The opinion of the court was delivered by: FULLAM
On June 21, 1970, this Court, per Kraft, J., entered an order approving the petition of the Penn Central Transportation Company for reorganization under section 77 of the Bankruptcy Act (11 U.S.C. § 205, et seq.). Paragraph 10 of the Order (Order No. 1) provided in part as follows:
"10. All persons, firms and corporations * * * holding for the account of the debtor deposit balances * * * hereby are restrained and enjoined * * * from offsetting the same * * * against any obligation of the debtor, until further order of this Court."
The Order further provided, in paragraph 7, that such depositories of funds of the debtor were authorized to honor all checks, drafts and vouchers drawn by the debtor against its bank accounts, without regard to the fact that the reorganization petition had been filed and approved. By further orders entered on June 23 and 24, 1970, it was made clear that the honoring of checks and drafts would be without prejudice to any claim the banks might have to priority, by reason of any alleged right of setoff which would otherwise have existed, or otherwise.
When the reorganization petition was filed, the debtor had many millions of dollars on deposit in some 142 bank accounts scattered throughout the United States. Telegrams were sent to each of these 142 banks, advising them of the filing of the reorganization petition, its approval by the Court, and, specifically, the provisions of paragraphs 10 and 7 of the Court's Order.
Notwithstanding the foregoing facts, nine of the banks involved made bookkeeping entries which purported to set off the debtor's funds against various loans allegedly due the banks, and refused to honor checks drawn on such accounts. The total amount of these purported setoffs is in excess of $4,500,000.
On July 14, 1970, the debtor filed a verified petition and obtained an order, returnable July 23, 1970, directing the nine respondent banks to show cause why the Court should not adjudge them in contempt of the Order of June 21, 1970, and require them to honor forthwith the debtor's withdrawals to the full extent of the funds on deposit. The respondent banks, and the approximate amount retained by each, are as follows:
National City Bank of Cleveland, Ohio $950,000
Citizens Fidelity Bank and Trust Company,
Louisville, Kentucky 60,000
National Bank of Detroit, Michigan 1,000,000
Lincoln Rochester Trust Company, Rochester, New York 59,000
Marine Midland Grace Trust Company, New York City 206,000
Central Penn National Bank, Philadelphia, Pennsylvania 1,800,000
First National Bank of Maryland, Baltimore, Maryland 142,000
First Wisconsin National Bank of Milwaukee, Wisconsin 220,000
Central Trust Company of Cincinnati, Ohio 75,000
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