-settling claimant stated at the hearing of Feb-

ruary 28. 1964 that he wished to have the settlement agree-

ments enforced to preserve to himself the additional

—l4a—

(Appendix A)

funds he would secure thereby. On the contrary, all non-

settling claimants taking a positicn stated, for reasons

set forth above, that settlements should be set aside.

After thorough consideration of the aforementioned peti-

tions, the positions of the parties with respect thereto

and the record herein, it is our decision that for the

reasons set forth above, the 102 settlement agreements

arrived at by the bankrupt and Class 2 claimants and

the order of July 21, 1961 approving those agreement:

must he set aside and those 102 Class 2 claims, to all of

which no valid objections have been made, must be al-

lowed in the amounts alloeated to them in the trustee’s

amended final report. In arriving at this decision we

are in no manner attempting to interfere with any man-

date of the Court of Appeals. The mandate directing

®) Sinee we have presided in these proceedings they

have been before the Court of Appeals in the following

appeals or petitions:

No. 12833 Woodmar, «t a! «. Hon. Robert EK. Tehan, ete.

Docketed November 14. 1959. Mandamus denied Jan.

21, 1960.

No. 12880 Woodmar vy. Hon. Robert EF. Tehan, ete.

Doecketed January 5, 1960. Mandamus denied Jan.

21, 1960.

No. 12883 Woodmar v. Hon. Robert E. Tehan, ete.

Docketed January 7, 1960. Mandamus denied Jan.

21, 1960.

No. 13023 Woodmar vy. MeLean

Docketed May 13, 1960. Judgment reversing Nov.

23, 1960.

—lda—

(Appendix A)

approval of settlements has been complied with. Subse-

quent occurrences in this court and in the Court of Ap-

peals compel the result we here reach, a result to which

no party in interest objects.

“: 3118S) Woodmar v. Mon. Robert FE. Tehan, ete.

Docketed August 25, 1960. Petition dismissed Nov.

4. 1960.

No. 13121 Woodmar v. Hon. Robert E. Tehan, etz.

Docketed August 27, 1960. Mandamus denied Tob.

24, 1961.

No. 13125 Woodmar v. Hon. Robert EK. Tehan, ete.

Docketed August 30, 1960. Petition dismissed Nov.

4, 1960.

No. 13215 Woodmar v. Walter A. MeLean, et al.

Docketed December 3. te Affirmed June 25, 1961.

No. 13369 Woodmar v. Hou. Robert FE. Tehan, ete.

Docketed May 29, 1961. Petition dismissed June 15,

1961.

No. 13387 Woodmar v. Hon. Robert E. Tehan, etc.

Docketed June 14, 1961. Petition denied June 22, 1961.

No. 13401 Woedmar v. Hon. Robert E. Tehan, ete.

Docketed June 21, 1961. Petition denied June 23, 1961.

No. 13555 Woodmar v. Spencer, et al.

Docketed November 16, 1961. Dismissed June 15, 1962.

No. 13575 Woodmar, et al v. MeLean, Ete.

Docketed December 15, 1961. Affirmed July 26, 1962.

No. 13579 Woodmar v. Julius, et al., ete.

Docketed December 20, 1961. Affirmed August 20,

1962.

No. 13713 Woodmar v. MeLean, ete.

Docketed April 21, 1962. Dismissed July 20, 1962.

—l6a—

( Appendix A)

For the above and foregoing reasons, It Is Ordered:

1. That the court’s order of July 21, 1961 insofar as

it approved settlement agreements between the bankrupt

and 102 Class-2 claimants be and it is hereby vacated and

set aside.

2. That said 102 Class 2 claims be and they are here-

by reinstated and the bankrupt’s objections thereco, which

have previously been held to be without merit, are denied.

3. That the trustee prepare orders allowing said 102

Class 2 claims in the amounts allocated thereto in the

amended final report.

Dated, this 28th day of April, 1964.

/s/ Robert FE. Tehan

U.S. District Judge

—l7a—

APPENDIX ‘‘B”’

UNITED STATES DISTRICT COURT

Northern District Of Indiana

Hammond Division

In the Matter of

WOODMAR REALTY COMPANY, No. 5151

a corporation,

Bankrupt.

OPINION AND ORDER.

