Richmond, F. & P. R. Co. v. Virginia Cent. Ry. Co.
| Citation | 222 Va. 167,279 S.E.2d 146 |
| Decision Date | 12 June 1981 |
| Docket Number | No. 781820,781820 |
| Court | Supreme Court of Virginia |
| Parties | RICHMOND, FREDERICKSBURG AND POTOMAC RAILROAD COMPANY v. VIRGINIA CENTRAL RAILWAY COMPANY et al. Record |
David F. Peterson, Fredericksburg, Charles A. Hartz, Jr., Richmond (Hicks, Baker & Peterson, Fredericksburg, on briefs), for appellant.
Glenn M. Cooper, Chevy Chase, Md. (Thomas E. Crosley, Jr., Fredericksburg, Paley, Rothman, Cooper & Eig, Chevy Chase, Md., Roberts, Crosley, Haley & Ashby, Fredericksburg, on brief), for appellees.
Before CARRICO, C. J., and HARRISON, COCHRAN, POFF, COMPTON, THOMPSON and STEPHENSON, JJ.
In this appeal, in order to determine who is entitled to certain railroad "car-hire funds" in controversy we must review a complex investment plan. The car-hire funds, some collected and held in an escrow bank account by Virginia Central Railway Company (VCR), and others payable to VCR, arose from rental charges for the use of freight cars owned by individual investors, leased to VCR, and sublet by VCR to various railroads.
Richmond, Fredericksburg and Potomac Railroad Company (RF&P) initiated this action on March 9, 1978, by filing its motion for judgment in the trial court against VCR for net freight charges alleged to be payable pursuant to an agreement dated December 1, 1976. Under the agreement, RF&P provided VCR with accounting services for "interline" shipments for which VCR collected the freight charges from the consignees. Pursuant to regulations of the Association of American Railroads, the collecting railroad apportions the collected freight charges among the various railroads that participated in the shipments, or the railroads over whose tracks the shipments moved. The agreement required RF&P to handle VCR's interline settlements and, subject to reimbursement by VCR, to pay to the other railroads the shares of the freight charges to which they were entitled. At the time the action was filed in the trial court, VCR's reimbursements to RF&P were delinquent in the amount of $81,270.04, plus interest.
On April 4, 1978, RF&P filed a petition seeking to attach specified tangible personal property of VCR in this State, and to require VCR to pay over to the General Receiver any car-hire funds in the possession of or receivable by VCR. A temporary restraining order was entered prohibiting VCR from removing its property from Virginia, and directing VCR to pay car-hire funds to the General Receiver in an amount not to exceed $88,500. After numerous individual car owners had been permitted to intervene as parties defendant, 1 VCR paid over to the General Receiver the car-hire funds collected by it and held in an escrow account in a District of Columbia bank.
The trial court heard the evidence ore tenus and by memorandum opinion dated June 8, 1978, concluded that the car-hire payments received by VCR and paid over to the General Receiver pursuant to the court order were owned by the individual car owners, not by VCR, and did not constitute assets of VCR subject to attachment. On June 19, 1978, RF&P applied to the clerk of the trial court for additional attachments of car-hire funds payable by various railroads to VCR. The intervenors filed motions to quash these attachments.
By order entered July 5, 1978, the trial court dismissed the original attachment, on the ground stated in its June 8 memorandum opinion, but awarded judgment in favor of RF&P against VCR in the amount of $81,270.04, with interest. By order entered September 27, 1978, the court, ruling that the car-hire funds receivable by VCR from other railroads were similar to those previously found to be immune to attachment, dismissed the additional attachments. The order directed that the funds originally deposited with the General Receiver be distributed to the car owners, that $89,236.99 in car-hire funds held by the various railroads be paid to the General Receiver, and that the General Receiver deposit $80,000 of those funds on interest pending the outcome of this appeal, and distribute the balance to the car owners.
On appeal, RF&P contends that the trial court erred in ruling that neither the car-hire funds held by VCR nor those held by other railroads subletting cars from VCR were subject to attachment by RF&P. RF&P further argues that the court erred in not ruling that, even if the car-hire funds were trust funds, when VCR used for the benefit of the car owners interline freight collections held in trust for RF&P, the car-hire proceeds became subject to payment of the debt owed by VCR to RF&P. The car owners have assigned cross-error to the trial court's failure to dismiss the attachment for lack of supporting evidence and lack of jurisdiction over the funds attached.
Resolution of the issues presented requires a thorough examination of the relationship between the car owners and VCR. The evidence, made a part of the record by a written statement signed by opposing counsel and by the trial judge, will be viewed in the light most favorable to the car owners, who prevailed in the trial court.
Railvest, Inc., a Maryland corporation, solicited various persons to purchase railroad freight cars for investment purposes. The cars were leased under ten-year non-equity leases by Alexander Korn and other owner-lessors to VCR, a wholly-owned subsidiary of Railvest. When a car leased to VCR was used by another railroad company, VCR received car-hire payments consisting of (1) a fee based upon the mileage the car traveled, (2) an amount for each day the car was used (per diem), and (3) an additional amount based upon the days of use for these particular types of cars (incentive per diem). While the mileage fee could be earned by any owner, under Interstate Commerce Commission (ICC) regulations the per diem and incentive per diem fees could only be earned by cars which were owned, or leased under non-equity leases for not less than ten years, by a common carrier. Prospective investors were informed that car-hire payments would be handled as "escrow" funds for the benefit of the owners and would not be adversely affected in the event that VCR became bankrupt.
Each owner-lessor signed a management agreement with Railvest and a lease agreement with VCR. Under these agreements the owner-lessors were to receive as "service charges" all the car-hire funds earned by their cars less deductions for expenses and the specified management fees charged by Railvest. The lease agreement provided that VCR, as lessee, would be responsible for the collection of all car-hire earnings generated by the cars while in VCR's service, and such earnings were payable by VCR to the owner-lessors pursuant to the management agreement. VCR reserved the right to place such of its permanent letterings and markings upon the cars as were necessary to implement the lease agreement under ICC regulations.
At the end of each month, VCR drew sight drafts on the railroads which owed rental for use of the cars sublet from VCR. These drafts were paid to a District of Columbia bank and placed in an escrow account pending distribution on a quarterly basis to the owner-lessors after appropriate deductions for expenses and management fees payable to Railvest.
We entertain grave doubt that a valid ground for the original pre-judgment attachment, asserted by RF&P under Code § 8.01-534(3), 2 was established in the trial court, as the evidence fails to show that the funds in the escrow account were ever in Virginia. Nevertheless, we will assume, without deciding, that there was a valid ground for attachment, and we will proceed to review the ruling of the trial court on the merits.
Joseph E. Keating, president of both Railvest and VCR, testified that...
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