IN RE PENN CENTRAL TRANSPORTATION COMPANY
| Decision Date | 31 January 1972 |
| Docket Number | No. 70-347.,70-347. |
| Citation | 339 F. Supp. 603 |
| Parties | In the Matter of PENN CENTRAL TRANSPORTATION COMPANY, Debtor. Application of Trustees for order directing certain shippers and others to pay amounts owing to the Debtor. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Blank, Rome, Klaus & Comisky by Marvin Comisky, and Goncer M. Krestal, Philadelphia, Pa., Sp. Counsel for Trustees of Penn-Central Transportation Co.
Dilworth, Paxson, Kalish, Levy & Coleman by Bruce W. Kauffman, Philadelphia, Pa., for Irving Trust Co.
Wolf, Block, Schorr & Solis-Cohen by Michael L. Temin, Philadelphia, Pa., for General American Transportation Co. and The David J. Joseph Co.
Duane, Morris & Heckscher by Henry T. Reath, Philadelphia, Pa., for United States Steel Corp.
Thomas G. Denny, for Stockard Shipping & Terminal Corp.
Duane, Morris & Heckscher by Reeder R. Fox, Philadelphia, Pa., for Harry Defler Corp.
Montgomery, McCracken, Walker & Rhoads by John S. Estey, Philadelphia, Pa., for Republic Steel Corp., D. H. Overmyer, Inc., Miller Lumber Co., Inc., Ohio Brass Co., and North American Coal Co.
Isadore Gottlieb, Philadelphia, Pa., for Massachusetts Lumber Co.
Drinker, Biddle & Reath by Raymond K. Denworth, Jr., Philadelphia, Pa., for Wire & Cable Dept., General Electric Co. and General Electric Co.
Anthony J. Visco, Jr., Philadelphia, Pa., and Clarence William Vandegrift, New York, N. Y., for Universal Carloading & Distributing Co., Inc.
William K. Klenk, II, Philadelphia, Pa., for Palisades Food Products, Inc.
John F. K. Cassidy, Syracuse, N. Y., for REA Express, Inc.
David D. Day, Pottstown, Pa., for Bermec Corp. a/k/a Berman Leasing Co. Raspin, Espenshade, Heins & Erskine by Paul Matzko, Philadelphia, Pa., for Connecticut Coal, Inc.
Al Watrin, for Consolidated Freightways, Inc.
Ballard, Spahr, Andrews & Ingersoll by Richardson Blair, Philadelphia, Pa., for Pierce Phelps, Inc.
Fox, Rothschild, O'Brien & Frankel by Nochem S. Winnet, Philadelphia, Pa., for First National City Bank.
Clark, Ladner, Fortenbaugh & Young by W. Charles Hogg, Jr. and Edward Toole, Philadelphia, Pa., for Committee of Interline Railroads.
Herr & Herr by Philip C. Herr, II, Philadelphia, Pa., for Alan McIlvain Co.
Ned Stein and M. H. Walls, Philadelphia, Pa., for Max Feldbaum & Sons.
Donald M. Swan, Jr., New York City, for Bethlehem Steel Corp.
Cohen, Todd, Kite & Spiegel by S. Arthur Spiegel, Cincinnati, Ohio, for The David J. Joseph Co.
Abrahams & Loewenstein by Albert Momjian, Philadelphia, Pa., for Transco, Inc.
Meltzer & Schiffrin by Richard R. Block, Philadelphia, Pa., for Blue Bird Food Products.
Lewis H. Gold, Philadelphia, Pa., for Art Kraft Container Corp., Mindlin Co., and Lifschultz Fast Freight.
William Nelson, Dept. of Justice, for the United States.
Davis, Polk & Wardwell by Michael A. Boyd, New York City, for Morgan Guaranty Trust Co.
The Trustees of the Debtor have filed a petition for an order directing certain shippers to pay amounts due Debtor. They assert that more than $9 million was due and owing from shippers and receivers on June 21, 1970, the date the petition for reorganization under § 77 of the Bankruptcy Act was filed, for freight service rendered prior to June 21, 1970, and that many of the shippers have offset against the freight charges amounts they claim the Debtor owes them. The Trustees assert that this violates paragraph 10 of Order No. 1, which provides in part:
"All persons, firms and corporations, ... holding for the account of the Debtor deposit balances or credits be and each of them hereby are restrained and enjoined ... from off-setting the same, or any thereof, against any obligation of the Debtor, until further order of this Court."
