Court Opinion

ID: 8880738
Source: CourtListenerOpinion
Date Created: 2022-11-26 20:27:12.442052+00
Date Added: 2024-06-11T17:06:38.048011
License: Public Domain

SWYGERT, Circuit Judge
(dissenting).
Several circumstances, I believe, require a reversal. The lack of conditions and ground rules prescribed in advance of receiving bids, the unequal treatment accorded the unsuccessful bidders, especially Shlensky, and the reliance upon extraneous esthetic considerations created a situation surrounding the sale that was so irregular as to amount to a gross abuse of discretion on the part of the district judge.
Initially, a public sale of the Edge-water Beach Hotel was ordered for October 9, 1968. The court rejected all bids received on that date as being insufficient in amount and authorized the trustee to sell the hotel at private sale without notice, but subject to the approval of the court. Thereafter, at a hearing held on November 22, 1968 at 2 P.M., four sealed bids were received and opened in court. Counsel for the trustee then requested a recess for the purpose of receiving amended bids. Three hours later the hearing was resumed. In response to a question from the attorney representing the Securities and Exchange Commission, the trustee announced that “this is the final bidding hour as far as the trustee is concerned, unless the court shall direct otherwise.”
At the resumption of the hearing revised bids were received. Holleb bid $800,000 for the trustee’s equity and assignment of the fire loss claim proceeds or “at the option of the trustee, an amount equal to such fire loss as agreed upon between the trustee and the buyer.” He also offered to indemnify the estate against claims of those holding liens on the real estate. Shlensky bid $960,000 for the trustee’s equity, including whatever might be the fire loss claim proceeds. Dunbar bid $8,150,000 for the hotel property, free and clear of liens and encumbrances.
Before adjournment, the attorney for the Securities and Exchange Commission inquired whether it would be acceptable if any of the bidders increased their cash offer during the time the bids were under consideration. The trustee said that it would not be acceptable. The judge then said, “I think the position I understand the trustee to have taken is that as far as the trustee is concerned he is finished with asking for bids.” The hear-ting was adjourned until a date in December in order to provide time for consideration of the bids.
On November 27, four days after the close of the bidding, Holleb wrote the trustee that he would agree to purchase the fire loss claim for $200,000. He stated in his letter, “That amount is to be added to the $800,000 in cash above referred to, making a total price of $1,000,-000.” On December 2 Holleb again wrote a letter to the trustee in which he agreed to indemnify the estate for secured claims against the personal property owned by the hotel. The first part of the letter read, “In connection with the undersigned’s offer to you to purchase the above-captioned property pursuant to a letter dated November 22, 1968 as amended by a letter dated November 27, 1968 you should be advised. * * * ” (Emphasis added.)
Upon learning of Holleb’s November 27 and December 2 letters to the trustee, Shlensky on December 6 wrote the trustee that he reaffirmed his previous bid of $960,000, “but I hereby waive any rights to the insurance claim proceeds and I agree that the proceeds of said uncollected fire loss (valued at $200,000 by the trustee and Holleb) shall remain the property of the Estate of H. R. Weiss-berg Corp. * * * The net effect of this proposal is to increase the benefit to the estate by the amount of the fire loss proceeds realized by the pending litigation, which as I have indicated the trustee and Holleb have valued at $200,-000 and therefore my proposal is in effect $1,160,000 insofar as the estate and the creditors thereof are concerned.” *1188Shlensky also agreed to indemnify the estate against any secured claims asserted against either the personal property or real estate of the hotel.
Dunbar did not change its bid after November 22.
On December 17, 1968 another hearing was held before the district court. Pri- or to the hearing, both the S.E.C. and the Creditors’ Protective Committee recommended acceptance of the Shlensky bid. At the hearing, counsel for the S.E.C. and the Protective Committee adhered to their recommendations. The trustee’s attorney analyzed the bids in the light of the letters written to the trustee by Holleb and Shlensky subsequent to the November 22 hearing. The trustee also addressed the court as did Holleb and counsel for Shlensky. At the conclusion of the hearing the judge announced that he approved the Holleb bid and directed the trustee’s attorney to draft an order in accordance with his decision.
