Brief in Opposition to Petition for Writ of Certiorari — Securities & Exchange Commission v. United States Realty & Improvement Co.

‘IN THE

OCTOBER : TERM, 1939

No. 796 ©

_,

SUPREME COURT OFTHE UNTED STATES

. 2

Seourrrms AND Exonancr Commassion,

— "

Unrrep States REALTY AND ©

- IMPROVEMENT ComMPANY.

Petitioner,

BRIEF OF. UNITED STATES REALTY AND IMPROVEMENT

‘ COMPANY IN OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI.

on

—_—

JOSEPH A. Bennett,

y Coartes W. Desa,

‘Henry M..Marx, —

of Counsel.

_#

WJ osEPH M. HartFIE.p,

Counsel for Respondent.

EN ee Cee Se RT cans! _s

‘ The Hamilton Press, 58 Stone St., New York City

\

™

INDEX

Opinions Below pet hd setie nee

The Questions Presented seneforteecrereeeteceecens 2

Te Wes I oii ea Micccaveseéescicsrvax. 2

ee eB hy Sane

Arwament. \...éen: fe Le ee i oe

Summary or Reasons Urcep sy Desror ror Nor

- GRANTING THE WRIT. oes ecaperneeerinercers

qr

I. Unpan THE E}\xpress Tens, OF THE SraTure; ANY’

CorPORATION WHICH CAN BECOME A BANKRUPT

MAY Propost AN ARntANGEMENT UNDER CHAPTER

, XI eesvee?es TC eo CCV Cs C4 ee ae SS SS a oe me

A. W une a statute is clear and unambiguous,

the courts may not —— or miodify its

meaning by construction, . RASA ee Nae 6

qn

B. In any event, there is no evidence, either

from .the historical derivation. of Chapter

XI, or in Committee Reports or proceedings,

of any Congressional intent to preclude cor-

-© + porations with publicly held securities from.

proceeding under Chapter XI.............

~l

The historical derivation of Chapter XI 7

| . The Congressional proceedings ...... 78

_C. There is no public interest requiring the con-

struction of Chapter XI urged by petitioner 10

1]. Tur Securities anD ExcHANGE CoMMISSION HAS

NO RIGHT TO INTERVENE IN A PROCEEDING UNDER

6, a Sudan oad sveeul Al pas 10

‘CHAPTER pia EVEN WITH THE PERMISSION _OF- tHE tee APs

‘ ~ A.

' B.

= II. Tu

A.

~~

PAGE

The Commigsion is a statutory body with

limited-authority,.and no‘statute authorizes

the Commission to d sakseneas ina a

XI proceeding . PO Pree eT ee eee TTT eT

: Thec ‘ommittee is not entitled to intervene

either as of right or by permission within

Rule 24 of ‘the, Federal Rules of Civil Proce-

dur, and in ay yevent may not intervene to

iinpeach a decree ‘already et ee

vs.

E SECURITIES AND Excuaxcr CoMMISSION HAS

NO STATUS TO APPEAL FROM THE ORDERS OF THE

District Court ........ besereees Tene ees

Chapter XI does not authorize wach an

appeal and Chapter X expressly denies it

_in an analogous’ situation meena ee eee

B.

IV. Ne

The Commission is not a proper party to

appeal within Sections 24 and 25 of the

Bankruptey Act or within general principles

10

11

11

requiring appellant to have an interest in|

the proceeding aw eke tuanv ewes dee do's peuve

REASONS OF PUBLIC INTEREST REQUIRE THIS

CouRT TO REVIEW THE ACTION OF THE COURT,

eee (in Wawa Cee hae bnnekes gees

The procedural questions of {intervention

and appeal are academic at this time, inas-

much’ as the Commission has already

achieved its purpose of having the substan-

tive jurisdictional question considered on.

IED icv are Nak Pac da cae dees uel ects wees

B.

The substantive. aeolian depends upon the

construction ‘of a statute admittedly unam-

13

biguous in language,’ and the Court -below ¢

_Conelusion

decided the question in accordance with gen-

eral principles of statutory construction

frequently ee: by this Court........

ili

Cases Cited

oy : PAGE

Case v. Los Angeles Liber Products Co. Ltd.

ace poe ekshdcneney ives 4

Credit Service, “Inc., JIn re, 30 F. Supp. 878... ioveeweus, we

Davis v. Rochester Can Company 220 A. D. 487 lobe |

- Case as Mellon v. Rochester Can Company)......10, 11

*” Federal Trade Commission. v. Raladam. Co.; 283 U. S.

