Broderick v. Rosner, 294 U.S. 629 (1935)

The requirement that the assessment may only be enforced through an accounting by a bill in equity, denies to the determination of the Superintendent that conclusive effect which attaches to it under the laws of New York. It amounts to a denial of the right of the Superintendent to resort to the courts of New Jersey in this case, p. 631and thus violates the full faith and credit clause and the due process clause of the Fourteenth Amendment.

The argument based on the impracticability of the equity remedy is irrelevant to any constitutional p. 633question in this case. The question is whether that which the New Jersey statute prohibits is constitutional; not whether that which it permits is legally valid or available. Furthermore, the criticism derived from the large number of the depositors and stockholders, does not arise from any intrinsic fault in the New Jersey statute but from a mere circumstance connected with the New York bank itself.

Distinguishing: Bemheimer n . Converse, 206 U. S. 516; Converse v. Aetna National Bank, 212 U. S. 567; p. 635Converse v. Hamilton, 224 U. S. 243; Selig v. Hamilton, 234 U. S. 652; and Marin v. Augedahl, 247 U. S. 142. In none of them was there involved a statute passed by the legislature of the forum in which the plaintiff chose to bring his suit to enforce the stockholder’s liability to assessment, which deprived the courts of that State of jurisdiction to determine a suit of that nature. The only point made therein was that a court of one State, having general jurisdiction, could not on the ground of policy or in its discretion refuse to enforce the judgment or give effect to the judicial proceedings of a sister State.

Under the doctrine of comity, a State may constitutionally refuse to enforce a transitory cause of action created p. 636by the laws of a sister State. Chambers v. Baltimore & Ohio R. Co., 207 U. S. 142; Dougherty v. McKenna Process Co., 255 Ill. 369; Spokane & I. E. R. Co. n . Whitley, 237 U. S. 487; Bradford, Electric Light Co. v. Clapper, 286 U. S. 145, 160; Home Insurance Co. v. Dick, 281 U. S. 397, 409.

It has generally been held by the courts that the full faith and credit clause is not jurisdictional but merely p. 637629 Opinion of the Court.

Broderick seasonably claimed that to sustain the asserted bar of the statute would violate Article IV, § I, of the Federal Constitution which provides that: “Full p. 639629 Opinion of the Court.

First. The conditions imposed by § 94 (b) of the New Jersey statute upon the bringing of suits to enforce such assessments, as here applied, deny to the Superintendent the right to resort to the courts of the State to enforce the assessment of liability upon the stockholders there resident. The requirement that the proceeding be by bill in equity, instead of by an action at law, would, if standing alone, be no obstacle. But by withholding jurisdiction unless the proceeding be a suit for an equitable accounting to which the “ corporation and its legal representatives, if any, and all of its creditors and all of its stockholders shall be necessary parties,” it imposes a condition which, as here applied, is legally impossible of fulfillment. For it is not denied that according to the decisions of the New Jersey courts 11 necessary parties ” means those whose presence in a suit is essential as a jurisdictional prerequisite to the entry of judgment, so that no decree can be made respecting the subject matter of litigation until they are before the court, Wilkinson v. Dodd, 40 N. J. Eq. 123, 130; 3 Atl. 360; In re Martin, 86 N. J. Eq. 265; 98 Atl. 510; McBride v. Garland, 89 N. J. Eq. 314; 104 Atl. 435; and that to secure jurisdiction personally over those who are not residents of New Jersey, or engaged in business there, is impossible. p. 640Pennoy er v. Neff, 95 U. S. 714; Wilson v. American Palace Car Co., 65 N. J. Eq. 730; 55 Atl. 997; Papp v. Metropolitan Life Ins. Co., 113 N. J. Eq. 522, 530; 167 Atl. 873. The corporation has no place of business in New Jersey; only a few of the many stockholders and creditors have either residence or place of business there.

Second. But for the statute, the action would have been entertained. Compare Young n . Masci, 289 U. S. p. 641629 Opinion of the Court.

