Court Opinion

ID: 9653426
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:46:33.882582+00
Date Added: 2024-06-11T18:12:59.111100
License: Public Domain

SWAN, Circuit Judge.
On March 6, 1944, the district court approved a plan of reorganization for the New York, New Haven & Hartford Railroad Company, principal debtor, as certified in the Fifth Supplemental Report and Order of the Interstate Commerce Commission. One feature of the plan was the acquisition by the reorganized New Haven of the assets of Old Colony Railroad Company, a secondary debtor.1 The order of approval was brought up to this court by numerous appellants, including the Protective Committee for Bonds of Old Colony. Upon the Committee’s appeal the district court’s order was reversed “so that the Commission may make its own independent findings of value and of price.” In re New York, New Haven & Hartford R. Co., 2 Cir., 147 F.2d 40, 50. Thereafter, on February 13, 1945, the district court referred the plan back to the Commission, but only for limited purposes. The terms of the order of reference are set out in In re New York, New Haven & Hartford R. Co., 2 Cir., 150 F.2d 169, where this court upheld the order against the charge that it did not conform to our mandate. After the plan was referred back to the Commission the Protective Committee for Bonds of Old Colony requested the Commission to hold further hearings and to reconsider its findings with respect to the price to be paid for the Old Colony properties in the light of material changes in conditions that have occurred since the close of the hearings before the Commission in 1942. The Commission, however, denied the request and without further hearings made, on May 14, 1945, its Sixth Supplemental Report and Order, reported in 261 I. C. C. 195. This effected no change whatever in the plan reported in its Fifth Supplemental Report and Order, but it discussed in detail the evidence presented on previous hearings relating to the elements of value comprising the Old Colony properties and it stated the reasons which led the Commission to adhere to tíre same purchase price as it had formerly approved. When the Sixth Supplemental Report and Order came on for hearing before the district court, the present appellants again filed objections *418to the plan and offered evidence in support .thereof,- but the district court determined that the evidence did not require a return of the proceedings to the Commission and, on September 6, 1945, made the two orders which the present appeals bring up for review. The first (No. 821)2 is in effect an order approving the plan; the second (No. 822) confirms the plan.3
I. Appeal of Protective Committee for Bonds of Old Colony.
1. The appellant contends that certification by the Commission of its Sixth Supplemental Report and Order without the granting of a hearing after the plan was referred back to it was a procedure inconsistent with the opinions and mandate of this court and contrary to the requirements of Section 77, Bankr.Act, 11 U.S.C.A. § 205; consequently the Commission’s Report and Order were invalid and the district court’s orders based thereon are erroneous. In its former opinions this court did not determine whether the Commission was required to hold a hearing after the Old Colony features of the plan of reorganization were referred back. We held that the Commission’s prior Reports and Orders were defective in that the price proposed for Old Colony properties appeared to be a figure arrived at by compromise and not by an independent exercise of judgment by the Commission, and we reversed the court’s order of approval "so that the Commission may make its own independent findings of value and of price.” We recognized that the Commission might “wish to take additional evidence and to modify the plan in the light of new facts,” 147 F.2d 40, 54; but there is nothing in our opinions which required the taking of evidence. So far as the appellant’s argument rests on supposed inconsistency between the procedure adopted by the Commission and the procedure directed by our opinion, it is based on a faulty premise.
There is more substance to the statutory argument, but we are not convinced by it. Subsection e of section 77, 11 U.S.C.A. § 205, sub. e, provides that if, upon disapproval of the plan, the proceedings áre referred back to the Commission, “it shall proceed to a reconsideration of the proceedings under the provisions of subsection (d) of this section.” Subsection d provides
“After the filing of such a plan, the Commission * * * shall, after due notice to all stockholders and creditors given in such manner as it shall determine, hold public hearings, at which opportunity shall be given to any interested party to be heard, and following which the Commission shall render a report and order in which it shall approve a plan * * * ”
The appellant argues that our reversal of the district court’s order of approval based on the Fifth Supplemental Report and Order was a judicial disapproval of the plan and rendered mandatorily applicable the above quoted statutory provisions. But the Commission rejected this argument and we agree with its rejection. The provisions relating to Old Colony constituted but one portion, although an important one, of a comprehensive plan for both the principal debtor and the several subsidiary debtors. Our disapproval of the Old Colony provisions was upon a very narrow ground, namely, that the Commission’s Report did *419not show that the proposed price was arrived at in the exercise of its independent judgment as to the value of Old Colony properties. The Old Colony provisions were referred back in order that it might exercise its independent judgment upon the record already made before it and such additional evidence, if any, as in its discretion it might wish to receive. Having declined to receive new evidence, we think the Commission was authorized to make findings as to value and price based on the old record without holding public hearings. As the court stated in Ford Motor Co. v. National Labor Relations Board, 305 U.S. 364, 373, 59 S.Ct. 301, 306, 83 L.Ed. 221:
“It is familiar appellate practice to remand causes for further proceedings without deciding the merits, where justice demands that course in order that some defect in the record may be supplied. * * * If findings are lacking which may properly be made upon the evidence already received, the court does not require the evidence to be reheard.”
To such a situation the above-quoted provisions of subsections e and d do not, in our opinion, apply. In other words the remand of a part of a plan does not require the Commission to reopen the record as to the entire plan nor to take additional evidence if in the Commission’s opinion the evidence already in the record is adequate for the correction of its error. See Interstate Commerce Commission v. Jersey City, 322 U.S. 503, 514-516, 64 S.Ct. 1129, 88 L.Ed. 1420; In re Chicago, M., St. P. & P. R. Co., 7 Cir., 145 F.2d 299, certiorari denied Park v. Group of Institutional Investors, 324 U.S. 857, 65 S.Ct. 860, 89 L.Ed. 1415.