RS socks behevne ee alee ks evened Rr Treen 10

Helvering v. City Bank ‘Farmers | Trust Aomuens.

Trustee, 296 Lif ED cise tes cns ces pened aaten 6,7

Iselin v. United States, 270 U.S. 245...... Screen 6

Mellon v. Rochester Can Company, 247 N. Y..521°(same

case as Davis v. Rochester Can Company)..:.., 11

O’Gara Coal Co., In re, 260 Fed. 742........0.0...005 . 8

Osaka Shosen Line v. United States, 3000.8. 98...... 7

Palmér v. Massachusetts, 308 U.S. 79.............. 6

_ Realty Associates Securities Corp., In re, 69 KF. (2d)

41, cert. denied 292 U. S..628 (also reported 6 F.

Supp. 549, 74 F. (2d) 6, 295 U.S. 295). .......06. x

Reo Motor Car‘Co., In re, 30 F.-Supp..785.......... 6

Thompson v. United States, 246 U. S..547....: Pepeere 7

United States v. Missotiri Pacific Railroad Company, |

Oe Se A rrr rer er rer rer Tr re 6

U nited States v. Shreveport Grain & Elevator C 0., 287 *

VU. 8. ; ees oC Cee CEES 0.0 6 @ & 0 eg % CHET C CLOCK EEE 7

Wallace v. Cutten, 298 U: S. 229

‘©

Statutes Cited.

PAGE

Bankruptey het (52 Statutes at Large 840; Title 11

U. 8. C.)

ee els aasiien | Si RN 5

a READ SRT errs yee evda dy esKavnks 8

i Be ee en sek

4 Sees. 101-399 (Chapters X and XI)....... pues 9

OE NE ie ee at seis yeaeceseekeens 9

oc See a) Sis catr atone 11,12

Sec. 306 6 vesu tenes SN Pe ey Pye ree de ee d

RR Dias SULEED AER ONY cat a

Sec, 322 ...... ES genvaais Rides tutioeieeate 4,5

Seb. B98 oars es cs ccdeece: eet ora p ee

ji TE ao acc who ek oe oe 7 rs

le WR ine secs ee ee rea 5

Former See. 12'..........0.. eer anne ae wate we 7,8

Court Rules |

Federal Rules of C ivil Procedure, | Peet ll

Miscellaneous ~~ : ;

H. Rept. No. 1409 on H. R. 8046, 75th Cong., 1st Sess.<.. i

S. Rept. No. 1916 on H. R. 8046, 75th Cong., 1st Sess... 9

Throop on Public Officers (1892), See. 556.........05 = 2

Report of the Eighth Annual New York Herald Tribune

~ Forum on Current Problems..:....+..%. sg: 10

IN THE:

_SUPEME COURT OF THE UNITED STATES

OCTOBER TERM, ssee

ra

a

No. 796

Securit1eE8 AND EXxcHANGE COMMISSION,

Petitioner,

Vv.

on ee 7 |

. Untrep States REALTY anp

IMPROVEMENT. COMPANY.

BRIEF OF UNITED STATES REALTY AND IMPROVEMENT

COMPANY IN OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI.

P Opinions Below

The decision of the Circuit Court of Appeals was

handed down January 15, 1940 and was filed February 2,

1940. Itas reported at 108 I’, (2d) 794, and is also con-

tained/in the record (R. 420).

The District Court orders (R. 142, 149, 151) a

Which the appeals were taken to the Circuit Court of

' Appeals, were entered July 28, 1939 and are unreported.

These orders were in effect formal entries of the District

Court rulings expressed: orally in open court on July 27,

1939 (R. 336-339). -.

»

2

The Questions Seaicinil

It i is submitted that the sole issues presented are as

follows:

1. Must a District Court refuse to assume jurisdic-

tion over a proceeding for an arrangement? under Chapter

~ XI of the Bankruptcy Act, solely because the. debtor is a

corporation, which has securities outstanding in the hands

of the public? |

a

2, May the Sucesitine and -Exehange Commission be

permitted by the District Court to intervene in a Chapter

Xi . oe

_ Jrveipective of the answer to question 2, may the

heresies and Exchange Commission appeal from orders

“of the District Court denying the Commission’ S motion to

dismiss the proceeding?! | a

-Petitioner’s question 2 (Petition, p. 2) relating to the

irness, equitability and feasibility. of the proposed

arrangement is not properly in issue’ at this time, and was

not in issue in the Circuit Court of Appeals, inasmuch as

* that question can be raised on ‘appeal only after the Dis-.

trict Court has itself considered the niatter. The District

Court hus not yet confirmed or disaffirmed the arrange-

ment, which has now heen amended, and as amended meets

many of the Commission’s arguments with respect thereto.

