Puget Sound Power & Light Co. v. Asia
| Decision Date | 05 December 1921 |
| Docket Number | 3724. |
| Citation | 277 F. 1 |
| Parties | PUGET SOUND POWER & LIGHT CO. v. ASIA et al. [1] |
| Court | U.S. Court of Appeals — Ninth Circuit |
Rehearing Denied January 9, 1922.
The court below dismissed the appellant's amended bill of complaint for want of equity. The following is the substance of the complaint:
On March 31, 1919, the appellant sold and delivered to the city of Seattle a certain street railway system, in payment for which the city delivered to the appellant an issue of $15,000,000 of municipal street railway bonds, each bond payable, with interest, at 5 per cent. per annum, payable semiannually on the 1st days of March and September. Each bond contained a covenant and obligation binding the city 'to pay into the special fund created by the ordinance authorizing the issuance of this bond, and out of the gross revenues of such municipal street railway system, and all additions and betterments and extensions of such system hereafter acquired, even though the balance of such gross receipts thereafter remaining may be insufficient to pay the cost of maintaining and operating said system, and said additions and betterments thereto and extensions thereof, a sum equal to 5 per cent. per annum, payable semiannually, on all unpaid bonds of the issue of $15,000,000. ' The city has received gross revenues from the operation of the railway system sufficient to pay all charges and indebtedness, which were, by the terms of the bonds, made superior to the bonds and in addition thereto has received gross revenues sufficient to pay, not only interest upon the bonds, but installments of principal which have not yet become payable and there will be due and payable upon such bonds interest at the rate of 5 per cent. per annum, payable semiannually which sum the city will pay unless, by reason of the acts of the defendants, the city is induced or compelled to breach its contracts and default in such payment, and divert the money applicable thereto to the payment of claims which are inferior in right to the bonds and the coupons attached thereto.
In order for the appellant to deliver clear title to the railway system, free from liens and mortgages, it was necessary for the appellant, immediately on receipt of the bonds from the city, to deliver the same to the trustees under certain mortgages, and those trustees held the same as collateral security for the debt which was secured by the mortgages so released, and the appellant is the owner of the equity of redemption in such bonds, and needs the amounts of interest payable on such bonds to apply upon the indebtedness secured by the mortgages, and, if interest be not paid upon the bonds, the entire issue will be deemed to be defaulted, causing to the appellant great and irreparable injury, for which there is no remedy at law.
The appellees have combined and confederated together to bring about a breach between the city and the appellant, and have greatly impaired the market value of the bonds, and, if default in payment of interest be caused by the appellees, then the market value of such bonds would be decreased millions of dollars. The appellees have instituted a suit against the city and the city treasurer and comptroller in the superior court of the state of Washington for King county, but have not joined the appellant as party defendant, which suit is without the jurisdiction of such superior court, because it is brought to set aside a judgment and decree rendered by the Supreme Court of Washington in favor of the appellant and the city of Seattle against Frank A. Twichell, plaintiff, and C. E. Horton, intervener, representing all the taxpayers of the city of Seattle. Twichell v. Seattle, 106 Wash. 32, 179 P. 127. The appellees have combined and confederated together to induce and compel the city to divert a sufficient portion of the gross revenue to the payment of the cost of maintaining and operating the municipal street railway system and the depreciation thereof, before paying any part of such gross revenue into said special fund, and to prevent the city and its officers from paying any part of the interest or principal of such bonds from such special fund, until after the payment of all costs of maintenance, operation, and depreciation of the railway system. The appellees, pursuant to such combination and confederation, asserted and caused to be published that the appellant's bonds were payable out of the net revenues of the municipal street railway system, and that the pledging of the entire gross revenues thereof to the payment of the bonds was illegal and void.
Pursuant to their combination and confederation, and for the purpose of carrying the same into effect, they commenced the suit in the state court, and alleged in their complaint therein that the city treasurer was paying into the said fund the entire gross receipts of the railway, in lieu of using the money for payment of conductors, motormen, and laborers employed on the lines, and other operating expenses, and that those salaries and expenses are being paid by the issuance of warrants of the city, which are recognized by the city and its officers as valid claims against the city; that in truth the city and its officers have the right to pay the wages of said employes and other operating and maintenance expenses, by applying thereto earnings of the street railway; that no provision had been made for paying depreciation charges out of the earnings of the street railway or otherwise, and it would be impossible to pay the same, or make replacement of the road, if the gross earnings of the system were used for paying the principal and interest on the bonds; that the prayer of the complaint was that the defendants therein be permanently enjoined from paying out of the street railway fund, or other funds of the city, the interest accruing on said bonds on March 1, 1921, until all of the wages of employes and cost of maintaining and operating said system, including depreciation charges, be first paid, and that the provisions of the ordinances, the contract and bonds, so far as they provide otherwise, be declared ultra vires, illegal, and void. Upon said complaint the said superior court issued a temporary restraining order as prayed for, and set for hearing on February 17, 1921, the plaintiff's application for a temporary injunction.
The appellees, in so attacking the bonds and in filing their complaint in the state court, acted in combination and confederation to bring about a breach of the contract between the plaintiff and the city, and for that purpose they sought and procured such restraining order, and the appellant was compelled to and did on February 1, 1921, and prior to the institution of the present suit, institute a suit against the city and its officer to enforce specific performance of the contract. The appellees continue to deny that the city was obligated to make payments into the special fund in case the gross earnings of the system were insufficient to pay, in addition to the cost of operation and maintenance of such system, the...
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...the action for want of equity. (The dismissal of this action was subsequently affirmed by the court of appeals in Puget Sound Power & Light Co. v. Asia, 9 Cir., 277 F. 1.) The power company, as sole bondholder, also brought an action in the Federal court against the city seeking specific pe......
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