Chapter 4971: REORGANIZATION OF RAILROADS

4971.01 Proceedings for reorganization.

When proceedings are pending in any court for the sale of the railroad of a railroad company, under a mortgage or deed of trust, and two thirds in interest of the creditors and two thirds in interest of the stockholders of the company agree, in writing, upon a plan for the readjustment or capitalization of the debt and stock of the company, the court shall render judgment against the company for the amount due and in arrear upon such securities. From the time of its rendition, such judgment is a lien on all the property embraced in such securities, and all the franchises and powers of the company, including its franchises to be and act as a corporation, conferred by the charter and the amendments to the charter of the company. Upon a sale had under such judgment, and a purchase at such sale by trustees, appointed by such agreement, on behalf of the parties to such agreement, all the property bound by the judgment, including such franchises, shall vest in such trustees. Such agreement shall provide that the unsecured debts of the company incurred for repairs or running expenses shall be paid in money or bonds of the reorganized company of the highest class issued. A copy of the agreement shall be filed in such court before the rendition of the judgment.

Cite as R.C. § 4971.01

Effective Date: 10-01-1953

4971.02 Meeting of creditors - proceedings.

As soon as practicable after the sale of the railroad of a railroad company under a judgment, the trustees shall call a meeting of the parties to the agreement provided by section 4971.01 of the Revised Code, by a notice signed by a majority of the trustees or their survivors, and published not less than once a week, for four consecutive weeks, in a newspaper published in the cities of New York and Philadelphia, and in a newspaper published in each county on the line of the railroad, specifying the day, place, and object of such meeting. The place for such meeting shall be on the line of the railroad. At such meeting, each of the parties to the agreement may vote according to the provisions of such agreement, but not exceeding one vote for every fifty dollars of the par value of the debt or stock of such party, according to a list of voters and their respective interests, which shall be prepared by the majority of the trustees. The trustees may act as judges of the election. By a majority in interest of the persons present, in person or by proxy, such meeting may retain or change the name of the company, decide, for the time being, the amount of its capital and the number of shares into which it is to be divided, fix the number of directors and their term of office, elect such directors, a majority of whom shall be residents of the states in which such railroad is situated, and do all things necessary or proper to reorganize the company. Any creditor may become a party to the agreement, either at or before such meeting. A stockholder may become a party to such agreement at any time within one year after such meeting.

Cite as R.C. § 4971.02

Effective Date: 10-07-1977

4971.03 Certificate to be filed.

A certificate, under the common seal of the company referred to in section 4971.02 of the Revised Code, specifying its name, and the railroad which it is to hold, maintain, and operate, shall be filed in the office of the secretary of state. A certified copy of such certificate shall be evidence of a compliance with sections 4971.01 and 4971.02 of the Revised Code, and of the reorganization and existence of the company.

Cite as R.C. § 4971.03

Effective Date: 10-01-1953

4971.04 Powers of new company.

The reorganized railroad company may, within six months after the organization, assume such debts or liabilities of the original company and make such adjustments or exchanges with any bondholder of the original company, and, within one year, make such adjustments or exchanges with any stockholder of the original company, as are expedient. For such purpose, the company may use bonds or stock which it is authorized to issue or create. It may make and issue such bonds, payable at times and places and bearing rates of interest not exceeding six per cent per annum, as it deems expedient, and secure the payment of bonds which it issues or assumes to pay by mortgages or deeds of trust of its railroad or other property, including all its cars, other rolling stock, equipment, machinery, tools, implements, fuel, materials, and other things then held or later acquired for constructing, operating, or repairing the railroad, or for repairing or replacing its equipment or appurtenances, as part and parcel of the railroad, and as constituting with the railroad one property. It also may include in such mortgage or deeds of trust all franchises held by the company connected with or related to the railroad, and all its other corporate franchises. Such franchises, including the franchise to be a corporation, in case of sale by virtue of such mortgage or deed of trust, or of any judgment specified in section 4971.07 of the Revised Code, shall pass to the purchasers to enable them to reorganize the company. Such company may issue an amount of capital stock which it deems proper, not exceeding a limit fixed by agreement with the trustees purchasing, and may establish preferences in respect to dividends or distributions in favor of any class of the stock in such order and manner as it deems expedient, not exceeding the limits fixed by such agreement. If authorized by the agreement, such company may confer on holders of bonds which it issues or assumes to pay the right to vote at meetings of stockholders, not exceeding one vote for every fifty dollars of the par amount of the bonds as was provided for in the agreement. Such right, once fixed, shall attach to and pass with such bonds, under such regulations as the bylaws prescribe, to the successive holders of such bonds, but does not subject the holder to assessment by the company or to liability for its debts, and does not entitle him to dividends or distributions.

