Brief for the Respondent in Opposition — Dudley v. Mealey

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CHATLES ELMORE oRor :

Supreme Court of the Unite TEA .

OcTOBER TERM, 1944

NO. 1268

PRANK A, DUDLEY, CHARLES DOHERTY and RON-

ALD G. WRIGHT, constituting the Stockholders

Protective Committee. Petitioners,

against

CARROLL E. MEALEY, as Trustee of Albany Hotel Cor-

poration, Debtor; THE NATIONAL COMMERCIAL

BANK AND TRUST COMPANY of Albany, as Inden-

ture Trustee for Debtor’s First and Refunding Bonds of

1939, and its First and Refunding Bonds of 1946:

BONDHOLDERS PROTECTIVE COMMITTEE for

the holders of Debtor’s First and Refunding Bonds of

1946; FIRST TRUST COMPANY of Albany, as Inden-

ture Trustee for Debtor’s General Mortgage Bonds and

its 7% Gold Bonds; GENERAL MORTGAGE BOND.

HOLDERS PROTECTIVE COMMITTEE; and FIRST

TRUST COMPANY of Albany,

Respondents.

In Proceedings for the Reorganization of

Albany Hotel Corporation, No. 32,561

TO PETITION FOR WRIT OF CERTIORARI

Attorney for Respondents,

Office and Post-Oftice Address.

GEORGE J, Harr, 2p, 7 State St., Albany 1, N. Y,

Of Counsel,

74 Chapel Street,

Albany 7, N.Y.

INDEX

Statement

a te tae tie SAE SBF 8D Sou RI ey la ig Aa, wae

Point [:

The question of insolvency is one of fact not re-

Viewable by this Court

te ee i ee ee a ee et ee

Point I]:

The decision of the Circuit Court is not in con.

flict with the decisions of this Court

PR te we *

Point IIT:

The fact that the Plan contemplates a sale to a

new corporation is expressly within the con-

templation and provisions of Chapter X

Point IV:

The judgment which petitioners desire to review

is not a final judgment and should not be re-

viewed by this Court

Point V:

The petition for a writ of certiorari should be

itp me Reet eT Ee eae

TABLE OF CASES CITED

Bement v. National Harrow Co... 186 Rie eee Moe's wicasd

Matter of Central Funding Corp.: Union Trust Co, of

Md. v. Wagner (C. C. A. 2d) 75 FB. (2d) 256

UPS ice eb

Continental Insurance Co, y. Louisiana Oil Refining

Co, (C. C. A. Sth) 88 F. (2d) 933 ......)........

In re Englander Spring Co. (D.C) N.Y.) 17 F. Supp.

15; affd. without opinion (C, CA. 2a) 86 FL (2d)

998 ,

6

ee ee 2 atk PONE RT ee A RE OEE OS SE ERS Ran SM

Group of Institutional Investors y, Chicago, M.. St. P.

& P. R. Co, B18 WU. B. GBB 2... cece eee e eens 4

Hamilton-Brown Shoe Co, v. Wolf Bros. & Co., 240

OE. 6 vvccuscsinsnadeedesctuendeaseauaes

Hedrick vy. Atchinson, T. & S. F. R. Co., 167 U.S.

: ener ere rrerrrererys eT TE hay ht

Jenkins v. Neff. 186 U.S. 230 2... ce eee ee ees

Kaufman v. Treadway, 195 U.S. 271... 6... e eee ee 4

In re Porto Riean Tobacco Co. (C. C. A. 2d), 112 F.

(DA) GBB orcs cccccnneccncnsnccccccccceeesesass 6

Toledo Scale Co. v. Computing Seale Co., 261 U. 8.

BD nc ce nde ten wesc deneccecsteuseuseesueusenas 7

STATUTES CITED

Chap, X, Sec, 216 of Bankruptey Act; 11 U.S. C. A.,

Me )) Se eeeereeTeTeTe TC CET TSE Ter Te 6

IN THE

Supreme Court of the United States

OcToper TERM, 1944

No. 1268

.

PRANK A. DubLEY, CHARLES DouERTY

wnd RoNnaLtp G. Wrigur, constitut-

ing the Stockholder’s Protective

Committee,

Petitioners,

against

CARROLL E. MEALEY, as Trustee of

Albany Hotel Corporation, Debtor,

et al.,

Respondents.