On Mareh 5, 1956, this court, Judge Luther M. Swygert

presiding, granted motions by the trustee and various lien

claimants to strike the objections of the bankrupt, Wood-

mar Realty Company, and its stockholders, to the allow.

ance of elaims and to the trustee’s final report, on the

ground that the bankrupt and its stockholders were not

parties in interest. The bankrupt and its stockholders ap-

pealed from this order, which appeal resulted in a partial

reversal by the Court of Appeals for this Cirenit. (See

In the Matter of The Woodmar Realty Company (1957)

941 F. 2d 768) A petition for rehearing was denied.

In its mandate. the Court of Appeals provided that

appellants reeove against the appellees. the trustee and

numerous lien claimants. the costs of the appeal in the

amount of $1926.40. Subsequently, some of the appellees

filed with the Court of Appeals a petition to retax costs,

which petition was denied on September 12, 1957. There-

after, the bankrupt proceeded against two of the nu-

merous lien claimant-appellees, John G. Phrommer and

a

(Appendix B)

Donald C. Gardner, to collect its judgment for costs.

Woodmar’s counsel stated that in singling out these two

Judgment creditors rather than proceeding against the

trustee or other creditors, he was motivated (1) by a

personal animus because of their alleged involvement in

the early stage of this proceeding, and, (2) by a desire

to have his judgment satisfied out of funds other than

the hankrupt estate, which he expects Woodmar to succeed

to.

On October 21, 1960, this court entered an order with

respect to appellate costs, a copy of which is attached

hereto and made a part hereof. Thereafter and on Octo-

ber 28, 1960, the two judgment creditors procecded against

paid the appellate costs plus interest in the total amount

of $2350.20.

On October 30, 1963, a petition was filed by John G.

Phrommer and Donald C. Gardner asking that the trus-

tee be ordered to reimburse them the amount expended

by them to satisfy the aforementioned judgment and to

charge such reimbursement as a part of the costs of the

administration of this estate. This petition came on for

hearing on February 28, 1964, on which date the baak-

rupt filed written objections and its counsel voice * his

objection. No other objection to the petition was made.

The court has considered the petition and prior history

of these proceedings relevant thereto and, despite the

fact that the bankrupt is no longer a party in interest.

has also considered the bankrupt’s objections thereto, and

is prepared to render iis decision.

It is te be noted that the court, in its order of Octo-

ber 21, 1960, preserved to the petitioners the right to

—19a—

(Appendix B)

seek equitable relief in respect to the matter of the costs

of the appeal of the order of Maren 5, 1956. The reason

for this is obvions. The petitioners were only two of the

numerous appellees against whom the bankrupt could have

proceeded and were no more responsible for the appellate

costs than were the other appellees. Also, had the order

of March 5, 1956 been affirmed, an advantage would have

been realized not by the petitioners alone but by the

claimants in each of the Class 2 claims still unpaid in

these proceedings.

It is our opinion that the ection of the appe ees in

seeking to have Judge Swygert’s order of Marin 5, 1956

affirmed by the Court of Appeals was actualiv inken for

the benefit of all Class 2 claimants, and v.as an attempt

to spare those claimants the necessity of resisting the

bankrupt’s objections to their claims.) The appellate

costs which the petitioners have paid should therefore,

in equity, be shared by all cless 2 claimants, excepting

those whose claims are allov.ed in sums less than $25.06.

For the above and fe:egoing reasons,

It Is Ordered:

1. That the trustee reimburse the petitioners the sum

of $2350.°G paid by them as costs of appeal from the

order of Maren 5, 1956.

( All of the bankrupt’s objections to Class 2 claims

have now been held by the court to be without merit.

—20a—

(Appendix B)

2. That when the court orders payment of the Class

2 claims, the trustee determine how many of those claims

exceed $25.00 and deduct from such claims their frac-

tional share of the $2350.20, paving the ciaimants only

the remainder.©?

Dated, Milwaukee, Wisconsin, this 28th day of April,

1964.

/s/ Robert E. Tehan

U.S. District Judge

UNITED STATES DISTRICT COURT

Northern District Of Indiana

Hammond Division

In the Matter of

WOODMAR REALTY COM?ANY, No. 3151

a corporaticn,

Bankrupt.

