Iowa v. Old Colony Trust Co.

215 F. 307 | 8th Cir. | 1914

ADAMS, Circuit Judge

(after stating the facts as above). Some general criticism of the proceedings in the foreclosure suit, of the management of the road by the receivers, of the issue of receivers’ certificates for $800,000, and the expenditure of that amount of money in the improvement or operation of the main line, hereinafter sometimes referred to as “the electric line” instead of upon the line sought to be abandoned, hereinafter sometimes referred to as “the steam line,” was indulged by counsel for appellant in their argument, but in their brief they reduce the questions for our consideration to a narrow compass. At the outset they disclaim any intention of seeking a review of (1) the order appointing the receivers, or continuing them in the operation of the road, (2) or of the order allowing the receivers to cease operation of the steam line pending the foreclosure proceeding, (3) or of the order authorizing the issue of receivers’ certificates, (4) or of the finding that the operation of the steam line had been at a loss. Two propositions only are argued in their brief: (1) That the District Court was without power or jurisdiction in the foreclosure suit to order an abandonment of the steam line; (2) that the law imposed upon the railroad company as a consideration for the rights, privileges, and franchises granted to it by the state the duty of continuously furnishing adequate service to the public throughout its entire line even if a pecuniary loss should be sustained thereby.

It will be convenient to consider these propositions in the reverse order in which they are stated.

-In view of the pleadings and record in this cause and of the disclaimer of counsel, we are relieved from any consideration of the causes which brought the steam line into the physical condition disclosed by the record, and for the purpose of determining whether the court below erred in ordering that line abandoned we must view its condition as it stood at the time of the hearing in the trial court, and,inasmuch as there is no evidence preserved in the record relating to that condition, we must take the facts disclosed by the pleadings and the findings of the trial court as expressed in its final order of December 7, 1912, authorizing the abandonment, to be true. They are stated with much detail in the preceding statement of- facts but may be summarized as follows: The short stretch of road sought to be abandoned is equipped for operation by steam only, while the balance or main part of the system is equipped for operation by electricity; there is little public necessity for.the continued operation of the steam line; it is in a wretched physical condition, unfit and dangerous for use and requiring the expenditure of a large amount of money to rehabilitate it; the railroad itself is hopelessly insolvent; neither it nor the receivers have money or means for raising money requisite for such a rehabilitation ; the continued operation of the main or electric line is of • large public importance; the steam line in and by itself does not pay its operating expenses, and to compel the receivers or any subsequent purchasers of the property to operate it would seriously embarrass if not prevent the successful operation of the electric line; the revenues of the entire line óf road do not justify the reconstruction and operation of the portion of it sought to be abandoned.

[1, 2] A railroad corporation is in an important sense a public corporation. It is dependent upon the public for its franchises to exist and carry on business, and in consideration' of these franchises it assumes and rqust perform certain duties and obligations for the benefit of the public. Among them, as a general rule, is the duty of maintaining its entire line of road in a reasonably safe and operative condition and for a fair consideration to carry passengers and freight over it at all reasonable times whenever requested to do so. These propositions are elemental and lay down a general rule which cannot, be gainsaid or denied. But there are some conditions which necessarily excuse full compliance with the requirements of these rules and, in our opinion, the present case affords a striking example of such-conditions. Here is a case where the line sought to be abandoned is not only not self-supporting, but its continued operation jeopards the successful operation of llie entire ystem of which it is merely a part. Moreover, its continued operation in its present condition is dangerous to life and property and there is no money or financial ability to improve its condition. Not only so, but there is little public necessity for ns continued operation, whereas, there is a great public necessity for the continued operation of the balance of the system.

In such circumstances she railroad company may abandon such an unprofitable and irreclaimable part of its road and neither the state nor unfortunate investors along the line can justly complain. They cannot force a railroad company to do the impossible Jack v Williams (C. C.) 113 Fed. 823; Id., 76 C C A. 165, 145 Fed. 281; Commonwealth v. Fitchburg Railroad Co 12 Gray (Mass.) 180; People v. Albany & Vermont Railroad Co , 24 N. Y. 261 82 Am. Dec 295; Morawetz on Private Corporations, § 1119 The principles announced in these cases seem especially applicable to railroads organized under and subject to the laws of the state of Iowa. In that state authority is directly conferred to change or remove a line of road after it has been permanently located and constructed. Such is the declared public policy of the state. Sections 209.4-2098, Iowa Code 1897. This statute is invoked for another purpose presently to be considered, and reference is now made to it only for the purpose of disclosing the policy of the state of Iowa, which, it is thought, is in essential harmony with the right to abandon a line oí road under certain conditions.

