order, but no such modification shall invalidate action previously taken, or rights or obligations which have previously arisen, in conformity with the commission's prior order or orders authorizing such solicitation, use, employment, or action.

The commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of this subsection (p) or any rule or regulation thereunder, and may require or permit any person to file with it a statement in writing, under oath, or otherwise as the commission shall determine, as to all the facts and circumstances concerning the matter to be investigated. The commission is authorized, in its discretion, to publish information concerning any such violations, and to investigate any such facts, conditions, practices, or matters as it may deem necessary or proper to aid in the enforcement of the provisions of this subsection (p), in the prescribing of rules and regulations thereunder, or in securing information to serve as a basis for recommending further legislation concerning the matters to which this subsection relates.

Any person who willfully violates any provision of this subsection, or any rule or regulation made thereunder the violation of which is made unlawful, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report, or document required to be filed hereunder or under any rule or regulation authorized hereby, which statement is false or misleading with respect to any material fact, shall be guilty of a misdemeanor, and on conviction in any United States court having jurisdiction, shall be punished by a fine of not less than $1,000 nor more than $10,000 or by imprisonment for not less than one year nor more than three years, or by both such fine and imprisonment, in the discretion of the court; but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation.

The provisions of this subsection (p) shall not be applicable to any person or committee which has begun to solicit, obtain, or use proxies, authorizations, or deposit agreements prior to 19 August 27, 1935, in connection with proceedings under this section as in force prior to such date or receivership proceedings against a railroad then pending in any State or Federal court, unless such person or committee makes application to the commission and receives authority to act as in this subsection provided, in which event the provisions of this subsection (p) shall be applicable to such person or committee, but such authorization shall not be upon terms which shall invalidate any action theretofore taken, or any rights or obligations which have theretofore arisen: Provided, That with respect to committees which

are not subject to this subsection (p) the judge shall scrutinize and may disregard any limitations or provisions of any deposit agreements, committee, or other authorizations affecting any creditor or stockholder acting under this section and may enforce an accounting thereunder or restrain the exercise of any power which he finds to be unfair or not consistent with public policy, including the collection of unreasonable amounts for compensation and expenses.

(q) Application of law granting powers to commission.-The provisions of section 12 of 20 Title 49 shall be applicable to enable the commission to perform its duties under this section and the provisions of such section shall apply to the debtor, any subsidiary or affiliated company, or any other person as herein defined.

(r) Separability clause.-If any provision of this section, or the application thereof to any person or circumstances, is held invalid, the remainder of this 21 section, or application of such provision to other persons or circumstances, shall not be affected thereby.

(s) Pending proceedings as governed by amendment of section.-Proceedings pending under this section on August 27, 1935, shall continue under, and be governed by, the provisions of this section as amended by act of August 27, 1935: Provided, That the amendment of this section by act of August 27, 1935, shall not invalidate any action taken before August 27, 1935, pursuant to this section as it existed prior to such date. (July 1, 1898, c. 541; Mar. 8, 1933, c. 204, sec. 1, 47 Stat. 1474; August 27, 1935, c. 774, 49 Stat. 911; June 26, 1936, c. 833, 49 Stat. 1969, Aug. 11, 1939, c. 689, 53 Stat. 1406.)

1Act of Aug. 27, 1935, rewrote the bankruptcy act of 1933.

2 Sec. 60 as enacted; changed by U. S. Code compilers to Code number.

* Sec. 44 as enacted. Changed by Code compiles to Code number.

• Interstate Commerce Act, as enacted.

Sec. 7 as enacted. Change to Code number.

"the interests or claims thereof shall be deemed to be affected by the plan, and" inserted by 1936 amendment.

'This proviso inserted by 1936 amendment.

8

This proviso inserted by 1936 amendment; ends with "If the judge shall confirm the plan, he shall enter an order," etc.

9

"title I and of section 5 of the Securities Act of 1933, as amended" as enacted. Changed to Code numbering by Code compilers.

10 "Securities Act"; changed by Code.

11 "3 and 4 of the said Securities Act" as enacted.

12

"14 of the Securities Exchange Act of 1934" as enacted.

18 “721, 722, 723, 724 and 725 of the Revenue Act of 1932" as enacted. Changed by Code.

14

15

"this amendatory section takes effect" as enacted; changed by Code.

"11 of this act" instead of "29 of this title" as enacted; changed by Code. 16 "Section 77" as enacted; changed by Code.

17 "or under this amendatory act" as enacted; changed to "prior to its amendment by act of August 27, 1935, or under this section as amended by such act.”

