Source: https://law.justia.com/cases/federal/appellate-courts/F2/596/1102/447107/
Timestamp: 2019-10-15 09:21:25
Document Index: 550628180

Matched Legal Cases: ['§ 77', '§ 205', '§ 77', '§ 721', '§ 211', '§ 211', '§ 211', '§ 104', 'art, 484', '§ 205', '§ 205']

Bankr. L. Rep. P 67,103, 596 F.2d 1102 (3d Cir. 1979) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Third Circuit › 1979 › Bankr. L. Rep. P 67,103
Bankr. L. Rep. P 67,103, 596 F.2d 1102 (3d Cir. 1979)
US Court of Appeals for the Third Circuit - 596 F.2d 1102 (3d Cir. 1979) Argued Oct. 16 and 17, 1978. Decided Jan. 11, 1979
We deal in this opinion with appeals by two indenture trustees, representing four secured bond issues, from orders of the district court approving and confirming the Amended Plan of Reorganization of Penn Central Transportation Company (PCTC or the Debtor) and related debtors in reorganization under § 77 of the Bankruptcy Act, 11 U.S.C. § 205.1 Judge Aldisert's opinion in In re Penn Central Transportation Co. (Reorganization Plan Appeals), 596 F.2d 1127, Nos. 78-1698/1700, 78-1702/03, 78-1710, 78-2311/12, 78-2314/15 and 78-2319/20 (3d Cir. January 11, 1979), filed simultaneously herewith, rejects challenges by other secured creditors to the Plan of Reorganization. Reference is made to that opinion for an account of the history of the proceedings, and a description of the debtor estates, the structure of the Plan, and the legal justifications for that structure. Judge Higginbotham's opinion in In re Penn Central Transportation Co., 596 F.2d 1155 (Stockholder Appeals), Nos. 78-1715, 78-2321, and 78-2336 (3d Cir. January 11, 1979) rejects challenges to the Plan made on behalf of shareholders in the Penn Central Company, the Debtor's sole stockholder.
The indenture trustees representing these creditors do not object to the basic structure of the Plan of Reorganization, but only to the allocation of securities to them within that structure. The three Irving Trust issues all of which were accorded "super secured" status in the final Plan contend that the distributions proposed to be made to them under the Plan do not provide them with compensation that is the equitable equivalent of the well-secured claims that they will be required to surrender. Therefore, they contend, the Plan violates the rule of absolute priority, originally applied in diversity railroad equity receiverships, Northern Pacific Ry. v. Boyd, 228 U.S. 482, 33 S. Ct. 554, 57 L. Ed. 931 (1913), and subsequently in proceedings under § 77 as well. E. g., Group of Institutional Investors v. Chicago, M., St. P. & Pac. R.R., 318 U.S. 523, 63 S. Ct. 727, 87 L. Ed. 959 (1943). The R & I bondholders' more modest assertion is that the proposed distribution to them is insufficient because of the Plan's failure to treat certain assets of the estate as properly subject to the lien of the R & I Mortgage. We will deal with these distinct contentions separately under the captions "I. The Irving Trust Appeals" and "II. The R & I Appeal." Our resolution of these issues, which requires some modification of the distributions to these appellants, does not affect the confirmation or consummation of the Plan.
The reorganization court recognized the force of this argument. Applying the standards for the evaluation of compromises announced in Protective Committee for Independent Stockholders of TMT Trailer Ferry Association v. Anderson, 390 U.S. 414, 88 S. Ct. 1157, 20 L. Ed. 2d 1 (1968), it concluded that no secured creditor was assured of surviving a litigated liquidation. It also concluded, however, that a handful of bondholders were significantly more secured by retained assets than others, were considerably more likely to emerge from a litigated liquidation with payment of all or nearly all of their claim in cash, and therefore merited more consideration than the Plan provided them. Referring to that group of creditors as "super secured," it wrote:
In re Penn Central Transportation Co., 458 F. Supp. 1234, 1302 (E.D. Pa. 1978).
