Before DUFFY, Chief Judge, and MAJOR and SCHNACKENBERG, Circuit Judges.
This appeal by Jacob Dyner (sometimes called petitioner) represents the second challenge in this court to the confirmed sale of 32,126 shares, or approximately 70% of the outstanding stock of Bethlehem Foundry and Machine Company to Intelectron, Inc., the shares being an investment asset of the debtor, Marathon Foundry & Machine Company. The order under attack, both previously and at present, was entered May 27, 1955 (nunc pro tunc as of May 9, 1955), in a proceeding under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq., and provided for the sale of the Bethlehem stock unless certain enumerated conditions were complied with. There was no compliance, and the court, on July 28, 1955, entered an order directing the trustees to consummate the sale of the Bethlehem stock to Intelectron, Inc. for the sum of $910,129.58, in accordance with its order of May 27, 1955.
On a previous appeal by the debtor this court affirmed the order, 228 F.2d 594. Our opinion in that case contains a rather complete statement of the situation as it existed at that time and in the interest of brevity reference is made thereto. It is pertinent to note that the essential issue decided on that appeal was that the District Court had the power to authorize and approve the sale of the Bethlehem stock to Intelectron and that it did not abuse its discretion in so doing. Application for certiorari was made to the Supreme Court, which was denied. Marathon Foundry & Mach. Co. v. Schwartz, 350 U.S. 1014, 76 S. Ct. 659. Thereupon, this court, on April 17, 1956, directed issuance of its mandate to the District Court.
Petitioner in his brief states the contested issues as follows: "1. Whether a district court in a proceeding under Chapter X of the Bankruptcy Act has the authority to set aside its confirmed sale of an asset of the debtor because of gross inadequacy of price? 2. Whether a district court in a proceeding under Chapter X of the Bankruptcy Act has the authority to set aside its confirmed sale of an asset of debtor, which asset was worth more than $1,000,000, where there was no advertisement of the sale and the sale price was inadequate? 3.Whether the price at which Bethlehem shares were sold to Intelectron, Inc. was grossly inadequate? 4. Whether the price at which the Bethlehem shares were sold to Intelectron, Inc. was inadequate and whether the failure to advertise the sale contributed to such inadequate price?"
A statement of the proceedings subsequent to our mandate appears to be in order. On April 20, 1956, a petition was filed by Mitchell Continental Corporation (hereinafter referred to as Mitchell), in which it was recited that an offer had been made to the trustees to purchase the Bethlehem stock in controversy at a price of $31.33 per share (a total amount of $1,006,507.58), and that a check in the amount of $50,000 accompanied the offer. The offer of Mitchell was referred to a referee acting as special master and hearings were had thereon.
While this matter was under consideration and on April 23, 1956, a petition was filed with the special master by Jacob Dyner (instant appellant), which contained a detailed recital of previous proceedings and in which it was represented that on February 10, 1956, he entered into an agreement with Thompson-Starrett Co., Inc. (hereinafter referred to as Thompson), by which the latter agreed to make available to the debtor the sum of $1,100,000, to be utilized in connection with other funds in the hands of the trustees in the payment of all claims against the estate, together with administrative expenses, and that a certified check in the amount of $100,000 accompanied the offer. The petition further recited that inasmuch as the offer might not be sufficient to pay all claims and expenses, Thompson had agreed to increase the amount available to the debtor to $1,300,000.It also was stated in the petition that Thompson agreed to make such amounts available only upon the condition that the Bethlehem shares be sold to Thompson but that the latter withdrew its offer when advised by its counsel that no plan of reorganization could be formulated which would permit the debtor to retain such shares in view of the order of May 27, 1955 (the order under attack). Thereupon, Thompson requested return of its check for $100,000. The petition prayed that the court extend the time for filing a plan of reorganization to May 15, 1956, that in the interim the trustees be restrained from delivering the shares of Bethlehem stock to Intelectron and that upon approval of the plan to be submitted, the court vacate its order of May 27, 1955, authorizing the sale of the Bethlehem stock.
On May 7, 1956, Jacob Dyner filed another petition in which reference was made to the offer by Mitchell to purchase the Bethlehem stock for $1,006,507.58, and stated that at a hearing on the Mitchell petition Intelectron had offered to pay to the trustees, upon delivery of the Bethlehem shares, an additional sum of $100,000, and to waive accrued dividends in the amount of approximately $97,000. The petition stated that Dyner as the owner of all the shares of the debtor desired to present a plan of reorganization (a copy of which was attached to the petition), which provided for the payment in full of all creditors of the debtor and of the estate, together with the expenses of administration. There was also presented a telegram dated April 23, 1956, from J. N. Doroshaw for Thompson, a copy of which was attached to the petition, which stated, "This will authorize you to deposit with the court our check for one hundred thousand dollars, and we will continue with our agreement with Jacob Dyner to furnish the additional one million dollars, subject to certain minor changes agreed upon with Mr. O. Biller."
