Bankruptcy Law Commons^™

Bankruptcy - Reorganization Under Section 77 B - Determination Of Amount Of Claims For Purpose Of Voting On Approval Of Reorganization Plan

Michigan Law Review

In proceedings under Section 77 B of the Bankruptcy Act for the reorganization of the Philadelphia Rapid Transit Company, a special master was appointed by the court, to ascertain and classify the creditors. Interested parties petitioned the court to instruct the master to require the "underliers," the class of creditors composed of the former owners of the various car lines taken over by the debtor Transit Company, to produce their books and papers to establish the fair amount of their claims, asserting that their properties were acquired by the debtor at grossly inflated prices; that their real value did not …

Banks And Banking-Constitutional Validity Of Statutes Allowing Reorganization Of Insolvent Bank

Michigan Law Review

A statute of Mississippi permitted the reopening of a closed bank, for the purpose of paying off creditors, upon terms proposed by three-fourths of the bank's creditors. The statute required that the proposition of the creditors be approved by the state superintendent of banks and confirmed by the court of chancery. Dissenting creditors opposed such a plan on the ground that the statute was unconstitutional because it impaired the obligation of contracts, and was contrary to the due process clause of the Federal Constitution. The court held that the statute was valid, that all it did was to change the …

Municipal Corporations-Constitutionality Of Municipal Debt Readjustment Act

Michigan Law Review

To avail itself of the remedial provisions of the National Bankruptcy Act as amended by section 80, the Imperial Irrigation District, a taxing district within the State of California, filed a petition for the readjustment of its debts. Pursuant to the requirements of section 80 the petition alleged that the District was unable to meet its debts and that a plan of readjustment had been accepted by 87.31 per cent of the creditors. Contestants, owners of petitioners' bonds, intervened. Held, section 80 of the National Bankruptcy Act as applied to the readjustment of the debts of an irrigation district …

Book Review. Cases And Materials On Creditors' Rights, 2nd Ed. By John Hanna, James J. Robinson

Articles by Maurer Faculty

No abstract provided.

Double Liability Of A Bank Stockholder For A Debt Of The Bank Incurred Before His Ownership Of The Stock - Ghingher V. Bachtell

Maryland Law Review

No abstract provided.

Corporations-Validity Of Option To Convert Preferred Stock Into Mortgage Bonds

Michigan Law Review

A corporation issued preferred stock, with a fixed dividend rate, power to elect a director voting as a class, and an option in the holder to convert, at his election, into mortgage bonds which were issued at the same time. After a substantial indebtedness had been incurred by the corporation, the stockholders exercised their option to convert into bonds. The corporation then went into bankruptcy, and in reorganization proceedings, the bondholders claim a preference over general creditors. Held, that the former holders of the preferred stock were stockholders and not creditors of the corporation and that, in the absence …

Corporations - Reorganization - Expedition Required Under Section 77b In Agreeing Upon And Presenting Acceptable Plan

Michigan Law Review

B corporation filed its petition for reorganization under Section 77B of the Bankruptcy Act. This was contested by answer of bondholders' committee and certain minor creditors as provided for in Section 77B (a) on the ground that reorganization was not in the best interests of the preserving of assets. Held, there is no reason to believe that with a fair and equitable plan of reorganization there would be no substantial equities; therefore, the petition is received and B is allowed to proceed under Section 77B and to present within a reasonable time some plan of reorganization as provided by …

Assignments - Effect Of Assignment Of Contract By Receiver Of Liquidating Insolvent Corporation

Michigan Law Review

The Chicago Tribune contracted to furnish the Washington Post with four comics and two features at a stipulated price per week. The Post went into the hands of a receiver who continued the contract and eventually assigned it to the Washington Post Publishing Company, plaintiff, along with "all assets of said company [the Post] of every kind, character, and description, except cash." The Post then went out of existence. The plaintiff, assignee, sued to enforce the contract, tendering payment in cash. Held, that the contract was assignable, that there had been a valid assignment, and that the contract remained …

Bankruptcy- Preferred Stockholders As Creditors For Accrued Dividends Under Section 77b Of The Bankruptcy Act

Michigan Law Review

Preferred stockholders were "beguiled" into purchasing their stock, and paid, as part of the subscription price, for accrued dividends at the rate of 6 per cent per annum from June 1, 1933, to the date of their respective subscriptions, upon the "virtual promise of refund" on December 1, 1933, the next dividend date. No dividend was declared or paid. Such stockholders seek to file a petition for the reorganization of the corporation under Section 77B of the Bankruptcy Act as "creditors" within the meaning of the word as employed in that section. Held, they are "creditors" within the meaning …

Evasion Of Mortgage Moratoria By Prosecution Of Personal Remedies, Gordon B. Wheeler, Edgar N. Durfee

Michigan Law Review

For reasons political, social and economic which have never been fully analyzed, the moratory legislation of the last five years has shown special favor to the debtor whose obligation is secured by mortgage of land, and this legislation is faintly echoed in moratory decisions which have no direct statutory foundation. Granted that contracts have sometimes received similar treatment, that banks and insurance companies have also enjoyed indulgence, and that the new chapters of the Bankruptcy Act extend asylum to all and sundry, yet the mortgage is so far favored that the word "moratorium" brings to mind this case before all …

