802 fications allowed. 73d CONGRESS. SESS. II. CH. 345. MAY 24, 1934. and approved as required by the provisions of subdivision (d) of this chapter; (4) all amounts to be paid by the taxing district for services or expenses incident to the readjustment have been fully disclosed and are reasonable; (5) the offer of the plan and its acceptance are in good faith; and (6) the taxing district is authorized by law, upon confirmation of the plan, to take all action necessary Changes and modi- to carry out the plan. Before a plan is confirmed, changes and modifications may be made therein, with the approval of the judge after hearing upon notice to creditors, subject to the right of any creditor Rights of creditor who shall previously have accepted the plan to withdraw his acceptance, within a period to be fixed by the judge and after such notice as the judge may direct, if, in the opinion of the judge, the change or modification will be materially adverse to the interest of such creditor, and if any creditor having such right of withdrawal shall not withdraw within such period, he shall be deemed to have accepted Conformity with sub- the plan as changed or modified: Provided, however, That the plan as changed or modified shall comply with all the provisions of this subdivision. thereafter. Promiso. division. Effect of confirina Disapproval of plan by court; statement of reasons Discharge of taxing "(f) Upon such confirmation the provisions of the plan and of the order of confirmation shall be binding upon (1) the taxing district, and (2) all creditors, secured or unsecured, whether or not affected by the plan, and whether or not their claims shall have been filed or evidenced, and if filed or evidenced, whether or not allowed, including creditors who have not, as well as those who have, accepted it. "(g) In the event the judge shall disapprove the plan he shall file an opinion stating his reasons for such disapproval. If he distract frath debts, etc. approve the plan, the final decree shall discharge the taxing district from those debts and liabilities dealt with in the plan except as provided in the plan; and upon the entry of such decree the jurisdiction of the court in such proceeding shall cease. upon approval. Certified copy of decree or order as evi court. "(h) A certified copy of the final decree or of an order confirming deure of jurisdiction of a plan of readjustment, or of any other decree or order entered in & proceeding under this chapter, shall be evidence of the jurisdiction of the court, the regularity of the proceedings, and the fact that the Order directing prop decree or order was made. A certified copy of an order directing the erty transfer, effect of transfer of any property dealt with by the plan, shall be evidence of the transfer of title accordingly, and if recorded as conveyances are recorded shall impart the same notice that a deed, if recorded, would impart. Status of proceedings under this chapter. Effective upon approval. Power of State over political subdivisions not impaired. (i) In proceedings under this chapter and consistent with the provisions thereof, the jurisdiction and powers of the court, the duties of the taxing district and the rights and liabilities of creditors, and of all persons with respect to the taxing district and its 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 petition of the taxing district was approved. "(j) This chapter shall take effect and be in force from and after the date of the approval of this amendatory Act and shall apply as fully to taxing districts and their creditors, whose interests or debts have been acquired or incurred prior to such date, as to taxing districts and their creditors, whose interests or debts are acquired or incurred after such date. "(k) Nothing contained in this chapter shall be construed to limit or impair the power of any State to control, by legislation or otherwise, any political subdivision thereof in the exercise of its political or governmental powers, including expenditures therefor, and including the power to require the approval by any governmental 73d CONGRESS. SESS. II. CHS. 345, 347. MAY 24, 25, 1934. agency of the State of the filing of any petition hereunder and of any plan of readjustment, and whenever there shall exist or shall hereafter be created under the law of any State any agency of such State authorized to exercise supervision or control over the fiscal affairs of all or any political subdivisions thereof, and whenever such agency has assumed such supervision or control over any political subdivision, then no petition of such political subdivision may be received hereunder unless accompanied by the written approval of such agency, and no plan of readjustment shall be put into temporary effect or finally confirmed without the written approval of such agency of such plans. 803 "(1) If any provision of this chapter, or the application thereof Saving provisions. to any person or circumstances, is held invalid, the remainder of the chapter, or the application of such provision to other persons or circumstances, shall not be affected thereby," Approved, May 24, 1934, 12.20 p.m. TO ACCOMPANY THE BILL (H.R. 5950) TO AMEND AN ACT TOGETHER WITH THE VIEWS OF THE MINORITY FEBRUARY 28 (calendar day, MARCH 5), 1934.-Ordered to be printed UNITED STATES WASHINGTON: 1934 FEBRUARY 28 (calendar day, MARCH 5), 1934.