Task: songer_casetyp1_7-3-4

What follows is an opinion from a United States Court of Appeals.
Your task is to identify the issue in the case, that is, the social and/or political context of the litigation in which more purely legal issues are argued. Put somewhat differently, this field identifies the nature of the conflict between the litigants. The focus here is on the subject matter of the controversy rather than its legal basis.
Your task is to determine the specific issue in the case within the broad category of "economic activity and regulation - bankruptcy, antitrust, securities". 

STEPHENS, Circuit Judge.
Appellee Merced Irrigation District, an irrigation district organized under the provisions of the California Irrigation District Act, Cal.Stats. 1897, p. 254, as amended, Decring’s General Laws, Act 3854, filed a petition for composition of debts under the provisions of Chapter IX of the Bankruptcy Act of 1898 as amended, 11 U.S.C.A. §§ 401-404. After a hearing of the petition, the District Court entered its interlocutory decree confirming the plan of composition proposed by the District. This is an appeal by certain bondholders of the District from said decree of confirmation.
The District is one of the largest irrigation districts in California, and was organized in 1919. To complete the development of the District three separate series of bonds, aggregating $16,190,000 in principal amount, were issued and sold. The first issue was in the principal amount of $11,940,000, dated January 1, 1922, due serially from 1934 to 1962, and bearing interest part at 5^4% and part at 6%. The second issue was in the principal amount of $3,250,000, dated May 1, 1924, due serially from 1937 to 1964, and bearing interest at 6%. The third issue was in the principal amount of $1,000,000, dated April 1, 1926, due serially from 1965 to 1966, a'nd bearing interest at 6%. The bonds were each in the amount of $1,000.
The District made all payments according to the maturities of its bond issues, including principal and interest, up to and including the payment due January 1, 1933. It defaulted on the July 1, 1933, payment.
Prior to such default and in March, 1932, a committee of representatives of the bond underwriters and an association called the California Irrigation and Reclamation District Bondholders Association, merged and thereafter those so merging functioned as a Bondholders’ Committee. This Committee solicited the deposit of District Bonds under a deposit agreement dated March 1, 1932, and a major portion of the bonds, including those of some of appellants herein, were deposited with the Committee. After negotiations a refunding program was submitted by the Board of Directors to the electors of the District, and was voted upon favorably in November, 1933. This program provided fqr payment in.full of the bond principal of the District with an extension of maturities and some reduction in interest.
After the enactment of Section 36 of the Emergency Farm Mortgage Act, 43 U.S. C.A. § 403, an application was made on December 16, 1933 by the District to the Reconstruction Finance Corporation [hereinafter for convenience referred to as R. F. C.], for funds with which to reduce and refinance the debt of the District.
The R. F. C. on November 14, 1934 adopted a resolution authorizing a loan, to the District of not exceeding $8,600,000 plus 4% interest upon the amount to be paid thereunder. It was provided in the resolution that the loan should be made subject to certain specified terms and conditions; one of which was set forth as follows in the resolution: “5. * * *(c) All or any part of the Old Securities acquired or held by or on behalf of this Corporation (R.F.C.) through any disbursement of or from the loan authorized hereunder as well as all rights in or to such Old Securities, may be kept alive for a greater or lesser time and for any purpose the Division Chief and Counsel may deem necessary, but this Corporation may at any time require the Borrower [District] to issue its new 4% bonds and exchange the same for the Old Securities held by or on behalf of this Corporation. Until such Old Securities have been exchanged'for'New Bonds, all such securities as well as all rights in or to the same shall continue to be and constitute obligations of the Borrower for the full amount thereof and nothing in this resolution shall be deemed to limit the right of this Corporation to enforce or cause to be enforced full payment of principal and interest of such Old Securities as and when the Division Chief and Counsel shall deem it advisable to 'do so * *
On December 11, 1934, the District by resolution accepted the loan and agreed to the terms and conditions of the resolution of R. F. C. above referred.to.
