# Appendix — Chicago & Eastern Illinois Railroad v. Kern > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_1803%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1964 - **Citation:** 379 U.S. 825 ## Text _ en APPENDIX A. ~~ Appellate Court Opinion of March 1, 1961, as modified on denial of rehearing on June 28, 1961, Case No. 48099. ‘Me: Presswine Justice Scowagtz Gclivered the opinion . of the conrt. This is an appeal from an order sustaining defendant's motion for summary decree and dismissing for want of equity a suit brought by preferred shareholders: seeking a declaratory decree holding. that defendant company had illegally amended its bylaws in order to create a system of staggered elections of directors, and for injunctive and other -relief. The principal issue is whether that amend- | ment is in violation of a provision for cumulative voting and annual election of all directors, as contained in a re- organization plan, a decree of court and the articles of incorporation. Defendant Chicago and Eastern IHinois Railroad Com- pany was an Illinois corporation until 1940 when, after reorganization under Section 77 of the Bankruptcy Act, it was incorporated as an Indiana corporation. It is licensed to do business in the State of Illinois, where it maintains general offices and transacts business. It has offices and does business in Indiana’as well. A plan of reorganiza- tion approved by the Interstate Commerce Commission in 1939, 230 I.C.C. Rep. 571, included a provision for the issuance of Class A preferred stock with the right of. cumulative voting in the election of directors and for a -board of thirteen members,’each director to serve one year. That plan was subsequently approved and confirmed by the United States Diktrict Court for the marneen —_ %a<- District of Illinois, Eastern Division. In the Matter of Chicago ¢ EI. R.R., Debtor, No. 52871. Defendant company was duly organized according to plan. Its certificate of incorporation provided for the right — of cumulative voting for all stockholders. As to holders of Class A stock (preferred), it was provided that so long as any such stock should remain outstanding, the consent of at least two-thirds thereof should be given to amend, alter or repeal any provisions of the certificate of incor- poration or bylaws which have reference to preferences, voting rights, and other incidents of the Class A stock. The certificate also provided for thirteen directors and stated that they should s¢rve for a period not exceeding one year. Bylaws were aflopted which conformed to the _plan and the certificate of incorporation, and the company operated thereunder until 195? These will be examined in greater detail later in this opinion. On July 10, 1953, the. railroad’s board of directors. approved an amendment to the bylaws which provided for thirteen directors, four of whom were to hold office for one year, four to hold office for two years, and five to hold office for three years, and that as each director’s term of office expired, he or his successor was to be elected for three years. Thns, the maximum number of directors to be elected in any one yea. was to have been five and the minimum, four, thereby creating a system of classified directors and staggered elections ard sharply qualifying * or completely defeating the cumulative voting provisions of the plan. On November 12, 1968, plaintiff Kern filed suit as a- Class A preferred shareholder in behalf of himself and others similarly situated, naming the railroad and indi- vidual members of the board of directors as defendants, seeking the relief hereinbefore referred tc. On November ilies 14, 1968 the defendant directors met at a regularly sched- uled meeting and adopted a resolution repealing the July 10, 1953 amendment and providing for non-staggered, one year terms of office for the company’s directors, as orig- inally fixed in the plan of reorganization. At the same meeting, four directors whose remaining terms exceeded one year and expired after May 1959 resigned and were then re-elected by the remaining nine directors, to serve until May 1959. Thereafter, five more directors whose remaining terms exceeded one year and expired after May 1959 resigned and were also re-elected to new terms until May 1959. On April 6, 1959 plaintiff Lesch, also a Class A pre- ferred shareholder, petitioned and was granted leave to become a party plaintiff and to adopt the allegations and prayers of Kern’s complaint, including the prayer for relief. On July 31, 1959, defendants moved for summary decree, supporting their motion by affidavits and sug- gestigns.“On October 14, 1959, plaintiffs filed their motion for summary decree, also supported by an affidavit and suggestions. An ordg was entered March 8, 1960, denying plaintiffs’ motion and granting defendants’ motion for su...mary decree and dismissing the suit for want of _ equity at plaintiffs’ costs. It is from that — that plaintiffs appeal. Defendants contend that inasmuch as the directors’ resolution in November 1958 repealed the classes of di- rectors and the staggered election system provided for in the 1953 resolution and provided for'a new board as requested in plaintiffs’ complaint, there was nothing for the court to declare or enjoin, the 1958 resolution having ~ eliminated whatever justiciable controversy may have ex- isted, thus making the case moot. This suit seeks a declara- — tion of the rights of stockholders. As it stands now, the ee —*— board of, directors may at any time revert to a. elections, and again Class A stockholders may feel their preferential position prejudiced by their inability to elect directors by cumulative voting. Plaintiffs, if they are right, are entitled to a more stable disposition of the litigation than one which gives them their rights, but reserves to - their opponents: the powér at any time to restore the former status. ‘Even if this case were considered moot, it is within the exception to the rule governing moot decisions because there is a substantial public interest involved. People ex rel. Wallace v. Labrenz, 411 Ill. 618, 104 N.E.2d 769; Kunin v. Forman Realty Corp., 21 Tll.App.2d 221, 224, 157 N.E.2d 785, 787. The railroad company is a large public service corporation. Its stock is widely held and available for purchase by the public. Its stock is listed on the New York Stock- Exchange. There is a wide general interest in the gtability of preferred stock, gnd efforts to eliminate . preferences thereof have been the subject of much litiga- tion. ‘Phe question is whether the power of minority shareholders to cumulate sufficient votes to elect repre _ sentatives on the board of.directors should be diminished / or extinguished in contravention of the. provisipns) of 4 — plan of reorganization, a decree of court;-and grticles of incorporation. For that is the natural end result of classified directorships and staggered elections. See Wolf- son v. Avery, 6 Ilk2d 78, 81-82, 126 N.E.2d 701, 704. We conclude that we should consider the merits of the case. The plan of reorganization -relative to rights of Class A preferred stockholders vnfade the following provisions, among others, approved by the Interstate Commerce Com- mission and the United States District Court: : “Q. Preferred stock having a par value of $40 a share shall be issued to the amount of 383,86214 shares. _—da— . This stock shall have the right of cumulative voting in the election of directors.” “X. Upon consummation of.the plan the reorganized conrpany shal] have-a board of directors consist- ing of 13 members. The Aaa of office of each director shall be one y ; Article IV of the railroad’s te of incorporation reads in part as follows: **. . . each stockholder, without distinction as to ; class, shall be entitled to one vote for each share N of stock standing in his name on the books of the - Company, and in ail elections for directors each stockholder shall have the right of cumulative voting. . “So — as any Class A stock shall remain - outstanding the consent of the holders of at least two-thirds of the Class A stock then outstanding . Shall be necessary to amend, alter or repeal any of the provisions of this Certificate of In- corporation, or of the by-laws enacted thereunder, which have reference to,.or which are protective of, the designation, rights, preferences, qualifi- cations, limitations, restrictions, voting rights, values and interests of the Class A stock.” Article VII of the document reads in part as follows: “The number of directors which the Company shall have shall be thirteen (1°). Directors need _ not be stockholders of the Company or residents of the State of Indiana. Phe names of the mein- ~ bers of the first board of directors, who shall «es serve until May 15, 1941, a period not exceeding one (1) vear, are as follows: .. .” Defendarffs contend that the plan of reorganization, as approved by the Interstate Commerce Commission and the court, with respect to the provision for a board of thirteen directors to serve for one year, was not intended .. a> a restriction extending into infinity. They place great oad o> eo emphasis upon Paragraph X of the plan, before quoted, ' which provides that upon consummation of the plan the company shall have a board of thirteen members, the term of office of each director to be one year, and upon - the court’s decree of June 16, 1941, finding that the re- _ organization plan has been fully carried out and ap- proving the consummation thereof by the railroad and its officers. In other words, by that interpretation the protection afforded Class A preferred stockholders was only for that fleeting moment in which the. plan. was consummated and perhaps for the term of one. year thereafter. This is indeed conjuring up a shadow for - what was offered as a hope of substance to those security holders who were asked to give their consent to the plan and for whose supposed protection the provision was made. We do not believe that the reorganizers so con- gidered it when it was prepared or that the court had such an interpretation in mind when if-was approved. Defendants further argue that there is no requirement in the certificate of incorporation inflexibly fixing the number of directors at thirteen, each of whom may serve for no more than one year. They contend that the words “to be elected” contained in the provision entitling each shareholder to cast as many votes as shall equal the number of his shares multiplied by the number of directors to be elected makes clear that it was intended that the number of directors to be elected would vary. That is drawing a farfetched inference in order to override the language to the contrary in the plan of reorganization which the certificate of incorporation was — to iuuplement. When a reorganization plan has been certified by the Interstate Commerce Commission and approved by. the court, as has been done in this case, that plan becomes a ‘final, is binding upon the debtor and all other interested parties, and must be enforced as written. 