Legal Document

350 U.S. 462 76 Supreme Court Reporter 516 100 L.Ed. 550 GENERAL STORES CORPORATION, Petitioner,v.Max SHLENSKY, Securities and Exchange Commission, Creditors' Committee WageClaimants. Number 170. Argued Jan. 18, 1956. Decided March 26, Messrs. Aaron Rosen, Frederic Pacific KF135 P2 Houston, New York City, for petitioner. 1 Mr. Max Goldweber, Jamaica, N.Y., respondent Wage Claimants. 2 Leon Singer, Creditors Committee. 3 Atlantic Alan Reich, Shlensky. 4 William or Haw. Hawai‘i Reports KFH45 A2 Timbers, Washington, D.C., Comm. 5 Justice DOUGLAS delivered the opinion of Court. 6 Petitioner instituted proceedings under chapter XI Bankruptcy Act, 52 Statutes-at-Large 905, as amended, 11 United States Code KF62 § 701 et seq., Annotated KF65 U5 alleging it was unable to pay its debts they matured. It proposed an arrangement general unsecured trade commercial debts, none which is evidence by any publicly held security. has indeed no nature way bonds, mortgage certificates, notes, debentures, obligations like character, held. does, however, have over 2,000,000 shares $1 par value common stock listed on American Stock 7,000 shareholders. One these—an owner 3,000 shares—and Commission moved that be dismissed unless, within a time fixed court, petition amended comply with requirements X 883, 501 corporate reorganization. The District granted motions. 129 F.Supp. 801. Appeals affirmed divided vote. 222 Federal Reporter, 2nd Series 234. case here certiorari. 809, 65. 7 Petitioner, formerly known D. Schulte, Inc., operated some years chain stores sale tobacco accessory products. also had difficulties. Its financial problems go back at least 1936 when filed reorganization former 77B Act. After completed in 1940, few prosperity followed postwar decline volume business, rise costs, substantial losses. During these $600,000 cash raised new management installed view converting existing into candy, food, drink establishments. That idea abandoned proceeds were used purposes. then decided liquidate specialty petitioner acquire two retail drugstore chains—Stineway Drug Company Ford Hopkins Company. Stineway acquired $1,220,320, borrowing $870,000 from purpose. Later borrowed additional $440,000 help make down payment stock, making total indebtedness $1,310,000, represented non-interest-bearing notes. $2,800,000, being $735,000, balance payable yearly amount $200,000 per cent interest secured stock. 8 While drug chains acquired, started liquidation own stores, process disposition those involved rejection numerous leases creation claims landlords against 9 would extend provide 20 confirmation plan annually thereafter. $1,310,000 debt $525,000 claims, exclusive landlords. We advised oral argument during course this offer not feasible creditors are now offered equivalent 40 their full satisfaction. 10 Much been devoted meaning versus Realty & Improvement Co., 310 434, 60 1044, 84 1293. In we relief properly sought but appropriate relief. debtor owned An leave debentures unaffected certificates reduce interest. argued case, instant one, affords corporations whose securities owned, while available debtors closely held; designed large corporations, smaller ones; character determines whether remedy. did adopt distinction case. Rather emphasized need determine facts formulation control debtor, provided XI, auspices disinterested trustees, assured other protective provisions chapter, better serve 'the public private interests concerned including debtor.' page 455, 1053. presented rather simple problem. There one class asked sacrifices, position stockholders remained unimpaired, id., 453—454, 456, 1052, 1053, contrary teachings Case Los Angeles Lumber Products 308 106, 1, 110. Moreover, history company serious question 'whether fair equitable best creditors' could effected 'without rearrangement capital structure.' Id., For reasons controlling consideration choice between XI. Nor structure. may well most cases where debtor's will afford more But necessarily so. A much composition company. And there reason can see why end. essential difference small needs served. 12 Readjustment all part insolvent without sacrifice violate fundamental principle plan, supra, emphasizes. 13 structure company, more, inadequate unless accounting misdeeds caused debacle. 14 minor problem compared management. Without today's readjustment temporary moratorium before major collapse. 15 These typical instances adequate remedy than appointment trustee, 156, his broad powers investigation, 167, role trustee preparing 169, duty render advisory report 172, requirement 'fair equitable, feasible', §§ 174, 221, power include subsidiaries, Hopkins, petitioner, 129—these controls gives entire community reorganized lacking both complicated must readjusted sound discretion indicates either necessary. Those conditions only illustrate X. others equally compelling. 16 fraud improvident overextension business out step modern trends. already suffered. Heavy short-term loans hang ominously company; converted operating holding subsidiaries pledged creditors. short needed. are, fears merely prelude disasters, what structure, so limited resources dissipated effort meet demands reduction. equitable' eventually reached paramount issue present concerns 'feasible.' 'feasible' X, might mean, first, merger and, second, funding realignment give balanced old liquidated launched heavy borrowings basis. If succeed, thorough going possible lower courts. reverse them if exercise transcended allowable bounds. cannot say does. think courts took reading functions serves reasonably concluded needed pervasive 17 Affirmed. 18 HARLAN decision 19 FRANKFURTER, whom BURTON joins, dissenting. This proceeding Chapter seq. these. corporation traded Exchange, hands stockholders. exclusively affects creditors, wage earners Act accords priority payment. All strongly support arrangement. capacity protector investors, opposed resort insisted procedure defined themselves arrangement, barring single stockholder representing twotenths percent debtor. suggestion improper behavior suffered misadventure apparently attributable changes consumer response type conducted original Schulte stores. X.* sustained Court, 234, judgment affirmed. 21 essence Court's acted discretion. guided inappropriate standards, left supporting basis stand. Such, N Dec. Immigration Nationality Decisions believe, situation here. 22 set deemed guiding ruling usually careful district judge misconceived upon him relying observation qualifying illumination literary factual context he quoted found guidance statement chapters (X XI) specifically devised different procedures, adapted structures many stockholders, individual * *.' 447, 1049. 23 first place, quotation breaks sentence, plainly enough indicated ratio decidendi loose generality. unquoted introduction, 'While do doubt general,' further cautionary phrase, 'as presently appear detail later details derive significance wholly shelter affecting security holders, changes, found, easily adversely affect precluded finding 'for creditors,' requisite confirmation. very application gave 'does mean scope differ respondent's.' 454, 1052. 24 Again, seemed indicate sharp line 'with stockholders' stockholders,' assigning restricting latter, went (what below), 'we find neither definition classification enable us large, holders many, 'held public', place jurisdiction court other.' 25 upshot matter critical extended requires conclusion observations particular elicited them. yet, dismissal fairly fact 'a quarter million recently selling dollars share.' 801, 805. Such disregards informal, efficient, economical readjustments change involved, charge impropriety intimated, urge 'best interests', 366 Chandler 840, 911, 766, refusal entertain work real hardship 174 claimants. 26 Not entertainment based misconception disregard amendment 35 July 7, 1952, 66 420, 433, 766. By Congress eliminated equitable'. stood decision, written absolute rule equity reorganizations laid Northern R. Boyd, 228 482, 33 554, 57 931, (H.R.Rep. 2320, 82d Cong., 2d Sess. 21.) Even still nothing show satisfy requirement, noted here, unlike Realty, leaves untouched holders. Since Decision degree turned enforcement rule, noteworthy given courts, Congress. suppose elimination, drastic clearest indication should generous even narrowest suggest. shriveled availability. 27 Appeals. At realty improperly brought anew Section law allow transfer proceeding, thereunder, 432, 728, H.R.Rep. 19.

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