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IN RE NINETEENTH & WALNUT STS. CORP.

DISTRICT COURT, E.D. PENNSYLVANIA


February 6, 1935

In re NINETEENTH & WALNUT STREETS CORPORATION; In re RITTENHOUSE PLAZA APARTMENT CORPORATION

The opinion of the court was delivered by: WELSH

WELSH, District Judge.

This is a proceeding for reorganization under section 77B of the Bankruptcy Act (11 USCA ยง 207), instituted December 17, 1934. On that day, a petition for reorganization was filed by the Nineteenth & Walnut Streets Corporation as "debtor," and a similar petition filed by the Rittenhouse Plaza Apartment Corporation as a "subsidiary debtor." The property involved is the Rittenhouse Plaza Apartment, a twenty-two-story building located at the northwest corner of Nineteenth and Walnut streets, Philadelphia, Pa.

Both petitions were approved, and William M. Anderson, the president of both corporations, and William H. Shoemaker were appointed temporary trustees. On December 20, 1934, on representations by the Continental Bank & Trust Company of New York City that it was successor trustee and mortgagee in possession of the property, we permitted that company to act in conjunction with the temporary trustees.

 The question before us is whether the temporary trustees should be made permanent trustees, and we shall consider also our former order permitting the Continental Bank & Trust Company of New York City to participate in the management and operation of the apartment in question.

 Upon both matters, a review of the facts of the case is essential.

 The Nineteenth & Walnut Streets Corporation (the debtor) was the owner of the apartment in question on July 7, 1924. On that date, it executed a $3,200,000 first mortgage upon the property, in the form of a trust mortgage to secure a bond issue of like amount, of which the said debtor was the obligor. The trustee and mortgagee named in the instrument was one Walter S. Klee. Subsequently, at a date which does not appear, Klee resigned, and the present Continental Bank & Trust Company of New York City became, and is now, the successor trustee and mortgagee. The trust mortgage provides (article VIII) that upon default in the payments due thereunder, the trustee mortgagee may enter and take physical possession of the apartment, and retain the same, together with all the revenues therefrom, until the indebtedness be fully paid.

  The Rittenhouse Plaza Apartment Corporation (the subsidiary debtor) became owner of the apartment, subject to the mortgage, by conveyance from the debtor on October 1, 1925. Subsequently, on March 11, 1932, being then considerably in default in its payments under the mortgage, it entered into a written agreement with the Continental Bank & Trust Company of New York City specifically confirming the provisions of article VIII of that instrument, and assigning to that company all the leases of its tenants, and otherwise vesting the company with full right to take possession of the apartment, and to hold the same, together with all its revenue, until the mortgage and bond indebtedness was fully paid. Clause VII of the agreement specially preserves the sanctity and security of the mortgage by providing that "it is expressly understood and agreed that this agreement shall not, nor shall anything done hereunder or pursuant hereto, constitute a waiver of any existing or future defaults under and/or with respect to the terms of the Trust Mortgage or any of the covenants or conditions of said Trust Mortgage or the bonds therein referred to, or of any right or remedy therein provided, regardless of the discharge from time to time, pursuant hereto, of some items of default and neither this agreement nor any act, payment or proceeding hereunder shall prejudice in any way the right of the Assignee to proceed to enforce any right or remedy of the said Trust Mortgages including, without limiting the generality of the foregoing, the right to declare the said Trust Mortgage and the bonds therein referred to and secured thereby immediately due and payable, as therein provided, and to institute an action for the complete or partial foreclosure of said Trust Mortgage and in any such action to apply for and obtain the appointment of a receiver of the rents, issues and profits of said premises." On March 11, 1932, by virtue of said agreement, the Continental Bank & Trust Company entered and took possession of the apartment, and has been managing and operating the property down to the appointment of the temporary trustees, on December 17, 1934. On January 21, 1935, it filed its petition for leave to intervene in the present reorganization proceedings, and praying the court to vacate any previous order made by it which might disturb or impair its right to the exclusive possession of the apartment. On the same day, and by the same counsel, three bondholders, averring that they had provable claims aggregating $52,000, filed a paper styled an "Answer" to the debtor's petition, controverting the material allegations of said petition. Motions to strike off both these papers have been filed by counsel for the temporary trustees. Among the reasons assigned by the Continental Bank & Trust Company in support of its prayer that the temporary trustees be dismissed, is the statement that "there does not appear, in the petitions filed by the debtor and subsidiary debtor, to be any assets in the possession of the debtor or subsidiary debtor, at the time of the filing of the petitions." Against this is the statement of the debtor or subsidiary debtor in their petitions that the assets exceed the liabilities by approximately $400,000, as follows: Assets: Land Value $3,975,000 Good Will 250,000 $4,225,000 Liabilities: 1st mortgage bond issue of $3,- 200,000, less bonds retired $400,000 $2,799,500 Interest due thereon 403,128 1st mortgage bond issue of $3,- 200,000, less bonds retired $400,000 2,799,500 Interest due thereon 403,128 2nd Mortgage 480,000 Interest due thereon 112,800 5,970 shares Capital Stock, no par value 5,970 $3,801,398 (Exclusive of City Taxes.)

19350206

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