Delaware & Hudson Co. v. NEW YORK, NEW H. & HR CO.

Decision Date07 November 1955
Docket NumberNo. 32,Docket 23551.,32
Citation227 F.2d 291
PartiesThe DELAWARE AND HUDSON COMPANY, Petitioner-Appellant, v. The NEW YORK, NEW HAVEN AND HARTFORD RAILROAD COMPANY and Connecticut Railway and Lighting Company, Respondents-Appellees.
CourtU.S. Court of Appeals — Second Circuit

Frederick H. Wiggin, New Haven, Conn. (Wiggin & Dana and John W. Barnett, New Haven, Conn., on the brief), for petitioner-appellant.

J. H. Gardner, Jr., New Haven, Conn., for respondent-appellee New York, N. H. & H. R. Co.

Edward K. Hanlon, New York City (Beekman & Bogue and A. T. Wenzell, New York City, on the brief), for respondent-appellee Connecticut Railway & Lighting Co.

Before CLARK, Chief Judge, and MEDINA and LUMBARD, Circuit Judges.

CLARK, Chief Judge.

The Delaware and Hudson Company appeals from an order in the reorganization proceedings of The New York, New Haven and Hartford Railroad Company which dismissed its petition for reopening of Order 763, entered on Claim 82 in the reorganization proceedings on August 4, 1944. Although the Consummation Order and Final Decree in the proceedings was entered on September 11, 1947, the present petition was not filed until May 11, 1953, or nearly six years later. The original Claim 82 was based upon the New Haven's guaranty of the par value and accrued dividends of the preferred stock of the Boston Railroad Holding Company. Now Delaware, as presently an owner of certain of these shares and relying on a variety of reasons for its delayed action, seeks a reopening of the proceedings to obtain a greater allowance for its benefit than has heretofore been accorded this interest. Although the complex facts and the several arguments deduced therefrom have been presented with skill and adroitness, we are constrained to conclude, as Judge Hincks convincingly demonstrates in his reasoned opinion, D.C. Conn., 128 F.Supp. 550, that Delaware's position is fundamentally untenable.

The Boston Railroad Holding Company was a corporation specially chartered in 1909 by the Commonwealth of Massachusetts to hold the securities of the Boston and Maine Railroad, and all its common stock has always been owned by the New Haven. In 1910 the charter of the Holding Company was amended, Acts and Resolves of Mass.1910, c. 639, to permit the issuance of preferred stock having a par value of $100 per share. In provisions set forth at 128 F.Supp. 552, 553, this amendatory Act prescribed a preference on liquidation for the preferred stock up to its par value, plus accrued dividends, and further prescribed payment of semiannual cumulative dividends, with the stock of its accrued dividends a charge and lien upon the Boston and Maine Railroad stock held by the Holding Company; it then provided means by which a majority of preferred stockholders could, in case of default in payment of dividends, apply to the Supreme Court of Massachusetts for an order of sale of the Boston and Maine stock to enforce the lien of the preferred stock thereon. Its § 5 also authorized a railroad corporation owning any of the common stock of the Holding Company to hold the preferred and to guarantee payment on the preferred of dividends and of par value on liquidation. Pursuant to this section the Holding Company issued 272,939 of its preferred shares to the New Haven; and in 1911, the New Haven sold 28,000 of these shares to the public. On all the stock certificates for this stock appears the New Haven's guaranty of cumulative dividends and the $100 par value upon which this claim is based.1 When the New Haven went into reorganization in 1935, 24,150 of these shares were still in the hands of public owners. Of the remaining preferred shares, the New Haven held 247,759, and 1,030 were in the treasury of the Holding Company.

After the start of the reorganization proceedings in 1935, the New Haven trustees pursuant to court order made four regular guaranteed semiannual preferred stock dividend payments. They defaulted, however, on all preferred dividends which became due after July 10, 1937.

On March 30, 1936, the president of the Holding Company, acting on behalf of those holding its guaranteed preferred stock, filed an unsecured claim (Claim 82) for the dividend due on January 10, 1936, and for further dividends that would thereafter become due. The management of this claim was then assumed by a Protective Committee for the preferred stockholders which by sanction of the Interstate Commerce Commission given on August 13, 1936, became the representative of 19,577 shares of publicly held preferred stock. The Protective Committee on April 3, 1941, also filed its Petition for Order 570 seeking to compel action by the New Haven trustees to bring about a liquidation of the Holding Company, which was the contingency upon which the guaranty of par value depended. On April 10, 1941, the New Haven trustees duly answered this Petition and the original claim, asserting that all claims in behalf of the preferred stock were so uncertain and contingent as not to be allowable.

Meanwhile the Interstate Commerce Commission (by Division 4) had submitted its Report and Order of March 22, 1940, on the New Haven Plan, 239 I.C. C. 337, in which it concluded that the preferred stock guaranty should be disaffirmed. The Commission adhered to this conclusion through all Supplemental Reports and Orders, and the disaffirmance was part of the Plan as finally approved, confirmed, and consummated.

On March 6, 1944, the Plan of Reorganization was approved; and on that same date the reorganization court denied the Petition for Order 570 (seeking a liquidation of the Holding Company) on the ground that such liquidation was not to the advantage of the New Haven estate (the holder of the majority of the preferred).