Here the nature of the cause of action brings it within the scope of the full faith and credit clause. The statutory liability sought to be enforced is contractual in character. The assessment is an incident of the incorporation. Thus the subject matter is peculiarly within the regulatory power of New York, as the State of incorporation. “ So much so,” as was said in Converse v. Hamilton, 224 U. S. 243, 260, “ that no other State properly can be said to have any public policy thereon. And what the law of Wisconsin [New Jersey] may be respecting the relative rights and obligations of creditors and stockholders of corporations of its creation, and the mode and means of enforcing them, is apart from the question under consideration.” Compare Bemheimer v. Converse, 206 U. S. 516, 532. In respect to the determination of liability for an assessment, the New Jersey stockholders submitted themselves to the jurisdiction of New York. For “the act of becoming a member [of a corporation] is something more than a contract, it is entering into a complex and abiding relation, and as marriage looks to domicil, p. 644membership looks to and must be governed by the law of the State granting the incorporation.” Modern Woodmen of America v. Mixer, 267 U. S. 544, 551. Compare Royal Arcanum v. Green, 237 U. S. 531; Hancock National Bank v. Farnum, 176 U. S. 640; McDermott v. Woodhouse, 87 N. J. Eq. 615, 618, 619; 101 Atl. 375.4 Obviously, recognition could not be accorded to a local policy of New Jersey, if there really were one, of enabling all residents of the State to escape from the performance of a voluntarily assumed statutory obligation, consistent with morality, to contribute to the payment of the depositors of a bank of another State of which they were stockholders.

The Superintendent is an independent executive on whom the legislature has conferred large responsibilities, compare Isaac v. Marcus, 258 N. Y. 257, 263-5; 179 N. E. 487; Matter of Broderick, 235 App. Div. 281; 257 N. Y. S. 382; among them, the determination of the questions involved in stockholders’ liability. He must decide whether there is a deficiency of assets which requires resort to that liability; and if so, what proportion of the full liability it is necessary to enforce; and when the assessments shall be paid. It is urged that unlike the assessment involved in Converse v. Hamilton, supra, that laid by the New York Superintendent is not conclusive as to its propriety and amount. The contention rests primarily upon a misconception of a provision in § 80 of the Banking Law, to the effect that “ the written statement of the superintendent, under his hand and seal of office, reciting his determination to enforce the individual liability or any part thereof, of such stockholders, and setting forth the value of the assets of such corporation and the liabilities thereof, as determined by him after examination and investigation, shall be presumptive evidence of such facts as therein stated.” This provision does not declare, as a rule of substantive law, that the determination is open to attack in an action to enforce the stockholders’ liability. It merely provides, as in the case of other official acts, a method of proof without the calling of witnesses. Thus it prescribes a rule of evidence; and may possibly affect p. 646the manner of pleading.5 But with such matters we have here no concern. It is enough, for present purposes, that a complaint alleging the stock ownership of the defendants, the assessment, the demand, and failure to pay, together with the determination of the value of assets and liabilities, referred to in § 80, sets forth a good cause of action.6 Broderick n . Aaron, 147 Mise. 854; 264 N. Y. S. 15; Broderick n . Betco Corp., 149 Mise. 245; 267 N. Y. S. 139; Broderick v. American General Corp., 71 F. (2d) 864; compare Broderick n . Stephano, 314 Pa. 408; 171 Atl. 582; Broderick v. McGuire, 119 Conn. 83; 174 Atl. 314. Even if the administrative determination of the assessment made in New York is subject to attack in a suit brought there or in any other State, that fact would not justify New Jersey in denying to the Superintendent the right to bring this suit.

7 Casey v. Galli, 94 U. S. 673, 681 ; National Bank v. Case, 99 U. S. 628, 634-5; DeWeese v. Smith, 106 Fed. 438, 445, aff’d, 187 U. S. 637; Murray n . Sill, 1 F. (2d) 589; Crawford v. Gamble, 57 F. (2d) 15; B. V. Emery & Co. v. Wilkinson, 72 F. (2d) 10; see Studebaker v. Perry, 184 U. S. 258, 266; Rankin v. Barton, 199 U. S. 228, 232. Compare Bushnell v. Leland, 164 U. S. 684; Korbly v. Springfield Savings Institution, 245 U. S. 330; Aldrich v. Campbell, 97 Fed. 663. p. 648CONTINENTAL ILLINOIS NATIONAL BANK &

A bankruptcy court is without jurisdiction in an ordinary bankruptcy proceeding to restrain a pledgee from exercising his contract right to sell collateral validly pledged to him by the bankrupt, even though the pledged collateral p. 651648 Argument for the Banks.

