& Nashville, but it is probable that additional mines eventually will be opened in territory closer to the Illinois Central line. Granting permission to construct only to the Louisville & Nashville would prejudice the position of the Illinois Central in the future and would not only afford the former a decided advantage but could result in the virtual exclusion of the latter from the entire area. It is evident that the new mines contain sufficient tonnage to provide substantial traffic for both railroads and that the anticipated benefits to be derived from the available tonnage outweigh the cost of construction of the proposed line.

In my opinion, the record warrants the conclusion, considering the coal area as a whole, that the mines in question should be provided with the service of the Illinois Central as well as that of the Louisville & Nashville, but if construction and operation by applicants of a line as far as the Wickliffe mine is permitted, such line would closely parallel that of the Louisville & Nashville between the two mines. The most practicable and economical method of furnishing the service and avoiding duplication of lines is for the applicants to construct and operate an extension to the Kirk mine, thence, in order to reach the Wickliffe mine, for the Illinois Central to acquire trackage rights and operate over the tracks of the Louisville & Nashville.

Subject to the condition that the Illinois Central operate between the proposed mines of the Kirk and the Wickliffe companies, under trackage rights, over the line of the Louisville & Nashville, construction of which was authorized in Louisville & N. R. Co. Construction, supra, I would authorize construction by the Chicago, St. Louis & New Orleans and operation by the Illinois Central of a line of railroad from a connection with their existing line at or near Central City to the proposed mine of the Kirk company.

261 I. C. C.

FINANCE DOCKET No. 10913

WESTERN PACIFIC RAILROAD COMPANY

REORGANIZATION

Submitted November 25, 1944. Decided February 28, 1945

Upon petition, maximum limits of final allowances of compensation for services rendered and to be rendered and expenses incurred and to be incurred generally between November 1, 1939, and December 31, 1944, by parties in interest, in connection with the proceedings and plan, approved.1

Emmet McCaffery, Horace E. Whiteside, Robert T. Swaine, Leonard D. Adkins, Charles H. Jagow, H. C. McCollom, Orville W. Wood, H. Brua Campbell, F. C. Nicodemus, Jr., Garret McEnerney, II, William J. Kane, and Francis P. Gray for petitioners.

REPORT OF THE COMMISSION

DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER BY DIVISION 4:

In compliance with the order entered on July 28, 1944, and the supplemental order entered on August 7, 1944, in proceedings No. 26591-S pending in the District Court of the United States for the Northern Division of California, Southern Division, for reorganization of The Western Pacific Railroad Company, debtor, pursuant to the provisions of section 77 of the Bankruptcy Act, 11 U. S. C. 205, petitions were filed by the parties in interest for final allowances under section 77 (c) (12) of the act in respect of services rendered and to be rendered and expenses incurred and to be incurred, generally, between November 1, 1939, and December 31, 1944, in connection with the debtor's reorganization proceedings and plan. Copies of the petitions were transmitted to us for the fixing of maximum limits pursuant to the provisions of the statute, and a hearing has been held. A brief was filed by the Reconstruction Finance Corporation.

By our report and order of May 27, 1940, 240 I. C. C. 206, we fixed maximum limits of allowances for services rendered and expenses incurred by many of the present petitioners from the inception of the proceedings to November 1, 1939. In that report we outlined the course of the proceedings, discussed the financial structure of the debtor, and referred to the plan approved by the Commission on Oc

1 For previous reports see 240 I. C. C. 206, 257 I. C. C. 836.

tober 10, 1938, 230 I. C. C. 61, and the modified plan approved September 19, 1939, 236 I. C. C. 1.

Numerous objections were filed to the approved plan pursuant to the order of the court that any such objections should be filed by December 8, 1939. A pretrial conference was held in the court on December 18 to 20, inclusive, and hearings on the plan were held on January 22 to 25, 1940, inclusive. A subsequent hearing before the court was held on August 5, 1940, following which, the court, on August 15, 1940, rendered an opinion approving the plan in all respects, Re Western Pac. R. Co., 34 Fed. Supp. 493. Appeals were taken and were argued before the Circuit Court of Appeals for the Ninth Circuit on July 28 and 29, 1941. On November 28, 1941, the Circuit Court of Appeals handed down an opinion reversing the district court and disapproving the plan, Re Western Pac. R. Co., 124 Fed. (2d) 136. Petitions to the Supreme Court of the United States for writs of certiorari to review this decree were filed and were granted on April 27, 1942. Argument before the Supreme Court was heard on October 13 and 14, 1942, and on March 15, 1943, that Court reversed the circuit court of appeals and affirmed the district court's approval of the plan, determining also that the first mortgage had a prior lien upon substantially all of the property of the debtor, a matter which had been vigorously contested throughout the proceedings by the refunding mortgage trustee. Ecker v. Western Pac. R. Co., 318 U. S. 448. A petition for rehearing filed by the debtor was subsequently denied.

After negotiations during March and April of 1943 failed to bring agreement between the parties upon a compromise plan, which some of the parties believed desirable, the plan was submitted for acceptance or rejection, and the results certified to the court by certificate dated September 4, 1943. On October 11, 1943, the court confirmed the plan, and on September 16, 1944, the reorganization committee filed with us an application for approval of the steps necessary for effectuation of the plan.

