In re New York, New Haven & Hartford R. Co.

• Decision Date: 23 January 1945
• Docket Number: No. 107.,107.
• Citation: 147 F.2d 40
• Parties: In re NEW YORK, NEW HAVEN & HARTFORD R. CO.
• Court: U.S. Court of Appeals — Second Circuit

147 F.2d 40 (1945)

In re NEW YORK, NEW HAVEN & HARTFORD R. CO.

No. 107.

Circuit Court of Appeals, Second Circuit.

January 2, 1945.

Motions for Modification and Stay of Mandate Denied January 23, 1945.

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Choate, Hall & Stewart, of Boston, Mass. (John L. Hall and James Garfield, both of Boston, Mass., of counsel), for debtor-appellant.

Henry S. Drinker, Edwin A. Lucas, Drinker, Biddle & Reath, and John Dickinson, all of Philadelphia, Pa. for Pennsylvania R. Co.

William D. Morton, Jr., of Boston, Mass., for Protective Committees for Holders of Preferred and Common Stock of New York, New Haven & Hartford R. Co.

Appleton, Rice & Perrin, of New York City (Lee J. Perrin, and Clifton S. Thomson, both of New York City, of counsel), for Bank of Manhattan Co.

Harold E. Staples and Tillinghast, Collins & Tanner, all of Providence, R. I., for Rhode Island Hospital Nat. Bank of Providence.

Howard W. Brown, Peabody, Brown, Rowley & Storey, Willard B. Luther and Peabody, Arnold, Batchelder & Luther, all of Boston, Mass., for Merchants Nat. Bank of Boston.

Edgar Turlington, and Greenbaum, Wolff & Ernst, of New York City, Roberts & McInnis, of Washington, D. C., for appellants Protective Committee for Bonds of Housatonic R. Co.

Richard Ely, Ely, Bradford, Thompson & Brown, Joseph B. Ely, all of Boston, Mass. (Seibert & Riggs, of New York City, of counsel), for appellant Protective Committee for Bonds of Old Colony R. Co.

Robert T. Bushnell, Atty. Gen., Arthur E. Whittemore, Sp. Asst. Atty. Gen., Earl Johnson, of Boston, Mass., for Commonwealth of Massachusetts.

Henry E. Foley, of Boston, Massachusetts, for appellant City of Boston.

Henry W. Anderson, of Richmond, Va., and Curtiss K. Thompson, of New Haven, Conn. (Hunton, Williams, Anderson, Gay & Moore, of Richmond, Va., and Parmelee & Thompson, of New Haven, Conn., of counsel), for Institutional Group for Boston Terminal Bonds.

Robert H. Davison, of Boston, Mass. (Haussermann, Davison & Shattuck, of counsel), for appellant Webster & Atlas Nat. Bank of Boston, Trustee.

Damon E. Hall and Rutherford E. Smith, both of Boston, Mass. (Hurlburt, Jones, Hall & Bickford, all of Boston, Mass., of counsel), for appellant Mutual Savings Bank Group Committee for Boston Terminal Co. Bonds.

Charles S. Clark, of South Duxbury, Mass., for Town of Duxbury.

Oliver & Donnally, of New York City (Fred N. Oliver and Willard P. Scott, both of New York City, of counsel), for Mutual Savings Bank Group.

Stewart & Shearer, of New York City (William A. W. Stewart and M'Cready Sykes, both of New York City, of counsel), for United States Trust Company of New York, Trustee of The Harlem River & Port Chester Mortgage.

Root, Clark, Buckner & Ballantine, of New York City (William P. Palmer and Philip E. Gregg, both of New York City, of counsel), for Bank of New York, Trustee under The New England Railroad Company Mortgage.

James L. Homire, of Washington, D. C., for Reconstruction Finance Corporation.

Beers & Beers, of New Haven, Conn. (Edmund Ruffin Beckwith, of New York City, of counsel), for Protective Committee for Holders of Boston and New York Air Line First Mortgage 4% Bonds.

Davis, Polk, Wardwell, Sunderland & Kiendl, of New York City (Edwin S. S. Sunderland, Judson C. McLester, Jr., Russel S. Coutant, and Arthur L. Krenzien, all of New York City, of counsel), for Insurance Group.

White & Case, of New York City (Fitzhugh McGrew, of New York City, of counsel), for Bankers Trust Company, Trustee, First and Refunding Mortgage.

Davies, Auerbach, Cornell & Hardy, of New York City (H. C. McCollom, of New York City, of counsel), Attorneys for Irving Trust Company, Trustee under 6% Collateral Trust Indenture.

Mitchell, Capron, Marsh, Angulo & Cooney, of New York City (Edward E. Watts, Jr., of New York City, of counsel), for City Bank Farmers Trust Company, Trustee, First Mortgage Central New England Railway Company.