The express provisions of § 77 negative the implication of the power to grant the order either in a summary or a p. 653648 Argument for the R. F. C.

The economic policy of financing railroads by short-term loans secured by pledge was recognized by the Congress in the Reconstruction Finance Corporation Act, and given specialized administrative control by the Interstate Commerce Commission; that policy should not be called into question as is done by the construction placed upon § 77 by the decision of the Circuit Court of Appeals. p. 655648 Argument for the R. F. C.

Under the express provisions of § 77, the noteholder is entitled both to vote on his note and in the various classes of creditors in which the collateral falls; hence, there can be no such shifting of classes of creditors or changes in the size of the various classes of creditors as will prevent the preparation and effectuation of a plan. In any reorganization of the debtor the secured obligations of other companies comprised in this petitioner’s collateral must be treated as outstanding, as they would have to be if they were still held in the treasury of the debtor. The validity of the pledge in this case is not questioned. To deny to p. 656the pledgee holding collateral the benefit of his contract is to give other creditors of the debtor, and the debtor himself, an advantage for which they have not bargained.

On June 7, 1933, The Chicago, Rock Island & Pacific Railway Co. filed a petition seeking a reorganization under p. 657§ 77 of the Bankruptcy Act, in the federal District Court for the Northern District of Illinois, Eastern Division, alleging that it was “ unable to meet its debts as they mature.” Nine of the debtor’s subsidiaries thereafter joined in the proceedings as permitted by subdivision (a) of the section. On September 26, 1933, the debtor filed a petition for instructions which alleged that it had outstanding collateral notes secured by mortgage bonds, part of which were issued by it, part by corporations forming a part of the system; that it had been unable to pay interest on its funded debt secured by mortgage liens on various portions of its property; that it would be obliged to default on interest about to become due on other mortgage bonds of the system; that the value of the collateral securing each of the outstanding notes is substantially in excess of the loan thereby secured; that if holders of the notes should sell the collateral it would cause a substantial and irreparable loss to the trust estate; and that a forced sale of the collateral at the present time might result in a substantial deficiency judgment against the debtor and the depletion of the respective interests in the trust estate of all creditors in proportion to the rank and lien of the obligations by which their claims or interests therein are evidenced. The petition prayed that the court determine whether it should enjoin the holders of the collateral notes, in the event of a default, from selling any of the collateral.

369,732.99 278,492.49 p. 659value of $14,409,000,2 are held severally by five banks—The Chase National Bank and the New York Trust Company, of New York City, the Continental Illinois National Bank and Trust Company and Harris Trust and

The St. Paul and Kansas City Short Line 4^% Gold Bonds are mortgage bonds of a corporation whose capital stock is owned by the Debtor; and they are guaranteed principal and interest by it. p. 660Savings Bank, of Chicago, and Mississippi Valley Trust Company, of St. Louis. Each of the collateral notes contains a provision that it shall become due in case of, among other events, (1) non-payment of interest, (2) insolvency of the debtor, (3) appointment of a receiver for the debtor. Each note held by a bank provides also that it shall become due in case of non-payment of interest on any of the notes held by the Reconstruction Finance Corporation. And all the outstanding notes provide that:

By the Act of March 3, 1933, c. 204, 47 Stat. 1467, original jurisdiction, in addition to that theretofore exercised in voluntary and involuntary proceedings to adjudge persons bankrupt, was conferred upon courts of p. 662bankruptcy “ in proceedings for the relief of debtors,” as provided in §§ 74, 75 and 77 of the act. We are here concerned'only with § 77. That section contains provisions for the reorganization of railroads engaged in interstate commerce. It permits any railroad corporation which is insolvent or unable to meet its debts as they mature to effect a plan of reorganization.

