Petitioners seek review of a decree of the Circuit Court of Appeals in the reorganization of the Western Pacific Railroad Company under Section 77 of the Bankruptcy Act. That decree reversed the order of the District Court which had approved the plan for reorganization certified to it by the Interstate Commerce Commission.
The petitions for certiorari ask adjudication of questions which are important in the field of railroad reorganization. They involve the respective function of Commission and court, the method of valuation of railroad property by the Commission, the legality of the exclusion of stockholders and certain creditors from participation in the estate, a more favorable participation of a Reconstruction Finace Corporation claim because of new money furnished for the plan, allocation of securities among claimants, priorities of liens created by different mortgages and subsidiary issues. Heretofore this Court has not passed upon them. For their determination we granted certiorari. 316 U.S. 654, 62 S.Ct. 1038, 86 L.Ed. 1734.
The debtor railroad company filed its petition in the District Court for the Northern District of California on August 2, 1935, alleging its inability to pay and discharge its indebtedness as it matured and praying for reorganization under Section 77. The petition was approved as properly filed, trustees were appointed, their appointment ratified, 207 I.C.C. 793, and the appropriate steps taken to bring the plan of reorganization before the Commission for consideration. Public hearings were held by the Commission at which other plans for reorganization were filed, one by a group of bondholders known as the Institutional Bondholders Committee and one by the A. C. James Company, a secured creditor of the debtor which also was financially interested in the treatment accorded the preferred and common stock of the debtor. After full consideration of the problems of the debtor's reorganization and after the development of a plan deemed in accordance with Section 77, the Commission certified its plan to the District Court on September 28, 1939.
The Commission's conclusions and orders were reached upon exceptions to the report of its Bureau of Finance. Its plan was the outgrowth of a study of the financial condition and economic situation of the debtor, viewed in the setting of the public interest in a national transportation system. The competing claims of the various classes of creditors and stockholders were appraised in the light of the requirements of the Act that they be accorded fair and equitable treatment. There is little if any dispute concerning the primary facts from which factual or legal inferences are to be drawn.
The debtor is a California corporation with its principal operating office in San Francisco. It carries on an interstate railroad business between the State of California, Nevada and Utah. For an understanding of this opinion the obligations of the debtor as of January 1, 1939, the date proposed for the beginning of the operation of the plan, may be stated as follows:
interest at interest at
contract contract
Claim or Interest Principal of rate to rate to
claim or effective effective
interest date of plan date of plan
by Reconstruction Finance
Corporation). $10,000,000.00. --------------- $10,000,000.
Equipment obligations. 2,750,050.00 94,202.00 2,844,252.
First Mortgage 5% Bonds. 49,290,100.00 13,143,776.66 62,433,876.
(secured by $10,750,
other collateral). 2,963,000.00 899,869.98 3,862,869.
$4,000,000 General and
and other collateral). 2,445,609.88 145,314.23 2,590,924.
Mortgage bonds). 4,999,800.00. 1,249,950.00 6,249,750.
72,448,559.88 $15,533,112.87 $87,981,672.