Hoboken Manufacturers Railroad Co. (the debtor) operates a terminal switching railroad along the waterfront at Hoboken, New Jersey. It is a common carrier subject to the provisions of the Interstate Commerce Act. 24 Stat. 379, 41 Stat. 474, 49 Stat. 543, 54 S.Ct. 899, 49 U.S.C. § 1, 49 U.S.C.A. § 1. The major part of its right of way and line of railroad is held by it under a 99 year lease from respondent dated June 19, 1906. In 1943 the debtor filed a petition for reorganization under § 77 of the Bankruptcy Act, 49 Stat. 1969, 53 Stat. 1406, 11 U.S.C. § 205, 11 U.S.C.A. § 205, in the District Court for the District of New Jersey. The petition was approved and petitioner Smith was appointed trustee. Shortly thereafter respondent notified the trustee that it would petition the reorganization court for termination of the lease. A hearing was held was decision reserved. While the matter was under advisement the trustee on order of the court adopted the lease. Thereafter the reorganization court granted respondent's motion to terminate the lease, holding that the appointment of the trustee was a breach of the terms of the lease entitling the lessor to re-enter. 56 F.Supp. 187. The Circuit Court of Appeals affirmed. 3 Cir., 150 F.2d 921. The case § here on a petition for a writ of certiorari which we granted because of the importance of the problem in the administration of the Interstate Commerce Act and the Bankruptcy Act.
The provision of the lease upon which the forfeiture was decreed reads as follows: 'The Lessee shall not and will not sell, assign or transfer this lease or underlet the demised premises, or any part thereof, or the rights and privileges, or any of them, hereby granted, without the previous consent of the Lessor expressed by endorsement on this lease made in pursuance of authority granted by resolution of the board of directors of the Lessor * * * This covenant shall also apply to any unauthorized sale or transfer thereof or underletting of the demised premises, or any part thereof, or of the said rights and privileges, or any of them, whether made by the Lessee or in any proceeding, whether at law or in equity or otherwise, to which the Lessee may be a party, whereby any of the rights, duties and obligations of the Lessee shall or may be transferred, encumbered, abrogated or in any manner altered, without the consent of the Lessor first had and obtained in the manner hereinbefore provided.'
By a further provision of the lease violation of that covenant entitled the lessor to terminate the lease and to re-enter on specified notice.
Sec. 77, sub. l, 11 U.S.C. § 205(l), 11 U.S.C.A. § 205, sub. l, provides: 'In proceedings under this section and consistent with the provisions thereof, the jurisdiction and powers of the court, the duties of the debtor and the rights and liabilities of creditors, and of all persons with respect to the debtor and its property, shall be the same as if a voluntary petition for adjudication had been filed and a decree of adjudication had been entered on the day when the debtor's petition was filed.'
Sec. 70, sub. b of the Bankruptcy Act, 11 U.S.C. § 110(b), 11 U.S.C.A. § 110, sub. b, provides in part: 'A general covenant or condition in a lease that it shall not be assigned shall not be construed to prevent the trustee from assuming the same at his election and subsequently assigning the same; but an express covenant that an assignment by operation of law or the bankruptcy of a specified party thereto or of either party shall terminate the lease or give the other party an election to terminate the same shall be enforceable.'