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In re Central Railroad Co.

decided: March 22, 1968.

IN THE MATTER OF THE CENTRAL RAILROAD COMPANY OF NEW JERSEY, DEBTOR, LEHIGH VALLEY RAILROAD COMPANY, APPELLANT


Staley, Chief Judge, and Kalodner and Forman, Circuit Judges.

Author: Kalodner

Opinion OF THE COURT

KALODNER, Circuit Judge.

This appeal is from the District Court's denial of the petition of the Lehigh Valley Railroad ("Lehigh") to intervene generally in a reorganization proceeding instituted on March 22, 1967 by the Central Railroad Company of New Jersey ("Debtor") under Section 77 of the Bankruptcy Act, 11 U.S.C.A. Sec. 205.

Lehigh's petition for general intervention, filed April 19, 1967, was premised on the grounds that its contacts with the Debtor were substantial; it had an interest in property in custodia legis ; and its interests were not adequately represented by any other party.

Hearing was had in the District Court on Lehigh's petition on May 9, 1967, and on general intervention petitions filed by the Reading Company, the State of New Jersey, the Baltimore & Ohio Railroad, the Lehigh Coal and Navigation Company, the Manufacturers Hanover Trust Company, and the Committee for Non-Railroad Stockholders.

On May 17, 1967 the District Court signed an Order which granted general intervention to the Reading Company, owner of 48.9 per cent of the Debtor's common stock, and to the Manufacturers Hanover Trust Company, trustee under the Debtor's mortgage indenture. The stated Order contained a provision directing the Trustees of the Debtor "to give notice" to those denied general intervention "of any and all matters directly affecting any interest" which they "may have in these proceedings".

The District Court, shortly thereafter, entered Orders allowing general intervention to the State of New Jersey, the Lehigh Coal and Navigation Company, and the Pennsylvania Railroad Company which owns 97.3 per cent of the outstanding stock of Lehigh.

On this appeal, Lehigh contends that (1) it has an absolute "right" to intervene generally in the reorganization proceedings, and (2) assuming that the right to general intervention is only permissive and its allowance rests within the sound discretion of the District Court, the latter abused its discretion in denying such intervention under the prevailing facts.

The Debtor, in reply, urges that Lehigh's contentions are without merit.

It is unnecessary to our disposition of the instant appeal to reach the issue as to whether Lehigh has an absolute right of general intervention, since, assuming arguendo, that Lehigh's right to such intervention is permissive only, we are of the opinion that the District Court improvidently exercised its discretion in denying Lehigh general intervention under the facts alleged in Lehigh's petition which are not controverted by the Debtor.

These facts may be summarized as follows:

Lehigh is a creditor of the Debtor to the extent of approximately $182,000, as a result of reciprocal freight interchange arrangements;

Lehigh and the Debtor each own 50 per cent of the stock of the Bayshore Connecting Railroad Company which connects their respective lines, and the ultimate plan of ...


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