February 28, 1946
IN RE UNITED STATES REALTY & IMPROVEMENT CO. NATIONAL CITY BANK OF NEW YORK
O'CONNELL ET AL
Before L. HAND, CHASE, and FRANK, Circuit Judges.
FRANK, Circuit Judge.
The agreements between the Bank and the trustee must be sharply differentiated from trustee's certificates which, issued for new and substantial consideration, must always be strictly enforced.*fn1 Because the pledged asset constituted an essential ingredient of any reorganization, the original entry of the injunction order, as to the Bank, was amply justified.*fn2 So, too, without the consent of the Bank, would have been its continuance for a reasonable period. In determining the length of that period, the large margin of security for the bank's debt (ensuring it against any probable loss for a considerable time) was of major importance. On the facts, there could be no abuse of discretion in continuing the injunction up to the present time, despite the Bank's objection. The Bank was thus in no position to exact a promise, such as that contained in the agreements, definitely limiting that period. For, in the circumstances, the Bank was indulging in no "forbearance"; it gave up nothing by the agreements except the stipulation for a reduced interest rate for the life of the agreements.
Consequently, we think the court was not obliged to enforce the terms of the trustee's agreements when it became obvious that to do so might seriously jeopardize reorganization through a plan then about to be considered. Except frustration of the Bank's desire to avoid the court's summary jurisdiction (should the trustee desire to sue it), the Bank has suggested no harm to it which will result from the court's refusal to allow it to realize on its collateral. We think that the court, when the agreement recently ended, properly kept the injunction alive, pending an exploration of current efforts to work out a plan.*fn3
Whether the plan under consideration at the time of entry of the order from which the Bank appealed was one which can be validly approved as fair and reasonable we need not and do not now consider.*fn4 We assume that none other than a valid plan will be approved; if that assumption should prove to be wrong, the remedy of review of course will be open to the Bank.*fn5 The injunction may properly be continued in effect until it appears that there is no reasonable likelihood of effecting reorganization.