Sec. Inv. Properties, Inc., Matter of

• Decision Date: 29 September 1977
• Docket Number: PROPERTIES-ATHEN,INC,No. 76-1119,76-1119
• Citation: 559 F.2d 1321
• Parties: In the Matter of SECURITY INVESTMENT PROPERTIES, INC., Bankrupt. GEORGIA POWER COMPANY, Appellant, v. SECURITY INVESTMENT PROPERTIES, INC., Appellee. In the Matter of GUARDIAN, Bankrupt. GEORGIA POWER COMPANY, Appellant, v. GUARDIAN, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1321

559 F.2d 1321

In the Matter of SECURITY INVESTMENT PROPERTIES, INC., Bankrupt.

GEORGIA POWER COMPANY, Appellant, v. SECURITY INVESTMENT PROPERTIES, INC., Appellee.

In the Matter of GUARDIAN PROPERTIES-ATHENS, INC., Bankrupt.

GEORGIA POWER COMPANY, Appellant, v. GUARDIAN PROPERTIES-ATHENS, INC., Appellee.

No. 76-1119.

United States Court of Appeals Fifth Circuit.

Sept. 29, 1977.

Robert W. Webb, Jr., Robert L. Mote, Mark S. Kaufman, Atlanta, Ga., for appellant.

Stacey W. Cotton, David W. Pollard, Atlanta, Ga., for appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before CLARK and GEE, Circuit Judges, and MARKEY ^*, Chief Judge.

CLARK, Circuit Judge:

We explore a boundary for summary jurisdiction of bankruptcy courts which is familiar to bankruptcy judges but relatively new ground for appellate courts. We must address a preliminary issue of mootness and answer the following question. In a proceeding under Chapter XI, can the bankruptcy judge summarily require a public utility to provide future service to a delinquent customer who did not comply with the utility's demand for a deposit or bond to reasonably secure future services? The district court found that the conversion of the Chapter XI arrangement to a bankruptcy did not moot the issue and held that the injunction was without jurisdictional limits. We agree the cause is not moot but reverse the holding on the merits.

The debtors, Security Investment Properties, Inc., and Guardian Properties Athens, Inc., initiated voluntary arrangement petitions under Chapter XI of the Bankruptcy Act. 11 U.S.C. §§ 711 et seq. At petitioner's request, the bankruptcy judge issued a temporary restraining order forbidding Georgia Power Company from discontinuing electric service at the debtors' apartment complexes. Georgia Power complained to the bankruptcy court that it should not be enjoined unless it received the deposit or surety bond that it had demanded because the debtors were then in arrears for past services. The tariff under which Georgia Power operates allows it to require a deposit amounting to approximately twice a customer's monthly bill.

Relying heavily upon the inherent powers of the bankruptcy court, the purposes of Chapter XI, and upon a decision of this circuit, In re Fountainbleau Hotel Corporation, 508 F.2d 1056 (5th Cir. 1975), the bankruptcy court held that its summary jurisdiction covered restraining Georgia Power from imposing any security requirement upon a Chapter XI debtor as a condition for future electric service. The bankruptcy court's order enjoined Georgia Power from terminating electric service to the debtors, but provided that the debtors would pay their monthly charges promptly.

Georgia Power appealed the bankruptcy court's order to the district court. Before the district court rendered a decision, the bankruptcy judge approved a consent order adjudging the debtors bankrupts and thus automatically terminating the Chapter XI proceedings. The debtors, now bankrupts, argued that the district court should dismiss Georgia Power's appeal, because a justiciable controversy no longer existed. The district court disagreed because the order continued to affect the rights of the parties and because the legal dispute it presented was capable of repetition yet evading review. On the merits of Georgia Power's complaint, the district court interpreted Fountainbleau as empowering the bankruptcy court to predicate summary jurisdiction over a public utility company upon a debtor's right to use the service and the need for protective orders against interference with that property right. Finding no significant distinction between Georgia Power's complaint and that of the telephone company in Fountainbleau, the district court affirmed the bankruptcy court's order and decision.

The district court correctly concluded that the consent order adjudging the debtors bankrupts did not render this case moot. The district court found that, even after the debtors went into bankruptcy, the injunction would continue to affect the right of Georgia Power to collect for the power it had provided. Thus, the case would continue to involve a substantial controversy between parties having adverse legal interests, and the controversy would not have become moot.

Apart from any continuing effect of the bankruptcy court's injunction, the district court could hear the case because it falls into the category of disputes capable of repetition yet evading review. Given the nearly universal use of utility services, the issue is one that may be expected to arise in the future with some regularity. The district court found that a substantial number of Chapter XI proceedings which were initiated in its district had short lives before terminating in bankruptcy. Georgia Power stated it has sustained losses where orders to provide services without security were entered in Chapter XI arrangements which subsequently collapsed.

The bankruptcy court has wide responsibility for supervising the continuation of a debtor's business under Chapter XI. If the short life of its orders to provide service without security could serve to immunize them from appellate oversight, governmental action would adversely affect Georgia Power's interests without a chance for redress. See Southern Pac. Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S.Ct. 279, 55 L.Ed. 310 (1911). Although we recognize that a bankruptcy court's order for service conceivably might remain in effect during the time required for appellate review, such a possibility will not render moot a challenge to policies that, as in the case at bar, have had their impact and continue in force, unabated and unreviewed. See Super Tire Engineering Co. v. McCorkle, 416 U.S. 115, 126-27, 94 S.Ct. 1694, 40 L.Ed.2d 1 (1974). Thus, on both grounds we affirm the district court's holding that this case did not become moot when the bankruptcy court adjudged the debtors bankrupts.

Every postulate of the district court's holding is premised on its construction and application of Fountainbleau. In that case, a telephone company appealed when the district court summarily enjoined it from requiring that the debtor, a hotel corporation reorganizing under Chapter X, pay an overdue bill and make a large deposit as a condition for continued service under its existing set of telephone numbers which would not be reassigned to it if service were interrupted.

For the Bankruptcy court to exercise summary jurisdiction over property, the debtor or his trustee must have actual or constructive possession of the property in question. See Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 481, 60 S.Ct. 628, 84 L.Ed. 876 (1940); In re American Southern Pub. Co., 426 F.2d 160, 163 (5th Cir.), cert. denied sub nom., Bailes v. First Nat. Bank of Mobile, 400 U.S. 903, 91 S.Ct. 141, 27 L.Ed.2d 140 (1970). Fountainbleau recognized that the bankruptcy court would not possess summary jurisdiction unless the debtor actually or constructively possessed some property interest on which the court could fix its exercise of summary jurisdiction. ¹ Fountainbleau held that the bankruptcy court could predicate summary jurisdiction upon the debtor's right to use the unique and valuable property interest in its telephone numbers, because the debtor's right to use these same numbers established jurisdictional possession.

Especially for a business such as the Fountainbleau hotel, telephone numbers constitute a unique property interest, the value of which increases as the number becomes widely known through publication in guidebooks, posting on billboards, and imprinting on publicity items. ² The property interest in such numbers differs from a subscriber's rights to the telephone utility's service. By contrast, the debtors in this case possess no indicia or adjunct of the future electric service in issue analogous to Fountainbleau's existing telephone numbers.

The debtors assert that their right to use electricity was established by Georgia Power's tariffs and existed at the date of their filing for a Chapter XI arrangement. Under debtors' theory, Georgia Power could not cut off their power before...