Wells Fargo Bank & Union Trust Co. v. Imperial Irr. Dist.

This is an appeal by certain bondholders from a decree of the District Court approving a plan for composition of indebtedness of the appellee District under Chapter 9 of the Bankruptcy Act, 11 U.S.C.A. §§ 401-404 .

Appellee is a local taxing agency organized in 1911 under the California Irrigation District Act of 1897, Stats. 1897, p. 254, as amended, Deering’s Gen.Laws, Act 3854. As authorized by that act it issued four issues of bonds, as follows:

First issue, January 1, 1915, $3,500,000 bearing 5% interest and maturing serially from 1936 to 1955.

Second issue, July 1, 1917, $2,500,000 bearing 5% interest and maturing serially from 1938 to 1957.

Third issue, October 1, 1919, $2,500,000 bearing 5%% interest and maturing serially from 1925 to 1934.

Fourth issue, July 1, 1922, $7,500,000 bearing 6% interest and maturing serially from 1935 to 1956.

Interest on all four issues was payable semi-annually on January and July first.

Beginning in 1924, the District was without cash to meet its current operating expenses and issued warrants for that purpose. Funds being unavailable for payment of these warrants, they were registered on presentation. On December 16, 1932, registered…

(dissenting).

It is immaterial, so far as concerns the establishing of a dangerous and wrongful precedent, that the contention of the illegality of the plan is raised here by but a small percentage of the creditors.

“The fact that the vast majority of security holders may have approved a plan is not the test of whether that plan satisfies the statutory standard. The former is not a substitute for the latter. They are independent. See Case v. Los Angeles Lumber Products Co., supra, 308 U.S. [106], pages 114-115, 60 S.Ct. [1], 6, 7, 84 L.Ed. 110 .” American United Mut. Life Ins. Co. v. Avon Park, 311 U.S. 138, 148 , 61 S.Ct. 157, 163 , 85 L.Ed. 91 , 136 A.L.R. 860 .

A. What the majority hold is that the debtor district, with 75 percent of the creditors, may be empowered to modify at any time within 37 years a plan affecting 25 percent of the creditors, without the district court retaining the power to determine whether the proposal of the 75 percent is fair and equitable and non-discriminatory to the 25 percent. The district court not only does not purport to retain such power, but it delegates the exercise of a power to make finally binding the modified plan of the debtor…