Before Waterman, Moore and Hamlin,*fn* Circuit Judges.
Swan-Finch Oil Corporation is a New York corporation with approximately 6,000 stockholders. It is largely a holding company. For a considerable time prior to September 1957 the affairs of Swan-Finch were controlled by one Lowell M. Birrell. About September 1957 Birrell fled the country and is currently resisting extradition from Brazil. On January 2, 1958 Swan-Finch filed a petition in the Southern District of New York seeking reorganization pursuant to Chapter X of the Bankruptcy Act, Section 101 et seq., 11 U.S.C.A. § 501 et seq. The petition was approved, and two trustees were appointed.
Due to Birrell's manipulations the affairs of Swan-Finch were in great confusion. One of the assets claimed by the Swan-Finch trustees was the entire issued and outstanding stock of Keta Gas and Oil Company, a Pennsylvania corporation. This stock had been acquired by Swan-Finch on September 27, 1955. On December 31, 1956, the Keta stock was purportedly transferred to Doeskin Products, Inc., a corporation at that time also controlled by Birrell. The subsequent controversy between Swan-Finch and Doeskin over the control of Keta was eventually resolved by the Second Circuit in favor of Swan-Finch in an opinion filed August 24, 1959, Pettit v. Doeskin Products, Inc., 2 Cir., 1959, 270 F.2d 95, certiorari denied, 362 U.S. 910, 80 S. Ct. 660, 4 L. Ed. 2d 618. However, prior to this decision, on July 16, 1958, while Keta was still under the control of Doeskin, Keta filed, in the Western District of Pennsylvania, a petition for an arrangement under Chapter XI of the Bankruptcy Act, Section 301 et seq., 11 U.S.C.A. § 701 et seq. That petition was approved, Keta was continued in possession, and on March 3, 1959 appellant was appointed Keta's receiver.
On November 6, 1959 the two trustees of Swan-Finch, the adjudicated owner of all the corporate stock of Keta, filed a petition on Keta's behalf in the Southern District of New York seeking Chapter X reorganization. On November 9 Judge Ryan provisionally approved the petition, and, as Keta is a subsidiary of Swan-Finch, hearings on this petition were consolidated with the Swan-Finch proceeding. On November 13 Judge Ryan denied appellant receiver's motion to dismiss Keta's Chapter X petition. On January 26, 1960 Judge Palmieri designated the two Swan-Finch trustees to be also trustees of Keta, and appointed a third trustee to serve as a trustee of both Swan-Finch and Keta, this new trustee being specifically charged with the duty to safeguard Keta's position in the consolidated Chapter X proceeding. On March 9, 1960 Judge Palmieri filed an opinion and order constituting final approval of Keta's Chapter X petition (Section 144 of the Act, 11 U.S.C.A. § 544).
Appellant first contends that because a Chapter XI proceeding was pending in the Western District of Pennsylvania the court below should have dismissed Keta's Chapter X petition without considering its merits. Appellant's argument relates to venue. He maintains that Keta's petition in the Southern District of New York does not satisfy the venue requirements of Chapter X unless it qualifies as "an original petition" under Section 129, 11 U.S.C. § 529. He then argues that Section 129 must be read in conjunction with Section 128 which also only applies to "an original petition,"*fn1 that the term "an original petition" has the same meaning in both sections, and that in Section 128 the term is defined as a petition filed at a time when "no bankruptcy proceeding is pending." Then, as the final step in this argument, appellant takes the position that the term "bankruptcy proceeding" in Section 128 refers to any proceeding initiated under any provision of the Bankruptcy Act, Title 11 of the U.S.C.A.
