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In re Woodmar Realty Co.

August 20, 1962


Author: Kiley

Before KNOCH, CASTLE, and KILEY, Circuit Judges.

KILEY, Circuit Judge.

Petitioners filed their Intervening Petition for Lien and Proof of Secured Claim in this proceeding which was begun twenty-one years ago under the Chandler Act*fn1 and developed into a straight bankruptcy proceeding.*fn2 Woodmar, the bankrupt debtor, objected to allowance of the claim. The court overruled the objection, allowed the claim, and debtor had appealed.*fn3

The petition, filed in August, 1953, is based upon defaulted City of Hammond, Indiana, improvement bonds and unpaid bond interest coupons. The petitioners are successors to First Merchants National Bank and Trust Company of Lafayette, Indiana, original claimant, one of "some 300" such bondholders who filed claims against the proceeds, in Trustee's custody, of sales of Woodmar real estate. There are seven bonds subject of the petition, two issued under Improvement Resolution No. 1296, and five issued under Resolution No. 1399, of the Hammond City Council. Petitioners' claim is No. 441.

This claim and the many others were subject of a report, in September, 1955, by Trustee McLean and of a petition by him for the allowance of claims. Woodmar and some of the stockholders objected.*fn4 After Judge Swygert, then of the Northern District of Indiana, disqualified himself, a pre-trial conference upon the issues was held by the late Judge Parkinson, then District Court Judge. It was decided, without objection, that Claim No. 441 should be tried as a typical improvement bond claim case to "test the validity of Woodmar's objections to claims." After Judge Parkinson's elevation to this Court, Judge Tehan of the Eastern District of Wisconsin, was appointed to try the issues. He did so, by agreement, on the record made before Judge Parkinson.

On January 19, 1960, Judge Tehan rendered an opinion that Woodmar's objections to the validity of petitioner's claim were without merit; on February 13, 1961, he filed a second opinion that petitioner's claim should be allowed, and ordered claimants to submit proposed findings of fact and conclusions of law; and on July 21, 1961, he filed a third opinion effectually overruling Woodmar's objections to the proposed findings and conclusions. Findings of Fact and Conclusions of Law were then entered July 21, 1961.

The Conclusions overruled Woodmar's objections and allowed petitioner's claim, with interest, based on the seven bonds and coupons issued under Resolutions 1296 and 1399 as liens against proceeds of sales of particular properties securing payment of these bonds and coupons; directed that the claim should be paid in accordance with the Indiana law, but that the claim should not be paid until "all claims filed herein affecting the ultimate allocation of cash to this claim have been either disallowed or allowed in fixed amounts."

The Conclusions rested on extensive findings of fact made in the three opinions. In the first opinion, covering twenty-eight pages in the appendix, Judge Tehan discussed in detail eleven of the seventeen objections levelled at the validity of petitioner's claim. In the second opinion, of seven appendix pages, he discussed the remaining six objections relating to "the amount in which that claim should be allowed." In his final opinion, of twenty-three pages, Judge Tehan gave his views of Woodmar's contentions bearing upon the proposed "findings, conclusions and order."

We see no merit in the contention that Woodmar was denied due process for want of findings as required by Fed.R.Civ.P. 52(a), 28 U.S.C.A. The three opinions, adopted in the Findings of Fact as additional findings are sufficient, American Crystal Sugar Co. v. Cuban-American S. Co., 2 Cir., 259 F.2d 524 (1958), to comply with Rule 52(a). This is clear from the decision in Lifesavers Corp. v. Curtiss Candy Co.,*fn5 7 Cir., 182 F.2d 4 (1950), cited by Woodmar.

There is no merit either in the argument that the District Court failed to decide the case before it. The court decided that Claim No. 441 was valid and ordered the claim allowed. The effect of the order was to establish the "law of the case" with respect to Woodmar's objections. The court was not able to specify the amount to be paid petitioners, as the court pointed out, since the total amount of all similar claims and petitioners' pro rata share of the total was not then known. The decision accomplished what the selection of No. 441, as a test, was intended to do for the remaining claims.

We do not find the judgment erroneous because it, under the circumstances of this case, does not give claimants the money due to them immediately and did not therefore finally decide the issue. The rule in American Service Co. v. Henderson, 4 Cir., 120 F.2d 525, 530, 135 A.L.R. 1414 (1941), does not, nor do any of the other cases cited by Woodmar, support the claim of error. Nor is the judgment here inadequate as the one in Buffum v. Maryland Cas. Co., 9 Cir., 77 F.2d 761 (1935), obviously was. We think the District Court's judgment as to the validity and amount of the claim at bar is final. The District Court could not prudently have decided more at the time. Upon the order of distribution, the details of payment and amounts of claims will undoubtedly be set forth.

Judge Tehan did not delegate his responsibility when he directed plaintiffs' attorneys to submit proposed findings and conclusions in accordance with the three opinions. The record discloses an unusually full hearing by a thorough, painstaking judge. By having the prevailing party submit proposed findings of fact and conclusions of law, the judge followed a practical and wise custom in which the prevailing party has "an obligation to a busy court to assist it in performance of its duty" under Rule 52(a). Dearborn Nat. Cas. Co. v. Consumers Petroleum Co., 7 Cir., 164 F.2d 332, 333 (1947).

The Findings of Fact include a description of the Woodmar real estate involved; find the amount of the lien on each lot which secured payment of bonds issued under Resolution 1296, 7th series, and under Resolution 1399, 7th, 8th, 9th and 10th series, including petitioner's lien; find that petitioner owned the defaulted bonds and coupons subject of Claim No. 441; find that their shares of the liens on each lot were proportioned to the total liens on each; and find that the lots were sold free of the liens which were ordered transferred to the proceeds of the sales.

Woodmar contends that petitioners had the burden of tracing the lien to the bankruptcy assets and that their proof failed to do so. Assuming, but not deciding this is so, there would, nevertheless, in view of the District Court's findings, be no merit to this contention. In the opinion of February 13, the court stated that the lienholders' rights asserted by petitioners were enforceable only against the proceeds of the sales of the lots to which their liens attached; and that the court records reveal the amounts received from the sales of these lots and the City of Hammond records disclose the lots affected by the lien claimed. And there is no question about the balance of proceeds of the sales, $451,000, being in custody of ...

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