Opinion ID: 109117
Heading Depth: 2
Heading Rank: 3

Heading: Enter a deficiency judgment against Conrail.

Text: The common stock of Conrail is plainly only token payment. Issuance of new and different securities by Conrail would have to have interest or dividend rights to be marketable and that would bring back into play some of the forces that plague the present trustees under § 77. Any securities issued by Conrail must minimize any actual or potential debt burden of Conrail, § 206 (i), 45 U. S. C. § 716 (i) (1970 ed., Supp. III). Moreover, § 301 (d) of the Rail Act provides that so long as more than half the debt of Conrail is guaranteed by the Government, a majority of the 15 directors are designated from outsidethe Secretary of Transportation, the Chairman and the President of the USRA, and five others named by the President with the consent of the Senate. One cannot read the Rail Act and believe that Congress thought that federal money going into Conrail could be made subordinate to any debt created by Conrail. A contrary assumption would make the watch-dog purpose of § 301 (d) quite superfluous. Yet, unless Conrail's new debt were serviced, it could not be marketed and even if it were, it could add no element of value to the compensation received by the creditors of these railroads under a reorganization plan. The upshot is that compensation for properties acquired by Conrail would be mostly paid for in Conrail stock with a sprinkling of the bonds of the Association issued to Conrail, assuming that they were not expended in the operations of Conrail between the time it started its operation and the date of the final plan of reorganization. The value of the properties to be transferred has not yet been determined. We held in the New Haven Inclusion Cases, 399 U. S. 392, 489 (1970), where the New Haven road was being shut down and its assets sold, that just compensation was to be measured by the highest and best value of the assets sold. In that case that value was liquidation value. In light of the findings of the Reorganization Courts in the present cases, we cannot say that the $500 million of federally guaranteed bonds comes anywhere near any reasonably assured value. [10] Value of any substantial amount cannot be attributed to the common stock of Conrail, because most of the problems of the existing roads will be inherited by Conrail and its prospects of generating income in excess of costs and fixed charges are, if not nil, remote. It would be irony to call entry of a deficiency judgment against Conrail adequate to make up any deficiency. For that judgment would only eat away at any value which the common stock of Conrail had. The vicious character of these legislative decisions is emphasized by the cram-down provision of the Rail Act. In § 77 proceedings there is a cram-down provision to prevent one class from a holdup of a fair and equitable plan. Section 77, however, allows a cram-down only if the Court first finds the plan fair and equitable and after the security holders have had their hearing. Under the Rail Act the assets are first transferred to Conrail even before the Special Court has made its fair and equitable finding. Moreover, the security holders never have a vote on the plan. Congress has lowered all the procedural barriers and foisted on these rail carriers a conveyance of their assets which, if done by private parties in control of a bankrupt estate, would be a fraudulent conveyance. Here it is achieved by Congress' purporting to act in the public interest. That is a taking for a public purpose; but by Fifth Amendment standards it is a taking of property without assurance of just compensation.