Court Opinion

ID: 9419727
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:51:15.791808+00
Date Added: 2024-06-11T17:22:20.218158
License: Public Domain

Me. Justice Eeankeuetee,
dissenting.
The Court holds that the Reconstruction Finance Corporation is not to be treated as an ordinary bondholder-creditor but is entitled to preferred treatment because it *547acquired the bonds of the debtor as part of an arrangement which made possible financing of the plan of composition. With this I agree. But I find nothing in Chapter IX which, while permitting the R. F. C. to be considered a preferred creditor for purposes of distribution, allows it to be classified among ordinary creditors for purposes of voting. Nor do considerations of policy require that the R. F. C. be given such a two-faced character. It is suggested that if the votes of a preferred creditor in the position of the R. F. C. could not be counted with the votes of the ordinary creditors that class might not furnish the necessary two-thirds of the aggregate amount of claims of that class. It must be remembered, however, that the mere failure of a class like that of ordinary creditors, e. g., those having no preferred position in the scheme for distribution, to accept a plan of composition does not prove that its resistance is improperly or unfairly recalcitrant. Cf. American United Ins. Co. v. Avon Park, 311 U. S. 138, 148. And recognition that bondholders may exercise their statutory rights as common creditors not to assent does not, of course, make of them a separate class of non-assenting bondholders with a veto power over the plan. But if the recalcitrancy does represent a dog-in-the-manger attitude, Chapter IX would seem to have provided for the contingency. According to § 83 (d) of the Act, 50 Stat. 653, 657, 11 U. S. C. § 403 (d), a plan might be approved without the otherwise necessary vote, not only where the claims of the creditors “are not affected by the plan,” but also where “provision is made in the plan for the protection of the interests, claims, or lien of such creditors or class of creditors.” But, though the bankruptcy court has the power of dispensing with the need of an approving vote by a class of creditors, by protecting that class’ interests, it is not available where the court has not in fact determined, as it has not in this case, that the dissent of that class was an abusive exercise of their right to veto a plan.
*548To give such flexible scope to § 83 (d),1 though, like other provisions of Chapter IX, it is not free from ambiguity, is the more pertinent if, as suggested, Chapter IX requires approval of two-thirds not of each class of claims but of the total amount of all claims. See Remington, Bankruptcy (1939) § 4364. On the other hand, if approval of the plan by two-thirds of each class is required, such a requirement can only mean that a group of more than one-third of any class is capable of exercising the veto power, except when § 83 (d) can be invoked. In establishing these classes, creditors are not properly grouped who, on *549the face-value of the same bonds, get different equivalents, and are, as to the only thing that matters, not bound together by the same ties but separated by antagonistic interests. To put these groups with such antagonistic interests into the same class is to contradict the very notion of a class. Reason rejects such classification and nothing in the statute indicates that Congress intended to define a class as a group with inconsistent interests.

 That this is a reasonable interpretation of § 83 (d) is indicated by the cumbersome but more detailed form in which the purpose of § 83 (d) is explained in an earlier draft of the Act:
. . (3) shall, with respect to creditors whose acceptance is not required under the provisions of subdivision (e) of this section if their interests, claims, or liens are protected in the manner provided in this clause (3), provide adequate protection for the realization by them of the value of their interests, claims, or liens, if the property or revenue affected by such interests, claims, or liens is dealt with by the plan, either as provided in the plan, (a) by the transfer or sale of such property subject to such.interests, claims, or liens, or such property shall continue to be held by the taxing district subject to such interests, claims, or liens, or (b) by a sale free of such interests, claims, or liens at not less than a fair upset price and the transfer of such interests, claims, or liens to the proceeds of such sale, or (c) by appraisal and payment in cash of the value of such interests, claims, or liens, or, at the objecting creditors’ election, of the securities allotted to such interests, claims, or liens under the plan, if any shall be so allotted, or (d) by such method as will in the opinion of the judge, under and consistent with the circumstances of the particular case, equitably and fairly provide such protection: Provided, That if provision therefor is made in the plan, the judge may require objecting creditors to accept, in lieu of any cash payment under this subdivision, such securities, of any kind, in payment of their interests, claims, or liens as shall, in the opinion of the judge, upon the consummation of the plan, represent the fair and equitable shares of such creditors in the property and revenues of the taxing district, available for the payment of its debts . . .” H. R. 5267, 73d Cong., 1st Sess. (1933) § 81 (b) (3), as it appears in the Hearings on that Bill, at page 17.