Opinion
No. 151.
November 4, 1929.
Appeal from the District Court of the United States for the District of Vermont.
Suit by the Canadian National Railway Company against the Central Vermont Railway Company, wherein George A. Gaston and another were appointed receivers for defendant, and the Rutland Railroad Company intervened. From an order requiring the receivers to adopt and perform an executory contract with intervener, the receivers appeal. Affirmed.
The appellants were appointed receivers of the Central Vermont Railway Company December 12, 1927. They took over the operation and management of a railroad engaged in part in interstate commerce, and found that in connection with its interstate business it was using a trestle and drawbridge across Lake Champlain from Alburg, Vt., to Rouses Point, N.Y., together with about three-fourths of an acre of land at the Rouses Point end of the trestle. This property was being used under the provisions of a certain contract and the amendments thereto, made by the Central Vermont Railway Company with the predecessors of the Rutland Railroad Company, dated May 2, 1900, and a certain lease dated August 16, 1900, for which the above-mentioned contract had provided.
The arrangement evidenced by these writings permitted a joint use of the trestle and drawbridge by the two railroads, each having a separate track, and the required maintenance expenses were to be paid by them on the basis of proportionate use, with a minimum payment of 25 per cent. of the maintenance cost. In addition to this, the Central was required to pay to the Rutland, as rental for the land above mentioned, the sum of $1,000 per year.
The receivers found that the Central used the trestle and drawbridge only on one of its branch lines, while the Rutland made main line use of it, and consequently the cost of operation per car for the Central was greatly in excess of such cost to the Rutland under the arrangement in force. They also considered the rental price of the land excessive, and, having thus determined that the contract was burdensome, notified the Rutland by letter, dated June 8, 1928, of their election not to adopt the contract, and to disclaim all rights and privileges under it. On the same day the general manager of the Central notified the Rutland that, on and after June 11, following, the Central would cease to operate its trains over the bridge and leased land, and would discontinue maintenance. The Rutland wrote the Central in reply, denying its right to abrogate the contract, and giving notice that the bridge would be maintained with the Central's share of such expenses charged to it. On June 12, 1928, the receivers telegraphed the Rutland reaffirming their election not to adopt the contract, and stating that upon discontinuing operations under it they would at once resume the running of their trains between Alburg, Vt., and Rouses Point, N.Y. For using the contract property in so doing, they offered to pay reasonable compensation without in any way affecting the contract. The Rutland replied, by telegram the same day, that any use of the property would be treated as pursuant to the contract.
The receivers did run such trains, and, after some further exchange of communications, in which the receivers asserted and the Rutland denied the right to elect not to adopt the contract, this intervening petition was brought in the receivership action. After hearing, the District Court found that the terms of the contract and lease were fair, reasonable, and beneficial, and held that the receivers had and should adopt them.
J.W. Redmond, of Newport, Vt., and Horace H. Powers, of St. Albans, Vt., for appellants.
Edwin W. Lawrence, of Rutland, Vt., for appellee.
Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.
The District Court in part proceeded on the theory, as claimed by the appellee, that the receivers could not repudiate the contract and lease until they were relieved of the necessity for using the property involved in carrying out their obligation under the law to operate the branch road. It is admitted by the receivers that neither at or before the time they gave notice of their election to abrogate had they been relieved, nor had they filed any petition to be relieved, by the Interstate Commerce Commission of such liability; but they insisted that they had the right to elect not to adopt the contract notwithstanding this, and say, in effect, that their subsequent use of the property is immaterial, because it was involuntary, in that it was compelled by their necessity to avoid abandonment of the line.