The loan from R. F. C. was calculated to pay 51.501 cents on the dollar of bond principal, with nothing for accrued interest. The proposal was submitted to the California Districts Securities Commission, and the Commission by its Order No. 54 on February 15, 1935, approved the issuance of the refunding bonds and the making of the contract therefor. Thereafter the proposal was submitted to the electors of the District, and they voted in favor thereof on March 20, 1935.
At this time the Bondholders’ Committee submitted to the bondholders whom it represented a questionnaire to determine whether they desired to take advantage of the cash settlement proposition. The nfa-jority of the bondholders (63% of the total) indicated their preference for the cash offer plan. The Committee thereupon voted in favor of the plan, and notified all depositing bondholders that they could withdraw their bonds within thirty days upon payment of their proportion of the expenses of the Committee, otherwise the Committee would deposit all bonds in its hands under the plan. Certain of the bondholders, opposing the plan, withdrew their bonds from the Committee.
By April 18, 1935, 75% of the District Bonds had been deposited under the cash plan, and the District filed a proceeding under Section 80 of the Bankruptcy Act as then in effect, 11 U.S.C.A. § 303, for confirmation. We shall refer to this as the first bankruptcy case.
Arrangements were made to carry out the plan, and on October 4, 1935, over 86% of the outstanding bonds were deposited and surrendered and the owners thereof received their $515.01 per bond.
On March 4, 1936, the District Court rendered its decree in the first bankruptcy case confirming the plan. An appeal was taken to this court from said decree, in view of the decision of the United States Supreme Court rendered on April 29, 1936, in the case of Ashton v. Cameron County Water Improvement District No. One, 298 U.S. 513, 56 S.Ct. 892, 80 L.Ed. 1309, holding Section 80 of the Bankruptcy Act unconstitutional. We entered our memorandum decision on April 12, 1937 [Bekins v. Merced Irr. Dist., 9 Cir., 89 F.2d 1002, certiorari denied 302 U.S. 709, 58 S.Ct. 30, 82 L.Ed. 548], reversing the decree of the District Court and remanding the cause with directions to dismiss.
During the pendency of said proceedings in the Supreme Court, the District, on July 20, 1937, filed a petition in the Superior Court of the State of Californiá in and for Merced County under the provisions-of California Statutes 1937, Chapter 24, for confirmation of the same plan of composition. In this case the R. F. C. filed its “consent” dated July 9, 1937. The case went to trial and was contested by substantially the same objectors as appellants in the principal case. The cause was submitted and the trial judge rendered an opinion on October 5, 1937, in favor of the District and ordered the preparation of findings and a decree in accordance with his opinion. No findings, however, were ever presented by the District and none was ever filed and no judgment has ever been signed and filed therein.
The present proceedings were inaugurated by the filing of a petition in the District Court on June 17, 1938, pursuant to Chapter TX of the Bankruptcy Act of 1938, 11 U.S.C.A. §§ 401-404.
Appellants raise the plea of res judicata by virtue of the decision of this court reversing the decree in the first bankruptcy case above referred to, as their “Ninth Proposition”. They also raise, as their “Eighth Proposition” the pendency of the proceedings before the Superior Court for Merced County in bar of these proceedings. Other points raised by appellants may best be stated by quoting from their opening brief:
“First Proposition: The Reconstruction Finance Corporation is not a creditor affected by the plan of composition and its consent is not entitled to be considered.”
“Second Proposition: Petitioner is barred from obtaining confirmation of its proposed plan of composition by reason of its lack of good faith and constructive fraud.”
“Third Proposition: Petitioner herein is not ‘insolvent or unable to meet its debts as they mature’
“Fourth Proposition: The plan of composition is not fair, equitable or for the best interests of the creditors, and it is discriminatory.”
“Fifth Proposition: The claims were improperly classified as being all of the same class.”