In Proceedings for the Reorganization of

Albany Hotel Corporation, No. 32,561.

BRIEF OPPOSING WRIT OF CERTIORARI

This brief is respectfully submitted on behalf of all

Respondents.

Statement

Albany Hotel Corporation, the Debtor, is the owner and

operator of the Ten Eyck Hotel in the City of Albany,

New York. On March 17. 1943, The National Commercial

Bank and Trust Company of Albany, as Indenture Trustee

5 Ne MONEE:

ee MTC |

under the mortgage given to secure the Debtor's first and

refunding mortgage bonds, instituted suit in the Supreme

Court of the State of New York, County of Albany, to fore-

close said mortgage, and had a Receiver appointed. On

March 20. 1943, the Debtor filed its petition under Chapter

X of the Bankruptey Act, seeking leave to effect a reorgan-

ization, On the same day the District Court for the North-

ern District of New York made its order approving said

petition as properly filed, and appointed the Respondent,

Carroll E. Mealey, Reorganization Trustee, His appoint:

ment was subsequently made permanent.

On or about January 12, 1944, the Reorganization Trustee

submitted a proposed reorganization plan, Thereafter the

petitioners filed a proposed plan, The record tiled by peti-

tioners with this Court deals almost exclusively with the

testimony taken before the District Court in connection with

said original plans. The hearings convinced the Trustee that

neither plan was feasible and could not properly be ap-

proved by the Distriet Court. Accordingly the Trustee, on

or about April 29, 1944, submitted an amended plan. Said

amended plan made no provisions for stockholders,

After further hearings the Distriet Court made its order,

dated June 13, 1944, finding the Debtor insolvent (R. 39),

finding the plan filed by the petitioners (the stockholders

neither fair, equitable nor feasible (R. 39), and approving

the amended plan filed by the Trustee (R. 39). The peti-

tioners appealed to the Circuit Court of Appeals from said

order (R. 44).

On January 5, 1945, the Cireuit Court handed down its

decision, accompanied by an opinion by Judge Learned

Hand evidencing a most painstaking study not only of the

briefs of counsel but of the printed record and the several

exhibits handed up to the Court upon the argument but not

contained in the printed record, wherein after reviewing the

3

facts and figures at length (R, 424), he says: “the debtor

was plainly insolvent.” (R. 426.) (Italics ours.) It re-

manded the cause to the District Court for further proceed-

ings not inconsistent with its opinion (R. 432),

Petitioners in their petition state (page 3) that: “Debtor

never operated the hotel property.” This same statement is

reiterated at page 10. The fact is that at all times since

built the hotel has been owned by Debtor. It was operated

by The Ten Eyek Co., Inc. as lessee until the bankruptey of

said lessee in 1942, at which time the Debtor took over the

operation and so continued until the reorganization proceed-

ing (R. 254, 255, 256). During the entire operation, both by

The Ten Eyck Co., Ine., and Debtor, United Hotels Company

of America, Ine., managed the hotel under a series of man-

agement contracts. Each of said three corporations had a

Board of five Directors, The petitioners, Frank <A, Dudley,

Charles Doherty and Ronald G. Wright constituted a

majority of each of said three Boards, In fact, therefore,

there has been no actual change in control from the date the

hotel was opened for business in 1898, down to the present

time,

SS NS ND

4

POINT I.

The question of insolvency is one of fact not reviewable by

this Court.

The District Court has found the Debtor insolvent, Its

said finding has been unanimously approved by the Circuit

Court.

Whether the Debtor was and is insolvent is a question of

fact not open to review in this Court,

Kaufman vy. Treadway, 195 U. 8. 271, 273.

Citing:

Hedrick vy. Atchison, Topeka & Santa Fe

Co., 167 U.S, 673, 677.

Bement v. National Harrow Co. 186 U. &.

70, 83.

Jenkins v. Neff. 186 U.S. 230.

ty.

POINT II.

The decision of the Circuit Court is not in conflict with

the decisions of this Court.

The rule enunciated by this Court in

Galveston H. & S. R. Co. vy, Texas, 210 T. 8.

217,

Consolidated Rock Products Co, vy. Dubois, 312

U.S. 510.

Group of Institutional Investors’ vy. Chicago.

