The opinion of the court was delivered by: GIBSON
On Petition for Reargument and for Specific Findings.
The American Appraisal Company was appointed by the court to appraise the properties of the debtor and filed its report. Exceptions were filed to the report on behalf of the debtor and of creditors inferior to the first mortgage bondholders. An extensive hearing followed, at which a number of witnesses were called, some in opposition to the report and others in support of it. On November 2, 1936, an order confirming the report was filed, wherein the value of the debtor's properties was found to be somewhat less than the indebtedness to the first mortgage bondholders. Accompanying the order was a memorandum opinion wherein the court endeavored to state its position in respect to the main contentions involved.
At the conclusion of the hearing upon the report none of the counsel engaged filed any request upon the court for any specific findings of fact or conclusions of law, but on November 30, 1936, two days beofe the expiration of the period in which the order might be reviewed, attorneys for the debtor and for the Bondholders' Protective Committee for Pittsburgh Hotels Corporation, 6 per cent. Serial Mortgage Gold Bonds, and for the Protective Committee for Pittsburgh Hotels Corporation Fifteen-Year 6 1/2 per cent. Sinking Fund Gold Debentures, filed a petition wherein, after reciting a number of alleged errors, they joined in praying the court to grant an oral reargument of the matter, and to make specific findings as follows:
"1. That the Court will make a specific finding with respect to the propriety of determining depreciation by means of estimating service lives rather than the recognized method of observing condition.
"2. That the Court will make a specific finding with respect to the propriety of determining cost of reproduction new at spot prices for material and labor, as of October 1, 1935, rather than by the use of average prices over a period.
"3. That the Court make a specific finding with respect to the propriety of estimating prospective earnings and cost of reproduction new for a hypothetical hotel of one thousand (1000) rooms, instead of for the existing William Penn Hotel containing fourteen hundred (1400) rooms."
The desirability of a reargument does not appear. When the hearing upon the report ended, all counsel waived an oral argument, agreeing to submit the matter upon written arguments. Briefs were exchanged, reply briefs filed, and replies to the reply briefs. The court endeavored to give these extensive arguments careful attention, and does not feel that so valuable a new point of view would appear as to justify interference with jury trials and further delay of the main proceeding, already long drawn out.
The first request for specific finding is not happily worded. It seems to confine the court to an unadmitted position, namely, that the method of observing condition is generally recognized as the only proper method of determining depreciation, and that such method is necessarily opposed to any consideration of service life. In the present appraisal both service life and condition were considered -- and properly so.
The second request arises from a variance in the method of the Appraisal Company engineer and that of the engineer called by exceptants to the report in calculating reconstruction cost. The former used present prices, while the latter took the average prices of labor and materials for a number of years. He included a number of the boom years prior to the years of financial stringency, thus increasing the cost of reconstruction. In view of the fact that the matter for the determination of the court was the present value of the hotel properties, we are of opinion that it was quite proper to consider present, rather than past, prices of materials and labor in determining reconstruction cost as an element of value.
The third request presents another point of controversy between engineers. The American Appraisal Company engineer held, from his investigation of the past, present, and future occupancy history of the William Penn Hotel (so far as he could predict it), that a 1000-room hotel would return a larger income than the present one of 1400 rooms, and that such a hotel should be considered in determining reconstruction cost. Engineers called by the exceptants, stressing the future rather than the past or present, were of a contrary opinion. The court is of opinion that the finding of the American Appraisal Company is correct in this respect, as well as in the use of present prices in determining reproduction cost.
But while of that opinion, it nevertheless does not file numbered specific findings of fact and conclusions of law, as it is felt that such action is not required under Equity Rule 70 1/2, 28 U.S.C.A. following section 723. That rule requires the court of first instance in deciding suits in equity to state specific findings of fact and conclusions of law. It is true, in bankruptcy proceedings equitable principles are to be applied, but bankruptcy actions are not suits in equity as contemplated by the rule. The finding in the instant case was not a final decision, but only a definite determination of a single fact necessarily determined in the course of the proceeding.In itself it is a specific finding of fact. The only conclusion of law which might be stated would be a declaration that the court had power to find the fact -- certainly a necessary accompanier of the order.
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