In re Yale Express System, Inc.

Decision Date08 November 1967
Docket NumberDocket 31567.,No. 125,125
Citation384 F.2d 990
PartiesIn the Matter of YALE EXPRESS SYSTEM, INC., Debtor. FRUEHAUF CORPORATION, Petitioner-Appellant, v. YALE EXPRESS SYSTEM, INC., Respondent-Appellee.
CourtU.S. Court of Appeals — Second Circuit

Marvin F. Hartung, New York City (Conboy, Hewitt, O'Brien & Boardman, Myron D. Cohen, New York City, of counsel), for petitioner-appellant.

William R. Glendon, New York City (Royall, Koegel, Rogers & Wells, David W. Bernstein, New York City, of counsel), for respondent-appellee.

Before FRIENDLY, KAUFMAN and ANDERSON, Circuit Judges.

IRVING R. KAUFMAN, Circuit Judge:

When we reversed the District Judge's prior ruling on Fruehauf Corporation's Fruehauf application for reclamation,1 we did so because we believed too much reliance had been placed on In re Lake's Laundry, 79 F.2d 326 (2d Cir. 1933). We expressed the view that the ratio decidendi of that case had been undermined by the adoption in virtually every state of the Uniform Commercial Code which was "well on its way to becoming a truly national law of commerce" United States v. Wegematic Corp., 360 F.2d 674, 676 (2d Cir. 1966). Accordingly, we remanded so that Judge Tyler could reconsider the petition in the light of our interpretation of the law that equitable principles and not hair-splitting distinctions on possession of title should govern the ultimate determination of the issues. We suggested also that if reclamation was not appropriate the district judge should consider whether Fruehauf was deserving of rental payments for Yale Express System's Yale use of its trucks and trailers during the reorganization. We find no error with Judge Tyler's denial of Fruehauf's claims for reclamation or rental payments.

On the record before us, it is clear beyond cavil that the prospects of reorganization would be frustrated if the reclamation petition were granted. In fact, such success as Yale is now having stems largely from its use of the very equipment Fruehauf seeks to reclaim. While it is true that the trustee finds himself dependent upon Fruehauf trucks and trailers since he has replaced older vehicles with modern Fruehauf equipment, the trustee is charged with using his best business judgment to cure the ailing corporation. The replacement of old conveyances by new and more efficient ones is certainly in the interest of the company.

Moreover, the trustee's goal of rehabilitating Yale is not a mere will-o'-the-wisp. On the contrary, the district judge found that successful reorganization of most, if not all, of the debtor companies is a reasonable possibility. Under these circumstances, and in light of the fundamental purpose of reorganization proceedings to enable the debtor to continue operations as well as to protect the rights of creditors, 6 Collier, Bankruptcy ¶ 0.11 (14th ed. 1965), we are unable to conclude that the court abused its equitable discretion. Cf. Id. at ¶ 3.32.

In light of our earlier suggestion that the district judge may give consideration to rental payments, if appropriate, Fruehauf and other creditors filed applications for such relief.2 And, at the hearing before Judge Tyler, other...

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29 cases
  • In re Greene
    • United States
    • U.S. Bankruptcy Court — Northern District of Alabama
    • May 18, 2000
    ...on these distinctions in form have been made obsolete by this article. In re Yale Express System, Inc., 370 F.2d 433 (2d Cir.1966), 384 F.2d 990 (2d Cir.1967). Ala.Code § 7-9-507 official comment (1997) (emphasis (b) Throwing Out Lake's Laundry — The History In point of fact, the quoted por......
  • In re Pillow
    • United States
    • U.S. Bankruptcy Court — District of Utah
    • January 8, 1981
    ...and Exchange Commission v. Albert & Maguire Securities Co., Inc., 378 F.Supp. 906, 912 (E.D.Pa.1974).16 See also Rosenberg, "Beyond Yale Express: Corporate Reorganization and the Secured Creditor's Rights of Reclamation", 123 U.Pa.L. Rev. 509, 522 n. 45 (1975) ("When one compares the provis......
  • Timbers of Inwood Forest Associates, Ltd., In re
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • July 9, 1986 payments or other transfers of value equal to the depreciation to be provided to the creditor. However, in In re Yale Express System, Inc., 384 F.2d 990 (2d Cir.1967), the court arguably softened that requirement. Yale Express involved collateral (truck trailers) depreciating through u......
  • United Savings Association of Texas v. Timbers of Inwood Forest Associates, Ltd
    • United States
    • U.S. Supreme Court
    • January 20, 1988
    ...if there was a reasonable prospect for a successful rehabilitation within a reasonable time. See, e.g., In re Yale Express System, Inc., 384 F.2d 990, 991-992 (CA2 1967) (Chapter X); In re Nevada Towers Associates, 14 Collier Bankr. Cas. (MB) 146, 151-156 (Bkrtcy.Ct.SDNY 1977) (Chapter XII)......
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