“Sixth Proposition: The decree unlawfully takes trust funds and vested rights belonging to the appellants.”
“Seventh Proposition: By the terms of the statute the court was without jurisdiction.”
“Tenth Proposition: Chapter IX of the Bankruptcy Act is void as applied to appellants.”
We shall deal with each point raised by appellants separately, enlarging on the statement of facts under each point where necessary for an understanding of the issue raised. We do not treat of the points in the same order as treated by appellants, however, since we deem it more orderly to discuss jurisdictional matters first.
Res Judicata
Appellants’ contention here is that “the rule of res judicata applies to questions of law as well as to questions of fact”; that the decision of this Court in the first bankruptcy case reversed the judgment of the United States District Court “on the ground that the grant of judicial power under which the latter Court had acted in entering a decree which impaired the obligations of the bonds held by the appellants was outside the bankruptcy clause of the Constitution and on that ground void”; that “the grant of Federal judicial power under which the District Court acted in rendering its prior decree was the same as the grant of Federal judicial power under which the District Court acted in rendering the decree now appealed from”; that “when a person obtains a judgment that a statutory grant of power — whether administrative or judicial- — is void, he may not be endlessly required to re-try the issue by repeating the grant in new statutes”.
For a clear understanding of appellants’ point, we shall briefly review the respective sections of the statute under which the first bankruptcy case was brought [48 Stat. 798, 11 U.S.C.A. §§ 301-303] and the statute under which the present case was brought [11 U.S.C.A. §§ 401-404], as well as the United States Supreme Court decisions as to their constitutionality.
In Ashton v. Cameron County Water Improvement District, 298 U.S. 513, 56 S.Ct. 892, 896, 80 L.Ed. 1309, the Supreme Court had under consideration the question of the constitutionality of the first Act as applied to a Texas water improvement district. The Court examined the corporate structure of the improvement district, and decided that it was a political subdivision of the State of Texas. It held that the statute under consideration was invalid because an “application of the statutory provisions [in the old Act] might materially restrict [the district’s] control over its fiscal affairs”.
It also decided that the State of Texas could not consent to the proceedings under the statute, for to do so would constitute an impairment of the obligation of contract, prohibited by the Federal Constitution.
It was after the decision in the Ashton case, supra, that this court rendered its decision in the first bankruptcy case relied upon by the appellants in their plea- of res judicata, reversing a decree'of the District Court which had approved a plan of composition.
In August, 1937, after the Ashton decision, the present Municipal Bankruptcy Act, 11 U.S.C.A. §§ 401-404 was passed. The question of the constitutionality of this second Act was before the United States Supreme Court in United States v. Bekins, 304 U.S. 27, 58 S.Ct. 811, 82 L.Ed. 1137. The Court considered the new Act in relation to the decision in the Ashton case, supra, and said (page 49 of 304 U.S., page 815 of 58 S.Ct., 82 L.Ed. 1137) :
“In Ashton v. Cameron County District, supra, the court considered that the provisions of chapter 9 [§§ 78-80, 11 U.S. C.A. §§ 301-303,] authorizing the bankruptcy court to entertain proceedings for the ‘readjustment of the debts’ of ‘political subdivisions’ of a State ‘might materially restrict (its) control over its fiscal affairs,’ and was therefore invalid; that if obligations of States or their political subdivisions might be subjected to the interference contemplated by chapter 9, they would no longer be ‘free to manage their own affairs.’
"In enacting chapter 10 [§§ 81-84, 11 U.S.C.A. §§ 401-404] the Congress was especially * solicitous to afford no ground for this objection. In the report of the Committee on the Judiciary of the House of Representatives, which was adopted by the Senate Committee on the Judiciary, in dealing with the bill proposing to enact chapter 10, the subject was. carefully considered. The Committee said:
“ ‘* * * The Committee on the Judiciary is not unmindful of the sweeping character of the holding of the Supreme Court above referred to (in the Ashton Case), and believes that H. R. 5969 is not invalid or contrary to the reasoning of the majority opinion. * * *
“ ‘The bill here recommended for passage expressly avoids any restriction on the powers of the States or their arms of government in the exercise of their sovereign rights.and duties. * * *’
“We are of the opinion that the Committee’s points are well taken and that chapter 10 is a valid enactment. The statute is carefully drazvn so as not to impinge upon the sovereignty of the State. * *” [Emphasis supplied.]
