276 U.S. 518 (1928), 174, Black & White Taxicab & Transfer Company v. Brown & Yellow Taxicab & Transfer Company

Docket Nº:No. 174
Citation:276 U.S. 518, 48 S.Ct. 404, 72 L.Ed. 681
Party Name:Black & White Taxicab & Transfer Company v. Brown & Yellow Taxicab & Transfer Company
Case Date:April 09, 1928
Court:United States Supreme Court
 
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Page 518

276 U.S. 518 (1928)

48 S.Ct. 404, 72 L.Ed. 681

Black & White Taxicab & Transfer Company

v.

Brown & Yellow Taxicab & Transfer Company

No. 174

United States Supreme Court

April 9, 1928

Argued January 13, 16, 1928

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Syllabus

A Kentucky railroad corporation made a contract with the plaintiff, a Tennessee corporation carrying on a transfer business at a city

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in Kentucky whereby it granted to plaintiff the exclusive privilege of going upon its trains, into its depot, and on its surrounding premises to solicit transportation of baggage and passengers, and assigned a plot of ground belonging to it for the use of plaintiff's taxicabs while awaiting the arrival of trains, the plaintiff, on its part, agreeing to render certain services and to make monthly payments. The term of the contract was for one year, to continue for consecutive yearly periods until terminated by either party on thirty days' notice. Plaintiff was the successor of a Kentucky transfer corporation of the same name which had had a like contract with the railroad company and which was dissolved after its shareholders had incorporated the plaintiff and caused the property and business to be transferred to it. The purpose of the change of corporations and contracts, cooperated in by the railroad company, was to create a diversity of citizenship. In a suit brought by the plaintiff in the federal court in Kentucky, on the basis of diverse citizenship, to restrain another transfer corporation, created in Kentucky, from soliciting business and parking vehicles on the railroad premises in violation of plaintiff's exclusive contract, and to restrain the railroad company from permitting such violations, Held:

1. That the suit was not subject to dismissal under Jud.Code § 37, since the controversy was real and substantial, the plaintiff was the real party in interest, and the requisite diversity of citizenship existed. The cooperation between the plaintiff and the railroad company to have the rights of the parties determined by a federal court was not improper or collusive within the meaning of § 37. P. 524.

2. The contract did not exceed the railroad company's powers under its Kentucky charter. P. 525.

3. The contract is consistent with the provision of the Kentucky Constitution, § 214, forbidding any railroad company to make any exclusive or preferential arrangement for the conduct of any business as a common carrier. P. 526.

4. In the absence of any governing provision of local statutes or constitution, the question whether such a contract is against public policy is one of general law. P. 526.

5. Under the common law, as construed and applied by this Court, by state courts generally, and by English courts, such contracts are valid. Delaware etc. R. Co. v. Morristown, 276 U.S. 182. P. 527.

6. Where the validity of a contract (in this case made in a state which has adopted the common law), involves no question of

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land title, or of local statute or constitution, or of fixed local usage, but depends upon a question of general law, federal courts, while inclining to follow courts of the state in which the controversy arises, are not bound by Rev.Stats. § 21 to do so, but are free to exercise their own, independent judgment. P. 529.

15 F.2d 509 affirmed.

Certiorari, 273 U.S. 690, to a decree of the circuit court of appeals which affirmed a decree of permanent injunction against the above-named petitioner and the Louisville & Nashville Railroad Company restraining violation of a contract between the railroad company and the respondent. The railroad company did not appeal.

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BUTLER, J., lead opinion

MR. JUSTICE BUTLER delivered the opinion of the Court.

[48 S.Ct. 405] Respondent sued petitioner and the Louisville & Nashville Railroad Company in the United States Court for the Western District of Kentucky to prevent interference with the carrying out of a contract between the railroad company and the respondent. The district court entered a decree in favor of respondent. The railroad company declining to join, petitioner alone appealed. The circuit court of appeals affirmed, 15 F.2d 509, and this Court granted a writ of certiorari. 273 U.S. 690.

