Summary
In Miller v. Climax Molybdenum Co., 10 Cir., 96 F.2d 254, 260, it was held not to apply to injunctions restraining interference under state court orders with property of a railroad in violation of orders of the Interstate Commerce Commission.
Summary of this case from Brown v. WrightOpinion
Nos. 1587, 1588.
April 18, 1938.
Appeals from the District Court of the United States for the District of Colorado; J. Foster Symes, Judge.
Injunction suits by the Climax Molybdenum Company, a Delaware corporation, against Victor A. Miller and another and against the South Park Railroad Company, a Colorado corporation, and another. From adverse orders, named defendants appeal.
Affirmed.
It seems helpful before taking up the suits brought by the Climax Molybdenum Company to first state material facts and the relation of the parties before it instituted these suits.
The Interstate Commerce Commission denied the application of the Colorado and Southern Railway Company to be relieved from further operation and to abandon its South Platte narrow gauge line between Waterton and Leadville, Colorado, a distance of 131.67 miles, together with several branch lines. Waterton is a station at the mouth of Platte Canon. From that point westerly to Leadville the line was through mountainous territory. It passes over the Continental Divide at an altitude of more than 11,000 feet. The order of the Commission was entered June 2, 1930, and provided that the application was "denied without prejudice". In its report it said: "We will deny the application without prejudice to its renewal by the applicant after the expiration of 36 months from the date hereof if it [the railway company] can show that the situation has not materially improved". Colorado Southern Railway Company Abandonment, 166 I.C.C. 470.
Thereafter on August 16, 1935, the Colorado and Southern Railway Company filed a petition (a) to reopen the case, (b) to amend its application by excluding therefrom its request for permission to abandon the west portion of its Denver-Leadville line between Leadville and Climax, 14.83 miles, and (c) to renew the application as amended.
The Railway Company had theretofore offered to donate the lines which it proposed to abandon or any portion thereof to any local interests or communities that might wish to operate them together with such rolling stock used thereon as might be necessary for continued operation, and to allow the operator entry into Denver. In August, 1935, when it asked that the case be reopened and amended its application it withdrew its offer to donate the lines and rolling stock. Further hearing was granted. Additional evidence was taken and on the amended application the Commission found:
"that the present and future public convenience and necessity permit abandonment by the Colorado Southern Railway Company of its narrow-gauge line of railroad and branches in Douglas, Jefferson, Park, Summit, and Lake Counties, Colo., described in the amended application. Our certificate will be issued with the provisions that it shall take effect and be in force from and after 60 days from the date thereof, and that within that period the applicant shall sell said line of railroad, or any portion thereof, to any person, firm, or corporation desiring to purchase the same for continued operation, at a price representing the fair net salvage value thereof. Nothing contained herein shall be construed as authorizing any purchaser to operate the line, or any portion thereof, in interstate commerce, without first securing a certificate therefor under section 1(18) of the Interstate Commerce Act [49 U.S.C.A. § 1(18)]."
The date of the Commission's order was October 12, 1936, and the effective date was later extended to April 12, 1937. See 217 I.C.C. 366, 382.
Between the two hearings before the Commission two corporations, each of them in embryo, made applications to the Commission to acquire the property of the Colorado and Southern Railway Company which it proposed to abandon, if it could obtain from the Commission the necessary orders in that respect, and each represented that it would continue its operation as a railroad. These offers on their part were doubtless made on the representations of the Colorado and Southern Railway Company that it would donate the rolling stock and equipment for that purpose. One of the prospective companies appeared as the Denver, Intermountain and Summit Railway Company, and the other as the Denver, Leadville and Alma Railroad Company, the latter represented by Mr. Victor A. Miller, appellant here in case No. 1587. The Commission gave them a hearing and in its report said:
"We think that neither applicant has made satisfactory proof of its ability to keep the lines in operation under present conditions, and both applications must be denied. The record indicates that independent operation at a profit would be impossible without either a great increase in traffic, of which there is no present prospect, or a very substantial reduction in charges.
"We find that the present and future public convenience and necessity are not shown to require the acquisition and/or operation by the Denver Intermountain Summit Railway Company or the Denver, Leadville Alma Railroad Company. * * * It follows that the applications must be denied."
See Denver Intermountain Summit Ry. Co. Proposed Acquisition, 193 I.C.C. 707.