In support of this argument appellant relies heavily upon the Seventh Circuit's holding in Matter of National Aircraft Corporation (Duggan v. Sansberry), 7 Cir., 1945, 149 F.2d 548. The facts there, though similar, are not identical with the facts in the present case. On December 27, 1943 Christopher Engineering Company filed a petition for Chapter X reorganization in the Eastern District of Missouri. On January 21, 1944 creditors of National Aircraft Corporation filed in the Southern District of Indiana an involuntary petition in ordinary bankruptcy against that corporate debtor. On April 6, 1944 the referee in the Indiana proceeding ordered certain of National's properties sold on April 20. On April 19, upon allegations that National was a wholly-owned subsidiary of Christopher, a petition was filed on National's behalf in the Eastern District of Missouri seeking a Chapter X reorganization. Thereupon, on that same day, the Missouri court issued an injunction enjoining the sale that had been ordered in the Indiana proceeding and that was to occur on the following day. The injunction order of the court in Missouri was ignored, the sale occurred as scheduled, and it was approved by the referee in the Indiana proceedings. This approval was affirmed by the district court in Indiana and then by the Court of Appeals for the Seventh Circuit. One of the grounds for the Seventh Circuit's decision was that a subsidiary which had been adjudicated a bankrupt in one district may not thereafter file a Chapter X petition in another district even though a Chapter X reorganization of its parent is pending in the latter district. The Seventh Circuit's reasoning in support of this ground is found at pages 551-552 of its opinion, supra, and is identical with appellant's argument as set forth in the preceding paragraph of this opinion.
The decision of the Seventh Circuit in Duggan v. Sansberry was reversed by the Supreme Court, 1946, 327 U.S. 499, 66 S. Ct. 657, 90 L. Ed. 809. However, as we read the Supreme Court's opinion, the reversal was on other grounds than the ground just mentioned. The Supreme Court held, we believe, that an injunction issued by the reorganization court pursuant to Section 113 of the Bankruptcy Act, 11 U.S.C.A. § 513, may not be collaterally attacked, and that the existence of facts necessary to sustain the jurisdiction of the reorganization court is an issue to be litigated only in that court pursuant to the provisions of Sections 137 and 144 of the Act, 11 U.S.C.A. §§ 537, 544. The language in the Supreme Court's opinion upon which we principally rely for this interpretation is set out in the footnote.*fn2 Our interpretation coincides with that of Collier (6 Collier, Bankruptcy (14th Ed.), § 3.12), and that of the Eighth Circuit, Magidson v. Duggan, 8 Cir., 1954, 212 F.2d 748, 757. Therefore we conclude that the question now before us was not considered by the Supreme Court in its decision reversing the Seventh Circuit in Duggan v. Sansberry.
We agree with the Seventh Circuit's analysis of Section 129 in all particulars - save one. That single point of disagreement, however, is vital to the outcome of the present case. We agree that Section 129 applies only to an "original petition." We agree that the term "original petition" is defined by Section 128 to mean a petition filed on behalf of a corporation at that time not the subject of a pending "bankruptcy proceeding." We disagree, however, with the Seventh Circuit's apparent conclusion - a conclusion that is clear dictum in view of the fact that the prior proceeding there involved was a proceeding in ordinary bankruptcy - that the term "bankruptcy proceeding" in Section 128 includes all Bankruptcy Act proceedings rather than merely proceedings in ordinary bankruptcy.
Sections 126-133 of the Bankruptcy Act, 11 U.S.C.A. §§ 526-533, are a unit constituting Sub-Chapter IV of Chapter X. Accordingly, as the Seventh Circuit recognized, these sections must be construed together. Section 127 provides:
"A petition may be filed in a pending bankruptcy proceeding either before or after the adjudication of a corporation."
The use in this Section of the word "adjudication" (see Section 1(2), 11 U.S.C.A. § 1(2)) requires the conclusion that in Section 127, and hence in Sections 128 and 129 as well, the term "bankruptcy proceeding" refers only to a proceeding in ordinary bankruptcy, i.e., a proceeding under Chapters I-VII of the Act.*fn3 This careful use of the term "bankruptcy proceeding" occurs not only in Sub-Chapter IV of Chapter X but throughout Chapter X (see, e.g., Sections 112, 114, 121; respectively 11 U.S.C.A. §§ 512, 514, 521) and throughout Chapters XI, XII and XIII (see, e.g., Sections 312, 412, 612, 316, 416, 616; respectively 11 U.S.C.A. §§ 712, 812, 1012, 716, 816, 1016.*fn4 As Collier states, 6 Collier, Bankruptcy (14th Ed.), § 1.10 at p. 245 (footnotes omitted):
"As we have seen before, a Chapter X proceeding is a bankruptcy proceeding in the broad sense. But the Act itself, as a matter of technical terminology, does not use the words 'bankruptcy proceedings' or 'proceedings in bankruptcy' in that sense, but uses them rather to distinguish the ordinary bankruptcy proceeding under ...