Respondent is a Tennessee corporation carrying on a transfer business at Bowling Green, Kentucky. The petitioner is a Kentucky corporation in competition with respondent. The railroad company is a Kentucky corporation. In 1925, it made a contract with respondent whereby it granted the exclusive privilege of going upon its trains, into its depot, and on the surrounding premises to solicit transportation of baggage and passengers. And

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it assigned a plot of ground belonging to it for the use of respondent's taxicabs while awaiting the arrival of trains. In consideration of the privileges granted, respondent agreed to render certain service and to make monthly payments to the railroad company. The term of the contract was fixed at one year to continue for consecutive yearly periods until terminated by either party on 30 days' notice.

Jurisdiction of the district court was invoked on the ground that the controversy was one between citizens of different states. The complaint alleges that the railroad company failed to carry out the contract in that it allowed others to enter upon its property to solicit transportation of baggage and passengers and to park on its property vehicles used for that purpose. It alleges that petitioner entered, solicited business, and parked its vehicles in the places assigned to respondent and also on an adjoining street, so as to obstruct the operation of respondent's taxicabs. Petitioner's answer alleges that respondent was incorporated in Tennessee for the fraudulent purpose of giving the district court jurisdiction, and to evade the laws of Kentucky. It asserts that the contract is contrary to the public policy and laws of Kentucky as declared by its highest court, and that it is monopolistic in excess of the railroad company's charter power, and violates § 214 of the constitution of the state.

The record shows that, in September, 1925, respondent was organized in Tennessee by the shareholders of a Kentucky corporation of the same name then carrying on a transfer business at Bowling Green and having a contract with the railroad company like the one here involved; that the business and property of the Kentucky corporation were transferred to respondent, and the former was dissolved. Respondent's incorporators and railroad representatives, preferring to have this controversy determined

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in the courts of the United States, arranged to have respondent organized in Tennessee to succeed to the business of the Kentucky corporation, and to enter into this contract in order to create a diversity of citizenship. The district court found there was no fraud upon its jurisdiction, held the contract valid, and found, substantially as alleged in the complaint, that petitioner violated respondent's rights under it. The decree enjoins petitioner from continuing such interference.

1. Section 37 of the Judicial Code requires any suit commenced in a district court to be dismissed if it shall appear that the suit does not really and substantially involve a dispute or controversy properly within its jurisdiction or that the parties have been improperly or collusively made or joined, either as plaintiffs or defendants, for the purpose of creating a case cognizable in such court. The requisite diversity of citizenship exists. And the controversy is real and substantial. The privilege granted is valuable. Petitioner treats the contract as invalid, and claims to be entitled, without the consent of the railroad company, to use railroad property to park its vehicles and solicit business. The railroad company has failed to protect the rights it granted. The motives which induced the creation of respondent to become successor to its Kentucky grantor and take a transfer of its property have no influence on the validity of the transactions which are the subject of the suit. The succession and transfer were actual, not feigned or merely colorable. In these circumstances, courts will not inquire into motives when deciding concerning their jurisdiction. McDonald v. Smalley et al., 1 Pet. 620, 624. It is enough that respondent is the real party in interest. Smith et al. v. Kernochen, 7 How. 198, 216. The incorporation of respondent or its title to the business and contract in question is not impeached.

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Cooperation between it and the railroad company to have the rights of the parties determined by a federal court was not improper or collusive within the meaning of § 37. Re Metropolitan Railway Receivership, 208 U.S. 90, 110; Harkin v. Brundage, 276 U.S. 36; South Dakota v. North Carolina, 192 U.S. 286, 311. It requires no discussion to distinguish Lehigh Mining & Mfg. Co. v. Kelly, 160 U.S. 327, and Miller & Lux v. East Side Canal Co., 211 U.S. 293. The district court had jurisdiction.

2. Petitioner maintains that the contract is not enforceable because in excess of the railroad company's power under its charter, and cites the decision of the Kentucky Court of Appeals in McConnell v. Pedigo, 92 Ky. 465. That case involved a grant by the railroad [48 S.Ct. 406] company of the exclusive privilege of standing hacks at the platform of its depot in Glasgow. The court did not refer to any of the terms of the charter. But petitioner states that the railroad company was incorporated by an act of the Legislature of Kentucky, approved March 4, 1850, and purports to quote the section relating to corporate powers:

The said Louisville & Nashville Railroad Company . . . may make all such regulations,...

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