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In re Peer Manor Bldg. Corp.

June 16, 1944


Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Philip L. Sullivan, Judge.

Author: Evans

Before EVANS, KERNER, and MINTON, Circuit Judges.

EVANS, Circuit Judge.

The factual background for the legal questions presented by this appeal appears in the opinion of this court in Peer Manor Building Corporation, 134 F.2d 839.See also the decision of this court in In re Peer Manor Building Corporation, Debtor, 143 F.2d 764.

Supplementing the facts therein appearing, it should be said that subsequent to the opinion of this court in 134 F.2d 839, petitioners, through an independent, new proceeding, sought a reorganization of debtor under Chapt. X of the Bankruptcy Act, 11 U.S.C.A. ยง 501 et seq. They proceeded on the theory that we had held that the original bankruptcy proceeding ended in a final adjudication which could not be reopened for the purpose of amending or submitting a new plan of reorganization. There had been no reservation of jurisdiction and the final decree ended the proceeding. Such ruling left open, to petitioners or any other creditors, the right to apply, in a new and separate proceeding, for the reorganization of said insolvent debtor, - the Peer Manor Company. Objections to the new proceedings because debtor did not come within the scope of said Act were presented and the District Court, feeling bound by the decision of this court in 134 F.2d 839, denied the relief sought and dismissed the petition. From such order of dismissal, this appeal is taken.

To secure a reversal petitioners (appellants) must successfully meet two objections which the appellees advanced. One is the defense of res judicata and if not res judicata, the "law of the case." The other is the failure of petitioners to show that Peer Manor Building Corporation was an "unincorporated company or association" within the meaning of that term as used in said Chapt. X. Petitioners must show that the evidence brings debtor within one of the groups covered by said Chapt. X. They must also convince us that our decision did not forever determine the liability of this debtor, dissolved by judicial decree of an illinois state court for failure to make reports and to pay franchise fees, to be reorganized upon petition of its creditors, or owners under said Chapt. X.

As to the first defense we are satisfied that our decision on the previous appeal is not res judicata, nor are we bound by it as the "law of the case." The parties were not the same; the evidence was not the same; nor was the issue the same. an adjudication or dismissal of a proceeding under Chapt. X of the Bankruptcy Act does not prevent the institution of new proceedings to reorganize a debtor. An involved debtor may successfully resist an attempt by its creditors to reorganize it under said Chapt. X. The next day it may be subject to another petition seeking the same purpose. The petitioners, as here, may not be the same creditors. The debtor's situation may have changed. The evidence may not be the same. The relief sought in the new petition may be appropriate in the second application and yet the denial of relief in the first proceeding may also have been proper upon the showing made.

It is true, the test which determined the first case may be properly used in determining the propriety of granting relief in the second proceeding. If the facts are similar and the ground for denial of relief be the same, the lower court and this court will doubtless follow the previous decision even though it be not res judicata.

Nor does the law of the case govern the disposition of the second proceeding.

Our conclusion is, therefore, that petitioners here were not precluded by the previous decision of this court from bringing the instant proceeding.

This disposition of this first objection brings us to the closely allied question of the character of the entity, - the Peer Manor Company, - when the petition now before us was presented to the District Court. In disposing of the preceding petition, this court said [134 F.2d 840]:

"Whatever may be the validity of the first contention of the appellant Witter, it seems to us his second contention is valid. The decree of August 27, 1937, purported to be final in all respects, and reserved jurisdiction only for the period of the extension of the indebtedness; and this reservation of jurisdiction was only for the purpose of supervising the procedure to carry out the court's decree. It reserved no jurisdiction to entertain a further reorganization proceeding. True, the agreement of extension entered into with the indenture trustee and made a part of the decree of August 27, 1937, provided a plan that was to be put into effect if the debtor should default, but that plan is not the one sought to be promulgated and approved. An entirely new and different proceeding is contemplated. The petition of December 5, 1941, was a new proceeding and not a continuation of the proceeding instituted July 23, 1936."

On this holding this court was unanimous. Division occurred respecting the right of creditors to file a petition under Chapt. X against an Illinois corporation dissolved by decree of court. One of the members of this court did not express himself on this issue, but contented himself with agreeing with the expressed conclusion of the court that the original proceedings having terminated in a final decree, they were not subject to be reopened at a later date for the purpose of submitting a new plan of reorganization. Upon the question over which this court divided sharply, Judge Kerner expressed no opinion, because not necessary.

We must therefore approach the question here presented as to the entity capacity of Peer Manor Building Corporation upon the evidence now before us. Neither the views expressed in the majority opinion nor in the so-called dissenting opinion on the other issue as to which the third judge expressed no opinion, need vex us. The facts in the instant case are stronger than on the previous hearing which presented the naked legal proposition of the right of creditors to reorganize an Illinois corporation dissolved for more than two years prior to the filing of the creditors' petition. We here have evidence ...

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