11 U. 8. C. A, secs. 205, 624; Denver € R. G. W. R. R. v. Goldman Sachs & Co., 212 F.2d 627 (10th Cir. 1954). The plan of re- organization unconditionally fixes the term of each direc- tor at one year. There is nothing in the language of the certificate of incorporation which negates this clear and unambiguous language embodied in the Commission order. We have before quoted from Article VII of the cer- tificate containing the language from which defendants’ interpretation is derived. It merely states that the names of the members of the first board, who shall serve until May 15, 1941, a period not exceeding one (1) year, are as follows (names follow). Defendants argue from this that the limitation of one year applies only to the first board. . That interpretation appears to us to strain severely the plain meaning of the sentence. As if to make certain that the directors’ terms of office should not exceed one year, words are added: “a period not exceeding one year.” It. indicates nothing more than a cautious purpose to keep within the one year limitation. : Defendants say that the make-up of the first board of directors was qualified to protect the interest of the Recon- struction Finance Corporation. Hence, it provided that upon consummation of the plan, the hoard should consist of thirteen members, five to ‘be ‘chosen by Kenneth D. Steere, five by Catrol M. Shanks (both of whom were re- organization managers) and three by the Reconstruction Finance Corporation. It then provided that as long as the Reconstruction Finance Corporation held not less than one million dollars of certain bonds, the selection of three members of each succeeding board should be subject to its | approval. That is consistent with and does not exclude. the conclusion that-the provision for the election of directors — annually was also intended to preserve the right of cumu- lative votii, given to the Class A stockholders. In the - period in which this reorganization was developed there - was extensive litigation over efforts by common stockhold- ers to eliminate or qualify the preferences of preferred stockholders. It was natural, therefore, that a plan of reorganization providing for cumulative voting should also include a provision for the election of the directors an- nually. Such a provision is important to the holders of stock having cumulative voting rights. Otherwise, the right is a snare and a delusion. To defeat the right, if their position were correct, the majority stockholders could always establish enough classes to outvote the holders of the minority stock. The next point made by defendants relates to a provi-: sion of the initial bylaws that the company should have thirteen directors and that “each director shall serve for the term for which he is appointed or elected. . . .” This language, defendants argue, “presupposed that, excepting the first board of directors, the term of office would not necessarily be one year nor that each director would hold office for the same period of time.” The routine statement by the draftsman of the bylaws that a director should serve © for the term appointed or elected is a slender. reed on which to base a denial of an important right granted to the Class A stockholders. 1 The next bylaw relied upon by defendants to support their theory is a standard authorization giving the board of directors the power “to make, alter, amend and rescind -the bylaws of the Company.” This authorization must be read within the context of the language in which it appears in Article VII of the certificate of incorporation, qualifying the nature of the power given. That article specifically excepts such powers, rights and privileges » — as may be reserved to the stockholders by law or by the \_ certificate of incorporation. Defendants argue that since the certificate of incorpora- tion provides that there be no distinction as to class in matters pertaining to the cumulative election of directors, the Class A preferred shareliolders had no rights peculiar to them as a class in such elections, and that to have requested their consent to the resolution would have given them a degree of control over the affairs of the railroad in excess of and in derogation of the rights of holders of common stock. The answer to this contention is that preferred shareholders are preferred, and that the rights which protect them against dilution of their power to elect directors were given to them by the plan of reorganiza- tion and the certificate of incorporation. The provision for notice to and consent of Class A stockholders presents no difficulty so far as the voting rights of common stock- holders are concerned. Both have equal rights in cumula- tive voting. No similar provision for notice and consent is needed for common stockholders. Defendants .contend that plaintiffs are estopped from maintaining this suit in any event because Kern par-’ ticipated and acquiesced in activities proceeding from the 1953 amendment and because they failed to make a formal demand upon the directors requesting that the amendment be repealed. The doctrine of estoppel is essentially equi- _ table. Not only Kern, but all Class A stockholders are involved. We must measure the nature of their right to cumulative voting against Kern’s alleged inconsistent con- duct. The violation of their rights’ is in contravention of an Interstate Commerce Commission order, the plan of reorganization, the Federal court decree, and the certifi- cate of incorporation. We are of the opinion that estoppel is inapplicable. Durkee v. People ex rel. Askren, 156 ~ ” aah: Til. 354, 40 N. E. 626; Automatic Steel Products, Inc. v. Johnston, 31 Del. Ch. 469, 64 A.2d 416; 8 Fletcher, Corpo- rations, sec. 4201, pp. 776-77 (931). Cf. Westlake Hospital Assn. v. Blez, 13 Tll.2d 183, 148 N.E.2d 471. Moreover, Kern has shown that he persistently argued against the bylaw in question and for a restoration of cumulative voting. In his affidavit Kern states that shortly after July 1953 he protested to various officials of defendant company that ' the staggered system was illegal; that he had numerous conferences with the president of the company with re- | spect thereto in the years 1954 to 1958; that on March 12, 1958 he wrote the secretar’-treasurer of defendant com- -pany regarding the illegality of the staggered system; that on May 9, 1958 after the annual-meeting he advised the directors of defendant company that he would by proper legal action contest the illegality of the staggered system; that on October 21, 1958 he again wrote the secretary-treasurer, advising him that he had retained lawyers to establish his position and that at no time had he acquiesced in the system. He attached a copy of his letter of March 12, 1958 to his affidavit. He received a reply from the secretary-treasurer dated March 26, 1958 stating the position of the company as upholding the right of the board to establish a classified system of directors and to revoke the provision for cumulative voting. On October 21, 1958 he wrote the secretary- treasurer that he had retained lawyers to correct the method of voting; that he was the record owner of at least 4000 shares of Class A stock and had given his authorization to his attorneys to examine the books of the company on his behalf. Thus, many specific requests were shown and were not denied. It is also urged that Kern did not exhaust his non- judicial remedies. The review we have made of the con- iti tinuous conferences over the years establishes that Kern did ail he could to induce the directors to revoke the amendment in question and that nothing was done until finally the directors were convinced that Kern would _. bring suit. Throughout that period they maintained they ~ had the right.to adopt the amendment. The attitude of ~ the majority directors was such that Kern was justified in instituting his suit without further demand. Defendants’ final argument is directed toward the prop- osition that plaintiffs are not entitled to recover expenses and attorneys’ fees. Plaintiffs answer this%gontention by asserting that notwithstanding the prayer in their com- plaint for these items, no application was made for them in the trial court, nor is any petition for expenses or fees pending before this court. There is therefore no occasion for this. court to consider that matter. In this opinion we have given weight to the provisions of the plan of reorganization. We have done so because the railroad corporation was organized pursuant to and for the consummation of the plan and therefore we felt that the plan had a strong bearing on the proper con- struction and interpretation of the articles of incorpora- tiori and the bylaws. We do not hold that the reorganiza- tion plan and agreement is now binding on defendant corporation. The basic.document on which plaintiffs’ rights must be determined is the certificate of incorporation. Both parties made motions for summary decree. As before stated, the chancellor sustained defendants’ motion and denied the motion of plaintiffs. While we have con- cluded that the chancellor erred in sustaining defend- ants’ motion, it does not follow that he erred in denying . plaintiffs’ motion. There is not and there cannot be an appeal from the order denying plaintiffs’ motion. That is not a final order nor is there any provision for an appeal - = from such an order. Allensworth v. First Galesburg Nat. Bank & Trust Co., 350 Ill. App. 263, 112 N.E.2d 528. Therefore the cause must be remanded. The order of the chancellor is reversed and the cause is remanded with directions to deny defendants’ motion for summary decree, to require defendants to answer the complaint, and for such other and further relief as is not inconsistent. with the views herein expressed. Order reversed and cause remanded with directions. McCormick, P. J., concurs. Dempsey, J. dissents. — 13a — : Dempsey, J., dissenting: If it were not for the question of mootnegs I would agree with the opinion of my colleagues. Two days after the plaintiffs filed their case, the de- fendants modified their procedure for the election of directors. The controversy no longer existed. The case was moot while in the trial court, is moot here, and _ should be dismissed. ‘‘The general rule is that when a reviewing court has notice of facts which show that only moot questions or mere abstract propositions are involved or where the substantial questions involved in the trial court no longer exist, it will dismiss the appeal or writ of error.” People v. Redlich, 402 Ill. 270. An appeal concerning a moot question need not be dismissed if there is a compelling reason of public interest which warrants its review. “Among the criteria considered in determining the ex- istence of the requisite degree of public interest are the public or private nature of the question presented, the desirability of an authoritative determination for the future guidance of public officers and the likelihood of future recurrence of the question.” People ex rel. Wallace v. Labrenz, 411 Ill. 618. I do not see where this case approaches such standards. I do not believe that inter- preting this Indiana corporation’s plan of reorganization, certificate of incorporation and bylaws is of such sub- stantial public interest to justify an Illinois court making this case an exce; tion to the rule; nor do I believe that we should render a judgment just to discourage a possible reversion to the former method’ of electing directors or to guide potential future litigation. LaSalle National Bank v. City of Chicago, 3 Ill. 2d 375. - oo _ APPENDIX B. Letter Opinion of the Hon. Samuel B. Epstein, Chief Justice, Superior Court of Cook County, a March 15, 1962 In re: Paul J. Kern, et al. v. Chicago and Eastern Illinois Railroad Company, ete. et al. re No. 58 8 18217- Gentlemen: In order for the court to rule properly upon plaintiff's motion for judgment on the pleadings and for summary judgment, it is necessary to determine what issues were adjudicated by the Appellate Court, and what issues, if any, remain undetermined. Obviously, this court is bound by te determination of such issues as the Appellate Court has ruled on, regardless of the court’s personal opinions on same. ‘In the opinion of this court, the poem Court has _ determined and adjudicated the following: 1. That the suit should not be dismissed as moot because the 1958 resolution repealed the 1953 pra- visions for the classification of the directors and the staggered election system, and that, consequently, the court is justified in declaring the rights of the stockholders in this suit. . . 2. That although the plan of reorganization of the former Illinois corporation does not govern the operations of the defendant Indiana corporation, the certificate of incorporation and bylaws, as amended, interpreted and construed in the light of the plan of reorganization, fixes the number of directors at ~~ iie— thirteen, and provides for non-staggered one-year terms of offices for such directors, with cumulative voting rights. 3. That in order to change the above requirements . of thirteen directors elected for a non-staggered term of one year only, a‘ two-thirds vote of the Class A. ‘stockholders is required. 