(2) that a receiver or trustee has been appointed for or has taken charge of all or the greater portion of the property of the corporation in a pending equity proceeding; or

(3) that an indenture trustee or a mortgagee under a mortgage is, by reason of a default, in possession of all or the greater portion of the property of the corporation; or

(4) that a proceeding to foreclose a mortgage or to enforce a lien against all or the greater portion of the property of the corporation is pending; or

(5) that the corporation has committed an act of bankruptcy within four months prior to the filing of the petition.

Derived from section 77B a, which allowed creditors, under certain conditions to file "a petition stating that such corporation is insolvent or unable to meet its debts as they mature and, if a prior proceeding in bankruptcy or equity receivership is not pending, that it has committed an act of bankruptcy within four months, that such creditors propose that it shall effect a reorganization

(4) was made necessary by Duparquet Huot & Moneuse Co. v. Evans, 297 U.S. 216, 56 S.Ct. 412, 80 L.Ed. 591 (1936), which held that a foreclosure receivership was not an "equity receivership" within the meaning of section 77B.

Sec. 132.

(11 U.S.C. § 532.) Fees for Filing

The filing of a petition under this chapter shall be accompanied by payment to the clerk of a filing fee of $100 if no bankruptcy proceeding is pending, otherwise $70. Where $100 has been paid and an adjudication is entered under this chapter, $30 thereof shall be distributed by the clerk as in the case of a bankruptcy proceeding; but, if the proceeding under this chapter is dismissed and no order of adjudication is entered thereunder, such sum of $30 shall be refunded to the person paying it.

Cf. section 77B a. The total fees in case of a pending bankruptcy have been reduced.

Sec. 133. (11 U.S.C. § 533.) Service of Copy of Petition and Subpena on Debtor

Upon the filing of a petition by creditors or an indenture trustee, a copy thereof, together with a subpena returnable within ten days or such longer time as the court for cause shown may have fixed, shall be served upon the debtor, as provided in subdivision a of section 18 of this Act for service of a petition and subpena for involuntary bankruptcy.

Not contained in section 77B.

Article V-Answer

Sec. 136. (11 U.S.C. § 536.) Debtor's Answer

Within ten days after the service of the subpena and of a copy of the petition, or within such further time as the court may for cause shown allow, an answer controverting the facts alleged in the petition may be filed by the debtor.

Based upon section 77B a. Express power to extend the time for filing an answer is added.

Sec. 137. (11 U.S.C. § 537.) Creditor's, Indenture Trustee's, or Stockholder's Answer

Prior to the first date set for the hearing provided in section 161 of this Act, an answer controverting the allegations of a petition by or against a debtor may be filed by any creditor or indenture trustee or, if the debtor is not insolvent, by any stockholder of the debtor.

Derived from section 77B a. Section 77B c(1) provided for a preliminary hearing to consider the appointment of a temporary trustee and a later hearing to decide whether a permanent trustee should be appointed. It was doubtful which hearing was meant to fix the time for filing the answer mentioned in that clause. As the latter hearing could be adjourned, further doubt existed whether the time for filing an answer was automatically extended if that occurred. No such doubts can arise under section 137. The passage from section 77B a read: "If three or more creditors who have provable claims which amount in the aggregate in excess of the value of securities held by them, if any, to $1000 or over, or if stockholders holding 5 per centum in number of all shares of stock of any class of the debtor outstanding shall, prior to the hearing provided for in subdivision (c) clause (1) of this section appear and controvert the facts alleged in the petition or answer, the judge shall determine as soon as may be the issues presented by the pleadings without the intervention of a jury, and unless the material allegations of the petition or answer are sustained by the proofs, the proceedings shall be dismissed." The present section no longer restricts to a specific percentage the right to controvert a petition.

Sec. 141.

Article VI-Approval or Dismissal of Petition

(11 U.S.C. § 541.) Petition of Debtor

Upon the filing of a petition by a debtor, the judge shall enter an order approving the petition, if satisfied that it complies with the requirements of this chapter and has been filed in good faith, or dismissing it if not so satisfied.

Sec. 142. (11 U.S.C. § 542.) Failure of Debtor to Answer; Noncontroversial Answer

If an answer is not filed by a debtor to a petition against it, or if the answer filed does not controvert any material allegation of the petition, the judge shall enter an order approving the petition if satisfied that it complies with the requirements of this chapter and has been filed in good faith, or dismissing it if not so satisfied.

Sec. 143. (11 U.S.C. § 543.) Controversial Answer by Debtor; Determination of Issues

If the answer of a debtor shall controvert any of the material allegations of the petition, the judge shall, as soon as may be, determine, without the intervention of a jury, the issues presented by the pleadings and enter an order approving the petition, if satisfied that it complies with the requirements of this chapter and has been filed in good faith and that the material allegations are sustained by the proofs, or dismissing it if not so satisfied.

Sec. 144. (11 U.S.C. § 544.)

Controversial Answer by Creditor, Indenture Trustee, or Stockholder; Deter

mination of Issues

If an answer filed by any creditor, indenture trustee, or stockholder shall controvert any of the material allegations of the petition, the judge shall, as soon as may be, determine, without the intervention of a jury, the issues presented by the pleadings and enter an order approving the petition, if satisfied that it complies with the requirements of this chapter and has been filed in good faith and that the material allegations are sustained by the proofs, or dismissing it if not so satisfied.

