New River Lumber Co. v. Tennessee Ry. Co.

• Decision Date: 07 March 1922
• Citation: 238 S.W. 867,145 Tenn. 266
• Parties: NEW RIVER LUMBER CO. v. TENNESSEE RY. CO. ET AL.
• Court: Tennessee Supreme Court

238 S.W. 867

145 Tenn. 266

NEW RIVER LUMBER CO. v. TENNESSEE RY. CO. ET AL.

Supreme Court of Tennessee.

March 7, 1922

Certiorari to Court of Civil Appeals.

Suit by the New River Lumber Company against the Tennessee Railway Company and others to compel specific performance of a contract. A decree dismissing the bills was affirmed by the Court of Civil Appeals, and complainants bring certiorari. Affirmed.

GREEN J.

In 1905 the New River Coal & Coke Company owned a large body of lands in Scott, Campbell, and Anderson counties, the timber on which was all sold to the New River Lumber Company of West Virginia.

The Tennessee Railway Company, a railroad corporation organized under the laws of Tennessee, was owned by the same interests that owned the New River Coal & Coke Company. The Tennessee Railway Company had under construction a line of railroad from Oneida, in Scott county, a station on the Cincinnati New Orleans & Texas Pacific Railway. This road was being constructed in a southerly direction to the mouth of Paint Rock creek, a distance of about 11 miles, and the Tennessee Railway Company was proposing to extend this line into the lands of the New River Coal & Coke Company above mentioned.

On June 1, 1905, the New River Coal & Coke Company sold to the New River Lumber Company of West Virginia the timber and timber rights on the lands aforesaid. On the same day the New River Lumber Company of West Virginia and the Tennessee Railway Company entered into a contract which is the basis of the litigation herein and has been the basis of much previous litigation. The Cincinnati, New Orleans & Texas Pacific Railway Company was also a party to this contract.

The contract provided, among other things, that the Tennessee Railway Company would complete its line to the mouth of Paint Rock creek and then extend the same through the lands heretofore referred to, a distance of about 32 miles, and would also construct 20 miles of lateral or branch tracks running off from the main line through certain parts of said lands.

The location and length of the laterals was prescribed and the general route of the main extension was set out, and the periods of time were stipulated during which these various extensions were to be made. Other obligations on the part of the Tennessee Railway Company were assumed which will be hereafter more particularly mentioned.

The New River Lumber Company of West Virginia on its part agreed to erect and equip a sawmill or sawmills upon its property sufficient to permit it to manufacture and ship 10,000,000 feet of lumber per annum within a fixed period after a stated portion of the extension of the railroad was made, and thereafter within a stated time agreed to manufacture and ship 15,000,000 feet of lumber per annum upon further extension of the railroad lines, and bound itself upon completion of the extension and laterals to manufacture and ship an average of 20,000,000 feet of lumber per annum. All this lumber was to be shipped over the lines of the Tennessee Railway Company and of the Cincinnati, New Orleans & Texas Pacific Railway Company, so long as the rates of the latter were fair and reasonable, and not in excess of those given by other carriers.

This contract was to continue in effect for 27 years from its date.

The Cincinnati, New Orleans & Texas Pacific Railway Company, in addition to assuming certain obligations under the contract which will later appear, undertook to guarantee that the Tennessee Railway Company would construct the main line and lateral tracks as agreed therein.

The New River Lumber Company of West Virginia transferred its assets to the New River Lumber Company of Ohio. The latter corporation acquired the benefits and assumed the obligations of the contract before us.

On March 1, 1907, the Tennessee Railway Company executed a mortgage to the Standard Trust Company of New York upon all its property to secure an authorized issue of $4,500,000 of bonds. Of this authorized issue $1,300,000 were sold. The sawmills were erected and equipped by the New River Lumber Company of West Virginia and its successor, the New River Lumber Company of Ohio, as provided in the contract. This was done at a cost of about $2,000,000 to these lumber companies.