4. That the plaintiffs are not estopped from main- taining this suit. *5.. That the plaintiffs were not required to exhaust any further nodn-judicial remedy, but were justified in instituting this suit without further demand. The Appellate Court did not rule on (1) the plaintiffs’ motion for summary judgment; (2). such matters as may be raised by the defendants’ answers to the complaint. The answers filed by the defendants, supported by certain affidavits, do not raise any new issues. They re- _ allege the issues which were involved before the Appellate’ Court and determined as above set forth. The affidavits filed in connection with the answers, setting forth the provisions of the certificates of incorporation and bylaws, and the applicable statutes of the State of Indiana, have no bearing upon any of the issues determined by the Appellate Court. The statutes of the State of Indiana are permissive, not mandatory. The provisions’ of the certificate of incorporation and bylaws are controlling. They are not in conflict with the appropriate statutes of Indiana. It may be conceded that under the statutes of the State of Indiana, classification of directors, staggering of their terms, provisions for non-cumulative voting rights are permissible, but these can be accomplished only by state amendment to the certificate of incorporation or the bylaws, for which a two-thirds vote of the Class A stock- holders would be required under the ramage of the Appel- late Court. Accordingly, this court concludes that the pore for- judgnient on the pleadings and for summary judgment should be granted; that the rights of the parties be declared as follows: 1. That the number of directors is fixed at thirteen. 2. That they be elected for a term. of one year. 3. That their term be not staggered. “4. That cumulative voting be permitted. That any of the foregoing may be changed only with the approval of two-thirds of the Class A . ‘stockholders. ‘ Please present a formal order in conformity with the ~__ “ foregoing. on Yours very truly, /8/ Samuel B. Epstein =o =. —ifa— APPENDIX C. Decree of Superior Court of Cook County, Ilinois, case no. 58 § 18217, entered March 27, 1962 DECREE This cause comes on to be heard on the motions of plaintiffs for judgment on the pleadings and for sum- mary judgment. Due and timely notice of the entry of this decree has been served upon counsel of record for defendanfs. The court has heretofore read and examined. the pleadings and all. affidavits filed: herein, has heard argument of counsel, has studied. the opinion heretofore rendered by the Appellate Court for the First District of Illinois in this cause (31 Ill. App. 2d 300), and has taken the matter under advisement. The court being fully advised in the premises, The Court Finds that it has jurisdiction of the subject matter of this cause and over all parties hereto. It is accordingly Ordered, Adjudged And Decreed that the motions of ’ plaintiffs for judgment on “the pleadings and for sum- mary judgment shall be an. each of them hereby are granted. Now, therefore, the rights of the parties hereto are declared by the court, and it_is Ordered, Adjudged And Decreed as follows: 1. The Certificate of Incorporation of the defendant, Chicago & Eastern Illinois Railroad Co., requires that said rdilroad have a board of thirteen directors elected aie for uniform terms of one ‘year each with cumulative voting hy shareholders. 2. The Certificate of Incorporation of said defendant, -Chicago & Eastern Illinois Railroad Co., requires that the consent of holders of at least two-thirds (34) of the outstanding Class “A” stock shall be necessary to amend, alter or repeal said requirements of the Certificate of Incorporation regarding number of directors, election of directors as aforesaid, and the length of their tetm of office as aforesaid. - 3. Said defendant, Chicago & Eastern Illinois Rail- road Co., a corporation; ?fts officers, directors, agents and attorneys, and each of them, shall be and they hereby are permanently enjoined and restrained from reducing ~ the number of directors of -the corporation or from changing the term of office of the directors of the cor- poration from-the uniform period of one (1) year as aforesaid, except with the consent of the holders of at _ least two-thirds (3%) of the outstanding Class “A” stock of said defendant corporation as provided in the Cer- tificate of Incorporation thereof. ‘ 4. This decree adjudicates all claims, rights and liabilities of all parties hereto and therefore there is no “just reason for delaying enforcement of or appeal from this decree. » 6. This court retains jurisdiction of the parties hereto and of the subject matter hereof only for the purpose of determining the right of plaintiffs to allowance of attorneys’ fees and expenses herein and for the purpose of enforcing this decree. Enter: /s/ Samuel B. Epstein Judge of the Superior Court of Cook Ccunty on _ Appellate Court Opinion of November 27, 1963, Case No. 48839. Ms. Presmine Justice Sonwartz De.iveren Tue Opryion Or Tue Cover. This is an appeal by defendants from a declaratory decree in a class a action brought by plaintiffs as two holders of Class A“ stock of the defendant company, who are suing on behalf of all such stockholders. The suit concerns the validity of a bylaw designed to change and modify the rights of the Ciass A stockholders with respect to cumulative voting. The case is before us -for the second time, the first opinion appearing in 31 Ill. App. 2d at 300, 175 N.E.2d at 408 (1961), where the facts are fully set forth. At _ that time we reversed a summary decree for defendants and remanded the cause with directions. Thereafter the chancellor held further hearings and granted plaintiffs’ motion for judgment on the pleadings and for summary judgments. The chancellor found that the certificate of incorporation of the defendant company required that it have a board of thirteen directors elected for uniform terms of one year each by cumulative voting by the shareholders, and further required the consent of the holders of at least two-thirds of the outstanding Class A stock to amend, alter or repéal the aforesaid pro- visions. The court decreed that the defendant company be restrained from reducing the number of directors of ‘the corporation or from changing their terms of office from the uniform period of one year, except with the consent of the holders of at least two-thirds of the ont- standing Class A stock. en — Two days after institution of thg jnstant suit the de- fendants revoked the offending b¥gMpand restored the provision for the annual election of all directors. De- © fendants contend that this made the case moot. We hold in our former opinion that the cause was not moot and that plaintiffs were not estopped because of their alleged participation and acquiescence in the illegal system of staggered elections nor because of their failure to make a+formal demand. We found that the equities favored the maintenance of this suit in behalf of all Class A stockholders since one plaintiff persistently urged a change in the illegal system of voting for a period of years, and that no further demand in exhaustion of nonjudicial remedies was necessary. On this appeal the defendants still argue at length that the bylaw in question was valid, and at the same time they also argue that the case is moot. Nothing presented to us forms any basis for changing the conclusions reached in our previous opinion. Since the court was divided however on the question vf mootness, we hate further examined and desire to. restate our position on that issue. ‘The continued alleged power of defendants to change the bylaws and thereby dilute the voting powers of the Class A stock distinguishes this case from, cases of ordinary mootness such as arise where an event makes the subject matter of an issue no longer controversial and future litigation on the particular issue impossible or in any event remote. The origin of the doctrine of mootness is not din but an examination of the available authority has helped in finding the true scope of its operation. The word “moot” originally meant “meet” or “a meeting,” especially an- assembly. of people, as a court of adjudicature. Gradually the words came to be used in litigation as an action at ities law, a plea or an accusation. It did not then have the hypothetical character it later assumed. In England it _ survives as the discussion of what is now called a “moot” case by students at the Inns of Court (See Oxford English Dictionary, vol. 6, p. 648 (1933)). The origin of tne doctrine seems to have escaped the careful historical and analytical scrutiny of either judges: or legal writers. The best explanation of its transformation from reality to the hypothetical rests, we believe, in the.development or refinement of the earlier feigned or collusive suit doctrine. In those cases the courts showed an early concern for ‘saving judicial time for rea] controversies and for pro- tecting tHe rights of third parties whose interests might | be impaired because of prior litigation. The chronology of the earliest discovered cases in England and in this state bear out the foregoing theory. The following are feigned, fictitious or collusive cases — selected for this purpose: In Henkin v. Guerss, 12 East¢ (K.B.) 247, 104 Eng. Rep. 97 (1810) it was held that courts of justice were consti- tuted for the purpose of deciding really existing ques- ‘tions of right beg: en the parties and were not bound to answer any impertinent question which persons thought _ proper to ask in the form of an action on a wager. | In McConnell v. Shields, 2 Yl. 582 (1839) the court thought that a feigned case was presented, and required proof at the next term that the case was not fictitious. Spragqins v. Houghton, 3 Ill. 211 (1840) was a qui tam proceeding. to collect a fine from a judge of election for allowing an alien to vote in the 1838 election for state and county officials. The court continued the case until further . records and vriefs were™filed because in the form pre- sented it was simply a fictitious suit.to decide whether an alien could vote in Illinois. . _ ~ — = People ex rel. Roberts v. Leland, 40 Til. 118 (1865) was a.writ of mandamus to compel the Clerk of the Superior Court of Cook County to remove the record of a case to the Supreme Court, despite the defendant’s failure to _ furnish a revenue stamp as required by the federal act. The court held the suit was fictitious as no notice was given the plaintiff in the suit of record and it was pre- sumably an attempt with the clerk’s blessing to get a construction of the federal revenue act. In Washburne v. People ex rel. King, 50 Ill. App. 98 (1892) an appeal from the award of a writ of mandamus to the Mayor of Chicago to issue a liquor license was dismissed as fictitious. The court found that a liquor li- cense had already been granted and suspected that the writ was not prosecuted for any direct result, but for . use that might be made of the jndgment upon subsequent _ application for licenses. In Hoskins v. Mann, 143 Ill. App. 49 (1908) John Henton, after retaining a life interest, conveyed certain farmland to his granddaughters. Henton then rented the property to John Hoskins. After Henton’s death, Hoskins brought a bill of interpleader to determine who was entitled to the rent prior to Henton’s death. The bill was dismissed as collusive, since the suit had been instituted by Hoskins at the insistence and cvercidn of the father of one of the granddaughters who had agreed to indemnify the plaintiff for attorney’s fees, and no demand for pay- ment of the rent claim had been made by either Henton’s widow or the three grandchildren. The foregoing cases are the progenitors of the moot- ness doctrine. In all of them it was the lack of a genuine controversy between the parties that was stressed. con The contemporary application of the doctrine as a mat- ° ter of policy should be considered in the light of the _ on recent adoption of procedures designed to resolve disputes by means of declaratory judgment proceedings, eve though no present issue demands