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Butler v. Greater Pythian Temple Ass'n of New York


decided.: June 17, 1953.


Before SWAN, Chief Judge, and L. HAND and FRANK, Circuit Judges.

Per Curiam.

On June 22, 1936 Greater Pythian Temple Association of New York filed its petition for reorganization under section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. A plan of reorganization was thereafter confirmed and, after consummation of the plan, a final order terminating the proceedings was entered September 6, 1940. In the summer of 1952 the present appellant, who holds a small amount of the real estate mortgage bonds issued by the debtor pursuant to the plan of reorganization, moved for reopening of the proceedings and, in a companion petition, asked the court to amend the plan of reorganization so as to provide for annual elections by the mortgage bondholders of two members of the board of directors which supervises the management of the debtor's property; and asked also for removal of the corporate trustee named in the real estate mortgage, and for a direction to the trustee to supply the petitioner with a complete list of the bondholders. The district court, assuming arguendo that it had jurisdiction, denied both petitions on the ground that no sufficent reason was shown to move the court to exercise discretion in favor of the petitioner.

So far as the petitioner sought removal of the corporate trustee for neglect of duty, and a mandatory direction that he supply a list of bondholders, the relief demanded was not within the bankruptcy court's jurisdiction.*fn1 The right, if any, to such relief must be enforced in a different forum.

So far as the petition sought to modify the plan so as to provide a different method of selecting the supervising board of directors, the question of jurisdiction is perhaps more doubtful.*fn2 In Knight v. Wertheim & Co., 2 Cir., 158 F.2d 838, 843 and Prudence Bonds Corp. v. City Bank Farmers Trust Co., 2 Cir., 186 F.2d 525, 527 we clearly intimated that entry of the final order under § 228, 11 U.S.C.A. § 628, gives the creditors indefeasible title to the new securities and puts an end to the court's power to change the plan. The appellant argues that even the final order closing the estate "may be reconsidered under section 2, sub. a(8), 11 U.S.C.A.§ 11, sub. a(8)" which confers jurisdiction to "reopen estates for cause shown".*fn3 Assuming arguendo that the bankruptcy court does have discretionary power for adequate cause to reopen the estate and, after reopening, to amend a completely consummated plan which contained no reservation of power to amend or alter, it is obviously a power to be exercised with extreme caution. We are satisfied that Judge Clancy did not err in refusing to exercise it in the case at bar. The appellant's petition alleged that vacancies have occurred in the board of directors because the "Protective Committee" has ceased to exist or if still in existence its members have not met as a Committee since July 1942. The answering affidavit of Roy A. Dickie, dated October 11, 1952, avers that the Committee is in existence and has been functioning since its organization in 1933; he names its five members. The power given them by the plan to select two directors still continues. If derelict in their duty they may no doubt be compelled to perform it, but there is no reason why the bankruptcy court should be called upon to enforce it. The basic theory of reorganization proceedings is that the debtor or its successor corporation, if there be one, has been rehabilitated by the plan so that it can carry on its business. The corollary of this is that it and its creditors should work out their mutual rights and duties in the ordinary tribunals and should not forever continue under tutelage of the bankruptcy court.

The orders on appeal are affirmed.

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