Corporate Reorganization-Section 77 Of The Bankruptcy Act--Power Of Court To Enjoin Sale Of Bonds Pledged As Collateral

Michigan Law Review

The recent Chicago, Rock Island case raised an interesting problem under Section 77 of the Bankruptcy Act. The Chicago, Rock Island as parent railroad of a system extending into one-fourth of the states, had pledged large blocks of its own mortgage bonds and those of its subsidiaries, as security for loans made to it by the Reconstruction Finance Corporation and some Chicago, New York, and St. Louis banks, under an agreement whereby the pledgees were given a power of private sale, without notice, upon set contingencies. In addition to the above it had previously pledged with trustees as security for …

Corporations-Section 77b Of The Bankruptcy Act-To What Corporations It Applies

Michigan Law Review

Creditors of a title and mortgage company which had gone into receiver's hands petitioned for a reorganization of the company under Section 77B of the Bankruptcy Act. Held, that the company was an insurance corporation. Insurance corporations are not amenable to Section 77B. Petition for reorganization dismissed. In re New York Title and Mortgage Co., (D. C. N. Y. 1934) 9 F. Supp. 319.

Constitutional Law--Mortgages--Frazier-Lemke Act

Michigan Law Review

In 1922 and 1924 appellee mortgaged property worth $18,000 to secure a loan of $9,000 from appellant which was to be repaid in installments over a period of thirty-four years. Default being made on the covenants in the mortgage, the mortgagee declared the full amount due and brought a suit to foreclose. Proceedings were stayed when the appellee sought relief under Section 75 of the Bankruptcy Act, but he was unable to obtain the requisite majority in number and amount to the composition proposed. The state court entered a foreclosure judgment and ordered a sale. The mortgagor then sought relief …

Corporations-Reorganization Under Bankruptcy Act-Jurisdiction Extending Throughout United States As Substitute For Ancillary Proceedings

Michigan Law Review

On petition of debtor railroad seeking reorganization under Section 77, the District Court for the Northern District of Illinois, eastern division, enjoined non-resident pledgees from exercising their power of sale. Extra-territorial jurisdiction was grounded on Section 77 B, giving to the District Court "exclusive jurisdiction of the debtor and its property wherever located." Held, that "exclusive jurisdiction" means control over the debtor's property wherever located within the United States, and to protect the property process may issue affecting persons anywhere within the United States. Continental Illinois Nat. Bank v. Chicago, Rock Island & Pacific Ry., (U.S. 1935) 55 …

Corporations - Reorganization Under Section 77 B - Right Of Mortgage Trustee To Vote To Exclusion Of Bondholders

Michigan Law Review

The trustee under a mortgage bond issue which was in default with foreclosure pending, sought to vote to the exclusion of the bondholders on a proposed plan for reorganization in a voluntary proceeding by the corporation debtor pursuant to Section 77B of the Bankruptcy Act. The trust indenture authorized the trustee on default to enforce the security by appropriate proceedings, and the individual bondholders were specifically forbidden to sue. The indenture also gave a majority in interest of the bondholders power by an instrument in writing to direct the procedure of the trustee or to remove him. There was no …

The Rights Of Creditors In Reorganization, Robert W. Crasher

Indiana Law Journal

No abstract provided.

Corporate Reorganization Under The Bankruptcy Act, Joseph Heffernan

Indiana Law Journal

No abstract provided.

Banks And Banking - Priorities On Insolvency Of Bank

Michigan Law Review

Plaintiff, clerk of court, deposited in a reputable bank a compensation award known by the bank to be such, pending review in an appropriation proceeding. On the insolvency of the bank, plaintiff sued for the immediate payment of the deposit in full, claiming a preference because: (a) "a special deposit, constituting a trust, was created"; (b) the unauthorized and, consequently, unlawful deposit-of any trust fund in a bank which knows the nature of the fund impresses a trust on the bank. Held, plaintiff was not entitled to a preference over the other depositors in the bank. Busher v. Fulton …

Sales - Chattel Mortgages Under The Bulk Sales Statutes

Michigan Law Review

Gessaman, who was a dealer in new and used automobiles, was indebted to the bank and other creditors. While so indebted, he executed and delivered to the acceptance corporation a chattel mortgage upon all the furniture, fixtures, equipment and supplies used in the business. Later the mortgagee took possession of the chattels without suit, and immediately afterward Gessaman was adjudged a bankrupt. The trustee, in behalf of the bank and other creditors, seeks to subject the chattels to a trust in the hands of the acceptance corporation upon the claim that the chattels were taken under a sale in violation …

The Status Of Creditors In Bankruptcy Administration In Kentucky, D. A. Sachs Jr.

Kentucky Law Journal

No abstract provided.

