Source: https://supreme.justia.com/cases/federal/us/298/160/
Timestamp: 2019-04-26 15:44:28+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 298 › Lowden v. Northwestern Nat'l Bank & Trust Co.
Lowden v. Northwestern National Bank & Trust Co.
1. The Court will not answer on certificate questions unrelated to the pending controversy, or questions unnecessarily general, or questions which admit of one answer in one set of circumstances and a different answer in another, the differentiating circumstances being imperfectly disclosed. P. 298 U. S. 162.
2. The question whether and to what extent a bank owing money to a railway and owning some of the railway's bonds may be allowed to set them off in an action on the debt brought by trustees appointed for the railway in reorganization proceedings under § 77 of the Bankruptcy Act is not a question that can be answered on certificate without full knowledge of all the relevant particulars of the situation. P. 298 U. S. 164.
Questions certified with relation to an appeal to the court below from a judgment, 11 F.Supp. 929, allowing a setoff in favor of the Bank, in an action by the trustees appointed for the Chicago, Rock Island & Pacific Railway Company in reorganization proceedings.
"Question 1. Does the right of setoff recognized by § 68(a) of the Bankruptcy Act apply to reorganization proceedings under § 77 of that act?"
"Question 2. If the first question be answered in the affirmative, can a bank which owns the unmatured bonds of a railroad corporation set off a deposit account of the railroad with the bank against the bonds, upon the filing by the railroad of a petition for reorganization under § 77 of the Bankruptcy Act, alleging that the railroad is unable to meet its debts as they mature?"
"Question 3. If the first and second questions be answered in the affirmative, may the United States District Court, for the District of Minnesota, in the suit by the trustees of the railroad's estate to recover the amount deducted from the account of t e railroad by the bank under the claimed right of setoff, recognize and establish as a proper setoff by the bank one which was not made until after the filing of the petition for reorganization and which has never been ordered, authorized, approved, or consented to by the court in which that petition was filed and approved?"
us have been framed without adequate regard to these established rules of practice.
Question No. 1 is too general and abstract, its relation to the controversy being indirect and problematical.
"In all cases of mutual debts or mutual credits between the estate of a bankrupt and a creditor, the account shall be stated and one debt shall be set off against the other, and the balance only shall be allowed or paid."
Bankruptcy Act § 68a, 11 U.S.C. § 108(a). The precept, framed on the example of ancient laws across the seas (4 Anne, c. 17, § 11; 5 Geo. II, c. 30, § 28), is now applicable by force of statute to the liquidation of estates in bankruptcy. We are asked to announce broadly whether it is applicable with similar inclusiveness to proceedings to reorganize a railroad, though the question tells us nothing as to the facts behind the controversy. "The court has repeatedly held that it will not answer questions of objectionable generality." White v. Johnson, supra; United States v. Worley, 281 U. S. 339, 281 U. S. 340; United States v. Mayer, supra. Without a showing of the facts, an answer to this question would declare a mere abstraction which might seem too narrow or too broad thereafter when the facts were shown forth. One must see the controversy in its setting before the implications of a ruling can be prefigured with assurance.
which was meant in its enactment to prescribe the rule of setoff upon a distribution of the assets. That stage of administration, or the analogous stage of a revision of the debts, may never be attained in a proceeding to reorganize, though a petition has been approved and trustees have been appointed. If a plan of reorganization is not proposed or accepted, or, being proposed and accepted, is not confirmed by the court within a reasonable time, the whole proceeding may be dismissed, § 77(c)(7), the title to the estate thus reverting to the debtor. By that time, there may even be ability to pay demands as they mature. What is done at the beginning amounts to little more than a provisional sequestration to give protection for the future.
constant, like the statute, in the absence of deflecting forces. Scott v. Armstrong, 146 U. S. 499, 146 U. S. 507; North Chicago Rolling Mill Co. v. St. Louis Ore & Steel Co., 152 U. S. 596, 152 U. S. 615; Scammon v. Kimball, 92 U. S. 362, 92 U. S. 366; Sawyer v. Hoag, 17 Wall. 610, 84 U. S. 622; Clark Bros. & Co. v. Pou, 20 F.2d 74, 77-78; Greene v. Darling, 5 Mason, 201, 210 (Story, J.); Gray v. Rollo, 18 Wall. 629, 85 U. S. 632; Dade v. Irwin's Executor, 2 How. 383, 43 U. S. 390-391; Studley v. Boylston National Bank, 229 U. S. 523, 229 U. S. 528-529; Pond v. Harwood, 139 N.Y. 111, 119, 34 N.E. 768; Frank v. Mercantile National Bank, 182 N.Y. 264, 268, 74 N.E. 841; Lockwood v. Beckwith, 6 Mich. 168, 175; Story, Equity Jurisprudence (14th Ed.) §§ 1871, 1872.
interested factions and shaping his decree accordingly. We have no thought at this time to foreshadow the result of an exploring expedition directed to those ends. When all the facts are known, they may be found to offer no excuse for a departure from the rule in bankruptcy which, as indicated already, is generally, even if not always, the rule in equity as well. They may point, on the other hand, to the need for an exception, or may even lead to a decree in the nature of a compromise, the moneys being paid into the registry of the court to abide its future action. A decision balancing the equities must await the exposure of a concrete situation, with all its qualifying incidents. What we disclaim at the moment is a willingness to put the law into a straitjacket by subjecting it to a pronouncement of needless generality.
Question No. 3 is so framed as not to call for an answer unless an affirmative answer is given to questions Nos. 1 and 2.
Our conclusion as to the defective form of the certificate is borne out in a striking way by the concession of the parties. Before the argument on the questions, plaintiffs and defendant joined in moving us for an order to bring up the whole case. That motion was denied. Nothing in the nature of the controversy called for a writ of certiorari in advance of a decision by the court of intermediate appeal. The significant thing, however, is that, in briefs submitted on that motion, both parties admitted that the second question was defective. The plaintiffs said: the statement "is not sufficiently complete to enable this Court to answer the second question as applied to this case." The defendant made a like objection. Plaintiffs and defendant fortified their general criticism by the enumeration of particular defects.
* The references in this opinion are to § 77 as enacted March 3, 1933, 47 Stat. 1474, and not to the amendments of August 27, 1935, 49 Stat. 911, 926.

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