1. By contract between two interstate railroads, both of which
were subject to the authority of the Interstate Commerce
Commission, one obtained trackage rights over the lines of the
other at a specified rental. The contract was terminable by either
party upon twelve months' notice. The grantee railroad subsequently
petitioned for reorganization under § 77 of the Bankruptcy Act, a
trustee was appointed, and stay orders pursuant to § 77(j) were
entered. Thereafter, the grantor gave notice that it was exercising
its right to terminate the contract. After the date when, by its
terms, the contract would thus have been terminated, the trustee
continued to operate trains over the lines of the grantor, and
refused to pay more than the rental specified in the contract.
Thereupon, the grantor brought suit in a state court to enjoin the
grantee and its trustee from using the tracks of the grantor
without the grantor's consent, and to recover $500 a day damages
for such use or, alternatively, the reasonable value of the use.
The state court denied an injunction, adjudged that the contract
had been terminated, and awarded damages.
that maintenance of the suit in the state court
was not precluded by the stay orders issued by the bankruptcy
court, nor by § 77 of the Bankruptcy Act, but that the state court
should have stayed its hand and remitted the parties to the
Interstate Commerce Commission for determination of the
administrative phases of the questions involved. Pp. 328 U. S. 138
328 U. S.
(a) So far as the suit involved a money claim against the estate
for acts of the trustee in operating trains over the grantor's
tracks, it was maintainable in the state court under § 66 of the
Judicial Code, which authorizes suits against the trustee, without
leave of the bankruptcy court, "in respect of any act or
transaction of his in carrying on the business." P. 328 U. S.
(b) Maintenance of the suit in the state court is not
inconsistent with the provisions of § 77 granting the
reorganization court exclusive jurisdiction over the debtor and its
property. P. 328 U. S.
Page 328 U. S. 135
(c) The exclusive jurisdiction of the bankruptcy court is
determined by the "main purpose" of the suit, which, in this case,
evidently was an attempt on the part of the grantor to obtain a
more favorable rental. P. 328 U. S.
(d) The principle that the exclusive jurisdiction of the
bankruptcy court extends to the adjudication of questions affecting
title is inapplicable here, since the trackage agreement created
only a personal obligation, and did not purport to grant any estate
in the property of the grantor. P. 328 U. S.
(e) The general rule in bankruptcy that the trustee takes the
contracts of the debtor subject to their terms and conditions is
applicable to proceedings under § 77 by virtue of the provisions of
§ 77(l). P. 328 U. S.
(f) The qualification in 77(l) that the rule of bankruptcy be
"consistent with the provisions" of § 77 made premature an
adjudication by the court that the contract was terminated prior to
a determination by the Interstate Commerce Commission that that
step was consistent with the reorganization requirements of the
debtor. P. 328 U. S.
2. Prior to rendition of judgment on the merits, the decision of
the Interstate Commerce Commission was necessary on certain phases
of the controversy:
(1) Whether termination of the trackage agreement would
interfere with the plan of reorganization to be formulated by the
Commission under § 77 of the Bankruptcy Act. P. 328 U. S.
(2) Whether the Commission should issue a certificate under §
1(18) of the Interstate Commerce Act that "the present or future
public convenience and necessity" would permit abandonment of
operations under the trackage agreement. P. 328 U. S.
(3) What would be a reasonable rental to be allowed, under §
5(2)(a) of the Transportation Act of 1940 if the Commission decided
that the trackage arrangement should be continued. P. 328 U. S.
3. Until determination by the Interstate Commerce Commission of
the administrative phases of the questions involved is had, it
cannot be known with certainty what issues for judicial decision
will emerge, and, until that time, judicial action is premature. P.
328 U. S.
181 S.W.2d 895 reversed.
The respondent railroad company brought suit in a state court
against the petitioner railroad company (which was a debtor in a
reorganization proceeding under § 77 of the
Page 328 U. S. 136
Bankruptcy Act) and its trustee, and was awarded damages. The
Court of Civil Appeals affirmed. 181 S.W.2d 895. The Supreme Court
of Texas refused an application for a writ of error. This Court
granted certiorari. 324 U.S. 838. Reversed,
328 U. S.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
Brownsville (The St. Louis, Brownsville and Mexico Railway Co.)
and Tex-Mex (The Texas Mexican Railway Co.) are interstate carriers
by railroad, and subject to the provisions of the Interstate
Commerce Act. 24 Stat. 379, 41 Stat. 474, 49 Stat. 543, 54 Stat.
