Court Opinion

ID: 9444365
Source: CourtListenerOpinion
Date Created: 2023-08-03 20:58:17.630968+00
Date Added: 2024-06-11T17:29:50.350761
License: Public Domain

HOLMES, Circuit Judge
(concurring) .
The Supreme Court said that the plan of reorganization was congenitally defective, which means that the defect existed at and from the date of its birth. A congenital defect is not necessarily incurable. The metaphor raises the question as to whether such a plan is born when filed by the parties, recommended by the Commission, approved by the court, assented to by the security holders, or at some other time. This is the latest plan that has been proposed; the others died aborning; it may be that a plan is not born until finally approved by the judicial process, and that it is in the making prior to the consummation of the brigaded powers of the court and the Commission. It is anomalous to speak of a plan as congenitally and irrevocably defective, as if it were a stillborn creature, when the court merely held that it was defective at birth, an imperfect plan.
Accepting the Supreme Court’s decision that there cannot be a merger or unification involving force or compulsion against a debtor corporation or its stockholders, the express provisions of the statute make it clear that a consent after the approval of the plan is all that is required. Section 77, sub. d of the Bankruptcy Act explicitly provides that a reorganization “may be different from any [plan] which has been proposed.” Section 5(2) of the Interstate Commerce Act, 49 U.S.C.A. § 5(2), expressly provides that when a plan for a unification is submitted to the Commission, the latter may prescribe “such terms and conditions and such modifications as it shall find to be just and reasonable” and that it may approve the plan “upon the terms and conditions, and with the modifications, so found to be just and reasonable”. Both statutes clearly contemplate that the Commission may modify unification plans which are submitted to it. Since both statutes authorize the Commission to modify the terms of a proposed merger, and any required consent to a plan that has been modified by the Commission must come after the modification, there is no basis for the suggestion that there must be a consent to any modification in advance of the time when it is made by the Commission. Moreover, the consistency clause of Section 77, sub. f provides that, upon confirmation of a plan, the Commission shall, without further proceedings, grant authority for the issue of any securities, assumptions of obligations, transfer of any property, sale, consolidation or merger of the debtor’s property, to the extent contemplated by the plan. It thus expressly contemplates that any proceedings under Section 5 of the Interstate Commerce Act shall take place after confirmation of the plan. The 1935 revision of Section 77 did more than *838change the location of the consistency clause; it added the words “upon confirmation of the plan,” which are highly pertinent in determining when any action required by the consistency clause must be taken.
In the light of the Supreme Court’s self-restricted jurisdiction and the first sentence of its opinion, it was proper for the Atlantic Coast Line to show, on remand for further proceedings in accordance with the court’s opinion, that the Florida East Coast Railway Company was not being compelled and would not be compelled to merge with the Atlantic Coast Line. The Supreme Court did not find anything wrong with the plan itself. The defect found by the court, on the record before it, related solely to the part, or the apparent lack of part, that the Florida East Coast Railway Company had taken in the proceedings.
The Supreme Court’s decision was not on the merits of the plan except in so far as it related to a forced merger. The opinion of the court of appeals on all other provisions of the plan was not within the scope of the writ of certiorari. It was a decision of the court en banc, and may not be overruled by a division of three judges. Except as to the merger provision, its holding that the plan was a good one is the law of this case. In raising a new point of law, the Supreme Court did not intend to shut out proof upon any issue of fact emerging therefrom. Out of the facts the law arises; and new or additional facts may alter a court’s decision.
When the petition for a reorganization in this case was approved by the judge as properly filed and as having been filed in good faith, the old equity receivership became moot and should have been dismissed, because the bankruptcy court immediately was vested with exclusive jurisdiction of the debtor and its property wherever located; and, in addition to the other powers conferred by Section 77, sub. a of the’ bankruptcy act, the district court was granted all the powers, not inconsistent with said section, which a federal court would have had if it had appointed a receiver in equity of the property of the debtor. Accordingly, it was not necessary or proper for the district court, by a summary order in a moot case, to revive powers that it already possessed in the bankruptcy proceeding. 11 U.S.C.A. § 205, sub. a. The bankruptcy proceeding that was to be dismissed had exclusive jurisdiction of the debtor and its property; the moot equity ease had jurisdiction of neither while the bankruptcy proceeding was pending.