Simpson v. SOUTH WESTERN RAILROAD COMPANY
| Decision Date | 11 January 1955 |
| Docket Number | Civ. A. No. 1156. |
| Citation | 128 F. Supp. 532 |
| Parties | W. H. B. SIMPSON, Lucy C. B. Simpson, Mary Elizabeth Simpson, T. H. Bowden, Ansel M. Smith, Belk-Simpson Company of Abbeville, South Carolina, Inc., Belk's Department Store of Clinton, South Carolina, Inc., The Greenville Bargain House, a corporation of the State of South Carolina, Plaintiffs, v. SOUTH WESTERN RAILROAD COMPANY, and Central of Georgia Railway Company, Defendants. |
| Court | U.S. District Court — Middle District of Georgia |
Bloch, Hall, Groover & Hawkins and Charles J. Bloch, Macon, Ga., for plaintiffs.
John B. Miller, Savannah, Ga., Harris, Russell, Weaver & Watkins, and H. D. Russell, Macon, Ga., for defendants.
This case came on to be heard upon motion to remand and was duly heard both upon oral argument and by briefs.
This case presents a new chapter in a long story of litigation between certain stockholders of the South Western Railroad Company on the one hand and the Central of Georgia Railway Company on the other. The previous chapters in that story are very interesting and appear chronologically as follows: Benton v. Callaway, 5 Cir., 1948, 165 F.2d 877; Callaway v. Benton, 1949, 336 U.S. 132, 69 S.Ct. 435, 93 L.Ed. 553; South Western R. Co. v. Benton, 1950, 206 Ga. 770, 58 S.E.2d 905, certiorari denied, 1950, 340 U.S. 815, 71 S.Ct. 44, 95 L.Ed. 599; Benton v. United States, D.C.M.D.Ga.1953, 114 F.Supp. 37, 39.
In the case last cited, Judge Conger, writing for a three-judge court, gave "a brief résumé of the high lights of the history of the South Western Railroad Company, and its long and intimate relation to the Central of Georgia Railway, and the court house battles and the long and arduous litigation, of which the present case ought to be a climax * * *." As Judge Conger stated, that history is "significant and intriguingly interesting."
In considering this motion to remand, however, this Court can consider only such portions of that long and interesting history as appear in the petition filed in the state court. The allegations of the petition must be examined against the background of Title 28, Section 1331 of the United States Code to see whether the petition states a cause of action which "arises under the Constitution (or) laws * * * of the United States" and against the background of Section 1336 to see whether the petition states a cause of "action to enforce, enjoin, set aside, annul or suspend, in whole or in part, any order of the Interstate Commerce Commission."
In construing the petition, we must, of course, consider all documents and exhibits annexed thereto and forming part thereof the same as the formal allegations of the petition. State of Louisiana ex rel. Saint v. Morgan's Louisiana & T. R. & S. S. Co., D.C. W.D.La., 18 F.2d 645.
The petition was filed in the Superior Court, Bibb County, Georgia, by W. H. B. Simpson, Lucy C. B. Simpson, Mary Elizabeth Simpson, T. H. Bowden, Ansel M. Smith, Belk-Simpson Company of Abbeville, South Carolina, Inc., Belk's Department Store of Clinton, South Carolina, Inc., The Greenville Bargain House, a corporation of the State of South Carolina against the South Western Railroad Company, hereinafter called the South Western, and the Central of Georgia Railway Company, hereinafter called the Central. The petition is, in length, consistent with the long litigation which has gone before. It comprises thirty-one pages and is documented with nineteen pages of exhibits. It traces all of the former litigation and negotiations concurrent with that litigation and subsequent thereto.
The petition makes the following case:
The capital stock of the South Western is $5,191,100, all common with par value of $100 per share. Petitioners own 664 shares (a little more than 1 per cent). The Central owns or claims to own 50,368 shares.
The South Western comprises some 340 miles of railroads, bridges, depots, and appurtenances in the heart of the system of the Central.
On December 19, 1932, the properties of the South Western were being operated by the Central under a long-term lease at a rental authorizing South Western to pay its stockholders an annual dividend of 5 per cent. On that date the District Court for the Southern District of Georgia appointed a receiver for the assets of the Central. The receiver adopted the lease of South Western and continued operation of both railroads.
On June 19, 1940, the Central filed its petition under Section 77 of the Bankruptcy Act, 11 U.S.C.A. § 205, and trustees in bankruptcy were appointed. The trustees by contract with South Western adopted the lease on a modified basis, agreeing to pay in lieu of rental the net income of the leased property, and to guarantee South Western against losses and expenditures for additions and betterments in excess of $50,000 per annum. The net income of the leased properties for the period June 19, 1940, to July 1, 1943, was determined by a segregation formula, or bankruptcy formula, promulgated by the Interstate Commerce Commission (252 I.C.C. 587) and approved by the District Court on August 19, 1943.
