294 U.S.

648
55 S.Ct. 595
79 L.Ed. 1110

CONTINENTAL ILLINOIS NAT. BANK & TRUST CO. OF

CHICAGO
v.
CHICAGO, R. I. & P. RY. CO. et al.
Nos. 479, 480.

CHASE NAT. BANK OF CITY OF NEW YORK

v.
SAME.
Nos. 481, 482.
MISSISSIPPI VALLEY TRUST CO.
v.
SAME.
Nos. 483, 484.
HARRIS TRUST & SAVINGS BANK
v.
SAME.
Nos. 485, 486.
NEW YORK TRUST CO.
v.
SAME.
Nos. 487, 488.

RECONSTRUCTION FINANCE CORPORATION

v.
SAME.
Nos. 489, 490.
Nos. 479, 480, 481, 482, 483, 484, 485, 486, 487, 488, 489, 490.
Argued Feb. 12, 13, 1935.
Decided April 1, 1935.
In Nos. 479488:
[Syllabus from pages 648-650 intentionally omitted]
Messrs. Herbert A. Friedlich, of Chicago, Ill., Paul D. Miller, of New
York City, Isaac H. Mayer and Carl Meyer, both of Chicago, Ill., Henry
Root Stern, of New York City, Bertram F. Shipman, of New York City, T.
M. Pierce and S. Mayner Wallace, both of St. Louis, Mo., and Hal C.
Bangs, Edwin W. Sims, and Franklin J. Stransky, all of Chicago, Ill., for
petitioners.
[Argument of Counsel from pages 650-652 intentionally omitted]
The Attorney General, and Messrs. A. A. Berle, Jr., of New York City,
and Cassius M. Clay, of Washington, D.C., for petitioners.

[Argument of Counsel from pages 652-656 intentionally omitted]

Mr. Elihu Root, Jr., of New York City, for respondents Bondholders' Protective
Committees.

Mr. Marcus L. Bell, of New York City, for respondents Trustees in

Bankruptcy.

Messrs. James H. McIntosh, Clifton P. Williamson, and Edward W. Bourne, all

of New York City, for respondent Protective Committee for Chicago, R.I. & P.
Ry. Co. General Mortgage Bonds.
Mr. Justice SUTHERLAND delivered the opinion of the Court.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

On June 7, 1933, the Chicago, Rock Island & Pacific Railway Co. filed a
petition seeking a reorganization under section 77 of the Bankruptcy Act (11
USCA 205), in the Federal District Court for the Northern District of Illinois,
Eastern Division, alleging that it was 'unable to meet its debts as they mature.'
Nine of the debtor's subsidiaries thereafter joined in the proceedings as
permitted by subdivision (a) of the section. On September 26, 1933, the debtor
filed a petition for instructions which alleged that it had outstanding collateral
notes secured by mortgage bonds, part of which were issued by it, part by
corporations forming a part of the system; that it had been unable to pay
interest on its funded debt secured by mortgage liens on various portions of its
property; that it would be obliged to default on interest about to become due on
other mortgage bonds of the system; that the value of the collaterial securing
each of the outstanding notes is substantially in excess of the loan thereby
secured; that if holders of the notes should sell the collateral it would cause a
substantial and irreparable loss to the trust estate; and that a forced sale of the
collateral at the present time might result in a substantial deficiency judgment
against the debtor and the depletion of the respective interests in the trust estate
of all creditors in proportion to the rank and lien of the obligations by which
their claims or interests therein are evidenced. The petition prayed that the
court determine whether it should enjoin the holders of the collateral notes, in
the event of a default, from selling any of the collateral.

Practically all of the collateral held by the banks and the Reconstruction
Finance Corporation consists of bonds of the debtor and its subsidiaries. These
bonds are secured by mortgages on the property of the system; and the
collateral, therefore, constitutes fractional interests in the liens created thereby.
The collateral pledged to the banks consists of bonds of the Rock Island or of
bonds (guaranteed by the debtor) of one of the subsidiary corporations, wholly
owned and operated under lease by the debtor. Six of the collateral notes,
aggregating.$13,659,877.58, are held by the Reconstruction Finance
Corporation and are secured by collateral of the face value of $41,702,465.85.1
The remaining notes, aggregating $4,125,000 in amount, and secured by
collateral of the face value of $14,409,000,2 are held severally by five banks:
The Chase National Bank and the New York Trust Company, of New York
City, the Continental Illinois National Bank & Trust Company and Harris Trust
& Savings Bank, of Chicago, and Mississippi Valley Trust Company, of St.
Louis. Each of the collateral notes contains a provision that it shall become due
in case of, among other events, (1) nonpayment of interest, (2) insolvency of
the debtor, (3) appointment of a receiver for the debtor. Each note held by a
bank provides also that it shall become due in case of nonpayment of interest on
any of the notes held by the Reconstruction Finance Corporation. And all the

outstanding notes provide that: 'Upon default of any kind hereunder, the payee
may sell in * * * New York City, or elsewhere * * * all or any of the security
held for the payment of this note, at any broker's board or at public or private
sale, without * * * notice * * *. And the payee may be the purchaser of any or
all property, rights and/or interests so sold * * *.'
8

None of the noteholders was a party to the proceeding. No noteholder was ever
served with process; and only the two Chicago banks were residents of the
district. But notice of the intention to present the petition for instructions had
been sent by registered mail to each of the noteholders, and also to the five
protective committees representing security holders of the system.3 All of these
parties were represented at the hearing. The holders of the collateral notes
appeared specially, and objected to the jurisdiction of the court on the ground
that (1) it had no jurisdiction of the person; (2) no jurisdiction over, or
possession of, the property, the sale of which was about to be restrained; and
(3) no jurisdiction to grant in a summary proceeding the injunction suggested;
but it was stipulated that the noteholders might present argument and file briefs
on the merits without waiving their special appearances. The Chairman of the
Protective Committee of the First and Refunding Bonds of the Debtor set forth
the facts relied upon as showing that unless the sale of the collateral was
enjoined, it would be impossible to prepare, and secure approval of, a plan of
reorganization. All of the appellants contend that the injunction entered, as
hereinafter stated, was without legal justification. Only the banks renew here
the challenge to the jurisdiction of the court to make the order in this
proceeding.

The Chicago, Rock Island & Pacific system comprises over 8,000 miles of line,
extending into more than one-fourth of the states of the Union, and into 20
federal judicial districts. At the commencement of this reorganization
proceeding, its capitalization outstanding in the hands of the public was
$459,059,808. Of this, $128,909,211 was in preferred and common stocks;
$312,365,720 in bonded indebtedness; and $17,784,877 in the collateral notes
here in question. In addition to the above, there were pledged as security for
some issues of its funded debt bonds and stocks of the system aggregating
$145,749,050; and as security for the collateral notes, the bonds and stocks
above mentioned, aggregating $54,711,465. If, pending the reorganization,
trustees for the bondholders and these noteholders should sell the pledged
securities, the capitalization outstanding in the hands of the public would to that
extent be expanded; and the aggregate capitalization might thereby become as
much as $659,520,323.