The offer of Thompson, as stated in the petition, was to the effect that it would purchase the Bethlehem shares from debtor in exchange for 77,055 of its cumulative convertible preferred stock, and 37,367 shares of its common stock, the said shares to be ascribed a value of $15 for the preferred and $5 for the common. In addition, Thompson proposed to lend the debtor the sum of $1,100,000 in cash, and proposed that a dividend of $3.30 per share be declared on the Bethlehem shares and in the event that no dividend be declared, Thompson would pay to the debtor $106,015.80 in cash. Also the agreement with Thompson provided, so the petition stated, that a claim of Bethlehem against the debtor in the amount of $143,000 would be waived. Petitioner proposed to personally make available $100,000, if required, to pay claims and expenses of administration. Petitioner by adding these various sums comes up with the result that the debtor will be securing $1,841,675 from Thompson subject to the latter's loan of $1,100,000, and predicated thereon states in his petition: "The offer of Thompson-Starrett represents more than twice the bid of $910,000 made by Intelectron, Inc. for the Bethlehem shares; and the bid of Intelectron is grossly inadequate and it would be unconscionable to permit the proposed sale of the Bethlehem shares to be concluded with Intelectron, Inc."
Petitioner prayed that the order of May 27, 1955 be set aside, as well as all orders entered subsequent thereto relating to the purported sale of Bethlehem shares, and that the trustees be directed to secure the adoption of the plan of reorganization submitted by petitioner, or, in the alternative, that upon the deposit of such sums as may be required to pay all claims and expenses of administration, the court dismiss the proceedings and return the shares of Bethlehem stock to petitioner. In addition to the telegram and the proposed plan of reorganization already referred to, there was attached to the petition the offer of Mitchell, previously shown, to purchase the Bethlehem shares for the amount of $1,006,507.58. It is significant that the purported agreement with Thompson was not shown or produced. Its existence depends entirely upon the allegations of Dyner's petition, together with any corroboration which may be found in Thompson's uncertain and vague telegram of April 23, 1956.
The hearing on the offer of Mitchell, previously commenced by the special master, was continued after the filing of the two petitions by Dyner, and from then on all petitions were considered by the master. The master in his report to the court recommended that the Mitchell offer be denied, as well as the two motions by Dyner, and that the trustees be instructed to carry out the mandate of the Court of Appeals. Dyner objected to the report of the special master. After a hearing in which all interested parties were heard or given an opportunity to be heard, the court, on May 18, 1956, entered its order overruling the objections of Dyner and approving the report of the special master. It is from this order that the appeal comes to this court.
Petitioner argues two propositions of law, allegedly supported by cited cases, (1) a confirmed judicial sale may be set aside for gross inadequacy of price and (2) inadequacy of price accompanied with other circumstances having a tendency to cause such inadequacy will justify setting aside a confirmed judicial sale. It is evident that the only difference in the two propositions is that by the second he couples inadequacy of price "with other circumstances." The other circumstances refer to the contention that the sale was inadequately advertised, which resulted in a paucity of bidders. The same cases are cited by petitioner in support of both propositions: In re Jewett & Sowers Oil Co., 7 Cir., 86 F.2d 497, 498; Slocum v. Edwards, 2 Cir., 168 F.2d 627, 630; Webster v. Barnes Banking Co., 10 Cir., 113 F.2d 1003, 1005, and Graffam v. Burgess, 117 U.S. 180, 191-192, 6 S. Ct. 686, 29 L. Ed. 839. In our view, neither these cases nor any other of which we are aware supports the proposition that a confirmed sale will be set aside for gross inadequacy alone or for gross inadequacy coupled with any other circumstance absent fraud or mistake. In fact, petitioner's counsel in argument to the District Court on his objections to the master's report stated, "This is a very serious issue. I have not been able to find a case on it. I don't think there is a case on it, but I think it is a case which merits much thought and some pioneering." True, statements may be found in some of the cases, including those relied upon by petitioner, which, standing alone, apparently support his contention; however, it is axiomatic that statements in an opinion must be considered in the light of the issues under consideration in connection with the facts relevant thereto.
Now, a brief comment regarding the cases relied upon by petitioner, as above cited. In the Jewett case this court affirmed a decree of the District Court which set aside a confirmed sale but it clearly appeared that the trustee had conveyed by mistake a vastly larger interest than had been offered for sale, and consequently the purchaser received an interest greater than his bid was intended to include. After pointing out this mistake we stated, 86 F.2d at page 498, "The disproportion between the sale price and the value of the contract sold * * * shocks the conscience of the court," and we cited cases to the effect that "'A sale will not be set aside for mere inadequacy of price unless that inadequacy be so gross as to shock the conscience, or unless there be additional circumstances against its fairness.'" As noted, however, these statements were made in a setting where admittedly a mistake had been made in what was intended to be sold as well as what the purchaser intended to acquire.
A similar situation existed in the Slocum case where an order confirming a sale was vacated.The court notes, 168 F.2d at page 630, "The question then concerns the situation where an order as entered did not express the sale intended by the parties." The court cites In re Burr Mfg. & Supply Co., 2 Cir., 217 F. 16, 21, in support of the statement that "inadequacy of price so great as to shock the conscience of the court was ground for vacating a sale already confirmed." The Burr case, however, is of no benefit to petitioner. There, the District Court confirmed a judicial sale, set it aside and ordered the property resold to a substantially higher bidder. The Court of Appeals reversed, holding that it was error to set aside the order of confirmation. The court stated, at page 21: "Before confirmation, if the inadequacy of the price be great, slight circumstances of unfairness on the part of the party benefited will be sufficient to prevent confirmation, and will justify the opening of the sale for further bids. * * * But the case is different after the sale has been confirmed, and the court below seems to have lost sight of ...