Court Opinion

ID: 9625723
Source: CourtListenerOpinion
Date Created: 2023-08-22 07:49:29.171735+00
Date Added: 2024-06-11T14:56:20.258074
License: Public Domain

LEVET, District Judge
(concurring):
I.
I concur in the determination of the majority regarding the action of Erie Lackawanna Railroad Company.
II.
I agree with the conclusion of the majority that the remaining actions must be remanded to the Commission; however, I disagree with the reasoning of the majority upon the following matters:
(1) HARLEM RIVER AND OAK POINT FREIGHT YARDS
I agree with the majority opinion in supporting the Commission’s rejection of the $32 million appraisal of Paul O’Keefe. As that opinion states, the NH Trustees submitted two reports of Arthur McCann, one at $18.1 million and *450one at $22.65 million (p. 433). The majority asserts, however, that the Commission’s report has no adequate explanation for the rejection of the higher estimate. I see no basis for this criticism of the Commission’s action.
First, the estimate of $18.1 million is based upon liquidation value which, as I understand the majority’s position in “I. The Commission’s Approach to Valuation of NH,” is the accepted method. The higher valuation by McCann at $22.65 million apparently was based not on liquidation value but on the value to an operating railroad.
The Commission’s report clearly indicates that it followed a net liquidation value standard (658, 659, 661) and this, as stated, is approved by the majority. NH cannot expect to receive both liquidation value and going concern value as the Commission recognized. (686-687)
(2) REAL ESTATE TAXES
The majority opinion rules that the Commission committed error with respect to a failure to allow NH a credit of $16.2 million in real estate taxes payable by NH on transfer of assets by NH to Penn-Central free of liens. The opinion states: “We likewise see no sufficient answer to the bondholders’ contention as to the failure to make a deduction for the $16.2 million of accrued real estate taxes on property required to be transferred free of liens, which, they say, resulted either in an overstatement of the consideration to be received by the estate or an understatement of liquidation value.” (p. 438)
The majority appears to assume a balance sheet of some sort on which the assets of NH transferred to Penn-Central are computed by some basis other than net liquidation value.
This I believe is error. The standard of valuation utilized was liquidation value, and NH had real estate burdened with accrued taxes. The cost of paying taxes, concededly, is deductible in the estimate of net liquidation value. There is no basis of valuation under which some other estimate is applied.
I have not overlooked the fact that counsel for the Commission at oral argument admitted the possibility of error on the part of the Commission. However, I believe that such statement was improvident, improperly conceded, and was, itself, an error which should not be perpetuated by subsequent findings of the Commission.
Though the position taken by the NH Trustees is not determinative, as to these items (Harlem River Yards and real estate taxes) it should be noted that the Trustees supported the Commission’s original report.
(3) NH’S INTEREST IN GRAND CENTRAL TERMINAL
I am in accord with the general conclusion that this interest must be recomputed, particularly as to NH’s claim to surplus income and that the allowance to NH has been substantially underestimated.
Though the majority opinion might possibly be viewed as a determination of the relevant legal issues, and although I have the highest respect for my colleagues, I am unable to join in the entire legal conclusions reached for the following reasons:
(a) It does not appear that all facts of a long record of some sort of a joint effort of NH and New York Central at Grand Central Terminal were submitted;
(b) No agreement on such facts by NH and by Penn-Central is revealed;
(c) No plenary adversarial judicial proceeding has taken place;
(d) I entertain substantial doubts of the jurisdiction of this court to make any legal disposition of such issues. I am unable to discern clear-cut findings of fact, conclusions of law, or the equivalent relative to NH’s interest — except that the majority states: “We conclude by the same token that NH’s claims to share in surplus income over and above all terminal expenses are exceedingly strong.” *451(p. 431) “ * * * All told it would be fair to assume that these readjustments will increase the liquidation value of NH’s interest in the GCT properties to at least $25 million.” (p. 432);
(e) The Commission has neither the authority nor the expertise to determine the complex legal issues which govern the extent of NH’s interest in Grand Central Terminal, and, hence, the Commission has no inherent present ability to determine what valuations are fair or proper.
In short, to send this maze of intricate legal perplexities, which include complex accounting and valuation problems, as one unit back to the Commission is futile, and any future ruling by the Commission can be little more than a mere guess based upon uncertainties.
It is my belief that practicality demands a different approach. I suggest the present elimination of any allowance to NH for Grand Central Terminal and a deferral or reservation of any adjustment therefor until the questions have been finally determined by a court of competent jurisdiction, and the Commission, with full knowledge of such determinations, has made a considered and a complete valuation.
I see no reason why this is not proper and practical, and any other procedure will surely create further dispute and futile litigation. The parties might well stipulate to this procedure upon such terms as would impose no unfairness because of such partial deferment.
(4) COST OF ACQUISITION OF NH TO PENN-CENTRAL
I do not disagree with any portion of the majority opinion as to cost of acquisition. I do, however, feel compelled to note that I believe consideration of this feature to be unnecessary under the theory adopted by the Commission.
CONCLUSION
Despite the objections stated, I agree that this entire matter must, nevertheless, be remanded to the Commission for the other reasons stated by the majority.