Badenhausen v. Glazebrook

The system of railroads known as the Seaboard Air Line Railway, consisting of about 4,000 miles in the Fourth and Fifth Judicial Circuits, was put in receivership by a bill in equity for mortgage foreclosures, in the Eastern District of Virginia, filed December 23, 1930. An ancillary receivership, with the same receivers, was had in the Fifth Circuit in the Southern District of Florida. Since that date provisions for reorganization of railroads in bankruptcy have been enacted, but no appeal to the powers of the bankruptcy court has been made. A plan for reorganization in equity was proposed and referred to a master and was under consideration for several years, including the recent years of war prosperity. After a number of modifications it was recommended for adoption by the master. The only objectors are appellants, who own about one-tenth of the bonds secured by mortgage on the Georgia & Alabama Railroad, lying in the Fifth Circuit and embracing about one-tenth of the mileage of the system. These objections were fully heard by the District Judge, of the Eastern District of Virginia, and were overruled by him, and a decree made to carry out the plan, with provisions for a sale under foreclosure of the several railroads if necessary to fix what was due nonconsenting lienholders, the decree not to operate unless confirmed and adopted also by the District Court in Florida. The District Judge in Florida heard the objectors, and entered a decree adopting and confirming that entered in the court of primary receivership. An appeal was taken by the objectors to the Circuit Court of Appeals of the Fourth Circuit from the decree of the Federal Court in Virginia, and the judgment was affirmed, with a thorough and well-considered opinion.Badenhausen et al. v. Guaranty Trust Co. et al., 4 Cir., 145 F.2d 40. An application for certiorari was made to the Supreme Court, and denied. Badenhausen v. Guaranty Trust Co. et al., 65 S. Ct. 440.