[Argument of Counsel from Pages 518-521 intentionally omitted]
Messrs. Stephen W. Downey, of Sacramento, Cal., for Merced Irrigation District, Harry W. Horton, of El Centro, Cal., for Imperial Irrigation District. George Herrington, of San Francisco, Cal., for Merced Irrigation District Bondholders' Protective Committee and Imperial Irrigation District Bondholders Protective Committee. (Messrs. Downey, Brand & Seymour, of Sacramento, Cal., Horton & Kirk, of El Centro, Cal., Orrick, Palmer & Dahlquist of San Francisco, Cal., of counsel), amici curiae.
Mr. C. F. Metteer, of Sacramento, Cal., for Reclamation District No. 1000, Nevada Irrigation Dist. and Irrigation Districts Association of Cal., for amici curiae.
Mr. Chas. D. Frierson, of Jonesboro, Ark., for Drainage Dist. No. Seven of Poinsett County, Ark., and other districts as amicus curiae.
Messrs. R. L. Ward, of Caruthersville, Mo., for Drainage Dists. Nos. 6 and 8 in Pemiscot County, Mo., and St. Francis Levee Dist. of Mo., Chas Claflin Allen, Jr., of St. Louis, Mo., for Bondholders, Drainage Dists. Nos. 1, 3, 8 and 9, in Pemiscot County, Mo.
Messrs. Stanley F. Reed, Sol. Gen., James B. Alley, Gen. Counsel, Max O'Rell Truitt, Solicitor, Hans A. Klagsbrunn, Asst. Counsel, Warner Gardner, and William Radner, all of Washington, D.C., for Reconstruction Finance Corporation, amici curiae.
Messrs. James N. Gillett, of Oakland, Cal., W. Coburn Cook, of Turlock, Cal., A. Heber Winder and Henry W. Coil, both of Riverside, Cal., Ross T. Hickcox, of El Centro, Cal., and Chas. L. Childers, of Los Angeles, Cal., John D. McCall, of Dallas, Tex., Harvey Roney, of Kansas City, Mo., and George M.
[Amicus Curiae Information from Page 522 intentionally omitted] Corlett, of Monte Vista, Colo. (Messrs. George D. Beardsley and Harry L. Donnelly, both of Kansas City, Mo., and Martin E. Lawson, of Liberty, Mo., of counsel), amicus curiae.
Messrs. Herman Phleger and Maurice E. Harrison, both of San Francisco, Cal., amici curiae, for petitioners.
Mr. Justice McREYNOLDS delivered the opinion of the Court.
Respondent, a water improvement district embracing 43,000 acres in Cameron county, Tex., was organized in 1914 under the laws of that state. Claiming to be insolvent and unable to meet its debts as they matured, it presented to the United States District Court, December 5, 1934, an amended petition with plan for adjusting its obligations-$800,000 6 per cent. bonds. This proposed final settlement of these obligations through payment of 49.8 cents on the dollar out of funds to be borrowed from the Reconstruction Finance Corporation at 4 per cent.
The petition follows and seeks relief under the act of Congress approved May 24, 1934, c. 345, §§ 78, 79 and 80, 48 Stat. 798, title 11 U.S.C.A. §§ 301, 302 and 303. It alleges that more than 30 per cent. of the bondholders had accepted the plan and ultimately more than two-thirds would do so. The prayer asks confirmation of the proposal and that nonassenting bondholders be required to accept it.
Owners of more than 5 per cent. of outstanding bonds appeared, said there was no jurisdiction, denied the existence of insolvency, and asked that the petition be held insufficient.
The trial court dismissed the petition for lack of jurisdiction. It held:
The petitioner is a mere agency or instrumentality of the state, created for local exercise of her sovereign power reclamation of arid land through irrigation. It owns no private property and carries on public business only. The bonds are contracts of the state, executed through this agency, and secured by taxes levied upon local property. Congress lacks power to authorize a federal court to readjust obligations, as provided by the act. Also the allegations of fact are insufficient.
The Circuit Court of Appeals took the cause, considered the points presented, and held that the allegations were adequate to show jurisdiction and to warrant introduction of evidence. Also that Congress had exercised the power 'to establish * * * uniform Laws on the subject of Bankruptcies,' granted by section 8, cl. 4, art. 1 of the Constitution. Accordingly it reversed the trial court and remanded the cause.
The Act of May 24, 1934 (48 Stat. 798), amended the Bankruptcy Act of July 1, 1898, c. 541, 30 Stat. 544, by adding chapter 9 (three sections 78, 79, 80, 11 U.S.C.A. §§ 301-303), captioned 'Provisions for the Emergency Temporary Aid of Insolvent Public Debtors and to Preserve the Assets Thereof and for other Related Purposes.'