a judgment or decree. other than one settling the legal questions involved. The . question of when an actual controversy exists for pur- poses of declaratory judgment proceedings is analogous to the problem of determining when a controversy is or is not moot. An examination of the case of Elward v. Pea- body Coal Co., 9 Ill. App. 2d 234, 132 N.E. 2d 549, illus- trates this point. There, a shareholder sued the corpora- tion and seven directors to set aside a stock option granted one director, because the option agreement vio- lated the statutéry provision requiring the option pur- chase price to be greater than the par value. Even though the director had not yet exercised or declared his inten- tion to exercise his option, the court found that an actual controversy existed, since at the time of the trial the market value of the stock was double the option price and the defendant corporation was contending for the legality of the option. The court was willing to draw an inference from the facts that certain future events would occur which would miake the controversy real and not moot. In the instant case, it is just as reasonable to be- lieve that the board of defendants of the defendant com- pany will again adopt a bylaw diluting the voting rights of Class A shareholders. The inference is even stronger when: the past action of the corporation and the geal with which it persists in asserting its right to change the by- laws are taken into account. The federal courts have refused to apply the doctrine of mootness in cases involving short term provisional] orders of federal regulatory agencies relating to rates and regulations. In such cases the litigation between the gov- ernment and the parties often extends beyond the period — 24a — of the short term orders allowing temporary rates and laying down temporary regulations; that is, these pro- visional orders often expire before final review is obtain- _ able by either side. Nevertheless, it is held that such a case does not become moot after expiration of the fixed period because of the reasonable possibility that the order — will be renewed. Southern Pacific Terminal Co. v. Inter- state Commerce Commission, 219 U.S. 498 (1911). That was an action to enjoin an order requiring the plaintiff to cease granting prefefences to a shipper for a period of two years, although the order had expired. The United States Supreme Court held that it had authority to ad- judicate the controversy, despite the expiration of the specitic order on which the issue was joined, saying: . ‘*The questions involved in the orders of the inter- state Commerce Commission are usually continuing (as are manifestly those in the case at bar) and their consideration ought not to be, ax they might be, de- feated, by short term orders, capable of repetition, yet evading review, and at one time the Government and at another time the carriers have their rights determined by the Commission without a chance of redress.” P. 515. , The same principle hax been applied in cases involving rate orders, Southern Pacific Co. vy. 1.C.C., 219 U.S. 433 - (1911) processing quotas, Gay Union Corn. v. Wallace, . 112 F. 2d 192 (D.C. Cir., 1940); agricultural marketing _ orders, Yarnell y. Hillsborough Packing Co., 70 F. 2d 435 (5th Cir., 1934); and military exclusion orders, Ebel v. Drum, 50 F. Supp. 186 (Mass., 1944). _ The most comprehensive study of this aspect of moot- ness we have been able to find is an article entitled “Fede- ral Jurisdiction to Decide Moot cases,” 94 U. of Pa. Law Review 125 (1945), (author Sidney Diamond, then Special Assistant to the Attorney General of the United States). — %a— This reveals the broad béundaries within which the court may take a case, even though the judgment will not de- termine property iights or assess damages. The author sets forth what appear to be sound and reasonable tests to apply where the issue of mootness is raised. These are— the defendant’s continued assertion of the legality of the discontinued acts; the defendant’s discontinuance of the acts before or after the institution of suit; the defendant's, motive or intent in discontinuing the acts; and the public interest involved in having the particular issue determined. The foregoing tests are all applicable to tiie pattern of the case before us, as an examination seriatiw will reveal. With respect to the continued assertion of legality, nearly half of a 75-page brief is devoted by defendants in the instant case to arguing the validity of the bylaw they have repealed, and a substantial portion of their oral ‘ar- gument was also devoted to the same proposition. They have not only argued its legality, but also its desirability. The second test of mootness, that the acts complained of were not discontinued until after litigation was threat- ened or commenced, is also applicable. The instant stit was instituted two days before repeal of the bylaw, and defendants were aware that plaintiff Kern had left the date of institution of his suit to his Chicago attorney. Al- though defendants claim they were unaware of the institu- ~ tion of the suit at the time of the repeal of the bylaw, the reasonable inference from these facts is that defendants would not have acted without the pressure applied by plain- tiff Kern. The motive or intent of.the defendant in discontinuing the acts sought to be enjoined is the third condition set out in the article. The only reasonable conclusion from the facts before ux is that it is the defendant railroad’s intent at some opportune time to repeal the bylaw. a es The factor of the publie interest involved is a fourth item to be considered in determining whether the court will hear the case. Illinois courts recognize that there is a public interest exception to the doctrine of mootness. People ex rel, Wallace v. Labrenz; 411 Ill. 618, 104 N.E. 2d 769. The Chicago and Eastern Illinois Railroad is a large public service corporation. Its stock is listed on the New York Stock Exchange. There is a wide general in- - terest in the stability of preferred stock, and efforts to eliminate preference have been the subject of much liti- gation. Cf. Bowman v. Armour ¢ Co., 17 Ill. 2d 43, 160 N.E. 2d 753. The interest of preferred shareholders gen- erally is sufficient, in our opinion, to establish the public interest in thi case, even though the particular stock may not have a large general distribution. It is our conclusion that mootness is not a shee of merit which may be raised by defendants to defeat the immediate litigation. Rather, mootness is a doctrine which the court imposes for its own protection, and it will nat be applied where it is apparent that the controversy is a genuine one concerning valuable rights and where the party defending maintains that it still has thé power to annul those rights and to recreate the condition as it ex- - isted at the time the litigation was commenced. The suit is not moot, and the controversy is a proper one for de- claring the rights of the plaintiffs and for the granting of equitable relief. The other legal conclusions of this court in its first Opinion consitituted the law of the case and will not again be considered. Seaburg v. Wiliams, 23 Il]. App. 2d 25, 161, -N.E. 2d 576; Crozier v. Freeman Coal Mining Co., 363 IIL 363, 2 N.E. 2d 293; People ex rel. Kastning v. Militzer, 301 Il 284, 133 N.E. 761. Certain factual questions arose - - after remandment, however, and will now be convidered. == 3a, Plaintiffs filed two motions in the trial court. The first was for judgment on the pleadings, and accordance with Section 45(5) of the Civil Practice Act (Hl. Rev.. Stat., ch. 110, §$45(5) (1961)), and the second, a renewal of . plaintiffs’ motion for summary judgment filed in the pro- ceedings, which resulted in the first appeal. Thereafter, defendants filed two affidavits of significance in opposi- tion to plaintiffs’ motions. The first was an affidavit of ‘Clair M. Roddewig, former. president of defendant rail- road company. It confirmed that Roddewig had had con- ferences with Kern, one of the plaintiffs, as Kern’s af- fidavit stated. Roddewig denied that Kern had ever told him he considered the disputed method of electing mem- bers of the board of directors illegal. Defendants argue that in this appeal their answer and affidavits must be given controlling weight and that they make a case of estoppel in the maintenance of this suit. It is.true that an affidavit in support of a motion for summary-judgment will be strictly construed and that it must leave no question: as to the movant’s right to judg- ment, whereas the opposing party’s affidavit will be con- strued liberally. Tansey v. Robinson, 24 Ill. App. 2d 227, '164 N.E. 2d 272 and the authorities therein collected. If the allegations made by Kern respecting conversations be- iween Roddewig and himself (which were controverted by Roddewig’s affidavit) were the sole evidence of Kern’s pro- tests concerning the illegality of the staggered system of elections and his efforts for restoration of cumulative voting, perhaps there would have been an issue of fact ‘ requiring resolution by trial. There were however as noted ir our previous opinion, other specific requests by Kern to correct the method of electing directors (31 Ill. App. 2d 300, 311) and these still remain undenied. | — 2a — The affidavit of Frank F. Vesper, general solicitor of the defendant railroad, was filed, setting forth certain sec- tions of Indiana law relating to railroads. In our opinion the trial court correctly ruled that these sections are per- missive rather than mandatory, and that they did not raise any questions of law or fact. Even if we held that the Indiana statutes were mandatory. rather than per- missive, a conflict exists between: Sections 55-206 and 55- 208 of the Indiana Statutes (Burn’s Statutes Annotated, (1955) ). Section 55-206 stutes : “The directors shall hold their office for one (1) year and until others are elected in their — Section 55-208 states: “Classification of directors. It shall be lawful for the board of directors of any railway company whose’ road passes through this state in‘o adjoining states, by lot or otherwise, to so efgssify the members there- of, that one-fourth (14) (as near as may be) shall terminate their official terms as directors at the first annual election thereafter; and one-fourth (14) at each subsequent election; and after being thus tlassi- fied, the stock and bondholders sinall elect only the number of the board of directors necessary to fill the vacancies created by the expiration of the — of service fixed as aforesaid.” The defendant railroad argues that a reasonable reading of the words “each subsequent election” appearing after the words “first annual election,” is that each subsequent election is an annual one and therefore a reasonable con- struction of the two sections would be that all directors are elected for one year, except where there are pro- visions for the staggered election of directors under See- « tion 95-208, in which case there is an implied four-year term for direetor. This is reading into the statute a provision whicd is not there. In any event, it appears = ompany is not required to violate its cor.