Cooperative Transit Co. v. West Penn Electric Co.

• Decision Date: 02 January 1943
• Docket Number: No. 5010.,5010.
• Parties: COOPERATIVE TRANSIT CO. v. WEST PENN ELECTRIC CO. et al.
• Court: U.S. Court of Appeals — Fourth Circuit

132 F.2d 720 (1943)

COOPERATIVE TRANSIT CO. v. WEST PENN ELECTRIC CO. et al.

No. 5010.

Circuit Court of Appeals, Fourth Circuit.

January 2, 1943.

Before SOPER and DOBIE, Circuit Judges, and COLEMAN, District Judge.

Jay T. McCamic, of Wheeling, W. Va., (Charles McCamic, of Wheeling, W. Va., on the brief), for appellant.

John D. Phillips, of Wheeling, W. Va. (Austin V. Wood, Hall, Paul & Phillips, and William J. Gompers, all of Wheeling, W. Va., on the brief), for appellees.

DOBIE, Circuit Judge.

The Cooperative Transit Company (hereinafter called Cooperative) filed a complaint in the United States District Court for the Northern District of West Virginia against the West Penn Electric Company (herein called Penn Electric) and several other defendants. The plaintiff and all the defendants are and were citizens of West Virginia. As the only basis for the jurisdiction of the District Court over the instant proceeding, Cooperative asserts that this proceeding is ancillary to the consolidated causes (in the same court) of Westinghouse Electric and Manufacturing Company, Plaintiff, v. Wheeling Traction Company, Defendant, and Cleveland Trust Company, Plaintiff, v. Wheeling Traction Company, Edward L. Yager, as Receiver of Wheeling Traction Company, the Colonial Trust Company and Westinghouse Electric and Manufacturing Company, Defendants.

A motion to dismiss the instant proceeding, on the ground that it was not ancillary, was duly filed by the defendants. This motion was sustained by the District Judge and the plaintiff, Cooperative, has appealed.

The complaint in the instant proceeding (occupying 34 printed pages in appellant's appendix) is long, complicated and somewhat diffuse. For the purpose of the motion to dismiss, all facts properly pleaded in the complaint must be taken as true.

We adopt the statement of facts, and the analysis of the plaintiff's prayer for relief, set out by the District Judge.

"Wheeling Traction Company was for many years engaged in the operation of street-car lines in and about Wheeling, West Virginia. On January 1, 1901, it executed a mortgage that in very broad and comprehensive terms, covered the assets of the company. The mortgage contained an after-acquired property clause, the following language being used in part:

"`Intending to include all street railways, * * *

"`Also all corporate property, real and personal * * * whether the said property and things * * * are now owned or shall hereafter be acquired by the Traction Company.

"`And also all the estate, right, title, interest, property, possessions, claim and demand whatsoever, as well in law as in equity. * * *

"`It is intended hereby to convey all property of any sort or nature whatsoever, whether real, personal or mixed, which the Traction Company now owns, or which it may hereafter acquire; * * *'

"About 1912, the West Penn Railways Company owned all the stock of the Wheeling Traction Company. From this time until 1931 the Traction Company was managed by the West Penn Railways Company, as part of the so-called "West Penn System." This System consisted of several corporations with practically identical ownership and direction.

"In 1916 the Traction Company needed a new car barn. A plot of land, known as the Gilchrist property, was selected as a site therefor. Clifford P. Billings, Vice-President and General Manager of the Company, authorized a real estate agent to acquire the same, and reported to the Board of Directors that it had been purchased for $43,200.00, $10,000.00 to be paid in cash and four notes given for $8,300.00 each. The West Penn Railways Company paid the $10,000.00 and an agent's commission of $3,000.00. Title to the land was taken in the name of Billings. He later conveyed it to the Tri-State Improvement Company, who conveyed it to the West Penn System Construction Company, who conveyed it to West Penn Securities Department, Inc. All of these companies were part of the West Penn System.

"The West Penn Securities Department, Inc., conveyed part of the property to Centre Foundry & Machine Company, and the rest to Clara Narrigan.

"Tri-State Improvement Company, West Penn System Construction Company, West Penn Securities Department, Inc., Centre Foundry and Machine Company, and Clara Narrigan, are all citizens and residents of West Virginia. The plaintiff, Cooperative Transit Company is a West Virginia corporation.

"On May 19, 1920, the Traction Company reimbursed the West Penn Railways Company for its advance of $13,000.00, and on August 31, 1920, the Traction Company made a charge on its books against the Tri-State Improvement Company for about $25,000.00, which represented payments made on this purchase. The Traction Company continued to make advances toward this purchase. In 1923 a car barn was erected on this property at a cost of $50,950.00, and other improvements totaling $30,000.00 were made. All this was paid for with Traction Company money. In April of 1924 a financial officer of the West Penn Railways Company stated: `* * * it would be well to allow the Gilchrist property to remain in the name of the Tri-State Improvement Company and to have the Wheeling Traction Company bill the Tri-State Improvement Company for all improvements and extensions actually made on the property for the car barn and other services. I have in mind the approach of the time when the Wheeling bonds become due * * *.'

"In 1924 a dividend of 15½% was declared on the Traction Company stock. All of this, amounting to $350,445.00, was payable to the West Penn Railways Company as sole stockholder. To get the funds for such dividend, the West Penn Railways Company loaned the Traction Company $250,000.00, and took its note therefor.

"On May 1, 1928, a charge of $144,767.80, the amount spent by the Traction Company on the car barn property, was transferred to the West Penn Railways Company and credited against the open account the Traction Company owed it.

"In 1931 foreclosure proceedings were begun in this Court, which resulted in the winding up of the affairs of the Traction Company. In this proceeding the Cooperative Transit Company purchased the property of the Traction Company and on July 31, 1933, received a Special Master's deed therefor. A part of the property so purchased was described in the decree of sale as `all the property and assets of the Traction Company hereinbefore found to be covered by or embraced in the lien of the said Mortgage Deed of Trust, dated Jan. 1, 1901.' The mortgage had been decreed to embrace `all corporate property, real and personal.'

"Since July 31, 1933, the Cooperative Transit Company has operated the property so acquired as a street railway.

"After May 1, 1928, the Traction Company paid the Tri-State Improvement Company, as rent for the car barn, $1,000.00 per month. This continued until the foreclosure proceedings. The Receiver in those proceedings paid no rent.

"From 1933 to 1935, the Cooperative Transit Company used the car barn without payment of any rent. In 1935 it entered into an agreement with Pan Handle Traction Co. (a connecting street railway) whereby the latter was to pay the rent for the car barn, and from May 1, 1935, to October 31, 1941, the Cooperative Transit Company paid the West Penn Securities Department, Inc., $250.00 per month, rent for this barn.

"The Centre Foundry & Machine Company notified the Cooperative Transit Company to vacate the car barn property on December 31, 1941. This action was filed December 29, 1941.

"The Complaint asks that the transactions, whereby title to the property came into the Centre Foundry & Machine Company and Clara Narrigan, be declared void; that the "appropriate parties" be required to convey title to the plaintiff; that an accounting be had for rent paid, and that the Centre Foundry and Machine Company be enjoined from interfering with Cooperative possession."

It is the contention of Cooperative, plaintiff in the instant proceeding, that the circumstances under which the car barn property was acquired served to vest equitable title thereto in the Wheeling Traction Company; that, by virtue of the after-acquired-property clause, the car barn property thus fell automatically within the terms and lien of the mortgage; that this...