Central Hanover Bank & Trust Co. v. Williams

• Decision Date: 03 March 1938
• Docket Number: 10928.,No. 10894,10894
• Citation: 95 F.2d 210
• Parties: CENTRAL HANOVER BANK & TRUST CO. et al. v. WILLIAMS et al. (two cases).
• Court: U.S. Court of Appeals — Eighth Circuit

95 F.2d 210 (1938)

CENTRAL HANOVER BANK & TRUST CO. et al. v. WILLIAMS et al. (two cases).

Nos. 10894, 10928.

Circuit Court of Appeals, Eighth Circuit.

March 3, 1938.

G. Carroll Stribling, of St. Louis, Mo. (A. M. Lewis, of New York City, and Thomas W. White and Fordyce, White, Mayne, Williams & Hartman, all of St. Louis, Mo., on the brief), for appellants.

Waldo C. Mayfield, of St. Louis, Mo. (Bartley & Mayfield, of St. Louis, Mo., on the brief), for appellees.

P. C. Simons and Simons, McKnight, Simons, Mitchell & McKnight, all of Enid, Okl., amicus curiæ.

Before STONE, WOODROUGH, and VAN VALKENBURGH, Circuit Judges.

WOODROUGH, Circuit Judge.

Guy W. Williams suffered personal injuries through the negligence of the St. Louis-San Francisco Railway Company while he was serving in the employ of the company as a railroad conductor in the year 1930 prior to any receivership or reorganization proceedings of the company. He obtained judgment against the company on account of the injuries in the sum of $15,000, which judgment became final on the 5th day of November, 1935. Thereafter he filed his motion in the proceedings for the reorganization of the railway company debtor under section 77 of the Bankruptcy Act, as amended, 11 U.S.C.A. § 205 and note, for an order to pay the full amount of the judgment or claim. The applicable provision of the Bankruptcy Act is:

"Claims of Employees for personal injuries and claims of sureties as preferred claims; change in wages or working conditions regulated; moving shops, etc., regulated."

"(n) In proceedings under this section, claims for personal injuries to employees of a railroad corporation, claims of personal representatives of deceased employees of a railroad corporation, arising under State or Federal laws, and claims on August 27, 1935 or thereafter payable by sureties upon supersedes, appeal, attachment, or garnishment bonds executed by sureties without security for and in any action brought against such railroad corporation or trustee appointed pursuant to this section, shall be preferred against and paid out of the assets of such railroad corporation as operating expenses of such railroad. No judge or trustee acting under this title shall change the wages or working conditions of railroad employees except in the manner prescribed in sections 151 to 163 of Title 45, as amended June 21, 1934, or as they may be hereafter amended. No reorganization effected under this title and no order of the court or Commission in connection therewith shall relieve any carrier from the obligation of any final judgment of any Federal or State court rendered prior to January 1, 1929, against such carrier or against one of its predecessors in title, requiring the maintenance of offices, shops, and roundhouses at any place, where such judgment was rendered on account of the making of a valid contract or contracts by such carrier or one of its predecessors in title." Subsection (n) of section 77 of the Bankruptcy Act, as added March 3, 1933, c. 204, § 1, 47 Stat. 1474, and amended August 27, 1935, c. 774, 49 Stat. 911, 11 U.S.C.A. § 205(n).

The trustees under the prior lien mortgage of the railway company created, in 1916, answered and resisted payment being made pursuant to the provision of the statute, on the ground that the same is unconstitutional in so far as it attempts to prefer claims for personal injuries to employees of the railroad company over the claims of the holders of the mortgage bonds, in that it deprives such bondholders of their property without due process of law. After hearing had been had the court ordered payment of the claim to be made subordinate only to the costs of administration of the reorganization, and the trustees for the bondholders have appealed and have reasserted the unconstitutionality of the provision of the statute.¹

We have no doubt that it is generally for Congress to say what items of expense connected with or growing out of the operation of the railroad shall have priority in bankruptcy or reorganization proceedings. That is a necessary incident of the power to establish uniform laws of bankruptcy and just and orderly proceedings in reorganization. To determine whether the power was exceeded in the matter involved, the nature of the property of the bondholders claimed to have been taken without due process must be considered....