The opinion of the court was delivered by: MADDEN
This matter comes before the Court, upon a petition for instructions, by trustees under a reorganization plan of the President Realty Company, Inc., a corporation of the State of New Jersey, and is opposed by a motion of dismissal by the Hotel President Operating Company, one of the parties in interest in the matter. One of the main attacks upon the petition of the trustees is to the jurisdiction of the court to hear and entertain such petition.
Prior to June, 1937, the President Realty Company, Inc., filed a petition in this court for reorganization of a corporation under the then Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. On June 23, 1937, this court appointed three trustees (two of the original trustees remain and by reason of the death of the third on March 16, 1942, a substitute was named on July 17, 1942) as the voting trustees of the outstanding capital stock of President Realty Company, Inc. On July 9, 1937, the said trustees executed a voting trust agreement, setting up the terms under which the said trustees should operate the corporation, and, in effect, making the trustees the directors of the reorganized company.
The President Realty Company, Inc., is the owner of the President Hotel located at Atlantic City, New Jersey, and this hotel property, together with its furniture, furnishings and equipment, constitute the sole assets of the corporation. The hotel is presently leased to the Hotel President Operating Company, a corporation of the State of New Jersey, under a lease which is dated July 1, 1937, and which will not expire, by its terms, until October 31, 1957. The terms and provisions of said lease were approved by this court under the then pending reorganization proceedings.
In its final decree, entered November 4, 1938, this court found that the plan of reorganization had been 'fully and completely executed, carried out and accomplished; discharged the trustees and declared the proceedings closed and terminated.' The court, however, by its decree, reserved to itself, jurisdiction to pass upon 'applications by the voting trustees * * * for allowances for compensation, expenses and counsel fees, in connection with the administration of their trust and for instructions with respect thereto, and the making of orders in connection therewith.'
On June 24, 1946, the trustees presented to this court a petition for advice and instructions wherein they informed the court that on June 17, 1946, the trustees had received an offer to purchase the hotel property, subject to the lease, for the sum of $ 1,025,000 in cash, but according to the terms of the trust agreement (approved under the plan of reorganization) it was necessary for two-thirds of the certificate holders of the corporation to approve the sale. That since the entry into possession by the tenant, under the previously described lease, and the confirmation of the reorganization plan by the court, the tenant, Hotel President Operating Company, had been purchasing mortgage participation certificates and voting trust certificates until it presently owned more than one-third thereof, namely 36.5 per cent.
The petition then alleges:
' * * * the petitioners have been informed and believe and, therefore, aver, that the Hotel President Operating Company proposes to vote the aforesaid voting trust certificates which it presently holds and owns, in disapproval of any offer for the purchase of said hotel to any person, corporation, partnership or association, other than itself, although it recently made an offer for the purchase of the hotel in an amount which would yield substantially less to other certificate holders than the present offer, which offer was rejected after failure to obtain consents from a sufficient number of other certificate holders.'
The answer, filed herein by the tenant-certificate holder, seeking dismissal of the present petition, vigorously denies these allegations and avers: ' * * * that it is interested in buying the hotel if it can do so at a price that it considers fair and reasonable to itself as buyer. However, as the holders of mortgage participation certificates and stock, the Operating Company is also interested in the possibility of the sale of the hotel to others if a price can be obtained which it considers fair and reasonable from the viewpoint of the seller.'
The petition thereupon prays advice and instructions from the court with respect to the trustee's rights and obligations to vote the stock of the President Realty Company (held by said trustees) in favor of a sale of the property upon receipt of written consents from holders of less than two-thirds of the whole amount of outstanding voting trust certificates, and, if so, upon what condition; 'and also with respect to the right of the said Hotel President Operating Company to vote the voting trust owns * * * in disapproval of the afore said offer * * * or any other offer'; and further, asking instructions respecting the terms and condition of any sale which may be ordered.
Upon the presentation of this petition by the trustees, the court issued an order to show cause why the prayers of the petition should not be granted, returnable before this court on August 9, 1946, and providing for proper notice to certificate holders and parties interested. Upon the return of the order to show cause, the tenant and certificate holder, Hotel President Operating Company, filed answer to the petition and moved to dismiss. Argument of counsel ensued, time was allowed for filing of briefs, and the matter adjourned until today, August 23, 1946. It might be said at this point that there has been no representation to the court of the action taken by the other certificate holders regarding the proposed sale, whether they have indicated approval or disapproval.
Does the reservation in the final decree reserve to the court the power to pass upon the present question? The decree says that jurisdiction was reserved in the court 'with respect to applications by the voting trustees and the trustees, under the Declaration of Trust for the benefit of the mortgage participation certificate holders who are presently, William H. Albright, Frank S. Norcross and George W. Wolin, for allowances for compensation, expenses and counsel fees, in connection with the administration of their trust and for instructions with respect thereto, and the making of orders in connection therewith.'
The late beloved John Boyd Avis was the Judge who entered such decree and would be the best one to interpret the meaning of the language employed therein. However, in his absence, we must read the words of the reservation in the best light and see if he meant to reserve to the court the power to pass upon the business judgment of the trustees in their operation of the hotel company as though they were directors of a corporation, or did he mean to reserve to the court the right to pass upon the fees and expenses payable by the corporation to its operating directors.
A careful reading of the wording and language of the decree leads me to the conclusion that the reservation was only as to fees and expenses of the trustees and not a reservation to consider a ...