Before acceptance of any plan, the Interstate Commerce Commission is directed to hold a public hearing, following which it shall render a report recommending a plan which “will, in its opinion, be equitable, will not p. 663discriminate unfairly in favor of any class of creditors or stockholders, will be financially advisable . . . and will be compatible with the public interest.” The commission is required to state fully the reasons for its conclusions. The plan is then to be submitted to the creditors and stockholders of the debtor for acceptance or rejection. No plan may be finally approved by the commission until it has been accepted in writing by or on behalf of creditors holding two-thirds in amount of the claims of each class affected by the plan, and by or on behalf of stockholders holding two-thirds of the stock of each class.

(d) Before creditors and stockholders of the debtor are asked finally to accept any plan of reorganization, the Interstate p. 665Comof the railway company or the appointment of a receiver or the non-payment of interest when due, the holder thereof might sell and dispose of the collateral; that there was

(g) Upon such approval by the commission, and after hearing such objections as may be made to the approved plan, the judge shall confirm the plan if satisfied that ... (6) the plan provides with respect to any class of creditors the acceptance of which is requisite to the confirmation of the plan, and who would not become bound by the plan under the provisions of subdivision (h) of this section, adequate protection for the realization by them of the value of their securities, liens, and claims, either (a) by the sale of such property subject to their liens, if any, or (b) by the sale free oi such liens at not less than p. 666danger that the holders would claim that one or more of the events entitling them to sell such collateral had occurred; that a sale of the collateral or any part thereof by the Reconstruction Finance Corporation or by the banks would be inconsistent with the purposes of § 77 and would hinder, impede, obstruct, delay, and, in effect, prevent the orderly preparation and consummation of a plan of reorganization; that the district court, under § 77, had exclusive jurisdiction of the debtor and its property wherever located; that under paragraph 15 of § 2 of the Bankruptcy Act, the court had power to make such orders, issue such process and enter such judgments as might be necessary for the enforcement of the act; and that it was

Article I, § 8, cl. 4, of the Federal Constitution vests Congress with the power 11 to establish . . . uniform laws on the subject of bankruptcies throughout the United States ”; and the simple question is—does § 77 constitute a law on the subject of bankruptcies? While attempts have been made to formulate a distinction between bankruptcy and insolvency, it long has been settled that, p. 668within the meaning of the constitutional provision, the terms are convertible. As early as 1833, Mr. Justice Story said that whatever might have been the rule of the English law on the subject, Congress might pass an act authorizing a commission of bankruptcy at the petition of the debtor; and that no distinction, practically or even theoretically, could be made between bankruptcies and insolvencies. 2 Story on the Constitution, 4th ed., § 1111. From the beginning, the tendency of legislation and of judicial interpretation has been uniformly in the direction of progressive liberalization in respect of the operation of the bankruptcy power.

But, while it is true that the power of Congress under the bankruptcy clause is not to be limited by the English or Colonial law in force when the Constitution was adopted, it does not follow that the power has no limitations. Those limitations have never been explicitly defined, and any attempt to do so now would result in little p. 670more than a paraphrase of the language of the Constitution without advancing far toward its full meaning. Judge Cowen, in Kunzler v. Kohaus, 5 Hill 317, 321, a decision which was approved by this court in Hanover National Bank v. Moyses, supra, said that the power was the same as though Congress had been authorized “to establish uniform laws on the subject of any person’s general inability to pay his debts ...” Probably the most satisfactory approach to the problem of interpretation here involved is to examine it in the light of the acts, and the history of the acts, of Congress which have from time to time been passed on the subject; for, like many other provisions of the Constitution, the nature of this power and the extent of it can best be fixed by the gradual process of historical and judicial “inclusion and exclusion.” Compare Davidson n . New Orleans, 96 U. S. 97, 104; Federal Trade Comm’n v. Raladam Co., 283 U. S. 643, 648.