2. The appellant further contends that there has never been a public hearing on the plan provisions as to Old Colony. This point was argued on the former appeal but was not passed upon and is still open.4 The report of the Compromise Committee was before the Commission at the February 1942 hearings, but it contained nothing as to the price to be paid for Old Colony properties. The purchase price was first proposed in the Joint Report dated April 4, 1942. The February hearings had been closed except for reception of the Joint Report but provision was made for the filing of briefs after that Report should be received. Section 77, sub. d, permits plans to be filed “before, or with the consent of the Commission during, the hearings” and says that after the filing of such a plan the Commission shall, after due notice, hold public hearings. The appellant argues that the Joint Report plan was filed after the close of the February 1942 hearing. With this premise we cannot agree. It was filed dming that hearing which remained open to receive it and allowed briefs to be filed thereafter in opposition to it. Since it was filed during the hearing, the public notice under which the February hearing was held should suffice; we do not construe subsection d to require a new notice every time a modification of the plan is proposed during the progress of a hearing thereon. Apparently no request was made by the appellant after the Joint Report was filed on April 4, 1942 to have the Commission take additional evidence relative - to value and price of Old Colony assets. Only after the Commission’s Third Supplemental Report and Order adopted the price proposed in the Joint Report did the present appellant feel aggrieved. The contention that no public hearing such as the statute requires was ever had with respect to the plan provisions as to Old Colony cannot be sustained.
3. The principal objection of the appellant is that the purchase price to be paid for the assets of Old Colony as provided in the plan certified by the Commission, and approved by the District Judge, is inequitable and unfair. The assets consist both of railroad properties and “non-operating” properties, the latter comprising four items: Stock of Union Freight Rail*420road having a book value of $235,000; $3,-600,000 (face) of New Haven first and refunding bonds; a claim against Bankers Trust Company for breach of covenants in the Old Colony lease assigned to it as trustee under New Haven’s first and refunding mortgage; and a claim against New Haven, which had been liquidated by the district court in the sum of $47,186,963, arising out of repudiation of the lease by the principal debtor’s trustees. In exchange for Old Colony assets New Haven is to release its prior lien claim against Old Colony . amounting on December 31, 1943 to $6,081,048, to pay Terminal bond interest and reorganization expenses of. Old Colony estimated at $4,413,796, and to deliver to Old Colony $4,398,305 (face) of new First and Refunding Bonds and $3,298,728 (face) of new Income Bonds. The Commission considered each of the assets and the evidence of record bearing upon its value and, without determining a definite value for each or an over-all valuation in dollars, found an equivalence in value between what Old Colony was to transfer to the reorganized New Haven and what it was to receive in exchange. Judge Hincks affirmed this equivalence by determining what he calls a “permissible valuation” for each of the items involved; and although his “permissive valuation” does not correspond with any finding in the Commission’s Report, neither does it conflict with anything in the Report. In short, we cannot say that the Commission did not appraise the properties in the same manner as did the Judge; indeed, we cannot say anything ■about how it did appraise them, for the Report does not disclose its method. However, it is established by the Western Pacific case, Ecker v. Western Pac. R. Corp., 318 U.S. 448, 63 S.Ct. 692, 87 L.Ed. 892, the Milwaukee case, Group of Institutional Investors v. Chicago, M., St. P. & P. R. Co., 318 U.S. 523, 63 S.Ct. 727, 87 L.Ed. 959, and the Denver & Rio Grande case Reconstruction Finance Corp. v. Denver & R. G. W. R. Co., June 10, 1946, 66 S.Ct. 1282, 90 L.Ed. 1400, that valuations by the Commission need not be expressed in dollars nor broken down into items; they need be no more than appraisals in equivalent securities of the reorganized debtor. And this is true although the assets appraised include “non-operating” property as well as “operating” railroad property.5 The function of the court is only to see whether “the Commission had applied improper statutory standards.” 6 Hence, if it is apparent that the Commission has conducted fair hearings, has given consideration to each element of value concerned in its over-all appraisal, and has not wrongly decided legal questions involved in the problems of valuation and of allotment of equivalent securities, we believe that the requirements of the statute are satisfied.