The present application involves two principal issues: (1) the extent of this Court's jurisdiction to control the right to resort to the remedy of set-off; and (2) assuming jurisdiction is found, the propriety of continuing the existing restraints against set-off.
The recent decision of the Court of Appeals in the so-called "bank set-off cases," In Matter of Penn Central Transportation Co., 453 F.2d 520 (3d Cir., 1971) sets forth the principles governing this Court's jurisdiction to control the exercise of set-off rights and, to a lesser extent, the principles governing the exercise of that control.
The Court of Appeals has reiterated the familiar principle that if, at the time of bankruptcy, there is no bona fide dispute concerning the bankrupt's ownership of property, the bankruptcy court possesses summary jurisdiction to vindicate the Trustees' claim to that property. In the cited case the property was a chose in action, and the Court, applying this general principle, held that the bankruptcy court's determination that there is no substantial dispute as to the bankrupt's ownership of the chose in action establishes the summary jurisdiction of the bankruptcy court. This necessarily implies that the bankruptcy court possesses jurisdiction to determine whether there is a substantial dispute concerning the ownership of the chose in action.
In the present proceeding, the question of whether there is a substantial dispute as to the Debtor's ownership of the chose in action involves not a determination of who is its proper obligee, but rather the determination of whether the chose in action exists. Crucial to this determination is the question of what occurrences prior to bankruptcy could have discharged the railroad's claims for services of carriage.
The Interstate Commerce Act provides the answer. In furtherance of the public policy against discriminatory practices, railroads are strictly regulated in their collection of charges for carriage of freight. 49 U.S.C.A. § 3(2) provides:
"No carrier by railroad ... shall deliver or relinquish possession at destination of any freight ... transported by it until all tariff rates and charges thereon have been paid, except under such rules and regulations as the Commission may from time to time prescribe to govern the settlement of all such rates and charges and to prevent unjust discrimination. ..."
By its ex parte Order No. 73, originally adopted in 1920, the Interstate Commerce Commission permits a rail carrier to extend credit up to a maximum of 120 hours after delivery of freight, provided adequate precautions are taken to insure payment within that time. 49 C.F.R. § 16(e); see, for example, United States v. Pennsylvania R.R., 308 F.Supp. 293 (E.D.Pa.1969).
The Supreme Court has unequivocally held that under this section a carrier may not accept in exchange for its services of carriage anything but money. Louisville and N. R. Co. v. Mottley, 219 U.S. 467, 477, 479, 31 S.Ct. 265, 55 L.Ed. 297 (1911); Chicago, I. and L. R.R. v. United States, 219 U.S. 486, 496, 31 S. Ct. 272, 55 L.Ed. 305 (1911); Fullerton Lumber Co. v. Chicago, M., St. P. and Pac. R.R., 282 U.S. 520, 51 S.Ct. 227, 75 L.Ed. 502 (1931). The Court has, however, sanctioned payment by check as the equivalent of payment in money, Fullerton Lumber Co. v. Chicago, M., St. P. and Pac. R.R., supra; and, where a carrier brings suit to recover freight charges, has permitted a shipper to plead and prove, by way of set-off or counterclaim, claims which it may have against the shipper for loss and damage, etc. Chicago and N. W. R. v. Lindell, 281 U.S. 14, 50 S.Ct. 200, 74 L.Ed. 670 (1930). But these are the only permitted variations on the general rule set forth in Mottley that no deviations from the provisions of the published tariff are permitted. Mottley, supra, 219 U.S. at 477, 31 S.Ct. 265. See Northeast Airlines, Inc. v. C. A. B., 345 F.2d 662, 666-668 (1st Cir. 1969).
In applying the foregoing principles to the resolution of the preliminary jurisdictional issue in the present case, it is necessary to differentiate among various respondent-shippers according to the grounds on which their claims are based. Four general categories appear:
1. Certain shippers contend they have overpaid earlier bills or mistakenly paid erroneous or duplicative bills. Included among these are Chrysler Corporation and General Electric Company. In essence, these shippers assert that they have not set off, they have paid in money. Such a claim, to the extent it is non-frivolous, presents a substantial dispute as to the existence of the railroad's chose in action. Therefore, the summary jurisdiction of this Court does not extend to a determination of the issues as to these parties unless by their consent.
2. Certain shippers contend that the Debtor has retained the proceeds from the salvage of damaged goods belonging to the shippers. Included in this category are Massachusetts Lumber Company and Thomas J. Holt Company. To the extent it is non-frivolously...
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