The first act, that, of 1800, so far ignored the English law, which was confined to traders, as to include bankers, brokers and underwriters as well. The act of 1841 added merchants; and other additions have been made by later acts until now practically all classes of persons and corporations are included. See Friday v. Hall & Kaul Co., 216 U. S. 449, 454. The act of 1800 was one exclusively in the interest of the creditor. But the act of 1841 took what then must have been regarded as a radical step forward by conferring upon the debtor the right by voluntary petition to surrender his property, with some exceptions, and relieve himself of all future liability in respect of past debts. The act of 1800, like the English law, was conceived in the view that the bankrupt was dishonest; while the act of 1841 and the later acts proceeded upon the assumption that he might be honest but unfortunate. One of the primary purposes of these acts was to “relieve the honest debtor from the weight of oppressive indebtedness and permit him to start afresh free from the obligations p. 671and responsibilities consequent upon business misfortunes,” and to give him “a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Local Loan Co. v. Hunt, 292 U. S. 234, 244.

Section 77 advances another step in the direction of liberalizing the law on the subject of bankruptcies. Railway corporations had been definitely excluded from the operation of the law in 1910 (c. 412, § 4, 36 Stat. 838, 839), probably because such corporations could not be liquidated in the ordinary way or by a distribution of assets. A railway is a unit; it can not be divided up and disposed of piecemeal like a stock of goods. It must be sold, if sold at all, as a unit and as a going concern. Its activities can not be halted because its continuous, uninterrupted operation is necessary in the public interest; and, for the preservation of that interest, as well as for the p. 672protection of the various private interests involved, reorganization was evidently regarded as the most feasible solution whenever the corporation had become “ insolvent or unable to meet its debts as they mature.”

As outlined by that section, a plan of reorganization, when confirmed, cannot be distinguished in principle from the composition with creditors authorized by the act of 1867, as amended by the act of 1874. It is not necessary to the validity of either that the proceeding should result in an adjudication of bankruptcy. The constitutionality of the old provision for a composition is not open to doubt. In re Reiman, 20 Fed. Cas. 490, 496-497, cited with approval in Hanover National Bank v. Moyses, supra. That provision was there sustained upon the broad ground that the “ subject of bankruptcies ” was p. 673nothing less than “ the subject of the relations between an insolvent or non-paying or fraudulent debtor, and his creditors, extending to his and their relief.” That it was not necessary for the proceedings to be carried through in bankruptcy was held not to warrant the objection that the provision did not constitute a law on the subject of bankruptcies. The same view sustains the validity of § 77. Both contemplate an adjustment of a failing debtor’s obligations; and although actual bankruptcy may not supervene in either, they are none the less laws on the subject of bankruptcies. With due regard for consistency, the constitutional validity of the one cannot well be sustained and that of the other denied, as this court quite evidently recognized in Canada Southern Ry. Co. v. Gebhard, 109 U. S. 527.

Second. Under § 77 does the bankruptcy court have authority to enjoin the sale of the collateral here in question if a sale would so hinder, obstruct and delay the preparation and consummation of a plan of reorganization as probably to prevent it? By § 2 of the Bankruptcy Act (U. S. C. Title 11, § 11), courts of bankruptcy are invested “ with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in bankruptcy proceedings.” They are essentially courts of equity, and their proceedings inherently proceedings in equity, the words11 at law ” probably having been inserted only with regard to clause (4) of § 2, which confers authority to arraign, try, and punish bankrupts and others for violations of the act. Local Loan Co. v. Hunt, 292 U. S. 234, 240. Their adjudications and orders constitute in all essential particulars decrees in equity. Idem, 241. The power to issue an injunction when necessary to prevent the defeat or impairment of its jurisdiction is, therefore, inherent in a court of bankruptcy, as it is in a duly established court of equity. Section 262 of the Judicial Code, which authorizes the United States courts “ to issue all writs not specifically provided for by statute, which may be necessary for the exercise of their respective jurisdictions ” recognizes and declares the principle. An example of its application is found in Kline v. Burke Construction Co., 260 U. S. 226, 229, where we held that a federal court, having first acquired jurisdiction of the subject matter, could enjoin the parties from proceeding in a state court of concurrent jurisdiction “ where the effect of the p. 676action would be to defeat or impair the jurisdiction of the federal court.” An injunction may be issued in such circumstances for the purpose of protecting and preserving the jurisdiction of the court “ until the object of the suit is accomplished and complete justice done between the parties.” Looney v. Eastern Texas R. Co., 247 U. S. 214, 221.