4. Even on the assumption that the law is as we have stated it, the appellant raises a number of objections to the Commission’s appraisal. The first is that the finality of an appraisal by the Commission is limited to a true reorganization, that is, to one where the property for which the new securities are to be issued belongs to the debtor. Since in the case at bar the plan contemplates a sale of Old Colony assets to the reorganized New Haven, the appellant argues that the Commission could not lawfully proceed as it did, but must follow the doctrine applied in First Nat. Bank v. Flershem, 290 U.S. 504, 527, 54 S.Ct. 298, 307, 78 L.Ed. 465, 90 A.L.R. 391, under which “A detailed appraisal must * * * be made of the corporation’s assets as of the date of the sale, based upon then values and the possibility of disposing of them in parcels, as well as an entirety.” Again, “ * * * a detailed valuation of the many items * * * was essential to intelligent bidding for the property in such parcels or as scrap.” It is true that if the transfer of Old Colony assets is like a judicial sale on foreclosure or execution, the Commission’s appraisal was not valid. But we think it is not. The purpose of the kind of appraisal required in the Flershem case is to protect those creditors who do not choose to come in; it is to provide an honest “upset price.” The same procedure is not required under section 77, for the reason that if minority creditors are not content with the plan, *421the court, under the “cram down” provisions added in 1935, 49 Stat. 919, can force them in; and if it does not, must reject the plan. Hence nothing should turn upon the fact that deeds of conveyance must be executed and exchanged for new securities, or that these transactions are described in terms appropriate to a sale. The “transfer” is as much a part of a true reorganization as if the title to the assets had been in New Haven. The statute itself so treats such a transaction, for section 77, sub. a, allows a subsidiary railroad corporation, such as Old Colony, to file a petition stating that “it desires to effect a reorganization in connection with, or as a part of the plan of reorganization of” the principal debtor. The plan now under consideration adopted the second alternative because the Commission determined that integration of the two railroads is required in the interests of the public. In such a situation we cannot understand how it can make the slightest difference, so far as concerns the appraisal of property, that there must be deeds to effect the transfer of the subsidiary’s assets and that the new securities, the release of the principal debtor’s prior lien claim against the subsidiary and the payment by the principal debtor of the subsidiary’s reorganization expenses are treated as constituting the “price.” We agree with appellees’ argument that the properties of the Old Colony are, for purposes of the plan, on the same footing with respect to the whole system as are lines securing a divisional mortgage of New Haven. In the St. Paul case, 318 U.S. 523, 63 S.Ct. 727, 87 L. Ed. 959, it was held that bondholders whose claims were secured upon part of a single railroad — a division — were not entitled to a separate appraisal. Yet the transaction by which their lien was wiped out and they were given new securities is as much a “transfer” for a “price” and therefore a “sale” as is the proposed extinguishment of the lien of Old Colony bondholders in exchange for new securities.
Because section 77, sub. b (5), 11 U.S.C.A. § 205, sub. b (5), declares that a plan “shall provide adequate means for the execution of the plan, which may include * * * the sale of all or any part of the property of the debtor * * * at not less than a fair upset price,” it is urged that the Commission was bound to set an upset price in dollars. But in our opinion the quoted provision is optional, not mandatory, as to any property which passes to the debtor or to the new reorganized company; indeed, there is some reason to suppose that it was interpolated in 1935 to provide against the possibility that the “cram-down” provision, also then introduced, might prove unconstitutional.
As we have said, the Commission’s overall valuation was not expressed in terms of dollars. However, in analyzing the record as to values it tentatively assigned cash values to certain assets in order to make sure that New Haven’s prior lien claims could be satisfied. It then considered Old Colony’s railroad properties and determined what their capitalization might be on various hypotheses. By aggregating the values so assigned the appellant attempts to prove that the total value of the assets was greater by some $2,700,000 than the “price” to be received for them. Such a method of attack is not justified, for the values “assigned” by the Commission were but “tentative.” As the Commission stated in concluding its discussion:
“The value of Old Colony properties and assets should not be determined solely by mathematical calculations since it is essentially a matter of judgment based upon a consideration of intangible as well as tangible elements and a general knowledge of system requirements.”
The Commission’s finding of equivalence in value between the assets to be transferred and the price to be paid can be upset by the court only if the Commission “applied improper legal standards.”
5. The appellant urges that it did apply an improper legal standard with respect to the $3,600,000 of New Haven first and refunding bonds in that Old Colony was not credited with interest of $928,000 paid on these bonds into a special bank account and held subject to further orders of the court. The Report does not expressly mention this item of interest. Old Colony’s right to it has never been adjudicated by the District Court, but for the purpose of testing the Commission’s valuation of Old Colony as*422sets Judge Hincks assumed it to be an asset belonging to Old Colony and construed the Commission’s Report to have treated it “as an unliquidated claim tlie proper value of which in its independent judgment was duly reflected in its comprehensive valuation of all Old Colony assets and as an asset which would pass to the New Haven upon the payment of the purchase price proposed for all Old Colony assets.” He attributed the absence of discussion relating to the interest item not to oversight by the Commission but to absence of contention as to the existence and amount of the asset. We understand this to mean that he ruled that in treating the claim as an Old Colony asset worth $928,000 the Commission did not violate legal standards. The appellant, of course, agrees that legal standards were observed if the interest item was included in the Commission’s over-all valuation, and argues that they were violated because it was not included. We think Judge Hincks was right in construing the Report to mean that it was included. It is not necessary for the Commission to show the precise method by which it reaches its over-all valuation. The objector to the valuation must show that “legal standards” were violated.
