Palmer v. Webster & Atlas Bank, 312 U.S. 156 (1941)

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Palmer v. Webster & Atlas Bank

No. 120

Argued January 8, 1941
Decided February 3, 1941
312 U.S. 156

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

1. Trustees of a railroad in reorganization proceedings under § 77 of the Bankruptcy Act, who, after rejection of leases of other lines, continue pursuant to § 77(c)(6) to operate them "for the account of the lessor," are not required by the Act of June 18, 1934, by § 65 of the Judicial Code, or by § 77(c)(6), to advance funds, without security, out of the estate of the railroad for the payment of obligations to creditors of the former lessors, which payment is not essential to continued operation of the lines. P. 162.

2. How far cash advances to the former lessors should go, whether the security for further advances is adequate, and whether advances are necessary to continued operation are all questions to be decided by the District Court having jurisdiction of the reorganization proceedings. Upon the facts of this case, the District Court exercised a sound discretion in ordering the trustees to withhold further cash payments in respect of obligations of the former lessors. P. 167.

3. The question whether, under a statute of the State, the railroad is directly liable in respect of the obligations in question is not presented by the record, and is not decided. P. 168.

111 F.2d 215 reversed.

Certiorari, 311 U.S. 625, to review the reversal of an order or the District Court directing the trustees of a railroad in reorganization proceedings under § 77 of the Bankruptcy Act to withhold certain payments out of the estate.