Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division.
Before SPARKS and ALSCHULER, Circuit Judges, and BRIGGLE, District Judge.
This is an appeal from an order of the District Court declining approval of an extension proposal of the debtor under section 74 of the Bankruptcy Act as amended by Act June 7, 1934, § 2, 11 USCA § 202.
A seventeen-apartment building located at 6300 North Claremont avenue, Chicago, Ill., hereinafter referred to as parcel A, and a six-apartment building located at 5680 Ridge avenue, Chicago, Ill., and hereinafter referred to as parcel B, are the only properties of debtor directly involved in this appeal.
Parcel A is encumbered by a first mortgage to the Chicago Title & Trust Company, as trustee, to secure the payment of outstanding bonds in the principal sum of $40,000 owned by appellee Herbert W. Krogman, and a junior mortgage indebtedness in the principal sum of $14,000 owned by Charles P. Ekholm. Parcel B is encumbered by a first mortgage in the sum of $17,500 in favor of the appellee New York Life Insurance Company.
Appellant was unable to obtain consents of a majority in number and amount of her creditors, but prayed that the extension proposal be confirmed without such consents under the terms of the amendment of June 7, 1934, to section 74, supra. To such confirmation appellees objected.
This amendment provides that if "the debtor fails to obtain the acceptance of a majority in number of all creditors whose claims are affected by an extention proposal representing a majority in amount, the debtor may submit a proposal for an extension including a feasible method of financial rehabilitation for the debtor which is for the best interest of all the creditors, including an equitable liquidation for the second creditors whose claims are affected." Bankr. Act § 74 (e), as amended by Act June 7, 1934, § 2, 11 USCA § 202 (e).
Paragraph (g) of section 74 (11 USCA § 202 (g) provides that: "The court shall confirm the proposal if satisfied that (1) it includes an equitable and feasible method of liquidation for secured creditors whose claims are affected and of financial rehabilitation for the debtor; (2) it is for the best interests of all creditors."
Paragraph (i) of said section 74 (11 USCA § 202 (i) provides: "Upon its confirmation an extension proposal shall be binding upon the debtor and his unsecured and secured creditors affected thereby: Provided, however, That such extension or composition shall not reduce the amount of or impair the lien of any secured creditor, but shall affect only the time and method of its liquidation."
The District Court found that the proposed extension did not include an equitable and feasible method of liquidation of the first mortgages affected thereby, was not for the best interests of the holders of the first mortgages, and would result in an impairment of their liens.
The proposed plan of extension (as modified by the referee), among other things, provided:
1. That all first mortgage notes be extended for three years.
2. That their rate of interest remain the same (sic per cent.) but the holders to be paid 3 per cent, interest per annum from the net ...