# Petition for Writ of Certiorari — Industrial Commissioner v. Sword Line, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386417_2266%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1954 - **Citation:** 348 U.S. 830 ## Text JUL15 1954 Ocroser Term, 1953 No. 214 INDUSTRIAL COMMISSIONER OF THE STATE OF NEW YORK, Petitioner, vs. SWORD LINE, INC., Respondent. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECGND CIRCUIT NATHANIEL L. GOLDSTEIN, Attorney General of the State of New York; WENDELL P. BROWN, Solicitor General of the State of New York, Counsel for Petitioner, Office and Post Office Address, The Capitol, . Albany, New York. Francis R. Curran, Samus. Stern, Assistant Attorneys General, Of Cownsel. —— LT BATAVIA TIMES, LAW PRINTERS, BATAVIA, B. Y. => INDEX. Surzgect Inpex. PAGE Petition for writ of certiorari ......--++-++ssrererrs 1 Opinions below ....-----++eererrerresttes ttt 2 Jurisdiction .......ceccscceeccecsecccecceeeses 2 Questions presented ......--+++++erereerrertee 2 Statutes involved .......---eeeeeeeeereeererens 2 Statement .......-ceceeereesceeeereeeeceserers 3 Reasons relied upon for allowance of the writ....c6 4 Conclusion .......ecsccccvccceccesccerceansces 17 Appendix ......-seeeserecesececersececceseess 18 TasLe or Cases COILED. Abelove, Matter of, 138 Mise. 241 (1930) ........---- 13 Abramson, In re (C. A. Qnd, 1914, 210 Fed. 878 ..... 13 American Iron Co. v. Seaboard Airline, 233 U. 8S. 261 (IDEA): os nin sn audnccscewasssanehopeneyses ene ces? Baker v. Atchison T. & S. F. Ry. Co. (C. A. 10th, 1939), 106 F. 2d 525, cert. den. 308 U. S. GRD: csidiivicccece 13, 14 City of New York v. Saper, 336 U. S. 328 (1949) .5, 6, 7, 8,9 Coder v. Arts, 213 U. S. 223 (1909) ......eeeeeeeees 8 Cover v. Schwartz (C. A. 2nd, 1942), 133 F.2d 541.... 16 Francisco, In re (D. C., N. D. N. Y., 1917), 245 Fed. 216 13 Johnson v. Norris (C. A. 5th, 1911), 190 Fed. 459, ap- peal dism’d 232 U. S§. 715, cert. den. 232 U. S. 723 .7, 8,9 Littleton v. Kincaid (C. A. 4th, 1950), 179 F. 2d 848, cert. den. 340 U. S. 809 ......-eeeeeceserecrercess 8, 9 Local Loan Co. Hunt, 292 U. S. 234 (1934) ......-- 13, 14 Macomb Trailer Coach, In re (C. A. 6th, 1953), 200 F. Qd 611, cert. den. 345 U. S. 958 ....-+--seeeseeeeees Meinhard, Greeff & Co. Inc. v. Brown (C. A. 4th, 1952), Oe Be eo, cic d.encncsc0 enced tats Ceeee mee enee II. PAGE Paley, Matter of, (Ritholtz), 260 App. Div. 632 (1940), aff’d 285 N. Y. 641 (1941) .......-- secre eee eeeee Pavone Textile Corp., Matter of, (Bloom), 302 N. Y. DOG (1951) ...... cece cece cece crete ert ceseceteees People of the State of New York v. J. G. Menihan Corp., 201 Mise. 1037 (1952), aff’d 281 App. Div. 805 (1953), aff’d 306 N. Y. 792 (1954) .....------- 13 Saper v. City of New York (C. A. 2nd, 1948), 168 F. OE MR packdcacdscdsddevedies cl irevieries y Sexton v. Dreyfus, 219 U. 8. 339 (1911) ......------ 8 United States v. Alaska S. S. Co., 253 U. S. 113 (1920) 16 United States v. Bloom, 342 U. 8. 912 (1952) aff’g Mat- ter of Pavone Textile Corp. (Bloom), 302 ee BOG (IGGL)... 2c e cee cee teen cece teense cece: 7 United States v. General Engineering & Manufactur- turing Oo. (C. A. 8th, 1951), 188 F. 2d 80, aff’d 342 U. S. 912 (1952) ... 0... ee ee eee eee e neces 3, 7, 8, 9, 16 Vanston Committee v. Green, 329 U. S. 156 (1946) .... 8 Walling v. Shenandoah-Dives Mining Co. (C. A. 10th, 1943), 134 F. 2d 395 .......-- cece eee eee ee ee eens 16 Weber, Matter of, 212 N. Y. 290 (1994) 2. cies scceeee 13 York Silk Mfg. Co., In re (D. C., M. D. Pa., 1911), 188 Fed. 735, aff’d 192 Fed. 81 (C. A. 3rd, 1911), appeal dism’d 232 U. S. 718 (1913), cert. den. 232 U. S. 724 (1913) 2... neva cence ences rsencceeeseesereecece 13 TasBLe or Statutes CIrep. Unrrep States Bankruptcy Act Section 2(a) (15) (11 U.S. C. 11(a) (15)) ...--. 5, 18 Section lla (11 U. S. C. 29a) ....-.-----+++---- 5, 18 Section 17 (1) (11 U.S. C. 35 (1)) ..--.------- 7, 9,18 Section 226 (11 U. S. C. 626) .......---- +e ee ees 11 Section 228 (11 U.S. C. 628) .......---- ee eee ees 11 Sections 301 et seg. (11 U.S. C. 701 et seg.) ....-- 3 United States Code, Title 28 (Judiciary Code and Judiciary) Section 1254, subd. (1) .........-- +e eee ee ee eee 2 Section 1341 ...... iccweirea sewers’ gale deen aoe 14, 19 TIL. PAGE New York State Debtor and Creditor Law (Chapter 12 of the Con- solidated Laws of New York) Section 150 ..........cceeececceeeeeeenerceees 7,15 Labor Law (Chapter 31 of the Consolidated Laws of New York) Section 570, subd. 3 .....-.seeeeeeeeeeeeeeeees 9,19 Section 570, subd. 5 ........seeeeeeeeeeeeeeees 15, 20 Section 573, subd. 2 .......eeeeeeeeeeeeeees 3, 15, 16 Section 620 ......-cceeeeecceccceeeseceneceees 15, 20 Section G21 ......0-.eceeecceerceccesercreces 15, 21 Section 624 .....cccecececcccerceescereeseees 15, 22 MisceLLANgous Marrer Crrep. Collier on Bankruptcy, 14th ed. 9 ee TIE si icie cc nsrne ns cenestnccesseshsenetes 14 v. 3, pgs. 296, 1819, 1820 ......--seeeeeeeeeeres 13 United States Constitution Art. III, Section 2 .......-.eseeeeeeeeeseeeees 16 Supreme Court of the United States Ocroser Term, 1953 No. In the Matter of Sworp Lixg, Inc., Debtor, InpusTRIAL CoMMISSIONER OF THE State or New York, Petitioner, vs. Sworp Liyzg, Inc., Respondent. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT The Attorney General of the State of New York, on behalf of the Industrial Commissioner of the State of New York, prays that a writ of certiorari issue to review the judgment of the United States Court of Appeals for the Second Circuit, entered in this case on April 27, 1954. The judgment reversed the order of the District Court and remanded the cause to that tribunal (R. 37-38). 2 Opinions Below The referee in bankruptcy did not render a written opin- ion. He did, however, sign findings of fact and conclusions of law (R. 3-8, 10, 19). The opinion of the District Court (R. 9-14) and the majority and dissenting opinions of the Court of Appeals (R. 17-37) were not reported officially at the time of the preparation of this petition. Jurisdiction The jurisdiction of this Court to review the judgment of the Court of Appeals, which was entered on April 27, 1954 (R. 37-38), is invoked under the provisions of 28 U. S. C. § 1254, subd. (1). Questions Presented 1) Whether, under the facts and circumstances of this case, the Court of Appeals was correct in its ruling that it had jurisdiction to determine the liability of the debtor for post-arrangement interest after the confirmation of the arrangement and close of the proceeding. 2) Whether the Court of Appeals erred on the law in concluding that such interest did not arise during the course of the arrangement proceeding and that the debtor will not be liable therefor after the confirmation of the arrange- ment and close of the proceeding. Statutes Involved The pertinent statutory provisions are printed in the Appendix, infra., pp. 18-22. 