6. A somewhat similar objection is urged by the appellant with respect to Old Colony’s claim 'against Bankers Trust Company. The Commission noted that the record shows that special counsel for Old Colony offered to compromise this suit for $4,000,000 and special counsel for the New Haven trustees recommended a compromise of $2,500,000, while certain of the secured creditors asserted that it had only a nuisance value. The Commission said that “For the purposes of this proceeding we will consider this claim as having a value of $3,250,000.” Later, in considering the amount of Old Colony’s claim of $47,186,-963 against New Haven for breach of lease, the Commission suggested that “if there be deducted from that the full recovery sought in the suit against the Bankers Trust Company ($13,379,215), the claim would be reduced to $33,807,748 * * * ” The appellant does not object to using the compromise value, $3,250,000, of the claim against Bankers Trust Company as a set-off against the breach of lease claim against New Haven, but strenuously protests against setting off the full ad damnum of the suit against Bankers Trust Company. In determining the compromise value of a claim, the Commission deals with a matter which is also within the province of the court. The validity of a claim presents a legal question which must necessarily be taken into account in determining its compromise value. If its validity were indisputable, we believe that the district judge could disapprove an inadequate compromise value as violating legal standards; conversely, if the claim were very doubtful, he could disapprove an excessive valuation. The opinion of Judge Hincks shows that he thought $3,250,000 a permissible compromise value for the claim against Bankers Trust Company; and the appellant does not controvert this. How much should be deducted as a setoff against the breach of lease claim is primarily a question of fact depending upon what the parties agreed to in the supposititious settlement. Whether their agreement produced a settlement so unreasonable as to require judicial disapproval would also, we assume, be a matter within the province of the court. Judge Hincks’ opinion expressed the view that it is “perfectly obvious as a matter of law” that if the claim were liquidated in the amount of $3,250,000, the breach of lease claim should be reduced by only the same amount. He did not read the Report as predicating the Commission’s comprehensive valuation upon a process whereby the value of the unsecured breach of. lease claim was reduced by the ad damnum of the Bankers Trust suit. The Commission merely considered the possibility of deducting the full ad damnum, it did not say that it did value the breach of lease claim on that basis. The Third Supplemental Report of October 6, 1942 referred to the suggestion that $3,250,000 would be a fair compromise value of the suit and “that Old Colony’s unsecured lease claim should be reduced only by the latter amount.” Judge Hincks was of opinion that when the Commission had thus stated the correct basis of setoff, its recital in the Sixth Report in hypothetical form of the extreme claim of certain New Haven parties did not justify the inference that the Commis*423sion’s valuation was based upon the adoption of such contention. We agree.
7. The appellant objects also to taking December 31, 1943 as the cutoff date, since it is now apparent that the plan will not be consummated until years later. When the Commission initially proposed this cut-off date it was in futuro. When it appeared from the trustees’ annual reports that estimates of Old Colony earnings up to that date were inaccurate, the Commission made corrections to conform to actualities. Because of the unexpectedly long delay in consummating the plan we see no reason for the Commission to postpone the cut-off date. As a practical matter some closing time must be set and it cannot be progressively postponed without reopening the issues and making new findings, with resulting new appeals. By the time these are finished conditions may again have changed, and so on ad infinitum. See Interstate Commerce Comm, v. Jersey City, supra. Indeed, if the closing date were to be advanced to 1946 or 1947 the change would probably be detrimental rather than beneficial to the appellant, for the court may take judicial notice that war earnings have ended and costs of labor and materials have advanced.
8. It is urged that the order of confirmation is erroneous because the plan was submitted to vote prematurely. The vote was takexx while the prior appeal was pending from the order of December 8, 1944. Subdivision e of section 77 provides that after the judge has approved the plan, he shall certify his opinion and order to the Commission. “The plan shall then be submitted by the Commission to the creditors * * * for acceptance or rejection, within such time as the Commission shall specify, * * We find nothing in the statute to suggest that the plan may not be submitted for vote pending an appeal from the order of approval. Nor do we see any good reason why this should not be done, thereby saving time if the order of approval is affirmed. Although the order was reversed on the appeal of Old Colony interests because of a formal defect which the Commission’s Sixth Report has cured, it would be a useless formality to submit the plan again to those creditors who have already voted in favor of it. It is urged that the plan, when submitted, was invalid as to Old Colony bondholders, and must therefore be resubmitted at least to them. This technically logical argument woxxld have more persuasive force if acceptance by Old Colony bondholders were requisite for confirmation of the plan. But section 77, sub. e, permits confirmation even though certain creditors have rejected it if the judge finds that the statutory conditions are met. Judge Hincks found that they were. Hence resubmission to the bondholders would be futile. If they voted favorably, confirmation would follow man-datorily; if they again rejected it (as appellant says they would) discretionary confirmation would follow. So the only question of importance is whether the judge’s findings (a) as to fair and equitable treatment, (b) unreasonable rejection, and (c) conformity with clauses (1) to (3) of the first paragraph of subsection e are warranted. In sustaining the order of approval we have already passed on conditions (a) and (c). It is urged that it cannot have been unreasonable for the bondholders to reject a plan which did not represent the Commission’s independent judgment, as this court subsequently held the plan did not. But there is little reason to suppose that this formal defect in the plan was the basis for the negative vote of the dissenters, rather than their belief that the plan provided unfair treatment. In the Denver & Rio Grande case, supra, 66 S.Ct. at page 1303, the court says that “If a plan gives fair and equitable treatment to dissenters, the elements which make the plan fair and equitable cannot be the basis for a reasonably justified rejection.” Since Judge Hincks has found the plan fair and equitable, a resubmission followed by a second rejection would accomplish nothing.
II. Appeal of Boston Terminal Bondholders.
These appellants are the trustee under the Terminal Company’s mortgage and two groups of holders of its mortgage bonds. In so far as their appeals question the *424procedure adopted by the Commission and the district court subsequent to the former appeal, no further discussion is needed. The principal questions presented by their appeals are whether the bondholders are unsecured creditors of the New Haven, whether the plan makes provision for them as such, whether their claim has been allowed, and whether they must be given an opportunity to vote upon the plan before it can be confirmed.
