Chicago, M. & St. P.Ry. Co. v. Des Moines Union Ry. Co.

• Decision Date: 23 May 1918
• Docket Number: 4885,4886.
• Citation: 254 F. 927
• Parties: CHICAGO, M. & ST. P. RY. CO. et al. v. DES MOINES UNION RY. CO. et al. DES MOINES UNION RY. CO. et al. v. CHICAGO, MILWAUKEE & ST. P. RY. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

254 F. 927

CHICAGO, M. & ST. P. RY. CO. et al. v. DES MOINES UNION RY. CO. et al.

DES MOINES UNION RY. CO. et al. v. CHICAGO, MILWAUKEE & ST. P. RY. CO. et al.

Nos. 4885, 4886.

United States Court of Appeals, Eighth Circuit.

May 23, 1918

Rehearing Denied October 28, 1918.

Burton Hanson, of Chicago, Ill. (J. C. Cook, of Cedar Rapids, Iowa on the brief), for complainant Chicago, M. & St. P. Ry. Co.

J. L Minnis, of St. Louis, Mo., for complainant Wabash R. Co.

J. L Parrish, of Des Moines, Iowa, and F. W. Lehmann, of St Louis, Mo. (W. E. Miller, of Des Moines, Iowa, on the brief), for defendants.

Before HOOK, SMITH, and STONE, Circuit Judges.

STONE Circuit Judge.

This is a bill by the Chicago, Milwaukee & St. Paul Railway Company and the Wabash Railroad Company against the Des Moines Union Railway Company, Frederick M. Hubbell, Frederick C. Hubbell, and F. M. Hubbell & Son. The complainants are railways passing through the city of Des Moines, requiring the use of terminal and depot facilities. Defendants are a terminal company at Des Moines and the individual owners of five-eights of its outstanding capital stock. Complainants, except for eight qualifying shares, own the other three-eights of such stock, the Wabash one-eighth, and the Milwaukee two-eighths. Complainants are now using the facilities of the terminal company under a 30-year contract, dated May 10, 1889, but related back to May 1, 1888, and expiring May 1, 1918. As holders of the stock control in the terminal company, the Hubbells have declared that, if complainants desire to use the terminals after the above date, they can do so only under such contract as may be made therefor. Believing that they have (aside from stock holdings) controlling interests and rights in the terminal property, complainants have brought their bill. The main object of the suit is to have determined the rights of the three companies in respect to the terminal property and operation. A subsidiary, but not unimportant, controversy is present regarding the right to several hundred thousand dollars accumulated from rentals, privileges and switching service by the terminal company, not arising from the use by nor service to the complainants.

The complainants allege that they are the real owners of the terminal property, and that defendant company simply holds the title in trust for them, or that the terminal ownership is subject to an easement in their favor, which gives them the right to use the property in perpetuity for terminal purposes, upon payment of the actual cost of operation, maintenance and taxes. The claim of the defendants is that the defendant company is the sole owner of the entire title to the terminal property, and also that complainants are estopped from questioning such title.

The decree of the court below adjudged that the defendant company had complete title to the terminal property, and that complainants had no interest therein, except as stockholders of the defendant company. But the court held that, growing out of provisions in that company's articles of incorporation, it owed to complainants and their successors a corporate obligation to furnish them terminal service upon equitable terms, and that such obligation was paramount to any obligation to serve other roads. From this latter provision in the decree defendants have prosecuted a cross-appeal. As to the accumulated earnings, the court below held that this fund belonged to the defendant company, and that the complainants had no interest therein, other than as shareholders in the defendant company. Complainants have appealed from the entire decree.

The determination of the main controversy is the definition of the legal effect of certain instruments and acts of the parties or their predecessors in interest. The determination of the right to the accumulated earnings depends upon the construction of the contract (dated May 10, 1889) under which the parties are now operating.

The Main Controversy.