The Tennessee Railway Company started working on the extension and lateral tracks stipulated in the contract, but its funds gave out long before this work was completed. The New River Lumber Company (and hereafter by this name we mean the Ohio Corporation) filed a bill in the chancery court of Scott county July 1, 1913, in which it set out the contract above mentioned; that it had completed its mills at great expense and was prepared to comply with its undertakings. It showed that the Tennessee Railway Company had failed to complete its part of the contract, and that the complainant was sustaining great loss by reason of this default of the railway company, and it asked for a specific performance of said contract.

On the same day, to wit, July 1, 1913, the Tennessee Railway Company filed a bill in the chancery court of Scott county against the Standard Trust Company, the trustee under its mortgage, and other parties. The Tennessee Railway Company in this bill averred its insolvency, and the bill was filed as a general creditors' bill. It was stated therein that it would be to the advantage of the road to complete the extension and laterals so as to get the increased business from the lumber company, but that it was financially unable to do this work. A receiver was appointed for the Tennessee Railway Company. Upon his appointment the receiver was directed to issue $65,000 of receiver's certificates to go on with this extension work, and by subsequent decrees in the case other receiver's certificates were authorized and issued in an amount sufficient to complete the entire extension and laterals.

The two suits, the creditors' suit and the one brought by the New River Lumber Company, were consolidated. Thereafter the trustee under the mortgage came into the case and opposed the issuance of the receiver's certificates and the priority given to them. Many other pleadings were filed in the consolidated causes, various proceedings had, and orders entered, and an immense record built up.

These causes came to this court in a contest between the bondholders and the holders of the receiver's certificates as to priority of satisfaction out of the assets of the Tennessee Railway Company. All this appears, and the matter is more fully stated in New River Lumber Co. v. Tennessee Railway Co. et al., 136 Tenn. 661, 191 S.W. 334.

The property of the Tennessee Railway Company was finally sold and bid in by J. N. Baker, trustee for a committee representing the holders of bonds and receiver's certificates. Baker operated the road for a while, and thereafter turned it over to a new corporation that was brought out called the Tennessee Railroad Company, organized under the laws of this state.

Other facts will be stated as they become relevant in the course of the opinion.

In order to state the issues in the present litigation we must now revert to the contract of June 1, 1905, among the New River Lumber Company of West Virginia, the Tennessee Railway Company, and the Cincinnati, New Orleans & Texas Pacific Railway Company. This contract contained the following provisions:

"Second. The Tennessee Company agrees that from time to time as its track has been constructed as agreed it will haul and deliver logs from its main line and the laterals built by it, or built or extended by the lumber company, upon log cars of modern construction which it will furnish promptly in such numbers and at such times as may be required to keep the mills of the lumber company continuously supplied with logs from any point or points thereon to the mill or mills of the lumber company located on said lines, at a flat rate of four ($4.00) dollars per car of not less than thirty-four (34) feet in length and sixty thousand (60,000) pounds capacity, said cars to be promptly loaded and unloaded by the lumber company; also that it will haul all cordwood, bark and forest products on suitable cars of not less than forty thousand (40,000) pounds capacity at the same rate from the woods at points of loading on its lines to the mill or mills, factory or factories, tannery or tanneries located by the lumber company on said lines, the said cars to be promptly loaded and unloaded by the lumber company; and also that the lumber company may attach its log loader to any log train of the Tennessee Company, which shall, without charge, transport or transfer said loader to any other point on the lines of the Tennessee Company where and as said loader may be needed for the business of the lumber company, under the supervision of the proper officer of the Tennessee Company; and the lumber company shall also have a right to use its own engine to shift its log loader from point to point as its business may require upon the main and lateral lines of the road of the Tennessee Company under the supervision of the proper officer of that company, when such shifting shall, in the judgment of the lumber company, not be practicable by attaching said log loader to the log trains as hereinbefore provided, without, however, unreasonably interfering with the regular operation of the main or lateral lines by the Tennessee Company, and the lumber company shall be liable for any damage that may be done by its engine when upon the lines of the Tennessee Company.

In consideration of the low rate agreed upon in this article second, the lumber company agrees that, after the completion of its first mill as hereinafter provided, the entire output of its mills, factories, tanneries, etc., derived from...