Smyth v. Asphalt Belt R. Co.

• Decision Date: 14 September 1923
• Docket Number: 267.
• Citation: 292 F. 876
• Parties: SMYTH et al. v. ASPHALT BELT R. CO. et al.
• Court: U.S. District Court — Western District of Texas

292 F. 876

SMYTH et al. v. ASPHALT BELT R. CO. et al.

No. 267.

United States District Court, W.D. Texas, San Antonio Division.

September 14, 1923

Andrews Streetman, Logue & Mobley and Robert H. Kelley, all of Houston, Tex., for complainants.

Mason Williams and R. J. Boyle, both of San Antonio, Tex., and G W. Wharton, of Fort Worth, Tex., for respondents.

WEST District Judge.

Statement of the Case.-- This is a suit by landowners to enjoin a railroad company from condemning their property as a right of way until it shall have first obtained the certificate of public convenience and necessity required by paragraph 20 of section 1, as added by section 402 of the Transportation Act of February 28, 1920 (41 Stat. 476). Jurisdiction rests solely upon the ground that the suit is one arising under the commerce clause of the Constitution and acts of Congress regulating interstate commerce. Paragraphs 18 and 20 of section 1 of the Transportation Act are as follows:

(18) 'After ninety days after this paragraph takes effect no carrier by railroad subject to this act shall undertake the extension of its line of railroad, or the construction of a new line of railroad, or shall acquire or operate any line of railroad, or extension thereof, or shall engage in transportation under this act over or by means of such additional or extended line of railroad, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity require or will require the construction, or operation, or construction and operation, of such additional or extended line of railroad, and no carrier by railroad subject to this act shall abandon all or any portion of a line of railroad or the operation thereof, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity permit of such abandonment.'

(20) 'Any construction * * * contrary to the provisions of * * * paragraph (18) * * * of this section may be enjoined by any court of competent jurisdiction at the suit of the United States, the Commission, any commission or regulating body of the state or states affected, or any party at interest. * * * '

The defendant Asphalt Belt Railroad Company, hereinafter for brevity called the A.B. Company, was regularly incorporated June 9, 1923, under the general incorporation acts of this state (chapter 1, title 115, of the Revised Statutes of Texas), for the purpose of constructing, owning, maintaining and operating a line of railroad from a point on the line of the San Antonio, Uvalde & Gulf Railway Company, hereinafter for brevity called the S.A., U. & G. Company, near the station of Pulliam, in Zavala county, thence northwesterly into Uvalde county, to a point at or near the mines of the Texas Rock Asphalt Company, about 20 miles from the beginning point; said line to lie wholly within the state of Texas, and the corporation to have all the powers and privileges conferred by the laws of the state of Texas upon chartered railroads, including power to construct and extend. Thereafter the A.B. Company, being unable to agree with the plaintiffs, landowners, as to compensation for the use of its right of way over their properties, instituted condemnation proceedings under the laws of the state of Texas.

Plaintiffs claim that the A.B. Company is a carrier by railroad, who is subject to the provisions of the Transportation Act, it being obliged by law, and its object and purpose being, to carry on its business as interstate carrier; and they further claim to be such parties at interest under the provisions of paragraph 20 of the Transportation Act, supra, as entitle them to enjoin the A.B. Company from proceeding further, unless and until it shall have obtained the certificate of public convenience and necessity provided for in paragraph 18 of the Transportation Act, supra. The plaintiffs further allege that this certificate is necessary upon the ground that the A.B. Company is owned and controlled through stock ownership by the stockholders, directors, officers, and employes of its codefendant, the S.A., U. & G. Company, an interstate carrier, and that consequently the proposed new line is in reality an extension of the S.A., U. & G. Railroad, and the same certificate would be required. The plaintiffs pray for injunction.

Upon the filing of the suit a temporary restraining order was issued. The defendant A.B. Company denied all material allegations, and declared that its sole purpose was to engage in intrastate commerce, and expressly denied that it was in any particular an extension or a part of the S.A., U. & G. Company. It affirmatively declared that it was not controlled by that company, and had and exercised a distinct entity of its own, wholly apart from, and in no manner controlled by, its codefendant interstate carrier; that it is not a carrier subject to the terms of the Transportation Act; that the court is without jurisdiction: and that the suit should be dismissed.