10

By the Act of March 3, 1933, c. 204, 47 Stat. 1467 (see 11 USCA 201 and

note, 202205), original jurisdiction, in addition to that theretofore exercised

in voluntary and involuntary proceedings to adjudge persons bankrupt, was
conferred upon courts of bankruptcy 'in proceedings for the relief of debtors,' as
provided in sections 74, 75 and 77 of the act (11 USCA 202, 203, and 205).
We are here concerned only with section 77 (11 USCA 205). That section
contains provisions for the reorganization of railroads engaged in interstate
commerce. It permits any railroad corporation which is insolvent or unable to
meet its debts as they mature to effect a plan of reorganization.
11

It provides for the filing of a petition by the railroad corporation in a court

designated by the act. If the petition be approved, the court, during the
pendency of the proceedings, is given exclusive jurisdiction of the debtor and
its property wherever located. The act requires that the railroad corporation
shall be referred to in the proceedings as a 'debtor,' and permits any corporation,
the majority of the capital stock of which is owned, or substantially all of
whose properties are operated, by the debtor under lease or operating
agreement, also to file a petition in the same proceeding stating that it is
insolvent or unable to meet its debts as they mature and that it desires to effect a
plan of reorganization in connection with the plan of the original debtor.

12

Other provisions of the section direct that a plan of reorganization shall include
a proposal to modify or alter the rights of creditors generally or of any class of
them, secured or unsecured, either through the issuance of new securities or
otherwise; that it shall provide adequate means for its execution; that the term
'creditor' includes 'all holders of claims, interests, or securities of whatever
character against the debtor or its property,' 11 USCA 205(b)(4); and that, if
the plan is not proposed or accepted or confirmed within a reasonable time to
be fixed by the judge, he may dismiss the proceeding.

13

Before acceptance of any plan, the Interstate Commerce Commission is

directed to hold a public hearing, following which it shall render a report
recommending a plan which 'will, in its opinion be equitable, will not
discriminate unfairly in favor of any class of creditors or stockholders, will be
financially advisable * * * and will be compatible with the public interest.' 11
USCA 205(d). The commission is required to state fully the reasons for its
conclusions. The plan is then to be submitted to the creditors and stockholders
of the debtor for acceptance or rejection. No plan may be finally approved by
the commission until it has been accepted in writing by or on behalf of creditors
holding two-thirds in amount of the claims of each class affected by the plan,
and by or on behalf of stockholders holding two-thirds of the stock of each
class.

14

Upon approval by the commission, the judge, after hearing, shall confirm the
plan if satisfied, among other things, that the plan affords adequate protection
for the realization by creditors of the value of their securities, liens and claims
in one of the ways pointed out by the section. Upon confirmation of the plan, it
is to be binding not only upon corporation and all stockholders and creditors
generally, but upon all secured creditors of each class of which two-thirds in
amount shall have accepted the plan. For convenient reference, various
pertinent excerpts from section 77 (11 USCA 205) are reproduced in the
margin.4

15

On November 22, 1933, the district court, after a hearing, entered an order
reciting that each of the collateral notes contained provisions that, in case of the
insolvency of the railway company or the appointment of a receiver or the
nonpayment of interest when due, the holder thereof might sell and dispose of
the collateral; that there was danger that the holders would claim that one or
more of the events entitling them to sell such collateral had occurred; that a sale
of the collateral or any part thereof by the Reconstruction Finance Corporation
or by the banks would be inconsistent with the purposes of section 77 and
would hinder, impede, obstruct, delay, and, in effect, prevent the orderly
preparation and consummation of a plan of reorganization; that the district
court, under section 77, had exclusive jurisdiction of the debtor and its property
wherever located; that under paragraph 15 of section 2 of the Bankruptcy Act,
11 USCA 11(15), the court had power to make such orders, issue such
process, and enter such judgments as might be necessary for the enforcement of
the act; and that it was necessary for the enforcement of section 77 that the
holders of the collateral be enjoined and restrained from selling or disposing of
the same pending the preparation and consummation of a reorganization plan.
Following these recitals, the Reconstruction Finance Corporation and the banks
were restrained and enjoined from converting, selling, or otherwise disposing of
the collateral or any part thereof until further order of the court.

16

An appeal followed to the circuit court of appeals where, upon full

consideration, the decree of the district court was affirmed. 72 F.(2d) 443. The
case was brought here on certiorari. 293 U.S. 550, 55 S.Ct. 213, 79 L.Ed. -.

17

The questions which we are called upon to determine relate to the construction
of section 77 in certain particulars; to its constitutionality; and to the powers of
the district court which were here asserted and exercised.

18

First. The constitutional validity of the section in its general scope and
application is not assailed, the subject being passed without discussion by any

of the parties. Never-theless, grave doubt has been expressed in respect of that
question; and since the question is inherently fundamental, we deem it
necessary to consider and dispose of it in liminepostponing, however, for
later consideration the limited contention of the banks, in which the
Reconstruction Finance Corporation seems not to join, that the due process
clause of the Constitution is infringed by the special application made of
section 77 in respect of the injunction.
19

Article 1, 8, cl. 4, of the Federal Constitution vests Congress with the power
'to establish * * * uniform Laws on the subject of Bankruptcies throughout the
United States'; and the simple question is: -Does section 77 constitute a law on
the subject of bankruptcies? While attempts have been made to formulate a
distinction between bankruptcy and insolvency, it long has been settled that,
within the meaning of the constitutional provision, the terms are convertible.
As early as 1833, Mr. Justice Story said that whatever might have been the rule
of the English law on the subject, Congress might pass an act authorizing a
commission of bankruptcy at the petition of the debtor; and that no distinction,
practically or even theoretically, could be made between bankruptcies and
insolvencies. 2 Story on the Constitution (4th Ed.) 1111. From the beginning,
the tendency of legislation and of judicial interpretation has been uniformly in
the direction of progressive liberalization in respect of the operation of the
bankruptcy power.

20

The English law of bankruptcy, as it existed at the time of the adoption of the
Constitution, was conceived wholly in the interest of the creditor and proceeded
upon the assumption that the debtor was necessarily to be dealt with as an
offender. Anything in the nature of voluntary bankruptcy was unknown to that
system. The persons who were permitted to fall within the term 'bankrupt' were
limited to traders. But the notion that the framers of the Constitution, by the
bankruptcy clause, intended to limit the power of Congress to the then existing
English law and practice upon the subject long since has been dispelled.