899, 49 U.S.C. § 1 et seq.
On November 1, 1904, they
entered into a written contract whereby, for payment of specified
rentals, Tex-Mex granted Brownsville the right to operate its
trains over the tracks of Tex-Mex between Robstown and Corpus
Christi, Texas, and to make use of terminal facilities of Tex-Mex
at Corpus Christi. The contract provided that it was to continue
for a term of 50 years from its date unless sooner terminated by
the parties. And it contained the following provision:
"It is further agreed that this contract may be terminated,
without giving any reason therefor, by either party upon giving
twelve months' notice of such intent to terminate the lease. "
Page 328 U. S. 137
In 1933, Brownsville filed its petition for reorganization under
§ 77 of the Bankruptcy Act. [Footnote 1
] The petition was approved, and petitioner
Thompson was appointed as trustee in the proceeding. Shortly
thereafter, the bankruptcy court entered stay orders to which we
will later refer. In October, 1940, Tex-Mex notified petitioners
that it was exercising its right to terminate and cancel the
trackage contract, effective twelve months after November 1, 1940.
The trustee, however, continued to operate over the Tex-Mex, and to
use the Tex-Mex facilities after November 1, 1941. Tex-Mex informed
him that a charge of $500 per day would be made for the use of
these facilities -- an amount in excess of the rental under the
contract. The trustee refused to pay any rental other than that
specified in the contract.
Thereupon, this suit was instituted by Tex-Mex in the Texas
courts to enjoin Brownsville and its trustee from using the tracks
or other facilities without the consent of Tex-Mex, and to recover
$500 a day damages for such use or, alternatively, the reasonable
value of the use of the property. The trial court overruled pleas
to its jurisdiction, and tried the case on the merits. It denied an
injunction. It held that the 1904 contract had been terminated, and
awarded Tex-Mex damages in the amount of $184,929.85. The Court of
Civil Appeals affirmed. [Footnote
] 181 S.W.2d 895. The Supreme Court of Texas refused an
application for a writ of error. The case is here on a petition for
a writ of certiorari which we granted because of the importance of
the problems in the administration of the Interstate Commerce Act
and of the Bankruptcy Act.
Page 328 U. S. 138
It is contended here, as it was in the state
court, that the maintenance of the present suit is precluded by the
stay orders, issued by the bankruptcy court and by § 77 of the
Sec. 66 of the Judicial Code, 28 U.S.C. § 125, authorizes suits
against the trustee, without leave of the bankruptcy court, "in
respect of any act or transaction of his in carrying on the
business." [Footnote 3
McNulta v. Lochridge, 141 U. S. 327
141 U. S. 332
this statute was said to grant an "unlimited" right "to sue for the
acts and transactions" of the estate. Operation of the trains is
plainly a part of the trustee's functions. Claims which arise from
their operation -- whether grade crossing claims, as in McNulta
v. Lochridge, supra,
or claims for the use of the tracks of
another, as in the present case -- are claims based on acts of the
trustee in conducting the business. Hence, this suit, so far as it
involves only a money claim against the estate for acts of the
trustee in operating trains over respondent's tracks, could be
maintained in the state courts against the trustee. [Footnote 4
] And the stay orders entered were
wholly consistent with this course. [Footnote 5
Page 328 U. S. 139
It is argued, however, that this suit cannot be maintained
consistently with the provisions of § 77 which grant the
reorganization court exclusive jurisdiction over the debtor and its
property. [Footnote 6
theory is that the suit interferes with the administration of the
estate, adjudicates the trustee's interest in property in his
possession, and indeed seeks to disrupt the operating schedule of
trains. It is clear that the issuance of an injunction against
operation of the trains over respondent's tracks would have been an
interference with the exclusive jurisdiction of the reorganization
court. The fact that no injunction was granted is not a decisive
answer. In Ex parte Baldwin, 291 U.
, 291 U. S. 618
the Court held that the exclusive jurisdiction of the bankruptcy
court is determined by the "main purpose" of the suit. In that
case, suit had been brought in the state courts to have a railroad
right of way declared forfeited, and, in addition, to recover
damages. The claim for damages was held to be "merely an incident"
to the suit for a forfeiture, and did not save the suit from the
defense that it was of the type which sought to interfere with the
exclusive jurisdiction of the bankruptcy court. We do not construe
Page 328 U. S. 140
bill as having as its main object the stoppage of the movement
of petitioner's trains over respondent's tracks. The main purpose
of the suit seems to be an attempt on the part of respondent to
obtain a more favorable rental.
