Vitagraph, Inc. v. St. Louis Properties Corporation

• Decision Date: 25 April 1935
• Docket Number: No. 10186.,10186.
• Parties: VITAGRAPH, Inc., et al. v. ST. LOUIS PROPERTIES CORPORATION et al.
• Court: U.S. Court of Appeals — Eighth Circuit

77 F.2d 590 (1935)

VITAGRAPH, Inc., et al. v. ST. LOUIS PROPERTIES CORPORATION et al.

No. 10186.

Circuit Court of Appeals, Eighth Circuit.

April 25, 1935.

Meyer Abrams, of Chicago, Ill. (Claude McElwee, Oscar J. Mudd, Foristel, Mudd, Blair & Habenicht, and Charles K. Berger, all of St. Louis, Mo., on the brief), for appellants.

Joseph H. Grand, of St. Louis, Mo. (Jacob Chasnoff, Clarence M. Turley, and Frank H. Sullivan, all of St. Louis, Mo., and David Levinson, of Chicago, Ill., on the brief), for appellees.

Before GARDNER, WOODROUGH, and VAN VALKENBURGH, Circuit Judges.

WOODROUGH, Circuit Judge.

Three creditors of the St. Louis Properties Corporation, having provable claims amounting in the aggregate to more than $1,000 in excess of the value of securities held by them, filed petition for reorganization of the St. Louis Properties Corporation under section 77B of the Bankruptcy Act (11 USCA § 207), and joining petitions were also filed by other creditors, to all of which the Properties Corporation and committees holding all but a small percentage of the mortgage bonds issued by the corporation filed answers in resistance. There was a hearing after notice, and the trial court found that the material allegations of the petition and joining petitions were not sustained by the proof, and that the petitions were not filed in good faith, and the court accordingly disapproved the same and dismissed them at the cost of the petitioners and joining petitioners. Appeal was allowed by the District Court, but no application for appeal was made to this court.

The St. Louis Properties Corporation and the bondholders' committees have moved to dismiss this appeal prosecuted by the creditors from the order of the trial court refusing to approve the creditors' petitions and dismissing the same, claiming that the appeal is not authorized by law. But the creditors contend that "the appeal lies as of right under section 25a of the Bankruptcy Act 11 USCA § 48 (a) authorizing appeals from a judgment adjudging or refusing to adjudge the defendant a bankrupt, or, if not allowable under that section; (2) that the appeal lies as a controversy under section 24a of the Bankruptcy Act, 11 USCA § 47 (a), or, if neither of those sections applies, (3) that the appeal lies under general statutes relating to appeals (28 USCA § 225)."

The questions raised are important and the subject has been fully briefed by counsel in this case and in St. Louis Can Co. v. General American Life Insurance Co. (C. C. A.) 77 F.(2d) 598, and Credit Alliance Corporation v. Atlantic, Pacific & Gulf Refining Co. (C. C. A.) 77 F.(2d) 595, submitted and decided at the same time.

The creditors' third contention, that they are entitled to prosecute this appeal as of right under the provisions of 28 USCA § 225, assumes that by the filing of their petitions in the lower court, the joinder of issues and the hearing and ruling thereon "a final decision of a case in the District Court" is presented, appealable under the general provisions of subdivision (a)^* of that section, and that they are not restricted in the manner of taking their appeal by the following provision of subdivision (c) of the section (28 USCA § 225 (c): "The circuit courts of appeals shall also have an appellate and supervisory jurisdiction under sections 47 and 48 of Title 11, over all proceedings, controversies, and cases had or brought in the district courts under Title 11, relating to bankruptcy, or any of its amendments, and shall exercise the same in the manner prescribed in those sections. * * *"

It is plain that if the proceedings of the creditors were "proceedings brought in the District Court under title 11 relating to bankruptcy, or any of its amendments," this court can exercise its appellate jurisdiction only in the manner prescribed in sections 47 and 48 of title 11.

"The principle * * * is, that a proceeding in bankruptcy, from its commencement to its close upon the final settlement of the estate, is but one suit. The several motions made and acts done in the bankrupt court in the progress of the cause are not distinct suits at law or in equity, but parts of one suit in bankruptcy, from which they cannot be separated." Wiswall et al. v. Campbell et al., 93 U. S. 347, 348, 23 L. Ed. 923.

The general appellate jurisdiction conferred upon this court "extends only to a re-examination of final judgments or decrees in suits at law or in equity, and it follows that we have no control over judgments and orders made by the courts below in mere bankruptcy proceedings," except as specially provided. (Idem.)