The present proceedings are brought under the second Act, declared constitutional by the Bekins case, supra.
It is asserted by appellants that the plea of res judicata should be sustained even though we might find differences in the two Acts. We quote from their brief on the question: “But the truth is that notwithstanding. any changes in words or lettering of sentences, the trial eventuates in that which offends the sovereignty of the state in the same manner that the decree of Section 80 offended, as determined in the Ashton case. It was not the form of trial, the form of the petition, the form of the consents or the name of the decree that counted. It was that an effectuating federal decree was not permissible under our plan of separate sovereignties.”
This argument, of course, assumes that our decision in the first bankruptcy case reversing the decree of the District Court decided the question of law as between the' parties to this proceeding that Congress was without power to enact any bankruptcy legislation relating to a California irrigation district. That question was not1 before us, and could not have been decided. The sole questions with which we were concerned were — Did the District Court at that time have jurisdiction to entertain the proceedings? Was the statute which purported to confer jurisdiction on the District Court constitutional? Our answer to those questions was in the negative — that at the time of such proceedings there was no valid law in effect conferring jurisdiction on the District Court.
Subsequent to our decision a law has been enacted which has been declared valid by the Supreme Court, and that law gives the- District Court jurisdiction to entertain the proceedings now before us. This holding cannot be tortured into a decree that forever bars the petitioner from enjoying with all others this completely changed situation.
It is argued, however, that the new Act cannot be distinguished from the old. Appellants state “When a person obtains a judgment that a statutory grant of power — whether administrative or judicial— is void, he may not be endlessly required to re-try the issue by repeating the grant in new statutes”. Sound as this statement undoubtedly is, as an abstract principle, it can have no application here where the Supreme Court has decided that the two Acts are effectively distinguishable. The Bckins case definitely holds that the constitutional objections found in the old Act are not to be found in the new Act.
It is next asserted by appellants that even assuming that the two Acts are distinguishable as to the grant of judicial power, that is, that the Bekins case did not overrule the Ashton case in that respect, still the decision of this Court in the first bankruptcy case is res judicata of the question of the power of a State to give its consent to bankruptcy proceedings.
There are two answers to this. First, an examination of our decision relied upon by appellants [89 F.2d 1002] does not disclose that we did other than to order that “a decree be filed and entered reversing the decree of said District Court, and remanding the cause with directions to dismiss the cause”. No reasons were given for our decision. There is nothing to indicate whether we relied upon the argument made at the hearing that the legislation was beyond the power, of Congress, or upon the argument that consent of the State would constitute an impairment of the obligation of contract. In fact, it does not even appear that we based our decision on either of these arguments. There may have been many reasons why the proceedings in the District Court should have been dismissed. At least these two reasons were argued by the appellants in that action. It cannot be said that the decision is res judicata as to either rule of law relied upon by appellants. Where a number of grounds for dismissal of an action are urged, an order of a court simply that the cause be dismissed, without an indication as to the ground upon which the court acted, can ;not be res judicata of all possible grounds! for such order.
The second answer to appellants’ theory is that even assuming that this court did decide that California could not properly consent to the proceedings brought under the old Act, this is not a holding that California can never consent to any bankruptcy legislation. All that was before us for decision was whether or not California could consent to the proceedings then before us. Assuming that we did decide the question of constitutionality upon this ground, still that decision would not be res judicata of the right of the State to consent to subsequent proceedings brought under a new and distinguishable Act.