1'. The Boston Terminal Company is a Massachusetts corporation created by special act, Acts of 1896, c. 516, for the purpose of providing a union terminal for five specifically named railroads, among which are the New Haven and the Old Colony. The Massachusetts statute imposed upon the five railroads three distinct obligations: (1) To use the terminal (Section 9 of the Act); (2) tc nay the Terminal Company’s operating cost,, (mostly bond interest and taxes), each railroad paying in proportion to its own use (Section 10); and (3) to pay any deficiency established upon foreclosure of the mortgage securing the Terminal Company’s bonds,, each railroad paying in such proportion as the Supreme Judicial Court of Massachusetts shall determine (Section 4). The obligation for operating expenses runs directly to the Terminal Company, for whom a trustee in reorganization has been appointed by the bankruptcy court in Massachusetts, but the obligation for any deficiency on foreclosure runs to the bondholders or their mortgage trustee.
Upon the prior appeal, these appellants took the position that the bankruptcy court had no power to discharge New Haven or Old Colony of their statutory obligations under the Massachusetts Act of 1896; hence they contended they were not creditors. We rejected the contention that the statutory obligations could not be modified.7 Consequently, for purposes of the present appeal, the appellants claim to be creditors of New Haven and Old Colony by reason of the contingent obligation of each to make payment in such sums as the Massachusetts Supreme Court may determine in the event that a deficiency is established by foreclosure of the Terminal mortgage. This statutory contingent obligation the plan proposes to abrogate. Although their claim is contingent and unliquidated, we think it plain that they are creditors within the statutory definitions.8 Indeed, the appellees do not dispute this, but contend only that'the ■ claim is not presently provable.
The Terminal Company is also a creditor of New Haven and of Old Colony based on their statutory obligations to pay proportionate shares of its operating expenses. Strictly, this question may not be before us because its reorganization trustee has not appealed; but consideration of its right seems proper, since the amount of the bondholders’ deficiency claims will be materially affected by enforcement of the right of the Terminal Company to collect part of its operating expenses from New Haven and Old Colony.
2. Article N 1(a) of the plan, which is set out in the margin,9 provides that the charters of the reorganized company (New Haven) and Old Colony shall *425be amended so as to release them from the obligation to use the terminal, to reduce retroactively to October 30, 1939,10 the annual compensation to be paid for such use subsequent to that date to a proportionate percentage of $275,000, and to abrogate the obligation to pay any deficiency on foreclosure of the bond issue. Since the bondholders and Terminal’s reorganization trustee are unsecured creditors whose rights the plan proposes thus to modify, provision must be made to take care of their claims. See Kuchner v. Irving Trust Co., 299 U.S. 445, 453, 57 S.Ct. 298, 81 L.Ed. 340. Article N 1(b)11 plainly does so with respect to the claim of Terminal’s reorganization trustee. It provides that he shall have the right to elect whether to exclude the bankrupt railroads from further use of the Terminal Company’s property and “file a claim for damages in these proceedings” or to accept the terms proposed in the plan for continued use by such railroads “and thereby waive all claim of damages arising from the rejection and all claims for compensation for the use of its property other than such compensation as is provided by the plan.” We understand this to mean that acceptance by Terminal’s trustee will release New Haven and Old Colony not only from any claim for damages but also from any administration claim for use and occupation during reorganization in excess of their proportion of the $275,000 annual compensation. These provisions appear to provide adequately for the claims of the trustee. If he rejects the offered terms, he *426may claim damages as an unsecured creditor and under Article J(17) of the plan will be entitled to receive common stock for his claim against New Haven; he will also have an administrative claim for use and occupation against the reorganization trustees of New Haven and Old Colony. If he accepts the offered terms, he will voluntarily relinquish these claims and accept in substitution therefor the reduced compensation which Article N 1(a) offers.
The parties are not in accord as to whether acceptance by Terminal’s trustee is intended to operate as a release of the bondholders’ claim for damages based on abrogation of the deficiency obligation in the event of foreclosure of the bond issue. The final clause of Article N 1(b) provides that if Terminal’s trustee shall exercise his election by rejecting the plan and shall not file a claim for damages within the two weeks next succeeding, “then such trustee, his successor-receiver, the Boston Terminal Company and its creditors and stockholders shall, each and every one of them, be barred from participating as a creditor or creditors in these proceedings, or from prosecuting any claim for damages against the estate of the using bankrupt railroads.” The appellants assert that, since they are creditors of Terminal, the quoted provision means that its trustee by accepting the plan can extinguish their right to damages against New Haven and Old Colony. Obviously that would be unlawful and the appellees so admit, at least by implication. They assert, however, that “The plan does not purport to affect the rights of the bondholders arising out of any deficiency which may be established through foreclosure of the Terminal Mortgage” and! “if such a claim is finally determined,” Article J (17) which reserves common stock for unsecured creditors, “is adequate to compensate for it.” Only if the district judge accepts the appellees’ concession as to the meaning of the plan can his order approving it be sustained. Article R provides that “The construction of the plan by the court shall be final and conclusive,” and that the court shall have “power to cure any defect” therein. We find nothing in Judge Hincks’ opinions to indicate that he has construed the plan differently from what we hold necessary for' its validity, namely, that the trustee’s acceptance of the offer can have no effect upon the bondholders’ claim for damages arising out of repudiation of the deficiency obligation under section 4 of the Act of 1896. On the assumption that consummation of the plan will be carried out in conformity with these views, we think it unnecessary to remand the cause in order that the district judge may make an explicit ruling that the plan does mean what we hold it must mean to be valid.
The bondholders further argue that the plan is inequitable because it fails to provide for payment of their deficiency claim against Old Colony. Under Article N 4 substantially all the assets of Old Colony are to be transferred to the recognized New Haven and the new securities which pay for them are to be issued and delivered to Old Colony’s bondholders. Thus Old Colony will have no assets with which to satisfy any deficiency judgment the Terminal bondholders may obtain against it, and the plan does not require the reorganized New Haven to assume this obligation of. Old Colony. However, there is nothing inequitable in this result. Old Colony is insolvent; hence its unsecured creditors are entitled to nothing until its bondholders have been paid in full. The new securities which Old Colony bondholders are to receive do not equal the face value of their bonds.