- - mitments to its Class A stockholders. ‘The decree of the trial court is affirmed. DEcREE AFFIRMED. MoCormiox, J., concurs. . — — Dempser, J., specially concurring: y ‘An important ‘question in the previous appeal, mae on the issue of mootness, was whether the controversy between the parties over the method of electing directors was permanently ended. A corollary question was whether the defendants had modified the method in good faith or whether it was done in an attempt to weaken the plain- tiffs’ suit. The defendants asserted that they made the change without knowing that the suit had been ‘Started two days before. Although they defended the validity of the bylaw under which the directors had been elected, they argued that the case was moot because the bylaw had been amended. I assumed that the amended bylaw would stand and ‘that the controversy was ended. I stated that I did not “believe that we sliould render a judgment just to discourage a possible reversion to the former method of electing directors.” I am now disturbed by the persistence of the defend- ants in insisting that the former bylaw was proper. This court was unanimous in holding that it was invalid, but the issue has been raised again and is teargued with un- relenting determination. The tenacity of the defendants on this subject casts doubt on their former good faith and = their future intention; there seems to be more than just a - possibility that the defendants may rever! to the former method of electing directors if a time to do so becomes propitious. I also said in the dissent that in my opinion the case _—- - was not of such public interest as to justify an exception to the criteria applicable to cases which are otherwise moot. I am still inclined to this view. However, -because of the doubt created by the defendants themselves, I must _ conclude that the substantive issue between the parties is not interred. This consideration outweighs my reservation as to the lack of public interest. I, oe concur in the opinion of my colleagues. — APPENDIX E. Judgment of Supreme Court of Illinois Denying Petition for Leave to Appeal! UNITED STATES ~ AMERICA State of Illinois } Supreme Court {f Se At a Term of the Supreme Conrt, begun and held in Springfield, on Monday, the ninth day of March in the year of our Lord, one thousand nine hundred and — four, within and for the State of Illinois. Present: Ray I. Kurnoprer, CH#tuer Justice Justice JozerH E. Dany Justice Hansy B. Hersuey Justice Roy J. SoiFissurs, JR. Justice Water V. Scuarrer Justice Brron O. Hovse Justice Rosert C. Unperwoop Wun G. Crank, Atrorney Geena ~ Roserr G. Mmey, Marsua, Atrest: Mrs. Eante Bersamin Searcy, CLERK Be It Remembered, that, to-wit : on the 16th day of March 1964, the same being one of the days of the term of Court aforesaid, the following proceedings were, by said court, had and entered of record, fo wit: Paul J. Kern and : ; Irving M. Lesch, | Petition for Leave to Respondents _ « | Appeal from Appellate No. 38361 vs. Court | ‘Chicago and Eastern Illinois : Railroad Co., an Indiana cor- { ~ poration, Alfred MacArthur,} First District David O. Mathews and F. 8.| 558 S 18217 Yantis, 48839 Petitioners And now on this day the Court having considered the Petition for Leave to Appeal herein as well as the record and abstract, filed in support thereof, and being now fully - advised of andiconcerning the premises, doth overrule the prayer of the petition and denies Leave to Appeal herein. And it is further considered by tlie Court that the said Respondents recover: of and from the said Petitioners costs by them in, this behalf expended, to be taxed, and that they have execution therefor. _I, Mrs. Earle Benjamin Searcy, Clerk of the Supreme Court of the State of Illinois and keeper of the records, files and Seal thereof, do hereby certify that the foregoing is a true copy of the final order of the said Supreme Court in the above entitled cause of record in my office. In Witness Whereof, I have hereunto subscribed my name and affixed the Seal of said court oo 16th day of . March, 1964. Mrs. Earle Benjamin Searcy, Clerk /s/ Supreme Court of the State of Illinois. he { - APP IX F. Reorganization Plan of Chicago & Eastern Illinois Railway Company AMENDATORY ORDER. - At a Session of the Interstate Commerce Commission, . Division 4, held at-its office in Washington, D.C., on - 20th sid of January, A.D. 1939. re Frsance Docker No. 9952. Cuicaco & Eastern Iuiinois Ratpway Company ‘\ ; REORGANIZATION. Upon consideration of the matters and things involved in this proceeding and of the petition filed by the Chicago and Eastern Illinois Railway Company on December 22, 1938, for modification of the report and order entered in _ this proceeding on November 4, 1938, and upon investiga- tion of the matters.and things involved in the: petition, and the division having, on the date hereof, made’ and filed a report on further consideration containing ‘ts findings of fact and conclusions thereon, which report is hereby re- ferred to and made a part hereof: It is hereby ordered, That the order dated November 4, 1938, approving a plan of reorganization of the Chicago | and Eastern Illindis Railway Company, be, and it is here- by, modified, and the following modified plan of reorgani- ‘gation be, and it is hereby, approv: d: A. The effective date of the plan shall be January l, 1937. : * —H#e— ak B. All of the property of she debteg shall be trans- ferred to it with its articles ‘of incorpodfition appropri- ately amended or to a new-corporation or subsidiaries _. formed for this purpose under the corporate laws of such state or states as shall-be necessary in order to = into effect and carry out the play. C. The capitalization of the reorganized company, after ‘consummation of the plan, shall, in addition to equip- ment-trust certificates then outstanding, be substantially as follows: Evansville Belt Railway Company bonds $142,000; prior-lien bonds $11,159,000 (plus such addition- al prior-lien bonds ds may be pledged with. the Recon- struction Finance Corporation in accorda ce with Section O hereof), out of an authorization of $20,000,000; ancome bonds $15,354, 500; and preferred stock $15,354,500, out of an authorization of $20,000,000; and no-par-value common stock 343,297. — out of an authorization of l ,000,000 shares. D. Claims entitled to priority over existing mortgages, if any, which are proved and allowed by the court, shall be paid in ‘fall in cash without interest within 120 -_ after consummation of the plan. E.. Equipment-trust certificates of series A, B, and C, outstanding at the time of the consummation of the plan, shall be assumed by the reorganized company. F. The trustee’s certificates outstanding at the time of the consummation of the plan shall be paid in full in cash, including unpaid interest thereon to the date of payment. G. Evansville Belt Railway Company bonds, $142,000, | shall be assumed by the reorganized company, but each holder may, at his option, within 60 days after the con- summation of.the plan, surrender his bonds and receive e — . ne ER Rea a AT Sparel gery are I ae A 36a — cash to the amount of the principal and the unpaid interest thereon to date of payment. Such payments of cash shall be made within 120 days after consummation of the plan. © Bonds surrendered shall be canceled. - H. First consolidated mortgage bonds, $2,736,000, shall be paid in cash, including unpaid interest thereon at the rate of 4 percent per annum from October 1, 1934, to the date of payment. Payments shall be made to the trustee under the first consolidated mortgage within 60 days after consummation of the plan and the funds %o paid shall be distributed by such trustee upon surrender of the bonds, which shall be canceled. I. Indebtedness to The Railroad Credit + Coenen shall be paid in cash, including unpaid interest to.the date of payment. Payment shall be made within 60 days after . the date of consummation of the plan. eae J. Indebtedness to the Reconstruction Finance Cor- poration shall be satisfied by the issue of new prior-lien bonds, series A, of a face amount equal to the principal amount of the indebtedness. Interest on the indebtedness _ after April 18, 1933, shall be computed at the following rates: From April 19, 1933, to June 30, 1933, inclusive, — at 5% percent per.annum; from July 1, 1933, to October 31, 1933, inclusive, at 5 percent per arinum; and from November 1, 1933, to December 31, 1936, inclusive, at 4 per- cent per annum. To the extent that the amount of interest so computed exceeds the amount of interest heretofore paid on such indebtedness, it shall be paid by the issue of new prior-lien bonds, series A, of a face amount equal to the amount of interest to be paid. Only $1,000 bonds shall be issued, and any fractional part of $1,000 shall be paid in cash. The bonds shall draw interest from January 1, 1937. : > Pree — ee ~ . 2 a ~ “ae 8 _-* Series-A bonds will be issued to the Reconstruction | Finance Corporation, if it will aacept them, in payment of ~any actual and reasonable expenses, including reasonable attorney’s fees, incurred by it in connection with the pro-. ceeding and plan, in the amount allowed by the court, with- in the maximum limit fixed by us, to the extent of the nearest thousand dollars within the amount allowed, at par and accrued interest from the last interest payment date immediately preceding the actual date of issue, such bonds not to bear interest prior to said last interest payment, date immediately preceding the actual date of issue. K. All of the securities pledged as collateral for loans to The Railroad Credit Corporation and the Reconstruc- tion Finance Corporation shall be surrendered and the old - prior-lien bonds so pledged shall be canceled. L. All claims of the general-mortgage Senators on account of principal and interest on the general-mortgage bonds shall be satisfied by: (a) paying the odd $36 in cash - without ‘interest; (b) by exchanging the remaining prin- cipal amount of $30,709,000 for 50 percent in new income- mortgage bonds and 50 percent in new preferred stock; and (c) by issuing for the unpaid interest on each $1,000 bond four shares of new no-par-value common stock. M. The claims of holders of old preferred stock; includ- ‘ing claims for cumulations of dividends, shall be satisfied by the issue of one share of new no-par value common stock for each share of old preferred stock, such common stock to be issued to each holder of old preferred stock within 60 days after delivery by such holder to-the reor- ganized company of the share certificates evidencing his ownership. . N. Contracts made by the trustee in pursuance of his duties‘as trustee; and executory contracts made by the 2 opel ata teal jarrow ee USN eS 5 RE ERE RE ip TPO BNE Ht 4 — $74 — . debtor not disaffirmed by the trustee and not by their terms terminating at or prior to the conclusion of the reorganiza- tion proceeding, shall be assumed: by the reorganized com- pany except that obligations, if any, now the subject of litigation shall be assumed by the reorganized company - _ only to the extent that a claim is finally established. Ob- ligations of other companies, guaranteed by the debtor, shall be assumed by the reorganized compary. Other _ claims, liabilities, or obligations not otherwise provided for and recognized as valid by the court, shall. be assumed by the reorganized company, and current operating ex- penses authorized by the court, and expenses of reorgani- zation allowed as provided in section 77 of the Bankruptcy Act, shall be paid in full in cash by the trustee or by the reorganized company, as the court may direct. O. New prior-lien bonds dated January 1, 1937, to ma- ture January 1, 1967, and bearing interest at the ratgof 4 percent per.annum payable semi-annually, shall be issued by the reorganized company. The authorized amount of such bonds shall be $20,000,000, of which there shall be immediately issued not in excess of $11,159,000. plus‘ bonds necessary to refund Evansville Belt Railway Company bonds, plus bonds that may be issued to the Reconstruction ‘Finance Corporation in payment of any actual and reason- - able expenses inc}juding reasonable attorneys’ fees. The _ bonds shall be secured by a mortgage which shall constitute a lien subordinate only, as to the properties respectively — covered thereby, to the liens securing the Evansville Belt Railway Company mortgage bonds, the trustees’ 314 per- cent equipment-trust certificates, and the debtor’s 5-per- _ cent equipment-trust certificates, upon all property ac-. quired by the reorganized company from the trustee in the proceedings, and upon all other property aequired by the new company at any time in the future, subject to. pro- visions with respect to:the sale of collateral; provided that the lien of such mortgage shall be subordinate to the title of any owner, whether as trustee or otherwise, to equipment leased or conditionally sold to the debtor, or the ‘trustee in the proceedings, or the reorganized company. Appropriate