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IN RE PITTSBURGH RYS. CO.

November 7, 1945

In re PITTSBURGH RYS. CO.


The opinion of the court was delivered by: MCVICAR

This is a proceeding for the reorganization of the Pittsburgh Railways Company which, prior to this proceeding, operated a system of railways in the City of Pittsburgh and in nearby territory.

A plan of reorganization has been filed which includes properties of underliers. It was approved by the Pennsylvania Public Utility Commission. No further action has been taken thereon.

 The City of Pittsburgh filed a petition to have the railways of the Pittsburgh Railways Company and its underliers considered as one system and as the property of the Pittsburgh Railways Company for reorganization. This petition was referred to Watson B. Adair, Esq., as Special Master, who heard much evidence thereon, made an exhaustive findings of fact and conclusions of law, and also, filed an opinion covering the questions of law involved. His report was adverse to the petition of the City. After hearing, this Court made an order sustaining the position taken by the Special Master and entered judgment thereon. 60 F.Supp. 600. From that judgment an appeal was taken by the City which is now pending in the Circuit Court of Appeals of this circuit and which I understand will be heard in January, next.

 Jules Guggenheim et al. filed a petition in the aforesaid proceeding, which now contains four prayers, the first of which is as follows: '1. W. D. George, Trustee, be directed to conduct an examination on behalf of the estate, pursuant to Section 21a and Section 167 of the Bankruptcy Act, for the purpose of inquiring into the matters described in this petition, as well as any other matters relating to possible claims of causes of action available to the estate against Philadelphia Company or any other party, and any other grounds for the equitable limitation or subordination of claims filed by Philadelphia Company in this proceeding; and that the Securities and Exchange Commission, through its attorneys, the petitioners and their attorneys and any other party in interest be permitted to participate in such examination.'

 On June 25, 1945, this Court made an order granting a rule upon the Trustee, upon the Philadelphia Company and upon each of the corporations named in the plan of reorganization, aforesaid, and upon their respective indenture trustees, creditors, stockholders and upon all creditors, stockholders and upon all creditors, stockholders and other parties in interest, including the United States Securities and Exchange Commission, to show cause, if any, why the relief prayed for should not be granted. September 20, 1945 was the date fixed therein for filing of answers, and October 17, 1945 was fixed as the date that the Court might hear preliminary issues, if any were raised. Answers were filed by the City of Pittsburgh and by the Securities and Exchange Commission which joined in, inter alia, prayer 1 of the petition. An answer was also filed by the Trustee of the debtor, wherein he took a neutral attitude and submitted himself to whatever order might be made by the Court. The Philadelphia Company filed a motion to dismiss and the following companies, known as 'guaranteed underliers' filed motions to dismiss so far as they were concerned, namely, Monongahela Street Railway Company, Pittsburgh & Birmingham Traction Company, the Suburban Rapid Transit Street Railway Company and the Pittsburgh Incline Plane Company. A hearing was held, as provided for in the order of June 25, 1945, on the aforesaid motions to dismiss and on the first prayer of the Jules Guggenheim petition. At the hearing, the petitioners Jules Guggenheim et al., Securities & Exchange Commission, the City of Pittsburgh, a committee of bondholders of the Southern Traction Company and the Citizens Traction Company favored the granting of prayer 1 of the aforesaid petition. The Philadelphia Company was opposed to the granting thereof and the aforesaid guaranteed underliers were opposed to the granting thereof so far as it affected them.

 Section 21, sub. a of the Bankruptcy Act, 11 U.S.C.A. § 44, sub. a, provides:

 ' § 21. Evidence. a. The court may, upon application of any officer, bankrupt, or creditor, by order require any designated persons, including the bankrupt and his or her spouse, to appear before the court or before the judge of any State court, to be examined concerning the acts, conduct, or property of a bankrupt.'

 Section 167, 11 U.S.C.A. § 567, provides:

 ' § 167. The trustee upon his appointment and qualification --

 '(1) shall, if the judge shall so direct, forthwith investigate the acts, conduct, property, liabilities, and financial condition of the debtor, the operation of its business and the desirability of the continuance thereof, and any other matter relevant to the proceeding or to the formulation of a plan, and report thereon to the judge;

 '(2) may, if the judge shall so direct, examine the directors and officers of the debtor and any other witnesses concerning the foregoing matters or any of them;

 '(3) shall report to the judge any facts ascertained by him pertaining to fraud, misconduct, mismanagement and irregularities, and to any causes of action available to the estate;

 '(4) may, subject to the approval of the judge, employ such person or persons as the judge may deem necessary for the purpose of assisting the trustee in performing the duties imposed upon him under this chapter;

 '(5) shall, at the earliest date practicable, prepare and submit a brief statement of his investigation of the property, liabilities, and financial condition of the debtor, the operation of its business and the desirability of the continuance thereof, in such form and manner as the judge may direct, to the creditors, stockholders, indenture trustees, the ...


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