Source: https://supreme.justia.com/cases/federal/us/414/212/
Timestamp: 2019-04-21 10:30:30+00:00

Document:
Justia › US Law › US Case Law › US Supreme Court › Volume 414 › Foley v. Blair & Co., Inc.
Foley v. Blair & Co., Inc.
Respondent securities broker was adjudged an involuntary bankrupt for having committed the fifth act of bankruptcy under § 3a(5) of the Bankruptcy Act. This adjudication was reversed by the Court of Appeals, but subsequently the bankruptcy court, on a petition by the broker which had been filed shortly after the adjudication, confirmed the broker's proposed arrangement with creditors under Chapter XI of the Act.
Held: Where the issue of whether the confirmation of the Chapter XI arrangement renders the case moot because the petitioners no longer have a monetary stake in resolving whether the fifth act of bankruptcy had been committed, was briefed and argued before this Court, but, because of the sequence of events, was necessarily not treated in the Court of Appeals' opinion, the Court of Appeals should have the opportunity to consider such issue in the first instance, and, in doing so, it should consider the effect of § 64a(1) of the Act providing that "one reasonable attorney's fee" for services rendered to petitioning creditors in involuntary bankruptcy cases shall be treated as a priority debt.
trustee" within the statutory definition. 471 F.2d 178. We granted the writ of certiorari, 411 U.S. 930, in order to resolve this issue of seeming importance in the administration of the Bankruptcy Act, and oral argument was heard on November 12, 1973.
The respondents have suggested, however, that we should not decide the merits of the controversy, because the present circumstances of Blair & Co. render the case moot. The suggestion is premised on a series of events following the filing of the original involuntary petition. On April 15, 1971, two days after the Referee had granted the petitioners' motion for summary judgment on the issue of whether Blair had committed the fifth act of bankruptcy, Blair filed a petition for relief under Chapter XI of the Bankruptcy Act, pursuant to § 321 of the Act, 11 U.S.C. § 721. [Footnote 3] On May 18, 1971, the Referee entered an order pursuant to § 325 of the Act, 11 U.S.C. § 725, staying ordinary bankruptcy proceedings under Chapters I-VII pending the determination of the Chapter XI petition.
the motion was denied. On June 12, 1973, the District Court denied a petition for review of that order. On October 2, 1973, while the present case was awaiting argument in this Court, the bankruptcy court entered an order confirming the arrangement proposed by Blair under Chapter XI. Apparently, no appeal was taken from the order of confirmation.
In light of the confirmation of the Chapter XI arrangement, the respondents suggest that this case no longer presents a live controversy. They rely upon § 371 of the Act, 11 U.S.C. § 771, which provides that confirmation of an arrangement "shall discharge a debtor from all his unsecured debts and liabilities provided for by the arrangement," and argue that the petitioners thus no longer have any monetary stake in resolution of the controversy over whether the fifth act of bankruptcy was committed. See generally 9 W. Collier, Bankruptcy 9.32, 9.33 (14th ed.1972). The respondents also argue that the original adjudication of bankruptcy is irrelevant to the present situation, since § 322 of the Act, 11 U.S.C. § 722, does not make the pendency of bankruptcy proceedings a prerequisite to the filing of a petition for relief under Chapter XI.
The Special Trust Fund is authorized by the Constitution of the New York Stock Exchange, Art. XIX, § 1.
"Immediately following his appointment by the Exchange, the Liquidator shall take control of the business and property of the Corporation for the purpose of liquidating the business of the Corporation and shall proceed as follows in connection with the liquidation:"
"i.) he shall promptly take such steps as he may deem practicable to reduce the Corporation's operating expenses and to dispose of the Corporation's salable assets;"
"ii.) he shall have power to retain independent public accountants, consultants, counsel and other agents and assistants and shall have power to augment and reduce or eliminate the staff of the Corporation;"
"iii.) he shall, as soon as practicable, assert and collect or settle all claims and rights of the Corporation;"
"iv.) he shall pay any claim against the Corporation considered by him to be a valid claim of any customer of the Corporation;"
"v.) he shall take such other steps as he deems necessary or appropriate to liquidate the business of the Corporation."
"It is agreed that consistent with the duty of the Liquidator to effect a fair and orderly liquidation of the business of the Corporation to enable prompt settlement with its customers, the Liquidator shall act in accordance with what he deems to be good business practice."
On the same date that this agreement was signed, Blair executed a second instrument that more specifically delineated the powers of the Liquidator, who was described as "the true and lawful attorney and agent of and for the Corporation [Blair]."
The actual order adjudging Blair a bankrupt was not issued until April 27, 1971.
The September 27 finding was an oral one, made in open court. Written findings to the same effect were filed on December 27, 1971.
While the effect of § 64a(1) upon the issue of mootness was discussed at oral argument, it was not the subject of briefing by either of the parties.

References: v. 
 v. 
 § 3
 § 64
 § 321
 § 721
 § 325
 § 725
 § 371
 § 771
 § 322
 § 722
 § 1
 § 64