642

35

33

Opinion of the Court.

scribed, and upon him were devolved functions aimed at eliminating the abuses of previous reorganization schemes." It was his duty to prepare the reorganization plan, and there were conferred upon him investigative powers and duties 36 which not only contemplated the discovery of wrongs done the debtor by its former management, but also insured the "prosecution of all causes of action" which might "add to the assets of corporations in reorganization." " These provisions were "of paramount importance in the revision of section 77B." 38 and are hardly indicative of a congressional desire to restrict the trustee's choice of a forum in which to litigate plenary suits. On the contrary, the conclusion more in accord with the purposes of Chapter X and with the pivotal position in which the trustee was placed 39 is that Congress

33 §§ 156 and 158.

37

The important defects of 77B reorganizations and the remedy provided in Chapter X are analyzed in S. Rep. No. 2084, 75th Cong., 3d Sess. 1-3 (1938).

36 Section 167 in part provides: "The trustee upon his appointment and qualification

"(1) shall, if the judge shall so direct, forthwith investigate the acts, conduct, property, liabilities, and financial condition of the debtor, the operation of its business and the desirability of the continuance thereof, and any other matter relevant to the proceeding or to the formulation of a plan, and report thereon to the judge;

"(2) may, if the judge shall so direct, examine the directors and officers of the debtor and any other witnesses concerning the foregoing matters or any of them;

"(3) shall report to the judge any facts ascertained by him pertaining to fraud, misconduct, mismanagement and irregularities, and to any causes of action available to the estate . . . .

37 S. Rep. No. 1916, 75th Cong., 3d Sess. 29 (1938).

38 Ibid.

39 "These functions of the independent trustee appointed in the larger cases are difficult to overemphasize. . . . Investors must be afforded a 'focal point' for organization." H. Rep. No. 1409, 75th Cong., 1st Sess. 43 (1937).

intended by the elimination of § 23 to establish the jurisdiction of federal courts to hear plenary suits brought by a reorganization trustee, even though diversity or other usual ground for federal jurisdiction is lacking.

The decision of the Circuit Court of Appeals is in entire harmony with the foregoing considerations. The language of § 2, in its ordinary sense and no longer limited by § 23, easily comprehends the present type of suit; and so to hold directly and effectively subserves Congressional desires as revealed in the plain policy of Chapter X and in the express elimination of § 23, which has, since its enactment in 1898, been viewed as a sharp restriction upon the jurisdiction theretofore exercised by bankruptcy courts and as a strong preference for state courts." Since all reorganization courts are the objects of the jurisdiction conferred by § 2," the District Court for the Southern District of New York has jurisdiction to hear the present suit, which is brought by reorganization trustees and which charges misappropriation of the assets of a Chapter X debtor." "This seems to be the only logical conclusion to

40 "The Bankruptcy Act of 1898, in respect to the matters now under consideration, was a radical departure from the act of 1867, in the evident purpose of Congress to limit the jurisdiction of the United States courts in respect to controversies which did not come simply within the jurisdiction of the Federal courts as bankruptcy courts, and to preserve, to a greater extent than the former act, the jurisdiction of the state courts over actions which were not distinctly matters and proceedings in bankruptcy." Bush v. Elliott, 202 U. S. 477, 479-80 (1906). And see pp. 649 and 650, notes 14-15, supra.

41 Section 1 (10) defines the courts of bankruptcy as follows: "Courts of bankruptcy' shall include the district courts of the United States and of the Territories and possessions to which this Act is or may hereafter be applicable, and the District Court of the United States for the District of Columbia"; Babbitt v. Dutcher, 216 U. S. 102 (1910). And see § 2 (a) (20) of the Bankruptcy Act.

42 Our conclusion is not changed by the language of § 23 (a), which as drawn in 1898, 30 Stat. 544, 552, was designed to grant a limited

be derived from the fact that § 23 has no application under Chapter X." 43

3. Respondents in the alternative argue that the equity receivership powers conferred by § 115" include jurisdiction to hear plenary suits and that all reorganization courts may exercise the jurisdiction so conferred. Petitioners would, in any event, confine the effects of § 115 to the reorganization court in which the reorganization petition has been approved. We need not pass on these contentions; for, assuming that § 115 is jurisdictional

45

jurisdiction to circuit courts over "controversies at law and in equity," as distinguished from "proceedings in bankruptcy," and which seems only to have recognized the rule existing under the 1867 Act that certain bankruptcy matters were the exclusive concern of the bankruptcy court. If "proceedings" as used in § 23 (a) denoted those instances in which summary jurisdiction was proper, to find that "proceedings" in § 2 has no such precise meaning simply exemplifies the variety of ways in which "proceedings" has been employed in the bankruptcy statute. Section 11 (e) authorizes trustees to institute "proceedings in behalf of the estate upon any claim" and refers to "any proceeding, judicial or otherwise." And §§ 60 (b), 67 (e) and 70 (e) speak of "proceedings" in connection with plenary. In Chapter X itself, §§ 101 and 102 refer to "proceedings under this chapter." This term must extend to plenary suits, for otherwise § 23, which deals only with plenary suits, would not be suspended at all. Significant too is that "bankruptcy proceedings" in § 2 was in 1938 changed to "proceedings under this Act" in order that the jurisdiction granted by § 2 would extend to "proceedings" under the new debtor relief chapters, including Chapter X.

