BANKRUPTCY-CORPORATE REORGANIZATION-POWER OF COURT TO ORDER INTERIM PAYMENTS WHILE PETITION IS PENDING UNDER CHAPTER X OF BANKRUPTCY ACT

A petition for reorganization was filed, pursuant to Chapter X of the Chandler Act, October 3, 1947, which was adjudged on the same day to be in good faith and within the terms of the act. The corporation was clearly solvent, in the sense that its assets exceeded its liabilities, but needed financial adjustment to meet the principal on outstanding income notes due the following June. Thereafter, and before a plan was approved, the court entered an order directing the trustee of the debtor to pay 6% to the holders of the first mortgage bonds as an interim distribution to be applied against the principal amount due on such bonds. The debtor and holders of subordinate income notes appealed on the ground that this order amounted to partial liquidation unauthorized under Chapter X. Held, as these interim payments would not interfere with the general plan of reorganization, the court had power to order them. In re Industrial Office Bldg. Corp., (3d Cir., 1949) 171 F. (2d) 890