THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, September 27, 1996 TAG: 9609270548
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: 38 lines
The North Carolina Railroad Co. has sued Norfolk Southern Corp. saying the big railroad has stopped paying its rent for using the 371-mile railroad.
Norfolk Southern failed to make its August and September rent payments worth $1.3 million, according to the suit filed this week in North Carolina's Wake County Superior Court.
A federal judge threw out a lease agreement between the two companies in July, saying that the lease wasn't approved by the required quorum of North Carolina Railroad's public shareholders. Dissident shareholders who opposed the terms of the lease boycotted the vote.
The track connecting Charlotte to Morehead City is 75 percent owned by the state of North Carolina.
``Norfolk Southern discontinued rental payments in August 1996 and continued to use our rail line to date, declining to continue payments on an interim basis except on terms that are unacceptable to the'' railroad, said John M. Alexander Jr., North Carolina Railroad's secretary and director.
The tiny railroad's board voted to sue Norfolk Southern despite the costs, Alexander said.
``These steps were necessary if we do not want Norfolk Southern to operate over our line without making payments,'' Alexander said.
The suit surprised Norfolk Southern, spokesman Bob Fort said. The railroad declined to comment until it can review the suit.
Norfolk Southern has leased access to the line since 1895 for $600,000 a year. The lease expired Jan. 1, 1995. The new 30-year lease called for rent payments starting at $8 million a year, adjusted for inflation.
North Carolina Railroad minority shareholders opposed the lease, saying annual rent provides only a 1.5 percent return on the railroad's $512 million of assets.
After the lease was thrown out by the court, the state hired financial advisers to explore a buyout of the minority shareholders. by CNB