In the Matter of Federal Shopping Way, Inc., a Washington Corporation, Debtor-Appellant

This is -an appeal from an order adopting a report by a referee in bankruptcy, sitting as a special master. It approved an involuntary petition for the reorganization of the debtor-appellant, Federal Shopping Way, Inc., pursuant to Chapter X of the Bankruptcy Act (Act), 11 U.S.C. § 501 et seq. Jurisdiction is conferred on this court by Sections 121 and 24 of the Act, 11 U.S.C. §§ 521 and 47.

The parties to this appeal are the appellant debtor corporation and, as appellees, the petitioning creditors, the Securities and Exchange Commission (S.E. C.), and the trustee appointed by the district court below. The S.E.C. entered the case because, two months prior to the filing of the involuntary reorganization petition, it had filed a petition for an injunction and appointment of a receiver under the antifraud provisions of Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a). The result of the latter litigation is the subject of a companion appeal, S.E.C. v. Federal Shopping Way, Inc., 433 F.2d 148 (9th Cir. September 28, 1970).

The debtor was incorporated under the laws of the State of Washington on May 24, 1955. Since that time its principal business has been the…