In Blair v. Commissioner, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465, the United States Supreme Court had under consideration a plea of res judicata in a case which may be said to be somewhat analogous to the one here under consideration.
The cited case involved the question of the liability of a beneficiary of a testamentary trust for taxes upon income which he had assigned to others prior to the tax years. The question first arose with respect to the tax year 1923. The Circuit Court of Appeals for the Seventh Circuit, 83 F.2d 655, held that under the Illinois law the trust was a spendthrift trust and the assignments were invalid. Upon that basis the Court held that the income was taxable to the beneficiary. Thereupon the trustees brought suit in the Illinois state court to obtain a construction of the will in respect to the power of the beneficiary to make the assignment. In this suit it was decided that the trust was not a spendthrift trust and that the assignments were valid. In a subsequent action for taxes for the years 1924, 1925, 1926 and 1929, the Government contended that the decision of the Circuit Court of Appeals to the effect that the income from the trust was taxable to the beneficiary was res judicata. The Supreme Court ruled against the Government’s contention, stating [pages 8, 9 of 300 U.S., page 331 of 57 S.Ct. 81 L.Ed. 465]:
“The Government contends that the judgment relating to the income for 1923 is conclusive in this proceeding as res judicata. Tait v. Western Maryland Ry. Co., 289 U.S. 620, 53 S.Ct. 706, 77 L.Ed. 1405. * * *
“We think that the ruling in the Tait Case is not applicable. • That ruling and the reasoning which underlies it apply where in the subsequent proceeding, although relating to a different ■ tax year, the questions presented upon the facts and the law are essentially the same. * * * Here, after the decision in the first proceeding, the opinion and decree of the state court created a new situation. The determination oí petitioner’s liability for the year 1923 had been rested entirely upon the local law. * * * The supervening decision of the state court interpreting that law in direct relation to this trust cannot justly be ignored in the present proceeding so far as it is found that the local law is determinative of any material point in controversy.” [Emphasis supplied.]
Now, let us compare the Blair case, supra, with the present case. In the Blair case, the decision relied upon in the plea of res judicata determined that under local law the assignments in question were invalid, and hence that the. income from the trust was taxable to the beneficiary. After that decision, the State courts determined that the assignments were valid, contrary to the decision of the Circuit Court of Appeals. Thereafter, in a suit on taxes for subsequent years, by reason of the new situation created by the state court decision, the Supreme Court held that the decision in the first case was not res judicata.
In the present case the first decision determined that the District Court was without jurisdiction over proceedings brought under the unconstitutional Act. After our decision, the new statute was enacted, which has been declared constitutional by the United States Supreme Court. It follows, by the clearest reason, that if a decision of a state court declaring valid certain assignments which had been considered invalid by the Circuit Court of Appeals in arriving at its decision in the Blair case, supra, creates a “new situation” sufficient to justify the denial of the plea of res judicata, on like principles the enactment of a new and different statute and a decision by the highest Court of our Country declaring the same to be constitutional, will create a “new situation” sufficient to justify the denial of the plea in this case.
Jurisdiction of the Court under the Statute
Appellants argue that: “Seventh Proposition: By the terms of the statute the court was without jurisdiction”. Since this question attacks the jurisdiction of the court under the terms of the applicable statute, it would seem, in some respects, more orderly to treat of it before we proceed to the treatment of res judicata. W'e have reversed the treatment of the two points because it is necessary in res judicata to treat of the Ashton and Be-kins cases in considerable detail, and with this treatment in mind our treatment of the other point may be more readily understood.
The argument of appellants under this point runs somewhat as follows: If the Bekins case did not overrule the Ashton case on the question of Federal power, then it follows that the Supreme Court in the Bekins case must have decided that the District involved was' not a governmental agency. This argument is premised upon- the holding of the Ashton case that since the agency there involved was a state agency, the statute there in question usurped the governmental powers of the State. The Court in the Bekins case held that the second Act did not usurp, the sovereign powers of the State. Appellants then carry their argument- — -since-the District involved in the Bekins case was determined not to be a state agency, then the Ashton case is still the law. The District involved in the principal case is a state agency under California decisions, therefore the Court has no jurisdiction.
