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MEYER V. FLEMING, 327 U. S. 161 (1946)

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U.S. Supreme Court

Meyer v. Fleming, 327 U.S. 161 (1946)

Meyer v. Fleming

No. 392

Argued January 4, 1946

Decided February 4, 1946

327 U.S. 161

Syllabus

1. Petitioner, owner of a substantial number of shares of stock in a corporation, filed on behalf of the corporation a claim (in the nature of a derivative suit) against a debtor in reorganization proceedings under § 77 of the Bankruptcy Act. Subsequently, a petition of the corporation for reorganization under § 77 was filed and approved, and a trustee was appointed.

Held:

(a) The bankruptcy court should allow the claim to be amended by joining the corporation or its trustee. P. 327 U. S. 172.

(b) If prosecution of the claim will be inconsistent with the plan of reorganization of the corporation or the administration of its affairs, the claim should be disallowed; if not, then the claim should be considered on its merits. P. 327 U. S. 172.

2. The "exclusive jurisdiction" granted the reorganization court by § 77(a) is that which bankruptcy courts have customarily possessed, and the title and powers of the trustee are by § 77(c)(2) assimilated to those of trustees in ordinary bankruptcy proceedings. P. 327 U. S. 164.

3. So far as enforcement of claims is concerned, there is no indication that Congress adopted a different rule in proceedings under § 77 than had long obtained in ordinary bankruptcy proceedings. P. 327 U. S. 164.

4. Litigation commenced by or on behalf of a corporation may not be defeated by supervening proceedings for reorganization of the corporation under § 77 of the Bankruptcy Act. P. 327 U. S. 165.

5. The trustee, being in a position to take control of the litigation by reason of the fact that the cause of action has become a part of the estate, should have the opportunity to make the choice -- of permitting the suit to continue without interference, of intervening in it, of starting a new suit, or of causing the suit to be abated -- which is most advantageous to the estate. P. 327 U. S. 167.

6. Since the claim in this case was filed before the petition of the corporation for reorganization under § 77 was approved, that event should have no different effect on the claim than it would have had on a suit which had been previously instituted by or on behalf of the corporation. P. 327 U. S. 169. chanroblesvirtualawlibrary

Page 327 U. S. 162

7. Where a claim on behalf of a corporation is filed in a reorganization proceeding, the necessary and proper procedure is for the reorganization court to summon in the corporation or its trustee, so that all parties will be bound by any order which is entered on the merits. P. 327 U. S. 170.

8. Continuation of the prosecution of the claim by the petitioner might be wholly compatible with the disposition of the claim by the reorganization court or with the administration of the estate. Pp. 327 U. S. 171-172.

149 F.2d 529 reversed.

In a reorganization proceeding under § 77 of the Bankruptcy Act, a claim of the petitioner was disallowed. The circuit court of appeals affirmed. 149 F.2d 529. This Court granted certiorari. 326 U.S. 707. Reversed and remanded, p. 327 U. S. 172.





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