President & Directors of the Manhattan Co. v. Pennsylvania Operating Corp.

253 A.D. 584, 3 N.Y.S.2d 310, 1938 N.Y. App. Div. LEXIS 8502

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: April 1, 1938
• Status: Published

Opinion

Per Curiam.

Two issues are presented: (1) Whether under the reorganization plan of the bondholders’ committee any voting trustees to be named should be designated by the court or selected by the bondholders themselves; and (2) whether the appointment of voting trustees was necessary and advisable under the plan proposed.

The statute under which the plan of reorganization is sought to be effected (Real Prop. Law, §§ 119 et seq.) (Burchill Act) does not confer upon the court power to appoint trustees in the first instance, nor did the plan of the committee of the majority of the bondholders so provide. While, under such circumstances, the court might properly refuse to approve the plan as proposed, it should not, over objection, provide that the trustees be selected by the court rather than by the bondholders. (Matter of Lawyers Mortgage Company, 277 N. Y. 244.) While in the case cited the court was considering the Mortgage Commission Act,

* the principle of the decision is controlling. Both statutes are in pari materia.

However, we are further of the opinion that, upon the record here presented, neither necessity nor advisability for the appointment of voting trustees was shown. The original plan of the bondholders, whereby the certificates of stock were to be attached to the second mortgage income bonds, seems to be more practical and will entail less expense. Control will be left in the bondholders and no question of the propriety of the extension of the voting trust agreement will be involved.

Accordingly, the plan of the reorganization committee as originally proposed, containing no provision for the voting trustees, should have been approved. The motion of November 3, 1937, permitting the amendment of the reorganization committee’s revised plan of reorganization in the manner provided for in paragraph (1) of the notice of motion, should have been granted.

It follows that the order of November 3, 1937, should be reversed, with twenty dollars costs and disbursements, and the motion granted as indicated, and the order of November 10, 1937, reversed in so far as appealed from.

Present — Martin, P. J., O’Malley, Townley, Glennon and Untermyer, JJ.

Order entered November 3, 1937, unanimously reversed, with twenty dollars costs and disbursements, and the motion granted as indicated in the opinion; and the order entered November 10, 1937, unanimously reversed in so far as appealed from. Settle order on notice.

Laws of 1935, ehap. 19.— [Rep.