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

• Decision Date: 28 December 1916
• Parties: NEW RIVER LUMBER CO. v. TENNESSEE RY. CO. ET AL. TENNESSEE RY. CO. v. STANDARD TRUST CO. ET AL.
• Court: Tennessee Supreme Court

191 S.W. 334

136 Tenn. 661

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

TENNESSEE RY. CO. v. STANDARD TRUST CO. ET AL.

Supreme Court of Tennessee.

December 28, 1916

Certiorari to Court of Civil Appeals.

Bills by the New River Lumber Company against the Tennessee Railway Company and others, and by the Tennessee Railway Company against the Standard Trust Company and others, wherein the Guaranty Trust Company, successor in interest of the Standard Trust Company, was allowed to defend and filed a cross-bill. Decree under the first bill for complainant and under the second bill for the complainant therein, and for cross-complainant in part and defendant trust company appealed to the Court of Civil Appeals, where the decree was affirmed, and defendant brings certiorari. Affirmed.

LANSDEN J.

The original bill in this case was filed to secure the specific performance of a contract entered into by the lumber company and the railway company to have certain extensions of the line of the railway company made into the timber lands of the lumber company. The trust company is the holder, as trustee of a mortgage, to secure certain bonds issued by the railway company, and is resisting the specific performance of the contract. The chancellor decreed a specific performance, and his decree has been enforced. An appeal was taken by the trust company to the Court of Civil Appeals, in which the decree of the chancellor was affirmed. The case is before us upon the petition of the trust company for writs of certiorari, and has been argued at the bar. A brief history of the litigation is necessary to be stated.

The original bill was filed July 1, 1913, and charged that the complainant New River Lumber Company of Ohio, as successor in title to a corporation of the same name organized under the laws of West Virginia, is the owner of timber rights to about 600,000,000 feet of timber standing upon lands adjacent and tributary to the lines of the railway company, and that on the 1st day of June, 1905, the contract which is made the basis of the bill was entered into between the railway and complainants' predecessor in interest. It is charged that at that time the railway company was the owner of a line of road extending about 11 miles in a southern direction from Oneida, Tenn., at which point it forms a junction with the Cincinnati, New Orleans & Texas Pacific Railway; that it was necessary to have an extension of this line of road into the timber lands of the complainant's predecessor at some future time before it could deliver its lumber, which it desired to manufacture, to the Cincinnati, New Orleans & Texas Pacific Railway, and from thence on to the general markets. The complainant's predecessor contemplated the expenditure of many hundreds of thousands of dollars in mills, machinery, and the like, constituting an organization for the cutting, sawing, and marketing of the timber which it owned; that the defendant railway company was substantially a timber line and was deriving about 70 per cent. of its gross revenues from the business of the complainant. In this situation the complainant's predecessor and the defendant railway company, and the Cincinnati, New Orleans & Texas Pacific Railway entered into a contract which was to remain in force for 27 years from its date, by which the railway company agreed with the lumber company, its successors and assigns, that it would complete its line of railroad to the mouth of Paint Rock creek and up New river through the timber lands which the complainant's predecessor was about to purchase, a distance of about 32 miles; and it also agreed to build certain lateral or branch lines which are set out in detail in the contract. It was agreed that the various lines of railroad should be completed about the 1st of January 1909; that the lateral branches might be increased or decreased up the various creeks by agreement between the parties; that the lumber company would not require the railway company to build any of the specified lines where the engineering difficulties made the extensions unreasonable; that the New River Coal & Coke Company, from which complainant's predecessor was about to purchase the timber interests referred to, was owned by the same interests that owned the defendant railway company. It was stipulated in the contract that if the railway company should afterwards place a mortgage upon its property, it would insert a clause in the mortgage as follows:

"Subject, however, to, and this indenture is executed with notice of, the prior rights of the parties other than the Tennessee Company to a certain agreement between Tennessee Railway Company, the Cincinnati, New Orleans & Texas Pacific Railway Company, and New River Lumber Company, dated June 1, 1905, a copy of which is filed with the trustee herein named contemporaneously with the execution of this indenture; it being the intention of the Tennessee Company to bind its property in said agreement described and any and all purchasers thereof by a lien hereby created, for the protection and security of this agreement and all the parties thereto other than the Tennessee Company, which lien shall be and hereby is declared to be prior and superior to the lien of this indenture or mortgage."

The complainant acquired all of the timber lands, together with all the rights accruing under the contract of June 1, 1905, on March 28, 1908, and afterwards it constructed a large sawmill equipped with all modern appliances for the manufacture of timber which had about a capacity of 20,000,000 feet per annum. This mill and the organization incident thereto have been in operation upon the premises adjacent to defendant's line of road, manufacturing and shipping lumber into the general markets from that date until the bill was filed. It had expended in this connection about $2,000,000.

The railway company completed its main line to Paint Rock creek, and thence up New river a short distance above the junction of Beech Fork creek with New river, but it is charged that this construction was not done within the time provided for in the contract.

The remainder of the main line, as well as the branch lines provided for in the contract, have not been built, and the railway company was, at the time of the filing of the bill, insolvent and unable to comply with its contract. It was charged that the construction of the whole of the railroad lines provided for by the contract was necessary to enable the complainant to procure the timber from its lands and to enable it to utilize and get the benefit of its plant and property, that it had no other means of transporting the products of the mills than over the lines of the railway company, and that this was known and fully understood by the parties to the contract at the time it was executed. It was charged that it had cut and removed the timber from its lands to such a point that unless the main line of the road, up to a point known as Charley's branch and a lateral of about 4 miles up Cage's creek, were completed during the present season for railway construction, it would be necessary for the complainant to shut down its enterprise, and this would cause it irreparable injury. It is charged that a stoppage of the mill for a considerable period of time would not only result in the loss of the profits of complainant's business, but of its trade and customers, and the disintegration of its organization for operating its mill.

It is further charged that the cost of constructing the line up Charley's branch and about 4 miles up Cage's creek would be about $65,000, and that this construction would temporarily enable complainant to continue its business; that the railway company is insolvent and without money or credit to build the road as provided by the contract, but that it was willing to comply with the contract so far as it was able to do so.

On March 1, 1907, the railway company executed to the Standard Trust Company a mortgage covering all of its line of road then built, and all of its other property tangible or intangible, both present and afteracquired, to secure a bond issue of not exceeding $4,500,000, 5 per cent., 30-year gold bonds, and that of this issue about $1,129,000 had been subscribed by divers and sundry parties, and were outstanding. It is said in the bill that by virtue of this bond issue the railway company became insolvent, and if its property was freed from the mortgage it would be dissipated and dismembered by executions, thereby destroying complainant's only means of transport to market. It is also shown that the railway company had been unable to procure the consent of its bondholders to make the extensions provided for in the contract. The bondholders refused to make any agreement which would permit the issuance of securities upon the railroad ahead of their bonds to be used in the extensions agreed upon. It is further charged that complainant has no other adequate or proper remedy than the specific performance of the contract for the extension of the lines of road, and that the damages which it would sustain are not determinable by any proper measure known to the law; that its timber rights on the lands referred to would expire in the year 1930, and such timber as was not removed by then would be lost to complainant entirely.

On the same day that the bill was filed the railway company filed its answer, and admitted all of the material allegations of the bill and expressed its willingness to perform the contract referred to, but averring its financial inability to do so. The trust company was proceeded against as a nonresident of Tennessee. There was no attachment of property belonging to this defendant. The bill and answer were presented to the chancellor, who authorized the...