Crawford v. Duluth St. Ry. Co.

• Decision Date: 30 June 1932
• Docket Number: No. 4618.,4618.
• Citation: 60 F.2d 212
• Parties: CRAWFORD v. DULUTH ST. RY. CO. CITY OF SUPERIOR et al. v. MITCHELL.
• Court: U.S. Court of Appeals — Seventh Circuit

60 F.2d 212 (1932)

CRAWFORD v. DULUTH ST. RY. CO.

CITY OF SUPERIOR et al. v. MITCHELL.

No. 4618.

Circuit Court of Appeals, Seventh Circuit.

June 30, 1932.

COPYRIGHT MATERIAL OMITTED

L. R. McPherson, of Superior, Wis., for appellant City of Superior.

John W. Reynolds, Atty. Gen., and Samuel Bryan, Asst. Atty. Gen., for appellant State of Wisconsin.

W. P. Crawford and Crawford & Crawford, all of Superior, Wis., and Mitchell, Gillette & Carmichael, of Duluth, Minn., for appellee.

Before ALSCHULER and SPARKS, Circuit Judges, and WILKERSON, District Judge.

ALSCHULER, Circuit Judge (after stating the facts as above).

The receiver in custody of the street railway property applied to the court for authority to abandon service on certain branch lines and to substitute bus service therefor. His showing, which is conceded on this appeal, is that the actual operating expenses of those branch lines exceeded their earnings; and that, under existing circumstances, it is impossible to operate them so as to cover expenses. He further showed that, if operations are continued on the branches, the whole system will be operated at a loss. It is not possible, without depleting the property in the custody of the receiver (even if money could be raised in that way), to continue the service. The receiver must either abandon the branches or shut down operation on the whole system.

Appellants assert that the District Court was without jurisdiction to hear the petition and grant relief thereon. With this we cannot agree. The property had been drawn into the custody and control of the court. The receiver was entitled to the instructions of the court as to its operation. The city and the state having intervened, it was proper for the court to determine the questions of confiscation presented. The controversy had relation to the property in the custody of the court, and, in justice to the parties before the court, ought to be determined in the principal proceeding. Central Union Trust Co. v. Anderson County et al., 268 U. S. 93, 96, 45 S. Ct. 427, 69 L.Ed. 862; Hoffman v. McClelland, 264 U. S. 552, 558, 44 S. Ct. 407, 68 L. Ed. 845. The court, of course, in giving instructions to the receiver, is bound by the federal statute which requires the receiver to manage and operate the property according to the valid laws of the state in which such property is situated, in the same manner that the owner would be bound to do if in possession thereof. 24 Stat. 554, § 2, Jud. Code § 65 (U. S. Code Ann., title 28, § 124).

Counsel for the receiver argues that the indeterminate franchise law operated to extinguish the provisions of the ordinance as to continuous operation. The Supreme Court of Wisconsin has drawn a distinction between a surrender of a street car franchise and that of other utilities. City of Oshkosh v. Eastern Wis. E. Co., 172 Wis. 85, 90, 178 N. W. 308; Calumet Service Co. v. Chilton, 148 Wis. 334, 354, 135 N. W. 131; La Crosse v. La Crosse Gas & Electric Co., 145 Wis. 408, 423, 130 N. W. 530. When it becomes necessary in a federal court to consider whether a state is depriving or attempting to deprive a litigant of property without due process of law in violation of the Fourteenth Amendment and the question turns on the existence and terms of an asserted contract, that court determines for itself whether there is a contract, and its terms. Railroad Comm. of Texas v. Eastern Texas Railroad Co. et al., 264 U. S. 79, 86, 44 S. Ct. 247, 68 L. Ed. 569. While the position of the receiver is not to be put aside lightly, the decision of the case, in our opinion, does not turn upon it, and we shall dispose of the case on the theory that the provisions of the ordinance as to continuous operation have not been affected by the surrender.

The provision of the ordinance applicable to the branch lines provides that "such new lines after being constructed and placed in operation shall be maintained and operated by said railroad company." The provisions of this ordinance do not operate to create a contract which requires the company to operate when operation means confiscation. In the absence in the ordinance of an express prohibition against abandonment, it was stated in State of Texas v. Eastern Texas R. Co. (D. C.) 283 F. 584, 593: "The law reads into the contract a proviso, which says: `The railroad may terminate this contract, and withdraw its property from public use, unless compensated, or there is a reasonable future prospect thereof.'" The right to abandon a railway system when the operation results in a loss and amounts to confiscation has been repeatedly upheld. Railroad Comm. of Texas v. Eastern Texas Railroad, supra; Bullock v. Florida ex rel. Railroad Comm. of Florida, 254 U. S. 513, 520, 41 S. Ct. 193, 65 L. Ed. 380; Brooks-Scanlon Co. v. Railroad Comm., 251 U. S. 396, 40 S. Ct. 183, 64 L. Ed. 323. And the same principle has been applied to a branch of a system when the entire system is being operated at a loss. Brooks-Scanlon Co. v. Railroad Comm., supra.

Conceding the force of the above decisions and admitting the right of the receiver to abandon the entire system, appellants invoke the Wisconsin statute which forbids the...