provision shall be made in the mortgage to enable the reorganized company at its option to sell free of the lien of the mortgage or to abandon any property covered by the mortgage. The proceeds of sale of any equipment may be ysed by the reorganized company for any proper purpose without any obligation to account — therefor under the mortgage;:the proceeds of sale of any . property other than equipment shall, subject to the pro- visions hereinafter set forth with respect to the sale or exchange of the Chicago Heights Terminal Transfer Rail- road Company stock, be paid to the trustee under the mort- gage and shall be subject to withdrawal by the reorganized company for use in payment for additions and betterments ° or for the retirement and cancellation of new prior-lien bonds. The reorganized company shall covenant to main- tain sufficient equipment to enable it to operate the road efficiently and properly but shall not otherwise be ob-. ligated to replace any equipme or other property. The . mortgage shall provide that all new prior-lien bonds shall be equally secured by it regardless of differences in the time of issue or in the maturity dates of such bonds. As additional security for the new prior-lien bonds there ehall be pledged with the trustee under the mortgage the entire capital stock (5,000 shares) of the Chicago Heights Terminal Transfer Railroad Company. The reorganized company or its mominees shall be entitled to vote this stock on all matters, and the mortgage shall provide for a release of the stock from the mortgage in the event of a PSs oye CAE Par FOS eee Speke rye yD are merger or consolidation of the properties of the Chicago - Heights Terminal Transfer Railroad Company and the reorganized company; provided, that sucht merger or con- solidation shall be upon such terms that the properties so merged or consolidated shall be subject to the lien of the mortgage securing the new prior-lien bends to the same extent as the property of the reorganized company prior to such merger or consolidation, stibject, however, as to the property. of the Chicago Heights Terminal Transfer Rail- road Company, to all liens on the property of that company existing at the time of such merger or consolidation. The mortgage shall further provide that the reorganized com- pany may sell or exchange the stock of the Chicago Heights Terminal Transfer Railroad Company at any time free of the mortgage upon the consent of a majority in amount of. the holders of outstanding new prior-lien, bonds, not in- cluding bonds held in sinking funds, to the making of such sale or exchange and to the proper disposition of the proceeds thereof. The new prior-lien bonds shall be issued in series, of which series A shall be issued in an amount sufficient to fulfill the provisions of this plan which require the issue of . such bonds. Provision shall be made that the acceleration of the maturity date of any series or default in the pay- ment of amy series at maturity shall operate to accelerate the maturity of all other series outstanding. As additional security for the payment to the Recon- struction Finance Corporation of the new prior-lien bonds, -series A, held by it, there shall be separately pledged with that corporation $550,000, principal amount, of Southern Illinois and Missouri Bridge Company bonds, $134,600, par value, of Fruit Growers Express Company sto¢k, the distributive share of capital of The Railroad Credit Cor- SS eh, Sessa - x ey — iy. hae PoP ON as Pe aid cat 2 ee Fy Ar Pana ae, are ere 7, ohm eo . : PORE Rad ee OR rate Prete» Pe RNS TAN Bie Se MERI OD ‘43 BE EE 6, tea? Lame Or x ” poration and such other collateral as we may later deter- mine to be necessary to safeguard the reconstruction loan under the conditions as they may exist when the loan is approved under the provisions of section 5 of the Recon- struction Finance Corporation Act. The reorganized com- pany shall be privileged at any time, at its option, to sell all or any part of the bonds and stock so pledged. The pro- ceeds of any such sale and the proceeds of any distribution of the distributive share of capital of the Railroad Credit Corporation shall be applied to the retirement and cancel- - lation of new prior-lien bonds, series A, held by the Re- construction Finance Corporation; provided, that the re- organized company at its option may apply any part of such proceeds to any capital purpose if the consent in writing of that corporation to such application be first obtained. Provision shall be made that the Reconstruction Finance Corporation shall be obligated to sell new prior- - lien bonds, series A, to the reorganized company for retire- ment or for deposit in the sinking fund at. par plus accrued interest, so long as that corporation owns any of such bonds. The reorganized company shall pay to that corpora- tion such accrued interest out of funds other than those derived from the liquidation of the collateral hereinabove mentioned. : For the series A bonds and any bonds issued to refund such bonds there shall be a sinking fund of $75,000 for each of the calendar years 1937 to 1946, inclusive, and $110,000 a year for.each of the years 1947 to 1966, in- clusive. Should if be necessary to refund the new series A bonds, the reorganized company may in its discretion provide for the benefit of the refunding bonds a sinking _ fund not to exceed $110,000 a year after January 1, 1967, to be appropriated out of available earnings after the_ appropriations for additions and betterments and before aay Sen ae Chee ae ee he PATIO PR ED iO oy vane ate atiogh \ a (ne any appropriations for the sinking fund for the benefit of the income bonds hereinafter referred to. Payments shall be made into the sinking fund only to the extent that in- ‘come for the purpose is available in each year and de- ficiencies resulting from lack of available income shall not — accumulate. The fund shall be used within one year from the date of the appropriation for the purchase or redemp- tion of such outstanding bonds. The bonds purchased or | redeemed shall either be deposited in the fund or canceled. Bonds deposited shall be kept alive and shall continue to draw interest which shail be added to the fund and used for the purposes thereof. If the bonds are canceled, annual payments by the reorganized company into the fund there- after shall nevertheless include an amount equal to in- terest on such canceled bonds so that the annual sinking fund payments will be the same as though the bonds had not been canceled, and the sum representing the interest on such canceled bonds shall continue to be a fixed charge ‘upon the company, equal in rank to thc interest on uncan- celed bonds of the same issue. Bonds may be ealled by lot for redemption and cancellation, or for deposit in the sink- ing fund. Bonds shall be so called upon 45 days published notice at prices, together with accrued interest, of 105 until 15 years after their date, 102 thereafter and until 24 years aftcr their date, and thereafter 101 until maturity. Bonds may also be purchased_op the open market at any time either with the sinking fund or other available funds, but only if such purchase can be made at.a price-not in excess of the redemption price, and provided also that such bonds shall not be purchased. with sinking-fund money at less than par plus accrued interest so long as any of the bonds are held by the Finance Corporation. The balance of the- new prior-lien bonds‘not required to be issued at series A may be issued by the reorganized OE EE IE LA CLES! OLLIE LINEN IER TMI a PEN. on | 1. company in one or more series, and providi a alta. fund on such series of bonds not to exceed 1 percent per annum of the face amount of bonds of the series outstand- ing. Such sinking fund shall be payable only to the extent earned as hereinafter provided for other bonds and shall be non-cumulative. These bonds may be issued only for the purpose of refunding Evansville Belt Railway Com- tgage bonds, new prior-lien bonds, and the bonded indebtedness of the Chicago Heights Terminal Transfer. Railroad Company and against property additions to the extent of 75 percent of the cost of such additions; pro- vided, however, that such bonds may be so issued against property additions only if the earnings of the reorganized _ company available for fixed interest charges, after pay- _ ment of rent of leased lines, for the 12 months preceding | the first day of January or of July, as the case may be, which is not less than three months next preceding the date of such issue, equal or exceed 144 times the fixed interest charges on equipment-trust' certificates, trustee’s equip- ment certificates, Evansville Belt Railway Company bonds and pew prior-lien bonds, including bonds held in sinking funds and including the bonds proposed to be issued at the time. Such bonds skall not be issued against property addi- tions paid for out of the appropriations for additions and | betterments provided for hereinafter. P. Income bonds in an authorized amount of $15,354,- 500 dated January 1, 1937, and maturing January 1, 1997, shall be issued. They shall be secured by a mortgage cover- ing the same property included in the mortgage securing the prior-lien bonds and shall constitute a lien upon such property subordinate only to the liens securing’ trustee’s equipment certificates, equipment-trust certificates, Hvans- ville Belt Raiiway Company mortgage bonds and new ff . . . 4 < és ; : eee ee ee ee ee ee ea TT ee ee ee . ; ¢ —Ba— prior-lien bonds; provided that the lien of such mortgage shall be subordinate to the title of any owner, whether as _. trustee or otherwise, to equipment leased or conditionally sola to the debtor, the trustee in.the proceedings, or the reorganized company. The income bonds shall bear interest ‘at the rate of 5 percent per annum, payable only to the extent that income is available for the purpose in accord- ance with provisions hereinafter stated, and deficiencies in interest from lack of income shall not cumulate. Interest. on the income bonds shall be paid to the trustee under the mortgage and dishursed by the latter, but only to the extent that available funds in the hands of the trustee equal. or exceed one-fourth of 1 percent:interest on the outstanding bonds of the issue.. . Pah ERA 3, The income bonds shall have a provision that at any a time prior to maturity each holder may, at his option, convert bonds held by him into new common stock on the basis of one share of stock for each $25 face amount of bonds; only whole bonds to be converted. Provision shall be made to protect the value ofthis conversion right against dilution resulting from the issue of additional stock by the reorganized company at a price less than $25 a share. ~ The mortgage securing the income bonds shall contain a provision for a sinking fund of $75,000 for each of the calendar years 1937 to 1946, inclusive, $40,000 a year for each of the calendar years 1947 to 1966, inclusive, and $150,000 a year for each of the calendar years 1967 to 1996, _ inelusive, but the latter amount is to be reduced to an amount not less than $40,000 a year, if it is found to be necessary to provide a sinking fund for any bonds issued to refund new prior-lien bonds, series A, the sinking fund ‘on which would not exceed $110,000‘a year. Sinking-fund appropriations shall be made only to the extent that in- PRAY Sam A Yd ee ee Ee — — = . — inate ‘ ee ‘ e P PELLET LENE I LEILI YL ELD LI ELLE VIDE LASALLE ELIE AIRS TGS, SREY Y MAES AA EN EE ESM . . ce TEE eT ee # — aniline come is available for that purpose in each year, and they . Shall be used within one year for the purchase or redemp- — _ tion of income bonds, which shall be canceled. ; Income bonds may, upon 90 days’ notice, be called for redemption by lot at any time at par plus unpaid interest earned up to 90 days prior to the redemption date. Bonds may be purchased in the open market with the sinking fund to the extent that funds are available as herein pro- vided,-but only if such purchase can be made at a price not a in excess of the redemption price. No income bonds shall be