*** Amendment of Aug. 11, 1939. Formerly read "claims for personal injuries to employees of a railroad corporation, claims of personal representatives of deceased employees of a railroad corporation, arising under State or Federal laws, and claims on August 27, 1935 or thereafter payable by sureties upon supersedeas, appeal, attachment, or garnishment bonds executed by sureties without security for and in any action brought against such railroad corporation or trustee appointed pursuant to this section, shall be preferred against and paid out of the assets of such railroad corporation as operating expenses of such railroad."

"the Railway Labor Act, as amended June 21, 1934, or as it may be hereafter amended" as enacted; changed by Code.

19 "the effective date of this amendatory section" as enacted.

20

"the Interstate Commerce Act as amended March 2, 1889, Feb. 10, 1891, and Feb. 28, 1920" as enacted.

" "amendatory" at this point omitted by Code.

Historical Note

Section 77B, sec. 207 U. S. Code, relating to jurisdiction of corporations other than those subject to the commission's Jurisdiction, as stated in sec. 77, 205 U. S. Code, was amended on June 22, 1938, by sec. 106, par. (3), to read

(3) "corporation" shall mean a corporation, as defined in this act, which could be adjudged a bankrupt under this act, and any railroad corporation excepting a railroad corporation authorized to file a petition under section 77 of this act;" On the same date sec. 77A, 206 U. S. Code, which gave courts original Jurisdiction in bankruptcy proceedings, was amended to stipulate that provisions of sec. 77A and 77B should continue in full force and effect, but with stated exceptions, which do not enlarge the jurisdiction of the commission.

The commission recommended substantial changes in the bankruptcy act, in its 1934 Annual Report (p. 18, 19) to secure advantages hoped for in its enactment. The Federal Coordinator's report, submitted Jan. 23, 1935, published as House Document No. 89, 74th Congress, 1st session, recommended revision of the act. [Recommendation discussed, 104 Fed. (2d) 1.]

See n. 3, this section, carriers in receivership or bankruptcy.

44

Payment of expenses of administration, by letter from the Honorable R. N. Elliott, Acting Comptroller General of the United States, Aug. 28, 1936, as follows: Funds which may be collected from the carriers under the provision of the last sentence of section 77 (11) of the Bankruptcy Act, as amended, quoted in your letter, (49 Stat. 916) are not appropriated moneys and are, therefore, not available for payment of expenses connected with duties to be performed by the Interstate Commerce Commission under the Interstate Commerce Act, but are to be covered into the Treasury as miscellaneous receipts under the provisions of Sections 3617, and 3618, Revised Statutes.

1. Constitutionality.

Notes of Decisions

2. Construction and interpretation.

8. In general.

5. Insolvency; evidence; proof.

6. Jurisdiction.

8. Appeal.

10. Proceedings, in general.

12. Notice.

13. Parties.

14. Intervention.

15. Staying of suits.

18. Injunction.

20. Priority.

22. Six-months rule.

30. Plan of reorganization.

35. Classification of claims and interests;

creditors.

38. Set-off and counterclaim.

40. Carriers' claims.

45. General creditors.
46. Damage claims.

47. Former employees.

50. Proof of claims.

55. Accounts; separation by parts of a

system.

60. Capitalization.

65. Contracts; leases.

75. Sinking fund,

78. Dividends.

80. Issuance of securities.

85. Bonds and bondholders.

90. Stock and stockholders.

66. Consolidation; acquisition; operation; 110. Appointment of trustees; ratification.

construction.

67. Abandonment of lines.

68. Taxes.

69. Loans.

70. Interest.

112. -Compensation of trustees.

115. Counsel; compensation.

120. Reimbursement, expenses in general.
135. Proxies; protective committees.
140. Deposit agreements.

1. Constitutionality.-Under the ex- Upon the authority expressly granted press power to pass uniform laws on the by the Constitution to Congress, that subject of bankruptcies, the legislation body is authorized to enact such bankis valid though drawn with the direct ruptcy legislation as it may deem wise aim and effect of relieving insolvent and appropriate. The constitutional persons in whole or in part from pay-grant of authority is not conditional nor ment of their debts, however it may limited, save that its laws be uniform operate collaterally or incidentally to throughout the United States.-In re impair or destroy the obligation of Chicago, R. I. & P. Ry. Co., 72 Fed. (2d) private contracts.-Continental Ill. 443 (450)*. Natl. Bank & Trust Co. v. Chicago, R. I. & P. Ry. Co., 294 U. S. 648 (680)*. As outlined in this section a plan of reorganization, when confirmed, cannot be distinguished in principle from composition authorized by the act of 1867, amended 1874. It is not necessary to the validity of either that proceedings result in an adjudication of bankruptcy.-Id., p. 672-3.

Section 77 in its general scope and aim is within the power conferred by the bankruptcy clause of the Constitution.-Id., p. 675.

Injunction against sale of collateral goes no further than to delay enforcement of the contract. It affects only the remedy. Not unconstitutional as violating the Fifth Amendment.-Id., P.

