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IN RE RANDOLPH-WELLS BUILDING CORPORATION

March 29, 1963

IN PROCEEDINGS FOR THE REORGANIZATION OF RANDOLPH-WELLS BUILDING CORPORATION, DEBTOR.


The opinion of the court was delivered by: Juergens, District Judge.

In this corporate reorganization proceedings Randolph-Wells Building Corporation (hereinafter referred to as "Randolph-Wells") on March 27, 1961 filed its amended petition asking that bankruptcy proceedings No. 7464 be reopened for the purpose of limiting the time within which bonds of the City State Safe Deposit Company might be exchanged for securities of Randolph-Wells (hereinafter referred to as "1935 Bonds"). The petitioner, Randolph-Wells, is the corporate successor to City State Safe Deposit Company, an Illinois corporation (hereinafter referred to as "City State").

On February 1, 1927 City State issued its First Mortgage 6 Per Cent Twenty-Year Sinking Fund Gold Bonds (hereinafter referred to as "1927 Bonds") in the aggregate principal amount of $2,359,500.00. The 1927 bonds were defaulted and on June 19, 1930 the holders thereof entered into a Bondholders' Protective Agreement, whereby they were to deposit their bonds with the Trust Company of Chicago, as depositary, and to receive certificates of deposit in exchange for their bonds.

City State, however, again ran into financial difficulties, and on February 6, 1935 a proceeding, entitled "In the Matter of City State Safe Deposit Company, No. 7034," was filed in this Court to reorganize City State under the provisions of Section 77B of the Bankruptcy Act. A reorganization plan was submitted and approved on July 8, 1935 in proceeding No. 7034, and Randolph-Wells was organized as the corporate successor of City State.

On November 14, 1935 an order was entered in proceeding No. 7034 which provided, among other things, that the new corporation, Randolph-Wells, upon receiving the conveyance of the debtor's property from the trustees be authorized and directed to execute its new mortgage bonds, issuable to the holders of the 1927 bonds in the amount of $2,359,500.00, to the Trust Company of Chicago for distribution to the holders of the old first mortgage bonds of City State, and to execute, accept and deliver to the Trust Company of Chicago, as trustee, its new indenture of mortgage and that the Trust Company of Chicago be authorized upon receipt of delivery of the 1935 bonds to authenticate the same and distribute the bonds and voting trust certificates deposited with it by the trustees to the holders of the 1927 bonds in the following manner:

    (a) New bonds of the corporation to be distributed
  in the same principal amount as the principal amount
  of the old first mortgage bonds presented by the
  holders and

Randolph-Wells executed and delivered to the Trust Company of Chicago an indenture of mortgage dated November 1, 1935; executed and delivered to the Trust Company of Chicago its new mortgage bonds (1935 bonds) in the amount of $2,359,500.00, dated November 1, 1935 and maturing twenty-five years after date and secured by the mortgage indenture; and issued and delivered to voting trustees shares of its common stock. Randolph-Wells, in accordance with the provisions of the 1935 indenture, directed the Trust Company of Chicago on or about November 26, 1935 to authenticate and deliver 1935 bonds in exchange for the 1927 bonds or certificates of deposit.

A final decree was entered in proceeding No. 7034 on April 20, 1936. There was no provision made in the proceeding limiting the time within which the holders of the 1927 bonds or certificates of deposit would be entitled to exchange their 1927 bonds or certificates for 1935 bonds and voting trust certificates or shares of stock.

Randolph-Wells by July 9, 1937 found itself in financial difficulty and was in default on the 1935 bonds; whereupon, this proceeding (Bankruptcy No. 7464) was commenced under Section 77B of the Bankruptcy Act.

This Court on May 2, 1939 entered an order approving the plan of reorganization pursuant to which the 1935 bonds were subordinated to a new first mortgage and converted the 1935 bonds from fixed interest bearing bonds to cumulative income bonds.

A final decree in the proceeding was entered on June 15, 1939, which ordered and directed the Trust Company of Chicago to carry out each of the directions, powers and authority provided in the reorganization proceedings. No provision was made limiting the time within which the holders of the 1927 bonds or certificates of deposit would be entitled to exchange such bonds or certificates.

On March 10, 1950 the Trust Company of Chicago resigned as trustee under the 1935 indenture and the supplemental indenture, and LaSalle National Bank (hereinafter referred to as "LaSalle") was designated and appointed by Randolph-Wells as successor trustee under the indentures on March 15, 1950. The records relating to authentication, issuance and delivery of the 1935 bonds were caused to be delivered to LaSalle by Randolph-Wells.

At the time of LaSalle's appointment as successor trustee, $2,298,000.00 in aggregate principal amount of the 1935 bonds had been authenticated and were outstanding as were also 22,980 shares of stock. Randolph-Wells also caused to be delivered to LaSalle $61,500.00 in aggregate principal amount of 1935 bonds which were not authenticated and had not been delivered to the bondholders. Subsequently, 1927 bonds or certificates of deposit were presented to LaSalle and were exchanged for authenticated 1935 bonds together with 135 shares of stock.

With the consent of the holders of approximately $2,000,000.00 in aggregate principal amount of the 1935 bonds, Randolph-Wells on November 1, 1960 consummated a voluntary reorganization. To effect this reorganization it was necessary to obtain the release of the 1935 indenture and the supplemental indenture. LaSalle, however, refused to release the indentures unless it received a sum of money sufficient to satisfy completely the claims of all the holders of the 1935 bonds who had not consented and of all the 1935 bonds to which the holders of unsurrendered 1927 bonds or certificates would be entitled upon surrender of the bonds or certificates. A sufficient sum of money was paid over and LaSalle released the indentures. The sum, including aggregate principal amount plus earned interest to November 1, 1960, was $95,991.84.

By its amended petition of March 27, 1961, Randolph-Wells sought to have Cause No. 7464 reopened and a bar date fixed prior to which holders of the 1927 bonds or certificates might surrender their bonds or certificates of deposit and further asked the Court to determine the status of LaSalle since LaSalle asserted it was unable to determine its liability or obligation to the holders of the 1927 bonds or certificates of deposit by reason of its becoming successor trustee to the Trust Company of Chicago or by reason of the orders of this Court in proceedings Nos. 7034 and 7464.

On July 17, 1961 this Court entered its order setting the cause down for hearing on September 6, 1961 and caused to be prepared a notice of the proceedings as follows:

    "Costello, Wiechert, Roberts & Gundlach, Attorneys,
    "First National Bank Building,
    "East St. Louis, Illinois
    "Bridge 1-2464
    "Sonnenschein Lautmann Levinson Rieser Carlin &
      Nath
    "77 W. Washington Street
    "Chicago, ...

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