purchased or redeemed with other than sinking fund | * moneys so long as any of the new prior-lien bonds, series ol A, are outstanding. Q. Preferred stock having a par value of $40 a share shall be issued to the amount of 383,8621% shares. The stock shall be entitled to a preferred dividend of $2 a share, “payable before payment of dividends on common stock in any one year, in accordance with provisions hereafter stated. To the extent that income is available for dividends, unpaid dividends for any year .shall cumulate but not otherwise. This stock shall also be entitled to a preference - against assets of $40 a share plus a sum equal to the -amount of all accumulated and unpaid dividends thereon. This stock shall be subject to retirement at any time upon 90 days’ notice, in any amount, at par plus a sum equal to the amount of all dividends thereon accumulated and unpaid prior to January 1 preceding the date of notice _plus an amount -equal to the dividends earned, as herein- after provided, during the period from January 1 preced- ing the date of notice to 90 days prior to the retirement date. The shares to be so retired. shall be selected by lot. . This stock'shali have the right of cumulative voting in the -- election of directors. Se. Tada EP irene | Bebo R. Common stock of no-par value shall be issued in the number of shares necessary to carry out the provisions of this plan, which relate to the issue of common stock of the reorganized company to holders of. Aeneral-mortgage bonds and old preferred stock; plus the total number of shares necessary to. provide for convérsion of the income bonds. This stock shall have the right. of cumulative voting in the election of directors. S. Income of the reorganized éiniiens that is available after payment of fixed charges in any year will be applied ~ - first to an appropriation for additions and betterments on account of the preceding calendar year amounting to not more than 2 percent of railway operating revenues for that year or not more than the difference found by sub- ‘tracting the unexpended accumulation of previous appro- priations in the fund from $500,000, whichever is less. In determining the amount of the appropriation for addi- tional equipment purchased, only the amount of the cash payments in each year for such equipment shall be con- \sidered. Afier the appropriation for additions and better- ‘ments, the remaining available income of the preceding calendar year will be applied to sinking-fund appropria- tion up to $150,000 a year for the new prior-lien bonds, series A, bonds issued to refund those bonds and for in- come bonds, but deficiences in available income shall not accumulate. During the 10 calendar years, 1937 to 1946, income available for sinking ‘fund appropriations, as afore- said, shall be applied one-half to the sinking fund for new prior-lien bonds, series A, and for any bonds issued to. refund new prior-lien bonds, series A; and one-half to the sinking fund for income bonds. Thereafter income avail- * able for sinking fund appropriations, as aforesaid, shall be applied first to the sinking fund appropriation for the new “ea an ae aol ak ha can ae CE Er ee > — 46a — prior-lien bonds, series ‘A, and for any bonds issued to refund new prior-lien bonds, series A; and then to the sinking fund appropriation for the income bonds. The. remaining available income will be applied to interest on the income bonds up to the full amount thereof. After full interest requirements on the income bonds have been met the incomé will be applied to sinking fund requirements, if ' any, of additional series of new prior-lien bonds, other than series A, before any balance remaining is to be available ~ for dividends on new preferred stock. Any balance then remaining shall be deemed to be available for dividends on the new preferred stock, but the declaration .of ae divi- dends shall be in the sole discretion of the board\of di- rectors of the reorganized company. If the new company shall make any charges for deprecia- tion of road, the amounts so charged, to the extent “hat they are available therefor, shall be used for the purposes of the additions and betterments fund ‘and the sinking funds, and to the extent so used’ shall be credited first to the payments herein required for the additions and better- ments fund and then to the payments herein required for sinking funds, and the charges for said funds out of in- come for the year in which such depreciation was charged a. be reduced accordingly. ores . ppropriations for additions and betterments and sink- ing funds and the payment of interest on the income bonds shall begin as of April 1, 3938, on account of the year 1937, if funds are available as heretofore specified. Any appro- priations or payments which by the terms of ‘the plan are required to be made on a date which is prior to the date of consummation of the plan shall be made as promptly as is reasonably possible after the date of consummation. : T. The plan provides for obtaining approximately $5,000,000 of new money, and funds to repay the existing or Fe sian Teach aNoe Gwudia abies ison t y | —7a— . obligation to the Reconstruction Finance Corporation cither from the Reconstruction Finance Corporation or through private channels through the sale of new prior lien bonds and the pledge of certain securities. On bonds issued for new money interest shall accrue from the last interest payment date immediately preceding the actual date of ’ issue. In the event that the financing must be done through the Reconstruction Finance Corporation the matter shall be raised seasonably by the proper party in a separate proceeding under section 5 of the Reconstruction Finance ~ Corporation Act so that this Commission may act upon it immediately upon confirmation of the plan of reorganiza- tion. The terms of such financing including the collateral security required, will be considered and disposed of in that proceeding. Submission of the plan to the stockholders and creditors shall be contingent upon receipt by this Com- mission within 30 days after approvial of the plan by the Court of a tentative commitment to supply the funds. U. The reorganized company will assume the liability nos" d will pay in due course, any and all taxes due to nited States from the debtor or the trustee, for any aan period prior to the date of confirmation of this plan of reorganization, without requiring proof thereof in this proceeding and without prejudice by reason of not having been. proven herein. V. The construction of the plan by the court shall be final and conclusive. The court may cure any defect, supply any omission, or reconcile any incongistency, in such manner or to such extent as may be necgssary or expedient to carry out the plan effectively. , ‘“W. Except as otherwise provided herein, the means for executing the plan and all details cf its consummation, not otherwise provided for, shall be put into effect and =o * carried out by the debtor. For this purpose, reorganization managers shall be appointed, consisting of Kenneth D. Steere, chairman of the board of directors of,the debtor, Carrol M. Shanks, chairman of the general-mortgage bond- holders committee, and one person to be designated by Steere and Shanks subject to the approval of the Recon-— struction Finance Corporation. The terms of any solicita- tion-of deposits of securities or authorizations to represent any creditor or shareholder of the debtor in the execution of the plan on the part of the debtor or the reorganization managers shall be subject to our prior approval. X. Upon consummation of the plan the reorganized company shall have a board of directors consisting of 13 members. The term of office of each director shall be one -year. The initial board of directors shall be chosen as follows: Kenneth D. Steere shall name five; Carrol M.” Shanks shall name five; and the Reconstruction Finance Corporation shall name three. So long as the Reconstruc- tion Finance Corporation holds not less than $1,000,000, face amount, of the new prior-lien bonds, series A, issued to it pursuant to the plan, the selection of three members of each succeeding board of directors shall be subject to - approval. “In the event that hnancing through ac: erent ae Finance Corporation is not consummated, and the new prior-lien borids are sold to other parties, the new owners | of a majority of such bonds shall have the privilege of naming three members of the initial board of directors. Y. Acceptance of the plan shall include acceptance of (2 the provisions of the new bonds, mortgages, and stock cer- tificates and all instruments necessary and appropriate.to the carrying out of the plan, other than the orders of the — 1a — court and this Commission, to the same effect as though the terms of such instruments were set forth in full herein. Z. The carrying out of the plan shall be as sities in the Bankruptcy Act. Ir 1s FURTHER ORDERED, “That the authorization and ap- proval herein granted by this Commission are upon the condition that the journal entries covering the necessary accounting adjustments under this order will be submitted to the Bureau of Accounts of this Comniission for approval before they are recorded on the hooks of the debtor under the plan of reorganization herein approved. ~ Ir 1s FURTHER ORDEREf, Thai nothing herein contained shall be, or be construed as, a grant of authority for the _ » issuance of any securities, assumption of obligations, trans- fer of any property, sale, consolidation, or merger of the debtor’s property, or pooling of traffic, pursuant to either the Bankruptcy Act or the Interstate Commerce Act, ex- cept as provided herein, or until further action by this Commission upon confirmation of the plan by the court. By the Commission, division 4. W. P. Barret, (SEAL) . Secretary. A True Copy. W. PBakrtTe, Secretary of The } Interstate Commerce Commission cuts APPENDIX G. Article IV, Section 1, Constitution of the | United States | | “Section 1. Full Faith and Credit shall be given in each State to the public Acts, Records, and Judicial Proceedings — of every other State. And the Congress may by general Laws prescribe the’ Manner in which such Acts, Records . _ and Proceedings shall be proved, and the Effect thereof.” | Article XI, Section 3, Constitution of the State of Illi- nois: “$3. The general assembly shall provide, by law, that in all elections for directors or managers of incorporated. companies, every stockholder shall have the right to vote, — -in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or managers to be elected, or to cumulate said shares, and give one candidate as many votes as the number of direc- tors multiplied by the number of his shares of stock shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and such directors or managers shall not be elected in any other manner.” SERIO ere rane — 5la-— APPENDIX H. Statutes of State of Indiana Burns Annotated Indiana Statutes, 1963 Cumulative Pocket Supplement, 1951 Replacement Volume, $95-206: “§55-206 [12863]. Election of directors—Qualifications and terms. There shall be an annual meeting of the stock- holders (to be held in one [1] of the counties in which or .through which such road is proposed to be or may be con- structed) for the election of directors to serve for the ensuing year, notice of which, appointing a time and place be given by the directors chosen as provided in the first section [§55-201] of this act for the first annual election, _.and, afterward by their successors in office; which notice shall be published not less than twenty [20] days previous thereto in a newspaper published in each county through which such road shall be ‘ntended to run (if there be stockholder®vesjding therein) in which a newspaper shall be published; and if no newspaper be published therein, then by six [6] written or printed notices put up in the most public places in such county: Provided, however, That the directors may prescribe by by-law a place outside the state for the holding of annual meetings, or, notwith- standing the limitation of section 9 [455-209] of this act, by resolution