Friedman v. Chesapeake & Ohio Railway Co.

Second Circuit

Friedman v. Chesapeake & Ohio Railway Co.

395 F.2d 663

CourtCourt of Appeals for the Second Circuit

DecidedJune 4, 1968

DocketNo. 462, Docket 31110

StatusPublished

Cited by2 cases

This text of 395 F.2d 663 (Friedman v. Chesapeake & Ohio Railway Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Friedman v. Chesapeake & Ohio Railway Co., 395 F.2d 663 (2d Cir. 1968).

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Opinion

PER CURIAM:

This is an appeal from a judgment dismissing a complaint which alleges as a first cause of action that plaintiffs-appellants are the owners of $200,000 face value B & O 4V2% convertible income bonds due February 1, 2010 ($22,000,000 principal amount outstanding); that the bonds were issued pursuant to an Indenture (Chase Manhattan Bank, Indenture Trustee); that the defendants Chesa[664]*664peake and Ohio Railway Company (C & O) and Baltimore and Ohio Railroad Company (B & O) affected a “merger in fact” by combining various departments and operating services; that by reason thereof the obligations of the B & 0 “under the terms of the Indenture and Bonds” became the obligations of the C & O; that interest arrears in said B & 0 bonds through December 31, 1965 is $4,-950,000; that in February 1966 C & 0 declared a $9,000,000 dividend on its common stock while there were arrears on the B & O bonds, thus making back interest payable under the Indenture and the Bonds; and that plaintiffs are entitled to seek recovery thereof in a class action.

A second cause of action alleges that such common stock dividend payment by C & O matured the B & O bonds; a third cause of action asserted a failure to make sinking fund payment as an event maturing the bonds; and a fourth cause of action alleged retirement annuity fund payments as an event of default.

As affirmative defenses, the defendants alleged first, exclusive jurisdiction in the Interstate Commerce Commission (ICC) to authorize mergers and assumption of the obligations of another carrier and second, failure to comply with the Indenture’s requirement that the holders of 25% of principal amount of the Bonds must request the Trustee to bring suit.

Summary judgment was properly granted. First, the “no action” (unless a request by 25% of the bondholders) clause of the Indenture applies as a bar to the action. Sutter v. Hudson Coal Co., 259 App.Div. 1053, 21 N.Y.S.2d 40 (2d Dept. 1940); Relmar Holding Co. v. Paramount Publix Corp., 147 Misc. 824, 263 N.Y.S. 776 (Sup.Ct.1932).

Second, there is no issue of fact as to a merger. The ICC’s approval of the use of joint facilities² was not approval of a merger as prescribed by law, 49 U.S.C.A. § 5(2) (a), (4), or of the assumption by C & O of B & O’s obligations. 49 U.S.C.A. § 20a(2).

The motion to amend the complaint was properly denied. See opinion below. 261 F.Supp. 728 (S.D.N.Y.1966).

In addition, appellants have conceded that on May 1, 1968 all accumulated interest from 1961 to 1967 inclusive was paid, thus removing any factual foundation for the first cause of action and rendering their claims to such interest moot.

Affirmed.

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PER CURIAM:

This is an appeal from a judgment dismissing a complaint which alleges as a first cause of action that plaintiffs-appellants are the owners of $200,000 face value B & O 4V2% convertible income bonds due February 1, 2010 ($22,000,000 principal amount outstanding); that the bonds were issued pursuant to an Indenture (Chase Manhattan Bank, Indenture Trustee); that the defendants Chesa[664]*664peake and Ohio Railway Company (C & O) and Baltimore and Ohio Railroad Company (B & O) affected a “merger in fact” by combining various departments and operating services; that by reason thereof the obligations of the B & 0 “under the terms of the Indenture and Bonds” became the obligations of the C & O; that interest arrears in said B & 0 bonds through December 31, 1965 is $4,-950,000; that in February 1966 C & 0 declared a $9,000,000 dividend on its common stock while there were arrears on the B & O bonds, thus making back interest payable under the Indenture and the Bonds; and that plaintiffs are entitled to seek recovery thereof in a class action.

A second cause of action alleges that such common stock dividend payment by C & O matured the B & O bonds; a third cause of action asserted a failure to make sinking fund payment as an event maturing the bonds; and a fourth cause of action alleged retirement annuity fund payments as an event of default.

As affirmative defenses, the defendants alleged first, exclusive jurisdiction in the Interstate Commerce Commission (ICC) to authorize mergers and assumption of the obligations of another carrier and second, failure to comply with the Indenture’s requirement that the holders of 25% of principal amount of the Bonds must request the Trustee to bring suit.

Summary judgment was properly granted. First, the “no action” (unless a request by 25% of the bondholders) clause of the Indenture applies as a bar to the action. Sutter v. Hudson Coal Co., 259 App.Div. 1053, 21 N.Y.S.2d 40 (2d Dept. 1940); Relmar Holding Co. v. Paramount Publix Corp., 147 Misc. 824, 263 N.Y.S. 776 (Sup.Ct.1932).

Second, there is no issue of fact as to a merger. The ICC’s approval of the use of joint facilities² was not approval of a merger as prescribed by law, 49 U.S.C.A. § 5(2) (a), (4), or of the assumption by C & O of B & O’s obligations. 49 U.S.C.A. § 20a(2).

The motion to amend the complaint was properly denied. See opinion below. 261 F.Supp. 728 (S.D.N.Y.1966).

In addition, appellants have conceded that on May 1, 1968 all accumulated interest from 1961 to 1967 inclusive was paid, thus removing any factual foundation for the first cause of action and rendering their claims to such interest moot.

Affirmed.

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395 F.2d 663, Counsel Stack Legal Research, https://law.counselstack.com/opinion/friedman-v-chesapeake-ohio-railway-co-ca2-1968.

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