The Statutes Involved

The questions ‘presented on this petition sath

primarily Chapters X and XI of the Bankrupte

(Sections 101-399; Title 11 U. S. C. Sees. 501-799). bes

tioner states (Petition, p. 3) that copies of Chapters X wnd

XI iat e beén filed in their entirety with the Clerk of this

. 1 The order of the District Court referring the proceeding toa.

referee, although tee hnieally appealed from, is not really in issue.

It seems clear that if the District Court properly assumed jurisdic-

tion of this Chapter XI proceeding, the\ order of reference was

proper. Section 331 of the acai Act.

®

oe

ry

s

Court, and the Debtor has taken the liberty of referring

to such statutes as-so filed. Citations of-sections of the

Bankruptey Act larein are, unless otherwise indicated,

under the numbering in the Act as adopted rather than

under the numbering in the, United States Code.

Statement of the Case.

This is a proceeding instituted bv. the Debtor on May

31, 1939 for an arrangement under Chapter XT of the

Bankruptey Act, which is now pending in the United

States District Court for the Southern District of New

+ York. The Debtor is a New Jersey corporation, engaged in |

the business of owning and. operating real estate, with

substantial assets and liabilities,- and with stock publicly.

held and listed « on the New York Stock Tne (R. 6, 7,

_ 134).

The factual background of the proceeding may * set |

- forth briefly as follows:

On June 1, 1919, the Debtor’s subsidiary, Trinity

Buildings Corporation of New York (hereinafter some-

times referred to as Trinity) executed and delivered to

Amaranty Trust Company of New York its bond in the :

amount of $7,000,000 maturing June 1, 1939, and as

security therefor »xecuted and delivered to said Trust.

Company as Mortgagee its first mortgage covering two

New York City officé buildings (R. 7, 30), ‘Share cer-

tificates in the bond and mortgage were issued by the.

Mortgagee, and the Debtor executed and delivered to the

Mortgagee its guarantee of the principal, interest and

sinking fund payments due under said bond and mort-

gage (R. 7). Although -the bond and mortgage were

secured, the guarantee was and is a wholly unseeured°

obligation. The share certificates were sold to the pub-

lic, and the principal amount thereof outstanding has been

reduced to $3,710,500 by oneration of the sinking fund (R. 7).

With the impending maturity of the aforesaid bond

and mortgage and guarantee, the Debtor’ proposed - to

hoiders of the share certificates a Modification Plan and

\ ain

wy

~ 4 °

‘posed’ an Amended Modification Plan and Arrangemen

dated May 1, 1939 (R. 9). |

On May 31, 1939 the ‘Debtor filed with the United

States District Court for the Southern District of New

York its petition for an arrangement under Chapter XI

of the Bankruptey Act (R. 6), and proposed as an arrange-

ment under Section 322-of Chapter XI the aforesaid

Amended Modification Plan and Arrangement dated ‘May —

1, 1939 {annexed to the Petition as Exhibit B, R., 30-63), |

The arrangement provided for:a modification and exten-

_sion of the Debtor’s above mentioned unsecured guarantee -

“of the bond and mortgage of Trinity maturing Jure 1, .

1939 and for the payment by the Debtor of all of its other

debts, secured and unsecured, as they matured (R. 8, 9).

Thus, the proposed arrangement affected only unse-

cured indelhtedness of the Debtor. | .

.The subsequent progress of the proceeding through

the decision of the court below, as ‘shown by the various

material orders and petitions, motions and other plead-

‘ings, is set - forth in the record, and a summary thereof is

contained in the record (Statement Under Rule 13, R. 1-5).

The proceeding is now pending before a Referee.

