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Carolina Motor Express Lines Inc. v. Blue & White Service Inc.

October 17, 1951

CAROLINA MOTOR EXPRESS LINES, INC.
v.
BLUE & WHITE SERVICE, INC.



Author: Finnegan

Before MAJOR, Chief Judge, and KERNER and FINNEGAN, Circuit Judges.

FINNEGAN, Circuit Judge.

On September 11, 1950, Carolina Motor Express Lines, Inc., a corporation organized under the laws of the State of Indiana, filed in the District Court for the Northern District of Illinois, Eastern Division, its verified petition for an arrangement under Chapter XI of the Bankruptcy Act. The petition alleged that the business of the corporate debtor is the ownership, leasing and operation of trucks, and the maintenance of a general trucking business for hire; that it had its principal place of business in Chicago, Cook County, Illinois, for the longer portion of the six months period immediately preceding the filing of the petition than in any other judicial district. It alleged further that the corporate debtor was and is unable to pay its debts as they mature, and that it desired to propose an arrangement with its unsecured creditors under Chapter XI of the Bankruptcy Act, and that the filing of the petition had been duly authorized by the shareholders and directors of the corporate debtor. The petition was signed and verified by the president of the corporate debtor. No schedules, no statement of executory contracts, no statement of affairs, and no plan of arrangement, as required by secs. 323 and 324 of the Bankruptcy Act, 11 U.S.C.A. §§ 723, 724, accompanied said petition, nor were they filed therewith or at any previous time.

However, on the very date of filing, September 11, 1950, the District Court ordered that leave be granted to file said petition "without schedules, statement of executory contracts, statement of affairs and plan of arrangment." On the same day the court entered an order which declared: "It appearing to the court that the debtor has not had opportunity to prepare the detailed information necessary to complete its schedules, the statement of affairs, its statement of executory contracts, and its plan of arrangement, and for good cause shown. It is ordered that the debtor be granted 30 days from this date within which to file its schedules, etc." (The record discloses that on October 11, 1950, within the time allowed by the order, the corporate debtor filed its plan of arrangement, statement of executory contracts, statement of affairs and schedules.)

A third order was entered by the District Court on September 11, 1950, in it the court states that having examined the petition and being fully advised in the premises, it finds that Carolina Motor Express Lines, Inc. is a debtor within Chapter XI, sec. 306(3), 11 U.S.C.A. § 706, of the Bankruptcy Act, and that the petition has been properly filed under Chapter XI, sec. 322 of said Act, 11 U.S.C.A. § 722, and continued debtor in control of assets.

On September 19, 1950, Blue & White Service, Inc., et al., an Indiana corporation, Marshall E. Alexander, Jr., doing business as Electric Accounting Service, and Tire Service Company, a division of Cooper Industries, Inc., of Indianapolis, Indiana, three creditors of the corporate debtor, filed their petition to vacate the order of September 11, 1950, finding that its petition for arrangement had been properly filed, and to dismiss the proceedings for lack of jurisdiction because, it was charged, the corporate debtor's principal place of business had not been in the Northern District of Illinois, Eastern Division, for a longer portion of the six months preceding the filing of the petition than in any other judicial district. It alleged that the debtor's principal place of business during such period had been and was then in Indianapolis, Indiana. On September 26, 1950, the same creditors filed an amended petition to vacate the order finding that the petition of corporate debtor was properly filed and to dismiss the proceedings. As an additional ground for dismissing debtor's petition, it was charged in this amendment that the petition for arrangement did not set forth the provisions of the plan of arrangement as required by the Bankruptcy Act, and that said petition for arrangement was not accompanied by a statement of debtor's executory contracts, nor by schedules, nor statement of affairs.

The record filed in this appeal discloses no answer on behalf of the corporate debtor to the amended petition of September 26, 1950. However, it does appear that the corporate debtor did, on September 22, 1950, answer the original petition to vacate the order of September 11, and to dismiss the petition for arrangement. In its answer the corporate debtor reaffirmed that its principal place of business during the six months preceding the filing of its petition for arrangement was at Chicago, Cook County, Illinois, for a longer period than in any other judicial district.

The proceedings were referred to a referee in bankruptcy who, on November 15, 1950, filed his memorandum and order denying the prayers of the amended petition to vacate the orders and to dismiss the petition. On petition for review, the order of the referee was affirmed and the prayers of the amended petition were denied. This appeal followed.

In seeking a reversal of the order of the District Court, the appellants here present the same contentions urged in the lower court. They are, first - that the principal place of business was not in Chicago, Cook County, Illinois, for the period of time, preceding the filing of the petition for arrangement, required by the Bankruptcy Act; and second - that the District Court had no jurisdiction over the proceedings for an arrangement because the corporate debtor's original petition failed to allege facts required by the statute and was not accompanied by schedules, statement of affairs, list of executory contracts, and a plan of arrangement.

We propose to consider the contentions in the order listed.

As we have pointed out, the petition of the corporate debtor avers that it has and has had its principal place of business in the City of Chicago, County of Cook, Illinois, within the Northern District of Illinois, Eastern Division, for a longer portion of the six months immediately preceding its filing than in any other judicial district. It is also alleged therein that its filing had been authorized by its shareholders and directors. The allegation that the petition was thus authorized to be filed in Chicago because that city had been its principal place of business for a longer portion of the six months immediately preceding than any other place in a different judicial district, created a prima facie presumption that Chicago was and had been its principal place of business during such period. The burden of overcoming this presumption was upon the creditors who sought to defeat jurisdiction. In re Hudson River Navigation Corp., 2 Cir., 59 F.2d 971.

The jurisdiction of the District Court in the case at bar is dependent upon a question of fact - did the corporate debtor have its principal place of business at Chicago for a longer portion of the six months next preceding the filing of its petition than in any other judicial district? Appellants urge that it did not. However, the referee determined the fact adversely to appellants, and his finding was sustained and approved by the District Court. We have examined the evidence adduced on the issue and are convinced that the finding of the lower court is justified by substantial evidence. Chicago Bank of Commerce v. Carter, 8 Cir., 61 F.2d 986.

In our opinion, however, the second contention of appellants is decisive of this appeal. The petition for arrangement here involved was filed pursuant to Chapter XI, secs. 322, 323 and 324 of the Bankruptcy Act, which are as follows:

Sec. 322. "If no bankruptcy proceeding is pending, a debtor may file an original petition under this chapter with the court which would have jurisdiction of a ...


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