There is another preliminary and material fact which we note here. On July 14, 1932, the Colorado Southern Railway Company and Victor A. Miller entered into a written contract which represented that Miller was acting for himself, his associates, and a corporation called the "Grantee", which Miller and his associates were to incorporate, whereupon it would become the party of the second part to the agreement. The contract recited that proceedings were then pending before the Interstate Commerce Commission for a certificate of public convenience and necessity authorizing the railroad company to abandon its line of road extending from Denver to Leadville, commonly known as its Platte Canon line together with certain branches thereof; that the Colorado and Southern offered to donate to the communities or local interests served thereby all or any part of the lines sought to be abandoned together with sufficient locomotives and rolling stock used thereon to operate the lines donated upon condition that the Colorado and Southern be relieved from all obligations to operate the same or any part thereof; that subject to the approval of the Interstate Commerce Commission and subject to the terms, provisions, conditions and modifications in said contract said Miller had accepted said offer for and on behalf of himself, associates and the "Grantee". Following the above recitations the contract reads:
"Article I. "Approval of Interstate Commerce Commission."1. The Articles of this agreement, following this Article I, shall not become effective or be in force unless and until the Interstate Commerce Commission shall by order authorize the C. S. to transfer and convey to the corporation (hereinafter referred to as the Grantee) the lines of railroad and equipment hereinafter described and relieve the C. S. from all obligations to thereafter maintain or operate said lines of railroad.
"2. The said Victor A. Miller (or the Grantee), within sixty days after the signing of this agreement, shall make, and thereafter diligently prosecute, an application for, and if possible obtain, such order from said Commission.
"Article II. "Conveyance of Lines and Equipment."1. The C. S. shall convey by quitclaim deed to said corporation, so to be incorporated by the said Victor A. Miller and his associates, which corporation is herein referred to as the Grantee, and which corporation shall become and be the party of the second part herein, all the following described narrow-gauge lines of railroad located in the State of Colorado (hereinafter collectively referred to as the South Park lines), together with the right-of-way therefor and the buildings, structures and other appurtenances thereunto belonging; and also the following described narrow-gauge equipment and rolling stock, tools and supplies, to-wit:"
(Here follows a general description of the line of railway from Denver to Leadville.)
"being a line 144.82 miles in length, more or less."
Seven branch lines are named, also rolling stock and equipment, including 16 locomotives and approximately 500 cars of various classes. On August 11, 1932, the Denver, Leadville and Alma Railroad Company applied to the Commission for authority to operate "trackage rights" over the line of the Colorado and Southern between Denver and Leadville. That application was heard with the application of the Denver, Intermountain and Summit Railroad Company to which we have already referred. The report is in 193 I.C.C. 707. We have already noted that in that report the application of each company was denied.
Victor A. Miller did not participate in the first hearing before the Commission (166 I.C.C. 470), but he did participate in the other two. The Climax Molybdenum Company appeared in all three of the hearings, and protested the granting of the orders sought in the first two. When the Colorado and Southern Railway Company eliminated from its petition that part of its line from Climax to Leadville, the Climax Molybdenum Company made no further objection. It owns and operates a mine at the station of Climax which produces the rare metal molybdenum used in steel alloys during the World War and later to a constantly increasing extent in automobile parts, bearings, rolls, mining machinery, etc. The Commission so found in its first hearing. It found that the production of molybdenum steel increased from 7500 tons in 1921 to 400,000 tons in 1928, which exceeded that of other alloys such as chrome, nickel and tungsten; that 95% of the world's supply of that metal is produced in the United States, and 85% of it at Climax; that the average molybdenum steel is composed of five pounds of molybdenum to one ton of steel. The Climax Company began its operations in 1916 because of the world's shortage of tungsten and operated it for war purposes until the time of the Armistice. It then for several years expended over $100,000 a year experimenting in the endeavor to develop a peace time market. Active operations were resumed in 1924 and have increased rapidly due in large part to the adoption of this metal by the Timken Roller Bearing Company. In 1928, 321,448 tons of crude ore were mined and milled in comparison with 92,263 tons in 1925. Rail shipments for export amounted to 124 carloads. The inbound traffic of the mine consisted of 375 carloads. Its investment in the property at the time of the first hearings was from three and one-half to four million dollars. Its mill at that time was treating over a thousand tons of ore daily and with its enlarged plant could treat 1,500 tons a day. The last inventory of its ore reserves made January 1, 1929, which was based on nearly 12,000 feet of diamond drill holes and eight miles of underground workings showed 20,158,000 tons, but the limits of the deposit were not then known. It was testified that the tonnage blocked out at the time of the hearing would be sufficient for 40 years of operation at the rate of half a million tons a year. Only about one ton of concentrates is derived from a hundred tons of ore. These shipments from the Climax were about 500 carloads a year. The Commission said that the interest shown in the plant by the Timken Roller Bearing Company, the Central Alloys Steel Corporation, the United States War Department, and the widespread market which has been developed entitled the Climax enterprise to be regarded as important, that its stability is indicated from the fact that the production cost of concentrates ready for shipment was about $300 a ton and their value about $600 a ton. The mine is located at Fremont Pass, an elevation of 11,319 feet, where much trouble is encountered in highway transportation because of snow. By highway it is only 18 miles down hill to Leadville, but great difficulty is experienced in keeping the highway open. As an example, it was closed from November 14, 1927, to May 20, 1928, and it was testified that the mine could not be operated economically without rail transportation. When shipments reach Leadville they are transferred to the Denver and Rio Grande Western for destination, either to other states or abroad. Practically all the shipments in and out are interstate. These facts induced the Commission apparently to leave the 15 miles of line from Climax to Leadville with the Colorado and Southern Railway Company without right of abandonment and for continued future operation. It will be borne in mind that authority to abandon the line was given to the Colorado and Southern Railway Company by the Commission's report of October 12, 1936, excluding therefrom, however, that part from Climax to Leadville. Said abandonment by subsequent orders was continued to and to become effective on April 12, 1937.
