Central Vermont Transp. Co. v. Durning

• Decision Date: 11 June 1934
• Docket Number: No. 200.,200.
• Parties: CENTRAL VERMONT TRANSP. CO. v. DURNING, Collector of Customs.
• Court: U.S. Court of Appeals — Second Circuit

71 F.2d 273 (1934)

CENTRAL VERMONT TRANSP. CO. v. DURNING, Collector of Customs.

No. 200.

Circuit Court of Appeals, Second Circuit.

June 11, 1934.

Martin Conboy, U. S. Atty., of New York City (Samuel C. Coleman and Edward J. Ennis, Asst. U. S. Attys., both of New York City, of counsel), for appellant.

Wallace R. Foster, of New York City (Horace H. Powers, of St. Albans, Vt., of counsel), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

This appeal is by the defendant, collector of customs of the port of New York, from an order which denied a motion to dismiss the bill of complaint and restrained him from seizing and forfeiting certain merchandise shipped on the Central Vermont Railway, Inc., at St. Albans, Vt., consigned to one Allen, at New York City, under a through bill of lading.

So far as the order appealed from denied the motion to dismiss the bill, it is not now subject to review because it is not final and the cause is still open for trial on the pleadings. We shall therefore review only the portion of the order which granted an injunction pendente lite.

The complainant Central Vermont Transportation Company was incorporated under the laws of Maine in 1908, and its stock, except certain directors' qualifying shares, was owned by the Central Vermont Railway Company, the stock of which was in turn owned by the Grand Trunk Railway Company, a Canadian corporation. In 1909, the complainant purchased two vessels, the New York and the New London, built in the United States and documented under the laws of the United States, and has continuously operated them between New London and New York. In 1923, the Canadian National Railway Company, also a Canadian corporation, acquired the Grand Trunk Railway Company. In 1929, the Central Vermont Railway, Inc., acquired the property of the Central Vermont Railway Company, and the Canadian National Railway Company acquired all the stock except directors' qualifying shares of the Central Vermont Railway, Inc. Central Vermont Transportation Company and Central Vermont Railway, Inc., are engaged in transportation of property partly by railroad and partly by water under common control for a continuous carriage between points in the states of Connecticut, Massachusetts, and Vermont and New York City and return by rail and by water. It also transports merchandise originating at points in the Western States which is routed over Canadian rail lines and thence over the Central Vermont and its connecting water carrier. All the merchandise transported in the boats New London and New York between points in the United States is transported over the whole or a part of a through route recognized by the Interstate Commerce Commission for which route tariffs have been filed with the Commission and such through route is in part over Canadian rail lines.

The merchandise involved in this proceeding moved by railroad from St. Albans, Vt., over the Central Vermont Railway, Inc., to New London, Conn., thence over the Central Vermont Transportation Company in one of its boats, the New York or the New London, to New York City, which transportation from St. Albans to New York is on a part of the through route herein described. While the merchandise was in the possession of the complainant under a through bill of lading, it was seized by the defendant as collector of customs for forfeiture under section 27 of the Merchant Marine Act of June 5, 1920. That act provides as follows:

"No merchandise shall be transported by water, or by land and water, on penalty of forfeiture thereof, between points in the United States, including Districts, Territories, and possessions thereof embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States, or vessels to which the privilege of engaging in the coastwise trade is extended by sections 13 or 808: Provided, That this section shall not apply to merchandise transported between points within the continental United States, excluding Alaska, over through routes recognized by the Interstate Commerce Commission for which routes rate tariffs have been or shall be filed with said commission when such routes are in part over Canadian rail lines and their own or other connecting water facilities. * * *" U. S. Code, title 46, § 883 (46 USCA § 883).

The steamboats New York and New London are not owned by citizens of the United States. This fact is evident from the definition of section 38 of the Merchant Marine Act of 1920 which says that no corporation "shall be deemed a citizen of the United States unless the controlling interest therein is owned by citizens of the United States" and that "the controlling interest * * * shall not be deemed to be owned by citizens of the United States (a) if the title * * * is not vested in such citizens free from any trust or fiduciary obligation in favor of any person not a citizen of the United States. * * *" 46 USCA § 802.

The Central Vermont Railway, Inc., an American corporation, owns the stock of the Central Vermont Transportation Company, but in turn is owned by the Canadian National Railway Company, a Canadian corporation, so that the transportation company is not a citizen within the meaning of section 38 because, under that statute, intervening holding companies make no difference and ultimate beneficial ownership controls. Such ownership is Canadian.

St. Albans, Vt., where the freight was shipped, is on a through route from western points in the United States to New York, which is in part over Canadian rail lines and their water carriers, and is recognized by the Interstate Commerce Commission as such. The Central Vermont Transportation Company filed tariffs with the Commission in its own name.

Approximately 33 per cent. of all freight transported in its steamboats is received from or destined to points in New England on the line of the Central Vermont Railway. The remainder comes from interior points in the west through Canada and thence over the lines of the Central Vermont Railway, Inc., to the boats of the Central Vermont Transportation Company. The transportation company has never employed its boats to carry traffic except as a part of a railroad operation.

Upon the passage of the Panama Canal Act (section 5, paragraphs 9-11 of the Act to regulate commerce 49 USCA § 5, pars. 10-12), the Central Vermont Railway Company applied to the Interstate Commerce Commission for authority to own the stock of the transportation company and disclosed that substantially all its stock belonged to the Grand Trunk Railway Company. Subsequently, in 1930, the Central Vermont Railway, Inc., made a similar application, and the Canadian National Railway made application for leave to own the stock of Central Vermont Railway, Inc. Each of these applications was approved and declared to be in the public interest.

The District Court held that the shipment in question came within the proviso of section 27 of the Merchant Marine Act of June 5, 1920, and granted an injunction pendente lite accordingly. With this conclusion we cannot agree.

It is argued by the complainant that section 27 of the Merchant Marine Act does not apply to it or to the merchandise it transports because of the paramount jurisdiction of the Interstate Commerce Commission. This argument is sought to be enforced by the language of Section 33 of the Shipping Act of September 7, 1916, which reads:

"* * * This chapter shall not be construed to affect the power or jurisdiction of the Interstate Commerce Commission, nor to confer upon the board concurrent power or jurisdiction over any matter within the power or jurisdiction of such commission; nor shall this chapter be construed to apply to intrastate commerce." 39 Stat. 738 (46 US CA § 832).

Section 1, par. (1) (a) of the Interstate Commerce Act (41 Stat. 474, 49 USCA § 1 (1) (a) provides that such act shall apply to:

"The transportation of passengers or property wholly by railroad, or partly by railroad and partly by water when both are used under a common control, management, or arrangement for a continuous carriage on shipment."

Section 6 (13), 37 Stat. 568 (49 USCA § 6 (13), provides that:

"When property may be or is transported from point to point in the United States by rail and water * * * the transportation being by a common carrier or carriers, and not entirely within the limits of a single State, the Interstate Commerce Commission shall have jurisdiction...