Landell v. Northern Pac. Ry. Co.

• Decision Date: 23 June 1954
• Docket Number: Civ. A. No. 5514-50.
• Citation: 122 F. Supp. 253
• Parties: LANDELL et al. v. NORTHERN PAC. RY. CO.
• Court: U.S. District Court — District of Columbia

122 F. Supp. 253

LANDELL et al. v. NORTHERN PAC. RY. CO.

Civ. A. No. 5514-50.

United States District Court, District of Columbia.

June 23, 1954.

Robert W. Lishman, Washington, D. C., for plaintiffs.

Bernard G. Ostmann, Washington, D. C., and Porter R. Chandler, New York City (Davis, Polk, Wardwell, Sunderland & Kiendl), New York City, for defendant.

TAMM, District Judge.

The issues of this case reach back over a period of ninety years to the time when Congress sought the expansion of the West by encouraging settlers and railroads through the inducement of free land which, at that time, must have seemed limitless. In this pioneer setting, on July 2, 1864, Congress created a Federal corporation, the Northern Pacific Railroad Company (hereafter referred to as the Railroad.)¹ Financial difficulties eventually caused the appointment of receivers in 1893, and in 1896, pursuant to a reorganization plan and foreclosure proceedings under consent decrees in the Circuit Court of the United States for the Eastern District of Wisconsin, the Northern Pacific Railway Company (hereafter referred to as the Railway), a Wisconsin corporation, acquired the Railroad with its land grants and other properties, and has since operated the road and has obtained patents for millions of acres under the land grants. Successors in interest to non-assenting minority stockholders of the Federal corporation under the reorganization bring this suit against the Railway to set aside the decrees and orders of the Circuit Court of the United States for the Eastern District of Wisconsin, to declare title to the Railroad, franchises, and all other properties of the Railroad to be still in the Railroad, and to have the Railway account to the Railroad for all properties and profits received during the past half century. Plaintiffs' allegations are substantially that the defendant became the legal successor to the Railroad by a fraud upon the Wisconsin court, that defendant has maintained this position by the misuse of judicial process, that the Wisconsin court exceeded its authority in approving conditions in the consent decrees which were in violation of the statute creating the Federal corporation, and that the proceedings were also void in that the United States was not made a party thereto. Defendant Railway has moved for summary judgment on the grounds that the action is barred by the statute of limitations and by laches. Consideration of this motion requires a review of the events preceding the filing of the present action on December 20, 1950.

After refusing to join in the reorganization of 1896, the dissenting stockholders, by written agreement in 1898, formed a committee to protect their rights and interests. Over the years, counsel for the committee and its members have been actively protesting possession by the Railway at stockholders' meetings of the Railway, to the Department of the Interior, the Interstate Commerce Commission, Attorneys General, and have agitated for Congressional investigation.

On the legal side, three suits are of special interest in consideration of the present motion. The first of these was brought in 1900 in the United States District Court for the Southern District of New York by Joseph Hoover "on behalf of himself and of such other stockholders of the Northern Pacific Railroad Company as may intervene and become parties hereto."² The action was against the Railway and others involved in the 1896 reorganization and in substance attacked these proceedings on many of the same grounds alleged by the present plaintiffs. After numerous periods of inactivity, the Hoover case was dismissed for lack of prosecution and a motion to restore it to the calendar was denied for inexcusable laches by Judge Hulburt on March 15, 1939.³ Neither the Committee of the minority stockholders nor any of its members individually at any time attempted to participate officially in this suit, although they followed the proceedings, and counsel for Hoover was also counsel for the committee. Subsequent to dismissal of the suit, it was learned that Hoover, instead of being a bona fide non-assenting shareholder, had actually participated in the reorganization, voting some of his stock in favor of the reorganization.