Bills And Notes-Bonds Payable At Office Of Trustee Which Becomes Insolvent After Deposit According To Agreement But Before Bonds Presented, Ralph W. Aigler

Michigan Law Review

By the terms of a trust mortgage securing a large bond issue the debtor agreed that it would punctually pay the principal and interest of every bond according to the terms of the bond and coupons and would "deposit the necessary funds for such purpose with the trustee at least five days prior to the respective due dates." For the maturities of March 1st and September 1st, 1931, the requisite funds were deposited. Plaintiff's coupons of March and his bonds and coupons of September were not presented on the due dates and not until after the trustee had failed and …

Corporate Reorganization Under Section 77b Of The Bankruptcy Act, Jacob J. Kaplan

Michigan Law Review

In the closing hours of its legislative life the 73rd Congress adopted the amendment to the Bankruptcy Act providing for the reorganization of corporations, and designated as Section 77B. The Act was approved. by the President on June 7, 1934. The statute had had a long and checkered history in Congress. Such legislation barely failed of enactment in the preceding session when Congress first gave to natural persons availing themselves of bankruptcy procedure the right to call themselves "debtors" rather than "bankrupts," and provided a substantially similar method of reorganization for railroad corporations engaged in interstate commerce. The present statute …

Effect Of Insolvency Proceedings On Creditor's Right To Interest, Fred T. Hanson

Michigan Law Review

Where the claims of all creditors are of the same class and. assets are insufficient to pay in full the amount due on all claims when insolvency proceedings are begun, the general rule is that interest thereafter accruing will not be included in computing dividends on claims. The reasons usually given for this rule are: (a) The delay in payment is not the act of the debtor but is an act of the law for the mutual benefit of all the creditors. (b) In the case of claims bearing different rates of interest, it would be inequitable to permit the …

Banks And Banking - Bank Collection Code - Preference For Certified Check On Drawee Bank's Insolvency

Michigan Law Review

The petitioner accompanied a bid on construction work with two certified checks drawn on the M Bank and payable to the government. On rejection of the bid the checks were returned, but in the meantime the drawee bank had been closed. The petitioner presented the checks to the receiver of the defunct bank who refused to honor them as preferred claims. An Illinois statute provided that when a bank has presented to it for payment an item drawn upon such bank, and such bank shall fail after having charged such item to the account of the drawer but without having …

Bankruptcy - Proof Of Claims For Unaccrued Rent

Michigan Law Review

In the very recent case of Manhattan Properties, Inc. v. Irving Trust Co., the Supreme Court for the first time authoritatively passed on the validity of a claim in bankruptcy by a lessor against the bankrupt estate for loss of future rents due after the filing of the petition. The Court, affirming the decision of the Circuit Court of Appeals, ruled that the landlord's claim was not provable. Mr. Justice Roberts, delivering the opinion of the Court, reviewed the long history of litigation on the subject and was impressed by the fact that although the great majority of the …

Bankruptcy - Proof Of Claim For Loss Of Future Rents

Michigan Law Review

A covenant in a lease provided:

" . . . that the filing of any petition in bankruptcy or insolvency by or against the Lessee shall be deemed to constitute a breach of this lease, and thereupon, ipso facto and without entry or other action by the Lessor, this lease shall become and be terminated; and, . . . the Lessor shall forthwith upon such termination be entitled to recover damages for such breach in an amount equal to the amount of the rent reserved in this lease for the residue of the term hereof less the fair rental value …

Banks And Banking - Reorganization Under Enabling Statutes Requiring Less Than Unanimous Agreement - Effect On Special Deposits

Michigan Law Review

The plaintiff issued drafts to the defendant bank under a special agreement that they were to cover certain checks already cashed or to be cashed. When a balance of such drafts stood at $2,000 in favor of the plaintiff, the defendant bank became insolvent. A North Dakota statute provided that if eighty per cent of the deposit creditors agreed to a plan of reorganization, and such plan was approved by the state bank examiner and the secretary of the guarantee fund commission, it was to be held binding on all other unsecured creditors. Eighty per cent of the depositors of …

Equity - Election Of Remedies - Proof Of Claim In Receivership

Michigan Law Review

Plaintiff sold certain chattels under a conditional sales agreement to a partnership which later went into receivership. The purchase price not having been paid, plaintiff filed a general claim with the receiver, which was allowed. Six months later, no dividend having been paid, plaintiff filed a petition to have the general claim withdrawn and a preferred one substituted, based on the title-retaining contract. The court held that by filing and allowance of the general claim plaintiff made a final election between inconsistent remedies which barred rescission and restitution of the specific property. The court held that the inexperience of plaintiff's …

Bankruptcy - Disposition Of Surplus Assets

Michigan Law Review

The Virginia Oil & Refining Co., a Delaware corporation with all of its business in Texas, went into bankruptcy in 1923. In 1931 hitherto worthless property became valuable and it appeared that there would be a large surplus after all of the creditors were paid. Various receivers in both the state and federal courts of Delaware and Texas, representing groups claiming to be stockholders of the company (which had forfeited its charter) and others claiming to represent the company, sought control of the assets. The bankruptcy court appointed a receiver, to whom the trustee was to turn over the surplus, …

The Sale Of Collateral Security By The Pledgee Thereof After The Invention Of The Bankruptcy Of The Pledgor, Richard Robinson Mcginnis

Indiana Law Journal

No abstract provided.