The injunction does not infringe § 67 (d), U. S. C. Title 11, § 107 (d). The substance of that provision is that bona fide liens shall not be affected by anything contained in the Bankruptcy Act. The injunction here in no way impairs the lien, or disturbs the preferred rank of the pledgees. It does no more than suspend the enforcement of the lien by a sale of the collateral pending p. 677further action. It may be, as suggested, that during the period of restraint the collateral will decline in value; but the same may be said in respect of an injunction against the sale of real estate upon foreclosure of a mortgage; and such an injunction may issue in an ordinary proceeding in bankruptcy. Straton v. New, 283 U. S. 318, 321, and cases cited. A claim that injurious consequences will result to the pledgee or the mortgagee may not, of course, be disregarded by the district court; but it presents a question addressed not to the power of the court but to its discretion—a matter not subject to the interference of an appellate court unless such discretion be improvidently exercised. So far as constitutional power is concerned, there is no difference between an injunction restraining the enforcement of a real-estate mortgage and one restraining the enforcement of a pledge by the sale of collateral security. Such differences as exist affect not the power but the propriety of its exercise—that is to say, the discretion of the court. Such an injunction, as just indicated, is within the contemplation of § 77, and we need not inquire whether it would be admissible under the act in force prior to the adoption of that section. Compare Straton v. New, supra. Nor does § 57 (h), 11 U. S. C. § 93 (h), also invoked by petitioners, have any pertinent application to the question under discussion in the light of the provisions, purpose and aim of § 77.

Petitioners urge that the injunction is precluded by a consideration of subdivision (1) of § 77, which confers authority upon the court to enjoin or stay the commencement or continuance of any judicial proceeding to enforce any lien upon the estate until after final decree. The point made is that the granting of this express power to enjoin judicial proceedings brought to enforce liens negatives the authority to stay the enforcement of liens by non-judicud proceedings, in accordance with the maxim expressio unius est exclusio dlterius. But clause (15) of p. 678§ 2 is still in the act; and it would be an unwarranted use of the maxim, which is only an aid to construction, to apply it in such a way as to work a destruction, pro tanto, not only of that clause, but of § 262, Judicial Code, and of the general principle upon which both are based.

We are not impressed with the attempt of petitioners to show that the record entirely fails to justify the conclusion of the courts below in that regard. It must be borne in mind that, in addition to the collateral aggregating more than $54,000,000, held by petitioners, there was outstanding additional collateral pledged as security in the sum of over $145,000,000, bringing the total up to approximately $200,000,000, a sum equal to nearly half of the capital then issued and in the hands of the public. At the time the injunction was applied for, there was danger that the noteholders would claim that the right of sale under the terms of the collateral notes had been brought into existence; and with the pendency of the reorganization proceedings and the suspension of the payment of interest, it well cannot be doubted that there also was danger that the noteholders would proceed to exercise p. 679their rights of sale under the collateral notes. Such action on the part of these noteholders might well precipitate similar action by other holders of pledged collateral.

