Opinion ID: 1507907
Heading Depth: 1
Heading Rank: 13

Heading: Appeal of Sparta Fritz, Jr.

Text: The appellant Fritz objects to the Plan upon three grounds: (1) That the value which the court placed upon the assets of Ageco and Agecorp is too low; (2) that under the Plan, the surviving company will have only a short term indebtedness, with the result that it will be required to pay more annually in federal taxes than it is required to pay today; (3) that certain bondholders, including the appellant, are given common stock instead of securities of indebtedness. Testimony as to valuation was taken before the Securities and Exchange Commission and before the District Court. Fritz seems to object to the method of valuation employed  capitalization of earnings. But capitalization of earnings is a well-recognized method of valuation, and we cannot say that the use of this method was improper. We think it sufficiently appears that the valuation was based upon consideration of the facts relevant to future earning capacity, as required by the rule of Consolidated Rock Products Co. v. Dubois, 312 U.S. 510, 526, 61 S.Ct. 675, 85 L.Ed. 982. The valuation was based upon competent evidence which we hold sufficient to justify it. The objection of Fritz to the capital structure proposed by the Plan must also be overruled. The alternative structure proposed by Fritz was attacked by other participants on the ground that it would prove disadvantageous to the operations of the surviving company, the market prices of its securities, and tax-wise; the SEC found that his proposals were fantastic. In the light of the evidence, we can not say that the District Court abused its discretion in rejecting Fritz's proposed structure. There is no merit in the contention that bondholders are entitled to something more than common stock in the reorganized company. It is not inequitable to allow bondholders stock in the surviving company, rather than securities of indebtedness. We have carefully considered the arguments brought forward in this most complicated and difficult case, which litigation might prolong for years. It has been dealt with by the Master, Judge Crane, and Judge Leibell in a most painstaking manner. We think that the compromise and plan which they have sanctioned, and the SEC has approved, are fair and equitable and are not disposed to revise their judgment in putting them into effect. For the foregoing reasons the orders are affirmed.