  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
only one class of creditors, apparently on the poorly articulated rationale that acceptance by some class was inherent in the concept of a reorganization or arrangement.81
In 1973, when the Commission On the Bankruptcy Laws of the United States submitted its Report recommending revision of the bankruptcy law and consolidating chapters X, XI and XII, it did not contain any provision expressly requiring an accepting class. Instead, the Commission's draft retained a structure similar to what had existed under the Act, permitting cram down treatment of dissenting classes and determining acceptance "exclusive of those creditors and equity security holders who are [so] provided for."82
In 1977, however, two bankruptcy court decisions extensively analyzed the "judicial gloss" of Herweg and its progeny and concluded that it was unwarranted by the statutory language, legislative intent, or purposes of chapter XII.83 Both cases therefore held that a
without addressing the issue.
81
Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 585-86, 55 S. Ct. 854, 861 (1935)("In no case of composition is a secured claim affected except when the holder is a member of a class, and then only when the composition is desired by the requisite majority and is approved by the court. Never, so far as appears, has any composition affected a secured claim held by a single creditor.")(dictum in holding the involuntary treatment of secured debt under the Frazier-Lemke Act constituted an unconstitutional taking of property); In re Herweg, 119 F.2d 941, 943 (7th Cir. 1941)("We do not understand that this section (the cram down provision of Bankr Act § 461(11)] provides a substitute for an arrangement, nor that it contemplates dispensing with an arrangement when no creditors can be found to consent to it) (chapter XII); In re Hamburger, 117 F.2d 932 (6th Cir. 1981)("Although an arrangement . . . 'may include: the retention by the debtor of all or any part of his property' (§ 461(12)) this provision is not mandatory and cannot be availed of for the debtor's relief unless it is included in an arrangement approved by the requisite number of creditors affected (§ 466).")(chapter XII); Kyser v. MacAdam, 117 F.2d 232 (2d Cir. 1941)("It is improper to deprive secured creditors of the right to vote by applying § 461(11) adequate protection.") (chapter XII); Meyer
v. Rowen, 195 F.2d 263 (10th Cir. 1952)("But, it was obviously not the purpose of Section 461, sub. 11 to dispense with an arrangement when no creditors can be found to consent to it; nor does it authorize the bankruptcy court to force secured creditors, unanimously opposed to the plan, to accept it simply because adequate protection is provided.")(chapter XII); Taylor v. Wood, 458 F.2d 12 (9th Cir. 1972) (the court affirmed, without comment or analysis, the referee's conclusion that "debtor's plan was incapable of confirmation under Section 467 or 468 of the Bankruptcy Act where the lone creditor affected refused to accept"); In re Northland Construction Co., 2 B.C.D. 1598, 1602 (E.D. Wis. 1976) (the Herweg analysis, although concerned with chapter XII, applies with equal force to chapter X).
82 REPORT OF THE COMMISSION ON THE BANKRUPTCY LAWS OF THE UNITED STATES, Part 2, §§ 7303(7) & (8) and 7-310(d)(1), 93d Cong., 1st Sess. H Doc No. 93-137 (1973)("Commission Report").
83
In re Hobson Pike Associates, Ltd., 3 BCD 1205 (Bankr N.D. Ga. 1977)(("There is no specific or clear statutory authority in Chapter XII that the one and only creditor, which is provided adequate protection under § 461(11) can defeat by mere opposition the plan and prevent confirmation just because the debtor has no other creditor to affirmatively accept the plan."); In re Marietta Cobb Apartments Co., 3 BCD 720 (Bankr S.D.N.Y. 1977) (The Herweg "reading of the Act would foreclose Chapter XII as a vehicle for the rehabilitation of a debtor with one mortgagee -- the norm in a large percentage of today's cases.").
17
