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In re Utilities Power & Light Corp.

January 22, 1942

IN RE UTILITIES POWER & LIGHT CORPORATION LEWIS
v.
OGDEN CORPORATION, ET AL



Author: Major

Before MAJOR, KERNER, and MINTON, Circuit Judges .

MAJOR, Circuit Judge .

This appeal is from an order, entered May 15, 1941, denying appellant's motion for leave to file a petition entitled a "Petition to Impound Certain Securities Covered by Contract Dated December 18, 1939, Between Charles True Adams, as Trustee, and Petitioner, and for the Appointment of a Trustee to Carry Out said Contract Pursuant to Decree of this Court Entered January 2, 1940, and for Other Relief in Connection Therewith." There is also an appeal from an order, entered May 16, 1941, fixing the fees of appellee Heath, Special Master, to whom was referred appellant's motion, for leave to file his petition, at the sum of $1,640, taxed against appellant.

The voluntary petition for reorganization of Utilities Power and Light Corp. (hereinafter referred to as the "debtor") under section 77B of the Bankruptcy Act, § 207, Title 11, U.S.C.A., was approved by the court, January 4, 1937. The plan of reorganization was approved, November 3, 1939, for submission to creditors and stockholders. Acceptances sufficient to insure confirmation, were returned by the master, with his report to the court, December 4, 1939. The plan of reorganization was proposed by the Atlas Corp. (hereinafter referred to as "Atlas") which was instrumental in the incorporation of the appellee, Ogden Corp. (hereinafter referred to as "Ogden" or the "New Company"). The latter was made a party to the proceedings, and to it all the property of the debtor was to be conveyed.During the course of the proceeding, Charles True Adams was the duly appointed, qualified and acting trustee of the debtor's estate and had the control, management and possession of its property until it was transferred to Ogden, as provided in the decree confirming the plan of reorganization.

On December 18, 1939, Adams as trustee, entered into an agreement with appellant Lewis concerning the sale of certain designated assets of the debtor corporation. Among such, and the only ones of substantial value, were $5,108,040 of 5 percent debentures of Central States Power and Light Corp. (hereinafter referred to as "Central States") valued at the time of the hearings on the plan of reorganization at $1,015,000. This valuation was later substantially increased by reason of the purchase, by Central States, of a large block of its bonds at a discount.

Paragraph 1 of the agreement between Lewis and Adams, provided: I hereby agree to purchase from you and you hereby agree, subject to the approval of the court and the Commission, to sell to me the securities above described for the sum of $1,600,000; plus interest thereon * * * at the rate of 4% per annum from the date hereof. * * *

The purchase price was subject to reduction by the income received from the described securities "from the date hereof to the date of the consummation of this agreement."*fn1 Adams agreed to proceed promptly to secure the approval of the Securities and Exchange Commission or any other regulatory body having jurisdiction. It was provided that if Adams was unable to secure said approval and to consummate the sale within 90 days from date, the time for securing said approval and consummating the sale should be extended and continued in force until terminated by 10 days written notice given by either party. In case the agreement was approved by the court, it was provided that it should be assumed and become the obligation of Ogden. The last paragraph of the agreement was to the effect that it embodied the entire understanding and that no representations or warranties were made which were not embodied therein.

On December 27, 1939, Adams petitioned the court for an order approving said agreement, and on the same date an order of approval was entered. Paragraph 2 of this order provided:

If prior to the consummation of said agreement the Atlas Plan of February 1, 1939, as amended, shall have been confirmed by this Court and te securities more particularly described in said contract dated December 18, 1939 between Charles True Adams, as said Trustee, and said Frank J. Lewis, shall have been delivered to the Ogden Corp., which corporation is more particularly described in said Plan of Reorganization, as amended, then and in that event said Ogden Corporation, by accepting the delivery of said securities, shall assume and become bound by all of the obligations of the said Charles True Adams, as Trustee, as provided and defined in said agreement of December 18, 1939, and in that event the said Ogden Corp. shall be substituted for the said Charles True Adams, as said Trustee, as a party to said agreement of December 18, 1939, and the said Charles True Adams, as said Trustee and individually, shall be released from any further obligation or liability under said contract, but in no event shall the said Frank J. Lewis be released from said contract on account of the substitution of said Ogden Corp. Provided, however, that said agreement and the assumption thereof by Ogden Corp. shall not in any wise affect, modify, or alter any obligation to be undertaken or performed by said Ogden Corp. under the Plan of Reorganization and shall be without prejudice to said Plan and any orders of this Court and the Securities and Exchange Commission approving the same or any acceptances thereof by old security holders.

Adams was given authority to make the necessary application to the Commission for permission to sell said securities and to cause to be done any and all things necessary or convenient to consummate said agreement in accordance with its terms, conditions and provisions. The order also found that under section 12 (d) of the Public Utility Holding Company Act of 1935, d, § 79l, Title 15, U.S.C.A. and the regulations promulgated thereunder, no sale of the securities in question could be made without first obtaining the approval of the Securities and Exchange Commission.

On January 2, 1940, the court entered its order confirming the plan of reorganization as proposed by Atlas Corp., by which title to all assets in the hands of the trustee was vested in Ogden, free and clear of all claims of the debtor, its stockholders, creditors and trustee, with certain exceptions not here material, and all creditors and stockholders of the debtor were perpetually enjoined from asserting any right, title, claim or interest therein. The order provided that all assets of the debtor corporation be transferred to Ogden, and that - "The New Company shall remain liable on the following contracts of the Trustee and the Debtor incurred in the course of the reorganization proceedings, which, by their terms, do not terminate at the conclusion of the reorganization proceedings, * * *" and then enumerated certain agreements, among which was the agreement between Adams and Lewis dated December 18, 1939, and included in the court's order of December 27, 1939. It was expressly provided that Ogden should not be bound to the agreement with Lewis -

With reference to the reservation of jurisdiction, the order provided:

The securities in controversy were delivered by Adams to Ogden on April 6, 1940, in accordance with the plan of reorganization as confirmed January 2, 1940. The agreement of December 18, 1939, was thrice amended, to-wit: March 12, 1940, July 5, 1940, and August 9, 1940.

On February 10, 1941, appellant served notice upon counsel for Ogden that on the following day he would appear before the court and ask leave to file a petition, (the one now in controversy) the prayer of which was (a) that Ogden Corp. answer within 10 days, (b) that the order of January 2, 1940, confirming the reorganization plan be vacated and set aside insofar as it authorized the said trustee to deliver to the Ogden Corp. the securities in question, and directed that the said Ogden Corp. be substituted in said contract in the place and stead of said trustee to carry out the contract aforesaid; (c) that the securities covered by the contract of December 18, 1939, together with income therefrom, be impounded, or, in the alternative, a trustee be appointed and the securities delivered by Ogden to such trustee with directions to the trustee to carry out the contract of December 18, 1939; (d) that upon final hearing, the amendment of March 12, 1940, extending the time of performance, be set aside and that the amendment of July 5, 1940, ...


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