In re Standard Gas & Electric Co.
| Decision Date | 01 December 1943 |
| Docket Number | No. 8316.,8316. |
| Citation | 139 F.2d 149 |
| Parties | In re STANDARD GAS & ELECTRIC CO. |
| Court | U.S. Court of Appeals — Third Circuit |
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Emil K. Ellis, of New York City (Moss & Moss, of Philadelphia, Pa., Edmund S. Hellings, of Wilmington, Del., and Julius Hallheimer, of New York City, on the brief), for appellants.
Sidney R. Nussenfeld, of New York City (William H. Button and Francis J. Quillinan, both of New York City, William H. Foulk, of Wilmington, Del., Leonard Cohen, and Morris Gottlieb, both of New York City, on the brief), for appellee.
Before JONES, GOODRICH, and McLAUGHLIN, Circuit Judges.
This is an appeal from an order entered below in a proceeding for the reorganization of Standard Gas and Electric Company, Debtor, under Sec. 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. The order appealed from perpetually restrains and enjoins Rudolph Spitzer, a stockholder of the debtor company, Emil K. Ellis, his attorney, and all other like stockholders from intervening in, or interfering in any way with, any lawsuits now pending or which may be brought in any court by Daniel O. Hastings as Special Trustee of the debtor.
The jurisdiction of the District Court in bankruptcy attached upon the filing of the debtor's petition on September 27, 1935. On November 26, 1937, the court found that certain causes of action for alleged wrongdoing by former directors of the debtor company and third persons were property and assets of the debtor in the reorganization proceeding and, as such, were within the exclusive jurisdiction of the court for the purposes of Sec. 77B of the Bankruptcy Act. The court thereupon appointed Daniel O. Hastings special trustee of such property and assets (the specifically identified choses in action) and directed him, as such trustee, "to hold title to, protect and conserve said property and assets, to institute and prosecute such suit or suits as may be appropriate to realize upon such property and assets and to enforce any and all claims, rights and causes of action included among such property and assets."
The plan of reorganization of the debtor company having been confirmed by the court on March 5, 1938, it was thereafter fully carried out and effectuated, so that, on August 2, 1938, the court entered a decree closing the proceeding except for the retention of jurisdiction, then expressly reserved, in respect of the matters committed to the care and charge of the special trustee as above stated. The decree of August 2, 1938, also expressly reaffirmed the like reservation of jurisdiction as contained in the order of confirmation of March 5, 1938.
In pursuance of the order of his appointment, the special trustee brought suit in the Supreme Court of the State of New York to recover in behalf of the debtor company against the alleged offenders on the causes of action referred to.1 Upon question raised as to the special trustee's legal capacity to sue in a foreign jurisdiction, his right to maintain the suit in the New York state court was confirmed by the Court of Appeals of that state. Hastings v. H. M. Byllesby & Co. et al., 286 N.Y. 468, 36 N.E.2d 666.
Thereafter, Spitzer, acting by his attorney, Ellis, served notice on counsel for the special trustee of an application to be made by him to the New York state court for leave to intervene as a party plaintiff in the suit of the special trustee, therein pending. The reasons assigned for the proposed intervention were that Ellis, the stockholder's attorney, had special experience in stockholders' actions and could contribute valuable assistance in the preparation and trial of the case. Counsel for the special trustee promptly moved the District Court in the reorganization proceeding for an injunction such as ultimately issued. The court forthwith entered a rule on Spitzer, his attorney, Ellis, and all other stockholders of the debtor to show cause why an injunction should not be granted as prayed for; and, on the return day of the rule, the court issued the injunction order now appealed from. In connection with that proceeding, Ellis appeared specially in behalf of himself. Neither Spitzer nor any other stockholder appeared. Ellis challenged the District Court's power to issue the injunction and its jurisdiction to issue process directed to a non-resident of the district in respect of the injunction. The same grounds supply the appellants' present contentions along with the further contention that the District Court's action amounted to an abuse of discretion.
The choses in action now being prosecuted by the special trustee in the plenary action in the New York state court constitute property and assets of the debtor in bankruptcy over which the District Court had acquired exclusive jurisdiction. The court so found in its order of November 26, 1937, from which no appeal was taken by anyone. Such property and assets became vested in the special trustee by virtue of the bankruptcy court's order to that effect. See In re Standard Gas & Electric Co., 3 Cir., 119 F.2d 658, 661; see also Gochenour v. Cleveland Terminals Building Co., 6 Cir., 118 F.2d 89, 93. Nor has the District Court's jurisdiction of the property and assets, now vested in the special trustee, ever been relaxed. It has been purposely retained, as it was within the District Court's power so to provide, for the efficient and complete administration of the debtor's estate. Cf. National Lock Co. v. Hogland, 7 Cir., 101 F.2d 576, 586; In re Paramount Publix Corporation, 2 Cir., 82 F.2d 230, 232.
It will hardly be questioned that a District Court has power to protect by injunction its exclusive jurisdiction over the property and assets of a bankrupt. And the same is true with respect to the property and assets of a debtor or the proceedings in bankruptcy for the debtor's reorganization. Cf. Continental Illinois National Bank & Trust Co. v. Chicago, Rock Island & Pacific Ry. Co., 294 U.S. 648, 55 S.Ct. 595, 79 L.Ed. 1110; Zeleznik v. Grand Riviera Theater Co., 6 Cir., 128 F.2d 533; Gochenour v. Cleveland Terminals Building Co., supra. The Zeleznik case in particular involved the restraint of a stockholder from prosecuting a derivative action in a state court against a corporation, its directors and officers after the corporation had petitioned for reorganization in bankruptcy, the District Court basing its action on its exclusive jurisdiction of the debtor and its property and assets. The power of a bankruptcy court to protect by injunction the subject-matter of its jurisdiction is inherent in the court as a virtual court of equity and exists as well by virtue of Sec. 2(15) of the Bankruptcy Act, 11 U. S.C.A. § 11(15), and the "all writs" provision of Sec. 262 of the Judicial Code, 28 U. S.C.A. § 377. See Continental Illinois National Bank & Trust Co. v. Chicago, Rock Island & Pacific Ry. Co., supra, 294 U.S. at page 676, 55 S.Ct. 595, 79 L.Ed. 1110. We think that the injunction issued in this case was well within the power of the District Court.
The appellants maintain that they assert no claim adverse to the rights of the special trustee but seek by...
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