Witter v. Nikolas

134 F.2d 839, 1943 U.S. App. LEXIS 3700
CourtCourt of Appeals for the Seventh Circuit
DecidedMarch 26, 1943
DocketNo. 8098
StatusPublished
Cited by10 cases

This text of 134 F.2d 839 (Witter v. Nikolas) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Witter v. Nikolas, 134 F.2d 839, 1943 U.S. App. LEXIS 3700 (7th Cir. 1943).

Opinions

MINTON, Circuit Judge.

On June 18, 1934, the Peer Manor Building Corporation, a corporation organized and existing under the laws of the State of Illinois, was dissolved by suit of the State in a State court of equity. The law of Illinois provides that the dissolution of a corporation “ * * * shall not take away or impair any remedy available to or against such corporation, * * * or any liability incurred, prior to such dissolution if suit or other proceeding thereon is commenced within two years after the date of such dissolution.” Smith-Hurd Annotated Statutes, Chapter 32, Section 157.94 (1941).

On July 23, 1936, more than two years after its dissolution, the said corporation filed a petition for its own reorganization under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. The District Court took jurisdiction of the petition and approved a plan of reorganization by its order of December 2, 1936, in which order the Peer Manor Building Corporation was referred to and treated as an existing corporation. The plan provided for an extension of the debtor’s bonded indebtedness to November 28, 1941, and for the necessary steps to be taken to consummate the plan.

On August 27, 1937, the District Court entered its final decree in which it decreed that the plan had been fully executed, the acts of the parties were approved, the debtor was discharged from all of its debts, claims and liabilities existing at the date of its approval therein, except as provided in the plan, and the creditors, claimants and stockholders were enjoined from interfering with the plan. The decree concluded with this paragraph: “That this proceeding is hereby finally terminated and closed with the exception that this court reserves jurisdiction over this cause during the period of extension for the purpose of entering such further orders, directions and decrees, as may hereafter be deemed necessary or proper in connection with carrying out the provisions of the said Plan of Reorganization, as amended.”

Apparently, the parties knew nothing about the dissolution, decree of June 18, 1934, as nothing appears in the record up to this point suggesting such fact. The final decree of the District Court incorporated in its body the agreement of the debtor made with the indenture trustee, by the terms of which agreement it was provided that upon default of the debtor corporation under the extension agreement, a certain plan of reorganization might be carried into effect. The debtor was in default at and after the expiration of the period of extension, which expiration date was November 28, 1941, and the debtor’s creditors and the indenture trustee on December 5, 1941, filed in the old proceeding, in which the final decree had been entered on August 27, 1937, a petition alleging the default and grounds for reorganization, and set forth a plan to form a new corporation to issue its stock for the out[840]*840standing bonds of the debtor, the old stockholders of the debtor to receive nothing. This plan was alleged to have the approval of 57% of the outstanding mortgage bondholders. The petition also alleged the pendency, in the Superior Court of Cook County, Illinois, of a suit brought by one Witter, the owner of a $500 bond, for partial foreclosure of the mortgage given to secure the bonded indebtedness. The petition concluded with a prayer for service of the petition and a subpoena upon the debtor, for approval of the petition, and for proceedings under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq.

Witter answered the petition, and among other things alleged the fact of the dissolution of the debtor corporation. A firm of attorneys purported to appear for the dissolved corporation more than seven years after its dissolution, filed an answer to the petition and set up the corporation’s dissolution. The District Court took jurisdiction, and appointed a trustee. The court ordered the trustee to take possession of the property and to operate the same, and to submit his recommendations; and the court stayed the proceedings of Witter in the State court to foreclose, and reserved jurisdiction. At the hearing, the creditor Witter offered in evidence a certified copy of the decree of dissolution of the debtor corporation. The court refused to admit it in evidence.

The creditor Witter appeals. He contends the court had no jurisdiction of the petition filed July 23, 1936, since the corporation had been dissolved for more than two years at that time, and its property had passed to its stockholders, and he alleged secondly that even if the proceedings under the petition filed July 23, 1936, "were valid, they terminated with the final decree of August 27, 1937, and the proceedings under the petition of December 5, 1941 to attempt a second reorganization is a new proceeding and must fail because the debtor had been dissolved at that time for more than seven years, and service could not be had upon it, and there was no corporation to be reorganized.

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.

The fact of the alleged debtor corporation’s existence became very material. Jurisdiction of this new proceeding had to be worked out by having first an entity that could be sued, and second a corporation found to be in existence, since only corporations can be reorganized under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq.

As to the first essential element, the having of an entity that could be sued, the corporation having been dissolved for more than seven years prior to the commencement of the proceedings, it was nonexistent and dead for all legal purposes. It could neither sue nor be sued. The service of process upon it was an impossibility. Chicago Title & Trust Co. v. 4136 Wilcox Building Corp., 302 U.S. 120, 58 S.Ct. 125, 82 L.Ed. 147; Reconstruction Finance Corporation v. Teter, 7 Cir., 117 F.2d 716, 725; Sarelas v. McCue & Co., 291 Ill.App. 540, 10 N.E.2d 700; Smith-Hurd Annotated Statutes, Chapter 32, Sec. 157.94 (1941).

The purported appearance and answer of the former corporation by the attorneys were a nullity. The corporation had been dead for sevén years, and was incapable of appointing attorneys or exercising any other corporate function. Since the court had no proper party before it and could not subpoena the. defunct corporation, it was without jurisdiction to proceed.

For another reason the court was without jurisdiction to proceed, because the second essential element was lacking.

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Bluebook (online)
134 F.2d 839, 1943 U.S. App. LEXIS 3700, Counsel Stack Legal Research, https://law.counselstack.com/opinion/witter-v-nikolas-ca7-1943.