21

In Waring v. Clarke, 5 How. 441, 12 L.Ed. 226, this court held that the grant
extending the judicial power to all cases of admiralty and maritime jurisdiction
was not limited to, and was not to be interpreted by, what were cases of
admiralty jurisdiction in England when the Constitution was adopted. Nor is
the implied power of Congress over the subject arising from that jurisdictional
clause and the general coefficient clause (article 1, 8, cl. 18) of the
Constitution to be thus confined. Detroit Trust Co. v. The Thomas Barlum, 293
U.S. 21, 4243, 55 S.Ct. 31, 79 L.Ed. 176; Panama R.R. Co. v. Johnson, 264
U.S. 375, 385387, 44 S.Ct. 391, 68 L.Ed. 748.

22

The same, it was said in the Waring Case, is true in respect of other grants of
power; and the bankruptcy clause was cited, page 458 of 5 How., 12 L.Ed. 226,
as an example. In the Matter of Edward Klein, decided by Mr. Justice Catron
sitting on circuit and printed in 1 How. (42 U.S.) 277, Note, Fed. Cas. No.
7865, it was definitely decided that the extent of the power of Congress was not
limited to the principle upon which the English bankruptcy system was
founded; and that decision was cited with approval by this court in Hanover
National Bank v. Moyses, 186 U.S. 181, 186, 22 S.Ct. 857, 46 L.Ed. 1113.
Whether a clause in the Constitution is to be restricted by the rules of the
English law as they existed when the Constitution was adopted depends upon
the terms or the nature of the particular clause in question. Certainly, these
rules have no such restrictive effect in respect of any constitutional grant of
governmental power (Waring v. Clarke, supra), though they do, at least in some
instances, operate restrictively in respect of clauses of the Constitution which
guarantee and safeguard the fundamental rights and liberties of the individual,
the best examples of which, perhaps, are the Sixth and Seventh Amendments,
which guarantee the right of trial by jury. That guaranty has always been
construed to mean a trial in the mode and according to the settled rules of the
common law, including all the essential elements recognized in this country and
England when the Constitution was adopted. Patton v. United States, 281 U.S.
276, 288, 50 S.Ct. 253, 74 L.Ed. 854, 70 A.L.R. 263, and cases cited. See, also,
Callan v. Wilson, 127 U.S. 540, 549, 8 S.Ct. 1301, 32 L.Ed. 223; Dimick v.
Schiedt, 293 U.S. 474, 476, 487, 55 S.Ct. 296, 79 L.Ed. 603, 95 A.L.R. 1150;
West v. Gammon et al. (C.C.A.) 98 F. 426.

23

But, while it is true that the power of Congress under the bankruptcy clause is
not to be limited by the English or Colonial law in force when the Constitution
was adopted, it does not follow that the power has no limitations. Those
limitations have never been explicitly defined, and any attempt to do so now
would result in little more than a paraphrase of the language of the Constitution
without advancing far toward its full meaning. Judge Cowen, in Kunzler v.
Kohaus, 5 Hill (N.Y) 317, 321, a decision which was approved by this court in
Hanover National Bank v. Moyses, supra, said that the power was the same as
though Congress had been authorized 'to establish uniform laws on the subject
of any person's general inability to pay his debts. * * *' Probably the most
satisfactory approach to the problem of interpretation here involved is to
examine it in the light of the acts, and the history of the acts, of Congress which
have from time to time been passed on the subject; for, like many other
provisions of the Constitution, the nature of this power and the extent of it can
best be fixed by the gradual process of historical and judicial 'inclusion and
exclusion.' Compare Davidson v. New Orleans, 96 U.S. 97, 104, 24 L.Ed. 616;
Fed. Trade Comm. v. Raladam Co., 283 U.S. 643, 648, 51 S.Ct. 587, 75 L.Ed.

1324, 79 A.L.R. 1191.

24

The first act, that of 1800 (2 Stat. 19) so far ignored the English law, which was
confined to traders, as to include bankers, brokers, and underwriters as well.
The act of 1841 (5 Stat. 440) added merchants; and other additions have been
made by later acts until now practically all classes of persons and corporations
are included. See Friday v. Hall & Kaul Co., 216 U.S. 449, 454, 30 S.Ct. 261,
54 L.Ed. 562, 26 L.R.A. (N.S.) 475. The act of 1800 was one exclusively in the
interest of the creditor. But the act of 1841 took what then must have been
regarded as a radical step forward by conferring upon the debtor the right by
voluntary petition to surrender his property, with some exceptions, and relieve
himself of all future liability in respect of past debts. The act of 1800, like the
English law, was conceived in the view that the bankrupt was dishonest; while
the act of 1841 and the later acts proceeded upon the assumption that he might
be honest but unfortunate. One of the primary purposes of these acts was to
'relieve the honest debtor from the weight of oppressive indebtedness, and
permit him to start afresh free from the obligations and responsibilities
consequent upon business misfortunes,' and to give him 'a new opportunity in
life and a clear filed for future effort, unhampered by the pressure and
discouragement of pre-existing debt.' Local Loan Co. v. Hunt, 292 U.S. 234,
244, 54 S.Ct. 695, 699, 78 L.Ed. 1230, 93 A.L.R. 195.

25

By the Act March 2, 1867, p. 567, 43, as amended by the Act of 1874, c. 390,
17, 18 Stat. 178, 182, the debtor for the first time was permitted, either before
or after an adjudication in bankruptcy, to propose terms of composition to his
creditors to become binding upon their acceptance by a designated majority and
confirmation by the judge.

26

The fundamental and radically progressive nature of these extensions becomes

apparent upon their mere statement; but all have been judicially approved or
accepted as falling within the power conferred by the bankruptcy clause of the
Constitution. Taken altogether, they demonstrate in a very striking way the
capacity of the bankruptcy clause to meet new conditions as they have been
disclosed as a result of the tremendous growth of business and development of
human activities from 1800 to the present day. And these acts, far-reaching
though they be, have not gone beyond the limit of congressional power; but
rather have constituted extensions into a field whose boundaries may not yet be
fully revealed.