Cite as R.C. § 4971.04

Effective Date: 07-30-1984

4971.05 Property of new company.

Upon reorganization and a conveyance by the trustees, or of such of them as are vested with the legal title, or their survivors, the railroad and other property, franchises, and things purchased, and the franchises, powers, faculties, privileges, and immunities which were possessed and enjoyed by the original railroad company, or by any company with which it had been consolidated, shall be vested in the company as reorganized. Such property, franchises, and things, and all property and things which the reorganized company thereafter acquires shall be taken, held, and disposed of for the use and benefit of the creditors and stockholders of the company who become such upon and after the reorganization, according to their respective rights, but subject to the powers of the company, and in no wise chargeable in respect to any debt, liability, or claim of any creditor or stockholder which subsisted prior to the sale and reorganization. All property of the original company not embraced in the sale shall be vested in the company as reorganized, in trust for all parties interested in such property as creditors, stockholders, or otherwise.

Cite as R.C. § 4971.05

Effective Date: 10-01-1953

4971.06 Issue of stock or securities.

In cases of railroad companies organized or reorganized under the laws of this state, in which the organization or reorganization agreement provides and stipulates that any class of creditors, bondholders, or stockholders of the original company, shall in any way be restricted or limited in participation in profits or dividends or distributions, or in respect to liens or the right to vote as the holders of stock or securities in the reorganized company, such reorganized company, and its directors and officers, shall issue the certificate of stock or securities into which the original stock, securities, or debts may be convertible with such restrictions or limitations distinctly set forth on the face of each so that purchasers may be advised of the terms of such restrictions or limitations. Holders of stock or securities created under such reorganization agreements may have only such restricted or limited rights, liens, participation in profits, dividends or distributions, and right to vote thereon, as are set forth in such agreements, certificate of stock, or securities.

Cite as R.C. § 4971.06

Effective Date: 07-30-1984

4971.07 Lien of mortgages.

The lien of the mortgages and deeds of trust authorized by section 4971.04 of the Revised Code shall be subordinated to the lien of judgments recovered against the railroad company, after its reorganization, for labor performed for it, materials or supplies furnished to it, or damages, losses, or injuries suffered or sustained by the misconduct of its agents, after such reorganization, or to the lien of judgments against such company in any action founded on its contracts or liability as a common carrier made or incurred after such reorganization.

Cite as R.C. § 4971.07

Effective Date: 10-01-1953

4971.08 Lien for labor performed.

In an action against a railroad company, domestic or foreign, operating a railroad in this state, when such action is to recover judgment for labor done, supplies furnished, damages or losses, or injuries suffered or sustained by the misconduct of its agents, or in an action founded on the company's contract or liability as a common carrier, if, when reduced to judgment by virtue of statute or principles of equity, it would become a lien upon the property of such company, prior to the lien of a mortgage or deed of trust made under the laws of this state, such judgments shall be a prior lien upon such property, notwithstanding its sale or conveyance by virtue of a judgment or decree of foreclosure for breach of the terms of such mortgage or deed of trust.

