Citations
- 188 F.2d 851
Full opinion text
FRANK, Circuit Judge.
Since appellant did not appeal from the order confirming the modified arrangement, we may not consider defects in that order, although it >vas more or less coupled with the order authorizing the sale. We turn, then, to the sale order.
Under Chapter XI, a sale of all the debtor’s assets may be authorized, pursuant to § 313(2), 11 U.S.C.A. § 713(2), only “upon cause shown”. This section is worded the same as § 116(3), 11 U.S.C.A. § 516(3), relative to such a sale in a Chapter X proceeding. It has been held that to prove “cause” for a sale under § 116(3) it is necessary to show that the assets are, in effect, “perishable”; such a sale must “be confined to emergencies where there is imminent danger that the assets of the ailing business will be lost if prompt action is not taken.” In re Solar Mfg. Corp., 3 Cir., 176 F.2d 493, 494. See also In re V. Loewer’s Gambrinus Brewing Co., Inc., 2 Cir., 141 F.2d 747, 748, where we stated the facts as follows: “There was no working capital on hand sufficient to operate the business and the creditors ánd stockholders were unwilling to furnish any. With the approach of warm weather the vats, kettles and other brewery machinery would deteriorate rapidly and lose substantially all their value, while both real and personal property would be absorbed by the mortgagee.” We think § 313(2) must be similarly interpreted.
The debtor here, therefore, was obliged to allege and had the burden of proving the existence of an emergency involving imminent danger of loss of the assets if they were not promptly sold. The petition for sale fell far short of alleging such facts. Nor is there a finding of fact, based upon evidence; supporting the conclusion that “cause” had been shown. Such a finding is required.
Section 216(10), applicable to a Chapter X proceeding, provides that a plan may authorize the sale of all the assets “at not less than a fair upset price” and the distribution- of the proceeds among the creditors. Although Fidelity Assurance Ass’n v. Sims, 318 U.S. 608, 63 S.Ct. 807, 87 L.Ed. 1032, throws some doubt on the scope of that section, the Sims case has been held to authorize a sale in pursuance of a Chapter X plan, at least where the original Chapter X petition was filed in good faith But Chapter XI, 11 U.S.C.A. § 701 et seq., contains no provision such as- § 216(10) ; and Section 101, part of Chapter X, 11 U.S.C.A. § 501 et seq., states: “The provisions of this chapter shall apply exclusively to proceedings under this chapter.” A report of the Senate Judiciary Committee, in connection with the 1938 revision of the Bankruptcy Act, said that § 101 “prevents the extension and application of any provisions of Chapter X to other chapters of this bill.”
There are good reasons why Congress, provided that a sale of all assets may be-part of a Chapter X plan but did not so-provide with respect to a Chapter XI arrangement: In Chapter X, under § 167, an independent trustee ordinarily investigates, all matters relating to the property of the company, examines the officers of the debtors and others concerning.such matters;, under § 169, the trustee prepares and presents the plan which the judge considers together with objections or alternative plans-proposed by any creditor; under § 175,, only after the judge approves the piando the creditors vote on it; under § 176, consents to a plan can ordinarily not be-obtained until the judge has approved it; and under § 216(10) the sale must be “at not less than a fair upset price”. The difference between a Chapter X and a Chapter XI plan is the more striking when, as here, the Chapter XI petition is filed under § 322, for then no trustee is appointed to administer the estate before confirmation of the arrangement.
It is true that § 306(1) defines a Chapter XI arrangement as “any plan of a debtor for the settlement, satisfaction, or extension of the time of payment of his unsecured debts, upon any terms”. It is urged that this section imports into Chapter XI something the equivalent of § 216 (10)— i.