Upon hearing July 30, 1923, the suit was dismissed for lack of jurisdiction, and the restraining order dissolved. Plaintiffs were allowed to amend, and a further hearing and resubmission of the whole matter was had on August 24th; the defendants again standing on their motion to dismiss. Being a rehearing 'after amendment' the former judgment of dismissal of July 30th is superseded and set aside.

The Question of Jurisdiction.-- The A.B. Company, because of its incorporation under the general laws of the state of Texas applying to railroads, has the right to construct, maintain, and operate a railroad wholly within the state of Texas. Obviously it has the right under such laws to condemn private property for public use as an intrastate common carrier, whether it intended to, or afterwards did engage in interstate commerce or not. The right to stay proceedings of this sort should therefore be made to clearly appear beyond any reasonable doubt. Since the plaintiffs' right to injunction rests upon provisions of an act of Congress regulating interstate commerce, the court would be without jurisdiction unless the facts show: (1) That the Asphalt Belt Railroad Company is owned and controlled by the San Antonio, Uvalde & Gulf Railroad Company, an interstate carrier, thus constituting it an extension and branch of the latter road; or (2) that the A.B. company is obliged by law, and its purpose is, to carry on business as an interstate carrier.

Considering the first ground: The court finds that the majority of the stockholders of the A.B. Company constitute either a majority of the stockholders of the S.A., U. & G. Company, or are persons who hold options on all outstanding bonds of the S.A., U. & G. Company, and on a majority of its stock; that most of the officers and directors of the A.B. Company are officers and directors, or employes, of the S.A., U. & G. Company; that the latter company's properties are now held, and for some years past have been held, and are operated through a receivership under orders of this court. The court concludes as a matter of law that this character of stock ownership and indirect control by stockholders of different railroad corporations does not constitute them 'a single corporation,' nor destroy the corporate entity of either. Georgia S. & F. Ry. Co. v. Georgia Public Service Com'n (D.C.) 289 F. 878; Pullman's Palace Car Co. v. Mo. Pac. R.R., 115 U.S. 587, 596, 597, 6 Sup.Ct. 194, 29 L.Ed. 499; 13 Rose's Notes on U.S. Reports, pp. 114, annotations; Conley v. Mathieson Alkali Works, 190 U.S. 406, 23 Sup.Ct. 728, 47 L.Ed. 1113.

The A.B. Company's proposed construction not being an extension or branch of the interstate carrier, the S.A., U. & G. Company, the certificate of public convenience and necessity is not required from the Interstate Commerce Commission by that company. Jurisdiction cannot, therefore, be maintained on the first ground.

The second and remaining basis for jurisdiction is plaintiffs' insistence that the A.B. Company is obliged by law, and its purpose is, to conduct business both as an intrastate and interstate carrier. What obligations are imposed by law on the A.B. Company, and does it intend to carry interstate commerce? Its certified articles of incorporation give no hint of grant of power or purpose to engage in interstate commerce, but the significant fact of its physical connection with the S.A., U. & G. Company, an interstate carrier, is kept in mind. Plaintiffs rely upon certain articles of the statutes of the state of Texas as showing that the A.B. Company is compelled to receive and transport freight and passengers moving in both intrastate and interstate traffic.

Summarized, article 6588 requires railroads to carry mails of the United States, fixing terms and prices for carriage of United States mail. This is an ancient statute, passed many years before the Interstate Commerce Act was passed. Such an act is necessarily in conflict with the provision of the national laws regulating the transportation of United States mails, and has no application to any issue before the court, and will be passed without comment.

Article 6608 provides as follows:

'To Receive Freights and Passengers from Connecting Lines.-- All railway companies doing business in this state shall be and they are hereby required to receive from all other railway companies with which they may connect at the state line of this state, or at any place within this state, or at any or all places where they may cross the line of any other railway doing business or operating a line of railway, in this state, all freights

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