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rule for chapter X.113
As Bankruptcy Judge Leif Clark demonstrated in his Greystone opinion,114 the chapter X model had no place in chapter XI, which expressly contemplated separate classification of unsecured claims and did not even require that classification be based on the "nature" of the claims.115 Since chapter XI was drafted to deal only with unsecured claims, its classification rule necessarily contemplated classification not on the basis of "rank" or "legal nature," but rather on more practical grounds, provided only that such differences were "just and reasonably necessary to effectuate the arrangement."116
Code § 1122(a) expressly prohibits dissimilar claims being classified together. Perhaps this was primarily intended to ensure compliance with the absolute priority rule, like the principal classification rule under the Act. Perhaps it was also intended to preclude the kind of gerrymandering where a debtor packs a class with friendly votes to outvote the objectors. It does not, however, contain any express language indicating how similarity is to be determined for that purpose, not even "according to the nature" of the claims. Nor does the language suggest any prohibition or restriction on separate classification of similar claims, which was not uncommon under the Act.
Nor does the legislative history of the Code reveal whether Congress understood either the chapter X rule or the chapter XI rule to be the dominant model for § 1122.117 This would suggest that both models should have equal weight under the Code, but legislative history suggests that the chapter XI rule was intended to prevail. The Bankruptcy Commission's draft § 7-302 required designation of classes of claims "which are of substantially similar character and the holders of which enjoy substantially similar rights,"
113
E.g., In re Scherk v. Newton, 152 F.2d 747 (10th Cir. 1945).
114
In re Greystone III Joint Venture, 102 B.R. 560, 567 (Bankr. W.D. Tex. 1989), rev'd, 948 F.2d 134 (5th Cir. 1991), cert. denied, 113 S. Ct. 72 (1992).
115
"For the purposes of the arrangement and its acceptance, the court may fix the division of creditors into classes and, in the event of controversy, the court shall after hearing upon notice summarily determine such controversy." Act § 351; see, e.g., Western Mesa Oil Corp. v. Edlou Co., 143 F.2d 843, 845 (9th Cir.), cert. denied, 323 U.S. 786 (1944).
116
See, e.g., Bartle v. Markson Bros. Inc., 314 F.2d 303, 305 (2d Cir. 1963). 117 In re Bloomingdale Partners, 170 B.R. 984 (Bankr. N.D. Ill. 1994).
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