On the assumption that the receivers and other petitioners base their petition to abandon upon the provisions of sections 2092 to 2098 of the Code of Iowa, counsel for appellants construct an argument of this kind; that, as these sections provide that any railroad company, desiring “to change or remove” a line of its road after the same has been permanently located, may file a petition “in the district court in any county wherein the change or removal is proposed to be made,” and, after giving a certain specified public notice of the filing of such petition, may secure the relief contemplated by the statute, the proceeding is a special one and the district court of the state is a special tribunal designated for administering that relief and is the only tribunal authorized to do so.

Moreover, they contend that authority to “abandon” a part of a line of a road is not comprehended within the language “to relocate, change or remove,” and, as a result, that the District Court of the United States has no jurisdiction over the present inquiry.

While the petitioners, after setting forth with much detail the facts already referred to, touching the inability of the receivers or of the railroad company to rehabilitate and operate the steam line and other conditions already referred to, which in their opinion rendered the abandonment of the steam line advisable, pray for leave to proceed under and in accordance with the Iowa statute, they also pray for such other and further relief as the facts justify and to equity and good conscience belong.

We have already seen that on a state of facts such as disclosed by the pleadings and proof in this case any railroad company, would have been justified on general principles of the common law in abandoning a part of its road in similar condition to that sought to 'be abandoned in this case, and without doubt could have received judicial sanction for such abandonment at common law irrespective of any statute. The prayer for general relief in this case is quite sufficient to enable the court to grant all proper relief whether the right be based on statute or common law.

But it is earnestly contended that receivers placed in the custody of railroad property pending foreclosure proceedings cannot initiate proceedings for abandonment, and that the court itself, in a foreclosure suit, the main purpose of which is to enforce the lien of a mortgage, had no jurisdiction to order such abandonment. In the first place, the receivers were not the only parties moving for the abandonment. They did not alone initiate this proceeding. The railroad company itself, the Old Colony Trust Company, which represented the bondholders secured by the first mortgage, and the American Trust Company, which represented bondholders secured by the second mortgage, joined the receivers in their petition to abandon. All the actual and contingent interests in the property, therefore, desired the abandonment of the line in question and prayed the court to order it.

[3] Did the court have jurisdiction in the foreclosure suit to grant the relief prayed for ?

The road including the electric line and the steam line were in custodia legis to be cared for and preserved for the best interests of all concerned. The electric line 125 miles in length constituted in itself a system of considerable importance, both to the owners and to the public at large, and was in a fair operative condition; the steam line was short, of some but comparatively little public importance, was in a dilapidated, worn-out condition, unfit and unsafe for operation; no money was available for its restoration, and its operation in its then condition would have, imperiled the successful operation of the more important electric system; all reasonable efforts had been exhausted to secure such a lease, sale, or other disposition of the steam line as would result in its continued operation, and these had proved unavailing; efforts had been made to operate the line in a limited way to serve the convenience of the comparatively few interested patrons; neither the parties to the suit nor others interested had taken any steps to secure a sale of the entire road, electric and steam, so as to bring about an operative reorganization of it. In these circumstances, what could the court charged with the duty of caring for and protecting the whole property have done except order the abandonment of the steam line and the sale of its salvage? It certainly could not have ordered its restoration without any money or means for raising money to defray its costs. It could not have continued to operate it and endanger the lives and property of unfortunate patrons. It ought not to have done any of these things for the convenience of a few patrons only, when by so doing it would have imperiled the successful operation of the-electric line and inconvenienced many patrons. We think the court not only had the power to make the order complained of in the foreclosure suit, but that its exercise under all the facts and conditions of this case was wise and for the best interests of all concerned.

As the stretch of road extending 14 miles between Colfax and Newton via Goddard was in an- inoperative and irreclaimable condition, its sale to some connecting line that might reclaim and operate it was the most reasonable disposition that could have been made of it, and, as counsel for appellants make no special complaint against that part of the order appealed from, either in their argument or brief, we shall refrain from any further consideration of it.

The decree of the District Court is affirmed.