The fact, however, that respondent's suit does not have as its
main purpose the ouster of petitioners from possession is not a
complete answer to the plea to the state court's jurisdiction. As
Ex parte Baldwin, supra,
p. 291 U. S. 616
held, the exclusive jurisdiction of the bankruptcy court is not
limited to protecting the possession of the trustee; it "extends
also to the adjudication of questions respecting the title."
See White v. Schloerb, 178 U. S. 542
Whitney v. Wenman, 198 U. S. 539
Petitioners argue that the present case comes within that
principle. It is pointed out that this suit seeks the cancellation
of the trackage agreement. It is argued that the rights granted
Brownsville under that agreement are property rights, and that a
suit to cancel the agreement and collect amounts other than the
specified rentals is a suit which interferes with and adjudicates
title to the property. If we were dealing here with a lease, a suit
to effect its forfeiture could not be maintained in another court
without consent of the reorganization court. But the trackage
agreement created only a personal obligation, and did not purport
to grant Brownsville any estate in the property of Tex-Mex. See
Des Moines & Ft. Dodge R. Co. v. Wabash, St.L. & P. R.
Co., 135 U. S. 576
135 U. S. 583
Union Pacific R. Co. v. Chicago, M. & St. P. R. Co.,
163 U. S. 564
163 U. S.
-583. It was an executory contract subject to
termination on a specified notice. The exclusive jurisdiction of
the reorganization court was a barrier to any action by any other
court which would disturb the possession of the trustee or
interfere in any way with his operation of the business. But, apart
from the qualification to which we will later refer, litigation
restricted to the amount due under a contract, express or implied,
Page 328 U. S. 141
use by the trustee of another's property no more interferes with
the administration of the estate than suits to determine his
liability under contracts calling for the delivery of coal or other
supplies. In each, the claim is reduced to judgment, and may then
be presented to the bankruptcy court for proof and allowance.
Cancellation of a contract pursuant to its terms alters, of course,
rights and duties of the trustee. But the bankruptcy rule is that
he takes the contracts of the debtor subject to their terms and
conditions. Contracts adopted by him are assumed cum
general rule is (1) that, if the other party had a right to
terminate the arrangement, that right survives adoption of the
contract by the trustee, and (2) that the incidence of termination,
except as it interferes with the exclusive jurisdiction of the
bankruptcy court, may be litigated in any court where the trustee
may be sued. That rule of bankruptcy is applicable to proceedings
under § 77 by reason of § 77(l) which provides:
"In proceedings under this section and consistent with the
provisions thereof, the jurisdiction and powers of the court, the
duties of the debtor, and the rights and liabilities of creditors,
and of all persons with respect to the debtor and its property,
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."
But, as we shall see, the qualification in § 77(l) that the rule
of bankruptcy be "consistent with the provisions" of § 77 made
premature an adjudication by the court that the contract was
terminated, prior to a determination by the Interstate Commerce
Commission that that step was consistent with the reorganization
requirements of the debtor.
Page 328 U. S. 142
Prior to the rendition of judgment on the
merits, the decision of the Interstate Commerce Commission was
necessary on two phases of the controversy -- one under § 77 of the
Bankruptcy Act, the other under provisions of the Interstate
(1) As we have said, the right to terminate a contract pursuant
to its terms survives the bankruptcy of the other contracting
party. And that general bankruptcy rule is applicable in § 77
proceedings by reason of § 77(l), which, as we have said,
incorporates into § 77 the rules governing the duties of debtors
and the rights and liabilities of creditors so far as they are
"consistent with the provisions" of § 77. We have considered the
meaning of that qualification in Smith v. Hoboken Railroad, W.
& S.C. Co., ante,
p. 328 U. S. 123
there held that a covenant of forfeiture in a lease of railroad
tracks and facilities should not be enforced by the bankruptcy
court prior to a determination by the Commission that such step
would be consistent with the reorganization requirements of the
debtor. The Commission has the primary responsibility for
formulating plans of reorganization under § 77. See
77(d). Forfeiture of leases by the court in advance of a
determination by the Commission of the nature of the plan of
reorganization which is necessary or desirable for the debtor may
seriously interfere with the performance by the Commission of the
functions entrusted to it.