In his “memorandum decision” and order entered January 15, 1969 confirming the sale of the hotel to Holleb, the district judge made a number of findings or subsidiary determinations. One is particularly important; it reads in part:
The designation by the Trustee in this regard of the 5:00 P.M. hearing on November 22, 1968, as being the final time and date of submission of bids should and does control herein. The SHLENSKY bid as made at 5:00 P.M. on November 22, 1968, is less than the HOLLEB bid of that date, considering the evaluation of the insurance claim at $200,000.00, as reserved by HOLLEB in his bid on that date. The undertaking of December 2, 1968, of HOLLEB, in which he agrees to pay the insurance adjuster, is merely a clarification of the insurance claim net evaluation, and the undertaking with respect to the claims secured by hotel furnishings merely reiterates the HOLLEB agreement stated in open court on October 9, 1968, the first hearing on return, of bids. The HOL-LEB bid, as of November 22, 1968, amounts to $1,000,000.00 for the equity in the property inclusive of the insurance claim and provides indemnity to the estate as against all of the secured claims. The SHLENSKY bid of that date is $960,000.00 for the equity and the insurance claim, but does not provide indemnity against the secured claimants. Such additional bid as made by SHLENSKY after the close of bidding on November 22, 1968, the Court finds that under the circumstances should not be considered for the reasons assigned above. The Court also finds that the value being placed on the insurance claim by SHLENSKY is purely speculative in the hands of the Trustee, and that SHLENSKY has not offered to pay for same on the HOLLEB basis.
It is apparent from the above quoted language that the judge determined in effect that the Holleb bid on November 22 included the amount of $200,000 representing the value of the fire loss claim. But an analysis of Holleb’s original bid together with his subsequent letters demonstrates that this is not the fact. Hol-leb’s bid on November 22 included no specific amount for the insurance claim. Instead, it provided in terms for the payment of $800,000 in cash “plus the assignment of insurance proceeds of a previous fire loss or at the option of the trustee, an amount equal to the value of such fire loss as agreed upon between the trustee and the buyer.” (Emphasis added.) Even Holleb himself in his December 2 letter considered the $200,000 offer for the fire loss claim an “amended” bid. Although the judge afforded Holleb’s December 2 bid nunc tunc treatment, he refused to treat Shlensky’s amended December 6 bid on the same terms. In effect he ruled that November 22 was the final bidding date for Shlensky while at the same time he permitted Holleb to subsequently amend his bid. The judge had no warrant for such unequal treatment of the competing bidders. His rul*1189ing was wholly inequitable and irregular ; it had no lawful basis in light of the facts before him.
If we look at the proceedings and events between October 9 and December 17 in their entirety, the inescapable conclusion is that no guidelines were prescribed by the district judge as to the content of the bids which were to be submitted, the procedure for such submission, and most importantly when the bids were to be considered final.1 The sale was neither public nor private but an improvisation.
An additional irregularity was the district judge’s consideration of the ultimate use the bidders intended for the property. In the first place, this intention was requested of the bidders by the trustee at the judge’s direction on December 11, long after the date the court ruled as the final date for bids. Thus the request was a complete afterthought, But more important, the property’s ultimate use was not an appropriate matter for the court’s consideration. Holleb’s statement with regard to his plans to develop the property in no way bound him and of course could not be accomplished without approval of the city’s building department and 2ioning board. If we take the judge’s statements at face value, he permitted this extraneous and improper consideration to influence his decision.2
*1190In sum, I believe that the procedure followed by the district judge in this bankruptcy sale was so haphazard and fraught with irregularities and aggravated unfairness as to amount to a gross abuse of discretion. I would remand and order a new sale to be conducted.

. This fact was brought to the attention of the district judge at the December 17 hearing. The attorney representing the S.E.C. made the following comment:
Now, I don’t say that there was anything wrong with the provision that he put in the bid, but the very fact that there was the option whereby he could agree with the trustee as to the value of the fire loss did not permit the Holleb offer to be amended after all of the others had been received, which is exactly what was done.
The attorney for the debtor commented:
I would suggest to your Honor that though no fault of the Court or of the trustee or, for that matter, of the debtor and perhaps by the design of the bidders, the rules have become a little bit fuzzy so that we are not clear at this point just what the rules of the game are.