The parties are also not in accord as to what, if the offer to the Terminal Company be rejected by its trustee, the plan provides with respect to the administration claim for use of its property by the reorganization trustees during these proceedings. The appellants assert that Article N 1 (a) puts a “ceiling” upon the amount of such claim, limiting it to the proportionate percentage of the $275,000 annual compensation. The appellees answer that both Judge Hincks and this court have held the contrary. This is correct. See 54 F.Supp. at page 625; ibid, at page 638; 147 F.2d at page 51. The argument that the proposed amendments to the charter of the reorganized company would make any greater payment ultra vires is not sound. Such charter limitations will not affect administration claims against the *427reorganization trustees. Payment of such claims is required by the statute, 11 U.S. C.A. § 102, sub. a, § 205, sub. 1. Article L of the plan provides that priority claims, except those against Old Colony, “shall be paid in cash or assumed by the reorganized company with the same relative priority as they now have with respect to the other obligations of such debtors.” And Article N 4 states that the reorganized company shall “assume and pay * * * (c) current liabilities and obligations of Old Colony trustees incurred during the reorganization proceeding.” Thus the administration claim is properly cared for.
3. The appellants contend that Order No. 45, together with subsequent proceedings in this cause, constitute a sufficient allowance of their claim to entitle them to vote upon the plan. The New Haven’s petition, upon which Order No. 45 was entered, alleged that the principal amount of Terminal bonds outstanding was $15,155,000, and stated that the “Debtor, together with other railroad companies, is liable to pay any deficiency following foreclosure of the mortgage securing said Bonds.” The order provides that the debtor’s petition shall constitute a sufficient filing or evidencing of said claims but that nothing contained in the order shall constitute a determination of the nature or extent of the debtor’s liability or constitute the allowance by the court of any claim against the debtor. Paragraph 6 of the order granted any party in interest upon leave of court the right to “protest” any claim within sixty days, concluding with the sentence: “In the absence of protest the aggregate amount of the bonds or other securities outstanding shall be considered as prima facie correct for the purposes of these proceedings.”
This order, coupled with the fact that no protest was ever filed and that the plan recognizes the existence of the bondholders’ claims by undertaking to deal with them, should, the appellants argue, serve as an effective “allowance.” See Hammer v. Tuffy, 2 Cir., 145 F.2d 447, 450; In re Jayrose Millinery Co., 2 Cir., 93 F.2d 471, 475; In re Two Rivers Woodenware Co., 7 Cir., 199 F. 877. There would be force in this argument were not the bondholders’ claims contingent on foreclosure and unliquidated in amount. The obligation running to the bondholders under section 4 of the 1896 Act is not a guaranty of the bonds; it is only an indemnity obligation to make good any deficiency upon a foreclosure of the mortgage securing them. Moreover, after the deficiency is ascertained it has to be apportioned between the several railroad obligors by the Supreme Judicial Court of Massachusetts. The appellants concede that the bankruptcy court has no power to foreclose the mortgage or to apportion any deficiency which may be established by foreclosure in Massachusetts. We are at a loss to understand upon what theory it can be supposed that the bankruptcy court has “allowed” the claim, when it is without power to determine the amount of it.
4. But we see no reason why a plan of reorganization cannot lawfully make provision for an unliquidated claim, or why, if such provision is adequate, the court cannot approve the plan before the liquidation and allowance of the claim. See In re Akron, Canton & Youngstown R. Co., 6 Cir., 117 F.2d 961, 964. Section 77, sub. c(7), 11 U.S.C.A. § 205, sub. c(7),12 seems to recognize that a creditor who has filed his claim may participate in the reorganization, subject to the later allowance of his claim. Article J (17) provides that the court shall reserve enough of the new common stock to allow equal proportionate distribution to any unsecured creditors whose claims “at the time of consummation” are “not then liquidated.” Since the amount of common stock which the reorganized company is authorized to issue is of neces*428sity limited, no other way exists but to give to each unsecured creditor his proportionate number of shares determined by the fraction which his claim, when liquidated, bears to the whole amount of liquidated claims. The Article presupposes that the reserved shares will be more than enough to meet the liquidated value of the claims, and provides that “any excess so reserved” shall be sold and the proceeds distributed among the holders of the new common stock, thus effecting a perfect equality of distribution.
5. There remains the question whether the Terminal bondholders must be given an opportunity to vote upon the plan before it can be confirmed. Section 77, sub. e, 11 U.S.C.A. § 205, sub. e, provides that the plan, after approval, shall be submitted for acceptance or rejection to creditors “whose claims have been filed and allowed.” Since the appellants’ claim had not been allowed, the district court had only two alternatives — either to exclude the bondholders from any vote at all, or to postpone confirmation of the plan until their claim should be liquidated and allowed. It chose the former alternative. We think this was permissible under the Act. Section 77, sub. I, 11 U.S.C.A. § 205, sub. I, provides that
“In proceedings under this section and consistent with the provisions thereof * * * the rights and liabilities of creditors * * * shall be the same as if a voluntary petition for adjudication had been filed and a decree of adjudication had been entered on the day when the debtor’s petition was filed.”