We think that the same considerations are applicable to a
determination that the trackage agreement in this case should be
terminated pending formulation of a reorganization plan. By §
77(b), the plan of reorganization may adopt or reject executory
contracts of the debtor, as well as unexpired leases. And the
adoption of either an executory contract or of a lease by the
trustee does not preclude a rejection of it in the plan. Moreover,
trackage agreements like leases of railroad tracks and facilities
are means by
Page 328 U. S. 143
which railroad systems have been assembled. The retention or the
sloughing off of trackage agreements may assume importance in the
fashioning of a plan of reorganization by the Commission. The
problem is kin to that involved in Continental Illinois
National Bank v. Chicago, R.I. & P. R. Co., 294 U.
. In that case, the Court sustained the power of
the reorganization court to enjoin under § 77 creditors who held
collateral notes of the debtor railroad secured by its bonds and
bonds of its subsidiaries from selling the collateral under a power
of sale in the notes where the sale would so hinder, obstruct, or
delay the plan of reorganization as would likely defeat it. The
Court stated (p. 294 U. S. 676
that a proceeding under § 77 is a
"special proceeding which seeks only to bring about a
reorganization if a satisfactory plan to that end can be devised.
And, to prevent the attainment of that object is to defeat the very
end the accomplishment of which was the sole aim of the section,
and thereby to render its provisions futile."
The Court concluded, in view of the complexity of the problems
involved in the reorganization, "that, without the maintenance of
the status quo
for a reasonable length of time, no
satisfactory plan could be worked out."
That decision prevented, in the interests of a reorganization,
the enforcement of the provisions of the contracts of the debtor
according to their terms. We think like reasons make it important
that the status quo
of this trackage agreement be
maintained pending decision by the Commission as to the proper
treatment of it in the reorganization plan. The Commission may
decide that it should be adopted. Or the Commission may conclude
that the trackage agreement should be rejected, or that its
termination pursuant to its terms should be allowed. These matters
involve not only the interests of the two parties to the trackage
agreement, but phases of the public interest,
Page 328 U. S. 144
as well. A court which enforced the termination clause of the
agreement pursuant to its terms would be narrowing the choice of
the Commission, and perhaps embarrassing it in the performance of
the functions with which it has been entrusted. For these and like
reasons which we have discussed in Smith v. Hoboken Railroad,
W. & S.C. Co., supra,
we think the court erred in holding
that the trackage agreement had been or should be terminated.
(2) The Commission has further functions to perform apart from
determining under § 77 whether it would be consistent with the
reorganization requirements of the debtor to terminate the trackage
By § 1(18) of the Interstate Commerce Act, it is provided
"no carrier by railroad subject to this chapter shall abandon
all or any portion of a line of railroad, or the operation thereof,
unless and until there shall first have been obtained from the
commission a certificate that the present or future public
convenience and necessity permit of such abandonment."
Carriers being reorganized under § 77 of the Bankruptcy Act are
not exempt from that provision. § 77(o), 11 U.S.C. § 205(o);
Warren v. Palmer, 310 U. S. 132
310 U. S.
-138. Whatever may be the powers of the Commission
under the Interstate Commerce Act, rather than § 77, over the terms
of the trackage agreement, Abandonment of Chicago, R.I. &
P. R. Co.,
131 I.C.C. 421; Kansas City So. R. Co. v.
Kansas City Terminal R. Co.,
211 I.C.C. 291, it is clear that
the Commission has jurisdiction over the operations. Sec. 1(18)
embraces operations under trackage contracts, as well as other
types of operations. See Chicago & Alton R. Co. v. Toledo,
P. & W. R. Co.,
146 I.C.C. 171, 179-181. And the fact that
the trackage contract was entered into in 1904, prior to the
passage of the Act, is immaterial; the provisions of the Act,
including § 1(18), are applicable to contracts made before, as well
as after, its enactment.
