MEYER V. KENMORE GRANVILLE HOTEL CO.
| Decision Date | 03 February 1936 |
| Court | U.S. Supreme Court |
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
1. An order of the District Court denying a petition which prays dismissal of a proceeding to reorganize a corporation under § 77B of the Bankruptcy Act, and incidentally for the recall of an injunction restraining creditors in that proceeding, is not appealable to the Circuit Court of Appeals as of right, but only by leave of that court. Bankruptcy Act, §§ 77B(k), 24, and 25. P. 162.
2. An order of the District Court confirming a plan of reorganization under § 77B of the Bankruptcy Act is not appealable to the Circuit Court of Appeals as of right, but only by leave of that court. P. 165.
77 F.2d 1004, 78 F. 2d 1018, affirmed.
Certiorari, 296 U.S. 565, to review orders of the Circuit Court of Appeals dismissing two appeals, and an order denying a petition to appeal, from orders of the District Court in reorganization proceedings under § 77B of the Bankruptcy Act.
Certiorari was granted in these cases as companion cases to St. Louis Can Co. v. General American Life Insurance Co., 77 F.2d 598, in which certiorari was granted on the same day, to resolve questions as to the mode of appeal from certain orders entered by a District Court in the course of a reorganization proceeding under § 77B of the Bankruptcy Act, 48 Stat. 912, 11 U.S.C. 207. The writ in St. Louis Can Co. v. General American Life Insurance Co. was later dismissed by this Court on stipulation of the parties, 296 U.S. 660.
On February 4, 1935, an involuntary petition was filed in the District Court for Northern Illinois for reorganization of a corporate debtor. The debtor filed an answer admitting the essential allegations of the petition, and the District Court found that the petition was filed in good faith, and ordered that it stand approved, and that creditors be restrained from asserting claims against the property of the debtor. After this order was entered, the petitioner here filed a petition in the reorganization proceeding setting up that she owned some of the mortgage bonds to which the property of the debtor was subject; that, subsequent to the petition for reorganization, but before it was approved, she had brought suit in the state courts against the debtor and others for an accounting, charging fraud in the issue and sale of the bonds and a fraudulent scheme to bring about a reorganization of the debtor to the detriment of the bondholders and to the advantage of the defendants in the suit. She prayed that the petition for reorganization be
dismissed for want of good faith and of jurisdiction in the District Court, and that the injunction be dissolved. The District Court entered an order March 20, 1935, denying the petition. From this order it allowed an appeal to the Court of Appeals for the Seventh Circuit, which dismissed the appeal without opinion. 77 F.2d 1004. The correctness of this ruling is presented in No. 375.
Meanwhile, the District Court proceeded with hearings, in which petitioner took no part, on a proposed plan of reorganization. The plan, after certain modifications, was ultimately approved by 94 percent of the bondholders of one class and 95 percent of another, and, with further changes directed by the court, was confirmed by order entered May 20, 1935. The Court of Appeals dismissed without opinion petitioner's appeal from this order, allowed by the District Court. 78 F.2d 1018. And it denied petitioner's application for leave to appeal from the same order, on the ground that petitioner, who alone sought leave to appeal, had not objected to the plan in the bankruptcy court, and so was not in a position to challenge the plan on her own behalf or on that of bondholders who had objected. The correctness of these rulings of the Court of Appeals is presented in No. 376.
1. The question in No. 375 is whether the order of the District Court denying the application to dismiss the proceeding brought under § 77B and to dissolve the injunction generally restraining creditors is, for purposes of appeal, the equivalent of "a judgment adjudging or refusing to adjudge the defendant a bankrupt," which, by § 25a of the Bankruptcy Act, 44 Stat. 665; 48 Stat. 926, 11 U.S.C. § 48(a), is appealable as of right to the Court of Appeals.
The appeal provisions of §§ 24 and 25 [Footnote 2] of the Bankruptcy Act are thus made applicable to orders entered in the course of a reorganization proceeding, and an order approving or disapproving a petition for reorganization is made the equivalent, at least for purposes of an appeal under § 25a, of a judgment adjudging or refusing to
adjudge the defendant a bankrupt. By § 24a and § 24b, appeals in "proceedings" in bankruptcy, as distinguished from appeals in "controversies arising in bankruptcy," may be taken only on leave granted in the discretion of the appellate court, except that, in the cases enumerated in § 25a, including, in clause (1), "a judgment adjudging or refusing to adjudge the defendant a bankrupt," an appeal may be taken as of right.
The petitioner appealed not from the order approving the reorganization, but from that denying her application to dismiss the reorganization proceedings. It is not contended that this order is one in a controversy arising in bankruptcy, appealable as of right under § 24a. See Taylor v. Voss, 271 U. S. 176, 181; Harrison v. Chamberlin, 271 U. S. 191; Hewit v. Berlin Machine Works, 194 U. S. 296, 299-300. It is urged that it is the equivalent of an order approving a petition in a reorganization proceeding, which § 77B(k) assimilate to an order of adjudication, appealable as of right. But an order refusing to set aside an adjudication of bankruptcy is not within § 25a, clause (1). This Court has held that an appeal can be taken from such an order only on leave of the appellate court under § 24b. Valley v. Northern F. & M. Insurance Co., 254 U. S. 348. The present appeal from the order refusing to dismiss the reorganization
proceedings does not stand on any different footing, and was rightly dismissed because taken without leave of the appellate court. Humphry v. Bankers Mortgage Co., 79 F.2d 345; Vitagraph, Inc. v. St. Louis Properties Corp., 77 F.2d 590; St. Louis Can Co. v. General American Life Insurance Co., supra; Credit Alliance Corp. v. Atlantic Pacific & Gulf Refining Co., 77 F.2d 595, and see Wilkerson v. Cooch, 78 F. 2d 311.
That part of petitioner's application to the District Court which asked that the injunction restraining creditors be set aside does not present a "controversy arising in bankruptcy," as distinguished from a "proceeding" in bankruptcy. The relief from the restraining order which petitioner sought was but incidental to her assault on the order approving the petition, and raised no issue capable of litigation independently of the proceeding in the bankruptcy court. It related only to the due administration of the pending proceeding, and so was a "proceeding" in bankruptcy, in which the allowance of an appeal is discretionary. See Taylor v. Voss, supra; Harrison v. Chamberlin, supra.
2. In No. 376, petitioner contends that the order of the District Court approving the plan of reorganization corresponds to an order confirming or rejecting a composition with creditors, and that the latter, as was held in United States ex rel. Adler v. Hammond, 104 F. 862, is appealable as of right under § 25 as equivalent to an order "granting or denying a discharge." But we think it plain that an order confirming a plan of reorganization under § 77B is not the equivalent of a judgment granting or denying a discharge,...
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