Citations
- 109 F.2d 313
Full opinion text
SANBORN, Circuit Judge.
This appeal is from an order confirming a plan of reorganization of the Champion Shoe Machinery Company, debtor, and Champion Acceptance Corporation (a wholly-owned subsidiary of Champion Shoe Machinery Company), auxiliary debt- or, in proceedings under § 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. The appellants are the owners of $6,500 face value of bonds of Champion Acceptance Corporation which were originally due February 1, 1933. They objected to the plan of reorganization on the ground that the bondholders had all been placed in one class, instead of divided into three classes, and that the plan approved failed to accord them rights which the court was bound to recognize.
The facts are undisputed. The Champion Acceptance Corporation on February 1, 1929, issued $1,400,000 of bonds falling due as follows: one-third February 1, 1932, one-third February 1, 1933, and one-third February 1, 1934. The bonds bore interest at 6% before’ maturity and 8% after maturity. They were guaranteed as to both principal and interest by Champion Shoe Machinery Company. The trust indenture securing the bonds was made by Champion Acceptance Corporation, with Mercantile Trust Company (now Mercantile Commerce Bank and Trust Company) as trustee. It required the deposit with the trustee of chattel mortgages, vendor’s liens and lien contracts, conditional sales contracts, lease contracts and similar securities, the aggregate principal amount of which should at least equal 120% of the face of the bonds outstanding. It also provided that Champion Acceptance Corporation should have the right to collect payments of principal and interest maturing upon pledged securities, but should pay over the proceeds collected to the trustee or deposit with it, in lieu thereof, acceptable securities of a similar nature equal to the amount collected, and should, with certain limitations, substitute cash or other acceptable securities for any mortgage securities in default.
Section 2 of Article IV of the trust indenture provided as follows: “Section 2. In order to prevent any accumulation of .the principal of any bonds or the interest coupons after maturity, the Corporation agrees that it will not directly or indirectly, through any arrangement, extend or assent to any extension of the time of payment of the bonds or of the interest coupons secured hereby, and in case the time for payment of any such bonds and interest coupons shall be extended beyond the time originally fixed for maturity, such bonds and coupons shall not be entitled in case of any default hereunder to the benefit or security of this Indenture, except subject to the prior payment in full of the principal of all the remaining bonds j issued and outstanding hereunder, not extended, and of such portion of the accrued interest thereon as shall not be represented by such extended coupons.”
Section 1 of Article VI of the trust indenture provided as follows: “Section 1. No bond or coupon pertaining to any of said bonds which in any way shall have been extended or renewed in violation of the terms hereof and no coupon which shall have been transferred or pledged separate and apart front the bond to which it pertains, unless it be accompanied by such