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IN RE JAMES BUTLER GROCERY CO.

November 19, 1935

In re JAMES BUTLER GROCERY CO.


The opinion of the court was delivered by: BYERS

BYERS, District Judge.

This is a motion for leave to commence in a state court an action against a corporate debtor in possession, to recover damages for personal injuries said to have been sustained through the debtor's negligence subsequent to the date of the order permitting it to continue in possession.

There was a stay granted in that order, pursuant to section 77B, subd. c, cl. 10, of the Bankruptcy Law, 11 U.S.C.A. § 207 (c) (10), enjoining the commencement of suits against the debtor until after final decree, and the motion therefore involves a lifting of that stay for the benefit of the moving party. A rather obscure question of interpretation and construction is presented.

 By the terms of the statute, the court has exclusive jurisdiction of the debtor and its property wherever located, and may exercise all powers not inconsistent with the act, which it would have exercised if it had appointed a receiver in equity.

 The debtor while in possession under order of the court (if so authorized) may exercise all the powers of a trustee (subdivision c, cl. 11, 11 U.S.C.A. § 207 (c) (11) and the trustee may exercise the powers of a receiver in equity in addition to those implicit in the following: "Such trustee * * * shall have all the title and shall exercise, subject to the control of the judge and consistently with the provisions of this section, all the powers of a trustee appointed pursuant to section 44 of this act * * * [section 72 of this title]." (Subdivision c, cl. 2, 11 U.S.C.A. § 207 (c) (2).

 Therefore apparently the trustee under section 77B, or his alternate, the debtor in possession, is a combination of an ordinary trustee in bankruptcy and a receiver in equity, unless the order of appointment is circumscribed so as to limit such amplitude of function.

 No. such limitation is here involved.

 All sections of the Bankruptcy Act, not inconsistent with section 77B, apply to proceedings thereunder, except those enumerated in clause k, 11 U.S.C.A. § 207 (k); these shall not apply unless an order of liquidation has been entered.

 No such order has been entered here.

 One of the sections thus excluded is section 63, 11 U.S.C.A. § 103, having to do with "Debts which may be proved." That section has been construed to prevent the liquidation, under section 63, of tort claims existing prior to adjudication in bankruptcy. See In re New York Tunnel Co. (C.C.A.) 159 F. 688. From such a claim there is no discharge under the Bankruptcy Act.

 Under section 77B, however, "'Claims' includes debts, securities, other than stock, liens, or other interests of whatever character." Subdivision b, cl. 10, 11 U.S.C.A. § 207 (b) (10). "Creditors" includes, for all purposes of the section, the reorganization plan, its acceptance and confirmation, "all holders of claims of whatever character against the debtor or its property * * *." Idem.

 The consummation of reorganization under section 77B is followed by the termination of the proceedings, which involves the entry of a final decree which "shall discharge the debtor from its debts and liabilities, and shall terminate and end all rights and interests of its stockholders, except as provided in the plan or as may be reserved as aforesaid." Subdivision h, 11 U.S.C.A. § 207 (h).

 The foregoing would seem to mean that a tort claim would be discharged, and hence should be liquidated and allowed in this proceeding. There is no provision for liquidation of claims as such, but the right to refer any matter (subdivision c, subd. 11, 11 U.S.C.A. § 207 (c) (11)) is probably sufficient.

 Subdivision o of the same section, 11 U.S.C.A. § 207 (o), is thought not to be to the contrary effect; it provides that in proceedings under section 77B "and consistent with the provisions thereof, the jurisdiction and powers of the court, the duties of the debtor and the rights and liabilities of creditors, and of all persons with respect to the debtor and its property, shall be the same as if a voluntary petition for adjudication had been ...


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