27

Section 77 advances another step in the direction of liberalizing the law on the
subject of bankruptices. Railway corporations had been definitely excluded
from the operation of the law in 1910 (chapter 412, 4, 36 Stat. 838, 839, 11

USCA 22), probably because such corporations could not be liquidated in the
ordinary way or by a distribution of assets. A railway is a unit; it can not be
divided up and disposed of piecemeal like a stock of goods. It must be sold, if
sold at all, as a unit and as a going concern. Its activities can not be halted
because its continuous, uninterrupted operation is necessary in the public
interest; and, for the preservation of that interest, as well as for the protection of
the various private interests involved, reorganization was evidently regarded as
the most feasible solution whenever the corporation had become 'insolvent or
unable to meet its debts as they mature.'
28

Equity receiverships, resorted to for that purpose, have never been satisfactory
for many reasons. Partly, no doubt, in recognition of that situation, Congress,
by section 77, added railroad corporations to the category of those who might
have relief by legislation passed in virtue of the bankruptcy clause of the
Constitution; and determined, after consideration, that such relief to be effectual
should take the form of a reorganization, and should extend to cases where the
corporation is 'unable to meet its debts as they mature.' The last phrase, since it
is used as an alternative for the word 'insolvent,' obviously means something
less than a condition of 'bankruptcy' or 'insolvency' as those words are
employed in the law. See Bankruptcy Act, 1(15), 11 USCA 1(15), which
defines an 'insolvent' as one whose assets, at a fair valuation, are not sufficient
to pay his debts. It may be construed to include a debtor who, although unable
to pay promptly, may be able to pay if time to do so be sufficiently extended.
Obviously, section 77 does no more than follow the line of historical and
progressive development projected by previous acts.

29

As outlined by that section, a plan of reorganization, when confirmed, cannot

be distinguished in principle from the composition with creditors authorized by
the act of 1867, as amended by the act of 1874. It is not necessary to the
validity of either that the proceeding should result in an adjudication of
bankruptcy. The constitutionality of the old provision for a composition is not
open to doubt. In re Reiman, 20 Fed. Cas. pages 490, 496, 497, No. 11,673,
cited with approval in Hanover National Bank v. Moyses, supra. That provision
was there sustained upon the broad ground that the 'subject of bankruptcies'
was nothing less than 'the subject of the relations between an insolvent or nonpaying or fraudulent debtor, and his creditors, extending to his and their relief.'
That it was not necessary for the proceedings to be carried through in
bankruptcy was held not to warrant the objection that the provision did not
constitute a law on the subject of bankruptcies. The same view sustains the
validity of section 77. Both contemplate an adjustment of a failing debtor's
obligations; and although actual bankruptcy may not supervene in either, they
are none the less laws on the subject of bankruptcies. With due regard for

consistency, the constitutional validity of the one cannot well be sustained and
that of the other denied, as this court quite evidently recognized in Canada
Southern R. Co. v. Gebhard, 109 U.S. 527, 3 S.Ct. 363, 366, 27 L.Ed. 1020.
30

That case involved an act of the Canadian Parliament by which railway

companies unable to meet their engagements might unite with their creditors in
the preparation of 'schemes of arrangement' to be filed in the court of chancery.
A scheme was deemed agreed to by the holders of mortgages, bonds, stocks,
rent charges, and preferred shares when assented to in writing by a designated
majority of the holders of each class of security. The scheme when confirmed
by the court became binding upon the nonassenting minority and this court
held it to be thus binding upon bondholders who were citizens of the United
States and who sued in courts of the United States to recover on their bonds.
The 'scheme' of the Canadian law was not unlike the 'plan' of section 77. The
significant part of the court's opinion, so far as the question now under
discussion is concerned, is the following, which appears at page 536 of 109
U.S., 3 S.Ct. 363, 369: 'The confirmation and legalization of 'a scheme of
arrangement' under such circumstances is no more than is done in bankruptcy
when a 'composition' agreement with the bankrupt debtor, if assented to by the
required majority of creditors, is made binding on the non-assenting minority.
In no just sense do such governmental regulations deprive a person of his
property without due process of law. They simply require each individual to so
conduct himself for the general good as not unnecessarily to injure another.
Bankrupt laws have been in force in England for more than three centuries, and
they had their origin in the Roman law. The constitution expressly empowers
the congress of the United States to establish such laws. Every member of a
political community must necessarily part with some of the rights which, as an
individual, not affected by his relation to others, he might have retained. Such
concessions make up the consideration he gives for the obligation of the body
politic to protect him in life, liberty, and property. Bankrupt laws, whatever
may be the form they assume, are of that character.'

31

After pointing out that the Canadian law was in accordance with the policy of
the English and Canadian governments in dealing with embarrassed and
insolvent railway companies; that it took the place in England and Canada of
foreclosure sales in the United States 'which in general accomplish substantially
the same result with more expense and greater delay,' the court added (page
539 of 109 U.S., 3 S.Ct. 363, 371): '* * * It is in entire harmony with the spirit
of bankrupt laws, the binding force of which, upon those who are subject to the
jurisdiction, is recognized by all civilized nations. It is not in conflict with the
Constitution of the United States, which, although prohibiting states from
passing laws impairing the obligation of contracts, allows congress 'to establish

* * * uniform laws on the subject of bankruptcy throughout the United States.'

Unless all parties in interest, wherever they reside, can be bound by the
arrangement which it is sought to have legalized, the scheme may fail.' It is
unnecessary to consider the criticism, sometimes made, that these excerpts are
dicta merely, since we are of opinion that they are sound in principle.
32

It follows, from what has now been said, that section 77, in its general scope
and aim, is within the power conferred by the bankruptcy clause of the
Constitution; and we so hold.

33

Second. Under section 77 does the bankruptcy court have authority to enjoin
the sale of the collateral here in question if a sale would so hinder, obstruct and
delay the preparation and consummation of a plan of reorganization as probably
to prevent it? By section 2 of the Bankruptcy Act (U.S.C. title 11, 11, 11
USCA 11), courts of bankruptcy are invested 'with such jurisdiction at law
and in equity as will enable them to exercise original jurisdiction in bankruptcy
proceedings.' They are essentially courts of equity, and their proceedings
inherently proceedings in equity, the words 'at law' probably having been
inserted only with regard to clause (4) of section 2, 11 USCA 11(4), which
confers authority to arraign, try, and punish bankrupts and others for violations
of the act. Local Loan Co. v. Hunt, 292 U.S. 234, 240, 54 S.Ct. 695, 78 L.Ed.
1230, 93 A.L.R. 195. Their adjudications and orders constitute in all essential
particulars decrees in equity. Id., page 241 of 292 U.S., 54 S.Ct. 695. The power
to issue an injunction when necessary to prevent the defeat or impairment of its
jurisdiction is, therefore, inherent in a court of bankruptcy, as it is in a duly
established court of equity. Section 262 of the Judicial Code (28 USCA 377),
which authorizes the United States courts 'to issue all writs not specifically
provided for by statute, which may be necessary for the exercise of their
respective jurisdictions' recognizes and declares the principle. An example of
its application is found in Kline v. Burke Constr. Co., 260 U.S. 226, 229, 43
S.Ct. 79, 67 L.Ed. 226, 24 A.L.R. 1077, where we held that a federal court,
having first acquired jurisdiction of the subject matter, could enjoin the parties
from proceeding in a state court of concurrent jurisdiction 'where the effect of
the action would be to defeat or impair the jurisdiction of the federal court.' An
injunction may be issued in such circumstances for the purpose of protecting
and preserving the jurisdiction of the court 'until the object of the suit is
accomplished and complete justice done between the parties.' Looney v.
Eastern Texas R.R. Co., 247 U.S. 214, 221, 38 S.Ct. 460, 462, 62 L.Ed. 1084.

