Court Opinion

ID: 9442409
Source: CourtListenerOpinion
Date Created: 2023-08-03 18:46:08.649154+00
Date Added: 2024-06-11T17:29:05.275517
License: Public Domain

HASTIE, Circuit Judge
(concurring).
I agree that the order of the district court should he affirmed. I am unable to agree that judicial action awarding the dividends in controversy to the public common stockholders amounts to no more than interpretation and enforcement of the approved plan of reorganization. Nor do I 'find it helpful to characterize that action as “within the framework of the plan”.
I. First, the plan, does not expressly mention these dividends. And the Commission says that it had no intention of ruling on their disposition since it did not advert to the matter.
Second, it cannot be established as a matter of law that the uncontemplated allocation of these dividends to either party is an implication inherent in the plan. While it can be argued that because these dividends were not otherwise allotted they should be added to the residue allocated to the North American Company, it can with equal force be argued that they should go to the public common stockholders as the earnings, after approval of the plan, of property specifically .allotted to them. Neither alternative is, as a matter of logic, inconsistent with the plan. Neither is, as a matter of law, required by the plan. Either disposition involves action beyond the interpretation of *979the plan and the -carrying out of its provisions, and, therefore, ¡beyond the specific language of the statute which outlines the judicial role in effectuating Section 11(e) reorganizations.
On the other hand, we are not dealing with a situation like that which confronted this court in the Engineers’ case.1 There it was the reallocation of assets by the district court which had, in effect, already been otherwise allocated by the plan which was disapproved by this court and the Supreme Court as beyond the competence of a court under the Public Utility Holding Company Act. Neither of the alternatives presented to us here has any such effect upon the approved plan.
II. The situation requires that some competent agency, now in first instance, dispose of property newly introduced into the corporate estate between the time -of the decree approving a plan of reorganization and its affirmance on appeal. And the task -must be accomplished without authoritative guide from the statute, the reorganization plan, or any rule of property law.
The special competency of the Commission to evaluate the factors involved in such a ¡problem as this and the fact that the Commission has already made exhaustive analysis of the -considerations involved in this reorganization would ordinarily suggest the propriety and desirability of seeking guidance -from the Commission. However, -in this -case, the Commission has already been asked to rule on the disposition of the property in question, and it has deferred t-o the district court because the dividends were earned after the Commission’s function as defined in Section 11(e) of the Act had. been completed, and the corporate estate had passed into custodia legis. At the -same time, in anticipation of concern about the propriety and scope of judicial action, the Commission explicitly found that the -fairness of the plan would not be affected by award of the dividends to either of the parties to this appeal.2
Moreover, the public common stockholders have invoked the jurisdiction of the -court to settle the controversy. And although appellants deny the power of the -court to award the dividends to the public common -stockholders, they contend that the court should find that the legal effect of the plan has been to allot the dividends to the North American Company. Thus the -Commission and all of the parties to this appeal are asking the court to take decisive action in the premises. N-o one wants the matter sent -back to the Commission.
In these circumstances, the court should act if it -lawfully -can.
III. I think the district court sitting, as provided in the Public Utility Holding -Company Act, as “-a court of equity” has power to -dispose of the dividends. Although the problem here appears to be of first impression in proceedings under this Act, similar problems of property disposition have been incidental to rate making orders. In United States v. Morgan, 1939, 307 U.S. 183, 59 S.Ct. 795, 83 L.Ed. 1211, the Secretary -of Agriculture had fixed stockyard rates which were challenged as improper by certain packers. Pending the -determination of the propriety of the rates and the method -of their establishment, the -court ordered the payment to its clerk o-f the difference between what the stockyards were charging and what the Secretary’s order would authorize them to charge. Thereafter the court -set -aside the Secretary’s order for procedural improprieties in its entry, without disposing -of the fund. Moreover, under the peculiar -circumstances of the -case -neither -past nor prospective administrative action could -reach the fund and it was therefore -argued that the court had power only to return the fund to the packers. Although no solution of this prob-' lem was to be found in the Stockyards and Packers Act, 7 U.S.C.A. § 181 et seq., the Supreme Court concluded that the general -po-wer o-f a court of equity over property within its -custody was adequate for a ju*980dicia'l award consonant with justice. Cf. Federal Power Commission v. Interstate Natural Gas Co., 1949; 336 U.S. 577, 69 S.Ct. 775.
