BANKRUPTCY - CORPORATE REORGANIZATION - EFFECT OF RELEASE OF COLLATERAL OBLIGOR ON DISSENTING CREDITORS

The federal district court confirmed a plan of reorganization of debtor corporation, under section 77B of the Bankruptcy Act, which expressly released defendant from liability as guarantor of bonds of the corporation and provided for cancellation of the bonds and substitution of new certificates of stock. The plaintiff, a bondholder, made no objection when the plan was submitted to the court; objection by other bondholders was overruled. The plaintiff brought suit in municipal court on the defendant's guaranty. Defendant pleaded the confirmation of the plan by the district court as res adjudicata.

The trial court denied the plea and entered judgment for the plaintiff. Held, trial court reversed and plea of res adjudicata allowed, it not appearing that the federal district court was wholly without jurisdiction to cancel the guaranty and release the defendant. Gottlieb v. Crowe, 289 Ill. App. 595, 7 N. E. (2d) 469 (1937).