Page 328 U. S. 145
See Louisville & Nashville R. Co. v. Mottley,
219 U. S. 467
219 U. S. 482
Though the contract were terminated pursuant to its terms, a
certificate would still be required under § 1(18). Brownsville or
its trustee could, of course, make the application for abandonment
of operations. But the fact that they might be content with the
existing arrangement and fail or refuse to move does not mean that
Tex-Mex would be burdened with a trackage arrangement in
perpetuity. Tex-Mex might invoke the Commission's jurisdiction
under § 1(18), and make application for abandonment of operations
by Brownsville or its trustee. There is no requirement in § 1(18)
that the application be made by the carrier whose operations are
sought to be abandoned. It has been recognized that persons other
than carriers "who have a proper interest in the subject matter"
may take the initiative. [Footnote
] See Atchison, T. & S.F. R. Co. v. Railroad
Commission, 283 U. S. 380
283 U. S.
-394. An application by a city and county for
abandonment of a part of the Colorado & Southern line was
indeed entertained. Colorado & Southern R. Co.
166 I.C.C. 470. Tex-Mex has even a more immediate
interest in the operations over this line. Its property is
involved, and the amount being paid for the use of its property is
deemed by it insufficient. The Commission is as much concerned with
its financial condition as it is with that of Brownsville. Tex-Mex
therefore has the standing necessary to invoke § 1(18).
Tex-Mex, however, points out that, in 1941, it made application
to the Commission "for authority to cancel trackage
Page 328 U. S. 146
agreements" with Brownsville, and that the Secretary of the
Commission returned the application saying,
"The Commission is without authority to consider an application
of the nature submitted by you. Its jurisdiction under Section
1(18) of the Interstate Commerce Act would extend only to
abandonment of operation by the St. Louis, Brownsville & Mexico
We need not consider whether the application was in proper form
for one authorizing and requiring abandonment of operations by
Brownsville. In any event, the secretary of the Commission was
without authority to bind the Commission in the matter. Cf.
Minneapolis & St. Louis R. Co. v. Peoria & P.U. R.
Co., 270 U. S. 580
270 U. S.
(3) The jurisdiction of the Commission is not restricted,
however, to determining whether or no operations of Brownsville
over the tracks of Tex-Mex should be abandoned. Prior to the
Transportation Act of 1940, the Commission had some jurisdiction
over trackage agreements of the character involved in this case.
Transit Commission v. United States, 289 U.
. But, by that Act, the Commission received new,
explicit powers over trackage rights. Sec. 5(2)(a)(ii)
"It shall be lawful, with the approval and authorization of the
Commission, as provided in subdivision (b) . . . for a carrier by
railroad to acquire trackage rights over, or joint ownership in or
joint use of, any railroad line or lines owned or operated by any
other such carrier, and terminals incidental thereto."
Trackage rights acquired without the consent and approval of the
Commission are unlawful. § 5(4).
The authority of the Commission under § 5(2)(a) extends to
fixing terms and conditions, including rentals for any trackage
agreements entered into subsequent to the effective date of the
Transportation Act of 1940. If, therefore, the two carriers had
voluntarily terminated the 1904 trackage contract and had entered
into a new one without the approval of the Commission, they would
Page 328 U. S. 147
violated the Act. There would be no difference in result merely
because the trackage contract expired, by its terms, or was
terminated by operation of an escape clause. Until abandonment is
authorized, operations must continue. While they continue, trackage
rights are being enjoyed. In absence of administrative control, the
law would, under those circumstances, imply a contract for the use
of another's property and award reasonable compensation. Thus,
trackage rights would be acquired on such terms as the court and
jury determined. But § 5(2)(a) vests in the Commission, not the
courts, the power to determine the terms and conditions under which
trackage rights may be acquired. The jurisdiction of the Commission
is exclusive. Transit Commission v. United States, supra.
In that case, the Commission had approved a trackage agreement
between two carriers, and the Court held that, the Commission's
jurisdiction being exclusive, approval by a state commission was
not necessary. The court below thought that case was not
controlling here in view of the fact that the Interstate Commerce
Commission had not acted. But, in a long line of cases beginning
with Texas & Pacific R. Co. v. Abilene Cotton Oil Co.,
204 U. S. 426
has been held that, where the reasonableness or legality of the
practices of the parties was subject to the administrative
authority of the Interstate Commerce Commission, the court should
stay its hand until the Commission had passed on the matter.