Charles A. Coolidge, Oscar M. Shaw, and Warren E. Carley, all of Boston, Mass. (Ropes, Gray, Best, Coolidge & Rugg, of Boston, Mass., of counsel), for Old Colony R. Co.

Hermon J. Wells, of New Haven, Conn. (J. H. Gardner, Jr., of New Haven, Conn., of counsel), for Trustees of property of New York, New Haven & Hartford R. Co.

Before SWAN, AUGUSTUS N. HAND and FRANK, Circuit Judges.

SWAN, Circuit Judge.

These fifteen appeals have been heard together upon a consolidated record. All of the appellants have appealed from an order of the district court entered March 6, 1944 approving a plan of reorganization for the New York, New Haven & Hartford Railroad Company (hereafter for brevity called "New Haven" or the "debtor") under section 77 of the Bankruptcy Act, 11 U.S.C.A. § 205. Three of the appellants, Bank of the Manhattan Company, Rhode Island Hospital National Bank of Providence, and Merchants National Bank of Boston, have appealed also from an order of the district court entered March 13, 1944 classifying creditors and stockholders. The appellants fall into several groups having common interests and raising the same or similar contentions. The issues presented will be discussed as distinct problems in so far as practicable and without necessarily referring to all of the appellants affected by them.

1. Objections to procedure: Numerous appellants complain of the procedure adopted by the district court and the Interstate Commerce Commission with respect to the fourth and fifth supplemental reports of the Commission. Its fourth supplemental report was filed with the court on July 13, 1943. After hearings upon objections to the plan approved by the Commission in its fourth supplemental report the district judge filed an opinion, 54 F.Supp. 595, expressing his approval of it in general but stating that in a few particulars the plan did not comply with legal standards, and indicating certain corrections that should be made. The opinion also invited the Commission, if it saw fit, to file a further supplemental report while the judge was holding the matter under advisement. Acting upon this suggestion the Commission, without further public hearings, filed its fifth supplemental report on February 8, 1944. The court ordered that all objections to the fourth supplemental report should be treated as objections to the fifth, permitted the filing of additional objections and, after hearing all objectors, rendered an opinion approving the plan, 54 F.Supp. 631, and made a formal order of approval.

Appellants urge that upon the certification of a plan by the Commission to the court, section 77, sub. e, 11 U.S.C.A. § 205, sub. e, requires the judge either to approve it or to dismiss the proceedings or to refer them back to the Commission for further action. We do not think that the statute compels a procedure so inelastic. Subdivision d of the section provides that after public hearings the Commission may either approve or refuse to approve any plan, and "may thereafter, upon petition for good cause shown filed within sixty days of the date of its order, and upon further hearings if the Commission shall deem necessary, in a supplemental report and order modify any plan which it has approved, stating the reasons for such modification." Under this provision we cannot doubt that until the court has acted upon the plan certified to it, the Commission has power, upon the timely petition of a party in interest or upon its own motion, to clarify, perfect or modify the plan on the basis of evidence already before it and without further hearings, if it deems such hearings unnecessary. Nor has the Commission doubted its power to render on its own motion a supplemental report modifying a plan previously certified to the court. Chicago Great Western Railroad Company Reorganization, 233 I. C. C. 63, 64; Chicago, Rock Island & Pacific Railway Company Reorganization, 249 I. C. C. 297. In the case at bar the court took under advisement the plan of the Commission's fourth supplemental report; it had entered no order of approval or disapproval before the fifth supplemental report was received. The fact that the court wrote an opinion inviting the filing of a fifth supplemental report and suggesting certain corrections in the plan of the fourth report certainly did not deprive the Commission of its statutory power under subdivision (d) to improve the plan by a supplementary report. We regard it as a commendable instance of "properly coordinated action" between the court and the Commission, the importance of which was noted in Ecker v. Western Pacific R. Corp., 318 U.S. 448, 475, 63 S.Ct. 692, 708, 87 L.Ed. 892.

2. Capitalization and stockholders' equities: Four appellants, namely, the debtor, the Pennsylvania Railroad Company (which owns a large block of the debtor's common stock) and two committees for New Haven stockholders (one representing holders of preferred stock, the other holders of common) complain of approval of the plan because it excludes existing stockholders from any participation therein.

The plan first approved by the Commission in March 1940, on the basis of a record closed in June 1939, fixed the total capitalization of the reorganized debtor at $365,000,000 and found that existing preferred and common stock was worthless. In September 1940 the Commission reopened the record to take further evidence with respect to the reorganization of the Old Colony Railroad, and a supplemental report was made in February 1941, modifying the plan of reorganization but making no change in the total capitalization or in the finding of no value for New Haven stock. This plan the court disapproved in an opinion of December 8, 1941 (unreported) without passing on the new capitalization and the lack of value of existing stock. After further hearings the Commission issued its third and fourth supplemental reports, the latter dated July 13, 1943. The plan approved in the fourth supplemental report reaffirmed the finding of no value for the...