Sjc * :¡s * *
I know your Honor has expressed a reluctance before to have bidding in open court, but it appears to me that we should not be bidding apples against oranges here, that we should be bidding apples against apples, that we should set up ground rules here and now.
Even the trustee recognized that the procedure lacked guidelines. He stated:
I ask your Honor to reconsider and if these bids are to be reopened, let’s have some dignified and honorable ground' rules whereby the position of your trustee will have some standing in this building.

. In the course of deciding to accept Hol-leb’s bid the district judge commented:
I considered the bids relatively the same. It was with this in mind, when after conferring with the Trustee, the Trustee’s attorney, and the attorney in charge from the Securities & Exchange Commission, I asked to be supplied by each of the bidders with some additional information. This additional information was most important to me because I am not only working with the problem of an estate, the Weissberg estate, as that Weissberg estate extends across the whole of the country from Baltimore, Maryland to New Orleans, from the Lord Baltimore Hotel to the Fountainbleau, to Palm Beach, Florida and on up back to Chicago, but I am concerned with the fact that this Court is a part of the Northern District of Illinois which is also the fatherland, so to speak, or the motherland, of Chicago.
I am concerned with what is going on and what is going to happen as a result of my rulings and my determinations in this case to a great city. You may make a ruling in one case that can affect the happiness of thousands of people in a certain area of the city, that will affect the tranquility of the entire city, and rulings of courts in equity are not confined to just the facts before them.
They are to be expanded to include the over-all concepts of decency and wisdom and equity as they affect all of the people. This is why bankruptcy courts, courts in Chapter X’s and Chapter XI’s, have plenary jurisdiction. It isn’t always that a dollar more here will bring a better outcome for the *1190estate, or a dollar less here will bring a better outcome for the city.
But in looking at the problem before me I wanted to be able to measure what will be the effect upon the whole of this estate, not just the very poor people and hardworkers who lost their jobs who worked out at the Edgewater Beach, but some of those hardworkers who have been laid off at the Emerson in Baltimore, Maryland; they are as interested in what happens at the Edge-water Beach as are the people who work for the Edgewater Beach, and the people who gave credit to the management in Palm Beach, Florida, they are just as interested in what happens to the Palm Beach as those who gave credit to the Palm Beach — I mean, to the Edgewater Beach Hotel.
So I asked Mr. Gesas to ask as quickly as possible each of the bidders to write me, send a copy of the letter to Mr. Windel and one to Mr. Gesas, and tell me “What is your ultimate use? What are your plans? How do you plan to go about using this? Over what period of time will it take to implement your program?” And then, “How can you demonstrate your financial capability,” not only of paying us but carrying through on their program.
I got one letter. I am concerned because I have the greatest respect for Mr. Shlensky, and I did not know that his brother had died until just yesterday. I have known them for years and years. He did not have a chance. I believe he would have had he had a chance, have answered that letter. He would have let me know.
I am satisfied with the program that has been suggested in the Holleb report, which I have had on my desk for several days, and opened just before I came in. This is not just to be another one of those slick, narrow, square, high-rise flamboyant, sky-breaker batches of structural steel and cement and glass that desecrate the beauty of the landscape as you go north on Sheridan Road. What he has in mind will carry over many years of construction, in fact, they do not contemplate completion within three to four years.
It involves a magnificent housing development very much akin to what has been done with the Sandburg Village— I believe Sandburg Village was named' — ■ and South Commons, the Juneau Village, with shopping centers, off-street parking and lower level structures, some superstructures, high superstructures with a minimum of demolition as they progress so that there will be maximum availability for use by Loyola University of the center structure until it will be the last one to be replaced.
Well, this fits closer into the dream that I had for Chicago, Mr. Holleb, I will tell you the truth, this fits closer into the dream that I had for Chicago, knowing that the maximum use out there could not be another hotel, than what I thought you had.
What I thought you had in mind was just another bunch of row houses, as I call them, row house 40-story apartment houses. If this is going to be something as you describe it, that will take its place in the place of the Edgewater Beach and lend to the beauty of the skyline what the Beach has given it over these many years, this I like. I have nothing else to go upon. Your bid gives out tomorrow.