Document: 336 U.S. 132 69 S.Ct. 435 93 L.Ed. 553 CALLAWAY et al.v.BENTON al. No. 21. Argued Oct. 19, 1948. Decided Feb. 7, 1949. [Syllabus from pages 132-134 intentionally omitted] Mr. T. M. Cunningham, of Savannah, Ga., for petitioners. Charles J. Bloch, Macon, respondent. Chief Justice VINSON delivered the opinion Court. 1 The Central Georgia Railway Company, whose Trustee is petitioner here, and its predecessor have leased operated property South Western Railroad Company since 1869. went into receivership in 1932, 1940 entered reorganization under § 77 Bankruptcy Act, 49 Stat. 911, 11 U.S.C. 205, U.S.C.A. 205. Western's lease was adopted successively by Central's Receiver Trustees. It has, consequence, remained solvent, no petition has ever been filed behalf. 2 Under plan promulgated Interstate Commerce Commission approved district court, given alternative selling to reorganized company return a fixed amount bonds latter, or having disaffirmed debtor returned.1 appeared specially proceedings asked that be company, but on basis studies estimates not now open challenge, rejected proposal found offered properties appears 'fair equitable equal value transportation property, (is) approved.'2 3 Following court approval plan, officers, reversing their previous stand, urged acceptance offer stockholders signified intention conveying company's if majority voted accept. Thereupon respondents, who are individual Western, brought an action Superior Court Bibb County, Georgia, where principal office located, asking injunction against officers directors, restraining them certifying railroad's if, upon vote stockholders, 'mere majority' stock favor plan. contention laws incorporated, entire assets cannot sold except unanimous stockholders. 4 Before decision reached state action, meeting held at which purchase incorporated considered. 30,137 shares were 9,057 favoring rejection. Petitioner, acting as party suit, then bankruptcy respondents other enjoined further prosecution temporary order prayed. own motion, interlocutory directors ground such sale law requires consent Petitioner amended his bringing attention injunctive and, after holding hearings, federal granted permanent declared court's null void excess jurisdiction. Upon appeal, Appeals Fifth Circuit, one judge dissenting, reversed 165 F.2d 877. We writ certiorari3 because conflict between authority importance question administration Act. 5 First. based primarily premise inclusion lines within system company. said attempt part 'to prevent consummation respects Western.' Again, 'the consolidation, merger sale, what conditions may convey State law; it law—a arises Act Act.' conclusion was, therefore, although whether railroad corporation can all without would ordinarily congizable state's courts, these circumstances applying law. 6 do agree. language factors took consideration arriving indicate clearly that, so far contemplates acquisition lessor railroad, ordinary rules intended apply. That invariably practice. As we 'business judgment'; 'if deems desirable keep system, must necessarily rather broad discretion providing modifications where, being along with debtor. For assumption modification sufficiently attractive insure creditors.' Group Institutional Investors v. Chicago, M., St. P. & P.R. Co., 1943, 318 523, 550, 63 727, 742, 87 959. itself recites acquired only they terms hereinafter set forth.'4 Otherwise, returned lessor. In addition, record replete statements Commission, parties choice any offerce: unfettered right accept reject.5 7 circumstances, see reason why incidents should applicable. One most important is, course, proportion corporation's accepting make effective. Since, held, this law, believe substitution rule erroneous.6 8 Not least difficulties contrary result fact gives clue lessor's controlling. Section 77, sub. e provides confirmation creditors two-thirds total allowed claims each class voting confirm event he satisfied finds, hearing, makes adequate provision fair treatment interests those rejecting it'. But neither nor so-called 'cram-down' applies They apply 'creditors accordance requirements subsection c section,' obviously does include lessor-offeree.7 And, 'creditor' specific b, individually, not. 9 sought find permitting simple shareholders provisions 5(11) Act.8 section relates voluntary mergers, line reorganization. undoubtedly carry simultaneously proceedings, United States Lowden, 1939, 308 225, 60 248, 84 208, procedure followed case. preferred, instead, out consolidation b(5) another corporations'. power flows different source than over consolidations While some findings required two Acts similar, f debtor's shall inconsistent purposes chapter procedural jurisdictional overlap.9 noted, contains proviso 'a applicable case number assent'. Whether operative when need decide. 