Source: https://www.legalcrystal.com/case/97018/warren-vs-palmer
Timestamp: 2018-05-25 22:57:00
Document Index: 407938810

Matched Legal Cases: ['§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77']

Warren Vs Palmer - Citation 97018 - Court Judgment | LegalCrystal
Warren Vs. Palmer - Court Judgment
LegalCrystal Citation legalcrystal.com/97018
Case Number 310 U.S. 132
.....s. 133 the amount of the deficit chargeable to the lessor and to impose a first lien on the leased property to secure it, and to do this after proceedings for reorganization of the lessor company under § 77 have been instituted in another district where the leased line is situate. p. 310 u. s. 140 . 108 f.2d 164 affirmed. certiorari, 309 u.s. 645, to review the affirmance of an order of the district court in a railroad reorganization proceeding under § 77 of the bankruptcy act. the order fixed the amount of a deficit arising from the operation of a leased line and declared it a first lien on the leased property. only the question of the bankruptcy court's jurisdiction to do this was brought here. page 310 u. s. 135 mr. justice reed delivered the.....
Warren v. Palmer - 310 U.S. 132 (1940)
U.S. Supreme Court Warren v. Palmer, 310 U.S. 132 (1940)
the amount of the deficit chargeable to the lessor and to impose a first lien on the leased property to secure it, and to do this after proceedings for reorganization of the lessor company under § 77 have been instituted in another district where the leased line is situate. P. 310 U. S. 140 .
The Boston and Providence Railroad Corporation, in 1888, leased its property, a line of road running between Boston and Providence, for 99 years to the Old Colony Railroad. It has continued as a separate corporation, receiving and distributing its rent, and is not a subsidiary or affiliate of the New Haven or the Old Colony. In 1899, the Old Colony leased its lines, including its leasehold in the Boston and Providence, to the New York, New Haven, and Hartford Railroad for 99 years. The New Haven operated its own and the leased property until it was put into reorganization under Section 77 of the Bankruptcy Act [ Footnote 1 ] in the District Court of Connecticut on October 23, 1935. The trustees of the New Haven operated the Old Colony under the lease until they rejected the lease by order of the court on June 2, 1936. Next day, the Old Colony filed under Section 77 in the same Connecticut court as a subsidiary debtor, the court appointed the trustees of the New Haven trustees of the Old Colony, and, on June 18, 1936, the court ordered the New Haven trustees to continue to operate the Old Colony as an integral part of the New Haven, the operation being for the account of the Old Colony. The order provided that, in the event leases of the Old Colony were later rejected, payments for operating the leased property and payments of rent under the lease would be deemed to have been for the account of the lessor, and could be recovered from the
leased property prior to any mortgage or lien thereon. On July 19, 1938, the court directed the trustees of the Old Colony to reject the lease of the Boston and Providence and to continue operation of the road for the account of the Boston and Providence pursuant to Section 77(c)(6). On August 4, 1938, the Boston and Providence was put into reorganization in the District Court of Massachusetts. Previously the system had been operating at a loss, and the trustees of the New Haven and the Old Colony asked the Connecticut court to determine the amount of the deficit attributable to the Boston and Providence for the period from June 4, 1936, to December 31, 1937, and to declare that amount a lien on the Boston and Providence in favor of the New Haven and the Old Colony. On January 16, 1939, the Connecticut court decided that it had jurisdiction to grant the requested lien on the Boston and Providence, although that road was under reorganization in another bankruptcy court, and on April 20, 1939, the court entered an order fixing the amount of the deficit and declaring it a first lien on the property of the Boston and Providence. The Circuit Court of Appeals, holding that the Connecticut court had jurisdiction to determine the lien, affirmed the order of January 16, 1939, but concluded that the Boston and Providence had been given no chance to be heard on the merits of the question, and remanded the later order for a determination of the "existence and amount of the obligation." [ Footnote 2 ]
Railroad reorganization in bankruptcy is a field completely within the ambit of the bankruptcy powers of Congress. [ Footnote 3 ] Under the commerce clause of the Constitution, Congress likewise has exercised its power to provide for the continued operation of interstate railroads such as petitioner. [ Footnote 4 ] The fact that the operator operates under a
lease does not affect the force of the requirement that the operation must continue until a certificate permitting abandonment is issued by the Interstate Commerce Commission. [ Footnote 5 ] The judicial functions of the bankruptcy court and the administrative functions of the Commission work cooperatively in reorganizations. [ Footnote 6 ] Provision is made by the Bankruptcy Act [ Footnote 7 ] for the operation of leased property on surrender. It is under this subsection that respondent claims to have become entitled to the amount sought in the motion for allowance and lien. This subsection modifies pro tanto the rule of the Interstate Commerce Act for operation.