34

Moreover, by section 2(15) of the Bankruptcy Act (U.S.C. title 11, 11, 11
USCA 11(15), courts of bankruptcy are invested with such authority in equity
as will enable them to exercise original jurisdiction in bankruptcy proceedings,

including the power to 'make such orders, issue such process, and enter such
judgments in addition to those specifically provided for as may be necessary for
the enforcement of the provisions of this act (title).' It may be that in an
ordinary bankruptcy proceeding the issue of an injunction in the circumstances
here presented would not be sustained. As to that it is not necessary to express
an opinion. But a proceeding under section 77 (11 USCA 205) is not an
ordinary proceeding in bankruptcy. It is a special proceeding which seeks only
to bring about a reorganization, if a satisfactory plan to that end can be devised.
And to prevent the attainment of that object is to defeat the very end the
accomplishment of which was the sole aim of the section, and thereby to render
its provisions futile.
35

The bankruptcy court, in granting the injunction, was well within its power,
either as a virtual court of equity, or under the broad provisions of section 2(15)
of the Bankruptcy Act, 11 USCA 11(15), or of section 262 of the Judicial
Code (28 USCA 377).

36

The injunction does not infringe section 67d, U.S.C. title 11, 107(d), 11
USCA 107(d). The substance of that provision is that bona fide liens shall not
be affected by anything contained in the Bankruptcy Act. The injunction here in
no way impairs the lien, or disturbs the preferred rank of the pledgees. It does
no more than suspend the enforcement of the lien by a sale of the collateral
pending further action. It may be, as suggested, that during the period of
restraint the collateral will decline in value; but the same may be said in respect
of an injunction against the sale of real estate upon foreclosure of a mortgage;
and such an injunction may issue in an ordinary proceeding in bankruptcy.
Straton v. New, 283 U.S. 318, 321, 51 S.Ct. 465, 75 L.Ed. 1060, and cases
cited. A claim that injurious consequences will result to the pledgee or the
mortgagee may not, of course, be disregarded by the district court; but it
presents a question addressed not to the power of the court but to its discretion
a matter not subject to the interference of an appellate court unless such
discretion be improvidently exercised. So far as constitutional power is
concerned, there is no difference between an injunction restraining the
enforcement of a real estate mortgage and one restraining the enforcement of a
pledge by the sale of collateral security. Such differences as exist affect not the
power but the propriety of its exercisethat is to say, the discretion of the
court. Such an injunction, as just indicated, is within the contemplation of
section 77, and we need not inquire whether it would be admissible under the
act in force prior to the adoption of that section. Compare Straton v. New,
supra. Nor does section 57h, 11 U.S.C. 93(h), 11 USCA 93(h), also invoked
by petitioners, have any pertinent application to the question under discussion
in the light of the provisions, purpose and aim of section 77.

37

Petitioners urge that the injunction is precluded by a consideration of

subdivision (l) of section 77, 11 USCA 205(l), which confers authority upon
the court to enjoin or stay the commencement or continuance of any judicial
proceeding to enforce any lien upon the estate until after final decree. The point
made is that the granting of this express power to enjoin judicial proceedings
brought to enforce liens negatives the authority to stay the enforcement of liens
by nonjudicial proceedings, in accordance with the maxim, 'Expressio unius est
exclusio alterius.' But clause (15) of section 2 is still in the act; and it would be
an unwarranted use of the maxim, which is only an aid to construction, to apply
it in such a way as to work a destruction, pro tanto, not only of that clause, but
of section 262, Judicial Code (28 USCA 377), and of the general principle
upon which both are based.

38

Third. It is evident that the effect here wrought by the menace of impending
sales of the collateral would seriously embarrass and probably prevent the
formulation and consummation of a plan of reorganization. Both courts below
so found. The findings of the district court are in the form of recitals in the
order, but are nevertheless in substance and in effect findings of fact. The
circuit court of appeals (72 F.(2d) 443, 452) approved these findings, and added
that without some control over the disposition of the collateral, 'the presentation
of a satisfactory plan of reorganization might as well be abandoned.' These
concurrent findings of the two courts, as this court has often held, should be
accepted as conclusive unless clearly erroneous. United States v. Commercial
Credit Co., 286 U.S. 63, 67, 52 S.Ct. 467, 76 L.Ed. 978; Stuart v. Hayden, 169
U.S. 1, 14, 18 S.Ct. 274, 42 L.Ed. 639; Dun v. Lumbermen's Credit Ass'n, 209
U.S. 20, 23-24, 28 S.Ct. 335, 52 L.Ed. 663, 14 Ann.Cas. 501.

39

We are not impressed with the attempt of petitioners to show that the record
entirely fails to justify the conclusion of the courts below in that regard. It must
be borne in mind that, in addition to the collateral aggregating more than
$54,000,000, held by petitioners, there was outstanding additional collateral
pledged as security in the sum of over $145,000,000, bringing the total up to
approximately $200,000,000, a sum equal to nearly half of the capital then
issued and in the hands of the public. At the time the injunction was applied
for, there was danger that the noteholders would claim that the right of sale
under the terms of the collateral notes had been brought into existence; and
with the pendency of the reorganization proceedings and the suspension of the
payment of interest, it well cannot be doubted that there also was danger that
the noteholders would proceed to exercise their rights of sale under the
collateral notes. Such action on the part of these noteholders might well
precipitate similar action by other holders of pledged collateral.

40

It is necessary, under section 77, first to prepare a plan and then to submit it,
perhaps with other suggested plans, to the Interstate Commerce Commission
for consideration and recommendation. The plan having been assented to by
two-thirds of each class of the stockholders and creditors and approved by the
commission, must then, and only then, be submitted for approval to the district
court. In the reorganization of a great railroad system like that here concerned,
these various steps call for a degree of consideration and an extent of detailed
work almost beyond the power of appreciation. The sale of the collateral
securities from time to time during the progress of this consideration and work
well might require such changes of detail in the plan, entailing new and perhaps
difficult reconcilements of views among many and conflicting interests, as to
force an abandonment of the proceeding.