But appellants’ conclusion is wrong. The Court in the Bekins case did not. premise its decision on the fact that the District involved was not a state agency,, but rather that the Act as drawn did not usurp state powers. Let us quote again from the Bekins decision, 304 U.S. page 51, 58 S.Ct. page 815, 82 L.Ed. 1137, wherein the Court quotes the Committee-on the Judiciary: “ ‘The bill here recommended for passage expressly avoids any restriction on the powers of the States or-their arms of government in the exercise of their sovereign rights and duties. No-interference with the fiscal or governmental affairs of a political subdivision is. permitted. The taxing agency itself is the-only instrumentality which can seek the-benefits of the proposed legislation.. * * ” The Court then states: “We-are of the opinion that the Committee’s, points are well taken and that chapter Kb [§§ 81-84] is a valid enactment. The statute is carefully drawn so as not to impinge, upon the sovereignty of the State. * *” The remainder of the reasoning of the-Court is upon the basis that while state agencies may be immune from taxation by the federal government, still consent of" the state may remove that obstacle; that it follows, therefore, that a state may con-sent to bankruptcy power over its agencies being conferred upon the federal courts.
Let us quote further from the Court’s opinion (p. 54 of 304 U.S., page 816 of 58 S.Ct., 82 L.Ed. 1137) : “The bankruptcy power is competent to give relief to debtors in such a plight and, if there is any obstacle to its exercise in the case of the districts organized under state law it lies in the right of the State to oppose federal interference. The State steps in to remove that obstacle. The State acts in aid, and not in derogation, of its sovereign powers. It invites the intervention of the bankruptcy power to save its agency which the State itself is powerless to rescue.”
Further, the Supreme Court may have found procedural differences in the two Acts to justify the conclusion that the later Act did not impinge the sovereign rights of the State. Assuming that it did so, we do not deem it within our province to reexamine the procedural aspects of the two Acts to say that the Supreme Court was wrong in its determination that there was a distinction.
The premise upon which the Appellants base their entire argument having fallen, there is nothing left to their point. The Bekins case held without question that the Act is constitutional as applied to a California Irrigation District, organized under the same California Statute as the one here involved. That case is binding upon us.
State Proceedings as a Bar
Appellants assert: “Eighth Proposition: There is another action pending in the state courts of California upon the identical cause of action and demanding the same relief, and that that action was commenced and pending under state law prior to the passing of Chapter X [§§ 81-84] of the Bankruptcy Act upon which this proceeding was prosecuted.”
In the appellants’ brief there is a concise analysis of the California Composition Act as codified in Cal.Stat.1937, Chap. 24, p. 92, titled “Irrigation District Refinancing Act.” We quote from the brief: “* * * tjjat act provides that any irrigation district being unable to pay its debts as they mature, such debts may be liquidated, refinanced, or readjusted as 1 herein provided. Such a proceeding is initiated by the Board of Directors of the district who shall adopt a plan. The plan must be concurred in by two-thirds in principal amount of the holders of each class of security affected thereby. The plan shall be presented to the California Districts Securities Commission and if found to be fair and equitable to the creditors the Commission shall approve the same and the board of directors is then authorized to file in the Superior Court in the county in which the district or the major part- thereof is located, a verified petition stating that the district is unable to meet such obligations as they mature; that it desires to effect the plan adopted and that it has been accepted by a sufficient number of creditors and the district desires to avail itself of the act. The Act provides that after the petition is filed the plan shall temporarily be in effect and that the filing of the petition shall automatically enjoin and stay, pending final determination of the proceedings as therein set forth, the commencement or continuance of proceedings or suits against the district or any officer thereof and shall enjoin and stay the enforcement of any lien or the levy of assessments except as is consistent with and in furtherance of the plan and that the Court in which the petition is filed, shall have exclusive jurisdiction * * * with respect to all suits, actions and proceedings against the district on account of the indebtedness affected.”
