IN RE PEORIA & EASTERN RY. CO

• Decision Date: 03 April 1941
• Citation: 37 F. Supp. 917
• Parties: In re PEORIA & EASTERN RY. CO.
• Court: U.S. District Court — Southern District of New York

37 F. Supp. 917

In re PEORIA & EASTERN RY. CO.

District Court, S. D. New York.

April 3, 1941.

Jacob Aronson and Crosby J. Beakes, both of New York City, for petitioner.

Charles S. Aronstam and Archie S. Karp, both of New York City, for income bondholders.

Louis G. Bernstein, Julius J. Rosenberg, Leonard B. Frutkin, and William J. Reinhart, Jr., all of New York City, for first mortgage bondholders.

Heard pursuant to Title 11 United States Code, Section 1213, 11 U.S.C.A. § 1213, by a three-judge court consisting of LEARNED HAND, Circuit Judge, WOOLSEY, and HULBERT, District Judges.

WOOLSEY, District Judge.

Our judgment on the matters now presented¹ is —

1. That Section 2 of the proposed agreement in respect of the Railroad Adjustment here involved to be made between the Peoria & Eastern Railway Company, the Cleveland, Cincinnati, Chicago & St. Louis Railway Company — commonly known as the "Big Four" — the New York Central Railroad Company and the Central Hanover Bank and Trust Company, be and it hereby is amended so as to read as hereinafter prescribed.

2. That Section 24 of the final decree entered herein on the 29th day of July, 1940, be and it hereby is amended so as to read as hereinafter prescribed.

3. That the petitioner Railway Company be allowed — in addition to the expenses granted by Section 21 of the decree, filed July 29, 1940 — its expenses in the sum of $6,184.61, covering the following items:

                Expenses on account of imprinting
                 legends on Bonds...................... $  500.00
                Expenses for advertising various
                 notices ..............................  1,760.45
                Expenses for printing, postage
                 insurance, registration, etc..........  2,683.76
                Fee for listing extended Bonds on
                 New York Stock Exchange...............    600.00
                Expense of transcript of stenographer's
                 minutes ..............................   390.40
                Recording fee (Supplemental Indenture
                 satisfaction pieces)
                 estimated ............................    250.00
                                                        _________
                     Total ...........................  $6,184.61
                

And also be allowed counsel fees, hereby fixed in the sum of $2,000, to Larkin, Rathbone & Perry for services herein to the Indenture Trustee, the Central Hanover Bank and Trust Company.

4. That the petitions of the intervenors and their counsel for allowances be and they hereby are dismissed without costs, on the ground that the Court is without jurisdiction to grant any allowances to others than the petitioner Railway.

I. We see no reason why the Peoria & Eastern Railway Company should be required to send out to income bondholders the names of any persons who may wish to be elected directors to represent the income bondholders. We think the income bondholders should do their own electioneering.

We hold, therefore, that the second paragraph of the proposed agreement in respect of the Railroad Adjustment under discussion between the Peoria & Eastern Railway Company, the "Big Four", the New York Central Railroad Company and the Central Hanover Bank and Trust Company, should be amended so as to read as follows:

"Second: The Peoria and Eastern does hereby agree:

"(1) That at least sixty days prior to the date on which there is to be a meeting of the stockholders of the Peoria and Eastern at which a director is to be elected to fill a vacancy caused by the death, resignation, inability to act, failure to qualify, or expiration of the term, of a director previously designated by the Income Bondholders, it will cause a notice to be published once a week for two successive weeks in the Wall Street Journal (or other newspaper of like character in case of the cessation of publication of the Wall Street Journal) in the City of New York, New York, and in a newspaper published and of general circulation in the City of Chicago, Illinois, requesting the Income Bondholders to notify the Trustee on or prior to the expiration of thirty (30) days from the date of the first publication of such notices, of the name and address of the person who is their choice as a director, and to accompany such notification with a statement of a Bank, Trust Company or other institution of good standing, satisfactory to the Trustee, that the Income Bondholder so notifying the Trustee has on deposit with such Bank, Trust Company or institution, Income Bonds in the aggregate principal amount and of the numbers set forth in such statement, or that the Income Bondholder so notifying the Trustee has presented for inspection to such Bank, Trust Company or institution Income Bonds in the aggregate principal amount and of the numbers set forth in such statement, with proof satisfactory to such Bank, Trust Company or institution of the ownership thereof by such Income Bondholders;

"(2) That anyone so proposed by Income Bondholders as a director will be qualified to become a director by having transferred to him at least one share of its stock;

"(3) To keep a list of the names and addresses of the Income Bondholders whose names and addresses are known or are made known to it, and will also, on or prior to the date of the first publication of the above notice, mail a similar notice to the Income Bondholders whose names and addresses are known to the Peoria and Eastern;

"(4) Also during the ninety days² preceding the date on which there is to be a meeting of the stockholders of the Peoria and Eastern at which a director is to be elected to succeed a director who shall have been previously designated by Income Bondholders, to furnish to any Income Bondholder requesting such information, the names and addresses of the Income Bondholders whose names and addresses are known to the Peoria and Eastern; and

"(5) Income Bonds owned by or held for the benefit of the New York Central, `Big Four' or the Peoria and Eastern or any of their affiliates or subsidiaries, shall not be voted for the purpose of the nomination of such director."

II. We hold that Article 24 of the final decree entered herein on the 29th day of July, 1940, be and it hereby is amended — the inserted amendment being italicized — so as to read as follows:

"Section 24. All questions concerning the amount and validity of the accounts between the `Big Four,' the New York Central Railroad Company and the Petitioner are not determined in these proceedings and are hereby specifically left open and reserved for future determination. Should the New York Central Railroad Company and/or the `Big Four' seek or attempt, in any year or at any time or times hereafter, to withdraw any part of the earnings or assets of the Petitioner by way of recoupment or repayment of said inter-company accounts, then and in such event said New York Central Railroad Company and/or `Big Four,' upon objection by the representative of the Income Bondholders elected to the Board of Directors, must prove and establish their right to do so."

III. A. By way of preface to the...