buyer. In the New York litigation, both Domnitchs are named as plaintiffs, but only the New York Connecting and the Indenture Trustee of its mortgage are named as defendants. And plaintiffs in that action seek enforcement of the 1965 agreement as modified by the 1970 agreement.
Conceivably, the New York court might be persuaded that the plaintiff cannot prevail, because of the absence of an indispensable party. Or, that court might conclude that relief must be limited to New York Connecting and the mortgage holder. But, having attempted to analyze the plaintiff's pleadings in the New York action and the plaintiff's presentations in this Court, I am persuaded that either such conclusion would run counter to the expectations of the Domnitch interests. I am satisfied that the New York litigation is intended by the Domnitchs to achieve a result which would in fact interfere with Penn Central's interests.
Moreover, I am inclined to believe that there is merit in the contention of the Indenture Trustee that it would be inequitable to permit plaintiff to proceed, even as against only New York Connecting and the Indenture Trustee, in view of the relationship between New York Connecting and Penn Central, and the restraints heretofore imposed upon the Indenture Trustee. Penn Central owns 100 percent of the stock of New York Connecting. New York Connecting is an integral part of the Penn Central system. Order No. 170 was entered in an attempt to maintain the status quo with respect to all leased lines, and to preserve the Penn Central system as a unit, without finally resolving issues as to the extent of this Court's jurisdiction over leased lines not themselves in reorganization. It restrains creditors of lessor railroads from taking legal action to enforce their claims against the lessors, except after giving 14 days' notice of intention to proceed, filed with this court and served upon all interested parties. It was and is the purpose of this Order to make it possible for this Court to evaluate each situation that might arise, and to determine whether enforcement of a particular claim against a lessor would pose a sufficient threat to the Penn Central system and its orderly reorganization as to justify assertion of jurisdiction to restrain such enforcement. Under the circumstances, I am satisfied that this Court had jurisdiction to enter Order No. 170. Since the Domnitchs have never sought to comply with Order No. 170 or to be excused from its terms, it would, at the least, be appropriate to restrain them from proceeding with the New York litigation until they have complied with Order No. 170. However, since all interested parties have now had their opportunity to be heard, in the interest of efficiency I shall treat their response to the Indenture Trustee's present petition as a request to be permitted to proceed with the New York litigation notwithstanding the provisions of Order No. 170.
It is manifest that plaintiffs seek a conveyance of the air rights free and clear of the lien of the mortgage. Their claim against the Indenture Trustee rests upon the assertion that, under the terms of the trust indenture, the Indenture Trustee is required to release the property from the lien of the mortgage upon deposit of the purchase price with the Indenture Trustee. (Whether or not this release provision remains applicable even after default under the mortgage is in dispute; I express no view on that issue.) The mortgage undoubtedly takes precedence over the subsequent option agreement. When the initial default occurred, in October of 1970, the Indenture Trustee refrained from exercising its remedies, which might have included foreclosure, as well as a wide range of other possibilities. In part, this was undoubtedly due to the likelihood that Order No. 1 in the Penn Central proceedings would be held applicable to prevent any attempt by the Indenture Trustee to enforce its remedies; and in part it was due to the express provisions of Order No. 170. It would be most inequitable if this Court were now to permit the Domnitchs to proceed, while continuing to restrain the Indenture Trustee. To permit both parties to proceed would obviously be totally inconsistent with the proper exercise of the responsibilities of a reorganization court; moreover, it would not likely be helpful to the Domnitch interests.
For all of the foregoing reasons, I have concluded that the plaintiffs in the New York litigation should not be permitted to proceed further.
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