M.. St. PL & PLR. Co. 318 U.S. 525,

is the very rule which the lower courts applied.

Reference to the opinion of the Circuit Court CR. $24),

shows that it went into great detail in its statement re

specting the assets and liabilities of the Debtor and gave

only proper weight to the lack of earning power demon:

ee eee ne eC ee

a Re

5

strated by the history of the hotel from INS1 to 1942, inelu-

sive, all in conformity with the aforesaid decisions of this

Court,

It is, however, proper to point out that the attempt of

petitioners at pages 4 and 5 of their petition to exclude from

the Debtor's liabilities $84,190.00 of real estate taxes is

predicate upon a misstatement of fact. They say that said

“real estate taxes became due Jan. 1, 1944 for the calendar

year of 1944. Debtor's insolvency was being determined as

of Dee. 31, 1943." These taxes. although payable January 1,

IN44, became a lien on the real estate during the year 1943

and are based on the 1943 assessment, and therefore cannot

be ignored in determining the Debtor's net worth as of

December 31, 1943.

Nor can there be excluded from the Debtor's liabilities the

$15,000.00 of first and refunding mortgage bonds which. al-

though legal title thereto was in the Debtor, cannot be con-

sidered an asset of the Debtor since they were ali pledged as

collateral security (R. 11).

Nor can there be added to the value of the land and build-

NZS, aS petitioners attempt to do at page 6 of their petition,

the $115,010.00 appraised value of the movable furniture,

silverware, ete. since its value was already taken into con-

sideration by Mr. Toth in arriving at the going value of the

Debtor (R. 118).

wasn gtoane tte ail

POINT III.

The fact that the plan contemplates a sale to a new cor-

poration is expressly within the contemplation and _ pro-

visions of Chapter X.

*

3 A sale of the assets of a Debtor corporation to a new cor-

3 poration is expressly sanctioned by Chapter X as it was by

: former Section 77B and has been repeatedly approved by the

% courts.

3

3 Section 216 provides:

“A plan of reorganization under this chapter * * *

‘ (10) shall provide adequate means for the execution of

; the plan, which may include: * * * the sale or transfer

5 of all or any part of tts properly to one or more other

: corporations theretofore organized or thereafter to be or-

§ ganized; * * * the sale of all or any part of its prop-

‘ erty, either subject to or free from any lien, at not less

3 than a fair upset price and the distribution of all or any

i assets or the proceeds derived from the sale thereof,

‘ among those having an interest therein; * * * (italics

4 ours ),

3 Bankruptey Act, Section 216; 11 U. S.C. A.

; Sec. 616.

Matter of Central Funding Corporation ; Union

Trust Company of Maryland y. Wagner

(C, C. A. 2d) 75 FL (2d) 256.

In re Porto Riean Tobacco Co, (C. CG. A. 2d)

112 F. (2d) 655.

In re Englander Spring Bed Co, (D.C. N.Y.

17 F. Supp. 15, aff'd. without opinion

(C.C, A. 2d) 86 F. (2d) 998.

Continental Insurance Company y. Louisiana

Oil Refining Co. (C. C. A. Sth) 89 FL (2d)

>>.

odode.

oP an eI EN:

POINT IV.

The judgment which petitioners desire to review is not a

final judgment and should not be reviewed by this Court.

The judgment. in question remanded the reorganization

proceeding to the Distriet Court for further proceedings not

inconsistent with its opinion (R. 431, 432). This Court has

repeatedly said that except in extraordinary cases a writ of

certiorari is not issued until final decree, and that the cir-

cumstanee that the decision of the Circuit Court of Appeals

is not a final one is a fact which standing alone may furnish

sufficient ground for the denial of the application.

Hamilton-Brown Shoe Co, v. Wolf Bros. & Co..

240 U.S. 251.

Toledo Seale Co. y, Computing Seale Co. 261

U.S. 399.

POINT V.

The petition for a writ of certiorari should be denied.

Dated, May 23. 1945.

Respectfully submitted,

CHARLES FE, NICHOLS.

Attorney for Respondents,

Office and Post- ftice Address,

75 State Street.

Albany 1, N.Y,

GrhoRGE J. Harr, 2p,

Of Counsel,

TE Chapel Street,

Albany 7, N.Y,

a