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IN RE INDUSTRIAL OFFICE BLDG. CORP.

December 17, 1952

In re INDUSTRIAL OFFICE BLDG. CORP


The opinion of the court was delivered by: SMITH

This is a corporate reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501-676. The matter is before the Court on the several claims of the holders of preferred stock of the Permanent Industrial Exposition of Newark, Inc., the predecessor of the Debtor. The claims are for distributive shares of the fund available for distribution among the preferred stockholders of the Debtor under the plan of reorganization heretofore approved and confirmed by the Court; the claims were filed before the approval of the plan and within time. The claim of Bernard J. Grad and Howard Grad is typical, and is therefore adopted for discussion.

The matter was heretofore referred to the Referee in Bankruptcy for hearing, and it now appears that it was submitted to him on a stipulation of facts and certain exhibits which were offered in evidence. The report of the Referee recommends the allowance of the claims, but we are constrained to reject his recommendation for the reasons stated herein. The essential facts are not in dispute, and the only questions here presented are questions of law.

 Facts

 I.

 The predecessor of the Debtor, the Permanent Industrial Exposition of Newark, Inc., was incorporated on June 16, 1922, under the laws of the State of New Jersey. The certificate of incorporation created two classes of stock, preferred and common, and authorized the issuance of preferred stock with a par value of $ 100 per share, and common stock with no par value. The stock was issued, and thereafter the name of the corporation was changed to 'Industrial Office Building Co.'

 II.

 The record does not disclose how this change was effected, but, in the absence of any evidence of irregularity, we think it reasonable to assume that the change was effected under the provisions of R.S. 14:11-1 et seq., N.J.S.A. 14:11-1 et seq., which require notice to the stockholders and their favorable action on the proposed change. There is no evidence that the stockholders, including the present claimants, had no notice of this change of name.

 The principal asset of the corporation was a large office building, the construction of which was completed in May of 1926; this building is located in the City of Newark, New Jersey, and is, and has been, generally known as the 'Industrial Office Building.' This asset was encumbered by a first mortgage which was given to secure an issue of first mortgage bonds. There were first mortgage bonds in the total amount of $ 2,984,500 outstanding in 1932, when the said corporation was apparently in financial distress.

 IV.

 The said corporation defaulted on the bonds, and on June 1, 1932, an action to foreclose the mortgage was instituted by the Fidelity Union Trust Company of Newark, the mortgage trustee, in the Court of Chancery of New Jersey. Thereafter a voluntary committee, hereinafter identified as the Committee, was organized. This Committee formulated a proposed plan of reorganization, dated September 15, 1932, which was submitted to the bondholders and stockholders.

 V.

 It seems reasonable to infer that the plan to reorganize the corporation was initiated pursuant to the provisions of R.S. 14:14-37 et seq., N.J.S.A. 14:14-37 et seq. It should be noted, however, that the stipulation of facts makes no reference to the statutory provisions, but our research reveals no other provisions which would have permitted the procedure which was here followed. The method which was here followed appears to have been in common use in many jurisdictions prior to the enactments of ...


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