124 F.2d 435 | 2d Cir. | 1942
The facts are not in dispute. In proceedings instituted in 1934 for reorganization of Ambassador Hotel Corporation, debtor, the district court, by order dated August 1, 1935, confirmed a plan of reorganization pursuant to which the appellant, New. York Ambassador, Inc., a new corporation organized under the laws of the
The appellants rely upon the principle, exemplified in Julian v. Central Trust Co., 193 U.S. 93, 24 S.Ct. 399, 48 L. Ed. 629, and Local Loan Co. v. Hunt, 292 U.S. 234, 54 S.Ct. 695, 78 L.Ed. 1230, 93 A.L.R. 195, that a federal court of equity or bankruptcy has ancillary jurisdiction to enjoin state court litigation, notwithstanding the provisions of section 265 of the Judicial Code, 28 U.S.C.A. § 379, when necessary to secure or preserve the fruits and advantages of a judgment or decree rendered in the original cause. As stated in the Hunt case, this principle “is well settled” and we shall assume that it continues with vigor unimpaired by anything said in the recent pronouncement in Toucey v. New York Life Ins. Co., Nov. 17, 1941, 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. —. But even under the broadest conception of the power of a federal court to protect its own decrees, the appellants’ contention must fail. No one has supposed that the power extends beyond enjoining state court proceedings which challenge the validity of rights decreed by the federal court. Sharp’s action in the state court is not of that character; it does not attack any decision of the reorganization court. On the contrary, Sharp concedes that the voting trust certificates were validly issued pursuant to the confirmed plan of reorganization, and the issue he tenders for decision by the state court is: What is the legal effect of a subsequently enacted state statute upon the rights created by the federal decree in holders of voting trust certificates. Obviously, this question had not been passed upon by the reorganization court. Nor was it one over which the court could reserve jurisdiction to itself. When the court confirmed a plan of reorganization which set up a New York corporation with stock issued to voting trustees, it used a tool created under and subject to state laws. The future fate of the corporation was not within the control of the bankruptcy court, nor could that court reserve power to adjudicate controversies in which it might become involved — whether they should arise from a change in state law or from the corporation’s own conduct, as for example, negligent injury to some guest of the hotel or failure to pay current bills. The appellants argue that a retroactive application of the statute under discussion will “modify” the plan of reorganization. We are not here concerned with how the statute is to be construed; but if the voting trust provisions shall be applied retroactively, it will