Atwater v. Wheeling & LE Ry. Co.

• Decision Date: 08 March 1932
• Docket Number: No. 5830.,5830.
• Citation: 56 F.2d 720
• Parties: ATWATER v. WHEELING & L. E. RY. CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

56 F.2d 720 (1932)

ATWATER v. WHEELING & L. E. RY. CO. et al.

No. 5830.

Circuit Court of Appeals, Sixth Circuit.

March 8, 1932.

H. H. Hoppe, of Cleveland, Ohio (C. F. Taplin and Taplin & Fillius, all of Cleveland, Ohio, on the brief), for appellant.

W. H. Boyd and Clan Crawford, both of Cleveland, Ohio (Charles F. Close, Andrew P. Martin, and Squire, Sanders & Dempsey, all of Cleveland, Ohio, on the brief), for appellees.

Before MOORMAN and HICKS, Circuit Judges, and HAHN, District Judge.

HAHN, District Judge.

The subject-matter of this action (and related matters) has been before the Interstate Commerce Commission: The Cleveland Passenger Terminal Case, 70 I. C. C. 342, reversed on rehearing, 70 I. C. C. 659; Directors of Wheeling & Lake Erie, 138 I. C. C. 643; Interstate Commerce Commission v. B. & O. R. Co., 152 I. C. C. 721; and Operation of Passenger Terminal Facilities at Cleveland, Ohio, by Wheeling & Lake Erie Railway Company, Finance Docket, Nos. 7298 and 7299, 154 I. C. C. 516; and before the courts: Wheeling & Lake Erie Railway Company v. Pittsburgh & W. V. Ry. Co. (C. C. A. 6) 33 F.(2d) 390, certiorari denied 280 U. S. 593, 50 S. Ct. 40, 74 L. Ed. 640; and Pittsburgh & W. V. Ry. Co. v. United States (District Court, N. D. Ohio, E. D. Statutory Court) 41 F.(2d) 806, affirmed, Pittsburgh & W. V. Ry. Co. v. United States, 281 U. S. 479, 50 S. Ct. 378, 74 L. Ed. 980.

The present action is by John J. Atwater, a minority preferred stockholder of the Wheeling & Lake Erie Railway Company; the action having been brought on behalf of the plaintiff and all such other stockholders who might desire to become parties to the action and join therein. The relief sought was an injunction to prevent and restrain the Wheeling & Lake Erie Railway Company from performing or in any wise carrying out a contract dated December 7, 1928, for the sale of its Ontario Street Passenger Site for $1,600,000 (that contract is hereinafter referred to as the option contract); and from performing or in any wise carrying out a contract dated November 27, 1928 (hereinafter referred to as the user contract), which provides for passenger service by the Cleveland Union Terminals Company (hereinafter referred to as Terminals), at the rate of $20,000 a year. For completeness injunctional relief was asked against other temporary contracts not necessary to detail.

Further injunctional relief was prayed for, the purpose of which was to enjoin Wheeling from doing those things which it is permitted to do by certificates of public convenience and necessity granted to it by the Interstate Commerce Commission. But plainly, the United States not having been a party, the granting of that relief did not come within the jurisdiction of the District Court. Pittsburgh & W. V. Ry. Co. v. United States, 281 U. S. 479, 50 S. Ct. 378, 74 L. Ed. 980; and Venner v. Michigan Central Railroad Co., 271 U. S. 127, 46 S. Ct. 444, 70 L. Ed. 868.

The facts which it is necessary to have in mind in the consideration of the present appeal are fully stated in Pittsburgh & W. V. Ry. Co. v. United States (D. C.) 41 F.(2d) 806, and 281 U. S. 479, 50 S. Ct. 378, 74 L. Ed. 980, and it is not necessary to repeat them here. The identical contentions made here were made in the above case, and on consideration of this record we are in accord with the conclusions there reached.

Wheeling proposes to abandon its Ontario Street Passenger Site, to sell the same, and to use the union passenger station of Terminals. The physical changes thus entailed are the abandonment by Wheeling of 1,035 feet of its line, the connection of its line with that of Terminals, and the use of Terminals' tracks for a few hundred feet more than 1,035 feet. Appellant argues that the first step is a change of its line, and the change of one of its termini by Wheeling within the meaning of section 8747 of the General Code, which permits such changes only upon the consent of three-fourths in interest of the stockholders of the company; and that it is likewise an aid and a sale of part of Wheeling's road to another railroad, and a lease of part of its railroad to another railroad, within the meaning of sections 8806-8809 of the General Code of Ohio, which require a favorable vote of at least two-thirds of the stock of each company. It is also argued that the second step proposed by Wheeling, that is, the use of Terminals' tracks for a few hundred feet in excess of 1,035 feet, is an extension of Wheeling's line beyond its previously designated terminus, within the meaning of section 8772 of the General Code, which requires the assenting vote of a majority of Wheeling's stockholders. It is conceded that the consent of stockholders has not been obtained.