In a railroad reorganization the process of allocating the value of the debtor's estate to creditors is regulated by the so-called absolute priority rule. Group of Institutional Investors v. Chicago, M., St. P. & Pac. R.R., 318 U.S. 523, 546, 63 S. Ct. 727, 87 L. Ed. 959 (1943) (Institutional Investors) . The requirements of that rule have been precisely stated in 6A Collier on Bankruptcy P 11.06, at 210-11 (14th ed. 1977):
The function of the absolute priority rule is two-fold. First, the rule is intended to assure that the investment securities distributed as compensation under the Plan have a value at least roughly equivalent to the value of the claim surrendered. The reviewing court is therefore required to make "a comparison of the new securities allotted to (the claimant) with the old securities which he exchanges to determine whether the new are the equitable equivalent of the old." Institutional Investors, supra, 318 U.S. at 566, 63 S. Ct. at 749. In addition, the rule commands that until senior creditors have received that "full compensatory treatment," Consolidated Rock Products Co. v. DuBois, 312 U.S. 510, 529, 61 S. Ct. 675, 85 L. Ed. 982 (1941), participation in the estate by junior creditors must be barred. RFC v. Denver & R.G.W.R.R., 328 U.S. 495, 517, 66 S. Ct. 1282, 90 L. Ed. 1400 (1946); In re Central Railroad Co. of New Jersey, 579 F.2d 804, 810 (3d Cir. 1978). These standards of priority protect both the principal of and interest on the senior creditor's claim. Institutional Investors, supra, 318 U.S. at 546, 63 S. Ct. 727. They also shield a secured creditor's priority in his security up to the lesser of the full value of his security or the full value of his claim. In re Equity Funding Corp., 416 F. Supp. 132, 145 (C.D. Cal. 1975).
Consolidated Rock Products Co. v. DuBois, supra, 312 U.S. at 528-30, 61 S. Ct. at 686-87 (footnotes omitted). Accord, Institutional Investors, supra, 318 U.S. at 565-66, 63 S. Ct. 727; Northern Pacific Ry. v. Boyd, supra, 228 U.S. at 508, 33 S. Ct. 554.
In re Penn Central Transportation Co., 458 F. Supp. at 1263-64. This delay might also have been accompanied by depletion of the estate. For example, any extended litigation ran the risk of tying up the liquidation of the marketable assets of the estate until after the expiration in 1983 of the Debtor's enormous tax-loss carry forwards a crucial asset of the estate. And the cost of conducting litigation both for creditors and for the estate would surely have been enormous.
Compromise of disputes as part of a plan of reorganization is one of the "(p)ractical adjustments" approved by the Supreme Court in Consolidated Rock Products Co. v. DuBois, supra, 312 U.S. at 529, 61 S. Ct. 675. The Court has recognized that "(i)n administering reorganization proceedings in an economical and practical manner it will often be wise to arrange the settlement of claims as to which there are substantial and reasonable doubts." Protective Committee for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson,390 U.S. 414, 424, 88 S. Ct. 1157, 1163, 20 L. Ed. 2d 1 (1968) (TMT Trailer Ferry) . The power to compromise is usually applied to claims belonging to the estate rather than to those of senior creditors like the Irving Trust bondholders. E. g., TMT Trailer Ferry, supra; Consolidated Rock Products Co. v. DuBois, supra. But since the terms upon which a major claim of a distressed estate is settled may often determine whether or not a given creditor class is able to participate in the estate at all, we can see no difference in principle that would forbid an enforced compromise of even the most senior of claims.
TMT Trailer Ferry, supra, 390 U.S. at 424, 88 S. Ct. at 1163. It follows that when a senior creditor's claim is settled, the compromise must satisfy the rule of absolute priority as well. The reviewing court must determine that the value of the proposed compromise distribution is fairly equivalent to the value of the potential claim surrendered. For the reorganization court that determination demands the exercise of "informed, independent judgment." Id. The program for the exercise of that judgment is established in the TMT Trailer Ferry opinion:
Id. at 424-25, 88 S. Ct. at 1163. This statement of the standard of review demonstrates that the weighing of claim against compensation cannot be an exact one. Nor should it be, since an exact judicial determination of the values in issue would defeat the purpose of compromising the claim. Florida Trailer & Equipment Co. v. Deal, 284 F.2d 567, 571 (5th Cir. 1960); In re Equity Funding Corp., 416 F. Supp. 132, 146 (C.D. Cal. 1975). We conclude that the reorganization court properly held that the test was whether the terms of the proposed compromise fall "within the reasonable range of litigation possibilities." In re Equity Funding Corp., supra, 416 F. Supp. at 145.
