51. , Joseph J. Doran, Albany, N.Y., for Public Service Commission of State of New York. ,In re LONG ISLAND R. CO." />

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July 7, 1954


The opinion of the court was delivered by: BYERS

The debtor has filed a petition verified June 17, 1954, to terminate and consequently dismiss this proceeding for the reason that it is in the position to qualify as a railroad redevelopment corporation as contemplated by Chapter 824 of the Laws of New York of 1954, enacted June 14, 1954, Railroad Law, McKinney's Consol.Laws, c. 49, §§ 300-313; and that it should be permitted so to qualify and otherwise to enter into all financial arrangements as specified, whereby it will have paid in full or adequately provided for all of its financial obligations and those of the present Trustee and prior Trustees appointed in this proceeding; and will have assumed and agreed to pay in due course all such obligations as are not presently due and payable, or will have otherwise discharged as provided for all such obligations in a manner consented to by the holders thereof.

This proceeding has been pending since March 2, 1949 and no plan of reorganization as contemplated by Section 77 of the Bankruptcy Act, 11 U.S.C.A. § 205, has thus far been perfected for consideration by the Court, although one is pending before the Interstate Commerce Commission subject to the submission of briefs before that body on September 1, 1954.

 During the more than five years which have elapsed since the filing of the original petition, the Debtor has been adequately operated under successive trustees appointed to administer the Debtor's property, but is cannot be said that such a legal expedient is desirable in and of itself, provided that the special skills peculiar to the competent running of a railroad as a private enterprise can be substituted therefor, under conditions calculated to promote successful operation and maintenance from the standpoint of the traveling public.

 This Debtor is probably sui generis from the legal as well as the railroad point of view. Its sole substantial stockholder, and its sole substantial bondholder, is and for many years has been the Pennsylvania Railroad Company; thus there are no conflicts among security holders.

 The majority of its passengers are commuters, who provide a type of traffic not usually classified as profitable from the standpoint of a carrier; its haulage of freight to points on Long Island is not in expectable volume considering the territory served; however, the freight business handled on the Bay Ridge branch to and from the tracks of the New York Connecting Railway Company is an important source of revenue.

 These considerations may indicate in part if not explain, all the difficulties which have impeded the interested parties in promulgating such a plan of reorganization as its is the purpose of Section 77 of the Act to bring into effect.

 A recognition of the complexities of the situation thus inadequately alluded to, prompted the Long Island Transit Authority (a State body brought into existence in response to a deep sense of the public interest involved in the extent to which railroads operating in New York have been adversely affected by changes in the traveling habits of its inhabitants) to undertake a study and the formulation of ameliorative legislation which would best promote the interests of the citizens of this State as a whole. Thus the enactment of Chapter 824 of the Laws of 1954.

 As the Court views the matters set forth in the pending petition, that which it is proposed to accomplish is substantially equivalent to a plan of reorganization so far as financial matters are concerned; plus that which no such plan could contain within itself, namely the assured co-operation of the State of New York, acting through sundry subordinate branches of government, for a limited period of years, in the effort to temper tax burdens and otherwise to enable a railroad in the circumstances of this Debtor to work out a complete rehabilitation of its equipment, facilities and service, and its ultimate emergence as an adequate self-sustaining element of the State's transportation system.

 If there is any technical impediment to the Court's inherent power to grant the prayer of the pending petition, I confess to a complete inability to discover it.

 Turning now to the merits, it appears that the matters stated in the petition may be thus briefly summarized:


 The intended qualification of the Debtor as a railroad redevelopment corporation, under the new law, upon obtaining a Certificate of Approval as prescribed in § 303 of the State Railroad Law, from the Public Service Commission of the State of New York, and the Long Island Transit Authroity. That certificate, if granted, will embrace the undertakings of the applicant concerning physical improvements and rehabilitation, the mainteance of working cash, as defined; the payment of corporate obligations and liabilities and that of its Trustee or Trustees appointed in this Court, all as defined and limited in said certificate. There are also therein stated:

 A capitulation of the funds to be loaned to the corporation in behalf of the acquisition of physical improvements and rehabilitation. This includes a new loan by the Pennsylvania Railroad Company of $ 5,500,000.

 Limitations affecting the payments of interest and dividends to continue throughout the statutory status as a railroad redevelopment corporation, on other than the new loans.

 That passenger fares are to be maintained so as to enable the corporation to live up to its several undertakings.


 The payment upon termination of this proceeding of all obligations of the Debtor and the Trustee or Trustees then due and payable and the assumption and payment in due course of all such obligations not then due and ...

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