Court Opinion

ID: 9425757
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:15:45.687924+00
Date Added: 2024-06-11T17:22:57.387002
License: Public Domain

Mr. Justice Stewart,
with whom Mr. Justice Powell joins,
concurring in the result.
The Court concludes that since the allowance of a setoff in a § 77 reorganization would grant “a preference to the claim of one creditor over the others by the happenstance that it owes freight charges that the others do not,” such setoffs should be disallowed “[a]s a general rule of administration.” Ante, this page. While I agree that the District Court should not have permitted a set-off in this case, I think that the broad rule adopted by *475the Court is unnecessary to reach this result, and I prefer to rest my conclusion on a narrower ground.
While judicial setoffs are specifically authorized in straight bankruptcy cases, § 68 of the Bankruptcy Act, 11 U. S. C. § 108, no express approval of them appears in the statute governing § 77 reorganizations.1 In Lowden v. Northwestern National Bank & Trust Co., 298 U. S. 160 (1936), this Court stated that the approval of setoffs in § 68 did not control in railroad reorganizations but “governs, if at all, by indirection and analogy according to the circumstances. The rule to be accepted for the purpose of such a suit is that enforced by courts of equity, which differs from the rule in bankruptcy chiefly in its greater flexibility, the rule in bankruptcy being framed in adaptation to standardized conditions, and that in equity varying with the needs of the occasion, though remaining constant, like the statute, in the absence of deflecting forces.” Id., at 164 — 165.2
*476By announcing a doctrine barring judicial setoffs as a “general rule” the Court in the present case adopts a rationale inconsistent with Lowden, which quite clearly envisioned a case-by-case analysis of the propriety of each attempted setoff in the light of equitable considerations. Rather than replacing this principle with a new and wholly inconsistent rule to be applied in all cases involving judicial setoffs, I would rest this decision on the particular facts before us, which adequately distinguish this case from the situation in Lowden,3
Section 77a gives the Reorganization Court “exclusive jurisdiction of the debtor and its property wherever located.” (Emphasis added.) It has been commonly accepted in the federal courts that “property” within the meaning of this section includes intangibles such as choses in action. See 2 W. Collier, Bankruptcy ¶[ 23.05 [4], p. 485 (1971), and cases there cited. It follows, therefore, that respondent’s debt to the Penn Central fell within the “exclusive jurisdiction” of the Reorganization Court immediately upon the approval of the petition for reorganization. While such jurisdiction may not empower the Reorganization Court to enforce the cause of action, see id., at 489-490; In re Roman, 23 F. 2d 556 (CA2 1928) (L. Hand, J.), it certainly does empower the *477court to protect the “property” and to immunize it from diminution through setoff or counterclaim. To hold otherwise would be inconsistent with the function of the Reorganization Court to consolidate and protect the assets of the petitioning corporation. Callaway v. Benton, 336 U. S. 132, 147 (1949); Warren v. Palmer, 310 U. S. 132, 139-141 (1940); Ex parte Baldwin, 291 U. S. 610, 615 (1934).
While the matter is not wholly free from doubt, I am persuaded that the Reorganization Court in this proceeding did in fact enjoin the allowance by any other court of judicial setoffs against any debts owed to the Penn Central.4 On this basis I join the judgment of the Court.

 I am unable to conclude, as does the dissent, post, at 479-480, that subsection l of §77 mandates allowance in §77 reorganizations of all setoffs allowed by § 68 in straight bankruptcies. While the dissent's ingenious reading of the statute would provide an easy semantic solution to the problem presented in this case, I am impressed with the fact that neither this Court in Lowden v. Northwestern National Bank & Trust Co., 298 U. S. 160 (1936), nor, apparently, any other federal trial or appellate court has considered subsection l to have any bearing whatsoever on the setoff problem. In the absence of any showing based on legislative history that such was the intent of Congress, and particularly in the absence of any briefing or oral argument on the matter, I would not, therefore, give this less-rhan-pellucid provision the force ascribed to it by the dissenting opinion.

 These statements of the Court concerning allowance of judicial setoffs in § 77 cases were, in a technical sense, dicta. The Lowden case came to the Court on questions certified by the Court of Appeals for the Eighth Circuit, and the Court dismissed the certificate without formally answering the questions because of the “defec*476tive form of the certificate . . . .” 298 U. S., at 166. The Court’s reasoning as to the availability of setoffs, however, has been viewed as authoritative. See, e. g., In re Lehigh & Hudson River R. Co., 468 F. 2d 430, 433 (CA2 1972); In re Yale Express System, 362 F. 2d 111, 116-117 (CA2 1966); Susquehanna Chemical Corp. v. Producers Bank & Trust Co., 174 F. 2d 783, 787 (CA3 1949). See also 4 W. Collier, Bankruptcy ¶ 68.10 [2], pp. 898-900, n. 17 (1971).

 Because of my view of this case I need not comment on the propriety of the rule adopted by the Court, although I think there are strong arguments that the rule can be unfair, see, e. g., In re Lehigh & Hudson River R. Co., supra, at 434, and that those arguments are not dealt with in the Court’s opinion today.

 The Reorganization Court’s initial order approving the Penn Central’s petition for reorganization, filed on June 21, 1970, contained the following provisions:
“9. All persons and all firms and corporations, whatsoever and wheresoever situated, located or domiciled, hereby are restrained and enjoined from interfering with, seizing, converting, appropriating, attaching, garnisheeing, levying upon, or enforcing liens upon, or in any manner whatsoever disturbing any portion of the assets, goods, money, deposit balances, credits, choses in action, interests, railroads, properties or premises belonging to, or in the possession of the Debtor as owner, lessee or otherwise, or from taking possession of or from entering upon, or in any way interfering with the same, or any part thereof, or from interfering in any manner with the operation of said railroads, properties or premises or the carrying on of its business by the Debtor under the order of this Court and from commencing or continuing any proceeding against the Debtor, whether for obtaining or for the enforcement of any judgment or decree or for any other purpose, provided that suits or claims for damages caused by the operation of trains, buses, or other means of transportation may be filed and prosecuted to judgment in any Court of competent jurisdiction, and provided, further, that the title of any owner, whether as trustee or otherwise, to rolling stock equipment leased or conditionally sold to the Debtor, and any right of such owner to take possession of such property in compliance with *478the provisions of any such lease or conditional sale contract, shall not be affected by the provisions of this order.
“10. All persons, firms and corporations, holding collateral heretofore pledged by the Debtor as security for its notes or obligations or holding for the account of the Debtor deposit balances or credits be and each of them hereby [is] restrained and enjoined from selling, converting or otherwise disposing of such collateral, deposit balances or other credits, or any part thereof, or from offsetting the same, or any part thereof, against any obligation of the Debtor, until further order of this Court.”