10 Nothing derogates way decisions upholding exercise statutory obligations, override interposing obstacles path otherwise lawful plans recently reaffirmed cases arising Act.10 Nor ambit less States. specifically put effect, notwithstanding.' statute not, however, give require asserted effect hands contract sale. signs depend business judgment, also charter incorporation. There therefore occasion implicitly accepts likely offeree elsewhere change picture. Congress leave judges accepted disregarded, Palmer Massachusetts, 79, 34, 93, criterion applied prospects offeree. Second. even governs sell properties, exclusive jurisdiction decide question. nondelegable control estate possession. Thompson Magnolia Petroleum 1940, 309 478, 628, 876; Isaacs Hobbs Tie Timber 1931, 282 734, 51 270, 75 645. question, did controversies affect estate.11 exception express statute.12 What wherever located. a. interest leasehold estate. Such 'property' meaning Any controversy involving court. 12 Here, involves leasehold, reversion fee jointly lessee, could proceedings.13 initiated decided determination rights inter se reversionary property. think here involved debtor, assertion error. 13 Ex parte Baldwin, 1934, 291 610, page 615, 54 551, 553, 78 1020, said: 'All possession bankrupt ownership passes, filing bankruptcy, custody bankruptcy. To protect interference, issue injunction.' Baldwin upheld adjudicate forfeiture easement way—clearly claimed ownership. See supra. Warren Palmer, 310 132, 865, 1118, New Haven lessee had operating account c(6), fix deficit resulting operation declare lien Since physical covered legal title thought immaterial. Clearly, remain ultimate responsibility it. And dissipation through losses suffered recoupment properly lodged supervising 14 Equally clear, internal management subject control. anomaly petitioner's position demonstrated facts just discussed. proceeding Connecticut while Boston Providence, Massachusetts Haven, like case, contemplated Providence hardly contended assume questions arising, example, classes Haven's accepted. incompatible a.14 Insofar reorganizing rests 15 Further support our Milwaukee reorganization, aspects, presented situation analogous before us: instituted lines, Terre Haute Southeastern Company. provided new Haute, latter scale down bonded indebtedness thereon, rental lease, substantially reduced. differentiate four respect earning character security each, Certain bondholders accordingly attacked unfair, preserve respective priorities bond issues. said, 546, 741, 959: 'Th short answer objection treated District purposes. raised argued treat them. considered problem solely rejection affirmance lease.' abundantly clear us, similarly considered.15 16 Other lend contentions. creditor pointed out, organization. bound assent, extent claim damages breach amounts due lessee.16 b(1) alter creditors, provide means execution, corporation. This permits executory contracts unexpired leases. 17 unquestionably working framework full complete also, corollary, These altered necessary achieve sound financial formerly involve however.17 'The courts customarily possessed.' Meyer Fleming, 1946, 327 161, 164, 66 382, 384, 90 595.18 conceive solvent extension traditional powers justified 18 A serious practical arise consequence cessation service lines. foreseen difficulty, however. unable operate following duty devolves continue lessor,19 completion lessee.20 speculate eventual disposition properties. Until final made, assured will maintained prejudiced thrust Webster Atlas National Bank, 1941, 312 156, 61 542, 85 642. 19 Third. Continental Illinois Bank Trust Co. Chicago R.I. 1935, 294 648, 55 595, 605, 79 1110, similar principles there involved. Rock Island this: 'Under enjoin collateral hinder, obstruct delay preparation probably it?' affirmative rested inherent equity defeat impairment jurisdiction, 262 old Judicial Code (now 28 1651), authorized writs statute, jurisdictions,' 2(15) 11(15), 'make orders, process, enter judgments addition for, enforcement act'. 20 Reliance based, fallacy previously adverted to. embarrass formulation promulgation formulated approved. leaves t facing disaffirmance risks separate No suggestion made unreasonably delayed. action.21 Texas Mexican R. 328 134, 142, 937, 943, 1132: 'Forfeiture leases advance nature seriously interfere performance Commissionof functions entrusted it.' Smith Hoboken R.R. Warehouse S.S. Connecting 123, 947, 1123, 168 A.L.R. 497. same considerations prevail later stage when, pursuant forfeited substituted lieu thereof. Unless sham illusory, effectively consummated merely postpone hindered development plan; left elsewhere. 21 conclude narrow erred enjoining suit leading Western. already litigation first Title 2283, forbids power, since, hold, Act.22 22 DOUGLAS, whom RUTLEDGE concurs, dissenting. 