The’ Debtor has submitted and the Referee has has hear-

ings on, certain modifications of the proposed-arrangement,

which as modified has been held by the Referee to be fair

Aavemaniiiiel, dated March 15, 1939, 9, and subsequently. aa

and equitable and for the best interests of er reditors.2 -

2 The Debtor does not believe factual arguments made by the -

Commission are relevant; however, it is nec ostary to deny the re

peated references to a purported insolveye¥ of the Debtor, ciieneciie

both in the Commussion’s petition and Judge Clark’s opinion. This

is not the case as is clearly illustrated by the record. The Debtor.is

solvent and allegations to the contrary are based on taking inte

account the Debtor’s guarantee.as a liability without gonsidering

the value of the mortgaged property (the Trinity Buildings) as an

asset.

Theref ore all runes based onthe doctrine of Case v. Los

Ang@tes } Lumber Products Co. Ltd., 308 U.S. 106 (Nov. 6, 1989)

are irrelevant. Furthermore, it is: subnutted that the doctrine «of

that case does not apply to.a Chapter XI proceeding. *

Ps ; .

ae

v

ARGUMENT

Summary of Reasons Urged by Debtor for

Not Granting the Writ.

The substantive question of jurisdiction has been

“decided by the court below in accordance with the exact

und, clear language of the statute, and. the prege of:

statutory construction adopted ly the court below 4s in.

aceardanee with principles enunciated by this Court on.

“mAanyV o¢ei iSiGls.

The procedural questions of the Commission's right

io intervene and appeal which have beeti raisedsby peti-

tioner are academic, since petitioner has achieved its

“purpose of having the spbstantive jurisdictional ques-

tion considered on the merits both by the Distriet Court

and the Cireait Court of. Appeals.

I. UNDER THE EXPRESS TERMS OF THE STATUTE,

_ANY CORPORATION WHICH CAN BECOME A BANK-

RUPT MAY PROPOSE AN ARRANGEMENT UNDER ~

CHAPTER XI. —-

There is no ambiguity whatever in the jurisdictional -

requirements set forth in Chapter XI.

Section 806(3) defines a ‘debtor’? as any person who

could beeome a bankrupf, and Section 306(1) defines ati

“arrangement”? as a plaw of a debtor for the settlemet,

sitisfgetion or extension of the. time of payment of his

wien debts upon any terms. Section 1(23) provides

that “‘persons” shall inclade corporations, and Section 4

provides that any person except a municipal, railroad, |

insurance, or banking corporation or a building and loan

association may become a bankrupt. |

Sections 322 and 323 authori ize a debtor wishing to effect

‘un arrangement to file a petition setting forth the proposed

arrangement. The arrangemeiit must modify or- alter thé

“rights of ansecured creditors generally or of ‘some class

af them (Seéction 356).

That the Debtor is entitled, under Section 4 of the

| 6

Bankruptey Act, to become -a bankrupt, has not been,

questioned, and is. net open to argument. Accordingly,

petitioner. admits- that the statute, read ‘‘literally’’, per-

mitted the Debtor to proceed under Chapter XI (Peti-

‘tion, po). ae aes

‘As for the authorities, the decision below ‘is one of

first impression in the Cirenit Courts 6f Appeals. The

only square holding by a District Court other than in this .

proceeding was in aceord with the decision below. [in 1

Crydit Service, dne., 30 F.Supp. 878 (D. Ct. De Md. 1940).

Another District Court in a dictum expressed contrary

views, which might be said to: support the contention of

the ee In re Reo Motor Car C 0., 30 F. ik tl 78)

(D. Ct. %. D. Mich. —

A. Where a statute is clear and unambiguous, the

courts may not enlarge or modify its re: by

construction.

In the words of Mr. Justice Frankfurter in Palmer ve

_ Massachusetts, 308 U.S. 79 at p. 83: (November 6, 1939) :

+o* @

And‘so we have one of those problems.

in the reading of a statute wherein meaning is

sought to be derived nat fron. specifie languaze

but by fashioning a mosaic of significance out of

the innuendoes of disjointed bits of a statute. At

best this is subtle business, calling for great weri-

ness lest what professes to be mere rendering

hecomes creation atid. attempted interpretation «tf

legislation becomes legislation itself.’’

This Court has generally refused to depart from thé.

exact wording of an unambiguous statute. United States

Vv. Missourt Pacific Railroad Company, 278 U.S. 26"

(1929); Jselin v. United States, 270 U. S. 245 (1926):

Wallace v. Cutten, 298 U, S. 229 (1936). This has evel

been done in cases imposing a tax or a penal liability.

—Helrering v. City Bank Farmers:Trust Company, Trustee,

¢

hz

should be read otherwise than in accordance with its

literal terms.