3 Statement A petition for an arrangement under Chapter XI of the Bankruptcy Act, Sections 301 et seg. (11 U. S. C. Section 701 et seq.), was filed by the debtor and approved on July 30, 1948 (R. 3, 9, 18). On the same day, the District Court entered an order enjoining and staying until final decree all persons from the commencement of any suit against the debtor (R. 4, 9, 18). On July 24, 1950, petitioner filed a claim for New York State unemployment insurance taxes and by reason of the inclusion therein of interest beyond the date of the filing of the petition, the debtor interposed an objection thereto (R. 5, 9, 18). A hearing on the objection was thereafter adjourned from time to time pending a decision by this Court in United States v. General Engineering & Manufac- turing Co. (1952), 342 U. S. 912 (R. 5, 6, 18), and upon the rendition of that decision and in conformity therewith, petitioner filed an amended claim, which included interest only up to the date of the filing of the petition (R. 6, 10, 18). This claim was allowed by the referee in bankruptcy on July 2, 1952 (R. 6, 10, 18), the same day on which he determined the debtor would not be liable in any other forum, after the close of the proceeding, for interest “aceruing’’ (R. 8) after the date of the petition (R. 7, 8, 19). On June 4, 1952, before the allowance and payment of the amended claim and without leave of the bankruptcy court, petitioner filed in the Office of the Clerk of the Coun- ty of New York, pursuant to Section 573, subdivision 2, of the New York State Labor Law, a warrant which included post-arrangement interest (R. 6, 10, 18). The debtor there- upon moved before the referee for (1) an order expunging 4+ the warrant from the judgment docket, (2) a permanent injunction against any proceeding by petitioner to collect post-arrangement interest outside the bankruptcy court, and (3) a determination of the question whether or not interest arose on the claim of petitioner after the date of the filing of the petition (R. 19). Following rulings that petitioner voluntarily submitted himself to the jurisdic- tion of the bankruptcy court; that he had knowledge of the proceedings with respect to the determination of the debt- or’s liability; and that he had knowledge of and was bound by the Court’s stay against the institution of any other proceeding, the referee held that petitioner was not em- powered to issue, file or levy execution under the warrant or resort to any other summary process to collect such in- terest in any proceeding other than before the bankruptcy court (R. 7, 10). In the interim, between the date of this determination by the referee and the petition for review of the order based thereon, the plan of arrangement was confirmed and the amended claim, which excluded post-interest, was paid in full (R. 2, 10, 18). On review of the referee’s order, petitioner offered no objection to that part of the order which temporarily re- strained him from levying execution under the warrant until the entry of a final decree. The issues before the Dis- trict Court were limited to the jurisdiction of the referee to permanently enjoin the collection of post-arrangement interest or to determine the debtor’s liability therefor, the survivability of .post-arrangement interest, the alleged vio- lation of the stay order by the filing of the warrant, and the jurisdiction of the referee to direct the vacation of 4 warrant docketed in another court (R. 10, 11). 5 On March 13, 1953, the District Court rendered an opin- ion vacating the permanent injunction, but continuing it temporarily until the entry of a final decree (R. 14, 19). The District Court reasoned that since 411 (a) of the Bankruptcy Act (11 U. S. C. 29a) was limited to suits pend- ing against a bankrupt at the time of the filing of a peti- tion on dischargeable claims, and then only until discharge, the permanent injunction could not be sustained thereunder. Although ruling that the threatened interference with the bankruptcy court’s possession, custody or orderly admin- istration of the bankruptcy estate, warranted the issuance of a temporary injunction under 4 2a (15) of the Act (11 U.S. C. 11a (15)), the court stated that even after a final decree or order of discharge has been entered (which was not the case here), a bankruptcy court should not act to determine whether a specific claim has been discharged; that such decision should be reserved to the court where the claim is sought to be enforced; that the filing of ihe claim was a submission only of the question whether inter- est therein included should be allowed, and not a submission of whether interest should be discharged; and that since there was no statutory authority for the referee’s deter- mination of the bankrupt’s liability subsequent to the clos- ing of the estate, he was not empowered to permanently enjoin the collection thereof. The District Court also directed that the order of the referee was not to be con- strued as an adjudication that the claim was invalid or that it had been paid; it upheld the authority of the referee to direct a vacation of the warrant; and it determined, on the reasoning that City of New York v. Saper (1949), 336 U. S. 328, was inapplicable, that the interest would never- theless survive the proceeding (R. 11-14). On March 26, 1953, the District Court entered an order on the opinion (R. 15) and the debtor thereupon appealed 6 from those portions of the order which vacated the per- manent injunction and directed that the order of the referee was not to be construed as an adjudication that the claim for post-arrangement interest was either invalid or that it had been paid (R. 3). Petitioner thereafter complied with that portion of the order which directed that the warrant be expunged from the judgment docket (R. 19). On April 27, 1953, the United States Court of Appeals for the Second Circuit, by Charles E. Clark, Circuit Judge, rendered an opinion reversing the order of the lower court and remanding the case to that tribunal for further pro- ceedings (R. 18-27). The court upheld the permanent in- junction mainly upon the authority of the Saper case and in so ruling, held that the interest in issue was not merely suspended during the pendency of the proceeding and that it could not be collected from the debtor after confirmation (R. 23-25). Cireuit Judge Jerome N. Frank filed an opin- ion in which he dissented from the majority view of the court (R. 27-37). The Court of Appeals ruled that injunctive relief was not premature despite the fact that the District Court had refrained from making a final adjudication and petitioner had not appealed from the order expunging the warrant from the judgment docket (R. 20). The Court determined it was empowered to grant the relief because the direct holding of the referee, which would have settled the ques- tion, was expunged; there was an absence of adequate pro- tection for the plan of arrangement; there was a direct threat of steps to collect; and the plan of arrangement, recognizing the insolvency of the bankrupt, had since been confirmed and payments had been made to carry it out (R. 20). 