In March, 1937, Victor A. Miller instituted a suit in the Colorado district court at Denver in his own name as plaintiff against the Colorado and Southern Railway Company as defendant in which he sought specific performance of his contract of date July 14, 1932, that is, he sought a decree ordering the railway company to convey to him the railroad and its equipment. He also asked the court in that suit to appoint a receiver "to take over and operate the property which is the subject of this action." We gave that contract some attention supra. Miller included in his complaint by general and specific description the line of railroad and right of way from Sheridan Junction, which is a station on said road a short distance out of Denver, to the City of Leadville in Lake county, also its buildings, structures, other appurtenances thereunto belonging, and a large part of its rolling stock, locomotives and cars.
The South Park Railroad Company, a newly chartered Colorado corporation, instituted its suit against the Colorado and Southern Railway Company in the state district court at Breckenridge, Summit county, Colorado, on April 12, 1937. It was chartered a short while before that date. It admits that it was launched for the purpose of acquiring the South Platte narrow gauge railroad extending from a point near Denver to Leadville, being a line 144.82 miles in length, which is the mileage named in the contract of July 14, 1932. The South Park Company alleged in its complaint that the Colorado and Southern had been the owner and had used the line for railroad purposes, but it had been informed and believed that the Colorado and Southern Railway Company had abandoned the line, had permanently abandoned railroad operations, and had by contract for a valuable consideration agreed to deed and convey it, and that its present interest in the property was the naked, legal title without substantial value. The alleged purpose of the suit was to condemn the line east of the station Climax and a large part of its rolling stock and thus acquire it as an intrastate common carrier. It attached a copy of the contract with Miller of July 14, 1932, to its complaint.
Victor A. Miller, of Denver, Colo., pro se (Thomas Keely, Rodney J. Bardwell, Jr., Robert S. Palmer, and Erskine R. Myer, all of Denver, Colo., on the brief), for appellants.
Walter E. Schwed, of Denver, Colo. (Barney L. Whatley, of Denver, Colo., on the brief), for appellee.
Before LEWIS, PHILLIPS, and WILLIAMS, Circuit Judges.
On April 7, 1937, the Climax Molybdenum Company filed its bill of complaint in the United States District Court against Miller and the Colorado and Southern Railway Company, being cause here numbered 1587. It alleged the facts with reference to the written contract between Miller and the Colorado Southern Railway Company of July 14, 1932, herein above partly quoted; that Miller had sued that railway company in the state court for specific performance of that contract and for the appointment of a receiver of the railway company property; that to turn over the entire line from Waterton to Leadville or that part of it from Climax to Leadville to Miller or to a receiver would be in effect in violation of the orders of the Interstate Commerce Commission and would cause great injury and damage to the Molybdenum Company. It alleged that it had no plain, speedy or adequate remedy at law, and it asked that both Miller and the Colorado and Southern Railway Company be enjoined and restrained, the first from receiving the railway property of the Colorado and Southern Railway Company or procuring a receiver therefor and the second from conveying or transferring to Miller any part of the property or changing the present method of operating that segment without authority therefor from the Interstate Commerce Commission first had and obtained.
Miller answered and attacked the federal court's jurisdiction and alleged that the suit was wrongfully brought to avoid the effect of section 265 of the Judicial Code, 28 U.S.C.A. § 379. Other attacks and criticisms are made on the bill. He insisted in his answer that under his contract of July 14, 1932, he was entitled to the appointment of a receiver of the railway and a decree for specific performance of said contract and to the rolling stock described in said contract; that service between Climax and Leadville had not been impaired and can not be impaired by the state court litigation.
