Court Opinion

ID: 5345051
Source: CourtListenerOpinion
Date Created: 2022-01-08 06:14:20.66968+00
Date Added: 2024-06-11T08:29:38.386075
License: Public Domain

O’Malley, J. (dissenting).
The invitation for bids by the Superintendent for the stock of the National Surety Corporation was subject to the approval of the court. (Insurance Law, § 421.) The court had power to inquire into the facts and circumstances even though the particular bid had been accepted or rejected by the Superintendent. (Matter of Casualty Co. of America [Rubin Claim], 244 N. Y. 443; Matter of Globe & Rutgers Fire Ins. Co., 149 Misc. 16.)
While it is urged that this proceeding had all the attributes of a judicial sale and that the principles applicable thereto should control, the following facts show that there was no true sale. No sale or contract of sale was entered into by the Superintendent with any bidder, nor did he submit any sale or contract of sale for approval. The application merely sought instructions and directions with respect to a proposed sale. The manner of, and further questions as to any sale, together with terms and conditions, were reserved for the hearing.
While the Special Term found that the bid of the appellant was adequate, the following facts lead to a contrary conclusion. The evidence shows that the market value of the stock had consistently increased over a period of some two years. In 1934 a bid of $6,000,000 was offered but refused. At that time an appraiser appointed by the court valued the stock at $8,900,000 and filed his official appraisal to that effect. In 1935 three bids were received, one of which, in the sum of $8,000,000, was recommended by the Superintendent upon certain conditions, which, however, were not met. In 1936, when this proceeding was started, the Superintendent fixed an upset price of $8,250,000. As appears from the majority opinion, the bids received ranged from $91.87§ a share for the whole issue, to $100.31, the amount offered by the appellant. These increasing offers over a period of some two years are indicative of the progressive enhancement in the market or sales value of the stock. In the meantime, more than $2,500,000 of earnings have accrued to the corporation and its tangible assets increased to that amount. In 1934 the earnings were $1,100,000; in 1935, $1,500,000, and for the first two months of 1936, $500,000, which if continued for this year, would result in earnings of $3,000,000. These are net earnings after the payment of taxes, the setting up of reserves and all other necessary write-offs.
It is noteworthy that substantially every creditor of the corporation opposed the acceptance of the appellant’s bid. The respondent, National Bondholders Corporation, representing approximately seventy per cent of the claims of all unpreferred creditors, or in an amount stipulated for the purposes of the hear*119ing to be between $17,000,000 and $21,000,000, out of a total of ' some $25,000,000, exclusive of the claim of the United States government, was among the objectants. While it is true that this respondent on a previous hearing gave approval to a sale of seventy per cent of the stock at a lesser figure, it did, at all times, oppose the sale of the entire issue. Another creditors’ committee representing claims of over $1,000,000, and a representative of the Ohio receivers of the National Surety Company likewise opposed. Substantially seventy-six per cent of the creditors, therefore, appeared to oppose the acceptance of the bid and only one single creditor appears to have favored it. It also is to be noted that the committee representing stockholders objected. Moreover, the testimony of the experts called on behalf of the objectants gave an average value of some $13,000,000 to the stock. Their testimony was also to the effect that a three years’ experience, or, until the end of 1936, would afford a better basis for ascertaining the real value. The record shows that the status.of the liquidation proceedings is such at this time as would not result in a present distribution to creditors and that a postponement of any sale would involve no practical risk. It appears, therefore, as contended for by the creditors and the owners (stockholders), the bid of the appellant was not adequate and should be rejected under all the circumstances. I am of opinion, therefore, that the best interests of the creditors and stockholders and of the corporation itself were served by the rejection of the appellant’s bid.
I, therefore, dissent from so much of the majority opinion as directs the acceptance of the appellant’s bid.
Martin, P. J., concurs.
Order reversed, with costs to the appellant, and the acceptance of the appellant’s bid approved. Settle order on notice.