7 Circuit Judge Jerome N. Frank, in the dissenting opin- ion, stated that no court had theretofore considered the question of whether confirmation of a Chapter XI pro- ceeding discharged post-interest (R. 28). He analyzed the authorities, particularly the Saper case, and concluded that interest was merely suspended; that by reason of insol- vency, it was not allowable; and since it was not allowable, it came within the exception to the discharge provisions of Section 17 of the Bankruptcy Act (11 U.S. C. 35) (R. 31, 34, 35). Penalties are not in issue, objection to the same having been withdrawn by respondent before the Court of Appeals. Reasons Relied Upon for Allowance of the Writ The following are respectfully submitted by your peti- tioner and relied upon as reasons for the granting of the writ: a) The United States Court of Appeals for the Second Cireuit has held that post-arrangement interest did not arise during the course of the proceeding and that the debtor will not be liable therefor upon the termination thereof. This ruling is in conflict with applicable decisions of this Court, particularly City of New York v. Saper (1949), 336 U. S. 328, which merely held that bankrupt estates cannot be directly used to pay post-bankruptcy interest on claims for unpaid taxes; United States v. Gen- eral Engineering & Manufacturing Co. (1952), 342 U. S. 912, which extended the rule to Chapter XI proceedings ; United States v. Bloom (1952), 342 U. S. 912, which ex- tended the rule to general assignment proceedings under the New York State Debtor and Creditor Law; Johnson ~. Norris (C. A. 5th, 1911), 190 Fed. 459, appeal dism’d. 8 Norris v. Johnson, 232 U. 8. 715, cert. den. 232 U. S. 723, Am. Iron Co. v. Seaboard Airline (1914), 233 U. S. 261, and Littleton v. Kincaid (C. A. 4th, 1950), 179 F. 2d 848, cert. den. 340 U. S. 809, which held that claims do not lose their interest bearing qualities when funds are in custodia legis: Seaton v. Dreyfus (1911), 219 U. S. 339, which held that if securities held by a creditor produce interest or divi- dends during bankruptcy, such amounts should be applied to post-bankruptcy interest; Macomb Trailer Coach, In re (C. A. 6th, 1953), 200 F. 2d 611, cert. den. 345 U. S. 958, Vanston Committee v. Green (1946), 329 U. S. 156, and Coder v. Arts (1909), 213 U. S. 223, which held that if a secured claim is worth more than the sum of principal and interest due, the ereditor, under those circumstances, is also entitled to payment of post-bankruptcy interest. Taxing authorities throughout the country are affected by the ruling and substantial sums of money are at stake. The issue is not free from doubt and public interest re- quires that this important and fundamental question of law be reexamined. As a matter of fact, Cireuit Judge Jerome N. Frank, in his dissenting opinion, stated (R. 27- 28): ‘‘J1, The cases cited by my colleagues (which I shall discuss later) have decided only that post-petition in- terest on a tax claim is not allowable unless a debtor becomes solvent during the bankruptcy proceeding. A different question is before us here, viz. whether con- firmation of a Chapter XI arrangement discharges such interest, if it has not been allowed (i. e. when the debt- or has not thus become solvent). No court has hereto- fore considered this question.”’ (Italics for empha- sis. ) No language in the Saper or General Engineering cases outlaws post-petition interest for all time. Mere disallow- ance in the particular proceeding is all that was intended. 9 While the possibility of making interest on tax claims dischargeable by judicial construction is not referred to in the opinion of this Court in the Saper case, the same Court of Appeals in considering the argument that interest on tax claims survives against a bankrupt even after pay- ment of the tax claims themselves, stated the following (Saper v. City of New York (C. A. 2nd, 1948), 168 F. 2d 268, 271-272) : «* © © But assuming arguendo that interest is not discharged upon payment of the tax claim, we do not see how that fact can be decisive on the present issue. * * * The fact that the bankrupt may not have re- ceived an immunity he might desire is not ground for upsetting the statutory scheme of distribution of the estate in the hands of the trustee * * *”’ The bankruptcy rule merely suspends or postpones the accrual of interest during bankruptcy, but claims do not lose their interest bearing qualities. It s merely a rule of convenience and equity in distribution during a particular insolvency proceeding. In the absence of a controlling provision in the Bank- ruptey Act, the general law should control (Johmson v. Norris, supra) and where interest on New York State unem- ployment insurance taxes is concerned, there is more than the general law to indicate payment should be made. Such interest is as much a part of the tax as the tax itself (Labor Law, Section 570, subd. 3; Matter of Pavone Textile Corp. (Bloom), 302 N. Y. 206) and since it is disallowable under the Saper and General Engineering cases, it is non-dis- chargeable under § 17, subdivision 1, of the Bankruptcy Act (11 U. S. C. 35 (1)). In Littleton v. Kincaid, supra, after citing the Saper case for the proposition that ordinarily interest on claims against a bankrupt estate runs to the filing of the petition 10 in bankruptcy, the court made it clear that the interest was merely suspended (pp. 852-853) : ‘«* * * Three reasons are usually given for its exist- ance: (a) The delay in payment is not the act of the debtor but is an act of law for the mutual benefit of the creditors. (b) In the case of claims bearing different rates of interest, it would be inequitable to permit the running of interest to increase the proportion of the assets to which some of the creditors are entitled at the expense of the other creditors while the estate is in the process of administration. (c) If all claims bear the same rate of interest, the addition of interest would not change the proportion of assets to which each would be entitled, and the computation may therefore be omit- ted as a useless act * * *.’’ ««* * * But the reason for the stoppage of interest on funds in custodia legis is not because the claims lose their interest bearing quality, but because of the in- equality which would otherwise result in the forced distribution in receivership to debts carrying different rates of interest. * * *”’ The Court of Appeals in the instant case has inferentially held that post-petition interest did not even arise during the pendency of the proceeding. This is in conflict with the opinion of the Court of Appeals for the Fourth Circuit in Mewnhard, Greeff é Co. Inc. v. Brown (1952), 199 F. 2d 70, which involved the issue of whether a claimant, whose proof of claim had been allowed in a stated amount, without post reorganization interest, could thereafter and in the same proceeding assert against a pledged bond, in accordance with contract, a claim for post-petition interest. The Court stated (p. 74): ‘«* * * We do not think, however, that claimant is precluded from asserting against the pledged bond any claim for interest accruing subsequent to the filing of the bankruptcy proceedings or the expense incurred subsequent to the filing of the claim in protecting the collateral securing the claim. The allowance of a claim 11 in bankruptcy operates ordinarily to estop the claimant as to all matters which were or should have been in- cluded in the claim, but not as to matters which could not have been included. Collier on Bankrutcy (14 ed.) vol. 3, p. 193; Remington on Bankruptcy (4 ed.) vol. 5 pp. 462, 463; United States v. American Surety Co., 2 Cir. 56 F. 2d 734, 736; Lesser v. Gray, 236 U. 8. 