New-York tribune., 1911-11-22
THIRD AVE. PLAN LEGAL
Court Of Appeals Permits Road
To Be Reorganized.
P. S. LAW IS INEFFECTIVE
Commissions Refusal to APP
prove Scheme Set Aside by
Highest Court.


Highest Court.
Albany. Nov 1.-THE Court Of Appeals
in a decision TODAY holds that the reor-
ganization plan ot tho Third Avenue Rail-
road Company. OF New York. need not be
approved By the New York city Public
Service Commission.
The reorganization committee Of the COM
pany applied 10 the Public Service COM
mission for permission to issue S5i9l6.0oo
I'm bonds and stock. The commission de-
MED the application on the ground that the
securities which 1t was desired to issue
were I'm excess Of the value OF the prop
erty.
The Appellate Division Of the supreme
Court reversed the determination of the
commission. The Court Of Appeals sus-
tains the decision of the lower court The
highest court holds that the provisions or
tho stock corporation law relating TO the
reorganization of insolvent railroad cor
porations were not repealed by the Puohc
Service Commissions law, and that so long
as the securities proposed 10 be issued oy
the reorganizers Of the Third Avenue
Railroad property did not exceed the face
value OF the securities already In exist
ence the reorganization plan or agreement
may be carried out.
The polnt at issue is an involved one
and depends on an Interpretation of the
utilities law. To obviate this ambiguity
the commission has attempted TO have the
law amended so as 10 leave no doubt about
IT, At the recent session Of the Legis-
Istllre a bill carrying such provision was
introduced in the Senate and passed II
was amended in the Assembly, and just
before the close OF the session-on the
final day-it was passed in an amended
form by the lower house. II was sent TO
the Senate for concurrence. but never
reached that body.
Milo L. MaItbie. one Of tho Public Ser
vice Commissioners. said yesterday:
II am correctly Informed as TO the dc
cison OF the Court Of Appeals in tho Third
Avenue reorga MIA tion case the Public SER
vice Commission Is stripped OF All coutro'
over new companies growing OUT OF reol
CauizatiOu Every street railway corpora
tion in Manhattan now in receivers hands
NAV reorganize and issue securities 10 the
full amount Of their present overcapltaliZa-
ton thus perpetuatirs the hnancai c9hul, IL
tions which have been the subject of so
much consideration and 10 remedy Vhlcn
the Public Service commissions Ia" was
formulated.
n also means that any corporation may
waste its ca pital, may declare dividends out
of earnings while allowing It's plant 20
dCteriorate. may 20 into receivers hands
and after reorganization may issue new
stock and new bonds running for long
Jeriod 20 the par value Of the old. Yet
The Public Service Commission is helpless
10 prevent such result.
As applied 20 the Third Avenue reorgani-
. yat =rarfNF4flN 4pnaTpnflV means
that the new company may issue stock ana
assume debt obligation 10 total par value
Of over f61.N0000 while having property
Of an actual value as determined by the
commission after rigid inquiry, not 70 cX-
coed $4,000 0OO IN 100000 The result
would be that tho new company would
start ont with capitalization far IN eN-
cess Of the value Of the property, and with
earnings insufficient 10 pay operating eX-
penses. depreciation, interest on the bonds
and "A fair return upon the stock
?. W. Whitridge. receiver OF the Third
Avenue Railroad Company when asked
what he thought Of the Court Of Appeals
decision In ;he Third Avenue Railroad
case yesterday. said:
The decision proves the correctness Of a
former statement OF mine that the Public
Service Commission has as much common
sense as a hen. ! havo held that opinion
for some time. and II now appears 10 have
the Endorsement or the. hiShest Judlclal
authorities of this state. The members OF
the commission are an extra ordinary ser
Of men. / do not mean 70 say that tuey
are not honest. they are as honest as any
men can be who keep scrap books filed
with newspaper clippings about themselves.
To me they are funny.
The serious point is that the commission
has held up the reorganization Of the
Third venue Railroad for two years and
put the property to expenses large and use
less I have been engaged I'm litigation
/ with the commission constantly. Il having
been necessary iu the discharge Of my
duties A. receiver to engage in nine law
suits With the commission The commits
sion has lost them all. Altogether the Pub
lie Service Commission has cost the Sc
cu-itv holders and the Third Avenue COM
pany at least $4,000.
presume that the reorganization COM
i mfttee will now go ahead with the reor-
/ ganizatiou plan. and that II viii become
effective i'm the near future. The plan is
conservative one Tt cuts the hXed
{ charges 81 .0O0. 900. reduces the aggregate
Capitalization about S6.000000 and pro-
vides about $1,000 600 Of new money for
WORKING capital. maintenance and I'M
provements II is a plan which. as the
result shows. no court could fail to ap-
prove.