4&

7

296.U. S. 85 (1935) ; Osaka Shosen Line v. U nited States,

300.0. S. 98, 101 (1937).

The Commission argues that, if* Chapter XI is not.

Cc

f

onstrued so as to exelude publicly owned corporations

rom acting they cunder, the publie protection safeguards

yf Chapter X will be ineffective and meaningless. How-

e

(

ver, this type of argument has heen rejected: by this

‘ourt where the statufe ‘‘expresses an intention reason-

ably intelligible and plain.’? Thompson. v. United States,

246 U.S. 547 (418). It is not for the courts through judi-

C

I

‘ial decision but for Congress threugh legislation to express

mblie poliey.

This Court, under the’ foregoina general principle, has

disregarded statements in Committee Reports when it

deemed the statute clearly contrary to such statements.

r

U. 8

c

vited States v. Shreveport Grain & Elevator Co., 287

7 (1932); Helvering v. City Bank Farmers Trust

ompany, Trustee, 296 U.S. 85 (1935). Of course, in the

instant case, as will’ be shown briefly hereafter, there is

no evidence of any Congressional intent that Chapter XI

-B. In any event, there is no evidence, either from the

historical derivation of Chapter XI, or in Commit-

tee Reports or proceedings, of any Congressional

interit to preclude corporations with publicly. held

securities from proceeding under Chapter XI.

é: The Historical Derivation of Chapter XI.

Chapter XI is deriv ed in part from former Section 12

of The Bankruptey Act, which was the old composition

-

porations. See cases eited under former Section 12 (11 °

+

section, Seetion 12, although unquestionably used prin-

OS)

eipally by individuals (and partnerships) was: available |

'» corporations, and in fact it was actually used: by cor-

WS. CLA, See.'30).

o

o

° 8 .

Furthermore, in at ‘least two of the corporate cases .- -

‘compositions were effected in respect of indebtedness

which was held by the public. Thus, ‘in In re Realty

Associates Securities: Corp, (citations. infra) a large cor-

poration. (total creditors’ claims of more than $12,000,000)

made a composition in respect ef bonded indebtedness which

was held by over 3,000 bondholders.” No- question was raised

‘as to the validity of the corporation’s acting under Scé.

tion 12, although problems arising’ in this composition

were. twice before the Cireuit Court of Appeals for the

Second C irenit and twice before the Supreme Court. Ji

re —, Associates Securities Corp., 69 F. (2d) 4!

(C. CY A-2d, 1984), cert. den, 292 U. S. 628 (1934). The

neh composition, was also -eensidered in 6 F. Supp.

549 which was modified in 74 F. (2d) 6 but confirmed i

295 ELS. 295 “pp ). See also In re O’Gara Coal Co.,

260° Fed. 742 (C. CL A-7th, 1919).

The’ aetivation of Chapter XI from Section 12 Lied

cates that Congress intended to make Chapter XT avail-

able to the same types of corporations which could for-

merly act under Section 12. Chapter XT is a proceeding

for a composition or settlement; Chapter X for a complete

reorganization, The Debtor’s proposed arrangement is 2

composition, and is strikingly similar ‘to that effected in

the Realty Associates @ase. “

‘The derivation of Chapter XI from former Section 12

also shoy's that an arrangement {vomposition) need not

disturb/ownership of the equity inferést (stock owne rship).

Section 12) compositions always contemplated that the

equyty interestseshould retain their position. .

f

/

2°

The iescicea Proceedings.

The question of limiting the application of ¢ hhapter XI

to small, closely held corporations does not appéar to

have been diseussed in thé entire legislative history of the

Chandler Act.

9g

The only statement in. the Committee Reports is that.

“on page 51 of the House Report®:

‘‘The inclusion of corporations (in Chapter XI)

will permit a large number of the smaller com-

panies such as are now seeking relief under Sec-

tion 77B but do not require the complex machinery

of that section, to resort: to the simpler and less

expensive, though fully adequate, ‘relief afforded —

by section 12.’’ -:(The Senate Report? refers gen-'

erally to the House Report, but does not otherwise

contain any statement whatever on the point.)

This quotation is revealing in showing (1) that the

_Committees had in mind primarily the fact of permitting |

small companies to’come ynder Chapter XI and not the

- matter of excluding other companies, and (2) that one of

the primary reasons for Chapter XI was to relieve the

burden of courts hearing unnecessary 77B (Chapter X)

proceedings. Such reasons are entirely compatible: with

permitting large, publicly. owned corpprations atso to take

tei: of the composition provisions of ,;Chapter XT.