43 6 Collier on Bankruptcy 673 (14th ed. 1947.)

Section 115 provides: "Upon the approval of a petition, the court shall have and may, in addition to the jurisdiction, powers, and duties hereinabove and elsewhere in this chapter conferred and imposed upon it, exercise all the powers, not inconsistent with the provisions of this chapter, which a court of the United States would have if it had appointed a receiver in equity of the property of the debtor on the ground of insolvency or inability to meet its debts as they mature."

45 The similar "powers" provision in § 77B has been viewed as non-jurisdictional. In re Standard Gas & Electric Co., 119 F. 2d 658,

and that it extends only to the primary court, jurisdiction in the present case may still be rested upon § 2. That section, in the absence of § 23, supports the jurisdiction of all district courts to hear plenary suits brought by a reorganization trustee, a result consistent with the aims of Chapter X and with the elimination of a section which is itself applicable to all district courts. Congress could have carved out of § 23 only a narrow exception in favor of the court in which the reorganization proceedings are pending and thereby left unchanged the jurisdiction of other courts over a trustee's plenary suits. Limited exceptions are familiar in the history of § 23. But Congress went further and eliminated § 23 entirely in Chapter X proceedings. Because of the countrywide ramifications of corporate debtors placed in Chapter X reorganization, it is as usual as not for the trustee to resort to foreign jurisdictions for the disposition of plenary suits. Allowing the primary court to hear these suits will not change this situation, if it is true that the process of a reorganization court does not run nationwide in plenary cases."

662 (1941); see In re Prima Co., 98 F. 2d 952, 958 (1938). These cases were decided after the passage of the Chandler Act and considered § 23 fully applicable in pending 77B proceedings. In Tilton v. Model Taxi Corp., 112 F. 2d 86 (1940), § 23 was considered applicable in § 77B proceedings so as to permit jurisdiction of the district court to be based upon a defendant's consent. And see Thompson v. Terminal Shares, 104 F. 2d 1 (1939), for a treatment of a similar provision contained in §77. On the other hand, § 115 has been interpreted as jurisdictional. In re Cuyahoga Finance Co., 136 F. 2d 18 (1943); see Warder v. Brady, 115 F. 2d 89, 93-94 (1940). Other courts have thought the suspension of § 23 in Chapter X cases would give the reorganization court jurisdiction to hear plenary suits. See Clarke v. Fitch, CCH Bankr. Law Ser. 153,805 (1942); Tilton v. Model Taxi Corp., supra at 88.

46 It has been so held. In re Standard Gas & Electric Co., 119 F. 2d 658 (1941); Bovay v. H. M. Byllesby & Co., 88 F. 2d 990 (1937); United States v. Tacoma Oriental S. S. Co., 86 F. 2d 363 (1936); Clarke v. Fitch, CCH Bankr. Law Ser. ¶ 53,805 (1942).

Congressional policy would receive only limited recognition if the suspension of § 23 is interpreted as allowing the trustee access to only the appointing court and as restricting his access to all other district courts.47

4. Our holding is, of course, that Congress in 1938 extended the jurisdiction of the reorganization courts beyond that exercised by ordinary bankruptcy courts. Section 2 of the 1898 Act contained the broad language borrowed from 1 of the Act of 1867. But the exception to § 2 (a) (7) acknowledged the overriding limitations of § 23, which was the embodiment of Congressional policy to exclude from the bankruptcy courts many of the trustee's plenary suits. That same meaningful section was expressly eliminated in 1938 in the process of perfecting a chapter of the Bankruptcy Act dealing with the distinctive and special proceedings in corporate reorganizations. Cf. Continental Bank v. Rock Island R. Co., 294 U. S. 648, 676 (1935). This negation of long-standing policy should be given effect consistent with the aims of Chapter X and should not be hedged by judge-made principles not in accord with those aims. Congress need not document its specific actions in elaborate fashion in order to direct this Court's attention to statutory policy and pur

47 The Chapter X cases cited in note 45, supra, did not reach the question of whether courts other than the primary court would have jurisdiction to hear plenary suits where the latter had jurisdiction of such a suit but could not exercise it because of personal service or venue difficulties. Nor did Mr. Gerdes, who construed the suspension of § 23 as establishing, by way of § 115, the jurisdiction of the reorganization court to hear plenary suits. Gerdes, Corporate Reorganizations: Changes Effected by Chapter X of the Bankruptcy Act, 52 Harv. L. Rev. 1, 21 (1938). But it was his opinion even under § 77B, where the applicability of § 23 was left in doubt, that all reorganization courts, not just the domiciliary court, had jurisdiction to hear plenary suits brought by the trustee, even though the usual grounds for federal jurisdiction were lacking. 2 Gerdes, Corporate Reorganizations 1480, 1513-14, 1525-26 (1936).