70, 35 8S. Ct. 227, 59 L. Ed. 471. So far as the interest here involved is concerned, interest subsequent to the filing of the petition was not provable as a part of the claim in the bankruptey proceeding. Collier on Bankruptcy (14 ed.) vol. 3, p. 1835; City of New York v. Saper, 336 U. S. 328, 331, 69 S. Ct. 554, 93 L. Ed. 710; United States v. Edens, 4 Cir.; 189 F. 2d 876. Expenses in- curred subsequent to filing of the claim were manifest- ly not includable within the claim and adjudication of the claim should not estop claimant from asserting them. * #@ #9) The State submits that Judge Jerome N. Frank was correct, in his dissenting opinion, when he stated that State of New York v. Femberg (C. A. 2nd, 1953), 204 F. 2d 502, did not involve the question confronting us here. Petition- er, who was the appellant in that proceeding and is fully familiar with what transpired in that case, reiterates that interest accruing during the pendency of that reorganiza- tion proceeding was disavowed because of the provisions of Sections 226 and 228 of the Bankruptcy Act (11 U. S. C. 626 and 628). This is borne out by the opinion of the court which said no more than ‘‘that the rate of interest on new securities under a Chapter X plan need not vary accord- ing to the varying interest rates to which the several credi- tors had been entitled before bankruptey’’ (R. 37). b) The decision of the Court of Appeals is also in direct conflict with New York State court decisions on the same issue of liability of the debtor for interest. 12 In Matter of Paley (Ritholtz), 285 N. Y. 641, aff’g. 260 App. Div. 632, the New York Court of Appeals held that a discharge in bankruptcy does not affect a debt or part of a debt that is not provable, such as after-accruimg interest. The debtor in that case argued that the discharge in bankruptcy extinguished the debt owing by the bankrupt and consequently the interest thereon, and rendered in- operative against the bankrupt the post-petition interest included in the judgment. The creditor contended that since interest had accrued subsequent to the petition, those items were not provable debts and consequently not affected by the discharge which, by the very terms of the statute and the order of discharge, was limited to provable debts. Since the New York Court of Appeals affirmed the case without opinion, we quote from the Appellate Division opinion (p. 635): ‘Among debts provable under the Bankruptcy Act, Section 63, subdivision a, clause (1) (11 U. S. Code § 103, subd. a, cl. (1) is any fixed liability evidenced by a note or any instrument in writing ‘absolutely owing at the time of the filing of the petition * * * whether then payable or not, with any interest thereon which would have been recoverable at that date.’ The item of interest here involved was not due, payable or recoverable at that date; it accrued after that date, i, e., between the date of the petition and the judgment which antedated the discharge. When it accrued, the principal debt had not at that time been discharged; and although the discharge related back to the date of filing the petition, it affected only provable debts. The item of interest in question being ‘interest accrued after the filing of the petition’ is expressly excluded from provable debts under the provisions of Section 63, subdivision a, clause (5). Accordingly it was not discharged.’’ 13 c) The decision of the Court of Appeals is also in con- flict with federal and state court decisions on a similar issue, the survivability of penalties after bankruptcy. The law is settled in both jurisdictions that penalties survive bankruptcies, including arrangements. Federal decisions to the foregoing effect are Abramson, In re (C. A. 2nd, 1914), 210 Fed. 878; York Silk Mfg. Co., In re (D. C., M. D., Pa., 1911), 188 Fed. 735; aff’d 192 Fed. 81 (C. A. 3rd, 1911), appeal dism’d 232 U. S. 718 (1913), cert. den. 232 U. S. 724 (1913); Francisco, In re (D. C., N. D. N. Y., 1917), 245 Fed. 216. State court decisions are also indicative of the same result (People of the State of New York v. J. G. Menihan Corp., 201 Misc. 1037, aff’d. 281 App. Div. 805, aff’d. 306 N. Y. 792; Matter of Weber, 212 N. Y. 290; Matter of Abe- love, 138 Mise. 241). See also Collier on Bankruptcy, 14th ed., Vol. 3, pp. 296 1819 and 1820. , d) The ruling of the Court of Appeals that injunctive relief against the State of New York was not at that stage premature, based as it was upon clearly erroneous findings of fact and conclusions of law, is in conflict with applicable decisions of this Court, particularly Local Loan Co. v. Hunt (1934), 292 U. S. 234 and Baker v. Atchison T. & 8. F. Ry. Co. (C. A. 10th, 1939), cert. den. 308 U. S. 620. The Hunt case, supra, held there is a lack of general pow- er in a bankruptcy court to determine the dischargeability of claims, that ancillary jurisdiction in that respect can be taken only after discharge, and that it must be attended by unusual and compelling circumstances or an inadequacy of protection of a debtor in a non-bankruptcy tribunal. 14 It is clear that the ancillary jurisdiction envisioned in the Hunt case is strictly limited to instances of insufficient remedy invoking a right to equitable relief; it does not ex- tend to or contemplate a general jurisdiction in the bank- ruptey court to determine upon application the discharge- ability of claims or to enjoin the enforcement of claims in other courts regardless of the pankrupt’s remedy (Collier on Bankruptcy, 14th ed.; Vol. 1, p. 291). Aside from the fact the referee exercised ancillary juris- diction before confirmation and discharge of certain debts, so that the advantages of discharge could not have been lost, the record is bare of any evidence entitling the debtor to come within the doctrine established in the Hunt case, or any of the other cases which adhere to the same limitation. The Atchison case, supra, emphasized the established principle that federal courts should exercise an appropriate reluctance to interfere with the fiscal affairs of a state. This is also evident by the provisions of 28 U. S. C. § 1341, which provides as follows: ‘The district courts shall not enjoin suspend or re- strain the assessment, levy or collection of any tax under State law where a plain, speedy or efficient remedy may be had in the courts of such State.’’ The Court of Appeals ruled that even though the District Court refrained from a final adjudication and petitioner did not appeal from the order expunging the warrant from the state judgment docket, it still had jurisdiction to decide the issue of the liablity of the debtor for the interest (R. 20). None of the reasons ascribed by the court justified a deter- mination of that issue. The State of New York was al- ready restrained by a temporary injunction and there was no direct threat of steps to collect; the expunging of the direct holding by the referee, which would have settled 15 the question, did not foreclose the debtor from its remedy in the state courts after the close of the proceeding; the plan of arrangement was still adequately protected by the temporary injunction; and although the plan of arrange- ment recognizing the insolvency of the bankrupt had then been confirmed and payments made to carry it out, such was not the situation when the issue arose before the ref- eree in bankruptcy. The debtor is not peculiarly handicapped in asserting in a non-bankruptcy forum its defense of discharge of the post- arrangement interest. The debtor may pay those items under protest and request a refund (Labor Law, Section 570, subd. 5). If that is denied, the debtor may request a hearing before an unemployment insurance referee, with appeals thereafter to the Appeal Board of the New York State Department of Labor, the Appellate Division of the Supreme Court, Third Department, and in a proper case, to the New York Court of Appeals (Labor Law, Sections 620, 621 and 624). These statutes meet the test of due process. If a warrant be docketed as a judgment (Labor Law, Sec- tion 573, subd. 2), the debtor would have an adequate remedy by an application for discharge under the provi- sions of Section 150 of the New York State Debtor and Creditor Law. e) The Court of Appeals in exercising ancillary juris- diction has decided an important question of federal bank- ruptey law, which has not, but should be, settled by this Court. In upholding the permanent injunction, the Court of Appeals has in effect ruled that the filing of the amended claim, without post-interest, and the filing of the warrant, including such interest, but outside the bankruptcy court, constituted a submission of the question whether the debtor 16 would be liable for post-interest after the close of the pro- ceeding. The amended claim, which excluded post-arrangement in- terest and superseded a previous claim, was filed on April 18, 1952. Commencing on that date, and on July 2, 1952, the date of the referee’s adverse ruling, the issue of its al- lowance was no longer before the referee. Respondent’s objection was only directed to the previously filed claim, which included the interest pending a determination by the United States Supreme Court in United States v. General Engineering & Manufacturing Co. (1952), 342 U. S. 912. Upon the filing of the amended claim, the issue of the al- lowance of the interest, as well as its dischargeability, be- came academic. Under federal law, the referee was not em- powered to act thereon (U. S. Constitution, Art. IIT, § 2; United States v. Alaska S. 8. Co. (1920), 253 U. S. 113; Walling v. Shenandoah-Dives Mining Co. (C. A. 10th, 1943), 134 F. 2d 395; Cover v. Schwartz (C. A. 2nd, 1942), 133 F. 2d 541). There was no real controversy before the Court. The previously filed claims which for all intents and pur- poses was no longer in existence on July 2, 1952, may not be deemed to have been a submission to the bankruptcy court of the liability of the debtor for post-interest after the close of the proceeding. The District Court was correct in its ruling that the filing only brought forth the issue of whether the interest was allowable in the proceed- ing (R. 14). Neither did the filing of the warrant constitute a submis- sion of the question to the court. The warrant, which was docketed against the debtor before confirmation, pursuant to statute, namely, Section 573, subd. 2, of the New York a ae a re ae, ee 17 State Unemployment Insurance Law (Article 18 of the Labor Law), did not constitute a claim in the proceeding and the only issue created by such filing was whether it violated the stay order or interfered with the orderly ad- ministration of the estate in bankruptcy. The limitation of the debtor’s remedy was an application for a temporary injunction. ; Conclusion For the foregoing reasons, the petition for a writ of certiorari should be granted. Respectfully submitted, NATHANIEL L. GOLDSTEIN, Attorney General of the State of New York, Wenvett P. Brown, Solicitor General of the State of New York, Attorney for Petitioner. June 17, 1954. Francis R. Cunray, Samus. STERN, Assistant Attorneys General, Of Counsel. 18 APPENDIX Bankruptcy Act (United States Code, Title 11): ‘2. Creation of Courts of Bankruptcy and Their Jurisdiction. a. The courts of the United States hereinbefore defined as courts of bankruptcy are here- by created courts of bankruptcy and are hereby in- vested, within their respective territorial limits as now established or as they may be hereafter changed, with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in proceedings under this Act, in vacation, in chambers, and during their respective terms, as they are now or may be here- after held, to— ‘*(15) Make such orders, issue such process, and en- ter such judgments, in addition to those specifically provided for, as may be necessary for the enforcement of the provisions of this Act: * * * 2 * @>> ‘$11. Suits By and Against Bankrupts. a. A suit which is founded upon a claim from which a discharge would be a release, and which is pending against a person at the time of the filing of a petition by or against him, shall be stayed until an adjudication or the dismissal of the petition; if such person is ad- judged a bankrupt, such action may be further stayed until the question of his discharge is determined by the court after a hearing, or by the bankrupt’s filing a waiver of, or having lost, his right to a dischar, or, in the case of a corporation, by its failure to file an application for a discharge within the time pre- scribed under this Act: * * *’’ “$17. Debts Not Affected by a Discharge. a. A discharge in bankruptcy shall release a bankrupt from all of his provable debts, whether allowable in full or in part, except such as (1) are due as a tax levied by * ¢ @ any State* * *,” “*§ 314. The court may, in addition to the relief provided by section 11 of this Act and elsewhere under 19 this chapter, enjoin or stay until final decree the com- mencement or continuation of suits other than suits to enforce liens upon the property of a debtor, and may, upon notice and for cause shown, enjoin or stay until final decree any act or the commencement or con- tinuation of any proceeding to enforce any lien upon the property of a debtor.’’ (italics for emphasis) ‘*§ 371. The confirmation of an arrangement shall discharge a debtor from all his unsecured debts and liabilities provided for by the arrangement, except as provided in the arrangement or the order confirming the arrangement, but excluding such debts as, under section 17 of this Act, are not dischargeable.”’ (italics for emphasis) ‘*§ 372. Upon the consummation of a proceeding under this chapter after confirmation of an arrange- ment, the court shall enter a final decree dischargin the receiver or trustee, if any; closing the estate; an | making such provisions, by way of injunction or other- wise, as may be equitable.’’ United States Code : Title 28 **§ 1341. Taxes by States. The district courts shall not enjoin, suspend or re- strain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.’’ **§ 2283. Stay of State Court proceedings. A court of the United States may not grant an in- junction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.’’ New York State Labor Law ‘*§570. Payment of contributions. 3. Default. An employer who fails to pay contribu- tions required to be made by him to the fund shall pay 20 interest :.t the rate of three-fourths of one percentum contribu of the amount of such contributions for each month he missions is in default. Such interest shall be assessed, collected apply te and paid as part of the payment required to be made days af by the employer to the fumd.’’ (Italics for emphasis.) such de’ * * * 3. D “«5, Refunds and credits. If any employer shall for sha make application for a refund of any contribution, decision interest, or penalty paid by him or for a credit thereof Written and the commissioner shall determine that such con- reasons tribution, interest or penalty, or any portion thereof ant or e was erroneously collected, the commissioner shall re- affected fund said amount or allow a eredit therefor, without «6 62 interest, as specified in this subdivision, unless the employer shall have already deducted said amount by way of credit:against moneys payable by him into the fund. No refund or credit shall be allowed unless an in twen application therefor shall be made on or before which- of notic ever of the following dates shall be the later: (a) one determi year from the date on which such payment was made; the emy or (b) three years from the last day of the first month provide following the end of that calendar quarter during of appe which the remuneration was paid which formed the may lik basis for contributions, interest or penalty claimed to board b have been erroneously collected. For a like cause and regardl within the same period a refund may be so made or peared a credit allowed on the initiative of the commissioner. referee. Any credit or refund of interest and penalties erron- 3° C eously collected, allowed by the commissioner under car the foregoing conditions, shall be a charge against the a ne special fund. Any credit or refund of deposits for this art hearings and appeals, and of contributions erroneously baibbent collected, allowed by the commissioner under the fore- discret going conditions, shall be a charge against the un- or rém employment insurance fund. rm vd * @ 99 and sl : ‘whethe ‘$620. Referee’s hearings. at the | ee affectec 2. Contested determinations, rules or orders. Any hearing employer who claims to be aggrieved by the industrial reverse commissioner’s determination of the amount of his sg and s 21 ributions or by any other rule or order of the com- ioner under any provision of this article may y to the commissioner for a hearing within twenty ; after mailing or personal delivery of notice of determination, rule, or order. Decisions. Every hearing as herein provided shall be held by a referee who shall render his sion within five days after the hearing is concluded. tten notice of the referee’s decision, containing the ons therefor, shall be promptly given to the claim- or employer, to the commissioner, and to any party sted thereby who appeared at the hearing.”’ § 621. Appeals to appeal board. Contested determinations, rules or orders. With- wenty days after the mailing or personal delivery otice of the decision after a hearing on contested rminations, rules, or orders by the commissioner, employer may take an appeal to the appeal board, vided he appeared at the hearing, by filing a notice ppeal with the commissioner, and the commissioner - likewise within such period take an appeal to the rd by giving written notice thereof to the employer, ardless of whether or not the commissioner ap- red or was represented at the hearing before the ree, Conduct of appeals. The appeal board may de- any case appealed to it under any provision of article on the basis of the record and of evidence viously submitted in such case, or it may in its retion hear argument or hold a further hearing, rémand such case to a referee for such purposes it may direct. If a further hearing is to be held argument had, the board shall fix a time therefor shall notify the commissioner, regardless of ther or not he had appeared or been represented he hearing before the referee, ard any other party .cted, provided such other party appeared at the ring before the referee. The board may affirm or erse, wholly or in part, or may modify the decision vealed from and shall render its decision promptly | shall thereupon send written notice thereof to- sees 22 ther with the reasons therefor to the commissioner and any other party affected thereby who appeared at the hearing before the referee.’’ ‘«¢§ 624. Appeals to courts Within thirty days after the mailing or personal delivery of notice of a decision by the appea board, the commissioner or any other party affected thereby who appeared at the appeal before the board may a peal questions of law involved in such decision to the appellate division of the supreme court, third depart- ment. The board may also, in its discretion, certify to such court questions of law involved in its decisions. Such appeals and the questions so certified shall be heard in a summary manner and shall have precedence over all other civil cases in such court except cases arising under the workmen’s compensation law. The commissioner shall be represented in court by the at- torney general without additional compensation. An appeal may be taken from the decision of such court to the court of appeals in the same manner and sub- ject to the same limitations, not inconsistent herewith, as is provided for in civil action. Tt shall not be neces- sary to file exception to the rulings of the appeal board. No bond shall be required to be filed upon an appeal to the appellate division or to the court of appeals except as hereinafter provided. Upon final determination of an appeal, the appeal board shall enter an order in accordance with such determination.”’ Pa 2 wPreeortiwne ti wwlfTllerelererlTrlhU ve ,er 23 APPENDIX Unrrep States Court or Appeals For rae Second Circurt— October Term, 1953 No, 132 Argued February 2, 1954 Decided April 27, 1954 Docket No. 22860 Sworp Linz, Inc., Appellant, Vv. InpusTRIAL CoMMISSIONER OF THE StTaTE or NEw York, Appellee Before Clark, Frank and Hincks, Circuit Judges Appeal from the United States District Court for the Southern District of New York, Sylvester J. Ryan, Judge. Reversed and remanded. | R. H. Guthrie, New York City (Mudge, Stern, Williams & Tucker and Ara P. Blanc, New York City, on the brief), for appellant. Samuel Stern, Asst, Atty. Gen. of the State of New York (Nathaniel L. Goldstein, Atty. Gen. of the State of New York, Wendell P. Brown, Sol.