City of Orangeburg v. Southern Ry. Co.

• Decision Date: 12 April 1943
• Docket Number: No. 5017.,5017.
• Citation: 134 F.2d 890
• Parties: CITY OF ORANGEBURG v. SOUTHERN RY. CO. SOUTHERN RY. CO. v. CITY OF ORANGEBURG et al.
• Court: U.S. Court of Appeals — Fourth Circuit

134 F.2d 890 (1943)

CITY OF ORANGEBURG v. SOUTHERN RY. CO.

SOUTHERN RY. CO. v. CITY OF ORANGEBURG et al.

No. 5017.

Circuit Court of Appeals, Fourth Circuit.

April 12, 1943.

Hugo S. Sims, of Orangeburg, S. C., for appellant.

Adam H. Moss, of Orangeburg, S. C., and Frank G. Tompkins, of Columbia, S. C., for appellee.

Before PARKER, SOPER, and DOBIE, Circuit Judges.

SOPER, Circuit Judge.

The City of Orangeburg instituted a suit in the Court of Common Pleas for Orangeburg County, South Carolina, against the Southern Railway Company, a Virginia corporation, to foreclose the lien of a paving assessment levied by the city in the sum of $6,937.01 on land of which the Railroad Company was alleged to be the owner. By appropriate proceedings the case was removed to the United States District Court below. Shortly thereafter the city instituted a second action in the state court to enforce the same assessment against the same land and, omitting the Southern Railway Company, joined as defendants the Southern Railway-Carolina Division, the South Carolina and Georgia Railroad Company, the South Carolina Railroad Company and the South Carolina Railway Company. The four last-named organizations are or were South Carolina corporations; and it is sufficient for the purposes of this discussion to mention hereafter only the Southern Railway-Carolina Division into which it is said the other South Carolina corporations were merged, and thereupon ceased to exist. In addition, the City of Orangeburg, acting through one of its officers, contemporaneously attempted to take possession of the land and to foreclose the lien of the assessment thereon by a proceeding in the nature of a summary process.

After the second suit was brought in the state court, the Southern Railway Company, the sole defendant in the removed case, filed a petition therein praying that the city and its officer show cause why they should not be adjudged in contempt of the federal court and also that they be restrained from interfering with the jurisdiction of that court by further proceedings to enforce the lien in the state court. In answer to this petition the city and its officer disaffirmed any intention to disregard the authority or act in contempt of the federal court and explained the bringing of the second suit on the ground that after the first action was brought, the city discovered that the Southern Railway Company was merely the lessee of the land and believed that in order to enforce the lien of the assessment it was necessary to bring into court the Southern Railway-Carolina Division, the real owner of the land. This answer took the further position that the federal District Court had acquired no jurisdiction over the land in the removed case because the Southern Railway Company was not the owner and therefore the second suit had conferred exclusive jurisdiction upon the state court since the action was in rem and service of process had been made therein upon the owner of the property. The federal court dismissed the charges of contempt of court on the ground that the contemnors had satisfactorily purged themselves of the contempt, but decreed that it had first secured jurisdiction over the property and enjoined the city and its officer from enforcing the lien of the assessment in any other manner or proceeding than in the case in the federal court. From this decree the pending appeal was taken.

The authority of an incorporated city in South Carolina to provide for the payment of one-half of the cost of street improvements by levying an assessment upon abutting property owners is derived from Article 10, § 17 of the State Constitution, and §§ 7374 and 7376 of the State Code. It is provided that the power may not be exercised except upon the written consent of two-thirds in number of the owners of the property and that the assessment must be entered in an assessment book stating the names of the owners, the location of the property, etc. The proper procedure for enforcing the lien of such an assessment was discussed at length in Town of Cheraw v. Turnage, 184 S.C. 76, 191 S.E. 831, where it was pointed out that under § 7376 payment may be compelled by summary proceeding by levy of an execution and sale of the property in accordance with the procedure relating to taxes; but that this method is cumulative and alternative and the better method is by suit in equity to foreclose the lien because in such suit every person who has any interest in the property can present his defense and the purchaser's title is better assured. It was further held that such a suit is a suit in rem; and that the equitable jurisdiction is not defective simply because all the persons interested in the property are not parties to the cause since the court has power to decree a sale of the interests of the defendants before it whereby their title will be transferred to the purchaser.

It is conceded that assessments for street improvements do not give rise to a personal liability under the South Carolina law and that the suits under discussion in the instant case are actions in rem. Town of Cheraw v. Turnage, supra, Beatty v. Wittekamp, 171 S.C. 326, 172 S.E. 122. Under the established rule set out in Kline v. Burke Const. Co., 260 U.S. 226, 43 S.Ct. 79, 67 L.Ed. 226, 24 A.L.R. 1077, and in many other decisions, the court, state or federal, which first acquires jurisdiction of the subject matter of a suit in rem holds it to the exclusion of any other court until its duty is fully performed, and to that end may enjoin the parties from proceeding in any other court when the effect of action therein would be to defeat or to impair its own jurisdiction. Our function is to determine whether the Southern Railway Company, the Virginia corporation, had such an interest in the property upon which the assessment was laid that the federal court obtained jurisdiction of it upon the removal of the first suit.

The precise interest of the Southern Railway Company in the land is not open to doubt. It holds the land under a lease of June 30, 1902 from the Southern Railway-Carolina Division. By that demise certain lines of railroad, together with all the lands of which the Carolina Division was seized and all rolling stock which it owned, were granted and conveyed to the Southern Railway Company for the full term of nine hundred and ninety-nine years, upon condition that the lessee should operate the railroad and use the revenues to pay the operating expenses, the cost of necessary new equipment, all taxes and assessments, federal, state or municipal levied on the property, and interest on the funded debt aggregating $11,259,500, and pay one-half of the residue to the Carolina Division. The lessee specifically agreed that it would discharge all of the duties and obligations imposed by the States of South Carolina, North Carolina and Georgia or other authorities upon the lessor as a common carrier or as the owner and lessor of the demised lines of railroad, and that it would not permit any claim to be created by its act or neglect against the lessor which might be adjudged to be a lien upon the property of the latter.

It is obvious that by this transfer the Southern Railway Company became the virtual owner of the property even though it be considered that under the South Carolina decisions the technical relationship between the parties to the lease is...