See General American Tank Car Corp. v. El Dorado Terminal
Co., 308 U. S. 422
cases cited. That course is singularly appropriate here. It is the
function of the Commission to determine the terms and conditions
under which trackage rights are acquired. If the parties were
allowed to bypass the Commission and litigate the question in the
courts, the power to fix the rental under trackage agreements would
be shifted from the Commission to the courts and juries. Moreover,
one jury would determine the amount of compensation due
Page 328 U. S. 148
for the period here in question, and another jury the amount due
for a subsequent period. But a major concern of Congress in dealing
with this problem was that neither inadequate rentals nor
extortionate nor unreasonable exactions would be made for trackage
rights. Transit Commission v. United States, supra,
289 U. S. 128
Those questions intimately relate to the financial strength of
carriers. And it is one of the Commission's high functions to
protect the public interest against unfair or oppressive financial
practices which in the past led to such great havoc and disaster.
That policy would be undermined if the carriers could repair to
courts for determination of the conditions under which trackage
rights could be secured. Then, jury verdicts or settlements would
take the place of the expert and informed judgment of the
It is suggested, however, that the Commission is empowered to
fix the rental only for the future, and that it has no power to
make an award with retroactive effect. But, on this phase of the
case, we are not dealing with the problem of reparations. In any
case, where application is made for trackage rights, the terms and
conditions fixed by the Commission are applicable when the
certificate of public convenience and necessity takes effect. If
operations do not start until that time, no problem is presented.
But frequently there will be applications for renewal of trackage
agreements which have expired. Operations may not be discontinued
until a certificate of abandonment is obtained. If new trackage
rights are granted, they run from the expiration of the old, and
their terms and conditions are applicable to the full term.
] Once the
Page 328 U. S. 149
has acted, the court may then proceed to enter judgment in
conformity with the terms and conditions specified by the
Commission. See El Dorado Oil Works v. United States,
328 U. S. 12
It is argued, however, that the trackage rights envisioned by §
5(2)(a) of the Act are consensual arrangements between the parties,
and that the Commission is not granted authority to force a
trackage agreement on a carrier. We do not decide what may be the
full reach of the power of the Commission under § 5(2)(a). We are
dealing here with an existing operation, not with a case where one
carrier seeks to initiate a new one by acquiring the right to run
its trains over the tracks of another. The Commission has the power
under § 1(18) to refuse to allow abandonment of the operations. If
it so refuses, trackage rights continue to be enjoyed by
Brownsville. The question of what would be the amount of a fair
rental to be paid by Brownsville would be highly relevant to a
decision by the Commission on the issue of abandonment. We conclude
that, at least in that situation, the Commission has the power
under § 5(2) to fix a reasonable rental for the use of the facility
by Brownsville regardless of the consent of Tex-Mex. [Footnote 10
] Denial of that power to
Page 328 U. S. 150
is not required by the language of § 5(2)(a). And this
construction of § 5(2)(a) is in harmony with the power of the
Commission under § 1(18) to refuse to authorize the abandonment of
operations. If operations must continue, it is more consistent with
this scheme of regulation for the Commission, rather than courts or
juries, to determine the amount of the rental. Any legal, including
constitutional, rights of Tex-Mex are protected by the review which
Congress has granted the orders of the Commission.
If the Commission granted trackage rights,
Tex-Mex could then recover judgment, as we have said, for the
amount of the rental fixed by the Commission. If, on the other
hand, the Commission authorizes the operations to be abandoned, it
"may attach to the issuance of the certificate such terms and
conditions as in its judgment the public convenience and necessity
may require." § 1(20). The Commission could permit abandonment
unless Brownsville paid such reasonable compensation for the use of
Tex-Mex's property as the Commission should fix.
Page 328 U. S. 151
In that case, too, the court would have an administrative
finding as a guide to the judgment it would enter. In case
abandonment were authorized without more, respondent would then be
free to move in this proceeding for judgment, and to apply to the
bankruptcy court for compliance with the Commission's order. In all
those situations, suits to recover the amounts due for use of the
tracks of Tex-Mex could be maintained in the state court [Footnote 11
] under the principles
announced in Central New England R. Co. v. Boston & Albany
R. Co., 279 U. S. 415
279 U. S. 420
If, however, the Commission decided that the trackage agreement
should be dealt with in the plan, the state court would not have
power to proceed further. For respondent's rights would be
protected by the provisions of the plan which may be reviewed only
by the reorganization court. § 77(e).
