ATLANTIC COAST LINE RAILROAD COMPANY, Appellant, v. ST. JOE PAPER COMPANY, et al., Appellees.
No. 15244.
United States Court of Appeals Fifth Circuit.
Nov. 5, 1954.
Rehearing Denied Dec. 9, 1954.
216 F.2d 832
Only when death occurred and the administration of the estate disclosed the existence of the property did the wife learn the facts. She acted promptly. And the complaints considered in their entirety, from first to last, do not show the elements or the presence of laches or estoppel.
The preceding discussion also establishes the fact that whether the three year,
Edward W. Bourne, New York City, Charles Cook Howell, Wilmington, N. C., Charles Cook Howell, Jr., Jacksonville, Fla., Richard B. Gwathmey, Wilmington, N. C., Howell & Howell, Jacksonville, Fla., Alexander & Green, New York City, (Andrew Oliver, New York City, J. Kenneth Campbell, Mineola, N. Y., William A. Boylan, New York City, of counsel), for Atlantic Coast Line R. Co.
William D. Mitchell, New York City, Guy W. Botts, Russell L. Frink, Jackson-
Before HOLMES, BORAH, and RUSSELL, Circuit Judges.
PER CURIAM.
The motion to dismiss should be overruled because this appeal involves entirely new issues, which were not decided or considered by the Supreme Court, and not disposed of by its reasoning or judgment, when this case was before it. 345 U.S. 948, 73 S.Ct. 866; 347 U.S. 298, 74 S.Ct. 574. The Supreme Court reversed the judgment of the Court of Appeals, and remanded the case to the District Court for further proceedings in accordance with its opinion; but it did not give any particular directions to the District Court and did not reinstate the latter‘s judgment which had been reversed by the judgment of the Court of Appeals. 5 Cir., 201 F.2d 325, 330. To reverse a judgment, according to Webster‘s dictionary, means to overthrow it by a contrary decision, to make it void, to undo or annul it for error. The mandate of the Supreme
This is the third appearance before us of this proceeding under
In his opinion of June 28, 1954, the District Judge failed to recognize this artificial value or disregarded its effect in the Supreme Court, and stated it to be clearly established by the record that this stock had no value, that it had never had any value during the pendency of this proceeding, and that there was no possible equity for stockholders after the payment of proven debts. Later he referred twice to this “worthless stock.” The creditors committee, which instituted this proceeding in bankruptcy, alleged that the fair value of the debtor‘s property was less than the principal and accrued interest on its outstanding bonds. The debtor, in its answer, admitted all of the allegations in the petition, and prayed that it be relieved from any duty under
At the hearing that preceded the order of June 28, 1954, from which this appeal was taken, the appellant offered evidence to show that the debtor had consented to the merger feature of the plan, as well as to its other provisions, and that no forced merger was contemplated by the plan so far as the debtor was concerned, because the latter had concurred in it initially, and had formally adopted it after the Supreme Court‘s decision. The majority of the Supreme Court thought that the plan would involve the application of force against the Florida East Coast Railway Company, as it spoke of the plan being forced or foisted upon the carrier or corporate entity; and the District Judge was of the opinion that the attempted adoption of the plan came too late, since it was “congenitally defective” and there were “no means of activating it.”
The Atlantic Coast Line, on remand, also proffered evidence to show that there had been no change in conditions as a result of which the plan, found to be fair by this court on January 19, 1953, had become unfair by June 21, 1954; it further offered to prove that not merely had there been no change in conditions which had made the plan unfair, but that the trend had been the other way and, if any change had taken place, the plan was fairer than it was when previously approved. The court below refused this proffer of evidence, and dismissed the bankruptcy proceeding on the ground that an unreasonable delay had occurred in the reorganization of the railroad. Thereupon, it ordered a turnover of the debtor‘s property to an equity receiver in the same court. This is the order that was appealed from and superseded in this case; it adhered to and confirmed the District Court‘s prior order of March 11, 1952, which had been reversed; it fixed August 1, 1954, at 12:01 A. M., as the effective date of dismissal of the petition for reorganization; and directed John M. Martin, as sole trustee in the reorganization proceeding, to turn over to John M. Martin, as sole equity receiver, all of the debtor‘s property. The effect of this order would be to eliminate the blended power of the court and the Commission, provided for by
“Until the amendment of March 3, 1933, railroads were outside the Bankruptcy Act. But the long history of federal railroad receiverships, with the conflicts they frequently engendered between the federal courts and the public, left an enduring conviction that a railroad was not like an ordinary insolvent estate. Also an insolvent railroad,
it was realized, required the oversight of agencies specially charged with the public interest represented by the transportation system. Indeed, when, in the depth of the depression, legislation was deemed urgent to meet the grave crisis confronting the railroads, there was a strong sentiment in Congress to withdraw from the courts control over insolvent railroads and lodge it with the Interstate Commerce Commission. Congress stopped short of this remedy. But the whole scheme of § 77 leaves no doubt that Congress did not mean to grant to the district courts the same scope as to bankrupt roads that they may have in dealing with other bankrupt estates. The judicial process in bankruptcy proceedings under § 77 is, as it were, brigaded with the administrative process of the Commission.”