The reorganization court carefully considered the competing contentions of the three Irving Trust bond issues and the Trustees before approving the allocations that are at issue on appeal. Its exercise of "informed, independent judgment" is entitled to "especial weight" upon review. New Haven Inclusion Cases, 399 U.S. 392, 463, 90 S. Ct. 2054, 26 L. Ed. 2d 691 (1970); RFC v. Denver & R. G. W. R. R., 328 U.S. 495, 533, 66 S. Ct. 1282, 90 L. Ed. 1400 (1946). In a similar situation, the TMT Trailer Ferry Court suggested in dictum that had the record in that case clearly indicated that the reorganization court had given "adequate and intelligent consideration" to the factors outlined above, its approval of a proposed compromise would have been affirmed, despite the presence in the record of virtually uncontested facts indicating "the probable existence of valid and valuable causes of action." 390 U.S. at 434, 438-39, 88 S. Ct. at 1171. These intimations, when coupled with the customary injunction that judicial findings of fact should not be overturned on appeal unless they are clearly erroneous, suggest that on all factual issues our review should be highly deferential. We think, however, that the issue of whether, viewing the facts in the light most favorable to the Plan, a particular legal theory is reasonably likely to succeed, is one on which our review must necessarily be plenary.
This argument has two prongs. First, the Trustees argue that evidence of market value should be ignored because the market can be expected irrationally to undervalue the securities of a once-distressed company emerging from a lengthy reorganization. In re Missouri Pac. R. R., 39 F. Supp. 436, 446 (E.D. Mo. 1941); See also Blum, The Law and Language of Corporate Reorganization, 17 U. Chi. L. Rev. 565, 566-69 (1950). That argument has considerable force when the securities in issue represent equity in, or long term interest bearing obligations of, a reorganized debtor. In such cases, the market value of the security will depend upon the investing public's perception of the future prospects of the enterprise. That perception may well be unduly distorted by the recently concluded reorganization and the prospect of lean years for the enterprise in the immediate future. Use of a substitute "reorganization value" may under the circumstances be the only fair means of determining the value of the securities distributed. When, however, the security contract is in essence a short term, non-interest bearing promissory note, whose value is largely independent of the long term fortunes of the enterprise, arguments based on the irrationality of the market are less persuasive. It can scarcely be contended that the market in commercial paper functions irrationally when it discounts a non-interest bearing future promise to pay in order to obtain its present value. Nor can the market be assumed to be irrational in questioning the precise date of payment on these obligations. The Trustees' own expert witness has testified that those payments are in doubt. It is therefore difficult for us to see why the distressed company rationale requires or permits us to ignore this evidence of value. Plainly, the promise of a dollar payable in several years is not worth 100 cents today.
318 U.S. at 565-66, 63 S. Ct. at 749. We think that the Trustees claim for this passage a meaning far broader than is warranted either by its context or by a fair reading of the absolute priority rule. The quoted statement was made in the context of a dispute concerning the proper compensation to be awarded to two parallel mortgages on different operating divisions of the debtor railroad. One division had historically been profitable; the other had generally lost money. The Plan proposed to consolidate both mortgages into an integrated financial structure. As Justice Douglas described it, the goal was "to fit each into the hierarchy of the new capital structure in such a way that each will retain in relation to the other the same position it formerly had in respect of assets and of earnings at various levels." Id. at 563, 63 S. Ct. at 748. This problem of parallel valuation raised corporate finance issues of considerable sophistication. Moreover, the issues of valuation involved required that the Court review the Plan's proposed attribution of the corporation's future profit and loss to particular encumbered assets, as well as its estimate of the amounts of those profits and losses. The evidence bearing upon these issues of valuation was conflicting and complex. See id. at 559-61, 63 S. Ct. 727.
It was in the context of this difficult problem of valuation and distribution that Justice Douglas stated that the use of dollar values "would create an illusion of certainty" and unduly burden the reorganization process. The wisdom of that position, in context, is indisputable. But it is not apparent that this statement was intended for universal application. First, Justice Douglas was careful to stress that the contest between the two mortgages was not one between senior and junior creditors, where the rule of absolute priority would have applied, but rather one between two first liens on different assets. Id. at 562-63, 63 S. Ct. 727. Second, the valuation issues in dispute were extremely complex and subject to substantial conflicting evidence. Here, in contrast, the valuation problem presented is relatively simple, and the evidence bearing upon it is clear and uncontradicted.7 Recognizing this evidence would pose no burden on the reorganization process. Finally, in the absence of Any other evidence in the record bearing on the value of the debt issues we question whether meaningful review would be possible if this evidence of value were not recognized. Surely we cannot be expected to review the proposed allocations under the Plan on the patently false assumption that these non-interest bearing debt securities have a "reorganization value" equal to their face value despite their deferred maturities. Some discount must be recognized, and no basis for taking account of that discount other than that proposed by Irving Trust has been suggested either in the reorganization court or on appeal. Moreover, we think that Irving's proposed discount rates are reasonable. The 16% Discount rate applied to the Series A Bonds was suggested by the Trustees' own expert witness. In light of this concession, the 8% Discount rate which Irving suggests should be applied to the more speculative A Preference Stock is conservative, and for that reason we do not think that the fact it was not formally presented before the district court prevents us taking notice of it here.