On April 16, 1937, the Molybdenum Company brought its suit in the United States District Court for the District of Colorado against the South Park Railroad Company and the Colorado and Southern Railway Company, here numbered 1588. It again alleged the facts that have been stated with reference to the procedures before the Interstate Commerce Commission and the orders that it had made. It further alleged the contract of July 14, 1932, between Miller and the Colorado and Southern and the character of the suit brought by the South Park Railroad Company in Summit county, Colorado, seeking to condemn the line of railway and a large part of the equipment used in its operation for the purpose of operating that part of it and its branches east of Climax; that on the day that suit was filed, April 12, 1937, the South Park Railroad Company, plaintiff, procured an ex parte order of said state district court that upon deposit by it in court of $1,000 the South Park Railroad Company might take possession of and use during the pendency and until final conclusion of said condemnation suit the said part of said line of railway, its branch lines and certain specified equipment consisting of engines, cars and snow plows; that the complainant in that case made the deposit of $1,000. It was alleged that if the South Park Railroad Company is permitted to take possession of the equipment so ordered and if the Colorado and Southern Railway Company is permitted to deliver the equipment specified in said order to it, that the Molybdenum Company will be unable to procure the necessary rolling stock to serve its customers or operate its mining property and will be compelled to cease its operations, close its plant and discharge its employes; that it will be left without railroad facilities and no one would be equipped to operate the line between Climax and Leadville; that the conduct of the South Park Railroad taken and threatened would be in violation of and contrary to the previous orders of the Interstate Commerce Commission; that the South Park Railroad Company relies on said contract that Miller made with the Colorado and Southern Railway Company on July 14, 1932, said Colorado and Southern Railway Company having by said contract conveyed the beneficial title to the equipment as well as the road. The Climax Molybdenum Company prayed for injunctive relief against the South Park Railroad Company and the Colorado and Southern Railway Company enjoining the former from receiving, possessing, taking or in any manner acquiring any of said railway equipment, and enjoining the latter from delivering any of said equipment to the South Park Railroad Company.
The South Park Railroad Company alleged, among other things, that two days after the state court in Summit county made its order that the South Park Railroad Company might take possession of the rolling stock it made its offer that it would release and quit claim to the Colorado and Southern Railway Company such of its equipment as would be necessary to its operation of the line between Climax and Leadville in order that it might continue to serve the requirements of the Molybdenum Company, although, it alleged, the Molybdenum Company "has no vestige of right, title or interest in said rolling stock and equipment through which it may compel the South Park Company to turn over and deliver to the Colorado and Southern Railway Company such rolling stock and equipment should the South Park Railroad Company come into legal ownership, possession and control thereof; that it is willing and offers to rent and lease on reasonable terms so much of the equipment and rolling stock as may be necessary to the operations which the Colorado and Southern Railway Company is required to maintain upon that portion of the line between Climax and Leadville." The South Park Railroad Company opposed the granting of the injunctive relief sought by the Molybdenum Company. The Colorado and Southern answered: "that if said South Park Railroad Company is permitted to take possession of the equipment specified in said order (of the district court of Summit county), this defendant will be unable to provide and furnish all the rolling stock required to handle and transport the business and traffic of the plaintiff."
On application the Colorado and Southern Railway Company and Victor A. Miller were enjoined as sought in the first suit brought by the Molybdenum Company, and the South Park Railroad Company and the Colorado and Southern Railway Company were enjoined as sought in the second suit brought by the Molybdenum Company.
Plainly, the institution of these two suits by the Climax Molybdenum Company was caused by the bringing of the two suits in the state district court of Colorado, one by Victor A. Miller against the Colorado and Southern Railway Company, a Colorado corporation, and the other by the South Park Railroad Company, a Colorado corporation, against the Colorado and Southern Railway Company.
The Colorado and Southern Railway Company operated for many years a narrow gauge railway from Denver, Colorado, westward through mountainous territory to Leadville, Colorado, consisting of approximately 150 miles of mainline and several branch lines. Several years ago it instituted proceedings before the Interstate Commerce Commission to obtain an order permitting it to abandon the line from Denver to Leadville and its branch lines. It had and still has approximately 900 miles of other railway in Wyoming, Colorado and New Mexico and perhaps a small amount of mileage in some of the adjoining states. Its first application for abandonment was denied with leave given to renew it. Finally on renewal it was granted with this exception, the Interstate Commerce Commission refused to grant abandonment of about fifteen miles of the mainline extending from the station Climax westwardly to Leadville. That was because appellee in cases here on appeal has a large mine at Climax that produces the rare metal molybdenum used in the manufacture of steel. Its only outlet for shipping is over that segment of the road, thence over the Denver Rio Grande Western and connecting carriers its products reaches all parts of the world. The facts in that respect and the great increase in the use of molybdenum are set forth above and apparently was the inducement for the Commission's final action.
