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Chicago, Milwaukee R.r. v. Harris Trust

OPINION FILED AUGUST 11, 1978.

CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC RAILROAD COMPANY, PLAINTIFF-APPELLEE,

v.

HARRIS TRUST AND SAVINGS BANK ET AL., DEFENDANT-APPELLEES. — (CLEMENT J. MCDONALD, INTERVENING DEFENDANT-APPELLANT.)



APPEAL from the Circuit Court of Cook County; the Hon. DONALD J. O'BRIEN, Judge, presiding.

MR. PRESIDING JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:

This appeal arises from an order denying appellant's petition for leave to intervene as a party defendant in a declaratory judgment action brought by the Chicago, Milwaukee, St. Paul and Pacific Railroad Company (Milwaukee Road) against the Harris Trust and Savings Bank (Harris) and The First National Bank of Chicago (First National), as trustees under the Milwaukee Road's General Mortgage and Income Debenture Indenture respectively. The issues are whether this court has jurisdiction to hear the appeal and, if so, whether the trial court erred in denying the petition to intervene.

Milwaukee Road brought the declaratory judgment action to seek an interpretation of its General Mortgage and Income Debenture Indenture, both of which provided that consolidated income available for fixed charges and the additions and deductions required to be made shall be determined in accordance with the Uniform System of Accounts (49 C.F.R. par. 1201 (1977)), prescribed by the Interstate Commerce Commission (I.C.C.). In September of 1974, the I.C.C. released a report and order amending the Uniform System of Accounts to require railroads to use the equity method of accounting, instead of the cost method, for all investments in the common stock of affiliated companies in which the railroad owns 20 percent or more of the outstanding voting stock (the Equity Method of Accounting for Certain Long-Term Investments in Common Stocks, I.C.C. Order No. 35949). The equity accounting order was made effective as of January 1, 1974.

Both Harris and First National made formal demands upon Milwaukee Road to follow the I.C.C. Order and (1) to include in its income for 1974 and subsequent years the undistributed earnings of all companies in which it owns 20 percent or more of the voting stock; and (2) to reflect its proportionate share of the undistributed earnings and losses of such affiliated companies from the date of acquisition to 1974, for the purpose of calculating net income available to pay the contingent interest on the railroad bonds. Milwaukee Road informed Harris and First National that the equity accounting order did not require any changes to be made in the cost method used to determine available net income and that it would not include its proportionate share of undistributed earnings of affiliated companies for any year. Milwaukee Road then instituted the declaratory judgment action requesting the court to interpret the provisions of the General Mortgage and Income Debenture Indenture in relation to the I.C.C.'s equity accounting order.

Appellant Clement J. McDonald (McDonald) is an owner of General Mortgage 4 1/2 percent Convertible Income Bonds Series B (Series B bonds). He filed a petition seeking to intervene in the declaratory judgment action, alleging that he and other Series B bondholders were not adequately represented by the trustee, Harris, and that they would be bound by a judgment or decree entered against the trustee. The petition also asserted that on March 20, 1974, McDonald had filed a class action in the Federal court against Milwaukee Road and others not involved in this appeal, alleging inter alia that the railroad improperly failed to include the earnings of certain subsidiaries in its computation of available net income for the years 1969 through 1974. McDonald was recognized as the representative of Series B bondholders in that action, which was commenced prior to both the I.C.C. order and the declaratory judgment action, and in no way does it involve the effect of the I.C.C. order. The issues in the Federal action concern whether certain subsidiaries are "railroad subsidiaries," as that term is defined in the General Mortage, so that their income should have been included in calculating available net income for the years 1969 through 1974, and whether certain loans made by the subsidiaries to Milwaukee Road should be treated as dividends.

In his petition to intervene here, McDonald asserts that the bondholders and Harris, the general mortgage trustee, have adverse interests because Harris breached its duties by failing to object to the accounting procedures; and that the general mortgage trustee cannot adequately represent the bondholders because it might not prevent determinations of material fact which might be adverse to the Federal action and be binding on the bondholders since they are in privity with the general mortgage trustee.

Milwaukee Road, Harris and First National all opposed the intervention of McDonald on the basis that the bondholders' interests were adequately represented by the trustee and that McDonald was attempting to add new issues in the declaratory judgment action.

The trial court denied the petition to intervene on three grounds: (1) McDonald and the other bondholders were adequately represented by the trustee; (2) the bondholders were adequately protected in the Federal action; and (3) McDonald was attempting to add many new issues to the declaratory judgment action. The order denying leave to intervene was entered on June 5, 1975. On October 7, 1975, the court entered an order finding that there was no just reason to delay appeal from the order denying the petition, and McDonald filed a notice of appeal on October 20, 1975.

OPINION

• 1 Considering first the question of our jurisdiction to hear this appeal, we note that where a judgment does not dispose of the entire controversy, the judgment is not appealable unless the trial court makes an express finding required by Supreme Court Rule 304(a) that there is no just reason to delay enforcement or appeal (Ill. Rev. Stat. 1975, ch. 110A, par. 304(a)) and that, if Rule 304(a) applies, the notice of appeal must be filed within 30 days of the order finding that there is no just reason to delay an appeal (Defenbaugh v. Streator Canning Co. (1967), 80 Ill. App.2d 423, 224 N.E.2d 487).

Harris contends the order of June 5, 1975, denying leave to intervene, was a final, appealable order and, since McDonald did not file a notice of appeal within 30 days thereafter, it maintains that we have no jurisdiction. McDonald argues that the order was not appealable until October 7, 1975, when the trial court made the specific finding that there was no just reason to delay appeal and that our jurisdiction attached when he filed a notice of appeal within 30 days of that finding.

It appears that in actions involving multiple parties and/or multiple claims for relief, the question as to whether a denial of a petition to intervene is in and of itself a final judgment under Rule 301, which does not require a Rule 304(a) finding to be appealable prior to the disposition of the related litigation, is not settled in Illinois.

The only supreme court decision in this State to discuss the issue did so when construing section 50(2) of the Civil Practice Act (Ill. Rev. Stat. 1961, ch. 110, par. 50(2)), which is the forerunner of Rule 304(a). In that case, Board of Trustees v. Timpone (1963), 28 Ill.2d 255, 190 N.E.2d 786, an eminent domain action, it was specifically held that section 50(2) *fn1 was applicable to denials of petitions to intervene in actions involving multiple parties or claims. Timpone, however, has not been considered dispositive by certain of the appellate courts; nonetheless, the reasoning of Timpone ...


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