-Ordered to be printed Mr. NEELY, from the Committee on the Judiciary, submitted the following REPORT [To accompany H.R. 5950] The Committee on the Judiciary, having had under consideration the bill (H.R. 5950) to amend an act entitled "An act to establish a uniform system of bankruptcy throughout the United States", approved July 1, 1898, and acts amendatory thereof and supplementary thereto, report the same favorably to the Senate and recommend that the bill do pass. The purpose and effect of this legislation are set out in House Report 207, which accompanied this bill in the House of Representatives, and which is hereby adopted as the report of the Committee on the Judiciary of the Senate, as follows: The controlling purposes of the bill are to provide a forum where distressed cities, counties, and minor political subdivisiors, designated in the bill as "taying districts", of their own volition, free from all coercion, may meet with their creditors under the necessary judicial control and assistance in an effort to effect an adjustment of their financial matters upon a plan deemed mutually advan tageous. If a plan is a greed upon by the taxing district and its creditors holding two thirds in amount of the claims of each class of indebtedness, and if the court is satisfied that the plan is workable and equitable, it may confirm the plan, and the minority creditors are bound thereby. The general plan of this bill, as may be seen from the foregoing, is substantially that of the bills amendatory of the Bankruptcy Act dealing with railroads and dealing with corporations, which have been approved by the House. THE CONSTITUTIONAL POWERS AND DUTIES OF CONGRESS The following quotation is taken from an opinion given by the Attorney General April 21, 1933: "Approaching the question whether Congress may enact any form of bankruptcy legislation applicable to municipalities, it should be borne in mind that Congress alone can effectively act. The Constitution prohibits the States from enacting any law 'impairing the obligation of contracts', and this prohibition 2 AMEND BANKRUPTCY ACT-MUNICIPAL INDEBTEDNESS covers a law discharging insolvent debtors from liabilities incurred prior to its passage." (Sturges v. Crowninshield, 4 Wheat. 122.) The committee concurs in this opinion, and is convinced that because of this limitation upon the power of the States contained in the Federal Constitution the States do not possess the power necessary effectively to deal with the situation which exists with regard to bankrupt taxing districts. In the hearings before the committee it was disclosed that as of date March 25, 1933, there were scattered among 41 States, 895 cities, counties, taxing districts, etc., designated in this bill as "taxing districts," which were in actual default with the number now well above 1,000, with many others threatened with default. The committee is also convinced that a large majority of holders of the obligations of these taxing districts desire the enactment of this proposed legislation. The committee has also taken into consideration, and regards of great importance, the public necessity of making it possible for cities, by mutual and effective agreement with their creditors, so to adjust their existing indebtedness as to carry forward without too hurtful a diminution the discharge of their governmental duties of fire, police, and sanitary protection, and education, and meet the increased burden incident to caring for those who must seek public assistance ia order to live. THIS BILL DOES NOT EXTEND THE FEDERAL JURISDICTION OVER THE STATES OR OVER ANY OF THEIR SUBDIVISIONS These defaulting taxing districts may now be sued by nonresidents in Federal courts as a private person may be sued for debt, and by mandamus may be compelled to levy the necessary tax to meet past due obligations, and their officers may be sent to jail for contempt if they refuse to proceed to the levy and collection of the necessary taxes. This bill would suspend the exercise of that Federal power during the reasonable time provided by the bill while a new plan possible of being carried out is in process of formulation. This bill does not permit a taxing district to be forced into court. Only upon its own initiative and petition can a taxing district become subject to the jurisdiction of the bankruptcy court under this bill. The bill is not only temporary, made so by a specific limitation of 2 years, but it is also specifically provided that as soon as the final decree is entered in any case the Federal court before which the readjustment has been effected shall immediately cease all jurisdiction, leaving the parties to their present and ordinary remedies with reference to all matters connected with the plan which may later come into controversy. As a further limitation upon Federal power and in respect for the rights and responsibilities of the States, it is provided as follows: (1) Nothing contained in this chapter shall be construed to limit or impair the power of any State to control by legislation or otherwise any political subdivision thereof in the exercise of its political or governmental powers, including expenditures therefor and including the power to require the approval by any governmental agency of the State of the filing of any petition hereunder and of any plan of readjustment, and whenever there shall exist or shall hereafter be created under the law of any State any agency of such State authorized to exercise supervision or control over the fiscal affairs of all or any political subdivisions thereof, and whenever such agency has assumed such supervision or control over any political subdivision, then no petition of such political subdivision may be received hereunder unless accompanied by the written approval of such agency and no plan of readjustment shall be put into temporary effect or finally confirmed without the written approval of such agency of such plans." This bill insofar as its coercive features are concerned is directed solely against the nonconsenting minority holding out, often, for its pound of flesh against the judgment of two thirds of the other creditors and against a taxing district unable to pay according to the present terms of its existing indebtedness, and in a sense holding out against the court of bankruptcy charged by the terms of the bill that before it may approve it, the judge must hear objections to the plan and find that the plan is fair and equitable. The mechanics of the bill are substantially those of the two amendments to tho Bankruptcy Act which are familiar to the House and which have been approved by the House. 79-956-77 - pt. 1 - 23 |