On July 28, 1944, the reorganization court decided Claim 82, which was treated as one for an allowance (1) on account of a breach of the guaranty of $100 (par value) on the preferred stock by reason of the disaffirmance of the guaranty under the Plan, and (2) on account of a breach of the guaranty of the stipulated dividends on the preferred stock. While allowing a payment of $32 per share (payable in common stock of the reorganized New Haven) for breach of the dividend payment guaranty (an allowance not disputed here), the court disallowed in full the claim based on disaffirmance of the guaranty of par value on liquidation. Order 763 entered on August 4, 1944, described this latter branch of the claim as "wholly disallowed, denied and dismissed." The reason given by the court for this denial was that, under the Massachusetts Acts incorporating the Holding Company, only the New Haven trustees, as owners of the majority of the preferred stock, had power to institute liquidation proceedings. See Hurley v. Boston R. Holding Co., 315 Mass. 591, 54 N.E.2d 183. Since the contingency of the trustees' so acting might not, and probably would not, come to pass, the court held that no loss had been proved on account of the breach of the par value guaranty. No appeal was ever taken from either Order 570 or Order 763.

Meanwhile, between January 27 and March 8, 1944, Delaware purchased 10,000 shares of the publicly held preferred stock of the Holding Company, most of which had been previously represented by the Protective Committee of the preferred stockholders. The last of Delaware's purchases was made only two days after entry of the Memorandum of Decision directing denial of Petition for Order 570 and almost five months before entry of Order 763, which adjudicated Claim 82. The stock purchased by Delaware never was transferred on the Holding Company's transfer books, but remained in the name of Delaware's brokers. Delaware never filed an appearance or participated in its own right and name in the reorganization proceedings until the filing of the present petition; nor, so far as appears, did it ever indicate that it disassociated itself from the prosecution of Claim 82 or the management of Petition for Order 570 by the Protective Committee for the publicly held preferred stock. When Delaware purchased the preferred shares it knew the New Haven was "in bankruptcy" and its attorneys carefully investigated the status of the Holding Company stock.

In 1945, Delaware supported legislation in the Massachusetts General Court to obtain dissolution of the Holding Company by legislative fiat; but that year the attempt failed. In 1946, however, the Massachusetts Legislature by its Chapter 518 of Acts of 1946 annulled the corporate existence of the Holding Company and provided for its receivership and liquidation. On July 3, 1947, at the earliest permissible date, Delaware joined with other preferred shareholders in a petition to a Massachusetts court for the receivership and liquidation of the Holding Company. So when the Final Decree and Order of Consummation in the New Haven reorganization proceedings was entered two months thereafter, Delaware, despite energetic activities on other fronts, had taken no part whatsoever in those proceedings.

In 1949, after the constitutionality of the Massachusetts Dissolution Act was upheld, Delaware & Hudson Co. v. Boston R. Holding Co., 323 Mass. 282, 81 N.E.2d 553, appeal dismissed 336 U.S. 932, 69 S.Ct. 746, 93 L.Ed. 1092, the liquidation of the Holding Company proceeded. Upon liquidation Delaware's contention that the lien of the publicly held preferred stock upon the Holding Company assets was prior to that of the preferred stock held by the New Haven estate was overruled, and the Massachusetts liquidation court allowed only $11.32 per share on this stock. See Delaware & Hudson Co. v. Boston R. Holding Co., 328 Mass. 63, 102 N.E.2d 67, certiorari denied 343 U.S. 920, 72 S.Ct. 676, 96 L.Ed. 1333. Notice of this allowance was sent to preferred stockholders on March 6, 1953. The present petition then followed. It sought for Delaware the difference between the $100 par value of the preferred...

To continue reading

Request your trial
4 cases
  • Hull v. Powell
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • November 16, 1962
    ...Edwards, 168 F.2d 627 (2d Cir. 1948). 16 Harris v. Warshawsky, 184 F.2d 660, 663 (2d Cir. 1950). Cf. Delaware & Hudson Co. v. New York, N. H. & H. R. R., 227 F.2d 291, 297 (2d Cir. 1955); Standard Steel Works v. American Pipe & Steel Corp., 111 F.2d 1000 (9th Cir. 1940). 17 In re Fair Cream......
  • In re Hudson & Manhattan Railroad Company
    • United States
    • U.S. District Court — Southern District of New York
    • July 8, 1971
    ...Blair v. Finan, 338 U.S. 824, 70 S.Ct. 70, 94 L.Ed. 500 (1949) (prohibiting extension voting trust); Delaware and Hudson Co. v. New York, N. H. & H. R. R. Co., 227 F.2d 291 (2d Cir., 1955), cert. denied 350 U.S. 987, 76 S.Ct. 473, 100 L.Ed. 854 (1956) (refusing reconsideration of disallowed......
  • In re Barbato
    • United States
    • U.S. Court of Appeals — Third Circuit
    • June 18, 1968
    ... ... BARBATO, Bankrupt, ... Royal Indemnity Company, a Corporation of the State of New York, a creditor, Appellant ... No. 16457 ... United States Court of Appeals Third Circuit ... Argued ... ...
  • Kansas Federal Credit Union v. Niemeier
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • November 12, 1955

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT