Black White Taxicab Transfer Co v. Brown Yellow Taxicab Transfer Co 13 16, 1928

Citation72 L.Ed. 681,276 U.S. 518,48 S.Ct. 404,57 A.L.R. 426
Decision Date09 April 1928
Docket NumberNo. 174,174
CourtU.S. Supreme Court

[Syllabus from pages 518-520 intentionally omitted] Messrs.N. P. Sims and John L. Stout, both of Bowling Green, Ky., for petitioner.

Mr. M. M. Logan, of Frankfort, Ky., for respondent.

[Argument of Counsel from page 521 intentionally omitted] Mr. Justice BUTLER delivered the opinion of the Court.

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, 47 S. Ct. 472, 71 L. Ed. 842).

Respondent is a Tennessee corporation carrying on a transfer business at Bowling Green, Ky. 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 it assigned a plot of ground belonging to if 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 section 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 deter mined 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 (28 USCA § 80) 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, 7 L. Ed. 287. It is enough that respondent is the real party in interest. Smith et al. v. Kernochen, 7 How. 198, 216, 12 L. Ed. 666. The incorporation of respondent or its title to the business and contract in question is not impeached. Co-operation 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 section 37. Re Metropolitan Railway Receivership, 208 U. S. 90, 110, 28 S. Ct. 219, 52 L. Ed. 403; Harkin v. Brundage, February 20, 1928, 276 U. S. 36, 48 S. Ct. 268, 72 L. Ed. 457; South Dakota v. North Carolina, 192 U. S. 286, 311, 24 S. Ct. 269, 48 L. Ed. 448. It requires no discussion to distinguish Lehigh Mining & Mfg. Co. v. Kelly, 160 U. S. 327, 16 S. Ct. 307, 40 L. Ed. 444, and Miller & Lux v. East Side Canal Co., 211 U. S. 293, 29 S. Ct. 111, 53 L. Ed. 189. 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, 18 S. W. 15. That case involved a grant by the railroad 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, rules and by-laws as are necessary for the government of the corporation, or for effecting the object for which it is created: Provided, that such regulations, rules and by-laws shall not be repugnant to the laws and constitution of said states or the United States. * * *'

The opinion does not hold or suggest that the contract was contrary to any provision of the Constitution or statutes of Kentucky or in violation of federal law. The court's conclusion rests on its determination of a question of general law, and not upon a construction of the charter. Moreover, that court has given this charter a much broader construction than that insisted on by petitioner. In Louis- ville Property Co. v. Commonwealth, 146 Ky. 827, 143 S. W. 412, 38 L. R. A. (N. S.) 830, it held that:

'In the maintenance of a place for hotel or restaurant accommodations, and for pleasure, recreation and rest, such as is afforded by a park, neither the letter nor the spirit of the Constitution or statute is violated, but the railroad company acts in the exercise of certain implied powers which it is not prohibited to exercise.'

So far as concerns the railroad company's charter authority to make it, the contract is clearly within the principle of that decision.

3. Section 214 of the Kentucky Constitution provides that no railway company shall make any exclusive or preferential arrangement for the handling of freight 'or for the conduct of any business as a common carrier.' Petitioner invokes the last clause. The railroad company is under no obligation to transport passengers or baggage from its station. McConnell v. Pedigo, supra, 468 (18 S. W. 15). It is not bound to permit those engaged in such transportation to use its property, to solicit patronage, park their vehicles or otherwise to carry on their business. The contract does not relate to the railroad company's business as a common carrier. D. L. & W. R. R. Co. v. Morristown, February 20, 1928, 276 U. S. 182, 48 S. Ct. 276, 72 L. Ed. 523.

4. The Court of Appeals of Kentucky held such contracts invalid in McConnell v. Pedigo, supra, and Palmer Transfer Co. v. Anderson, 131 Ky. 217, 115 S. W. 182, 19 L. R. A. (N. S.) 756, 133 Am. St. Rep. 237. Invalidity of a similar contract was assumed arguendo in Commonwealth v. Louisville Transfer Co., 181 Ky. 305, 204 S. W. 92. As reasons for its conclusion, that court suggests that the grant of such privileges prevents competition, makes such discrimination as is unreasonable and detrimental to the public and constitutes such a preference over other transfer men as to give grantee a practical monopoly of the business. It has not held them repugnant to any provision of the statutes or Constitution of the state. The question there decided is one of general law. Donovan v. Pennsylvania Co., 199 U. S. 279, 300, 26 S. Ct. 91, 50 L. Ed. 192. This court holds such contracts valid. Donovan Case, supra, 297 (26 S. Ct. 91); Morristown Case, supra. And these decisions show that, without its consent, the property of a railroad company may not be used by taxicabmen or others to solicit or carry on their business, and that it is beyond the power of the state in the public interest to require the railroad company without compensation to allow its property so to be used.

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