Court Opinion

ID: 6861732
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:49:31.14133+00
Date Added: 2024-06-11T16:05:15.452230
License: Public Domain

GRONER, Associate Justice
(dissenting).
*233I think the order confirming the sale of the properties involved in this litigation was erroneously entered, and that the court below should have ordered a new sale and on materially different terms.
Leaving entirely out of consideration the facts tending to show fraud in relation to the original issue and sale of the bonds and assuming the foreclosure suit to have been in all respects regular, I think it perfectly clear the decree of sale imposed conditions which inevitably tended to throttle bidding and depreciate the value of the properties to be sold. The decree provided that the properties should be first offered separately and then as an entirety. This provision in an ordinary sale where the unity of the properties is apparent and the preservation of the unity necessary, would be quite in order, but in this case the properties offered for sale were so distinct and different in their characteristics that it was obviously in the interest of fair bidding that they should be sold separately. There were twelve parcels in all; one the Wardman Park Hotel, another the Carlton Hotel, another the Chastleton Apartments, another Cathedral Mansions, and others were large apartment buildings located in different parts of the city, the Department of Justice Building, the stock in trade of a drug store, and the automobile and garage supplies in a hotel garage. Some of the properties were incumbered by prior mortgage. Five of the properties were incumbered only by the mortgage then in process of foreclosure. In times like these it may be assumed that the ordinary investor in hotel properties, or in apartment buildings or in office buildings, would be unwilling to invest in all three classes. If, in view of this, the properties had been offered separately, each one upon the basis of its own value, it is entirely reasonable to think that many persons would have been interested in the sale and that a very much larger bid would have been received.
Another objection I find to the order of sale was the provision requiring all cash. The properties offered for sale are said to have cost in the neighborhood of twenty millions of dollars. They had been appraised some two or three years before for around twenty-eight millions. They had been mortgaged in the aggregate for something like fifteen millions. The offer of them at public auction for cash practically shut out all other bidders than the bondholders’ protective committee, thus leaving the bondholders who had not deposited their bonds wholly without any means of protection for their investment. It is quite true, as the opinion notes, that these nondeposit-ing bondholders were an insignificant minority; but even so, they were entitled to have the properties sold for the largest amount which could in any circumstances be realized. As it was, it is not surprising that the only bidder was the representative of the bondholders’ committee and the price bid at the sale grossly inadequate. As I have already pointed out, five of the properties, including the Wardman Park and Carlton Flotéis, were free of underlying lien or mortgage of any kind. These properties when sold were assessed for taxation at approximately ten millions of dollars, and, yet, allowing no value to any of the equities, if there were any, of the properties sold subject to prior mortgage, the amount bid and accepted was only about 28 per cent, of the appraisal for taxation of the others, and was less, as was claimed, than the amount which the receivers of the properties had been offered for the Wardman Park property alone. When this gross disparity in value and bid price is considered in connection with the fact that no official appraisement was made of the properties prior to the sale, nor statement filed of the receivers of earnings of the hotels or the rents received from the apartments and office buildings, it is clear to me that the sale, notwithstanding it was in the interest of 99 per cent, of the bondholders, was not the sort of judicial sale which a court ought to approve and confirm. It is, of course, fundamental that no court ought ever to confirm a sale of property which it has taken over and administered, unless convinced that the sale has been fair and free and open equally to all bidders. Where the price is so grossly inadequate, as is the case here, it is obvious that there has been either mis-í take, misapprehension, or some other factofc resulting in a sacrifice of the property, and in that case, even the fact that confirmation of the sale is in the interest of all but a small minority ought not to control. Nor do I think the optional provision found in the court’s opinion, through which appellants may now deposit their bonds and enjoy the benefits of the purchase made by the bondholders’ committee equally with the other depositing bondholders, changes the situation. Quite true, in the light of present-day conditions it is to their advantage *234to exercise the right and put an end to the litigation, but the provision, though in the interest of appellants is, as,I view it a mere makeshift, which is by no means the same as a fair sale of their properties to the highest bidder.
I am in disagreement with the opinion of the majority in thinking that the rule laid down by the Supreme Court in First Nat. Bank v. Flershem, 290 U. S. 504, 54 S. Ct. 298, 78 L. Ed. 465, 90 A. L. R. 391, is not applicable here.
Associate Justice HITZ joins with me in this dissent, and we are both of opinion that the decreé below should be reversed and the case remanded to the court below, with directions to order a tésale.