_In fact, the Bankruptey Act expressly provides that.

Chapter X is not available to a debtor in cases where

Chapter XT is available. Section 130(7). os

In addition, whereas in Chapter X, careful standards

of size are set up for the application of certain provisions

thereof, no such standards appear in Chapter’ XI. It

would be impossible for the.courts to set up such standards

- without infringing on the legislative field of. Congr ess.

The Confmission participated actively in the prepara-

"tion of the 1938 amendments of the Bankruptcy, Act, con-

taining as new Chapters, both X and XJ; if ‘it had at the

time been intended that Chapter XI ‘be unavailable in the

instant type of situation, it would havebeen a simple matter,

with the necessary consent of Congress, to inelude such a

restriction in the statute. |

3H, - Rept. No. 1409 on H. R. 8046, 75th Cong.; Ist Session.

4S. Rept. No. 1916 0n H. R. 8046, 75th Cong., 1st Session.

10

\

c. There i is no public interest requiring om construction

of Chapter XI urged by petitioner.

For many ‘years, judicial supervision (in addition to —

‘the self-interest of the parties) was the sole regulatory

measure used in reorganizations and readjustments. An

arrangement under Chapter XI is essentially merely a

composition, rather than ‘a’ complete reorganizatiOn and

readjustment of inter ests in a corporation. There seems:

no ‘reason for thie courts to require more than judicia!

- supervision When C ongress required no more,

Il. THE SECURITIES. AND EXCHANGE COMMISSION

HAS NO RIGHT TO INTERVENE IN A PROCEEDING

UNDER CHAPTER XI, EVEN WITH THE PERMISSION

OF THE COURT.

The Commission has urged that it should have igi

permitted to intervene in the proceedings below, and that

the. order of the Cireuit Court of Appeals denying it the

right to do so was of such public importance that the

matter should be: reviewed by this Court.

For the. reasons pointed out on pages 12-14 of this

brief, this question seems of no present significauce.

Accordingly, the Debtor will confine its argument on this

point to a very brief statement. _—

A. The-Commission is a statutory body with limited

authority, and no statute authorizes the Commis-

sion to participate in a Chapter XI proceeding.

It is an established principle that governmental

agenciés eveated by statute have no ‘authority except such

‘ as is specifically granted them by statute.> Federal Trad:

Commission Vv. Raladam Co., 283 U. S. 643 (1931); Davis

.

5 Mr. Justice Douglas, when Chairman of the Securities and

Exchange Commission stated, ‘‘The administrative ageney has no

powers but the powers granted in the statute.’ (Address mace

October 26, 1938, printed in Report of the Eighth Annual New

York Herald Trihune Forum on Current Problems.)

; 11 e -°

v. Rochester Can Company, 220 A. D. 487 (1927), affirmed .

without discussion as Mellon v. Rochester. Can Company,

247 N. Y. 521 (1928); Throop on Public Opere (1892), .

Section 556.

Chapter XI makes no reference to the Commission,

although Chapter X specifically grants a limited authority

~ to the Commission. There is no other statute which

either directly or impliedly gives the Commission authority

to participate in a Chapter XI proceeding.

B. The Committee is not entitled to intervene either as

__— -of right or by permission within Rule 24 of the Fed-

eral Rules of Civil Procedure, and in any event

may not intervene to impeach a decree already °

made. ; .

We refer to the portion of the opinion of the court

below (R. 423-424) which deals with right of intervention, .

and submit that the Court was correct in its reasoning and

conclusion therein set forth. The cases cited by the Com-

mission involve either property interests or an express

statutory authority or no, intervention *at all.

/

lll. THE SECURITIES AND EXCHANGE COMMISSION

HAS NO STATUS TO APPEAL FROM THE ORDERS OF

_ THE DISTRICT COURT.

As in the intervention question raised by petitionér,

the Debtor believes that the question of appeal does not

warrant review by this Court on certiorari. The Debtor’s

very brief argument follows. ,

A. Chapter XI does not authorize ‘such an appeal and

Chapter X expressly denies it in an analogous

situation.