681.

Congress has constitutional power to impose the requirement contained in the amendment of Aug. 11, 1939. Earnings, while a railroad is in possession of the court and operated by receivers are not necessarily and exclusively the property of the mortgagees, but are subject to payment of claims which have superior equities. Claims having such equities may be accorded priority in payment although they arose prior to the receivership.-Carpenter v. Wabash Ry. Co., 309 U. S. 23*.

Congress may determine the amount of claims and number of creditors necessary to file an involuntary petition. It may authorize filing of voluntary petitions and may limit that right insofar as involuntary petitions are concerned. Even solvent persons may go through bankruptcy by the voluntary route. And this was so before the 1933 amendments.-Id., p. 450.

There were no legal obstacles to Congress making the jurisdiction of the court of bankruptcy co-extensive with the territorial boundaries of the United States. Congress might validly extend the jurisdiction of any district court to the entire United States.-Id., p. 450.

laws on the subject of bankruptcies was Grant of power to establish uniform necessarily a grant of power the exercise of which would impair the obligation of contracts. Discharge of the debtor's debts is contemplated, which is an impairment of contractual obligations.-Id., p. 452.

In dividing debtors into classes, such as farmers, corporations, individuals, railroads, Congress is acting within its powers. It is not for the courts to brush aside such classifications on the ground that there is not sufficient Justification in fact therefor.-Id., p. 450.

The bankruptcy power is subject to the Fifth Amendment. Mortgagee's vested rights may not be impaired by action of Congress. To do so is to take property without compensation. Trust deeds constituted vested first liens upon the rest of the railroad's property and the income, which neither the legislative department nor the judiciary may impair without just compensation.-Id., 90 Fed. (2d) 312 (314)*.

The amended act is not unconstitu tional on the ground that classification of railroads is unreasonable so as to make the amendment a nonuniform law.—Id., p. 513.

There is nothing in article 3 of the Constitution to preclude delegation of a limited power to an administrative agency, as, after the judge approves a plan of reorganization the commission shall submit it to stockholders and creditors to be accepted or rejected, and in cases or circumstances provided such submission shall not be necessary.—Id.,

The exercise of bankruptcy power of Congress is subject to the due process clause; par. (n) of this act is not repugnant to the due process provision.-p. 508-9. Thompson v. Siratt, 95 Fed. (2d) 214*.

The provision that on rejection of a lease, lessee on order of the judge, shall continue operation, despite losses, until abandonment is authorized, does not violate the Fifth Amendment.-Webster & Atlas Natl. Bank v. Palmer, 111 Fed. (2d) 215 (218) *; see 26 Fed. Supp. 18, 30 Fed. Supp. 541.

Amended bankruptcy act not unconstitutional as vesting judicial powers in a "judge" rather than a court. Since 1800 in enacting bankruptcy laws Congress has spoken of bankruptcy judges and bankruptcy courts indiscriminately. Reference to the "Judge" is intended to signify the "court acting through the judge" as distinguished from judicial action by the referee. In re New York, N. H. & H. R. Co., 16 Fed. Supp. 504 (506).

Grant of power to the court to confirm a plan which has failed fully to satisfy the composition features of the act, if the court is satisfied it provides for equitable treatment, is not unconstitutional as depriving creditors of due process, or of right to have made a determination ❘ of value of their equities by public judicial sale. Id., p. 509-10.

Delegation to the commission of power to determine certain facts relates only to power to approve specific plans for reorganization, each exercise of the power being conditioned upon concurrence of numerous expressly stated facts. Such power is not a power exclusively legislative and its delegation therefore cannot offend Art. I, sec. 1 of the Constitution.—Id., p. 507.

Provision that no plan shall be approved or confirmed by the judge unless first approved by the commission and certified to the court is not void as limiting the judicial power.-Id., p. 507.

Not unconstitutional because no ascertainable standard for determination is set up, for judicial approval is conditioned upon a judicial finding that the plan is equitable, indicating Congressional intent that the bankruptcy court will be controlled by the fundamental and flexible principles of equity juris-565 (568). prudence. Id., p. 508.

Congress may enact several separate subjects in one bill, subject to the limitations of due process.-Chase Natl. Bank v. Mobile & O. R. Co., 30 Fed. Supp.

2. Construction and interpretation.

Not unconstitutional in requiring | Within the meaning of the constitujudge to approve the filing of a petition if satisfied it complies with the act and is filed in good faith, the act not setting up ascertainable standard whereby to determine existence of good faith.-Id., p. 506.

tional provision the terms bankruptcy and insolvency are convertible. From the beginning the tendency has been uniformly in the direction of progressive liberalization in respect to operation of the bankruptcy power.-Continental Ill.