Section 8747 of the General Code was enacted as an original act on April 6, 1876, 73 Ohio Laws, p. 115. At that time new railroads were still being constructed in this state, and this statute, and other statutes passed as a part of the same act, were intended to apply to railroads then being constructed. The intention of the Legislature in enacting this legislation was the subject of consideration by Mr. Chief Justice Taft (then Circuit Judge) in Louisville Trust Co. v. Cincinnati Inclined-Plane Ry. Co. (C. C.) 91 F. 699, pages 704, 705. Referring to the sections of this act, he said: "They were intended to apply to a road which has been projected, and not completed. The change therein referred to is a change of plan before the plan has been executed. The change is a change of proposed lines and proposed termini, not an extension of a completed railroad. That is covered by section 3306. * * *" (now Section 8772, General Code of Ohio).

It appears that prior to the enactment of this legislation and for some time thereafter, there was much litigation in the state of Ohio by subscribers to the stock of proposed railway companies who, after the proposed lines or proposed termini had been changed, sought to have the subscriptions to their stock canceled. Chapman v. Railway Co. (1856) 6 Ohio St. 120; Railway Co. v. Elliott (1859) 10 Ohio St. 57; Jewett v. Railway Co. (1878) 34 Ohio St. 601; Railway Co. v. Fisher (1883) 39 Ohio St. 330; and Armstrong v. Karshner (1890) 47 Ohio St. 276, 24 N. E. 897. This legislation was enacted for the purpose of defining the circumstances under which a subscriber to the stock of such proposed railroad might have the subscription to his stock canceled. The statute can have no application to a completed railway such as Wheeling.

The only statutes which may plausibly be claimed to be applicable to the situation which we have here are sections 504-2 and 504-3 of the General Code of Ohio, which deny the right to a railroad company to abandon its passenger station except with the allowance and consent of the public utilities commission of the state. This contention has heretofore been made by a stockholder of Wheeling, and the decision of this court and of the Supreme Court of Ohio were adverse. Wheeling & Lake Erie v. Pittsburgh & W. V. Ry. Co., 33 F.(2d) 390, certiorari denied 280 U. S. 593, 50 S. Ct. 40, 74 L. Ed. 640, and Pittsburgh & W. V. Ry. Co. v. Public Utilities Commission of Ohio, 120 Ohio St. 434, 166 N. E. 372.

It was held in Pittsburgh & W. V. Ry. Co. v. United States, supra, at page 811 of 41 F.(2d), that the operation of the other statutes relied upon has been superseded by the acts of Congress (see, also, Atchison, T. & S. F. R. Co. v. Railroad Commission, 283 U. S. 380, 391, 51 S. Ct. 553, 75 L. Ed. 1128). We are also of the opinion that under the laws of the state of Ohio these statutes requiring the vote and consent of stockholders would have no application to the present situation. The laws of the state of Ohio (General Code, §§ 9160-9169, pursuant to which Terminals was organized) authorize the incorporation of union passenger stations by "the presidents of two or more railroad companies running railroads to the same city, or village, by the consent and under the direction of their respective boards of directors." The act authorizes the building of such a union passenger station and permits the borrowing of money and the issuing of bonds for that purpose. The changes contemplated by Wheeling are those only which are necessary to enable it to use a union passenger station. It cannot have been the intention of the Legislature that a railroad company may participate in the incorporation and building of a union passenger station "by the consent and under the direction of (its) respective board of directors," and that it cannot make, except with the consent of its stockholders, such necessary minor and trivial changes in its roadbed and method of operation to use such union passenger station.

It is urged that both the option contract and the user contract are invalid because they were authorized by directors, a majority of whom were elected by stockholders who had acquired their stock in contravention of the Clayton Act, § 7, 15 USCA § 18 (see Directors of Wheeling & Lake Erie, 138 I. C. C. 643; and Operation of Facilities by Wheeling & Lake Erie Ry. Co., 154 I. C. C. p. 516 at pages 523 and 524); and also in contravention of section 8683 of the General Code of Ohio. This stock was purchased by the so-called proprietary companies who owned and held the stock of Terminals Company. But it cannot be said that the effect of making the contracts here complained of was "to substantially lessen competition" between Wheeling and the other corporation, the effect which it is the purpose of the Clayton Act to condemn. Nor can it be said that the purpose in the making of these contracts was that "of restricting trade or competition," which is condemned by section 8683 of the General Code. And it has never been held that the acts of directors elected by stock so held are void or even voidable. The meritorious claim, if any, is that the directors thus elected had interests adverse to Wheeling. However, it appears from...