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IN RE PENN CENT. TRANSP. CO.

October 25, 1974

In the Matter of PENN CENTRAL TRANSPORTATION COMPANY, Debtor, UNITED NEW JERSEY RAILROAD & CANAL COMPANY, Secondary Debtor, Prolerized Schiabo-Neu Company, Petitioner to Reclaim Property and For Other Relief


The opinion of the court was delivered by: FULLAM

 Re: Petition of Prolerized Schiabo-Neu Company to Reclaim Property and For Other Relief

 FULLAM, District Judge.

 Petitioner, Prolerized Schiabo-Neu Company ("Prolerized"), seeks to recover $8,500 deposited with the railroads in connection with its agreement to purchase 6.44 acres of land, located in Greenville Yard, New Jersey. The land to be sold under the agreement was, and still is, owned by the Secondary Debtor and leased to the Debtor for a term of 999 years from July 1, 1871. Because Penn Central's management failed to approve the transaction, as required by the terms of the agreement, the property was never conveyed to Prolerized.

 The unsettled issues are whether Prolerized is entitled to reclaim its down payment, and, if not, whether its claim against the estates of the railroads is secured by a vendee's lien. The Trustees of the Debtor take the position that Prolerized's claim is an unsecured pre-bankruptcy claim for $8,500, and have verified it as such for purposes of the Debtor's proof of claims program.

 On May 13, 1970, Prolerized entered into the sale contract now the basis for its $8,500 claim. In language which reflects the casual disregard for the distinct corporate entities of parent and lessor-subsidiaries that existed before reorganization, the agreement began:

 
"AGREEMENT.
 
"The United New Jersey Railroad & Canal Company (hereinafter called Grantor) has agreed through C. Nichols, Manager-Real Estate, Penn Central Transportation Company, Lessee, subject to the approval of the management and Board of Directors of Penn Central Transportation Company and of Grantor (if other than Penn Central Transportation Company) and the Public Utility Commission of the State of New Jersey to sell to [Prolerized] (hereinafter called the Grantee) the land in Grantor's Greenville Yard. . . ."

 Other paragraphs of the contract included these terms:

 
"In the event either management or Board of Directors fails to approve and authorize this transaction . . ., then the sum paid on account will be refunded without interest to Grantee who hereby agrees to accept same, whereupon this writing shall be cancelled and annulled and neither party hereto shall have any claim whatever against the other by reason hereof.
 
* * *
 
"Anything herein to the contrary notwithstanding, it is distinctly understood and agreed that this instrument does not constitute a binding agreement or impose any obligation on grantor, Penn Central [Transportation] Company or their agents (except as provided above in reference to the cost of title report, survey and the return of the down payment) unless and until Manager-Real Estate of Penn Central [Transportation] Company gives written notification to Grantee to the effect that this transaction has received necessary approval and authorization of management and Board of Directors and that Grantor is legally bound."

 On behalf of the grantor, the contract was signed as follows:

 
"The United New Jersey Railroad & ...

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