Reading Company v. Brown

PETITIONER: Reading Company
LOCATION: Alamance County

DECIDED BY: Warren Court (1967-1969)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 391 US 471 (1968)
ARGUED: Mar 04, 1968 / Mar 05, 1968
DECIDED: Jun 03, 1968

Facts of the case


Media for Reading Company v. Brown

Audio Transcription for Oral Argument - March 04, 1968 in Reading Company v. Brown

Audio Transcription for Oral Argument - March 05, 1968 in Reading Company v. Brown

Earl Warren:

Francis Shunk Brown, 3d, etc.

Mr. Rhoads?

Owen B. Rhoads:

May it please the Court.

I would like, if I may, to enter two questions which were asked by Mr. White yesterday, by members of the court.

Mr. Justice Black asked how the fire started.

On the record, this is a fire of undetermined origin.

For the purposes of this argument we of course have admitted negligence of the receiver but it's a fire of undetermined origin.

Mr. Chief Justice, you asked whether and about the availability of the bond.

The bond is a performance bond.

It is available, of course.

Its amount doesn't meet the enormous claims here.

This matter would be here no matter what the amount, I believe, because we feel so strongly that this claim, an unliquidated claim for property damages, arising from a negligence a receiver during a Chapter XI proceeding is not entitled to the first status priority which claimants seek.

As Your Honors have said in recent cases, very recent cases, where a priority is sought, the burden on the claimant is a very heavy one.

And may I quote Your Honor's words in the case of Nathanson against the National Labor Relations Board in which this Court said the theme of the Bankruptcy Act is equality of distribution.

And if one claimant is to be preferred over others, the purpose should be clear from the statute.

We submit that there's no such clarity here.

The Act is unim -- is unambiguous.

If claimant is to succeed, he must concisely and convincingly bring the claim within Section 64, subsection (a) (1) of the Act.

That Act provides that cost and expenses of administration, including the actual and necessary cost and expenses of preserving the estate subsequent to the filing of the petition, are entitled a first priority.

Hugo L. Black:

Why isn't the operation of a business by the receiver in order to carry on the business for the purpose of preserving and as far as possible?

Why are not the expenses of that carrying on?

What are the administrative expenses?

Owen B. Rhoads:

The expenses of carrying on that business, Your Honor, most certainly are cost and expenses of administration, provided they are necessary and this necessary is based on the definition and narrow wording of the statute and there can be no question.

If the costs are necessary such as are closely and approximately related to the carrying on the business, costs which can be reasonably anticipated.

They are cost of administrations entitled of first priority.

Hugo L. Black:

Suppose they were operating a railroad and the Indians had threw sparks out during the operation, would that be a part of the administrative expenses?

Owen B. Rhoads:

If Your Honor pleases, that would be dealt with under Section 77 on the railroad reorganization sections which in -- which codify the equitable principle.

They are not applicable to either Chapter XI or the liquidating bankruptcy proceedings.

Congress has of -- has provided for a different set of rules applicable to situations involving railroads as the Acts so clearly shows in Section 77 (n).

Hugo L. Black:

Well, if it's necessary to carry on the business, why can you -- how can you say it's not necessary?