The contract between the trustees of the Central and the South Western was terminated July 1, 1943, and thereafter the trustees of Central adopted the South Western lease for the duration of the bankruptcy.
A plan of reorganization of the Central was promulgated by the Interstate Commerce Commission and was approved by the Bankruptcy Court June 24, 1946. That plan allotted to South Western $2,200,000 of the first mortgage 4 per cent series A bonds and $1,770,000 of 4½ per cent income bonds series B of the reorganized company in exchange for all of the said leased properties.
The South Western stockholders in March, 1944, 1945, and 1946 rejected the plan as grossly unfair and inadequate.
On February 11, 1947, the Interstate Commerce Commission submitted the plan to creditors and leased lines for acceptance or rejection on or before midnight, March 28, 1947.
On March 13, 1947, the directors of South Western resolved that the plan be accepted subject to the assent by the holders of a majority of the South Western stock.
On March 25, 1947, L. O. Benton, Jr. and Charles J. Haden as stockholders of South Western filed in Bibb Superior Court their petition to enjoin the officers and directors of South Western from holding a stockholders' meeting on March 28, 1947, to consider said plan and, in the event such meeting should be held and a mere majority of the stockholders should approve the plan, to enjoin the directors from consummating it.
The Superior Court did not enjoin the meeting, and the stockholders on March 28, 1947, approved the plan by a vote of 30,137 shares to 9,057 shares.
The Judge of the Superior Court held hearings on March 26 and 27, 1947, and deferred his ruling upon request and agreement of counsel. On April 18, 1947, M. P. Callaway, trustee of the Central, filed in the Bankruptcy Court a petition against L. O. Benton, Jr., Charles J. Haden, and the South Western, praying that Benton and Haden be enjoined from further prosecuting their petition in the Superior Court, and on said date the District Court granted a preliminary injunction as prayed.
On April 24, 1947, the Judge of the Superior Court of Bibb County, Georgia, of his own motion issued an interlocutory injunction against the defendants in the state court, basing his ruling on the ground that South Western had no charter power to sell its railroad without unanimous consent of the stockholders.
On August 15, 1947, the District Court made its injunction permanent and also annulled the interlocutory injunction granted by Bibb Superior Court on April 24, 1947. This action of the District Court was reversed by the United States Court of Appeals for the Fifth Circuit on January 13, 1948, Benton v. Callaway, 165 F.2d 877. This decision was upheld by the Supreme Court of the United States, Callaway, v. Benton, 336 U.S. 132, 69 S.Ct. 435, 93 L.Ed. 553.
Then the litigation in Bibb Superior Court proceeded to a permanent injunction on December 5, 1949, which was upheld by the Supreme Court of Georgia on April 10, 1950, in the case of South Western R. Co. v. Benton, 206 Ga. 770, 58 S.E.2d 905, and certiorari was denied by the Supreme Court of the United States on October 9, 1950, 340 U.S. 815, 71 S.Ct. 44, 95 L.Ed. 599.
In the meantime, South Western's properties had continued to be operated by Central from December 19, 1932 to June 19, 1940, under the lease adopted by the receiver, from June 19, 1940 to July 1, 1943, under the segregation formula by the trustee, and from July 1, 1943 to July 1, 1948, under the lease by the trustee.
On March 5, 1948, the Bankruptcy Court had passed an order rejecting the lease of the South Western as of the consummation date of the plan, which was July 1, 1948, and provided that:
"From and after the consummation date the reorganized company shall operate the lines of the South Western for the account of the South Western, subject to the jurisdiction of this court; provided that, if the properties of the South Western be acquired on the terms set forth in the plan subsequent to the consummation date and within a reasonable time after the termination of the litigation now pending, the effect of such acquisition shall be the same as if such properties had been acquired on such terms on the consummation date, and the result of operation by the reorganized company of South Western's railroads for the account of South Western, whether profit or loss, shall not affect the amount of bonds distributable under the plan to South Western Railroad Company, or the interest payable thereon from the consummation date."
The order of Judge Scarlett of March 5, 1948, did not prescribe any formula for determining the results of the operation. The properties had been operated under the segregation, or bankruptcy, formula from June 19, 1940 to July 1, 1943, and under the lease from July 1, 1943 to ...
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...Barron & Holtzoff Federal Practice & Procedure, § 325 (1960) (superseded by Wright & Miller, supra). See also, Simpson v. Southwest Railroad Co., 128 F.Supp. 532 (D.C.Ga.1955), affirmed on other grounds, 231 F.2d 59 (5th Cir. 1956), cert. denied, 352 U.S. 828, 77 S.Ct. 41, 1 L.Ed.2d 50 One ......
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Simpson v. South Western Railroad Company, 15765.
...this opinion is made possible by the very excellent statement of the case by the able trial judge in his opinion which is reported at 128 F.Supp. 532. In essence the appellants charge that the Central of Georgia Railway Company had acquired some 98% of the stock in South Western; that the i......