It is then provided for notice of hearing and service upon known holders of bonds affected and at any time prior to the hearing any creditor- may answer; changes or modifications may be made and then the court if it finds the plan to be fair and equitable and that it complies with the provisions of the act and has been accepted in writing by the required number of creditors and the offer and acceptance are in good faith and that the district is authorized to take the necessary action to carry out the plan, shall make an interlocutory judgment approving the plan. This decree does not enforce the plan as against non-consenting creditors. A separate hearing follows in which the rights of non-consenting creditors are determined through the condemnation of the bonds held by the objecting bondholders, etc. under eminent domain.
The California Act was passed to become effective in March, 1937. The Federal Bankruptcy Act was amended to in-elude the provision under which the present proceedings were brought in August, 1937. However, at the time of the amendment referred to, the state court proceedings under.the California Act, which are set up in bar to the proceedings before us, were pending. The case'was pending in the state court at the time the bankruptcy amendment had been held constitutional in the Bekins case (April 7, 1938). On March 10, 1938, the Superior Court in which the state composition proceedings were pending, reached a point of decision in the case, and the court was waiting the filing of proposed findings of fact and conclusions of law by the District, in accordance with the California Code of Civil Procedure [C.C.P. § 632], The findings of fact and conclusions of law have never been submitted to the court for approval, and no findings of fact or conclusions of law and no judgment has been filed or entered in the state proceedings. The question then is whether such pendency of an action in the state court on substantially the same matter, is a bar to the federal action. If the state statute and action thereunder are superseded by the federal action, then, of course, there is no bar to the court’s proceeding with the federal action.
In Re Watts and Sachs, 190 U.S. 1, 23 S.Ct. 718, 724, 47 L.Ed. 933, there was a state proceeding under Section 1245 of the Revised Statutes of Indiana, Thornton’s Rev.Stat. of 1897, providing that a receiver might be appointed, “When a corporation has been dissolved, or is insolvent, or is in imminent danger of insolvency, or has forfeited its corporate rights.” The Court appointed a receiver to complete old contracts but enter into no new ones. Certain creditors petitioned under the Bankruptcy Act of the United States for proper proceedings in the Federal Court and a receiver was appointed by the judge of that court and was given directions to take possession of the properties involved. He did so. Upon appeal, the court said at page 27 of 190 U.S., at page 724 of 23 S.Ct, 47 L.Ed. 933: “* * * And the operation of the bankruptcy laws of the United States cannot be defeated by insolvent commercial corporations applying to be wound up under state statutes. The bankruptcy law is paramount, and the jurisdiction of the Federal courts in bankruptcy, when -properly invoked, in the administration of the affairs of insolvent persons and corporations, is essentially exclusive. Necessarily, when like proceedings in the state courts are determined by the commencement of proceedings in bankruptcy, care has to be taken to avoid collision in respect of property in possession of the state courts. Such cases are not cases of adverse possession, or of possession in enforcement of pre-existing liens, or in aid of the bankruptcy proceedings. The general rule as between courts of concurrent jurisdiction- is that property already in possession of the receiver of one court cannot rightfully be taken from him without the court’s consent, by the receiver of another court appointed in a subsequent suit; but that rule can have only a qualified application where winding-up proceedings are superseded by those in bankruptcy as to which the jurisdiction is not concurrent.”
See also Taylor v. Sternberg, Trustee in Bankruptcy, 293 U.S. 470, 55 S.Ct. 260, 79 L.Ed. 599.
It is argued by appellants that the action having been commenced in the state court is not superseded by the Bankruptcy Act, providing composition as is sought in this case. They cite certain authorities as sustaining their contention, among them the following: “Proceedings under State insolvency laws pending at the time of the passage of a bankrupt act are not affected by the latter act.” Note in 45 L. R.A. at page 187.