-Gen., and Francis R. Curran, Asst. Atty. Gen., on the brief), for appellee. The debtor filed a petition for an arrangement under Chapter XI of the Bankruptcy Act, 11 U. S. C. §§ 701 et seq., on July 30, 1948. On that same day the petition was ap- proved and the court made an order enjoining and staying until final decree all persons from the commencement of any suit against the debtor. On July 24, 1950, respondent- appellee, the Industrial Commissioner of the State of New York, filed a proof of claim in the amount of $98,209.97, representing unpaid pay roll contributions from October 1, 1946, to July 30, 1948, of $88,199.82, plus interest of $9,- 961.14 computed to July 30, 1950, and interest on the late payment of $49.01. The debtor filed objections to this claim on the ground that interest could be allowed only to 24 July 30, 1948—the date of the filing of the petition for ar- rangement. Before the hearing on these objections and following the decision of the Supreme Court in United States v. General Engineering & Mfg. Co., 342 U. 8S. 912, which had been awaited, respondent, on April 18, 1952, filed an amended proof of claim in the amount of $88,592.31, which included interest only to July 30, 1984. The State did not apply to the court for leave to amend the claim; the debtor did not agree to the amendment. The claim was allowed on July 2, 1952, and has been paid in full according to a plan of arrangement confirmed July 31, 1952, under which claims entitled to priority were paid in full and claims not so entitled were paid in part, but in each case without interest beyond July 30, 1948. On June 4, 1952, respondent, without leave of the bank- ruptcy court, filed in the office of the County Clerk of New York, pursuant to § 573(2) of N. Y. Labor Law, a warrant in the amount of $119,068.54, representing the claim as allowed, plus penalties and interest computed to May 31, 1952, in the amount of $30,476.23. On July 2, 1952, the debtor moved before the Referee for (1) an order expunging the warrant from the state judgment docket, (2) a permanent injunction against any proceeding by the respondent against the debtor outside the bankruptcy court, and (3) a determination of the ques- tion whether or not interest arose on the claim of respond- ent after July 30, 1948. The Referee found, as a ‘‘conclu- sion of law,’’ that respondent was not entitled to interest on his claim beyond the date of the filing of the debtor’s petition for an arrangement; accordingly he granted debt- or’s motion. Respondent petitioned for review of this order to the United States District Court, which vacated the injunction and held, inter alia, that the order of the Referee ‘‘is not to be construed as an adjudication that the claim of the Industrial Commissioner for interest and penalties accrued since July 30, 1948 is either invalid or has been paid.’’ It did continue a temporary injunction until entry of the final decree and did order the warrant expunged from the judgment docket—an order which has been complied with. At the time of the hearing below a eer 8 —= ES. OS Ea. SS ~ ~ | ‘ Q 8 y e - 5 or: SF oer P Fhe er Oe Ot 25 final decree had not been entered in the arrangement pro- ceedings. Ciark, Circuit Judge: It is conceded, as it must be in the light of relevant Su- preme Court decisions, that bankrupt estates cannot be directly used to pay post-bankruptcy interest on claims against the bankrupt for unpaid taxes. This was settled for ordinary bankruptcy by the leading case of City of New York v. Saper, 336 U. S. 328; for proceedings in reorganiza- tion by United States v. Edens, 342 U.S. 912 affirming 4 Cir., 189 F. 2d 876; for proceedings by way of arrangement by United States v. General Engineering & Mfg. Co., supra, 342 U. S. 912, affirming.8 Cir., 188 F. 2d 80, and see Com- monwealth of Massachusetts v. Thompson, 1 Cir., 190 F, 2d 10, certiorari denied 342 U. S. 918; and even for a general assignment under N. Y. Debtor & Creditor Law by United States v. Bloom, 342 U. 8. 912, affirming Pavone Textile Corp. v. Bloom, 302 N. Y. 206, 97 N. E. 2d 755. This appeal raises the question whether, notwithstanding this current of authority, such interest may nevertheless be collected by direct action against a debtor after con- firmation of its arrangement in Chapter XI proceedings. It is the position of the State of New York, vigorously asserted here and elsewhere, that such collection may be made by using the ordinary remedies available against sol- vent debtors. And this view appears to have been sub- stantially the view of the district court in reversing the decision of the referee in bankruptcy for the debtor, al- though it did refrain from a final adjudication.’ But since 1 This is made most clear not only by respondent’s specifie contentions herein, but also by his citation to us, as correct and authoritative, of a decision by a referee in the Unemployment Insurance Referee Section of the State Department of Labor—Case No. E2340-53R, Starrett Television Corp.—holding an employer liable for interest on unpaid taxes during the pendency of arrangement proceedings in reliance on Judge Ryan’s deci- sion in this case. 2 In view of this and of the fact that respondent has not appealed from the order expunging the warrant from the state judgment docket, it may be suggested that injunctive relief now is premature. But the expunging 26 a plan of arrangement recognizing the insolvency of this bankrupt has been confirmed and payments made to carry it out, the issue is before us and must be decided. Par- ticularly in the case of a reorganized or ‘‘arranged’’ cor- poration such as this is it clear that the State’s position ealls for payment of interest before the debtor can go ahead with its activities. That is, the Supreme Court rul- ings cannot then accomplish what they seem intended to do; on the contrary, they will lead in actuality to simpler and harsher collection of the tax interest than if ordered through the medium of reorganization or arrangement. We do not believe that all this history and decision can really have been intended to produce so pyrrhic a result. The basis of the State’s claim rests upon the provisions in the Bankruptcy Act for priority and nondischargeability of tax claims and the complete assimilation of post-bank- ruptey interest to the taxes themselves. Thus §371 of the Act, 11 U. S. C. §771, provides that the confirmation of an arrangement shall not discharge debts not dischargeable under §17, 11 U. S. C. §35, while §17 excepts from discharge debts as ‘‘are due as a tax levied by the United States, or any State, county, district, or municipality.’’* In §354 as now amended, 11 U. S. C. §755, it is provided that, when an order in an arangement proceeding is entered directing that bankruptcy be proceeded with, only claims for taxes legally due and owing to the United States or any State or any subdivision thereof at the time of the filing of the original petition under this title,’ together with the or- of the direct holding by the referee in bankruptey which would have settled the question, the absence now of any adequate protection for the plan of arrangement, and the direct threat of steps to collect, see note 1 supra, convince us that action is now necessary. 8 The provisions of § 226, 11 U. 8. C. § 626, applying to reorganization proceedings, are somewhat differently framed, being to the effect that the property dealt with by the plan is free and clear of creditors’ claims, and there is no specific exception for claims allowable under § 17, 11 U. 8. ¢. arrangemen a ease of ordinary benkruptey. Of course a differentiation between these proceedings would be most unfair and inequitable, and the rationale de- veloped later in this opinion avoids necessity for any attempt to make it. ) oe 27 dinary provable claims, §63, 11 U. S. C. $103, ‘‘shall be allowed.’’