Seaboard Air Line R. Co. v. Savannah Union Station Co.

• Citation: 196 F.2d 431
• Decision Date: 18 June 1952
• Docket Number: No. 13761.,13761.
• Parties: SEABOARD AIR LINE R. CO. v. SAVANNAH UNION STATION CO.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

196 F.2d 431 (1952)

SEABOARD AIR LINE R. CO. v. SAVANNAH UNION STATION CO.

No. 13761.

United States Court of Appeals, Fifth Circuit.

May 2, 1952.

On Rehearing June 18, 1952.

T. M. Cunningham, Savannah, Ga., Harold J. Gallagher, New York City, James B. McDonough, Jr., Norfolk, Va., for appellant.

Henry L. Walker, Washington, D. C., Charles Cook Howell, Wilmington, N. C., for appellee.

Before SIBLEY, RUSSELL and RIVES, Circuit Judges.

RUSSELL, Circuit Judge.

The determination of this appeal requires answer to the question whether the purchaser in a railroad receivership reorganization of the properties and rights in and under leases and operating agreements of the insolvent company, and its receivers, who, by the provisions of the sale, is given the right, within the time provided "to elect not to assume or adopt" any executory contract, and that "no user of rights prior to the expiration of said period shall be deemed to conclude the Purchaser in respect to such election, and upon the filing of such election the Purchaser shall be deemed not to have assumed or adopted such contracts, leases or any rights therein described or to be bound by the obligations of such contracts, leases or agreements", who timely elects not to adopt after a user of the rights so provisionally acquired, is bound contractually by the terms of such agreements for the time of use between the date of purchase and the date of election not to adopt, and the further question whether, under the circumstances, and as otherwise present here, the Court should fix and award judgment for rentals prior to rejection or should await determination of value of use by the Interstate Commerce Commission.

The appellant is the purchaser at a foreclosure sale directed by the receivership Courts. The operating agreement here involved grants trackage rights and use of station facilities essential to operation of a line of the railroad into and in the Savannah Union Station, owned by the appellee, who is the lessor. The purchase and use of such rights was approved and authorized by the Interstate Commerce Commission, (261 I.C.C. 689) subject to the rights of "disaffirmance". The operating agreement, providing for a term of 50 years, was originally entered into in the year 1902 by a corporate predecessor of the insolvent — in — receivership "seller". Its receivers had never formally adopted the operating agreement, but continued to use appellee's tracks and facilities and apparently paid rental at the agreed rate. The purchaser, appellant, did likewise but insists that such payments were made "not pursuant to the Operating Agreement but on the same basis as if the Operating Agreement had been in effect as to it, with one exception." This exception is the amount appellee claims was appellant's share under the terms of the Operating Agreement of the cost of replacing certain electric signal wires and trunking with underground cable, which item, in the amount of $9,468.41, was awarded appellee by the judgment of the Court now appealed from. In the suit now under review the appellee's complaint was predicated upon the contention that an adoption of the Operating Agreement resulted from the user of the station facilities, and consequently that the notice of appellant's election not to adopt, which had been properly evidenced and given, was ineffective. Recovery was sought of the rentals computed as provided by the agreement for periods both before and after the time of appellant's notice of election not to adopt. The suit is the "Savannah action" referred to in our decision in Seaboard Air Line R. Co. v. Savannah Union Station Co., 5 Cir., 181 F.2d 267, in which we considered the unsuccessful effort of appellant to secure from the receivership Court an injunction against the prosecution of the present suit. As there determined, the merits of the Savannah action were not properly for determination by the receivership Court, or by this Court, since the only question was whether the receivership Court abused its discretion in dismissing the attempt to secure an injunction against its prosecution. However, many of the important facts of the cause are set forth in that decision and can be ascertained by reference. After that decision, the appellant filed its defenses by motions to dismiss and by answer, and subject thereto, demanded a trial by a jury. Among the points thus urged, and now controlling if determined in appellant's favor, is that appellant is not bound by the terms of the operating agreement and consequently only the Interstate Commerce Commission has jurisdiction to determine what reasonable rental it shall pay for the use of the facilities during the period prior to notice of its election not to adopt, as well as for the use subsequent to such notice. The appellee moved for summary judgment in its favor. The appellant moved for summary judgment of dismissal. The trial Court, adjudging that "defendant Seaboard's rejection of the Operating Agreement operated prospectively and had no retroactive effect", awarded judgment for the amount of expense claimed which arose prior to the date of rejection as the stipulated rental and held that rental liability thereafter should be "reasonable rental" and that this should be determined by the Interstate Commerce Commission. Jurisdiction of the cause was retained to enforce the finding of that body, if necessary. Appellee apparently has abandoned the predicate of its suit for we are told that proceedings have been instituted before the Interstate Commerce Commission to have such rental determined.

The appellant insists that it was not, and is not, a party to the operating agreement; that it never made any affirmative adoption of that agreement and it was never bound by it. In support of its proposition that it did not become bound to the agreed rental by virtue of the use of appellee's property and the payment of rental therefor, and that a receiver, by taking possession of a leasehold does not become assignee of the term, it relies upon the rulings in Quincy, M. & P. R. Co. v. Humphreys, 145 U.S. 82, 12 S.Ct. 787, 36 L.Ed. 632, and United States Trust Co. v. Wabash W. Railway...