23 taken allows undo agencies 24 'consolidation, purchase' continued forth Plan.' 25 If acquired, waive equipment. Securities allocated bear dividends period prior acquisition. determines allotment equitable' 'equal property.' 26 On February 11, 1947, submitted including midnight March 28, 1947. 13, assent holders stock. met 9,057. Accordingly mailed ballot approving Commission. 27 balloting certified Thereafter hearing confirmed reserving adjudication attempted annul Subsequently overruled objections minority valid issued seems plain me judicial review, determine validity tendered agencies. 29 subs. d, e. passes approves certifies submits e, included definition creditor. b. Milwaukee, 549, certify results submission.' 'shall confirm' (1) requisite percentage obtained (2) 'that acceptances procured forbidden law'. (Italics added.) 'shall, review,' binding 'all secured unsecured, adversely affected filed, approved, well have, f. 30 organized to, orders relative thereto, supervision judge, j, exceptions material stay commencement until decree.1 31 historic instances 'exclusive jurisdiction' vested heretofore zealously guarded encroachments courts. 1132. restricted protection business. sole 'by plainly alone ascertain cast Once determined corporate 32 precisely situations maintained, long recognized decree. Local Loan Hunt, 292 234, 695, 1230, 195. policy reflected 265 Code, frowned years exception. Toucey York Life Ins. 314 118, 62 139, 143, 86 100, 137 967. recognition necessity wrote subdivision j 77. 33 hold invalid Court, lost much myriad underlying every validly organized; proxies executed pursuance code; contain certain kinds provisions, authorize types securities, etc., etc. intrude injunctions questions, command process lost, efficiency undermined, minorities leverages scheme explicitly With reads follows: 'Prior acquire, forth, present * leased-line holders, time direct. method acquisition, purchase, merger, shall, trustee managers begin function. 'If railroads three personal appurtenant thereto real owned conveyed company; lessors become entitled lease; conveyances waivers instance delivery securities proposed it, specified.' 261 I.C.C.Rep. 515. 309. 333 853, 68 736. report (261 I.C.C. Rep. p. 308): (South Western) insists severance cares plan.' commented acquire are, disaffirmance, liberty take back,' counsel stated you offer, gentlemen; does.' precise received little commentators. mentioned Committee reports debate 1935 amendments passed. However, line, analyzed Meck, Problems Leased Line, Law Contemp. Prob. 509, 'Upon remains lessee's trustees, reorganiz tion. Consequently, modified more Acceptance determined, submitting according incorporated.' affected, 959, discussion infra, nearly changes deemed unless Reorganization, 239 485, 536—538; 240 255, 270—271. 532, 533, 735, re York, N.H. H.R. D.C., F.Supp. 631, 638. 905, 5(11), 5(11). Ry. Cir., 587, argument (2)(b), (c), (f) mandatory Seaboard Air Line Daniel, 426; Schwabacher States, 334 182, 958; 522, 819, 1402. Arkansas Corporation Thompson, 313 888, 1244; Gardner Jersey, 329 565, 67 467, 91 504. Terminal Shares, Inc., 104 1. Even may, discretion, pending .Ct. 1020; Order Conductors America Pitney, 326 561, 322, 318. Foust Munson Lines, 299 57 90, 81 49. Cf. Pullman 496, 643, 971; City Fieldcrest Dairies, 316 168, 986, 1355. Whether, withheld outcome j. connection with, debtor-lessee capital When enacted 1933, lessor, reenacted, though draft Federal Coordinator Transportation, proposals formed amendments. Report 1934. H. Doc. 89, 74th Cong., 1st Sess., 230. Friendly, Amendment Reorganization 36 Col.L.Rev. 27, 49; Meck Masten, Leases Yale L.J. 626, 653. arose phase use Terminal, obligations owed repudiated facilities considering Terminal's violated Second Circuit statement: enables reject burdensome lease. compel furnish offered; choose can, creditor, file proof entitled. offer. irrelevant approve making Moreover, able obtain either amendment amend Company; amend, Haven.' 147 40, 52. noted insolvent meet debts, Haute's note independently institutional investors group committee, argument, saying: 'We agree divested existing liens properties.' 535. Swaine, Decade 56 Harv.L.Rev. 1193, 1217. dual status been, be, explained Contempt. 516, theory deal capacities: unsecured owner line. former capacity receive creditors. line.' 6, true requiring lessor-offeree renounce assert agreements parties. determining 272 295. Adolf Gobel, 80 849, 77B, 207, Greenbaum Lehrenkraus Corp., 73 285, receivership. (6) provides: rejected, elect longer end decree impractical public abandonment 49, amended.' Operation carried Providence. 169 337. 102 923; Guaranty Henwood, 347, 108 Hanover Callaway, 135 592. Kline Burke Construction 260 226, 43 1077; Mandeville Canterbury, 47, 472, 605. part: 'In staying suits continuation *.'

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