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COSTELLO v. PAN AM

February 11, 1969

John COSTELLO, as Trustee of the Estate of Transocean Air Lines, a corporation (Bankrupt); John M. England, as Trustee of the Estate of Transocean Corporation of California (Bankrupt); and Orvis M. Nelson, Plaintiffs,
v.
PAN AMERICAN WORLD AIRWAYS, INC.; Continental Airlines, Inc.; The Boeing Company; and Aviation Financial Services, Inc., Defendants


Pollack, District Judge.


The opinion of the court was delivered by: POLLACK

POLLACK, District Judge.

This is a plenary suit instituted by bankruptcy trustees and a principal stockholder and former officer of the bankrupts to recover damages for alleged antitrust and common law violations. The case was assigned to me for all purposes under Rule 2 of the General Rules of the United States District Court for the Southern District of New York. The action was commenced on September 30, 1963 and is at issue. There have been extensive discovery proceedings. A preliminary trial has been held to determine whether the claims of plaintiffs as trustees in bankruptcy and the individual plaintiff are barred by applicable statutes of limitation.

 Jurisdiction to entertain this action on behalf of the trustees rests on section 23 of the Bankruptcy Act, 11 U.S.C. § 46, which confers jurisdiction upon all district courts to hear plenary suits where the bankrupt might have brought them if bankruptcy proceedings had not been instituted.

 The individual plaintiff, Orvis M. Nelson, has joined the trustees in this suit claiming damages under the antitrust laws for injuries to him as a stockholder, officer and director of the bankrupt and also asserting a common law claim on his individual behalf arising out of the general subject matter herein. Only the former claims are considered at this time and only from the viewpoint of the statute of limitations; no limitary bar is asserted against the common law claim. *fn1"

 The parties have agreed on most of the facts relevant to the issue tried and these have been incorporated in the findings of the Court with the caveat that they are agreed to only for purposes of decision on the statute of limitations prior to trial on the merits of this case. Additional findings of fact made by the Court after trial on the issue of the statutes of limitation are set forth in the decision and have been identified as such by a mark adopted for that purpose. The chronology which is significant herein is as follows.

 On 23 June 1960, certain creditors of Transocean Air Lines ("TAL") filed an involuntary petition in the United States District Court for the Northern District of California seeking to have TAL adjudicated a bankrupt. John Costello was appointed Receiver of the Estate of TAL, with full powers including power to sue, on 12 August 1960.

 On 3 April 1961, TAL filed in the pending involuntary bankruptcy proceedings a petition for an arrangement under § 321 of Chapter XI of the Bankruptcy Act, 11 U.S.C. § 721.

 On 16 October 1962, by order of the Referee in Bankruptcy, TAL was adjudicated a bankrupt and John Costello was appointed and then qualified as trustee of TAL. The Chapter XI proceeding was not dismissed and has remained pending; and from time to time steps have been taken therein by TAL, including the amendment of the plan of arrangement of May 1961 and an application for its confirmation; later, a request was made that decision on the amended plan be deferred. The Referee thereafter continued to carry the matter on his calendar in order to permit the filing of a satisfactory plan of arrangement with a view to setting aside the 16 October 1962 order of adjudication.

 Section 11(e) of the Bankruptcy Act, 11 U.S.C. § 29(e), which is entitled "Suits by and against bankrupts", provides that a receiver or trustee may, within two years subsequent to the date of adjudication (or within such further time as the federal or state law may permit) institute proceedings on behalf of the estate upon any claim against which the period of limitation fixed by federal or state law had not expired at the time of the filing of the petition in bankruptcy.

 Section 1(12) of the Bankruptcy Act, 11 U.S.C. § 1(12), defines "date of adjudication" as "the date of the filing of any petition which operates as an adjudication, or the date of entry of a decree of adjudication * * *"; and § 1(2) of the Bankruptcy Act, 11 U.S.C. § 1(2), defines "adjudication" as "a determination, whether by decree or by operation of law, that a person is a bankrupt."

 The foregoing provisions of the straight bankruptcy sections of the Act are incorporated in a Chapter XI proceeding by § 302, 11 U.S.C. § 702, which directs that the provisions of Chapters I-VII shall, insofar as they are not inconsistent with or in conflict with the provisions of Chapter XI, apply in proceedings under Chapter XI. Section 302 further provides that the incorporated provisions relating to "bankrupts" shall be deemed to relate to "debtors", and those relating to "bankruptcy proceedings" or "proceedings in bankruptcy" shall be deemed to include proceedings under Chapter XI. It is further provided in § 302 that in applying the bankruptcy sections in proceedings under Chapter XI "the date of the filing of the petition under section 321" shall be taken to be "the date of adjudication" except where an actual adjudication had previously been entered.

 In marking the filing of the Chapter XI petition as "the date of adjudication" for the purposes of Chapter XI proceedings (§ 301, 11 U.S.C. § 701), section 302 gives such filing the effect given to the filing of a voluntary petition in bankruptcy under Chapters I-VII, § 18(f), 11 U.S.C. § 41(f), and to the filing of voluntary petitions under other chapters of the Bankruptcy Act; see, § 102, 11 U.S.C. § 502; § 402, 11 U.S.C. § 802; § 602, 11 U.S.C. § 1002.

 The jurisdiction, powers and duties of the court, its officers, the debtor and creditors are the same from the date of filing of a Chapter XI petition "as if a decree of adjudication had been entered" on that date. §§ 312, 341, 352; 11 U.S.C. §§ 712, 741, 752.

 The petition filed by TAL under Chapter XI in the pending involuntary bankruptcy proceedings altered the extension of time to bring a plenary suit allowed to the representative of the estate by the Bankruptcy Act in the absence of such petition. The "date of adjudication" which governed after such petition was filed was 3 April 1961, namely, the date ...


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