41

It must be apparent, if we consider only the impressive facts set forth in the
forepart of this opinion in respect of the extensive operations of the railway
company and its subsidiaries, the extent, multiplicity and variety of their
obligations, the complicated nature of their capital structure, the great volume
of their securities held as collateral by many and widely separated creditors, and
other circumstances, that without the maintenance of the status quo for a
reasonable length of time no satisfactory plan could be worked out. The
preparation of any plan the important details of which could survive the
changes in, and the consequent fluctuation and disturbance of, the financial
structure, brought about by recurring sales of collateral, would seem to be a
practical impossibility. Under all the circumstances, we are of opinion that the
district court properly exercised its discretion in favor of respondents.

42

Fourth. We find no substance in the contention of the petitioning banks that

section 77, as applied by the court below to permit an injunction restraining the
sale of the collateral, violates the Fifth Amendment. The basis of the contention
is that since, by the terms of the pledge, the pledgees are empowered on default
to sell the collateral at such times as they may select, section 77, as thus
applied, deprives them of their propertythat is to say, impairs or destroys their
contractual rightswithout due process of law.

43

The Constitution, as it many times has been pointed out, does not in terms
prohibit Congress from impairing the obligation of contracts as it does the
states. But as far back as Calder v. Bull, 3 Dall. 386, 388, 1 L.Ed. 648, it was
said that among other acts which Congress could not pass without exceeding its
authority was 'a law that destroys or impairs the lawful private contracts of
citizens.' The broad reach of that statement has been restricted (Legal Tender
Cases, 12 Wall. 457, 549, 550, 20 L.Ed. 287); but the principle which it

includes has never been repudiated, although the extent to which it may be
carried has not been definitely fixed. Speaking generally, it may be said that
Congress, while without power to impair the obligation of contracts by laws
acting directly and independently to that end, undeniably, has authority to pass
legislation pertinent to any of the powers conferred by the Constitution
however it may operate collaterally or incidentally to impair or destroy the
obligation of private contracts. Legal Tender Cases, supra; Louisville &
Nashville R.R. v. Mottley, 219 U.S. 467, 480482, 484, 31 S.Ct. 265, 55
L.Ed. 297, 34 L.R.A. (N.S.) 671; Highland v. Russell Car & Snowplow Co.,
279 U.S. 253, 261, 49 S.Ct. 314, 73 L.Ed. 688. And under the express power to
pass uniform laws on the subject of bankruptcies, the legislation is valid though
drawn with the direct aim and effect of relieving insolvent persons in whole or
in part from the payment of their debts. See Hanover National Bank v. Moyses,
supra, at page 188 of 186 U.S., 55 L.Ed. 297, 34 L.R.A.(N.S.) 671; Highland
from the nature of the power, and this must have been within the contemplation
of the framers of the Constitution when the power was granted.
44

The injunction here goes no further than to delay the enforcement of the
contract. It affects only the remedy. As already appears, this court has upheld
the power of a court of bankruptcy to stay the enforcement of the remedy under
a real-estate mortgage; and the remedy under a pledge, so far as constitutional
power is here concerned, presents a situation strictly analogous in character.

45

Fifth. It is next contended that the court was without power to issue the
injunction in a summary proceeding. Obviously, an application for an
injunction against the immediate enforcement of a remedy is not the assertion
of an adverse claim. The bonds deposited as collateral were not in the hands of
purchasers, but in the hands of creditors as security. That the equity which the
debtor retained was a property interest was not and could not be disputed by the
creditors; nor was the claim of the creditors in respect of their rights in the
collateral security or the rank of their liens questioned by the debtor. In short,
no adverse claim was brought forward by either of the parties to the
controversy. The only question was in respect of the creditors' remedy; and the
sole point is as to the authority of the bankruptcy court to delay for a reasonable
time an interference with the reorganization proceeding which would result
from an immediate sale of the collateral. The court below dealt adequately with
the situation, and its conclusions find ample support in the decisions. See, for
example, In re Purkett, Douglas & Co. (D.C.) 50 F.(2d) 435, 438; John
Matthews, Inc., v. Knickerbocker Trust Co. (C.C.A.) 192 F. 557; Allebach v.
Thomas (C.C.A.) 16 F.(2d) 853.

46

The Reconstruction Finance Corporation raised the question in the district court

by a demurrer, asserting that the allegations of the debtor's petition were

insufficient. But in a summary proceeding, as the term itself implies, the merits
of the controversy are determined without the formality in respect of pleadings
which is required in actions at law or suits in equity. In such a proceeding we
see no reason why the allegations of the petition may not be helped out by
timely affidavits. Doubt has been expressed by lower federal courts as to the
propriety of a demurrer in such a proceeding. In re Snelling (D.C.) 202 F. 258,
Judge Morton aptly said: 'Summary procedure implies, I think, a single hearing
* * * at which the merits of the controversy are investigated and decided,
without much regard to the formal pleadings.' See, also, In re Rockford Produce
& Sales Co. (C.C.A.) 275 F. 811, 813. In any event, we think, as against
demurrer, conceding its propriety, the petition is sufficient. Pertinent
allegations are epitomized in the early part of this opinion.
47

The contention of the petitioners that they were not given sufficient notice or a
full opportunity to be heard is quite evidently without merit. They had ten days'
previous notice by registered mail of the application for the injunction. All
appeared specially and participated in the hearings, for which ample time was
allowed. Briefs were filed on both sides, and additional memoranda were
presented to the court by the Reconstruction Finance Corporation and one of
the banks.

48

Sixth. The territorial jurisdiction of the district court is assailed by three of the
banks on the ground that they were located outside the Northern District of
Illinois. The contention is that the district court was without power to issue its
process for service outside the district. Section 77(a), 11 USCA 205(a),
provides that after the petition of the railroad company is approved, 'the court
in which such order approving the petition is entered shall, during the pendency
of the proceedings under this section and for the purposes thereof, have
exclusive jurisdiction of the debtor and its property wherever located.' Congress
may authorize the civil process of a federal district court to be served upon
persons in any other district. Toland v. Sprague, 12 Pet. 300, 328, 9 L.Ed. 1093;
United States v. Congress Const. Co., 222 U.S. 199, 203, 204, 32 S.Ct. 44, 56
L.Ed. 163; First Natl. Bank v. Williams, 252 U.S. 504, 510, 40 S.Ct. 372, 64
L.Ed. 690. There are other cases to the same effect, but it is unnecessary to cite
them. Section 77 deals with railway corporations whose lines and activities are
not confined to a single district or a single state, but in numerous instances
reach into many districts and many states. The lines of the Rock Island system
extend into twenty districts and fourteen states. Jurisdiction over reorganization
proceedings, however extensive the railway lines may be, is conferred upon a
single district court. The usefulness of the section would be greatly minimized
and in some instances destroyed if that court were powerless to send its process

into any state when necessary to effectuate the purposes of the law. As has
already been shown, the equity in the collateral remaining in the railroad
company is property; and over this property, wherever located, the federal
district court is given exclusive jurisdiction by the precise language of section
77, just quoted. As a necessary consequence of that jurisdiction, the court must
have the power to preserve and safeguard the property for the benefit of the
trust estate so far as that is compatible with the rights of the pledgees.
Jurisdiction over the property wherever located carries with it jurisdiction to
enjoin, in a proper case, interferences with the property, and that includes, by
necessary inference, the power to send process to that end for service upon the
persons to be enjoined wherever they may be found within the United States.
49

It is said that the words 'wherever located' mean wherever located within the
district. But considering the nature of the property involved, the number of
districts and states over which it is distributed, and the manifest policy of
avoiding ancillary administration as far as possible, a construction so narrow
must be rejected as at war with the whole spirit and purpose of the law.

