State of South Carolina v. Jack

• Decision Date: 01 May 1906
• Docket Number: 463.
• Citation: 145 F. 281
• Parties: STATE OF SOUTH CAROLINA ex rel. CUNNINGHAM et al. v. JACK et al. JACK v. WILLIAMS et al.
• Court: U.S. Court of Appeals — Fourth Circuit

145 F. 281

STATE OF SOUTH CAROLINA ex rel. CUNNINGHAM et al. v. JACK et al.

JACK v. WILLIAMS et al.

No. 463.

United States Court of Appeals, Fourth Circuit.

May 1, 1906

J. W Barnwell (B. M. Shuman, on the brief), for appellants.

B. A Hagood, T. P. Cothran, M. F. Ansel, and S. J. Simpson, for appellees.

Before GOFF and PRITCHARD, Circuit Judges, and MORRIS, District Judge.

MORRIS District Judge.

This is an appeal from the decree of the Circuit Court (Simonton Circuit Judge) entered February 1. 1902, dismissing the cross-bill of the appellants filed in the case of Jack plaintiff, against Williams and Beattie, defendants. The original case of Jack a citizen of Georgia, against Williams and Beattie, citizens of South Carolina, was filed in the Circuit Court of the United States for the District of South Carolina, at Charleston, in April, 1897, alleging that under a decree of that court entered August 17, 1892, directing a foreclosure sale of the property, rights, and franchises of the Carolina, Knoxville & Western Railroad Company, said Williams was the highest bidder at said sale, and had become the purchaser of the 15 miles of railroad sold under that decree for $15,000. The bill in the original case further alleges that, although Williams was the purchaser reported to the court, and to whom the legal title of all said property was conveyed, that the complainant Jack and said Beattie and Williams had jointly furnished the purchase money, and that under an express agreement Williams held the title for the joint benefit of himself and the said Jack and Beattie. The bill alleged that the railroad as projected had been intended to extend from Hambury, N.C., to Knoxville, Tenn., but that only 12 miles had been completed, which had been hastily and imperfectly constructed and insufficiently equipped. This 12 miles had been constructed by a construction company which itself became insolvent, and could proceed no further with its contract. The bill further alleged that it was first operated in 1889, and after 1892 had been operated by the receiver appointed by the court until the sale thereof in July, 1896, when it ceased to be operated; that during all that time it had not paid operating expenses, and not a dollar had been paid on account of interest or receivers' certificates; that the roadbed had sunk, the bridges were out of repair, and that to put the road in repair to make it safe to operate would cost at least $10,000; that it would be financially ruinous for the then owners to attempt to run the road; that the owners had exerted themselves to promote a scheme by which the small portion of the road which had been built could be operated, but had not succeeded; that the citizens along the line had been in vain appealed to for assistance, and that while the road was operated they to a large extend refused to patronize it, and hauled their produce and merchandise by wagons to Greenville. It was a fact appearing in the subsequent proceeding that in the effort made by the receiver in the original case to successfully operate the road the court had authorized him to borrow $12,500 on receiver's certificates, which had been spent in constructing 3 miles of additional track to reach the town of Marietta, which construction extended the track from 12 miles to 15 miles. The bill of complaint of Jack further alleged that the Legislature of South Carolina had passed an act, approved March 5, 1897, requiring all owners of railroads to reorganize, under section 1610 of the Revised Statutes of South Carolina, within 60 days after the passage of the act, under a penalty of $50 per day for failure to do so. The bill alleged that it would be utterly useless for the owners of said railroad to attempt to comply with said act, and yet if they refused to do so they might be subjected to the penalty imposed by said act. The prayer of the bill was that the defendants Williams and Beattie be enjoined from taking any steps to become incorporated under the above-mentioned South Carolina law, that a receiver be appointed to take possession of said property, and to sell the same for purpose of partition among the parties owning the same, in such manner as the court might direct. The Circuit Court appointed Mr. W. C. Cothran receiver, as prayed. The receiver obtained the services of a skilled railroad expert to report to the court the then condition of the 15 miles of road, and he reported that the trestles and roadway were in very bad condition, the track in a great many places covered with earth, in some places for a distance of 100 yards to the depth of two feet, and that it would cost $10,907.50 to put it in a condition to be operated for one year. The court in a decretal order entered May 18, 1897, recited the disastrous history of the road, and that it had been demonstrated that if then repaired and put and maintained in proper condition for operation it could only be operated at a positive loss. That in the suit in which the former receiver was appointed and in which the foreclosure decree of sale was entered the property was three times offered at public sale as a railroad without receiving what was then considered an adequate bid, and was finally sold at the fourth public sale to the holders of the receiver's certificates at the sum of $15,000, which was not sufficient to pay the debts incurred by the receiver. That as a railroad it was absolutely worthless, and that its rights, privileges, and franchises to maintain and operate the railroad had been forfeited.

In view of the worthless character and condition of the property as a railroad, and the futility of any attempt to operate it as a railroad, the court directed the receiver to remove the iron rails and fastenings from the roadbed, and to sell them together with the rolling stock. The property so removed was sold as directed by said order of the court, and the proceeds after deducting expenses were distributed to the owners. There were certain other provisions having reference to the possibility of the state of South Carolina chartering another corporation for the purpose of exercising the franchises of the Carolina, Knoxville & Western Railway Company, in which case, as the court held, the present owners would be entitled to be paid the value of the rails, etc., removed, and the new corporation would be damaged only to the extent of relaying the rails, and the court directed $2,000 to be retained by the receiver to answer any such damage. No such new corporation was ever created, and the said provision has never become operative. Thereafter, on December 19, 1900, the state of South Carolina, with the consent of the Attorney General of the state, at and by the relation of T. B. Cunningham and others, by leave of the court filed its cross-bill against Jack, Williams, and Beattie and the Charleston & Western Carolina Railway Company. The cross-bill recited the various acts of assembly by which the Carolina, Knoxville & Western Railway Company was in 1887 made a corporation and succeeded to the rights, privileges, and franchises of several prior corporations,...