Opinion ID: 1480159
Heading Depth: 1
Heading Rank: 3

Heading: Was the Plan Validly Accepted?

Text: Sec. 179 of the Chandler Act, 11 U.S.C.A. § 579, provides that after a plan has been accepted in writing by or on behalf of creditors holding two-thirds in amount of the claims filed and allowed of each class, and, if the debtor has not been found to be insolvent, by or on behalf of stockholders holding a majority of the stock of each class, of which proofs have been filed and allowed, exclusive of creditors or stockholders or any class of them who are not affected by the plan, the judge shall fix a hearing for consideration of the confirmation of the plan. Sec. 209 of Art. IX of the Chandler Act, 11 U.S.C.A. § 609, provides that Any creditor or stockholder may in a proceeding under this chapter act in person, by an attorney at law, or by a duly authorized agent or committee. Under the terms of the deposit agreement dated August 9, 1934, as amended, and as originally approved by the trial court on August 20, 1934, a security holder, by depositing his security with the Reorganization Committee, conferred upon that committee adequate power to accept a plan of reorganization on his behalf. The deposit agreement provides that the plan may be changed or modified in the manner provided in the bankruptcy act either before or after confirmation. But, if in the opinion of the court the change or modification will adversely affect the interest of any depositor, the Committee shall give notice thereof to such depositor in the manner provided in the agreement and the depositor may, within a period of time fixed by the court, withdraw his acceptance and deposited securities and that every depositor having such right of withdrawal who shall not exercise it within the period so fixed shall be irrevocably and conclusively deemed to have accepted the plan as changed or modified. The original plan of reorganization filed in August, 1934, was accepted by 82 per cent in amount of the noteholders and approximately 60 per cent in amount of the preferred stockholders. They manifested their acceptance by expressly assenting to and accepting the plan in their letters transmitting their securities to the Reorganization Committee. By the order of May 28, 1940, the depositing security holders were given until June 22, 1940, to withdraw their deposit of securities without expense to them should they not approve the second amended plan of reorganization as modified May 20, 1940. In accordance with the order of May 28, 1940, the Reorganization Committee, within five days from the date thereof, mailed to each of the creditors and preferred stockholders of the debtor known to the committee, a copy of the second amended plan of reorganization as modified May 20, 1940, summaries of the plan and order of May 28, 1940, the advisory report and supplemental advisory report of the Securities and Exchange Commission, and a communication advising them that they might, without expense to them, withdraw their deposited securities by a written request so to do filed with the committee, and that should they not withdraw their deposited securities on or before June 22, 1940, they should be deemed to have assented to and accepted the plan. Pursuant to the order of May 28, 1940, the trustee, within ten days from the date thereof, caused a notice directed to the creditors and preferred stockholders of the debtor to be published in newspapers of general circulation, at Tulsa, Oklahoma, Chicago, Illinois, New York City, New York, and Philadelphia, Pennsylvania, advising such creditors and stockholders of the filing of the second amended plan as modified, that such plan could be accepted by deposit of securities with the Reorganization Committee, by failure to withdraw securities on deposit with such committee on or before June 22, 1940, or by filing a written acceptance thereof with the trustee and that they might withdraw deposited securities without expense to them on or before June 22, 1940, by filing with the Reorganization Committee a written request for such withdrawal. On May 28, 1940, there were deposited with the Reorganization Committee notes in the principal amount of $8,611,000 and 31,676 shares of preferred stock. Between that date and June 22, 1940, there were withdrawn from deposit, notes of the principal amount of $31,000 and 979 shares of preferred stock. Subsequent to May 28, 1940, additional deposits were made so that there were on deposit with the Reorganization Committee on July 22, 1940, notes of the principal amount of $8,710,000 and 32,143 shares of preferred stock. In their letters of transmittal of securities to the Reorganization Committee deposited after May 28, 1940, each depositing security holder expressly assented to and accepted the second amended plan of reorganization as modified May 20, 1940. In addition, holders of notes of the principal amount of $75,000 and holders of 4,105 shares of preferred stock, not deposited with the Reorganization Committee, filed with the trustee written acceptances of the second amended plan of reorganization as modified May 20, 1940. The Reorganization Committee as the duly authorized committee of the depositing security holders accepted the second amended plan as modified May 20, 1940. Thus, it was accepted by 72 per cent of the preferred stockholders and 88 per cent of the principal amount of the notes. We are of the opinion, therefore, that the second amended plan of reorganization as modified May 20, 1940, was accepted by or on behalf of two-thirds in amount of the creditors and by stockholders holding a majority of the stock who are affected by the plan as required by § 179 of the Chandler Act. Furthermore, the trial court in the order of May 28, 1940, [7] found that it was not practicable to apply § 179 of the Chandler Act in this proceeding, if so to do would require the execution and filing of acceptances personally by the creditors and preferred stockholders, of the second amended plan as modified. Sec. 276, sub. c(2) of the Chandler Act, 11 U.S.C.A. § 676, sub. c(2) provides the provisions of §§ 77A and 77B shall apply to proceedings thereunder where the petition was approved more than three months before the effective date of the Chandler Act, to the extent that the judge shall deem their application practicable.