Again, in 'bankruptcy cases, courts occasionally have to deal with 'funds the existence of which was unanticipated by the parties and the statute. The courts have never felt their powers as courts of equity inadequate to dispose of sudi funds on equitable principles. Thus, in Johnson v. Norris, 5 Cir., 1911, 190 F. 459, L.R.A. 1915B, 884, some $88,000 remained in the hands of the trustees after the payment of all claims. The debtor took the position that-this entire balance should be returned to him. The creditors took the position that first they should be paid the interest which had .accrued on their claims since the date of filing. The statute, In terms, had no provisions for the repayment of any sums to the debtor, nor any provision allowing the payment of interest accruing after the filing of claims. But the court held that its inherent powers as a court of equity were adequate for the disposition of the fund and the allowance of the priority claimed by the creditors. Cf. Berl v. Crutcher, 5 Cir., 1932, 60 F.2d 440; but cf. Wheeling Structural Steel Co. v. Moss, 4 Cir., 1932, 62 F.2d 37.
Such cases' are sufficiently suggestive of the range of judicial power in dealing with funds in custodia legis in analogous situations to be persuasive that equivalent power exists here. • They exemplify the inherent power 6f equity to achieve justice fully in the disposition Of a subject matter which in some appropriate manner has come within its reach and control. A statutory scheme, whether in bankruptcy or rate making or public utility holding company reorganization, may serve to bring an estate within the jurisdiction of equity for the accomplishment of specified purposes. But the• statutory outline of the judicial role in such cases cannot anticipate, nor in terms comprehend, all problems which may arise or all action which may be necessary to achieve justice fully, yet in manner consistent with the overall purpose of the statute. Thus the statute leaves a substantial area for the exercise of inherent judicial power, although in the nature of the case, precise definition of that area is neither desirable nor practicable.
The contention of appellants that the district court lacked power to enter the order appealed from presupposes that Section 11 (e) of the Act forecloses the district court from exercising this normal and inherent equitable power. But neither the language nor the structure of the Act justifies this conclusion. Retention of the essential ■character and incidental powers of an equity tribunal is entirely consistent with the express grant to the court of a veto power in connection with the determination that a plan is fair and equitable and the power to enter orders to carry out the terms and provisions of a plan. Express statutory authorization is not essential to the exercise of such normally inherent power. The absence of statutory prohibition suffices.
I think it enough for this decision that the statutory scheme for implementation of ■a reorganization plan had brought all of, the assets of the corporation within the jurisdiction of a court which the statute denominates a court of equity; that the dividends in question were earned by stock thus in custodia legis; that neither the duty nor the power of the court with reference to the disposition of this property is prescribed or defined by the statute; and that reorganization as contemplated by the Public Utility Holding Company Act is not fully accomplished so long as these dividends, a part of the corporate estate, remain undistributed. In such case the court can and should seek to achieve full justice consistent with the overall purposes of the Act by an award of the dividends in accordance with the court’s best judgment of fairness.
IV. Once the critical problem of judicial power is solved, I have no doubt that the award of the dividends to the public common stockholders was equitable and should be approved.

. In re Engineers Public Service Co., 3 Cir., 1948, 168 F.2d 722, reversed sub nom. S.E.C. v. Central-Illinois Securities Corp., 1949, 338 U.S. 96, 69 S.Ct. 1377.

. It is to be noted that this finding was concurred in by the district court,