A brief history is essential to any proper understanding and determination of the case. As to that part of their respective railways entering Des Moines, the Milwaukee is the remote successor of the Des Moines Northwestern Railway Company and the St. Louis, Des Moines & Northern Railway Company, while the Wabash is the remote successor of the Des Moines & St. Louis Railway Company. Prior to 1881 the Wabash, St. Louis & Pacific Railway Company was the owner of a railway line extending from St. Louis northwesterly to Albia, Iowa, about 68 miles southeasterly from Des Moines. J. S. Polk, J. S. Clarkson, F. M. Hubbell, and J. S. Runnells were at the same time interested in a short narrow-gauge line, the Des Moines Northwestern Railway Company, extending northwesterly from Waukee, a town about 15 miles westerly from Des Moines. Desiring to connect these lines at Des Moines, the Wabash and the above individuals entered into a contract December 8, 1880, providing for the organization by these individuals of a new company, the Des Moines & St. Louis Railway Company, and the building by it of a standard-gauge line from Albia to Des Moines, with funds furnished by the Wabash Company. On the same day the Wabash Company entered into contract with the Des Moines Northwestern Railway, with the expressed object of increasing and securing the 'through' traffic of that line. This it sought to do by agreeing to furnish funds for the extention of that line northward and westward, and by agreeing to provide a connection from Waukee with the contemplated Des Moines & St. Louis Railway tracks to be laid in Des Moines. In April, 1881, yet another company, the St. Louis, Des Moines & Northern Railway Company, was organized by the above individuals, and soon began constructing a narrow-gauge line from the northwest to Des Moines. A part of this line formed a link between Waukee and Des Moines, over which the Northwestern shortly thereafter secured running rights.

During the year 1881 and thereafter, the acquirement of right of way in Des Moines and the construction work there proceeded; the land being taken in the name of James F. How, James F. How, trustee, G. M. Dodge, St. Louis, Des Moines & Northern Railway Company, or the Des Moines & St. Louis Railway Company; that taken by How, or How, trustee, being paid for by the Wabash.

With the three lines entering or about to enter Des Moines and the land being acquired for terminals, the time and necessity for some terminal arrangement had arrived. The contract of January 2, 1882, was executed by the three railways and by the individuals (Dodge and How) in whose names part of the land had been taken. This contract is the basis of complainants' claims upon the main issue in the case. They contend that titles and rights defined therein remain unchanged in essentials. Defendants claim later departures radically affected such titles and rights as are to be found in the contract.

This contract, omitting signatures, was as follows:

'This agreement, made at the city of New York, the 2d day of January, 1882, by and between the Des Moines & St. Louis Railway Company, the Des Moines Northwestern Railway Company, and the St. Louis, Des Moines & Northern Railway Company, and the several individual signers hereto, witnesseth:

'First. The companies above named are engaged in the construction of railways converging at the city of Des Moines, and have heretofore agreed upon the purchase, construction and maintenance at their joint expense for terminal facilities in the city of Des Moines to be held and used in common as hereinafter provided.

'Second. In pursuance of said agreement, various purchases have been made of real property in the city of Des Moines in the name of James F. How, individually, James F. How, trustee, and Grenville M. Dodge, and certain additional property has been appropriated by the Des Moines & St. Louis Railway Company, and the construction of buildings and other improvements upon said premises has been begun.

'Third. It is mutually agreed by the parties above named, that the expense incurred by the purchases and improvements above mentioned and such others as may be hereafter made, shall be borne in the proportion of one-half by the Des Moines & St. Louis Railway Company and one-quarter by each of the other two companies above named. It is understood that a depot company may be organized and may take permanent charge of the property upon the terms herein set forth, and that said company may issue and deliver to the companies, parties hereto, its mortgage bonds to the amount of their respective portions of the cost of the said purchases and improvements.

'Fourth. The title to said property shall be and remain in a trustee to be named by agreement by said companies, but subject to the joint use and occupation of all of said railway companies upon the terms herein described.

'Fifth. The individual signers hereto hereby declare said purchases to have been made in their names upon the trusts above referred to, and agree to quitclaim and convey the same to said trustees upon demand and reimbursement.

'Sixth. The Des Moines & St. Louis Company shall at all times be charged with the police control, supervision and maintenance of said property, and the expense thereof shall be apportioned between it and the said other two companies, the apportionment to be determined by the use thereof which they shall respectively make as evidenced by the wheelage; payment of the sum required to be made monthly to the Des Moines & St. Louis Railway Company, within 10 days after rendition of an account stated.

'Seventh. The control of said property by the Des Moines & St. Louis Railway Company shall not extend to a determination of the character and extent of

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