Marine Harbor Properties, Inc. v. Manufacturers Trust Co., 317 U.S. 78 (1942)
U.S. Supreme CourtMarine Harbor Properties, Inc. v. Manufacturers Trust Co., 317 U.S. 78 (1942)
Marine Harbor Properties, Inc. v. Manufacturers Trust Co.
Argued October 16, 19, 1942
Decided November 9, 1942
317 U.S. 78
1. In exercise of the federal bankruptcy power, Congress may exclude every competing or conflicting proceeding in state or federal tribunals. P. 317 U. S. 83.
2. Although the pendency of a prior proceeding in a state or federal court does not bar the filing of a petition under Chapter X of the
Bankruptcy Act, the bankruptcy court may not in such case approve the petition unless it appears that the interests of creditors and stockholders would not be best subserved in the prior proceeding. P. 317 U. S. 83.
3. The party filing a petition under Ch. X while a prior proceeding is pending in a state or federal court has the burden of showing that the interests of creditors and stockholders would not be best subserved in the prior proceeding. P. 317 U. S. 83.
4. When a prior proceeding is pending, a petitioner's showing of "need for relief" under Ch. X, which § 130(7) requires that every petition contain, must demonstrate that at least in some substantial particular the benefits, advantages, or protection which Ch. X affords to creditors or stockholders are unavailable in the prior proceeding. P. 317 U. S. 84.
5. That a debtor was seeking to escape the jurisdiction of a state court to which it had theretofore voluntarily submitted is immaterial in the determination of whether its petition under Ch. X was filed in "good faith" within the meaning of § 146(4). P. 317 U. S. 84.
6. The issue as to the adequacy of the prior proceedings as compared with Ch. X is the same whether the petition is filed by the debtor or by creditors. P. 317 U. S. 85.
7. Whether filed by the debtor or by others, all petitions under Ch. X must show the "need for relief" (§§ 130-131), and the bankruptcy court must be satisfied in every case that the petition has been filed in "good faith" (§§ 141-144). P. 317 U. S. 85.
8. In this case, wherein prior proceedings were pending in a state court and the value of the property of the debtor was less than the amount of a first mortgage indebtedness thereon, held that the debtor, petitioning under Ch. X, had not sustained the burden which was upon it of showing that the interests of creditors and stockholders would not be best subserved in the prior proceedings in the state court. P. 317 U. S. 85.
(a) The rule of full priority of creditors over stockholders, applied in § 77B proceedings, obtains also in proceedings under Ch. X. P. 317 U. S. 85.
(b) It did not sufficiently appear in this case that the stockholders were willing to make a fresh contribution in money or in money's worth in return for a participation reasonably equivalent to their contribution. P. 317 U. S. 85.
(c) It did not appear that continuation of the state proceedings would deny junior creditors any benefits which Ch. X would afford
them. The full priority rule which obtain under Ch. X protects the rights of senior creditors against dilution either by junior creditors or by equity interests. P. 317 U. S. 86.
(d) It did not sufficiently appear in this case that a state foreclosure proceeding, instituted for and on behalf of first mortgage creditors exclusively, was inadequate, measured by Ch. X standard, to protect their interests. P. 317 U. S. 87.
125 F.2d 296 affirmed.
Certiorari, 315 U.S. 794, to review the reversal of an order of the District Court, 41 F. Supp. 814, approving a petition under Chapter X of the Bankruptcy Act filed by a debtor corporation.