ORDER.

On March 5, 1956, this court, Judge Luther M. Swygert

presiding, granted motions by the trustes and various lien

claimants to strike the objections of the bankrznt. Wood-

mar Realty Company, and its stockholders, to the allow-

ance of claims and to the trustee’s final repurt, on the

ground that the bankrupt and its stockholders were not

() For example, if 200 elaims are entitled to more

than $25.00. each of such claims will be charged with

1/200 of the appellate costs.

—2la—

(Appendix B)

parties in interest. Tie bankrup: and its stockholders ap-

peeled from this order, which appeal resulted in a re-

versal by the Court of Appeals for this Cireuit (See J

the Matter of The Woodmar Realty Company (1957) 241

F. 2d 768). A petition for rehearing was denied

In its mandate, the Court of Appeals provided that

appellants recover against the appellees, the trustee and

numerous lien claimants. the costs of the appeal in the

amount of $1926.40. Subsequent?., some of the appellees

filed with the Court of Appeals a petition to retax costs,

which petition was denied on September 12, 1957. There-

after, the bankrupt proceeded against two of the nu-

merous lien claimant-appellees, John G. Phrommer and

Donald C. Gardner. to collect its judgment for costs. On

September 26, 1957, these two judgment creditors filed

a petiuion for an order requiring the trustee to pay costs,

to which petition the bankrupt objected, and on October

5, 1957, the trustee filed a petition for instructions concern-

ing payment of costs.

The bankrupt has attempted to levy upon the stock of

the two above-named judgment credicvors in two Indiana

corporations, of which they are officers, University Gar-

dens Corporation and Dell Homes, Inc. On advice of

counsel, the two judgment creditors have refused to per-

mt the United States Marshal, Roy M. Amos, through

his deputy, access to the corporate stock registers of

those corporations.

On December 9, 1957, a petition was filed on behalf of

the United States Marshal seeking an order directing the

judgment debtors. Phrommer and Gardner, as officers

-.

(Appendix B;

of the two above-named corporations, to produce the cor-

porate records of these corporations so that a levy could

be made upon their stock.

Woodmar’s counsel, Mr. Crumpacker, has stated in open

court, that in singling out these two judgment ered!‘ors

rather than proceeding against the trustee or other credi-

tors, he was motivated (1) by a personal animus because

of their alleged involveient in the early stage of this pro-

ceeding, and, (2) by a desire to have his judgment satis-

fied out of funds other than the bankrupt estate, which

he expects Woodmar to succeed to.

In view of the fact that the judgment creditors, Phrom-

mer and Gardner, have sought and been denied relief

from the Cireuit Court of Appeals for this Cireuit, and

in further view of the principle that a judgment creditor

ean elect to proceed against one, or all, or any of the

judgment debtors, the court has no alternative but to

grant the relief sought by the United States Marshal. It

would appear, however, that sinee these judgment debtors

have not been shown to be without financial responsibility.

but on the contrary appear to be long-time residents of

the community with substantial assets, the relief sought

by the United States Marshal should be postponed for

ten days from the date hereof, thereby giving the two

judgment debtors an opportunity to satisfy the judg-

ment without being subjected to the harassment of produe-

ing books and documents or submitting to other means of

discovery.

-—23a—

(Appendiz B)

For the above and foregoing reasons,

It Is Ordered:

1. That the petition of Roy C. Amos, United States

Marshal filed December 9, 1957, for an order directing

John G. Phrommer and Donald C. Gardner, as officers

of University Gardens Corporation and Dell Homes, Inc.

to produce the corporate records of said corporations

necessary in making a levy on their stock in that cer-

poration be and the same is hereby granted, and said

officers are directed to so produce said records.

Provided, hewever, that this order be stayed until! ten

days from the date hereof, and,

Provided further that if the aforesaid judgment is fully

satisfied within such period ten days from the date of

this order, this order will be of no force or effect.

Provided further, that nothing herein contained «2 con-

strued as barring the judgment creditors, John G. Phrom-

mer and Donald C. Gardner, from seeking equitable relief

hereafter in this proceeding in respect to this matter of

costs.

Dated, this 2ist dav of October. 1960.

/s/ Robert E. Tehan

U. S. Distriet Judge