be permitted to sell. There is of course the limit of a reasonable time for the interference of the law. The point we wish to make is that there is the same justification for interference with the right of the pledgee to enforce payment of his claim of debt that there is for the like interference of the law with the collection of other debts. There is no room to doubt, although apparently some do doubt, the power of a bankruptcy court to administer bankruptcy assets as its judgment dictates. The real question is not one of the existence of the power, but is one of its exercise. Should the pledgee be given leave to sell these shares of stock? Under
existing conditions there can be no real sale. This is not because the stock is valueless, but because there are no purchasers, however great the bargain. If it is sold, the inquitous plan, which the referee has found this bankrupt has concocted, to rob his creditors, will succeed. Surely neither the court nor this pledgee should promote such an iniquity.
The learned referee feels this as keenly as any one. He evidently felt constrained to permit its accomplishment because of his reluctance to deny to the pledgee the exercise of the right for which the latter had bargained. A permitted sale will not merely do this great wrong to the general creditors, but it will be of no benefit to the pledgee beyond giving him the gratification of having his own way. We say this because we assume that this creditor is not seeking to sell the stock in order that he may reap a 400 or 500 per cent. gain from its resale. Otherwise it will not benefit him. There are other tests of value than market price when, as here, there is no market. Reasonably expected income is one. At what the owners of like shares of stock hold their shares is another. The balance sheet of the corporation is still another. If this were a condemnation proceeding, any one's estimate of just compensation would surely not be less than $20,000. Only $13,000 or $14,000 will pay all creditors, including the pledgee in full. If there was a market for the stock which promised a price sufficient to pay the pledge, the pledgee might ask for leave to sell because he might feel he should not be obliged to take any risk of loss however remote. There is, however, no such promise. The only promised result of the sale is to change the title to the stock. The pledgee is no worse off before the sale than after unless he is seeking, which we are sure he is not, the unholy gain to which we have referred. The corporation is not in the red. Its balance sheet shows a book value for this stock of about $30,000. It may be a wise policy for it to defer dividends until the business situation settles down, but the first dividend it declares will go far to wiping out the pledged debt. This dividend will go to the pledgee as well without a sale as after one. A sale might be worked out through the trustee by permitting creditors to buy the stock, paying all above the sum due the pledgee in their dividend claims.The sale should be made by the trustee and not the pledgee. It may be made subject to the sum pledged or an upset price of more than this fixed.
The learned referee has stated the question on review to be whether he has authority to impose terms and conditions upon the pledgee in the conduct of any sale made by him. This we assume had reference to the suggestion to fix an upset price for such sale. We think the real question is incorporated in the order made by the referee. He was asked to permit the pledgee to sell, and he made an order imposing very fair and sensible terms as to the mode of sale. We are, however, of the opinion, and so rule, that the prayer of the petition should have been denied, with leave to the pledgee to re-present it.
The petition for review is allowed; the order of the referee disapproved and reversed; and the cause remanded to the referee, with directions to deny the petition for leave to sell, with leave, however, to renew the application at any time.
We may add that the general creditors must devise some plan in the interim to wind up the affairs of this bankruptcy estate and take care of their own interests. All that the court can do is to afford them a fair opportunity to do this. Eventually the trustee must sell this stock or the pledgee be permitted to take care of himself. "If eventually, why not soon?"
© 1992-2004 VersusLaw Inc.