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U.S. Supreme Court

Smith v. Hoboken R. Warehouse & S.S. Connecting Co., 328 U.S. 123 (1946)

Smith v. Hoboken R. Warehouse & Steamship Connecting Co.

No. 384

Argued December 11, 1945

Decided April 29, 1946

328 U.S. 123


1. The provision of § 70(b) of the Bankruptcy Act that

"an express covenant that an assignment by operation of law or the bankruptcy of a specified party thereto or of either party shall terminate the lease or give the other party an election to terminate the same shall be enforceable"

is applicable to railroad reorganizations under § 77 of the Bankruptcy Act. Pp. 328 U. S. 126-128.

2. The provision of § 70(b) of the Bankruptcy Act authorizing enforcement against a bankruptcy trustee of an express covenant of forfeiture embraces a covenant applicable to any "transfer" of the premises "in any proceeding, whether at law or in equity or otherwise," to which the lessee is a party, and "whereby any of the rights, duties, and obligations" of the lessee are "transferred, encumbered, abrogated or in any manner altered" without the lessor's consent. P. 328 U. S. 128.

3. Whether, in a proceeding for reorganization of an interstate railroad under § 77 of the Bankruptcy Act, enforcement against the trustee of a covenant of forfeiture in a lease of railroad tracks and facilities would be "consistent with the provisions" of § 77, within the meaning of § 77(1), presents problems primarily for consideration and decision by the Interstate Commerce Commission, and the reorganization court should not have declared a forfeiture of the lease until the questions had been passed upon by the Commission. Pp. 328 U. S. 128-129.

(a) Whether the public interest requires that the line be operated by the lessee, rather than the lessor, presents a question for the Commission under § 1(18) of the Interstate Commerce Act. P. 328 U. S. 130.

(b) It is the function of the Commission under § 77 of the Bankruptcy Act to prepare the plan of reorganization of the debtor company, and, if the reorganization court decrees a forfeiture in advance of consideration of the problem by the Commission, it would interfere with the functions entrusted to the Commission under § 77. Pp. 328 U. S. 130, 328 U. S. 132.

150 F.2d 921 reversed. chanroblesvirtualawlibrary

Page 328 U. S. 124

In proceedings for the reorganization of a railroad under § 77 of the Bankruptcy Act, the reorganization court granted respondent's motion to terminate a lease in which the debtor company was lessee. 56 F.Supp. 187. The Circuit Court of Appeals affirmed. 150 F.2d 921. This Court granted certiorari. 326 U.S. 707. Reversed, p. 328 U. S. 133.

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