The question is whether a receivership for the collection of rents and profits in a suit for the foreclosure of a mortgage is an 'equity receivership' within the meaning of section 77B of the Bankruptcy Act (11 U.S.C.A. § 207), providing for the reorganization of debtor corporations in involuntary proceedings.
In 1934 and afterwards, '2168 Broadway Corporation' was the owner of a large hotel in the city of New York, and of the fixtures and furniture contained therein. It had no other property. The holder of a mortgage on the hotel began an action of foreclosure and procured the appointment of receivers to collect the rents and profits. Soon after that appointment, three creditors of the corporation, holding claims a little in excess of $1,000, filed a petition in a District Court of the United States for the reorganization of the corporate debtor in accordance with section 77B of the Bankruptcy Act, alleging that the value of the assets was largely in excess of the liabilities, but that the debtor was unable to pay its debts as they matured. The District Court dismissed the petition on the ground that submis ion to the receivership in the suit for foreclosure was not an act of bankruptcy and did not relieve the creditors from showing in their petition that such an act had been committed. 11 F.Supp. 404. The Circuit Court of Appeals for the Second Circuit affirmed (78 F.(2d) 678), declining to follow a decision in the Circuit Court of Appeals, Seventh Circuit which upheld a different conclusion. In re Granada Hotel Corporation, 78 F.(2d) 409, affirming (D.C.) 9 F.Supp. 909. Because of this conflict and because of the importance of removing doubt as to the meaning of the statute, a writ of certiorari was granted by this court.
Section 77B of the Bankruptcy Act, which took effect as law on June 7, 1934 (Act of June 7, 1934, 48 Stat. 911, 912, § 1; 11 U.S.C. § 207, 11 U.S.C.A. § 207), provides for two classes of proceedings, voluntary and involuntary. Any corporation, with exceptions not now important, may file a petition stating that it is insolvent or presently unable to meet maturing obligations, and that it desires to effect a plan of reorganization. If the petition is approved, the court assuming jurisdiction shall have and may exercise all the powers, unless specially withdrawn, 'which a Federal court would have had it appointed a receiver in equity of the property of the debtor by reason of its inability to pay its debts as they mature.' Section 77B(a), 11 U.S.C.A. § 207(a). But jurisdiction is not confined to proceedings initiated by the debtor. The statute makes provision by the same section for the reorganization of a corporate debtor at the instance of the creditors. Three or more creditors who have provable claims against a corporation aggregating $1,000 or more in excess of the value of securities may file 'a petition stating that such corporation is insolvent or unable to meet its debts as they mature and, if a prior proceeding in bankruptcy or equity receivership is not pending, that it has committed an act of bankruptcy within four months,' and that such creditors propose that it shall effect a reorganization. Section 77B(a). A later subdivision (section 77B(i); 11 U.S.C. § 207(i), 11 U.S.C.A. § 207(i) rounds out the statutory scheme. 'If a receiver or trustee of all or any part of the property of a corporation has been appointed by a Federal, State, or Territorial court, * * * a petition * * * may be filed under this section at any time thereafter by the corporation, or its creditors as provided in subdivision (a) of this section', and upon the approval of the petition by a court of appropriate jurisdiction, 'the trustee or trustees appointed under this section, or the debtor if no trustee is appointed, shall be entitled forthwith to possession' of the property, displacing in so doing the possession of the trustee or receiver theretofore appointed.
To fix the meaning of these provisions there is need to keep in view the background of their history. There is need to keep in view also the structure of the statute, and the relation, physical and logical, between its several parts. History and structure will be found to teach together that a receivership in a foreclosure suit is not an equity receivership within the meaning of the law.