50

Seventh. The Reconstruction Finance Corporation contends that sections 77

and 2(15) of the Bankruptcy Act, 11 USCA 205 and 11(15) must be limited
by the provisions of section 5 of the Reconstruction Finance Corporation Act
(c. 8, 47 Stat. 5 (see 15 USCA 605)), which empowers the corporation to take
over and liquidate collateral accepted by it as security. The Reconstruction
Finance Corporation Act creates a corporation and vests it with designated
powers. Its entire stock is subscribed by the government, but it is none the less
a corporation, limited by its charter and by the general law. The act does not
give it greater rights as to the enforcement of its outstanding credits than are
enjoyed by other persons or corporations in the event of proceedings under the
Bankruptcy Act. The provisions and principles of enforcement of the
Bankruptcy Act, including section 77, are binding upon the Reconstruction
Finance Corporation, in the absence of some pertinent statutory exception, as
they are upon other corporations. We are unable to find such an exception in
the authority to liquidate collateral held as securityan authority enjoyed in
common with any other lender of money who has taken the trouble to provide
for it in his contract with the borrower. What is given to the lender in either
event is a remedy which, when subject to the control of the bankruptcy court
under given circumstances in the one case, is equally so in the other.

51

Finally. Petitioners insist, with much force, that the injunction, granted in
November, 1933, and still operative, is likely, if continued, to result in
irreparable injury. We do not interpret the order, as suggested by the
Reconstruction Finance Corporation, as continuing the injunction in force until

a plan of reorganization is effected or the proceeding under section 77

dismissed. On the contrary, we understand that the injunction may at any time
be dissolved upon application and proper notice and showing. It contemplates,
as we have already suggested, only reasonable delay.
52

It is true that no plan has yet been consummated; and, so far as the record
shows, none has been prepared or is in the course of preparation. If this long
delay were without adequate excuse, the retention of the injunction for the long
period which has intervened since it was granted could not be justified. But the
delay is obviously due to the many doubts and uncertainties arising from the
present litigation. Until they are finally resolved, the consummation, or even
the preparation, of any definite plan is plainly impracticable. With those doubts
and uncertainties now removed, the proceeding should go forward to
completion without further delay, or be dismissed.

53

The delay and expense incident to railroad receiverships and foreclosure sales
constituted, probably, the chief reasons which induced the passage of section
77; and to permit the perpetuation of either of these evils under this new
legislation would be subversive of the spirit in which it was conceived and
adopted. Not only are those who institute the proceeding and those who carry it
forward bound to exercise the highest degree of diligence, but it is the duty of
the court and of the Interstate Commerce Commission to see that they do.
Proceedings of this character, involving public and private interests of such
magnitude, should, so far as practicable, be given the right of way both by the
court and by the commission, to the end that they may be speedily determined.

54

Decree affirmed.

55

Mr. Justice BRANDEIS took no part in the decision of this case.

The collateral pledged with the notes held by the Reconstruction Finance
Corporation consists of the following securities:
Listed collateral:
Chicago, Rock Island &
Pacific Railway Company
First and Refunding 4%
Gold Bonds............... $7,575,000.00
St. Paul & Kansas City
Short Line Railroad Company

First Mortgage
4 1/2% Gold Bonds......... 9,374,500.00
Rock Island, Arkansas &
Louisiana Railroad
Company First Mortgage
4 1/2% Gold Bonds......... 3,862,000.00
--------Total
$20,811,500.00
Unlisted collateral:
Chicago, Rock Island &
Gulf Railway Company
Extension First
Mortgage 5% Bonds........ $6,927,000.00
Chicago, Rock Island &
Gulf Railway Company
Carrollton Branch 6%
Bonds....................... 331,000.00
Kankakee & Seneca
Railroad Company 4 1/2%
Bonds....................... 352,000.00
Rock Island & Dardanelle
Railway Company First
Mortgage 5% Bonds........... 100,000.00
Rock Island Memphis
Terminal Depot First
Mortgage 5% Bonds........... 900,000.00
Rock Island Memphis
Terminal First Mortgage
5% Bonds.................... 400,000.00
Rock Island Omaha Terminal
First Mortgage 5%
Bonds....................... 906,000.00
Rock Island Improvement
Company:
Blue Island Shops
Bonds....................... 199,000.00
Cedar Rapids Terminal
Bonds....................... 369,732.99
Little Rock Mortgage
Bonds....................... 278,492.49
Peoria Terminal
Mortgage Bonds.............. 290,247.86

First and Collateral

5% Bonds.................. 3,310,000.00
Trinity & Brazos Valley
Receiver's Certificates..... 747,492.51
Trinity & Brazos Valley
First Mortgage Bonds
(now pledged under
Colorado & Southern
Mortgage; C., R. I. & P. has
agreed to pledge them
with Reconstruction
Finance Corporation upon
release from that Mortgage
May 1, 1935).............. 4,380,000.00
--------Total................... $19,490,965.85
Assignment of Chicago,
Rock Island & Pacific
Railway Company's
distributive share in assets
of Railroad Credit
Corporation, approximately. 1,400,000.00

The notes held by the five banks and the collateral securing the same are as
follows:
COLLATERAL

Amount
of Loan
Chase National Bank......... $2,000,000
Continental
Illinois Bank and Trust Co... 1,250,000
New York Trust Co.............. 500,000
Harris Trust & Savings Bank... 250,000
Mississippi
Valley Trust Company........... 125,000
$4,125,000

C. R. I. &
Refunding
4% Bonds

P.

St. Paul
& Kansas
City Shor
Line 4 1/
Gold
Bonds

$3,253,000

$3,956,00

1,307,000
800,000
405,000

2,758,00
1,010,00
490,00

190,000
$5,955,000

240,00
$8,454,00

The $4,125,000 was reduced to $3,866,923.34 by application of debtors'

deposits in the Continental and Mississippi Valley banks.
The St. Paul & Kansas City Short Line 4 1/2% Gold Bonds are mortgage bonds
of a corporation whose capital stock is owned by the debtor; and they are

guaranteed principal and interest by it.