In “straight” bankruptcy the right to vote is limited to creditors “whose claims have been allowed.” 11 U.S.C.A. § 93, sub. a. Among debts which “may be approved and allowed,” are included “contingent debts and contingent contractual liabilities,” 11 U.S.C.A. § 103, sub: a(8), and “claims for anticipatory breach of contracts, execu-tory in whole or in part, including unexpired leases of real or personal property.” 11 U.S.C.A. § 103, sub. a(9). Similarly broad definitions are contained in the section dealifig with the reorganization of railroads, section 77, sub. b, 11 U.S.C.A. § 205, sub. b, defining “claims” to include “debts, whether liquidated or unliquidated,” and “creditors” to include “all holders of claims of whatever character * * * whether or not such claims would otherwise constitute provable claims under this Act. * * *” But the proviso added to section 57, sub. d in 1938, 11 U.S.C.A. § 93, sub. d, states
“That an unliquidated or contingent claim * * * shall not be allowed if the court shall determine that it is not capable of liquidation or of reasonable estimation or that such liquidation or estimation would unduly delay the administration of the estate or any proceeding under this title.”
This procedural section regulating the rights of creditors in “straight” bankruptcy is made applicable to railroad reorganization by section 77, sub. l, 11 U.S.C.A. § 205, sub. I, since it is not inconsistent with the provisions of section 77.
To ascertain the deficiency for which New Haven is liable to Terminal bondholders will certainly unduly delay confirmation of the plan, but it will not unduly delay payment to the bondholders out of the reserve of common stock held under Article J (17) of the plan. Are we to say that liquidation of their claims, which will not unduly delay the final step in administration— distribution of the new securities — must cause the postponement of an earlier step, like voting, until the claims are liquidated? That would be unreasonable, for it would subject all the other creditors to that kind of delay which the proviso to § 57, sub. d, was meant to avoid. We think that the correct construction of the statute is to say that a creditor whose claim cannot be liquidated or otherwise “estimated” without unreasonably delaying a given step in the administration of the debtor’s estate, may not share in that step; but if his claim can be liquidated or “estimated” without unreasonably delaying a later step he is to be allowed to share in that step. As in many cases, the court must choose between a more complete justice to part of those involved and an indefinite delay detrimental to the whole group. The reorganization procedure was devised in the interest of expedition, Continental Illinois Nat. Bank & Trust Co. v. Chicago, Rock Island & P. Ry., 294 U.S. 648, 685, 55 S.Ct. 595, 79 L.Ed. 1110, although experience often shows, unfortunately, that it fails to accomplish that *429purpose. It is true that Judge Hi-ncks did not expressly decide that it would unduly delay confirmation to have it wait upon ascertaining the amount of the deficiency claim of the bondholders. But to remand the cause for such a finding is unnecessary, for it is perfectly clear that such ascertainment would unduly delay confirmation. A decision otherwise we should consider an abuse of discretion.
The appellants argue that on the prior appeal we held that “The plan enables New Haven to reject what in effect amounts to a burdensome lease,” 147 F.2d at page 52; that the last paragraph of § 77, sub. b, 11 U.S.C.A. § 205, sub. b, provides that if an unexpired lease “shall be rejected by any plan,” any person injured by such rejection “shall for all purposes of this section be deemed to be a creditor of the debtor to the extent of the actual damage or injury determined in accordance with principles obtaining in equity proceedings”; hence, they say, their right to vote upon the plan cannot be defeated. Our reference to the rejection of a burdensome lease was only by way of analogy; but even if the analogy were perfect the above quoted provisions of § 77, sub. b, do not provide what are the rights of the lessor when the extent of his actual damage cannot be determined in accordance with principles obtaining in equity proceedings, but must, as here, be determined by a special tribunal — the Supreme Judicial Court of Massachusetts. In such a case, for reasons already stated, we think § 57, sub. d, 11 U.S.C.A. § 93, sub. d, prescribes the procedure. Accordingly we hold that the bondholders were not entitled to vote upon the plan and that the order of confirmation was not premature.
III. Appeal of the Commonwealth of Massachusetts.
The contentions raised by this appellant require no separate discussion. They either repeat objections which we overruled on the prior appeal, 147 F.2d 40, 51, certiorari denied 325 U.S. 884, 65 S.Ct. 1577, 89 L.Ed. 1999, or make common cause with the other appellants with respect to matters dealt with in our discussion of their appeals.
The orders appealed from are affirmed.

 New Haven filed its petition for reorganization on October 23, 1935. On June 3, 1936, Old Colony filed its petition in the same proceeding. The Interstate Commerce Commission, after hearings, reported a plan of reorganization in 1940, 239 I.C.C. 337. This plan did not include Old Colony. On rehearing before the full Commission a modified plan was proposed which did include Old Colony, 244 I.C.C. 239. On March 25, 1941 modifications of the plan were proposed by the Second Supplemental Report and Order, 244 I.C.C. 521. In December 1941 the District Judge disapproved the plan and recommended to the Commission a report of a Compromise Committee. See 254 I.C.C. 63, 64. In February 1942 further hearings were had before the Commission; the hearings were kept open until April 4, 1942 for receipt of the “Joint Report” of the Compromise Committee. On October 6, 1942 the Commission filed its Third Supplemental Report, incorporating in the reorganization plan the provisions of the Joint Report, 254 I.C.C. 63. Certain parties moved for rehearing which was denied and the plan was again submitted in the Commission’s Fourth Supplemental Report and Order, 254 I.C.C. 405. The district judge disapproved the plan in some respects and invited the Commission to file a further report. In re New York, N. H. & H. R. Co., D.C., 54 F.Supp. 595. Its Fifth Supplemental Report and Order was filed on February 8, 1944, 257 I.C.C. 9. The plan proposed therein was approved by the District Judge on March 6, 1944 in 54 F. Supp. 631.