Since the United States District courts are courts of law (civil and criminal), equity, admiralty, and bankruptcy, it is ordinarily more logical to shift from an equity receivership to a bankruptcy proceeding than it is to reverse the movement. Courts of equity may enjoin suits at law and keep creditors at bay, but they cannot discharge debts, reduce or adjust them, or otherwise impair the obligations of contracts; but the bankruptcy courts, within the limits of the Fifth Amendment, may do any and all of these things. They are not only courts of equity, but in a proceeding under said
According to Blackstone, a bankrupt was formerly defined as “a trader who secretes himself and does certain other acts tending to defraud his creditors,” 2 Bla.Com. 471; but at present the bankruptcy law, especially the federal statutes, are founded on principles of humanity as well as justice; and, to that end, they confer privileges on the debtor that tend toward his rehabilitation, while protecting the substantial rights of his creditors. Everything legislatively possible has been done that could be done to take the odium and hardship out of bankruptcy. In many of the chapters the insolvent persons are not even called bankrupts; they are referred to as debtors; provisions relating to bankrupts are deemed to relate also to debtors.
The advantages in bankruptcy of a sale of assets, free of liens or subject to liens, far outnumber those of selling property in an equity receivership. The latter has been tried and found wanting. New England Coal & Coke Co. v. Rutland R. Co., 2 Cir., 1947, 143 F.2d 179. The order appealed from would jettison the services and expert knowledge of the Interstate Commerce Commission, which has worked on this case since 1941 and recommended more than one plan that has been rejected by the lower court. On a prior appeal, this court held that it was not proper for the District Court to try to wrest the leadership of this reorganization proceeding from the Commission, 201 F.2d 325. In Ecker v. Western Pacific Railroad Corp., 318 U.S. 448, 468, 63 S.Ct. 692, 87 L.Ed. 892, the Supreme Court said that
Our appellate jurisdiction in this matter is full and complete,
The trial judge said in his opinion of June 28, 1954, that he was loath to believe that any action taken by the holders of this worthless stock would be of any significance; that the effect of the reorganization proceedings was to eliminate the Florida East Coast Railway Company and its stockholders, at their request, as factors in the preparation or adoption of any reorganization plan. This statement went beyond the terms of the order itself, which relieved the debtor from any duty to file a plan but did not undertake to disqualify the debtor from consenting to a plan or even initiating one; it dealt with what the debtor was under duty to do, not with what it might do.
Under the decision of the Supreme Court the District Judge had no alternative but to disapprove the plan since that court had declared it illegal. However, he erred in dismissing the
HOLMES, Circuit Judge (concurring).
The Supreme Court said that the plan of reorganization was congenitally defective, which means that the defect existed at and from the date of its birth. A congenital defect is not necessarily incurable. The metaphor raises the question as to whether such a plan is born when filed by the parties, recommended by the Commission, approved by the court, assented to by the security holders, or at some other time. This is the latest plan that has been proposed; the others died aborning; it may be that a plan is not born until finally approved by the judicial process, and that it is in the making prior to the consummation of the brigaded powers of the court and the Commission. It is anomalous to speak of a plan as congenitally and irrevocably defective, as if it were a stillborn creature, when the court merely held that it was defective at birth, an imperfect plan.
Accepting the Supreme Court‘s decision that there cannot be a merger or unification involving force or compulsion against a debtor corporation or its stockholders, the express provisions of the statute make it clear that a consent after the approval of the plan is all that is required.
In the light of the Supreme Court‘s self-restricted jurisdiction and the first sentence of its opinion, it was proper for the Atlantic Coast Line to show, on remand for further proceedings in accordance with the court‘s opinion, that the Florida East Coast Railway Company was not being compelled and would not be compelled to merge with the Atlantic Coast Line. The Supreme Court did not find anything wrong with the plan itself. The defect found by the court, on the record before it, related solely to the part, or the apparent lack of part, that the Florida East Coast Railway Company had taken in the proceedings.
The Supreme Court‘s decision was not on the merits of the plan except in so far as it related to a forced merger. The opinion of the court of appeals on all other provisions of the plan was not within the scope of the writ of certiorari. It was a decision of the court en banc, and may not be overruled by a division of three judges. Except as to the merger provision, its holding that the plan was a good one is the law of this case. In raising a new point of law, the Supreme Court did not intend to shut out proof upon any issue of fact emerging therefrom. Out of the facts the law arises; and new or additional facts may alter a court‘s decision.
When the petition for a reorganization in this case was approved by the judge as properly filed and as having been filed in good faith, the old equity receivership became moot and should have been dismissed, because the bankruptcy court immediately was vested with exclusive jurisdiction of the debtor and its property wherever located; and, in addition to the other powers conferred by
RUSSELL, Circuit Judge (concurring specially).
Even casual consideration of the past proceedings and rulings1 in this matter will reveal grounds for substantial argument as to what is, as often denominated, “the law of the case“. However, it would be unusual, to say the least, to attribute to the Supreme Court an intention to abandon determination of the important, if indeed not the controlling, question which had underlain the prior decisions of the trial and the Appellate Courts, and to which alone the Supreme Court had restricted itself upon the grant of certiorari. With much more logic and respect might it be assumed that the court was deciding the case as made and presented with the result that the decision should be construed to hold that the equitable owners of the property supplant in interest the holders of the worthless stock and are thus entitled to the say-so on the question of merger which would ordinarily be enjoyed by
The trial court properly refused to approve the plan. The matter should have been returned to the Interstate Commerce Commission for the formulation of a fair and lawful plan which would protect both public and private interests.