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Public Service Commission of v. Philadelphia Rapid Transit Co.


February 19, 1936


On Petition for Rehearing.

These cases are before us on petition for reargument.

In deciding the questions raised in the petition, it must be kept in mind that this is a proceeding in bankruptcy under section 77B of the Bankruptcy Act and must be disposed of in accordance with the provisions of that act under the applicable broad principles of equity.

Counsel for appellees contend that we erred in holding that these payments were in effect the approval of the plan of reorganization filed by them.

Courts act by orders, decrees, and judgments; and in reviewing these, consideration must be given to what they actually accomplish. The plan filed herein is rather long, involved, and complicated. The payments are ad interim for use and occupation and anticipate further and full allowances. They were not made in accordance with the contract rentals, but on some other basis and in accordance with some other plan. As a matter of fact, they were made in exact accord with the detailed provisions of this complicated plan. To say that this happened by chance does not commend itself to the intelligence of reasonable minds. There is no explanation of just how these payments came to be made in accordance with the plan of reorganization before the court. In the absence of any explanation, we are forced to the conclusion that they were in effect the approval of the plan. They did indirectly what could not be done directly. It was tantamount to the approval of the plan by the court without the consent of the Public Service Commission of Pennsylvania which cannot be done under the provision of 77B of the act.

From the order directing the payment of $700,000, the Public Service Commission under the facts of this case had the right to appeal. It may be, as suggested by appellees, that the function of the commission is to approve or disapprove the plan, after due and proper hearing. But suppose the court, after the certificate of public interest had been filed by the commission, had proceeded without consulting the commission, and without its consent and over its objection, and had approved the plan as a whole, could the commission not have appealed from the order approving the plan? We think it could.

The court could not, by ignoring the commission, take from it the rights given to it by the act, but this is exactly what it did, and the only way in which the commission could protect itself and maintain its rights was by a speedy appeal from the order directing payment. The legal effect was the same whether the court approved the plan as a whole or in part, by piecemeal.

But the act, within the four corners of which this case must be decided, does not confer any rights upon the city controller, or the representative of the city council. Neither did the District Court make him a party or confer upon him the right of appeal. It gave him the right to be heard as controller and representative of the city council only. Upon further reflection in the light of the argument of counsel in this petition, we are of opinion that S. Davis Wilson as city controller or representative of city council had no standing before this court and no right to appeal. If the court below wanted to hear him as adviser, controller, or representative, it could do so, but this privilege did not give him the right to appeal as a party from the decree of the court. Consequently his appeal will be dismissed.

As to the allowances for the use and occupation of the properties leased by the Philadelphia Rapid Transit Company from the underliers, we held, and reaffirm our position, that creditors in a bankruptcy proceeding are entitled to know what property was used and occupied and the extent of that use and occupancy before allowances may be made therefor, and this is particularly so in view of the contention that the debtor is paying for property which it does not occupy or use.

In opposition to this position and in support of the allowances made, counsel cite cases to the effect that receivers and trustees should be given a reasonable time to elect whether or not they will affirm the lease and that during this period they should pay the stipulated rental. Those cases are inapplicable here, because the filing of the plan was in effect a disaffirmance of the leases, and the appellees are not asking the court to make allowances in accordance with them. They say that the Philadelphia Rapid Transit Company, being "now in possession of the underliers' property, whether or not there has been an election to adopt the leases, is liable for the rent accruing thereunder." That is true, but in this bankruptcy proceeding creditors are entitled to know what that property is and what use is being made of it. The underliers, like any other person in any bankruptcy proceeding, are entitled to be justly and fairly paid for the use and occupancy of their property; but like any other person, they should and must show what that property is and that it is occupied and used. They occupy the same position as any other person, whose property is being used by receivers and trustees in bankruptcy, and like any other person, they cannot expect a court of bankruptcy to make allowances until they show just what property is being used and occupied and the extent thereof. Until a court knows that, how can any fair and just allowance be made? When these are shown, surely proper allowances will and should be made, but until then, can they in good faith ask or demand allowances, when no step has been taken to supply the court with this information? If any one in the meantime suffers or is inconvenienced the court is sorry, but the fault cannot be charged to it.

The appeal of S. Davis Wilson is dismissed, and the petition for rehearing of the appeal of the Public Service Commission is denied.


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