2d 54
some purpose in changing the date when the court should acquire "exclusive
jurisdiction," not only over the property of the "Debtor" (which it had before),
but over the "Debtor" itself; and a priori it may indeed appear reasonable to
suppose that it meant for all purposes to push that date back to the filing of the
petition. The only light that the Congressional reports apparently throw upon
the intent of 111 is as follows: "More effective and orderly procedure is
provided by thus eliminating the doubts which presently exist under 77B as to
the nature and extent of the court's jurisdiction before the entry of an order
approving a petition." At least it is clear that there were questions about the
reorganization court's personal jurisdiction of the "Debtor" itself before
approval. Our decision in In re Fox Metropolitan Playhouses, Inc., 2 Cir., 74
F.2d 722, was one. In any event, when we consider the sections of Chapter X
immediately adjacent to 111, we cannot escape the conclusion that, whatever
may have been the other "doubts," if any, that Congress thought it was
"eliminating," the section did not automatically deprive the state courts of their
existing jurisdiction over pending suits in personam. The very next section
112 provided that until approval "the jurisdiction, powers, and duties of the
court * * * shall be the same as in a bankruptcy proceeding before
adjudication"; and, as we have just said, the jurisdiction of the bankruptcy court
before adjudication does not displace automatically the jurisdiction of state
courts. On the contrary, the bankruptcy court must rely upon 11 in order even
to stay state suits. We cannot believe that Congress meant in 111 to give to
the reorganization court a jurisdiction which it at once took away in 112.
Furthermore, 112 and 114 are both in exactly the same words, except that
one covers the period before filing and the other the period after; and we
should therefore have to suppose that 111 ran counter to this apparent purpose
of drawing a jural distinction between the two periods. Finally, we can see no
greater reason to make the filing of a petition automatically put an end to the
jurisdiction of state courts in a reorganization proceeding than in bankruptcy. In
each case no other court can create any new interests in the property, for that
would affect the quantum of the assets to be distributed; but there is no reason
to suppose that state courts will not as satisfactorily liquidate existing claims in
personam in reorganization as they will in bankruptcy. Indeed, there is more
reason to suppose that an alleged bankrupt will neglect the defence of a suit
against him than that a "Debtor" will do so. The alleged bankrupt may, and
usually does, anticipate a discharge, and is not unlikely to be indifferent to such
claims; but a "Debtor," whether the petition is approved or not, will ordinarily
not be entirely discharged, and will therefore have more motive to contest a
claim. We are therefore disposed to interpret 111 in accordance with the
Congressional report: i. e. as only "eliminating the doubts which previously
exist(ed) within section 77B." We have mentioned only one such "doubt"; but it
is quite possible that there were others that we do not know. It is clear that the
amendment was meant to subject the "Debtor" personally to the control of the
Taylor v. Sternberg, supra, 293 U.S. 470, 55 S.Ct. 260, 79 L.Ed. 599, does not
seem to us an authority to the contrary. It arose in bankruptcy, the bankrupt
being adjudicated two days after an involuntary petition had been filed. On the
same day a receiver, appointed by a state court in an insolvency proceeding,
presented his report to that court, which at some time not specified awarded
allowances to him and to his attorney. The question was whether he should be
allowed to withhold these allowances from the amount to be turned over to the
trustee in bankruptcy, and the Court said "no." It was most unlikely that the
award could have been made before the adjudication, for it appears from the
opinion in the Court of Appeals, 8 Cir., 71 F.2d 157, 158, that the receiver did
not even present his "Final Report" until the day when the adjudication was
entered. Besides, even if the judge did make the allowances on the same day,
ordinarily the law will not undertake to divide a day. Indeed, there is nothing to
show that the Supreme Court thought of the services as creating personal debts
of the bankrupt to the receiver and his attorney, rather than charges against the
assets. In view of these considerations, when Sutherland, J., said 293 U.S. on
page 473, 55 S.Ct. on page 262, that "with the filing of the petition in
bankruptcy, the power of the state court in that respect ceased; and its order
fixing the compensation * * * was a nullity because made without jurisdiction,"
if he had in mind claims in personam, at least he was thinking of their
allowance after adjudication.
Notes:
1
Lion Bonding Co. v. Karatz, 262 U.S. 640, 642, 43 S.Ct. 641, 67 L.Ed. 1151;
Gross v. Irving Trust Co., 289 U.S. 342, 53 S.Ct. 605, 77 L.Ed. 1243; Taylor v.
Sternberg, 293 U.S. 470, 55 S.Ct. 260, 79 L.Ed. 599; In re Diamond's Estate, 6
Cir., 259 F. 70, 74