Fred M. Vinson

“ Nor is the ambit of federal power less broad in cases arising under the bankruptcy laws of the United States. Section 77, sub. f of the Bankruptcy Act specifically provides that the plan of reorganization shall be put into effect, 'the laws of any State or the decision or order of any State authority to the contrary notwithstanding.' The statute does not, however, give the Commission or court the right to require acceptance by a lessor not in reorganization of an offer for the purchase of its property, and no such power has been asserted by the Commission in this case. ”

“ The lessor's bondholders were therefore more like holders of the debtor's bonds than are stockholders of an independently owned lessor. This argument was made before the Commission by an institutional investors group committee, which contended that the assets of Terre Haute should be treated as assets of the debtor for purposes of reorganization. ”

“ Thereupon the respondents, who are individual stockholders of South Western, brought an action in the Superior Court of Bibb County, Georgia, where South Western's principal office is located, asking for an injunction against South Western, its officers and directors, restraining them from certifying the company's acceptance of the offer to the Interstate Commerce Commission or from selling the railroad's property to the reorganized debtor if, upon a vote of the stockholders, a 'mere majority' of the stock was voted in favor of the plan. ”

“ South Western was not in reorganization jointly with its lessee, nor could it have been reorganized in the Central's proceedings. [13] The controversy which respondents initiated in the state court, and which the district court decided after having enjoined the state proceedings, requires a determination of the rights of the stockholders of South Western inter se to sell their reversionary interest in the property. We think that the interest here involved is not part of the property of the debtor, and that the district court's assertion of exclusive jurisdiction was error. ”

“ It may be noted, in addition, that § 5 (11) contains a proviso that the majority vote provision shall not apply if 'a different vote is required under applicable State law, in which case the number so required shall assent'. Whether that proviso is operative when a state's law requires unanimous consent of the shareholders is a question we need not decide. ”

“ Otherwise, the lease is to be disaffirmed and the property returned to the lessor. In addition, the record is replete with statements by the Commission, the court, and the parties that South Western's stockholders are to have the choice open to any offerce: an unfettered right to accept or reject. ”

“ See Swaine, A Decade of Railroad Reorganization Under Section 77, 56 Harv.L.Rev. 1193, 1217.↑ The dual status of a lessor whose lease has been, or will be, rejected and to whom an offer of purchase or modification is made is explained by Meck, The Problems of the Leased Line, 7 Law and Contempt. Prob. 509, 516, as follows: 'The plan in theory must deal with the lessor in at least two capacities: as an unsecured creditor and as owner of the leased line. In the former capacity the lessor will receive the same treatment as other unsecured creditors. ”