The obligations to the United States creditors comprise: $56,200,000 principal and interest due on Trustees' Certificates held by the United States and in default since 1976; $51,800,000 of Trustees' Certificates guaranteed by the United States and due in 1986, and $368,100,000 due to the United States Railway Association (USRA) for loans made pursuant to section 211(h) of the RRRA. These debts are costs of administration entitled to first priority. "Had the United States not provided the funds to pay, the trustees would be dealing with an equal amount of unpaid obligations held by a multitude of individual creditors and suppliers. . . . (T)he United States is both equitably and legally fully entitled to rights incident to an unpaid administrative debt." Staff Report of the SEC on Plans of Reorganization 81, Joint App., Vol. I, Book 3 at A-1200. In a litigated liquidation the United States could reasonably contend that its claims were entitled to priority ahead of other costs of administration and of secured creditors. With respect to claims of state and local taxing authorities, which make up the bulk of other costs of administration, the priority of federal claims is made clear in the statute, 45 U.S.C. § 721(h) (1), (3) (B) (1976 Supp.), and its legislative history, See H.R.Rep.No.1743, 94th Cong., 2d Sess. 34-35, Reprinted in (1976) U.S.Code Cong. & Admin.News, pp. 5837, 5846, 5857-58. With respect to secured creditors the case for federal priority emerges implicitly from the provisions of the RRRA. In terms, § 211(h) does not specify how much of the debtor's property is to be primed by loans made pursuant to the statute. Other portions of § 211, however, suggest an arguable contention that the government intended to take a lien on All of the debtor's property. Section 211(e), for example, which delineates the prerequisites for § 211(h) claims, provides that before any loans are extended, the United States Railway Association must make a finding in writing that, Inter alia, "the applicant has offered such security as the Association deems necessary to protect reasonably the interests of the United States." Section 211(f) provides, in addition, that:
The Irving Trust bondholders contend, however, that the possible federal priority could not reasonably have been intended to reach non-operating assets like their collateral. A reasonable argument can be made, however, that even non-operating assets were primed by the federal claims. The debtor's Operating assets were surely an unlikely source for such repayment since they had produced no profits for years. It seems likely that the government was looking to the non-operating assets for its security. This view of congressional intention is reinforced by the reality that non-operating assets like the Park Avenue Properties were long recognized as vital contributors to the continued operations of the railroad. Thus, in adjudicating the demands of Penn Central creditors that certain properties of the debtor not be sold, this court quoted with approval from the Penn Central Merger Cases, 389 U.S. 486, 510-11, 88 S. Ct. 602, 614, 19 L. Ed. 2d 723 (1968):
In re Penn Central Transportation Co., 484 F.2d 323, 330 n. 37 (3d Cir.), Cert. denied, 414 U.S. 1079, 94 S. Ct. 598, 38 L. Ed. 2d 485 (1973). With this holding in mind, it seems reasonable to conclude that the debtor's non-operating assets were intended to be subject to the government's lien for RRRA administration expenses. If so, then the Irving Trust bonds were primed by $476.1 million of federal claims.
The bondholders contend, however, that their potential liability on a worst case basis is limited to the federal government claims. Conceding, as they must, that both the $118,000,000 of other administrative costs and the $449,800,000 of state and local tax claims are costs of administration entitled to first priority in this proceeding, the Irving Trust bondholders argue that under settled principles of bankruptcy law, these costs may not be assessed against their security absent a showing that the security was benefited by the claim. In re Lehigh Valley Railroad Co., 558 F.2d 137 (3d Cir. 1977); Central Railroad Co. of New Jersey v. Manufacturers Hanover Trust Co., 421 F.2d 604 (3d Cir.), Cert. denied, 398 U.S. 949, 90 S. Ct. 1867, 26 L. Ed. 2d 289 (1970); 5 Collier on Bankruptcy P 77.21 at 611 n.21 (14th ed. 1978). This rule is, as Collier points out, simply an adaptation to the reorganization context of the general principle applicable under section 64 of the Bankruptcy Act, 11 U.S.C. § 104 (1976). See 6A Collier on Bankruptcy P 13.14(2) at 635 (14th ed. 1977).