Section 77B, under the authority of which the creditors filed their petitions, was enacted by Congress as an amendment to the Bankruptcy Law, so there is presented to us the same inquiry concerning section 77B which the Supreme Court has recently considered at length and answered fully as to section 77, 11 USCA § 205 viz.: "Does the section constitute a law on the subject of bankruptcy?" Continental Illinois Nat. Bank & Trust Co. v. Chicago, R. I. & P. Ry. Co., 55 S. Ct. 595, 604, 79 L. Ed. ___, decided April 1, 1935. While section 77 concerns reorganization of railroad corporations which are in many respects peculiar among corporations, we think that the reasoning of the Supreme Court leads inevitably to the conclusion that section 77B likewise "constitutes a law on the subject of bankruptcy" and is a constitutional amendment to title 11 USCA relating to bankruptcy.

It follows that the petitions for reorganization filed by the creditors, and the joinder of issues, and hearing and order made "were proceedings brought in the District Court under title 11 relating to bankruptcy and one of its amendments," and were appealable only "in the manner prescribed by sections 47 and 48 of title 11." It is true that the petitions were disapproved and dismissed so that the property of the corporation was not taken over, and there was no further exercise of the bankruptcy jurisdiction, but, as the proceedings were brought under the amendment to title 11, no appeal to this court is accorded except under the restrictions of subdivision (c), (28 USCA § 225).

No express provision is to be found in section 77B for appeals from orders made in the proceedings contemplated by the section except as it is provided in paragraph (c) (9), 11 USCA § 207 (c) (9) that appeals may be taken to the circuit courts of appeals from "orders fixing such allowances," which appeals may be taken "independently of other appeals in the proceeding." There is in this recognition of congressional intent that there are certain appeals allowable where bankruptcy in some form contemplated by section 77B is in process, but no inference can be drawn from the legislation as a whole, except that the provisions of the Bankruptcy Act respecting appeals must control.

Accordingly, we consider first section 25a, 11 USCA § 48 (a): "Appeals, as in equity cases, may be taken in bankruptcy proceedings from the courts of bankruptcy to the circuit courts of appeal * * * in the following cases, to wit: (1) From a judgment adjudging or refusing to adjudge the defendant a bankrupt."

Manifestly, the order in this case refusing to approve the creditors' petitions and dismissing the same at petitioners' cost was not literally "a judgment refusing to adjudge the defendant a bankrupt," but the contention is that Congress intended to identify them with each other so completely as to make one practically the equivalent of the other and equally appealable. We do not think so.

The general scope and purpose of section 77B, as stated in section 77A (11 US CA § 206), is to add to the jurisdiction of the courts of bankruptcy. The existing jurisdiction is referred to as "jurisdiction to adjudge persons bankrupt in voluntary and involuntary proceedings"; the addition is to "exercise original jurisdiction in proceedings for the relief of debtors, as provided in section 77B section 207 of this chapter. * * *" Consideration of the provisions of section 77B discloses that the "proceedings for the relief of debtors" are all aimed at a reorganization of the debtor which will save it from liquidation. But, as was fully developed by the Supreme Court, the proceedings have not lost their character as proceedings in bankruptcy. The several amendments which have been made are advancing steps "in the direction of liberalizing the law on the subject of bankruptcies." "Taken altogether, they demonstrate in a very striking way the capacity of the bankruptcy clause to meet new conditions" and in their "general scope and aim they are within the power conferred by the bankruptcy clause of the Constitution." Continental, etc., Co. v. Chicago, R. I. & P. Ry. Co., supra. See "Corporate Reorganizations under the Bankruptcy Act," Amer. Bar Assn. Journal, vol. 21, No. 2, p. 73; "Some Comments on the Corporate Reorganizations Act," Harvard Law Review, vol. XLVIII, No. 1, p. 39.

Though broad powers are conferred on the court of bankruptcy in section 77B to aid in accomplishing the "reorganization" there is recognition throughout the section that all plans of reorganization may fail, and that after all efforts have failed, the adjudication and liquidation of bankruptcy, as applied before the amendment, may turn out to be the only recourse. The court may, in the end, have to render a judgment adjudging or refusing to adjudge the defendant a bankrupt after all the "proceedings for the relief of the debtor" have been gone through with. Continental, etc., Co. v. C., R. I. & P. Ry. Co., supra. Therefore, it cannot be said that the order under section 77B which is sought to be appealed from here is precisely of the same nature as a judgment refusing to adjudge a defendant a bankrupt. It lacks an element of conclusiveness inherent in the bankruptcy judgments which involve the absolute processes of liquidation. Obviously, whether Congress ought or ought not to make the order herein...