The second suit, United States v. Northern Pacific Railway Co., 311 U.S. 317, 61 S.Ct. 264, 85 L.Ed. 210, is also known as the Land Grant Case. In 1924, President Coolidge and the Secretaries of Agriculture and Interior asked Congress to investigate the land grants to the Northern Pacific Railway Company. After a five-year study, a joint committee of Congress recommended that the Attorney General be authorized to institute an action to obtain "a final and complete determination of the respective rights of the United States and the Northern Pacific Railway Company to the end that the grants shall be finally adjusted and the interests of the United States and the grantee shall be fully protected."⁴ Congress approved the recommendation⁵ and suit was begun by the Attorney General in 1930. The District Court referred the case to a Special Master who made one report in 1933 and another in 1937. After the second report in 1937, minority stockholders of the Railroad attempted to intervene. The motion was denied as coming too late in the progress of the litigation. Schmidt v. U. S., 9 Cir., 102 F.2d 589. Upon remand of U. S. v. Northern Pacific Railway Co., 311 U.S. 317, 61 S.Ct. 264, 85 L.Ed. 210 by the Supreme Court to the District Court for further proceedings, a second petition by the minority stockholders for leave to intervene was made and denied. 41 F.Supp. 273.

The third suit is the present one, the first suit initiated by the committee since its formation in 1898. From the briefs filed and the oral arguments for and against granting the motion for summary judgment, three questions are posed: (1) Does the statute of limitations apply as a bar to this action; (2) Is this the kind of situation to which the doctrine of laches can be applied; and if so, (3) Do the facts in this case warrant such application.

Since the Court, for the reasons set forth below, finds that the plaintiffs are barred by laches, it is not necessary to pass on defendant's contention that this suit falls within the concurrent jurisdiction of law and equity and therefore the statute of limitations must be applied.

Plaintiffs maintain that the doctrine of laches cannot apply to a case like the present one in which it is alleged that (1) an act done is in violation of a statute, and in which this violation still continues today; (2) in which a court acts beyond its powers; and (3) in which a decree is procured by a fraud upon the court. Plaintiffs make the plausible argument that a transaction which is fraudulent and illegal in its inception cannot be made legitimate and lawful by the passage of time. This is a basically sound argument. Does it not follow, however, that persons injured by an allegedly fraudulent transaction must exercise their legal rights within some reasonable period of time, at least within the lifetime of some party or witness to the original transaction? It is this Court's view that although time may not make legal that which is illegally conceived, time may bar the capacity of allegedly injured persons to complain of the transaction. Order of Railroad Telegraphers v. Railway Express Agency, Inc., 321 U.S. 342, 349, 64 S.Ct. 582, 88 L.Ed. 788.

The Court is asked to accept as an equitable proposition the idea that a suit is never barred where the above enumerated conditions exist. As Mr. Justice Story remarked: "It is for the public interest and policy to make an end to litigation, or, as was pointedly said by a great jurist, that suits may not be immortal, while men are mortal." Ocean Insurance Co. v. Fields, 18 Fed.Cas. pages 532, 539, No. 10,406, 2 Story, 59. Present plaintiffs are asking the aid of equity against an alleged wrongdoer but deny that the principles of equity may be evoked as against themselves. It has long been settled that the public interest, intervening equities of third parties and the rule of "clean hands" may all operate to raise the bar of laches. Vigilantibus non dormientibus aequitas subvenit. "If the complainants may put forward these excuses for delay after 30 years, there is no reason why they may not allege the same as an excuse after the lapse of 60. The truth is, there must be some limit of time within which these excuses shall be available, or titles might forever be insecure. The interests of public order and tranquillity demand that parties shall acquaint themselves with their rights within a reasonable time, and, although this time may be extended by their actual ignorance, or want of means, it is by no means illimitable." Wetzel v. Minnesota Railway Transfer Co., 169 U.S. 237, 241, 18 S.Ct. 307, 309, 42 L.Ed. 730.

On the final point, whether laches applies under the facts of this case, the Court finds against the plaintiffs for the following reasons:

Plaintiffs assert that there has been no lack of diligence since for more than fifty years they have continuously sought administrative and legislative relief. In other words, they raise the novel point that an injured party can avoid laches by seeking remedies other than legal. Under limitations, a plaintiff may safely resort to peaceful settlement of his claims, Shaffer v. Rector Well Equipment Co., 5 Cir., 155 F.2d 344, or pursue an administrative remedy provided for by statute, Order of Railroad Telegraphers v. Railway Express Agency, supra. But this right is not perpetual. If it is in the public interest that there be an end to litigation, certainly it cannot be held that diligence can be handed down successfully from one generation to another. This is literally true in the present case since not one of the original dissenting stockholders is alive today, nor are any of the original parties who participated in the reorganization of 1896,...