We think each of the suits brought in the state court against the Colorado and Southern Railway Company by Miller and by the South Park Railroad Company threatened violation of the order of the Interstate Commerce Commission that the Colorado and Southern should continue operation of that part of the line between Climax and Leadville. The Colorado and Southern concedes in its answer here that it is its duty in obedience to the orders of the Commission to continue that operation, but it says that it can not do so if through the state court possession of that part of the rolling stock which the South Park is seeking to obtain is in fact obtained by it, and it is obvious if Miller should succeed in placing a receiver in possession and charge of that part of the road that also would prevent or interfere with its operation by the Colorado and Southern Railway Company. Miller also in his state court suit seeks decree for specific performance of his contract of July 14, 1932. In this court by affidavit in opposition to the issuance of the writ, in his answer, and in his argument pro se he concedes that he can not interfere with that part of the line, but he did not offer to amend his bill in the state court by eliminating the Climax-Leadville segment from that suit. The South Park Railroad Company in its answer to the bill of the Climax Molybdenum Company offered to lease to the Colorado and Southern Railway Company the necessary rolling stock out of that described in Miller's contract that might be needed in the continuation of operations of that segment and then added as a separate defense that Molybdenum Company had a plain, speedy and complete remedy at law in that it may compel the Colorado and Southern Railway Company to procure necessary cars from the South Park Company or others by normal, customary legal processes by application to and proceedings before the public utilities commission of the state of Colorado or the Interstate Commerce Commission of which Molybdenum Company must avail itself prior to an application to this court. We do not doubt that the District Judge exercised a wise discretion in granting the writs.
Both appellants contend that this court is without jurisdiction. Title 28 U.S.C.A., § 41, pars. (8) and (27) give the District Court jurisdiction:
"Of all suits and proceedings arising under any law regulating commerce," and
"Of all cases for the enforcement * * * of any order of the Interstate Commerce Commission."
Title 49 U.S.C.A. § 1 (18), (19) and (20) makes provision for the abandonment of lines or parts of lines of railway. They require procedure before the Interstate Commerce Commission. Paragraph (20) contains this:
"Any construction, operation, or abandonment contrary to the provisions of this paragraph or of paragraph (18) or (19) of this section may be enjoined by any court of competent jurisdiction at the suit of the United States, the commission, any commission or regulating body of the State or States affected, or any party in interest; and any carrier which * * * knowingly authorizes, consents to, or permits any violation of the provisions of this paragraph or of paragraph (18) of this section, shall upon conviction thereof be punished," etc. Lucking v. Detroit Nav. Co., 265 U.S. 346, 44 S.Ct. 504, 68 L.Ed. 1047.
It is argued with much insistence that both suits brought by the Molybdenum Company fly in the face of the prohibition of section 379, 28 U.S.C.A., which provides that the writ shall not be granted by any court of the United States to stay proceedings in any court of a state. But the writ does not stay court proceedings in either case brought in the state court. It did not seek a stay of them. Each stay order and each writ specified future acts by the parties to those suits. Neither writ commanded, directed or prohibited either court or its officers to do, not to do, or refrain from doing any thing. Moreover, that section of the statute is not one of jurisdiction. Smith v. Apple, 264 U.S. 274, 44 S.Ct. 311, 68 L.Ed. 678; National Surety Co. v. State Bank, 8 Cir., 120 F. 593, 61 L.R.A. 394; Chicago, R.I. P. Co. v. Callicotte, 8 Cir., 267 F. 799, 16 A.L.R. 386.
The District Judge delivered an opinion in passing on the issue whether writs of injunction should issue. It has been certified up with the record. In reference to the South Park Railroad Company he said this:
"It appears there has been very recently organized a corporation known as The South Park Railroad Company, defendant in the case. It has no paid in capital, has never owned or operated a railroad, and there is no showing here of its ability to operate in the event it should acquire any part or all of this railroad."
That company must have been acting with, under the direction of, or in collusion with Miller, because Miller attached the contract of July 14, 1932, with the Colorado and Southern to his complaint in the state court, and within less than a month thereafter the South Park Railroad Company filed its suit against the Colorado and Southern Railway Company in the state court in Summit county and it attached that same contract to its complaint. Each suit, in our opinion, was brought to circumvent and avoid the rulings of the Interstate Commerce Commission.
The orders appealed from are affirmed.