adopted at any meeting by stockholders holding shares representing two-thirds [34] of the voting power of the capital stock entitled to vote at any annual meeting. Three [3] judges of election shall be chosen by the board of diyectors previous to any annual meeting of the stockholdets, who shall be stockholders but not di- rectors at the time of such election, whose duty it shall be to receive the votes of the stockholders at such election for — 52a — directors, and who shall openly count the votes and de- clare the result, and shall furnish the directors elécted at — such meeting of the stockholders with a certificate of their election, which certificate shall be evidence of their author- _ ity to act as such directors. Not less than seven [7] nor more than thirteen [13] directors shall be chosen at such meeting of stockholders, by ballot, and by a majority of . the votes of the stockholders present in person or by proxy. No person shall be a director unless he shall be a stockholder, owning stock absolutely in his own right, and ‘ qualified to a vote for directors at the election at which he shall be chosen. The directors shall hold their office for one [1] year and until others are elected in their places. [1 R.S. 1852, ch. 83, An act to provide for the incorporation of railroad ‘companies, §4, p. 409; as amended Acts 1933, ch. 101, §8, p. 683 and Acts 1955, ch. 139 §1, p. 282.) Burns Annotated Indiana Statutes, 1951 Replacement Volume, §22-207 : 55-207 [12864]. Number of directors—The stock- holders of any railroad company. heretofore incorporated in this state, or that may be hereafter incorporated, may, by the vote of a majority in interest of the stockholders of such company, at any annual or other meeting thereof, determine that the directors of said company shall consist of any number not less than five [5] nor more than thirteen [13], who shall be cliosen from any of the stockholders; and thereafter such company may elect from any of its stockholders the number of directors it has fixed and de- termined upon as aforesaid, in the same manner and with - the same effect as if this section was contained in the original act incorporating such company. [1 R.S. 1852; ch. 85, An act to authorize railroad companies to increase the amount of their capital stock and to increase the number of their directors, §2, p. 423.] 4 x t gs gt Burns Annotated Indiana Statutes, 1951 Replacement Volume, §22-208: 55-208 [12865] Classification of directors.—It shall be lawful for the board of directors of any railway (company . whose road passes through this state into adjoining states, by lot or otherwise, to so classify the members thereof, that one-fourth [14] (as near as may be) shall terminate their official terms as directors at the first annual election there- after, and one-fourth [14] at each subsequent election; and after being thus classified, the stock and bondholders shall elect only the number of the board of directors necessary to fill the vacancies created by the expiration of the period of services fixed as aforesaid. [Acts 1869 (Spec. Sess.), An act authorizing the classification of the board of directors of railroad companies, ch. 50, $1, p. 103.] Indiana Statute, S. 133, approved February 23, 1939: Burns Annotated. Indiana Statutes, 1951 Replacement Volume, §§2209-2210: 55-2209. Sale or reorganization under court authority. —In case of the sale of any railroad and its property, under or by the authority of any competent court or courts (part of which railroad may be situate within the state of Indiana and part situate in an adjoining state, and em- braced in the mortgage or mortgages or deed or deeds of trust), it may be sold at one [1] time and place, as an en- tirety, at such point on the line of said railroad either within or without the state, and upon such notice, as the court or courts ordering such sale may direct. . In case of the reorganization of any railroad and its .property under or by the authority of any competent court or courts of the United States in a proceeding for the reorganization of a railroad pursuant to section 77 of the = Act of Congress of July 1, 1898, entitled “An act to es- tablish a uniform ‘system of bankruptcy throughout the United States,” as amended (only a part of which railroad need be situate within the state of Indiana), the corpora- tion to which all or any part of said railroad and its prop- erty may be transferred by or pursuant to an appropriate — order or decree of said court or courts may be a corpora- tion organized under this act and having all of the powers, rights, privileges, immunities, and franchises provided in this act: [§§55-2209 - 55-2215]. _ This act is hereby declared to apply to and embrace any and all rights or purchases of railroads their franchises, rights and privileges, under judicial decrees, or judgments of any of the courts of the state of Indiana, or of the United States, at any time, whether said sale under such decrees or judgment, may have occurred before or after the passage of said act. [§§55-2209 - 55-2215]. [Acts 1945, ch. 202, §1, p. 659.] 55-2210. Incorporatioa by purchasers or reorganizers.— In case of the sale of any railroad and its property (situ- ated wholly or partly within this state, or situated partly in this state and partly in an adjoining state) by virtue of any mortgage or mortgages or deed or deeds of trust, either by foreclosure or other judicial proceedings, or pur- suant to any power contained in such mortgage or mort- gages or deed or deeds of trust, or by the joint exercise of — said powers and authorities, the purchaser or pur- chasers thereof, their survivors or survivors, or he or his or they or their associates or assigns, may form a corpora- tion by filing in the office of the secretary of state a certi- ficate specifying the name and style of the corporation, the number of directors, the names of the first directors and the period of their service (not exceeding one [1] yedr), shy cheat PRORRES BIDY fed becca 208. 9 eV ROR Ry fede coo ane aR 8a the amount of original capital, and the number of shares into which said capital is to be divided; and in case of the ’ reorganization of any railroad and its property (situated wholly or partly within this state and whether owned prior to the reorganization proceedings by a corporation of this state or by a corporation of another state) in a proceeding under section 77 of the Act of July 1, 1898, entitled “An Act to establish a uniform system of bankruptcy through- out the United States,” as amended, any three [3] or more persons, being either directors or officers of the railroad, may form a corporation by filing in the office of the secre- tary of state a certificate specifying the name and style of the corporation. the number of directors, the names of the first directors and the period of their service (not exceeding one [1] year), the amount of original capital, and the number of shares. into which said capital is to be _ divided; and the persons signing said certificate, and their successors, shall be a body corporate and politic, by the | name’in said certificate specified, with power to sue and © be sued, contract and be contracted with, and maintain and operate the railroad in said certificate named, and transact all business connected with same; and a copy of such cer- tificate, attested by the signature of the secretary of state or his deputy, shall, in all courts and places, be evidence of the due organization and existence of the said corpora- tion and of the matters in said certificate stated. [Acts 1945, ch. 202, §2, p. 659.] [Acts 1865, ch. 20, An act to authorize, regulate and confirm the sale of railroads, to enable purchasers of the roads to form corporations and to exercise corporate powers, and to define their rights, powers and privilegés; to enable such corporations to pur- chase and construct connecting and branch roads, and to operate and maimtain the same. §§1 and 2, p. 66, as amended, Acts 1939, ch. 18, §§1 and 2, p. 659. ] — 56a — APPENDIX I. Section 77(f) of Bankruptcy Act 11 U.S.C. § 205(f) (Supp V to 1934 ed.): § 205(f)—Binding effect of confirmation; discharge of debtor from liabilities; issuance of securities. _ Upon confirmation by the judge, the provisions of the - plan and of the order of confirmation shall, subject to the right of judicial review, be binding upon the debtor, all stockholders thereof, including those who have not, as well as those who have, accepted it, and all creditors se- cured or unsecured, whether or not their claims shall have been filed, and, if filed, whether or not approved,’ includ- ing creditors who have not, as well as those who have, accepted it. Upon confirmation ‘of.the plan, the debtor and any other corporation or corporations organized or to be organized for the purpose of carrying out the plan, shall have full power and authority to, and shall put into effect and carry-out the plan and the orders of the judge relative thereto, under and subject to the super- vision and the control of the judge, the laws of any State or the decision or order of any State authority to the con- trary notwithstanding. The Property dealt with by the pian, when transferred and conveyed to the debtor or to the other corporation or corporations provided for by the plan, or when retained by the debtor pursuant to the plan, shall be free and clear of all claims of the debtor, its stockholders and creditors, and the debtor shall be discharged from its debts and liabilities except such as may consistently with the provisions of the plan be re- served in the order confirming the plan or directing such transfer and conveyance or reten'ion, and the judge may . toe? wy DT de vate” tna Nae — 57a — require the trustee or trustees appointed hereunder, the debtor, any mortgagee, the trustee of any obligation of the debtor, and all other proper and necessary parties, to make any such transfer or conveyance, and may require - the debtor to join in any such transfer or conveyance made by the trustee or trustees. Upon the termination of the proceedings a final decree shall be entered discharging the ‘trustee or trustees, and’ making such provisions as " may be equitable, by way of injunction or otherwise, and closing the case. Upon confirmation of a plan, the Com- mission shall, without further proceedings, grant author- «- ity for the issuance of any securities, assumption of obligations, transfer of any property, sale, consolidation or merger of the debtor’s property, or pooling of traffic, to the extent contemplated by the plan and not incon- sistent with the provisions and purposes of chapter 1: of Title 49 as on August 27, 1935, or thereafter amended. « The provisions of sections 77a to 77aa of Title 15 shall not apply to the issuance, sale, or exchange of any of the following securities, which securities and transactions therein. shall, for the purposes of said sections, be treated as if they were specifically mentioned in. sections 77¢ and 77d of Title 15, respectively: (1) All securities issued | pursuant to any plan of reorganization. confirmed by the judge in accordance with the provisions of this section; (2) all securities issued pursuant to such plan for the purpose of raising money for working capital and other purposes of such plan; (3) all securities issued by the debtor or by -the trustee or trustees pursuant to sub- section (c), clause (3) of this section; (4) all certificates of deposit representing securities of, or claims against, the debtor, with the exception of such certificates of de- posit as are issued by committees not subject to subsection (p) of this section. The provisions of subdivision. (a) of section 78n of Title 15 shall not be applicable with respect to action or matter which is within the provisions of sub- - section (p) of this section. [Act July 1, 1898, c. 541, § 77; as amended Mar. 3, 1933, c. 204, § 1, 47 Stat. 1474; Aug. 27, 1935, ce. 774, 49 Stat. 911; June 26, 1936, c. 833, 49 Stat. 1969.] So ross Sa tte ate eatery ek i a ES PR $ a --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_1803%3A3. Public record. Not legal advice.