Cite as R.C. § 4971.08

Effective Date: 10-01-1953

4971.09 Enforcement of lien.

In order to take advantage of section 4971.08 of the Revised Code, before the day fixed for the sale of the property of such railroad company under judgment or decree of foreclosure and sale, a party prosecuting an action referred to in such section shall file with the clerk of the court in which the judgment or decree was rendered, a notice in writing, setting forth the title of his action, the court in which it is pending, the amount of his claim, the date from which he claims interest thereon, the probable amount of costs, and that he claims the judgment sought by him to be recovered would, when obtained, become a lien prior in law or equity to the lien of the judgment or decree of foreclosure and sale. Before the day of sale, or at the time of such sale, he shall serve a certified copy of such notice upon the officer or other person making such sale. Prior to offering the property for sale, such officer or other person shall read such notice publicly at the time and place of sale, and with his return of sale, return the copy of notice with the indorsement of his proceedings under such notice upon it to the court.

Cite as R.C. § 4971.09

Effective Date: 10-01-1953

4971.10 Court to retain amount of lien.

On the return of the officer or other person making a sale referred to in section 4971.09 of the Revised Code, before confirming such sale and ordering distribution of the funds arising from it, the court shall retain in its custody or under its control a sufficiency of such proceeds, applicable to distribution to the claimants under the liens of the mortgage or deed of trust, to satisfy any judgment which may be recovered in the action provided for in section 4971.08 of the Revised Code.

Cite as R.C. § 4971.10

Effective Date: 10-01-1953

4971.11 Action to satisfy judgment.

Within sixty days after the determination of the action referred to in section 4971.08 of the Revised Code, the party claiming such priority of lien, if he has recovered judgment against the railroad company, shall file his answer and cross-petition in the action pending in the court holding the fund, setting forth his claim thereto. Such court shall make the orders necessary to the determination of the questions of priorities and distribution of the retained fund as provided in section 4971.10 of the Revised Code.

Cite as R.C. § 4971.11

Effective Date: 10-01-1953

4971.12 Provisions applicable to certain other companies.

Sections 4971.01 to 4971.19 , inclusive, of the Revised Code apply to companies whose railroads are partly within and partly without this state. A domestic company possessing such a railroad, may exercise all its powers, privileges, faculties, and franchises outside this state. A foreign corporation possessing a railroad which is partly in another state and partly within this state, may exercise and enjoy all its powers, privileges, faculties, and franchises in this state, for the purposes of such railroad and its business, not inconsistent with the laws of this state. Mortgages and deeds of trust made by such corporation upon its railroad, equipment, or other property within this state, shall operate in the manner and with like effect as provided with respect to railroad companies so reorganized. Such part of the railroad as is within this state is subject to taxation and all regulations of law as are railroads of this state in like cases, and the corporation owning such railroad shall be subject to all duties imposed by law in respect to it. Such corporation may sue and be sued in all cases and in the manner that a company of this state might sue or be sued.

Cite as R.C. § 4971.12

Effective Date: 10-01-1953

4971.13 Mortgaged property may be sold without appraisement.

Railroads and other property mortgaged by a reorganized railroad company, if the court deems it expedient, may be sold without appraisement, at judicial sales under judgments upon such mortgage but the court shall fix a minimum sum below which no sale shall be made. To fix that amount, the court may refer the subject to a master with instructions to take testimony and report the sum.