However, the L.R.A. note cited by appellants referred to the original Bankruptcy Act, which contained a provision-expressly saving certain state proceedings. This saving clause has since been-stricken out, and the law as it now stands-is in conformity with the view expressed-by the opinion of In re Watts, supra. See-8 C.J.S. Bankruptcy, § 12, p. 421, wherein it is stated: “The provisions of the-federal Bankruptcy Act are superior to-all state laws upon the subject, and suspend them in so far as they conflict therewith and relate to the same subject matter and affect the same persons. [Citing many cases.]”
In Pitcher v. Standish, 90 Conn. 601, 98 A. 93, L.R.A.1917A, 105, it was held that State laws are in conflict with federal, so as to be suspended by the latter when the two cover the same field or the subject matter of the state law is within the purview of the federal legislation. And in the case of Leonard Levin Co. v. Star Jewelry Co., 54 R.I. 465, 175 A. 651, it was held that insolvency law of a state is superseded by Bankruptcy Act, at least in so far as the law relates to the distribution of assets for payment of certain debts. The clarity of these cases and the extent of the uncontradicted authority compel the ruling that the state act was superseded by the federal Bankruptcy Act.
Validity of the Act as Applied to Appellants
Appellants’ point here, under their ‘‘Tenth Proposition”, is divided into two subheadings, the first of which is entitled “As here applied the Bankruptcy Act prefers junior liens to senior liens, and discriminates among liens of equal rank”. This particular phase of appellants’ argument we shall deal with under our discussion of the merits of the controversy.
The second portion of this “Tenth Proposition” is subtitled “The California statute purporting to consent to this proceeding is void under the Constitution of California”.
The California legislature enácted a statute authorizing its agencies to proceed under the federal Bankruptcy Act (California Statutes, 1939, Chapter 72, p. 1009). The argument of appellants, how.ever, is that such statute is invalid in that it is repugnant to Section 16 of Article I of the Constitution of California which provides in part, “ * * * No * * * law impairing the obligation of contracts shall ever be passed.”
We do not deem it necessary to discuss this point in detail, as the United States Supreme Court disposed of a similar contention in the Bekins case. There the argument was made that the California statute purporting to consent to the proceeding was repugnant to the “impairment of the obligation of contracts” clause of the Federal Constitution art. 1, § 10. The Court did not consider the point well taken, and held that the proceedings under consideration were valid, since the State had consented. Even though the point is not discussed at length in the Court’s opinion, the case is direct authority for the proposition that consent by a state to proceedings before the Federal bankruptcy court does not constitute an impairment of the obligation of contract as prohibited by the Federal Constitution. Since there is no difference between the wording of the prohibition in the Federal Constitution and the prohibition in' the California State Constitution, it follows that like consent would not constitute an impairment of the obligation of contract under the California Constitution.
Having determined that the court has jurisdiction under the Municipal Bankruptcy Act; that the former proceedings in the United States District Court are not res judicata of this proceeding; that the case pending in the California state court is no bar to it; and that the Act is valid as applied to appellants, we now approach the merits of this case with the consideration of the status of the R.F.C. It is quite apparent that if R.F.C. is to be considered in all respects

Question: What is the specific issue in the case within the general category of "economic activity and regulation - bankruptcy, antitrust, securities"?
A. bankruptcy - private individual (e.g., chapter 7)
B. bankruptcy - business reorganization (e.g., chapter 11)
C. other bankruptcy
D. antitrust - brought by individual or private business (includes Clayton Act; Sherman Act; and Wright-Patman)
E. antitrust - brought by government
F. regulation of, or opposition to mergers on other than anti-trust grounds
G. securities - conflicts between private parties (including corporations)
H. government regulation of securities
Answer:

Answer: B