Federal claims $476,100,000 State & Local Taxes $449,800,000 Other Costs of Administration $118,000,000 -------------- Total $1,043,900,000
We conclude that the Plan must be modified to improve the distribution to the Mohawk & Malone Bondholders. In this regard Irving Trust suggests that the fairest solution is to allow the Mohawk & Malone claim to be satisfied in full out of the escrowed cash that is its security. While a strong argument might be made for such treatment, we think it is undesirable to establish a precedent that secured creditors may demand cash satisfaction for the secured portion of their claim upon consummation of the plan. If such a principle were recognized, we see no reasoned distinction between the right of a creditor who can show that he is 100% Secured by retained assets in a worst case liquidation to a 100% Cash settlement of his entire claim and that of a creditor who can show that he would be at least 30% Secured by retained assets to a 30% Cash settlement. As the Trustees suggest, such a requirement of cash satisfaction would be inconsistent in principle with feasibility requirements. See Case v. Los Angeles Lumber Products Co., 308 U.S. 106, 117, 60 S. Ct. 1, 84 L. Ed. 110 (1939).
Objections to the diversion of rentals and dividends, identical to those offered by the Bank of New York as successor trustee under the R & I mortgage, have heretofore been presented to this Court. In In re Penn Central Transportation Company (Park Avenue Properties), 484 F.2d 323 (3d Cir.), Cert. denied, 414 U.S. 1079, 94 S. Ct. 598, 38 L. Ed. 2d 485 (1973), Judge Adams wrote:
More recently, in In re Lehigh Valley Railroad Co., 558 F.2d 137 (3d Cir. 1977), we had occasion to reiterate our view that there is no material distinction, for reorganization purposes, between income and proceeds from sales. In Lehigh Valley, the court considered the claims of certain bondholders for the sequestration of rents from mortgaged property, and held that the four-pronged test of Central Railroad of New Jersey v. Manufacturers Hanover Trust Company, 421 F.2d 604 (3d Cir.), Cert. denied, 398 U.S. 949, 90 S. Ct. 1867, 26 L. Ed. 2d 289 (1970), was applicable. In so ruling, Judge Forman wrote:
The reorganization court rejected this argument for at least two reasons.15 First, it observed that even if there were an administration expense claim for losses in the operation of leased lines, it would not be the property of Penn Central, but rather the property of the Trustees. The court reasoned that any operating losses which might give rise to chargeback claims were made possible by the reorganization process, and by funds made available from the Penn Central estate as a whole. As the reorganization court stated, "(t)o say that this detriment suffered by the estate as a unit should now be redressed, but only for the benefit of the R & I Mortgage, is to express a strange view of the appropriate exercise of the equitable powers of a federal court." In re Penn Central Transportation Co., 458 F. Supp. 1234, 1305 (E.D. Pa. 1978).16 It concluded, moreover, that the draftsmen of the R & I indenture had no intention of producing the anomalous result of subordinating the security of third-party creditors of the leased lines to the claim of the R & I bondholders. We find these reasons persuasive and agree with the reorganization court that the claim for chargebacks was properly rejected.