Section 208 of the Bankruptey Act (Chapter X)

expressly provides that the Commission shall have no

right of appeal from orders of the District Court. If the

Commission, which has affirmative functions to perform in

\

12

a hapter X X, cannot appeal from Chapter X orders, i, would

seem strange indeed to permit appeals. in. Chaptér XI :

where the Commission is not even mentioned. Further-

more, since the Commission may not, under Section 208,

appeal from an order denying a Chapter X petition on

_the ground that the remedy under Chapter XI is adequate,

why should it: be permitted to appeal from an original .

order approving the filing of and adequacy of a Chapter

XI petition? 6 |

B. The Commission is not a proper party to appeal .

within Sections 24 and 25 of the Bankruptcy ‘Act

or within general principles requiring appellant to

have an interest in the proceeding.

For its amplification of this argument Debtor merely

‘refers to Sections 316, 24 and 25 of the Bankruptey Act and,”

to the opinion of the ‘court below: (R. 425) that the Com-

mission’s ‘appeals ‘should be dismissed because the Com-

‘mission is not aggrieved by the orders appealed from; it

a

has no interest that is affected by the litigation.’’ If the

_ proceeding is valid the Commission concededly has ne.

interest therein; if invalid, the proceeding is a nullity.

iv. NO REASONS OF PUBLIC INTEREST REQUIRE

THIS COURT TQ REVIEW THE. ACTION OF THE COURT

BELOW. :

For the purpose of considering vieties this Court

should grant the petition for certiorari, the decision of the

Circuit Court of Appeals should be subdivided into (1) its: -

holdiny on the substantive question of whether the Dis-

trict Court could assume jurisdiction of a Chapter “XI

proceeding instituted by a corporation with publicly held

securities, and (2) its holdings on the procedural ‘questions

of inte rvention and appeal.

13

A. ‘The procedural questions. of intervention and

appeal are academic at this time, inasmuch as the

Commission has already achieved its purpose of , .

having .the substantive jurigdictional question con-

sidered on appeal. ;

It seems clear. that the ‘pal i the procedural:

points are not, in and of themselves, of sufficient public

importance and interest to warrant review orf certiorari.

The Commission’s motion for leave to intervene was

admittedly solely for the purpose of moving the court

(a) to dismiss the Debtor’s petition, (b) to deny confirma-

tion of the Debtofs arrangement, and (c) to dismiss the

proceeding (R. 133). The Commission made, a motion

(R-145) covering the matters set forth in its petition for

leave to intervene, and the court expressly considered the

matters and made its rulings thereon (R. 149). Accord-

ingiy, so far as the District Court was_ concerned, the

Commission completely achieved its purpése in interven-

ing, namely to~chaHenge jurisdiction. Furthermore, on

appeal, even though the Circuit Court dismissed the Com-

mission's appeals, it expressly considered and ruled upon

the substantive question of jurisdiction, The fact tliat the

Circuit Court reversed the District Court’s order grant-

“ing leave to intervene was immaterial, since in practical

result, all-purpose of irtervention, namely, to have an

authoritative ‘adjudication of the substantive issue, had

‘already been achieved. = ’ |

_ B. The ‘substantive question depends upon the con-

* struction of a statute admittedly unambiguous in

language, and the court below degided the question

in accordance with general principles of statutory

construction frequently approved by this Court.

. The substantive question involved, and the only ques-.

tow which, in the.opinion of the Debtor, could conceivably

justify review by this Court, is the question of whether .

‘the District Court should have denied the Debtor the remedy

‘14

of Chapter’ XI solely because its securities are held by

the public. - f

The Commission’ admits that the court below, in holding

‘that the District Court properly assumed jurisdiction of

the proceeding, read the statute with literal exactness (Peti-

tion, p.9). As shown above, the statute was not only unam-

biguous but reasonable. Unrider these circumstances, the -

court below, in re fusing. to follow the intricate reasoning of -

the Commission, which was not justified by either the word-

jng of the statute, or its historical derivation, or anyestate-

ments in the Committee Reports, was merely following the

authoyitative line of; decisions of this Court. Therefore, ..

. no review, by certiorari seems warranted.

Conclusion

No sufficient public interest has been shown to. war-

rant réview.of either the procedural or substantive ques-

tions considered below, and the -petition’ of certiorari

should be denied. . 3

Dated: New York, N. Y., Mareh a1, 1940.

Respectfully submitted,

f

Josten M. Hairrrenp,

Counsel for Respondéut.

Josern A. BENNETT,

Cartes W. Dippe.r,

Henry M. Marx,

of Counsel.

' \

e

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