The Constitution, as it many times has been pointed out, does not in terms prohibit Congress from impairing the obligation of contracts as it does the states. But as far back as Calder v. Bull, 3 Dall. 386, 388, it was said that among other acts which Congress could not pass without exceeding its authority was “ a law that destroys or impairs the lawful private contracts of citizens.” The broad reach of that statement has been restricted (Legal Tender Cases, 12 Wall. 457, 549-550); but the principle which it includes has never been repudiated, although the extent to which it may be carried has not been definitely fixed. Speaking generally, it may be said that Congress, while without power to impair the obligation of contracts by laws acting directly and independently to that end, undeniably, has authority to pass legislation pertinent to any of the powers conferred by the Constitution, however it may operate collaterally or incidentally to impair or destroy the obligation of private contracts. Legal Tender Cases, supra; Louisville & Nashville R. Co. v. Mottley, 219 U. S. 467, 480-482, 484; Highland v. Russell Car Co., 279 U. S. 253, 261. And under the express power to pass uniform laws on the subject of bankruptcies, the legislation is valid though drawn with the direct aim and effect of relieving insolvent persons in whole or in part from the payment of their debts. See Hanover National Bank v. Moyses, supra, at p. 188. So much necessarily results p. 681from the nature of the power, and this must have been within the contemplation of the framers of the Constitution when the power was granted.

The Reconstruction Finance Corporation raised the question in the district court by a demurrer, asserting that the allegations of the debtor’s petition were insufficient. p. 682But in a summary proceeding, as the term itself implies, the merits of the controversy are determined without the formality in respect of pleadings which is required in actions at law or suits in equity. In such a proceeding we see no reason why the allegations of the petition may not be helped out by timely affidavits. Doubt has been expressed by lower federal courts as to the propriety of a demurrer in such a proceeding. In the Matter of Snelling, 202 Fed. 258, Judge Morton aptly said, “Summary procedure implies, I think, a single hearing ... at which the merits of the controversy are investigated and decided, without much regard to the formal pleadings.” See, also, In re Rockford Produce & Sales Co., 275 Fed. 811, 813. In any event, we think, as against demurrer, conceding its propriety, the petition is sufficient. Pertinent allegations are epitomized in the early part of this opinion.

Sixth. The territorial jurisdiction of the district court is assailed by three of the banks on the ground that they were located outside the Northern District of Illinois. The contention is that the district court was without power to issue its process for service outside the district. Section 77 (a) provides that after the petition of the railroad company is approved, “ the court in which such order approving the petition is entered shall, during the pendency of the proceedings under this section and for the purposes thereof, have exclusive jurisdiction of the p. 683debtor and its property wherever located.” Congress may authorize the civil process of a federal district court to be served upon persons in any other district. Toland v. Sprague, 12 Pet. 300, 328; United States v. Congress Construction Co., 222 U. S. 199, 203-204; First Nat. Bank v. Williams, 252 U. S. 504, 510. There are other cases to the same effect, but it is unnecessary to cite them. Section 77 deals with railway corporations whose lines and activities are not confined to a single district or a single state, but in numerous instances reach into many districts and many states. The lines of the Rock Island system extend into 20 districts and 14 States. Jurisdiction over reorganization proceedings, however extensive the railway lines may be, is conferred upon a single district court. The usefulness of the section would be greatly minimized and in some instances destroyed if that court were powerless to send its process into any State when necessary to effectuate the purposes of the law. As has already been shown, the equity in the collateral remaining in the railroad company is property; and over this property, wherever located, the federal district court is given exclusive jurisdiction by the precise language of § 77, just quoted. As a necessary consequence of that jurisdiction, the court must have the power to preserve and safeguard the property for the benefit of the trust estate so far as that is compatible with the rights of the pledgees. Jurisdiction over the property wherever located carries with it jurisdiction to enjoin, in a proper case, interferences with the property, and this includes, by necessary inference, the power to send process to that end for service upon the persons to be enjoined wherever they may be found within the United States.

It is said that the words “wherever located” mean wherever located within the district. But considering the nature of the property involved, the number of districts and states over which it is distributed, and the p. 684manifest policy of avoiding ancillary administration as far as possible, a construction so narrow must be rejected as at war with the whole spirit and purpose of the law.

Finally. Petitioners insist, with much force, that the injunction, granted in November, 1933, and still operative, is likely, if continued, to result in irreparable injury. We do not interpret the order, as suggested by the Reconstruction Finance Corporation, as continuing the injunction in force until a plan of reorganization is effected or the proceeding under § 77 dismissed. On the contrary, p. 685we understand that the injunction may at any time be dissolved upon application and proper notice and showing. It contemplates, as we have already suggested, only reasonable delay.