was in the custody of the Connecticut court by virtue of the provision of § 77(a). [ Footnote 8 ] By virtue of subdivisions 77(c)(10) and 77(c)(6), [ Footnote 9 ] it is clear that leaseholds are in some instances to be operated by the lessee's trustees.
"to require that expenses which have contributed either to the preservation or creation of the fund in its custody shall be paid before a general distribution among those entitled to receive it. [ Footnote 10 ]"
Such a power reposes in any court charged with custody of property. It is an in rem jurisdiction springing from possession of the property which is necessary in order that the court may adequately care for the property. Thus, a court having custody of a ship is able to secure wharfage by virtue of its power to decree a preferential payment. [ Footnote 11 ] And here, the court is able to carry out the operation of the Boston and Providence by promising or granting a lien to those who carry out the operation.
If the Connecticut court has possession of the property and operated it under § 77(c)(6) for its owners, could it fix a lien on the property after another bankruptcy court took the administration of the property? By § 77(c)(6), railroads in reorganization which had been operating lines under lease were allowed to reject the lease, but required to continue operation of the leased lines if the lessor had no ability to operate. Thus, Congress recognized the possible occurrence of the situation now before us, and evinced a desire that rail service should not, in such a case, be interrupted. In view of the public importance of rail service, we think this subsection represents an intention to give the court charged with operation the fullest ability to secure the necessities of operation -- an intention to give the operating court power to promise those having the materials, men, and equipment needed for operation a first lien on the road to secure payment for the operation. [ Footnote 12 ] This in no way impairs the operation of § 77(a), which grants to the Massachusetts court,
The "purposes" of § 77 include the development of a "fair and equitable" [ Footnote 13 ] plan of reorganization. The Massachusetts court is left with jurisdiction to accomplish this, but is bound to recognize the priority of the lien declared by the Connecticut court. By § 77(c)(6), the Connecticut court was given jurisdiction
Continental Illinois Nat. Bank & Trust Co. v. Chicago, R.I. & P. Ry. Co., 294 U. S. 648 , 294 U. S. 667 -675.
Palmer v. Massachusetts, 308 U. S. 79 , 308 U. S. 87 , note 14.
Thompson v. Magnolia Petroleum Co., 309 U. S. 478 ; Ex parte Baldwin, 291 U. S. 610 ; cf. Isaacs v. Hobbs Tie & T. Co., 282 U. S. 734 ; Green v. Finnigan Realty Co., 70 F.2d 465, 466; In re Chambers, Calder & Co., 98 F. 865.
New York Dock Co. v. The Poznan, 274 U. S. 117 , 274 U. S. 120 -121.
It may be noted that Congress did not adopt the rule of Gross v. Irving Trust Co., 289 U. S. 342 , in this situation. In the Gross case, property of a debtor had been in the custody of a state receivership court prior to the debtor's adjudication in ordinary bankruptcy. It was held that, because of the bankruptcy court's paramount jurisdiction, the administrative expenses of the receivership had to be proved in bankruptcy, and could not be declared a lien by the receivership court on property in its custody.