Thus, however the case may be viewed, the court below should
have stayed its hand and remitted the parties to the Commission for
a determination of the administrative phases of the questions
involved. Until that determination is had, it cannot be known with
certainty what issues for judicial decision will emerge. Until that
time, judicial action is premature. The judgment will be reversed,
and the cause remanded so that the case may be held pending the
conclusion of appropriate administrative proceedings.
MR. JUSTICE JACKSON took no part in the consideration or
decision of this case.
This petition was filed in the reorganization proceedings of the
Missouri Pacific R. Co., which owned about 94 percent of the voting
stock of the New Orleans, Texas and Mexico Ry Co., which, in turn,
owned all of the voting stock of Brownsville.
No complaint was made on appeal of the denial of an
"Every receiver or manager of any property appointed by any
court of the United States may be sued in respect of any act or
transaction of his in carrying on the business connected with such
property, without the previous leave of the court in which such
receiver or manager was appointed; but such suit shall be subject
to the general equity jurisdiction of the court in which such
manager or receiver was appointed so far as the same may be
necessary to the ends of justice."
Judgment for damages was granted only against petitioner
trustee; judgment for costs was granted against the trustee and
Brownsville, jointly and severally.
The stay orders authorized the trustee to defend any suits which
might be brought.
In view of our disposition of the case, it is unnecessary to
decide at this time whether or not the suit may also be maintained
against Brownsville. The stay order, entered for the benefit of the
debtor, followed the provisions of § 77(j) of the Bankruptcy Act,
49 Stat. 911, 922, 11 U.S.C § 205(j), and provided:
"That commencement or continuation of suits against any of the
debtor companies is hereby stayed and enjoined until after final
decree entered in these proceedings, provided, however, that suits
or claims for damages caused by the operation of trains, buses, or
other means of transportation may be filed and prosecuted to
judgment in any court of competent jurisdiction, and any order
heretofore staying the prosecution of any such causes of action or
appeal is hereby vacated."
Sec. 77(a) provides in part:
"If the petition is so approved, the court in which such order
is entered shall, during the pendency of the proceedings under this
section and for the purposes thereof, have exclusive jurisdiction
of the debtor and its property wherever located."
See Greif Bros. Cooperage Co. v. Mullinix,
264 F. 391,
397; 4 Collier on Bankruptcy (14th ed.) § 70.43.
Cf. Texas & P. R. Co. v. Gulf, C. & S.F. R.
Co., 270 U. S. 266
270 U. S. 273
which holds that a party in interest who is opposed to construction
of an extension may not "initiate before the Commission any
proceeding concerning the project," his remedy being to appear in
opposition if application is made or to seek an injunction under §
1(20) if no application is made. And see Powell v. United
States, 300 U. S. 276
The terms and conditions approved by the Commission in Long
Island R. Co. Trackage,
180 I.C.C. 439, aff'd, Transit
Commission v. United States, 289 U. S. 121
were given retroactive effect in that sense.
The argument is that the Commission has that authority only
under § 3(5), which gives the Commission authority to require the
use of terminal facilities, including main-line tracks for a
reasonable distance outside of the terminal.
Sec. 3(5) provides:
"If the commission finds it to be in the public interest and to
be practicable, without substantially impairing the ability of a
common carrier by railroad owning or entitled to the enjoyment of
terminal facilities to handle its own business, it shall have power
by order to require the use of any such terminal facilities,
including main-line track or tracks for a reasonable distance
outside of such terminal, of any common carrier by railroad, by
another such carrier or other such carriers, on such terms and for
such compensation as the carriers affected may agree upon, or, in
the event of a failure to agree, as the commission may fix as just
and reasonable for the use so required, to be ascertained on the
principle controlling compensation in condemnation proceedings.
Such compensation shall be paid or adequately secured before the
enjoyment of the use may be commenced. If under this paragraph the
use of such terminal facilities of any carrier is required to be
given to another carrier or other carriers, and the carrier whose
terminal facilities are required to be so used is not satisfied
with the terms fixed for such use, or if the amount of compensation
so fixed is not duly and promptly paid, the carrier whose terminal
facilities have thus been required to be given to another carrier
or other carriers shall be entitled to recover, by suit or action
against such other carrier or carriers, proper damages for any
injuries sustained by it as the result of compliance with such
requirements, or just compensation for such use, or both, as the
case may be."
If the order of the Commission were challenged, its review
could, of course, be had only in the manner provided by statute.
See El Dorado Oil Works v. United States, 328 U. S.