Sections 141, 142, 143, and 144 are based on the following language of section 77B a: "If such answer shall admit (a) the jurisdiction of the court, and (b) the material allegations of the petition, the court shall enter an order approving the petition as properly filed under this section if satisfied that it complies with this section and has been filed in good faith, or dismiss it if not so satisfied. If such answer shall deny any material allegation of the petition, the judge shall determine summarily the issues presented by the pleadings, without the intervention of a jury, and if the material allegations of the petition are sustained by the proofs and the court is satisfied that the petition complies with this section and has been filed in good faith it shall approve the petition; otherwise the court shall dismiss the petition; and if any such petition shall be so approved, the proceedings thereon shall continue with like effect as if the corporation had itself filed a petition or answer under this section." The last clause quoted has been omitted. Under section 77B the debtor seemed to be required to file an answer in every case, making it difficult to enter an approval order on default. The present sections cover the case where an answer is not filed.

Sec. 145. (11 U.S.C. § 545.) Finality of Determinations

If any issue raised in an answer filed under section 136 or 137 of this Act has, after hearing upon notice to the debtor, creditors, indenture trustees, and stockholders entitled to controvert the allegations of the petition, already been tried and finally determined under the provisions of section 143 or 144 of this Act, such final determination shall be conclusive for all purposes under this chapter.

Cf. section 77a. There was no corresponding provision in section 77B.

Sec. 146. (11 U.S.C. § 546.) Good Faith of Petition

Without limiting the generality of the meaning of the term "good faith," a petition shall be deemed not to be filed in good faith if

(1) the petitioning creditors have acquired their claims for the purpose of filing the petition; or

(2) adequate relief would be obtainable by a debtor's petition under the provisions of chapter XI of this Act; or

(3) it is unreasonable to expect that a plan of reorganization can be effected; or

(4) a prior proceeding is pending in any court and it appears that the interests of creditors and stockholders would be best subserved in such prior proceeding.

While "good faith" does not seem a term adequately descriptive of issues here set forth, sufficient case law had grown up under the term in section 77B a to warrant its retention upon the terms here specified.

Sec. 147. (11 U.S.C. § 547.) Amendment of Petition to Comply with Provisions Governing Arrangements

A petition filed under this chapter improperly because adequate relief can be obtained by the debtor under chapter XI of this Act may, upon the application of the debtor, be amended to comply with the requirements of chapter XI for the filing of a debtor's petition, and shall thereafter for the purposes of chapter XI be deemed to have been originally filed thereunder.

There was no corresponding provision in section 77B.

Sec. 148. (11 U.S.C. § 548.) Order of Approval as Stay of Other Proceedings

Until otherwise ordered by the judge, an order approving a petition shall operate as a stay of a prior pending bankruptcy, mortgage foreclosure, or equity receivership proceeding, and of any act or other proceeding to enforce a lien against the debtor's property.

Section 77B a first provided for a petition "whether or not the corporation has been adjudicated a bankrupt" and then, "if the petition is so approved, an order of adjudication shall not be entered." This irregularity of form is avoided in the comprehensive stay provision of section 148.

Sec. 149. (11 U.S.C. § 549.) Final Order of Approval as Determinative of Court's Jurisdiction

An order, which has become final, approving a petition filed under this chapter shall be a conclusive determination of the jurisdiction of the court.

There was no corresponding provision in section 77B,

Bankruptcy Act Anno. 5th Ed.-13

§§ 146-149

Article VII-Proceedings Subsequent to Approval of Petition

Sec. 156. (11 U.S.C. § 556.) Appointment of Trustees; Continuance of Debtor in Possession

Upon the approval of a petition, the judge shall, if the indebtedness of a debtor, liquidated as to amount and not contingent as to liability, is $250,000 or over, appoint one or more trustees. Any trustee appointed under this chapter shall be disinterested and shall have the qualifications prescribed in section 45 of this Act, except that the trustee need not reside or have his office within the district. If such indebtedness is less than $250,000, the judge may appoint one or more such trustees or he may continue the debtor in possession. In any case where a trustee is appointed the judge may, for the purposes specified in section 189 of this Act, appoint as an additional trustee a person who is a director, officer, or employee of the debtor.

Derived from section 77B c(1) which read: "Upon approving the petition or answer, or at any time thereafter, the judge, in addition to the jurisdiction and powers elsewhere in this section conferred upon him (1) may, after hearing upon notice to the debtor and to such others as the judge may determine temporarily continue the debtor in possession or appoint a trustee or trustees of the debtor's estate The enactment of present section ended the practice of leaving the debtor in possession, except in small cases, and the practice of appointing friendly trustees, except where a disinterested trustee has also been appointed.

Sec. 157. (11 U.S.C. § 557.) Attorney for Trustee

An attorney appointed to represent a trustee under this chapter shall also be a disinterested person: Provided, however, That for any specified purposes other than to represent a trustee in conducting the proceeding under this chapter the trustee may, with the approval of the judge, employ an attorney who is not disinterested.

There was no corresponding provision in section 77B.

Sec. 158. (11 U.S.C. § 558.)

Interest of Persons

A person shall not be deemed disinterested, for the purposes of section 156 and section 157 of this Act, if

(1) he is a creditor or stockholder of the debtor; or

(2) he is or was an underwriter of any of the outstanding securities of the debtor or within five years prior to the date of the filing of the petition was the underwriter of any securities of the debtor; or

(3) he is, or was within two years prior to the date of the filing of the petition, a director, officer, or employee of the debtor or any such underwriter, or an attorney for the debtor or such underwriter; or