Cite as R.C. § 4971.13

Effective Date: 10-01-1953

4971.14 Creditors may agree on capitalization - notice.

When judicial proceedings are pending in a court for the sale of a railroad, and such railroad is in the hands of a receiver appointed by such court, two thirds in interest of each class of mortgagees or holders of the bonds issued under a mortgage, two thirds in interest of all other classes of creditors of the railroad company, and the owners of two thirds of the shares of the stock of such company may agree in writing upon a plan for the adjustment of such indebtedness, by capitalization or otherwise. When such agreement is made and filed in the office of the secretary of state, the secretary of state shall cause public notice of such agreement to be given in a newspaper of general circulation published in each of the cities of Columbus, Cincinnati, and Cleveland, and also in a newspaper of general circulation published in each of the counties through or in which the railroad is located. Publication shall be made immediately after the agreement is filed and continued for six consecutive weeks. The cost of such publication shall be paid by the company. A duplicate of such agreement shall be kept at the principal office of the company. All persons in interest, not parties to such agreement, may, for four months after the date of the first publication, appear, either in person or by proxy, and become a party to such agreement, by signing it, and thereby secure its benefits.

Cite as R.C. § 4971.14

Effective Date: 10-01-1953

4971.15 Stocks or bonds held in a fiduciary capacity.

When a portion of the stock or bonds of a railroad company is held by the state, by a county, township, or municipal corporation, or by an executor, administrator, guardian, or other wise in a fiduciary capacity, the governor, board of county commissioners, board of township trustees, legislative authority, or other authority of the municipal corporation, or person holding in fiduciary capacity, may become parties to an agreement for the reorganization of such company, and may control, exchange, or manage such stock or bonds according to the terms of the agreement and receive new stock or bonds to be issued in place of the original stock or bonds, which shall be held on the same terms and subject to all liens which attached to the original stock or bonds.

Cite as R.C. § 4971.15

Effective Date: 10-01-1953

4971.16 Rights of creditors who do not sign agreement.

As used in this section, "incompetent person" means a person who is so mentally impaired as a result of a mental or physical illness or disability, or mental retardation, or as a result of chronic substance abuse, that the person is incapable of taking proper care of the person's self or property or fails to provide for the person's family or other persons for whom the person is charged by law to provide. Persons in interest who fail to become parties to the agreement within the four-month period referred to in section 4971.14 of the Revised Code are entitled to the same rights, interest, estate, remedy, liens, and action, and none other, which parties in interest of like class and amount who signed the agreement obtained by and under it. If a person in interest fails for six years after the publication of the notice mentioned in such section to apply at the principal office of the company, either in person or by proxy, to become a party in interest in the agreement, such person, unless an infant or incompetent person, shall be barred of all interest, claim, right, or action under the agreement or otherwise. In case of such disability such rights shall be extended for two years after the termination of the disability.

Cite as R.C. § 4971.16

Effective Date: 10-01-1953; 2007 HB119 08-07-2007

4971.17 Court to make order as to costs.

When the agreement provided for by section 4971.14 of the Revised Code is made and filed, notice of it given, and proof thereof made or offered to be made in the court in which the proceedings are pending, the court shall dismiss the proceedings. Such court may make such order or decree touching the costs and expenses of the proceeding as it deems just.

Cite as R.C. § 4971.17

Effective Date: 10-01-1953

4971.18 Agreement may be with each interest.

The adjustment agreement is not required to be between the several interests specified in section 4971.14 of the Revised Code, but may be between each interest separately, and the railroad company.

Cite as R.C. § 4971.18

Effective Date: 10-01-1953

4971.19 When railroad used by two companies.

If the railroad involved in the judicial proceedings referred to in sections 4971.01 to 4971.19, inclusive, of the Revised Code, is used, in whole or part, by the railroad company in common with another railroad company, on the same track, between points on the railroad common to both, and within the limits of the termini established by their charters, the company owning the railroad, if it can be done without impairing the usefulness thereof to such company, may lease for a period of years for an annual rent or sell for a fixed sum, to the company to which the railroad, in whole or in part, is common, an undivided interest in such railroad upon such terms as they agree upon. Such lease or sale shall be reported to and approved by the court, and when made and approved, the lessee or vendee thereof shall hold such interest free from any previous lien on it.

Cite as R.C. § 4971.19

Effective Date: 10-01-1953