3

Protective Committee for the Chicago, Rock Island & Pacific Railway General
Mortgage 4% Bonds; Protective Committee for the Chicago, Rock Island &
Pacific Railway First and Refunding 4% Gold Bonds and Secured 4 1/2% Gold
Bonds Series A; Protective Committee for the St. Paul & Kansas City Short
Line 4 1/2% Gold Bonds and Rock Island, Arkansas & Louisiana 4 1/2% Gold
Bonds; Protective Committee of the Burlington, Cedar Rapids & Northern
Consolidated 5% Gold Bonds; Protective Committee for the Chicago, Rock
Island & Pacific Railway, 30-year 4 1/2% Convertible Bonds.

'(a) Any railroad corporation may file a petition stating that the railroad
corporation is insolvent or unable to meet its debts as they mature and that it
desires to effect a plan of reorganization. The petition shall be filed with the
court in whose territorial jurisdiction the railroad corporation, during the
preceding six months or the greater portion thereof, has had its principal
executive or operating office, and a copy of the petition shall at the same time
be filed with the Interstate Commerce Commission hereinafter called the
commission: * * * If the petition is so approved, the court in which such order
approving the petition is entered shall, during the pendency of the proceedings
under this section and for the purposes thereof, have exclusive jurisdiction of
the debtor and its property wherever located. The railroad corporation shall be
referred to in the proceedings as a 'debtor.' Any corporation, the majority of the
capital stock of which having power to vote for the election of directors is
owned, either directly or indirectly through an intervening medium,
by any railroad corporation filing a petition as a debtor under this section, or
substantially all of whose properties are operated by such a debtor under lease
or operating agreement may file, with the court in which such other debtor had
filed such a petition, and in the proceeding upon such petition under this
section, a petition stating that it is insolvent or unable to meet its debts as they
mature and that it desires to effect a plan of reorganization in connection with,
or as a part of, the plan of reorganization of such other debtor; and thereupon
such court shall have the same jurisdiction with respect to it, its property and its
creditors and stockholders as the court has with respect to such other debtor. * *
*
'(b) A plan of reorganization within the meaning of this section (1) shall include
a proposal to modify or alter the rights of creditors generally, or of any class of
them, secured or unsecured, either through the issuance of new securities of any
character or otherwise; * * * (3) shall provide adequate means for the execution
of the plan, which may, so far as may be consistent with the provisions of
sections 1 and 5 of the Interstate Commerce Act as amended (Title 49), include

the transfer or conveyance of all or any part of the property of the debtor to
another corporation or to other corporations or the consolidation of the
properties of the debtor with those of another railroad corporation, or the
merger of the debtor with any other railroad corporation and the issuance of
securities of either the debtor or any such corporation or corporations, for cash,
or in exchange for existing securities, or in satisfaction of claims or rights, or
for other appropriate purposes. * * * The term 'creditors' shall, except as
otherwise specifically provided in this section, include, for all purposes of this
section and of the reorganization plan, its acceptance and confirmation, all
holders of claims, interests, or securities of whatever character against the
debtor or its property. * * *
'(c) Upon approving the petition as properly filed the judge * * * (7) if a plan of
reorganization is not proposed or accepted, or, if proposed and accepted, is not
confirmed, within such reasonable time as the judge may, upon cause shown
and after considering any recommendation which has been filed by the
commission, allow, may dismiss the proceeding. * * *
'(d) Before creditors and stockholders of the debtor are asked finally to accept
any plan of reorganization, the Interstate Commerce Commission shall after due notice hold a public hearing at which the
debtor shall present its plan of reorganization and at which, also, such a plan
may be presented by the trustee or trustees, or by or on behalf of creditors of
the debtor, being not less than 10 per centum in amount of any class of
creditors. Following such hearing, the commission shall render a report in
which it shall recommend a plan of reorganization (which may be different
from any which has been proposed) that will, in its opinion be equitable, will
not discriminate unfairly in favor of any class of creditors or stockholders, will
be financially advisable, will meet with the requirements of subdivision (g) of
this section, and will be compatible with the public interest. In such report the
commission shall state fully the reasons for its conclusions. * * * Thereafter the
plan of reorganization recommended by the commission shall be submitted in
such manner as the commission may direct to the creditors and stockholders of
the debtor for acceptance or rejection, together with the report or reports of the
commission thereon. * * *
'(e) A plan of reorganization shall not be finally approved by the commission
until it has been accepted in writing and such acceptance has been filed in the
proceeding by or on behalf of creditors holding two-thirds in amount of the
claims of each class whose claims or interests would be affected by the plan,
and by or on behalf of stockholders of the debtor holding two-thirds of the
stock of each class: Provided, however, That if adequate provision is made in

the plan for the protection of the interests, claims, and liens of any class of
creditors or stockholders in the manner provided in clauses (5) and (6) of
subdivision (g), of this section, then the acceptance of the plan by such class of
creditor or stockholders shall not be requisite to the approval of the plan. * * *
'(g) Upon such approval by the commission, and after hearing such objections
as may be made to the approved plan, the judge shall confirm the plan if
satisfied that * * * (6) the plan provides with respect to any class of creditors
the acceptance of which is requisite to the confirmation of the plan, and who
would not become bound by the plan under the provisions of subdivision (h) of
this section, adequate protection for the realization by them of the value of their
securities, liens, and claims, either (a) by the sale of such property subject to
their liens, if any, or (b) by the sale free of such liens at not less than
a fair upset price, and the transfer of such liens to the proceeds of such sale, or
(c) by appraisal and payment in cash of either the value of such liens and claims
or, at the objecting creditors' election, the value of the securities allotted to such
liens and claims under the plan. Section 57, clause (h), of this Act (section 93,
clause (h) of this title) shall be applicable to the appraisal of securities under
this section, and the value of the unpaid balance shall be appraised as an
unsecured claim. * * *
'(h) Upon such confirmation the provisions of the plan shall be binding upon *
* * (7) all secured creditors of each class of which two-thirds in amount shall
have accepted the plan. * * *
'(i) In addition to the provisions of section 11 of this Act (section 29 of this title)
for the staying of pending suits against the debtor, such suits shall be further
stayed until after final decree (and) the judge may, upon notice and for cause
shown, enjoin or stay the commencement or continuance of any judicial
proceeding to enforce any lien upon the estate until after final decree. * * *
'(n) In proceedings under this section and consistent with the provisions thereof,
the jurisdiction and powers of the court, the duties of the debtor and the rights
and liabilities of creditors, and of all persons with respect to the debtor and his
property, shall be the same as if a voluntary petition for adjudication had been
filed and a decree of adjudication had been entered on the day when the
debtor's petition was filed. * * *'