Duggan v. Sansberry, 327 U.S. 499 (1946)
Duggan v. Sansberry
No. 418
Argued February 6, 1946
Decided March 4, 1946 *
327 U.S. 499
CERTIORARI TO THE: CIRCUIT COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Syllabus
1. In a federal court in which a petition for reorganization of a corporation under Chapter X of the Bankruptcy Act had been approved and reorganization proceedings were pending, a petition was filed for reorganization under Chapter X of an alleged subsidiary against which a bankruptcy proceeding was then pending in another federal court. The reorganization court ordered a stay of a scheduled sale of the property of the alleged subsidiary in the bankruptcy proceeding.
Held: that the order of the reorganization court was binding upon the bankruptcy court, and was not there subject to collateral attack. Pp. 501, 504.
2. It was the duty of the bankruptcy court to obey the stay order of the reorganization court, irrespective of whether the petition for reorganization of the alleged subsidiary had been properly filed. P. 504.
3. Since the interested parties had an opportunity in the reorganization proceeding to secure a determination of the question whether a parent-subsidiary relationship existed between the corporations, the same issue should not be tried collaterally in the bankruptcy proceeding. P. 507.
4. Section 149 of the Bankruptcy Act, which provides that "[a]n order, which has become final, approving a petition filed under this chapter shall be a conclusive determination of the jurisdiction of the court," cannot be construed as allowing a collateral attack in the bankruptcy court upon the proceedings in the reorganization court. P. 508.
5. Under its constitutional power on the subject of bankruptcies, Congress may proscribe collateral attack in bankruptcy proceedings on proceedings initiated in a reorganization court. P. 510.
149 F.2d 548 reversed.
Christopher Engineering Company petitioned for reorganization under Chapter X of the Bankruptcy Act in the District Court for the Eastern District of Missouri, which appointed Duggan as trustee. Subsequently, an involuntary petition in bankruptcy was filed by its creditors against National Aircraft Corporation in the District Court for the Southern District of Indiana, which appointed Sansberry as trustee. Later, an order was entered directing that National’s property be offered for public sale. On the day before the sale, a petition was filed on behalf of National in the reorganization proceedings of Christopher in the Missouri District Court, which issued a decree finding that National was a wholly owned subsidiary of Christopher and enjoining the sale of National’s property. The sale nevertheless was made, approved, and confirmed. Upon petitions for review filed by Duggan and the National Aircraft Corporation, the District Court affirmed the referee’s order. Its decision was affirmed by the Circuit Court of Appeals. 149 F.2d 548. This Court granted certiorari. 326 U.S. 709. Reversed and remanded for further proceedings, p. 511.