Court Opinion

ID: 8886936
Source: CourtListenerOpinion
Date Created: 2022-11-26 22:08:58.898327+00
Date Added: 2024-06-11T17:06:58.383092
License: Public Domain

SEITZ, Chief Judge
(concurring).
The issue before' us is whether the reorganization court had summary jurisdiction to order that appellants honor Penn Central’s post-petition drafts on its accounts and to enjoin each appellant from setting off against the Company’s deposits its respective outstanding loan balances. It is contended that by simultaneously permitting withdrawal and enjoining set-off pursuant to a summary proceeding the reorganization court effected a turnover of Penn Central’s funds held by appellants in contravention of section 23 of the Bankruptcy Act, 11 U.S.C. § 46.
Section 23 requires that adverse claims to property held other than by the debtor must be decided in a plenary proceeding by a court of general jurisdiction. It is for the reorganization court, however, to decide at the outset whether adverse claims in fact exist. See May v. Henderson, 268 U.S. 111, 115, 45 S.Ct. 456, 69 L.Ed. 870 (1925). The sole basis for the claims here asserted is the contractual right of set-off embodied in the various loan agreements existing between Penn Central and the *524appellants. The reorganization court determined, as it is permitted to do, that in the factual setting of this reorganization the right should not be recognized. See Lowden v. Northwestern Nat’l. Bk. & Trust Co., 8 Cir., 84 F.2d 847, cert, denied 299 U.S. 583, 57 S.Ct. 109, 81 L.Ed. 430 (1936). See generally 5 Collier on Bankruptcy, § 77.10 and n. 6 (14th ed. 1970). This determination in effect eliminated appellants’ adverse claims against Penn Central’s deposits since appellants do not contest the Company’s right thereto in the absence of the right of set-off. Compare In re Standard Gas & Electric, 119 F.2d 658, 662 (3rd Cir. 1941). Consequently, the reorganization court had summary jurisdiction to order appellants to honor the Company’s drafts and to enjoin appellants’ right of set-off.