 It orders “That the record of this Court in the proceedings upon a plan bo enlarged to include said Sixth Supplemental Report and Order of the Interstate Commerce Commission together with all evidence received at the hearing herein and that the order of this Court of March 6, 1944 (Order No. 734) approving the plan as contained in the Eifth Supplemental Order of the Commission, being consistent with the requirements of the appellate opinions of January 2, 1945, and January 23, 1945, 147 F.2d 40, and with the appellate mandate of January 30, 1945, in the light of the record as thus enlarged, in all respects be reinstated as an order of this Court in full force and effect.”

 During the pendency of the appeals from the order of March 6, 1944 approving the plan, the Commission submitted the plan to be voted upon and, on December 29, 1944, certified to the district court that the plan had been accepted by all classes of creditors entitled to vote thereon, except holders of Housa-tonic bonds and Old Colony bonds. The holders of Housatonic bonds filed no objections to the order of confirmation and have taken no appeal therefrom.

 As we said in 150 F.2d 169, 170 of the Old Colony appeal, we “decided nothing respecting the provisions affecting Old Colony except that the Commission had not made independent findings of value and of price and the statute required that it should. Hence the Commission’s new report will be subject to attack upon any legal ground when it comes before the district court.”

 See 318 U.S. at page 500, 63 S.Ct 692, 87 L.Ed. 892.

 318 U.S. at page 473, 63 S.Ct. at page 707, 87 L.Ed. 892.

 See 147 F.2d 40, 52, certiorari denied Commonwealth of Massachusetts v. New York, N. H. & H. R. Co., 325 U.S. 884, 65 S.Ct. 1577, 89 L.Ed. 1999.

 11 U.S.C.A. § 205, sub. b; 11 U.S. C.A. § 103, sub. a (8).

 N. The reorganized company shall acquire as a part of its reorganization all of the properties, franchises, and assets of the Old Colony except those of the Old Colony’s Boston group (those covered in Finance Docket No. 12614) upon the terms and conditions as follows:
1(a) The charter of the reorganized company and of Old Colony shall be amended, and the franchises and statutory obligations of the reorganized company and of Old Colony (including any charter, franchises, and statutory obligations acquired by the reorganized company in connection with the acquisition of the properties, assets, and franchises of any other railroad, and as operator of the Boston group) shall be amended or superseded so that (1) the reorganized company and Old Colony will be relieved of any obligation to continue to use the property of the Boston Terminal Company, and of any obligation to make any payments for such use if and when such use shall be discontinued; (2) the obligation of the reorganized company and Old Colony and their trustees to *425make payments on account of interest and principal (at maturity or otherwise, including any deficiency on foreclosure or any other claim with respect thereto) of the debt of the Boston Terminal Company represented by its presently outstanding bonds (or any extensions, renewals or refunding thereof) after the date on which the trustees have made the last payments on account of interest on said bonds, shall, so long as the reorganized company (for itself or as operator of the Boston group) shall use the property of the Boston Terminal Company, be satisfied by payment by the reorganized company of an amount per annum (and at that rate for any period of less than a year) obtained by applying to $275,000 the percentage of the total use of such property from time to time by the principal debtor (including in such percentage prior to the consummation of the plan use by its trustees for itself and as operators of Old Colony and thereafter use by itself and as operator of the Boston group); and (3) the obligation to pay operating expenses shall be limited to the amount of such expenses after deducting all revenues from rentals and concessions; provided, however, that, if the number of passengers using the South Station of the Boston Terminal Company shall substantially increase in the future, this Commission will consider an application by any bondholder of the Terminal Company to make an equitable revision of the amount payable by the reorganized company.
(b) The trustee in bankruptcy of the Boston Terminal Company or any receiver in equity which may hereafter be appointed by any court of competent jurisdiction to manage the property and affairs of such corporation shall have the right to elect whether he will exclude the using bankrupt railroads from further occupation and uso of the property of the Boston Terminal Company and file a proof of claim for damages in these proceedings, or will accept the terms proposed in the plan for the continued occupation and use of such property by such railroads and thereby waive all claim of damages arising from the rejection and all claims for compensation for the use of its property other than such compensation as is provided by the plan, such election to be exercised upon the submission to Mm by this Commission of the plan for acceptance or rejection under section 77, sub. e, of the Bankruptcy Act and within such time thereafter as this Commission in its order of submission shall fix; provided, however, that if such trustee or any successor-receiver shall not exercise Ms election by rejecting the plan within the time thus limited, and shall not file a claim for damages herein within the 2 weeks next succeeding, then such trustee, his successor-receiver, the Boston Terminal Company and its creditors and stockholders shall, each and every one of them, be barred from participating as a creditor or creditors in these proceedings, or from prosecuting any claim for damages against the estate of the using bankrupt railroads.

 October 30, 1939, is the date on which the reorganization trustees made their last payments on account of Terminal’s operating expenses.

 See note 9 supra.

 “ (7) The judge shall promptly determine and fix a reasonable time within which the claims of creditors may be filed or evidenced and after which no claim not so filed or evidenced may participate except on order for cause shown, the manner in which such claims may be filed or evidenced and allowed, and for the purposes of the plan and its acceptance, after notice and hearing, the division of creditors and stockholders into classes according to the nature of their respective claims and interests. * * *M