In re Penn Central Transp. Co., 458 F. Supp. 1234 (E.D. Pa. 1978) (Approval Opinion); In re Penn Central Transp. Co., 458 F. Supp. 1364 (E.D. Pa. 1978) (Confirmation and Consummation Opinion) . Unless otherwise noted, all citations herein are to the Approval Opinion
E. g., RFC v. Denver & R.G.W.R.R., 328 U.S. 495, 66 S. Ct. 1282, 90 L. Ed. 1400 (1946); Institutional Investors, supra; Ecker v. Western Pacific R.R., 318 U.S. 448, 63 S. Ct. 692, 87 L. Ed. 892 (1943). The absolute priority rule also applies in proceedings under Chapter X of the Bankruptcy Act, and so cases decided under that statute are relevant here as well. See Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 473 n.11, 94 S. Ct. 2504, 41 L. Ed. 2d 243 (1974)
See Institutional Investors, supra, 318 U.S. at 561-66, 63 S. Ct. 727; Cf. Nashville C. & St. L. Ry. v. Browning, 310 U.S. 362, 370, 60 S. Ct. 968, 84 L. Ed. 1254 (1940) ("(R)ailroads, unlike farms and city lots and stocks and bonds, are not objects of exchange. The very notion of a 'full cash value' for a railroad is in many respects artificial. . . . Whatever may be the pretenses of exactitude in determining such a 'value' to claim for it 'scientific' validity, is to (use) the term in its loosest sense." (citation omitted))
See Ecker v. Western Pac. R.R., supra, 318 U.S. at 476, 63 S. Ct. 692; Consolidated Rock Products Co. v. DuBois, supra, 312 U.S. at 528, 61 S. Ct. 675
Similarly in RFC v. Denver & R. G. W. R. R., 328 U.S. 495, 517, 66 S. Ct. 1282, 90 L. Ed. 1400 (1946), also relied upon by the Trustees as authority for their position, the records apparently contained sharply conflicting evidence of value. Were such evidence in the record here, we would, of course, have deferred to the conclusions of the finder of fact, as did the Court in RFC, supra
E. g., In re Denver & R. G. W. R. R., 23 F. Supp. 298 (D. Colo. 1938); In re New York, O. & W. Ry., 25 F. Supp. 709 (S.D.N.Y. 1937); In re Missouri Pac. R. R., Bankr.L.Rep. (CCH) P 3780 (E.D. Mo. 1935), Aff'd sub nom. J. P. Morgan & Co. v. Missouri Pac. R. R., 85 F.2d 351 (8th Cir.), Cert. denied, 299 U.S. 604, 57 S. Ct. 230, 81 L. Ed. 445 (1936)
These New York City properties include the Waldorf Astoria, Biltmore, Barclay, Roosevelt and Commodore Hotels, and the Bankers Trust, American Brands, Pan Am, Westvaco, Union Carbide, Chemical Bank, ITT, Graybar, and Manufacturers Hanover office buildings. The properties and liens thereon are described in detail in In re Penn Central Transportation Company, 354 F. Supp. 717 (E.D. Pa. 1972), Aff'd in part, modified and rev'd in part, 484 F.2d 323 (3d Cir.), Cert. denied, 414 U.S. 1079, 94 S. Ct. 598, 38 L. Ed. 2d 485 (1973)
The court's conclusion that chargeback rights belong to the trustee of the estate, in view of his role as a manager of the debtor's reorganization, seems amply supported by related case and statutory law. A trustee is appointed to supervise the reorganization of a railroad pursuant to 11 U.S.C. § 205. He is given legal title to the railroad's property for the special purpose of rehabilitating the company. See, e. g., Thompson v. State of Louisiana, 98 F.2d 108, 110 (8th Cir. 1938). That title is exclusive and thus, for example, a debtor railroad corporation is not liable for personal injuries caused by negligent operation of the railroad by the trustees. Detwiler v. Chicago, R. & P. Ry. Co., 15 F. Supp. 541 (D. Minn. 1936). Among the powers which are vested in the trustee, consistent with his function of reorganizing the company, is the power to reject leases. See generally In re Penn Central Transp. Co., 382 F. Supp. 821 (E.D. Pa. 1974), Aff'd, 510 F.2d 969, 970 (3d Cir. 1975); In re Hoboken Mfrs. R. Co., 56 F. Supp. 187 (D.N.J. 1944), Aff'd, 150 F.2d 921 (3d Cir. 1945), Rev'd on other grounds sub nom., Smith v. Hoboken R. R., Warehouse and Steamship Connecting Co., 328 U.S. 123, 66 S. Ct. 947, 90 L. Ed. 1123 (1946). Once such a lease is rejected, the operation of the leased line is for the account of the lessor. 11 U.S.C. § 205(c) (6) (1946); In re Penn Central Transp. Co., 382 F. Supp. 821, Aff'd, 510 F.2d 969, 970 (3d Cir. 1975). It seems plausible to assume that the power to reject a lease, which is vested in the trustee so as to further the reorganization of the debtor, includes within it the power to supervise the operation of the leased lines and effect any chargeback which arises. Since this entire procedure is mandated by exigencies of reorganization, it is unlikely that Section 77 contemplated the preemption of the chargeback funds by prior lienholders