Granting the undoubted duty of the receivers to operate this branch line until lawfully relieved from so doing (49 USCA § 1, par. 18), it does not follow that they could not elect to repudiate the existing contract when they did. Ordinarily, receivers have a reasonable time in which to elect whether or not to adopt executory contracts. This, of course, includes leases. Sparhawk et al. v. Yerkes et al., 142 U.S. 1, 12 S. Ct. 104, 35 L. Ed. 915; American File Co. v. Garrett, 110 U.S. 288, 4 S. Ct. 90, 28 L. Ed. 149; United States Trust Co. v. Wabash Western Railway, 150 U.S. 287, 14 S. Ct. 86, 37 L. Ed. 1085; Butterworth v. Degnon Contracting Co., 214 F. 722 (C.C.A.2d). No question is made but that the receivers gave notice of their election not to adopt the contract within a reasonable time, and no user of the property up to the time of such notice affected their right to make this election. Butterworth v. Degnon Contracting Co., supra. Indeed, their election was within the time limited by their order of appointment for taking such action.
Having exercised their right to terminate the contract and lease, and given notice of such election in unmistakable language, the express contractual relations between the parties thereto were brought to an end. When they had thus renounced their express contractual right to use the property, the receivers gave notice of their intention to use it, and offered to pay a reasonable price for such use. They not only took advantage of their ability to end an existing contract, but undertook to make a new one on terms which they dictated. They now seek to maintain their right to name the new terms, on the ground that they were bound by law to continue to operate their trains over the bridge and land. Yet this duty to operate their trains did not carry with it the right to use property of the Rutland Railroad in so doing on terms imposed upon the owner without its consent. That company insisted, and promptly notified the receivers, that any use by them of the property must be in accordance with the terms of the contract. Continued use after such notice fixed the terms of the user, for the lessor and not the lessee was then empowered to dictate the terms of the additional use of the property. Black v. La Porte (C.C.A.) 271 F. 620-623; Amsden v. Blaisdell et al., 60 Vt. 386, 15 A. 332; 16 R.C.L. 688.
What happened is plain. The receivers needed to use the property, at least until relieved by the Interstate Commerce Commission of their obligation to operate the branch road. They considered the existing arrangement for use onerous, brought it to an end, and offered the Rutland a new rate of payment on the basis of whatever would be reasonable. The Rutland then could have treated further use of the property by the receivers either as an act of trespass or tenancy. Black v. La Porte, supra. It elected to treat it as a tenancy. It could then accept the terms of payment offered by the receivers, or fix its own terms. It did the latter by requiring the receivers to adopt the arrangement theretofore existing, if they used the property. The receivers then, knowing that their offer of new terms of payment had been rejected, had the choice of using the property on the Rutland terms or vacating it. They chose to use it, and thereby reinstated and adopted the contract and lease they had repudiated.
That their choice was compelled by the necessity of operating the road until they obtained leave to abandon it has no bearing now on the effect of their action. As previously pointed out, they had a reasonable time in which to decide whether or not to adopt the existing arrangement. They repudiated it within such time, but did so when they knew they must continue to use the property for a while, at least, under some arrangement. Because their own new terms for use were refused, they had to accept those which were offered. We are not called upon to decide whether a reasonable time to determine to, or not to, adopt the contract, would have included whatever delay an application to the Interstate Commerce Commission for leave to abandon and its decision would have required, because the election was made without any such application. The reasonableness of permitting receivers in the position of these an opportunity to find out whether they could do without the use of the property involved, provided they took timely action to that end, before having to decide whether or not to adopt a contract for its use, is not without force, however.
The trial court, after hearing, found that for the welfare of the Central the receivers should adopt the contract and lease. While the evidence was by no means all one way on this subject, it was sufficient to support the finding, and we accept it accordingly.
Finally it is claimed that the receivers could not appeal from the order, because it was administrative and rested upon the discretion of the court that appointed them. Bosworth v. Terminal Railroad Association of St. Louis, 174 U.S. 182, 19 S. Ct. 625, 43 L. Ed. 941, is ample authority in support of the right to appeal, since this claim was by an intervener and was antagonistic to the rights of both parties to the original suit.
Decree affirmed.