Perhaps the most important collateral matter arising during the course of these proceedings concerned the proposed refunding of the $10,000,000 of trustees' certificates which had been acquired by the Reconstruction Finance Corporation, hereinafter called the Finance Corporation. The plan approved by us and by the district court provided that the Finance Corporation should receive in respect of its collateral note the same treatment as the first-mortgage bonds were to receive in consideration of the Finance Corporation's exchanging the $10,000,000 of trustees' certificates for an equal amount of new first-mortgage bonds, or the purchase by the Finance Corporation of $10,000,000 of new first-mortgage bonds at par in order to pay off the trustees' certificates.

261 I. C. C.

By petition filed October 11, 1940, the debtor's trustees requested authority to extend for 1 year the trustees' certificates maturing December 1, 1940, and also requested the court to reserve jurisdiction to provide by supplemental order that the trustees might issue and sell new certificates to retire the outstanding certificates. The parties supporting the plan, believing that the refunding of the certificates through either a new public issue or a private placement would upset the plan unless an extension of the Finance Corporation's commitment were obtained, the Finance Corporation having expressed itself willing to make the exchange provided in the plan, but not having agreed to the alternate purchase, opposed the request of the trustees in this respect. The court directed the trustees to obtain from the Finance Corporation the extension of the certificates for 1 year, and this was done.

The question of refunding these certificates was raised again in January of 1941 by counsel for the A. C. James Co., who urged the trustees to refund the certificates privately with parties other than the Finance Corporation. After vigorous opposition to this proposal by other parties, the trustees, on March 27, petitioned the court for instructions as to whether they should retire a portion of the certificates. At about the same time, the A. C. James Co. filed a motion with the court urging that at least $3,000,000 of the certificates be paid off and the balance refunded. The matter came on for hearing before the court on April 22, and on May 13, 1941, the court rendered a decision denying the motion of the A. C. James Co., and instructing the trustees to discontinue negotiations to refund the certificates with any one except the Finance Corporation. An appeal from this order was taken by the A. C. James Co. No argument was held on the appeal, the case being submitted at the time of the argument on the main appeal from the order approving the plan. The A. C. James Co., appeal was dismissed on September 30, 1941, and a petition for rehearing filed on October 23, 1941, was denied on December 11, 1941.

When the trustees, on September 17, 1941, filed a petition to extend further the certificates maturing on December 1, 1941, the A. C. James Co. filed an answer thereto requesting that the trustees be required to pay off not less than $5,000,000 of the certificates and to resume negotiations for refunding the balance thereof at favorable rates of interest. Following negotiations, the Finance Corporation and the trustees agreed that upon deposit of $5,000,000 in cash by the trustees with the Finance Corporation as collateral security for the $10,000,000 of certificates, the Finance Corporation would credit interest to the trustees, in respect of this collateral, at the same rate being paid on the certificates. A supplemental petition for authority

to deposit the collateral security was filed by the trustees on October 30, 1941, and the arrangement was approved by the court on November 26, 1941, after a hearing before the court on November 17, at which the A. C. James Co. pressed its proposal in opposition to the agreement between the Finance Corporation and the trustees.

The cash position of the debtor having continued to improve, the trustees, in their petition filed on September 4, 1942, for instructions with reference to the maturing of the certificates on December 1, 1942, reported that they would be able to retire a substantial portion of the certificates. The Finance Corporation offered to extend informally the certificates under existing cash collateral arrangements pending decision of the Supreme Court on the plan. At the hearing before the District Court on November 2, 1942, those parties supporting the plan urged acceptance of the Finance Corporation's offer, while the A. C. James Co. urged retirement of all of the certificates. By order dated November 4, 1942, the court directed the trustees to accept the proposal of the Finance Corporation, and this arrangement has continued to the present time.

The activities of the several petitioners during the period under consideration are described in detail in the respective petitions and affidavits filed in support thereof and in the evidence adduced at the hearing thereon. Details of the disbursements by the parties were furnished. Unless otherwise stated later herein, all the expenses reported are regarded as reasonably necessary in connection with the services to which they were incident.

Institutional bondholders' committee.-Frederick H. Ecker, John W. Stedman, and Reeve Schley, as a committee representing a group of institutional holders and owners of the debtor's first-mortgage bonds request an allowance of $150,739.89 for expenses during the period November 1, 1939, through July 31, 1944, and an allowance of $2,000 for expenses which the committee estimates it will incur through December 31, 1944. The members of the group at the time the committee was organized on February 1, 1936, held or owned $16,941,400 of the debtor's first-mortgage bonds. The firm of Cravath, Swaine & Moore of New York (and their predecessor firm Cravath, de Gersdorff, Swaine & Wood) have been counsel for the committee since its organization. The firm of Morrison, Hohfeld, Foerster, Shuman & Clark were retained as the committee's San Francisco counsel in October 1939. Various associates of the committee's New York counsel have served as secretary of the committee. The committee received an allowance of $64,190.91 from the estate of the debtor for its expenses through October 31, 1939, including $50,000 for services of its New York counsel. New York counsel has also received $35,000 additionally from the committee for its services through October 31, 1939.