In re Standard Metals Corp.

48 B.R. 778, 1985 U.S. Dist. LEXIS 21513
CourtDistrict Court, D. Colorado
DecidedMarch 21, 1985
DocketNo. 84 B 0945 G
StatusPublished
Cited by28 cases

This text of 48 B.R. 778 (In re Standard Metals Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Standard Metals Corp., 48 B.R. 778, 1985 U.S. Dist. LEXIS 21513 (D. Colo. 1985).

Opinion

MEMORANDUM OPINION

JAY L. GUECK, Bankruptcy Judge.

THIS MATTER is before the Court on various motions relating to the proof of claim filed by Dann S. Sheftelman (“Shef-telman”). After notice, a hearing was held February 5, 1985. This memorandum opinion represents the Court’s findings of fact and conclusions of law pursuant to B.R.P. 9014 and 7054.

Introduction

The transaction giving rise to Sheftel-man’s claim involves the debtor, Standard Metals Corporation (“Standard Metals”) and two related entities — National Smelting of New Jersey, Inc. (“NSNJ”) and National Smelting & Refining, Inc. (“NSR”). NSNJ is a wholly-owned subsidiary of NSR. Standard Metals, in turn, owns 50% of the outstanding stock of NSR.

NSNJ was the owner of a lead smelting and refining facility located in Pedrick-town, New Jersey. Captial for operation of the Pedricktown plant was generated by the sale of $6,600,000 of Industrial Devel[780]*780opment Revenue Bonds issued by the New Jersey Economic Development Authority. The bonds were issued on behalf of NSNJ. They were secured by a mortgage on the Pedricktown plant and 100,0Q0 shares of Standard Metals stock.

The bond offering took place in February, 1983. Interest was payable January 1 and July 1 of each year. The interest payments of July 1, 1983 and January 1, 1984 were made as scheduled. However, NSNJ was also required, by virtue of an indenture agreement, to make monthly payments to a sinking fund used for payment of amounts due on the bonds. NSNJ defaulted on this obligation when it failed to make the required monthly payment in November, 1983. The Indenture Trustee under the Indenture Agreement was the National Bank of Georgia (“Bank of Georgia”). The Bank of Georgia first mailed notices to bondholders, advising them of the default, in February, 1984.

The July 1, 1984 interest payment was not made. The July 1, 1984 interest coupons were returned, together with a notice advising the bondholders that there were no funds to pay them.

The bonds had been issued in bearer form. Consequently, the Bank of Georgia did not have the names and addresses of the individual bondholders. There was no central location to where notice of the default could be given to the bondholders. When the original notice of default was given in February of 1984, only those individuals who had elected to convert their bonds into registered form received notice. As additional inquiries were made of the Bank of Georgia, it would add the name of the inquiring party to the mailing list. By January, 1985 the Bank of Georgia’s mailing list contained approximately 600 names.

On March 5, 1984, Standard Metals, NSNJ and NSR all filed voluntary petitions under Chapter 11 of Title 11. The NSNJ and NSR proceedings have subsequently been converted to proceedings under Chapter 7. Standard Metals, however, is progressing through the Chapter 11 reorganization process.

From the beginning of the Standard Metals proceeding, it was apparent that the reorganization process would have to be accomplished very rapidly if it were to be successful. On May 4,1984, Standard Metals moved this Court for an order fixing a bar date for filing proofs of claim pursuant to B.R.P. 3003(c)(3). On May 7, 1984, an order was entered fixing June 10, 1984 as the last date upon which proofs of claim could be filed. The court mailed a copy of the May 7th order to all creditors contained on the court’s mailing matrix. Neither Sheftelman nor any other bondholder was on that matrix.

Standard Metals filed a Plan of Reorganization on August 28, 1984. The Plan is to be funded by a loan from Citicorp Industrial Credit. Counsel for Standard Metals stated that in order for the Plan to meet the confirmation standards of 11 U.S.C. § 1129, it is necessary to pay unsecured creditors 100% of their allowed claims. The current loan proposal with the bank contemplates a loan of approximately $12,-000,000.00. This amount is only marginally sufficient to pay the unsecured claims for which proofs have been filed, without consideration for Sheftelman. The bank is unwilling to loan additional funds. Thus, allowance of the Sheftelman claim could jeopardize feasibility of the Plan.

On August 30, 1984, Sheftelman filed his proof of claim. This proof of claim discloses that Sheftelman personally holds six (6) of the bonds having a face amount of $5,000.00 each. However, the proof of claim is purportedly filed on behalf of all persons who purchased or otherwise acquired NSNJ bonds during the period between February 1, 1983 and February 20, 1984.

Attached to the proof of claim is a complaint, dated August 3,1984, which Sheftel-man filed in the United States District Court in and for the District of New Jersey. The complaint alleges violations of the federal securities laws, common law fraud and deceit and common law negligence. Standard Metals, NSNJ and NSR were alleged to have participated in the [781]*781wrongful acts, but were not named as defendants, due to the automatic stay. At the time the complaint was drafted, Shef-telman was aware that these three entities had filed for protection under Title 11 and • of the concomitant effect of 11 U.S.C. § 362(a).

Sheftelman moved for relief from stay on October 22, 1984, in order to prosecute the New Jersey United States District Court action against Standard Metals and liquidate the claim. Relief from stay was ultimately denied on November 21, 1984. Sheftelman appealed the order denying relief from stay on December 6, 1984.

The debtor filed an objection to Sheftel-man’s proof of claim on November 26, 1984. The objection rested on three grounds: (1) the claim was not timely filed, (2) the claim improperly purported to represent a class of bondholders, (3) the claim should be estimated under § 502(c). This Court declined to estimate the claim and that matter is not currently before the Court. The remaining portions of the objection were set for hearing February 5, 1985. Notice of the hearing was sent December 27, 1984.

Beginning January 10, 1985, there was a flurry of activity on this matter. On that day Sheftelman filed no less than six motions. The motions of particular importance here are:

(a) motion for continuance of February 5, 1985 hearing;
(b) motion to have B.R.P. 7023 apply to contested matter;
(c) motion for extension of time within which proof of claims may be filed. This was not merely a motion to allow Sheftelman to file his proof of claim out of time.

The motion for continuance was denied January 14, 1985. The motion for extension of time within which any and all proofs of claim may be filed was also denied at that time. However, as clarified by the Order of January 23, the Court reserved the right to further consider the motion at the February 5 hearing. Sheftel-man appealed the Order denying the extension of time to file all proofs of claim.

At the request of Sheftelman, the hearing on the objection to claim was bifurcated. Only the procedural objections, including the question of late filing, were heard at the February 5 hearing. The merits of the claim were to be heard at a later date, as necessary.

On January 16, 1985, Sheftelman noticed his own deposition, pursuant to F.R.C.P.

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Bluebook (online)
48 B.R. 778, 1985 U.S. Dist. LEXIS 21513, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-standard-metals-corp-cod-1985.