Court Opinion

ID: 6886555
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:29:53.240841+00
Date Added: 2024-06-11T16:05:43.711106
License: Public Domain

EVANS, Circuit Judge
(dissenting in part).
I can not agree that creditors of an Illinois corporation, which has been dissolved for failure to pay its franchise tax, may not file an involuntary petition in bankruptcy against said debtor. I believe the holding in Re 211 East Delaware Place Bldg. Corporation, 7 Cir., 76 F.2d 834, should be followed, not overruled.
Whether an Illinois corporation which has been dissolved, because its officers failed to keep it alive, by refusing to pay the Illinois franchise tax, may file a voluntary petition in bankruptcy after a decree of dissolution, presents, I must admit, a question of doubt and uncertainty.
The right of creditors to file an involuntary petition against such an Illinois corporation also presents a question where judgment is somewhat suspended, although the right of creditors to invoke the jurisdiction of the bankruptcy court in such a case seems to me stronger than the right of the debtor itself to file a voluntary petition.
The uncertainties arise from a reading of the decision in Chicago Title & Trust Co. v. Forty-one Thirty-Six Wilcox Bldg. Corporation, 302 U.S. 120, 58 S.Ct. 125, 82 L.Ed. 147, where the question was presented and considered. There, the majority, three judges dissenting, held that such a corporation could not file a voluntary petition. None of the judges who sat in that case and voted with the majority, save one, is at present, a member of the Supreme Court. Two of the justices who opposed the holding of the majority and favored the minority view, written by Justice Cardozo, are members of the Court. Six new members of the Court have not passed on the question.
However, the controverted, question in this case, namely, the right of creditors to file an involuntary petition, was not decided in that case, although referred to. The majority opinion did recognize fhat a different question was presented where the proceedings were involuntary, — the petition being signed by the creditors.
In other words, an involuntary petition against a dissolved corporation might lie, although a voluntary petition by the dissolved corporation would fall.
I think neither question is finally settled by that decision (302 U.S. 124, 58 S.Ct. 125, 82 L.Ed. 147). In view of the change in personnel of the Supreme Court, it is not finally settled that the dissolved debtor corporation may not file a voluntary petition in bankruptcy. Surely, there is nothing in that opinion to justify our overruling the decision in Re 211 East Delaware Place Building Corporation, 7 Cir., 76 F.2d 834, followed by this court in Park Beach Hotel Bldg. Corp., 7 Cir., 96 F. 2d 886, which recognized the right of creditors to file an ¿«voluntary petition against such a dissolved corporation. In fact, the leaning, if there be any, to be drawn from the majority opinion is favorable to the creditor’s right to institute involuntary bankruptcy proceedings against the dissolved debtor corporation.
Strong reasons, it seerñs to me, support the position of petitioning creditors. They have been stated by the courts of this and other circuits and need not be repeated. Hammond et al. v. Lyon Realty Co., 4 Cir., 59 F.2d 592; In re Double Star Brick Co., D.C., 210 F. 980; In re Munger Vehicle Tire Co., 2 Cir., 159 F. 901; In re Storck Lumber Co., D.C., 114 F. 360.
I dislike the idea of letting insolvent corporations fraudulently promoted (or in good faith created) defeat creditors in their efforts to save something from the wreck, through reorganization under Sec. 77B of the Reorganization Act. The creditors *843were unaware of the action of the officers' of the corporation which led to the dissolution. As to the creditors, it was just another fraud, worse perhaps than the one practiced on them when they bought the debtor’s securities. Unless the Illinois statute finally and completely seals the existence of the corporation by dissolution, the creditors should not be barred. The Illinois statute, as I read it, does not completely terminate the corporation’s existence. The corporation is not completely dissolved. It is not wholly dead. It lives for some purposes — to perform some affirmative acts, protective of its creditors. It is a de facto corporation so far as creditors’ attempting to reach its assets is concerned. Life Ass’n of America v. Passett, 102 Ill. 315.
It is not so dead as to prevent creditors, seeking. to protect their rights under the Reorganization Act, from recognizing it and its estate as the legitimate subject of reorganization. In short, it is a de facto corporation for a limited purpose. Nor would I hold, until the Supreme Court has been given the opportunity to pass on it, that it was so dead it could not (by voluntary proceedings) invoke the jurisdiction of the Federal Court to protect all creditors through its reorganization. In other words, it is not stone dead even though so immovable and paralyzed as to prevent activity along the lines for which it was organized.