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18 Fordham L. Rev. 99 (1949)
Summary Jurisdiction of the Chapter X Court in Corporate Reorganization

handle is hein.journals/flr18 and id is 109 raw text is: COMMENTS SUMMARY JURISDICTION OF THE CHAPTER X COURT IN CORPORATE REORGANIZATION ARTHUR H. FRIBOURGt An interesting fusion of two long-developing lines of legal thought is ex- pressed in the recent decision of the U. S. Court of Appeals for the Third Circuit in Matter of International Power Securities Corporation,' a debtor in reorganization under Chapter X of the Bankruptcy Act. It is first an extension of the doctrine of unification of control by a single court over the property and affairs of a debtor under its protection, and, second, an assertion'of the great'breadth of the court's jurisdiction over all matters prerequisite to the debtor's reorganization. The debtor, International Power Securities Corporation, has as its principal assets certain mortgages on power plants in Italy owned by Societa Edison of Milan, an Italian corporation. These mortgages formed the collateral behind the debtor's own publicly-held bond issues. By the terms of the mortgages Societa Edison was permitted to pay off its obligations to the debtor corpora- tion by turning in the debtor's bonds, in lieu of cash, for amortization payments, and bond interest coupons, in lieu. of cash, for its own interest payments. In 1940 Societa Edison failed to pay the interest on its mortgages, and as a result the debtor was forced to default on the interest payments on its bonds. Amor- tization of Societa Edison's mortgages and of the debtor's bonds has likewise ceased. The two blocks of bonds which were the subject of the order appealed from totalled almost one-third of the debtor's outstanding obligations. One block, $3,929,000 in face amount, was concededly owned by Societa Edison and was held in Italy. The other, $1,250,000 in face amount, was held at the National City Bank of New York, ostensibly for account of the Banco di Roma of Lugano, Switzerland. Upon the petition of the disinterested trustee, who claimed that the latter block of bonds was in fact owned by Societa Edison and that, therefore, rights of set-off or counterclaim existed as long as the bonds were so owned, the District Court for New Jersey issued a temporary injunction restraining the two banks and Societa Edison from selling or otherwise disposing of them. All three appeared specially to contest the court's jurisdiction. None of them had appeared in the proceeding or done business within the District of New Jersey. Notice of the trustee's application was served on Societa Edison and the National City Bank outside the district and on the Swiss bank by mail. The court continued the temporary injunction until a later hearing at which proofs were submitted as to the ownership of the $1,250,000 of bonds. At that hearing the banks renewed their jurisdictional objections, pointing out (1) that both the bonds and the banks were outside the normal territorial jurisdiction of the court, and (2) the summary extraterritorial jurisdiction of the bankruptcy t Member of the New York Bar. 1. 170 F. 2d 399 (C. A. 3d 1948).

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