* Since there is nothing in the Act which spe- cifically covers either the allowance or the nondischarge- ability of interest on taxes, such a claim if based affirma- tively on the statute must be brought within the terms here cited to gain the special immunity claimed. But the lan- guage is not apt for the purpose—thus such interest is hardly a tax ‘‘legally due and owing’’ at the time of the filing of the petition; and the history of the status of such claims and their treatment judicially is persuasive to the contrary. Nor can the State rest on the statute’s silence and the assumption that claims survive unless expressly eut off. For we think the contrary true under the scheme of the Act. Before the matter was settled by the ruling in the Saper ease there had been sharp differences of view among federal judges and commentators on the issue—a situation not unnatural in view of the absence of statutory mandate. Without pausing here for a full citation of opposing au- thorities, we may refer to the able decision in favor of allowance of interest in Davie v. Green, 1 Cir., 133 F. 2d 451, which persuaded two of our colleagues, Carter v. United States, 2 Cir., 168 F. 2d 272, and was relied on by the dis- senting justice in the Saper case, 336 U. S. 328, at page 341. Our opposing decision in Saper v. City of New York, 2 Cir., 168 F. 2d 268, produced a conflict in and among circuits which led to the Supreme Court review settling the issue, City of New York v. Saper, supra, 336 U. S. 328. The approach to the issue of Justice Jackson, speaking for the Court in this decisive case, is instructive. First is his initial statement of the problem: ‘“‘The ultimate issue in these three cases is whether tax claims against a bank- rupt bear interest until date of bankruptcy, as held by the court below, or until payment, as previously held by another Court of Appeals.’’ (Italics here and later sup- plied.) He continues: ‘‘More than forty years ago Mr. Justice Holmes wrote for this Court that the rule stopping interest at bankruptcy had then been followed for more 4 The corresponding section of Chapter X, § 238(3), 11 U. 8. C. § 638 (3) as amended, is identical in the language quoted. 28 than a century and a half. He said the rule was not a matter of legislative command or statutory construction but, rather, a fundamental principle of the English bank- ruptey system which we copied.’’ Then after finding logical implications to the same effect in §63(a)(1) and (5), 11 U. S. C. §103(a)(1) and (5), and §57(j), 11 U.S. C. §93(j)—the latter dealing specifically with debts owed the United States or any state or subdivision thereof—he con- tinues: ‘‘Moreover, there is no interest except that which acerues according to law—it is exactly such interest that the ‘fundamental principle’ cuts off as of bankruptcy. Section 57(n), 11 U. S .C. §93(n), requires governmental claims to be proved in the same manner and within the same time as other debts and only for cause shown may a reasonable extension be granted. Tax claims are treated the same as other debts except for the fourth priority of payment, §64(a), 11 U. 8. C. §104(a), and the provision making taxes nondischargeable, $17, 11 U.S. C. §35. But each of these sections is silent as to interest.’”’ Then he makes an extended analysis of the case authority and later amendments of the Bankruptcy Act to state: ‘‘The Court of Appeals concluded that by the 1926 amendment and the Chandler Act, Congress assimilated taxes to other debts for all purposes, including denial of post-bankruptcy mter- est. We think this is a sound and logical interpretation of the Act after those amendments to §§64(a) and 57(n).”’ 336 U. S. 328, at pages 329, 330, 331, 332, 337, 338. So conclusive did-this reasoning and decision seem to us that recently when the State of New York again made a like contention to us, we rejected it, citing particularly the last quotation made above. In State of New York v. Fewm- berg, 2 Cir., 204 F. 2d 502, 503, Judge Kaufman approved a plan of reorganization of Huyler’s, Inc., which granted the State on bonds issued for unpaid unemployment taxes only such interest as other bondholders of like class were to receive, not the 9 per cent per annum provided for this tax by New York law. It is obvious that we could not properly have affirmed the approval of the plan, which made no provision for the contingency, if the law would permit the State to make later collection of the additional 29 amount. But in fact we referred to the principle that even governmental priorities were ‘‘fully discharged upon con- summation of the final plan of reorganization’’; said that “ Our opinion so stated as follows: ‘‘The State of New York does not object to the failure to pay interest during the reorganization proceedings. * * *’’ The State advanced this sole contention: The Plan allotted to all un- secured creditors—including the State for its pre-petition taxes—debentures bearing interest at 6%; but for the bankruptcy, the State’s tax claim, under a state statute, would have carried interest at 9%, while the other creditors would have been entitled to a smaller rate; the plan was therefore unfair in not giving the State, through the de- bentures, 9% for the post-confirmation period. In affirm- ing the order which confirmed the plan, we held the plan fair. This amounted to saying no more than that the rate of interest on new securities under a Chapter X plan need not vary according to the varying interest rates to which the several creditors had been entitled before bankruptcy. Patently, then, the Feinberg case did not involve the ques- tion confronting us here. 18 The debtor retained no property not covered by the plan. e l- n ie e 8 iS A. - in te d sh y: S- 39 Unirep States Court or APPEALS FOR THE Seconp Crmcuit At a Stated Term of the United States Court of Appeals, in and for the Second Circuit, held at the United States Courthouse in the City of New York, on the 27th day of April one thousand nine hundred and fifty-four. Present: Hon. Charles E. Clark, Hon. Jerome N. Frank, Hon. Carroll C. Hincks, Circuit Judges. In the Matter of Sworp Lins, Ivnc., Debtor-Appellant, InpusTRiAL CoMMISSIONER OF THE State oF NEw York, Appellee Appeal from the United States District Court for the Southern District of New York This cause came on to be heard on the transcript of record from the United States District Court for the Southern District of New York, and was argued by counsel. On consideration whereof, it is now hereby ordered, ad- judged, and decreed that the order of said District Court be and it hereby is reversed and action remanded for pro- ceedings in accordance with the opinion of this Court with costs to the appellant. It is further ordered that a Mandate issue to the said District Court in accordance with this decree. (S.) A. Dantex Fusaro, Clerk. (6100) --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386417_2266%3A1. Public record. Not legal advice.