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In re Penn Central Transportation Co.

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


July 23, 1973

IN THE MATTER OF: PENN CENTRAL TRANSPORTATION COMPANY, DEBTOR. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS TRUSTEE UNDER THE NEW YORK AND HARLEM RAILROAD COMPANY GOLD BOND AND SECOND MORTGAGES, APPELLANT IN NOS. 72-2116 AND 72-2117, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS INDENTURE TRUSTEE UNDER THE NEW YORK CENTRAL AND HUDSON RIVER RAILROAD COMPANY REFUNDING AND IMPROVEMENT MORTGAGE DATED OCTOBER 1, 1913, APPELLANT IN NOS. 72-2118 AND 72-2119, THE FIDELITY BANK, AS A STOCKHOLDER IN AND ON BEHALF OF THE NEW YORK AND HARLEM RAILROAD COMPANY, APPELLANT IN NOS. 72-2120, 72-2121 AND 72-2123, THE FIDELITY BANK, ON BEHALF OF: (A) ITSELF AND ALL OTHER STOCKHOLDERS OF THE NEW YORK AND HARLEM RAILROAD COMPANY OTHER THAN PENN CENTRAL TRANSPORTATION COMPANY; AND (B) THE NEW YORK AND HARLEM RAILROAD COMPANY, APPELLANT IN NO. 72-2122, MANUFACTURERS HANOVER TRUST COMPANY, AS INDENTURE TRUSTEE UNDER THE NEW YORK CENTRAL AND HUDSON RIVER RAILROAD COMPANY THREE AND ONE-HALF PERCENT GOLD BOND MORTGAGE, DATED JUNE 1, 1897; BANKERS TRUST COMPANY, AS INDENTURE TRUSTEE UNDER THE NEW YORK CENTRAL AND HUDSON RIVER RAILROAD COMPANY CONSOLIDATION MORTGAGE DATED JUNE 20, 1913; AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK AS INDENTURE TRUSTEE UNDER THE NEW YORK CENTRAL AND HUDSON RIVER RAILROAD COMPANY LAKE SHORE COLLATERAL INDENTURE DATED FEBRUARY 4, 1898, AND THE NEW YORK CENTRAL AND HUDSON RIVER RAILROAD COMPANY MICHIGAN CENTRAL COLLATERAL INDENTURE, DATED APRIL 13, 1898, APPELLANT IN NO. 72-2124, RICHARD JOYCE SMITH, TRUSTEE OF THE PROPERTY OF THE NEW YORK, NEW HAVEN AND HARTFORD RAILROAD COMPANY, DEBTOR, APPELLANT IN NO. 72-2125, PENN CENTRAL COMPANY, APPELLANT IN NO. 72-2126

484 F.2d 323. (D.C. Bankruptcy No. 70-347).

Seitz, Chief Judge, Van Dusen, Aldisert, Adams, Gibbons, Rosenn and Weis, Circuit Judges. Seitz, Chief Judge, Concurring.

SUR PETITION FOR REHEARING

The petition for rehearing filed by Appellees-Trustees in the above-entitled cases having been submitted to the judges who participated in the decision of this court and to all the other available circuit judges of the circuit in regular active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is denied.

By the Court, ARLIN M. ADAMS, Judge.

SEITZ, Chief Judge, Concurring.

I think the panel's opinion can be read to mean that under the circumstances, the district court lacked statutory authority to act on the trustees' petition. Because that inference can be drawn, I desire to make clear that I do not view the appeal and, therefore, this petition for rehearing in banc as presenting a question of the statutory authority of the district court to consider and approve the trustees' petition.

In my view § 77(o) gives a trustee authority to file a petition seeking a private sale of any of the debtor's property. It seems to me to follow that the district court has authority to pass on such a petition without first referring it to the ICC as part of a plan of reorganization. This construction is compatible with §§ 77(d) and (e) because of the requirement in § (o) that the trustee must allege, and of course the district court must find, that such a sale is "in the interest of the debtor's estate and of ultimate reorganization." (emphasis supplied)

Given the numerous and varied problems arising in this, and other, reorganizations, a formulation in terms of "lack of authority" is highly undesirable. It removes the flexibility and unnecessarily rigidifies the bounds within which the district court must act. On the other hand, an interpretation which recognizes the "authority" of the district court to act but focuses upon its use of that authority retains the flexibility of the statute while permitting the courts to apply traditional standards in administering it.

The issue here then, as I see it, is whether the district court erred in approving the determinations of the trustees that the sales of these properties were: (1) in the interest of the debtor's estate; and (2) in the interest of the ultimate reorganization. In resolving this issue, the district court was called upon to exercise its discretion. In consequence, the court of appeals was required to find an abuse of discretion by the district court before it could reverse.

The factors relied upon by the panel of the court form a sound basis for the conclusion that at this stage it was not consistent with a sound exercise of discretion for the district court to approve the trustees' recommendation that the sales were in the interest of the ultimate reorganization of the debtor. I therefore do not seek rehearing in banc.

Circuit Judges Van Dusen and Aldisert join in the foregoing opinion.

19730723

© 1998 VersusLaw Inc.



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