State of Tennessee v. Taylor

• Decision Date: 07 July 1948
• Docket Number: No. 10706.,10706.
• Parties: STATE OF TENNESSEE, suing by WOLF. ENBARGER, Dist. Atty. Gen., ex rel ATCHLEY et al. v. TAYLOR, United States District Judge.
• Court: U.S. Court of Appeals — Sixth Circuit

169 F.2d 626 (1948)

STATE OF TENNESSEE, suing by WOLF. ENBARGER, Dist. Atty. Gen., ex rel ATCHLEY et al. v. TAYLOR, United States District Judge.

No. 10706.

Circuit Court of Appeals, Sixth Circuit.

July 7, 1948.

COPYRIGHT MATERIAL OMITTED

James B. Wright, of Knoxville, Tenn., and George G. Allen, of Sevierville, Tenn., for petitioner.

No attorney for respondent.

Before SIMONS, ALLEN, and MARTIN, Circuit Judges.

MARTIN, Circuit Judge.

The State of Tennessee, suing by the District Attorney General for its Second Judicial Circuit on relation of eleven of its citizens, has petitioned this court for a show cause order to be directed to the Honorable George C. Taylor, United States District Judge for the Eastern District of Tennessee, Northern Division at Knoxville. The State avers that the appeal which it has taken from orders and decrees of the district court furnishes an inadequate and incomplete remedy; and that the issuance of a writ of mandamus in aid of the appeal is necessary to afford adequate protection to the State from the erroneous actions of the district judge. The petition which was filed on May 17, 1948, prays that the district judge be ordered to show cause why this court should not direct him to dissolve an injunction, issued by him on April 11, 1947, restraining the State of Tennessee and its relators from proceeding with a suit filed on March 27, 1947, in the Chancery Court for Sevier County, Tennessee, and to dismiss a reorganization proceeding filed in the United States District Court on March 20, 1947, by the Smoky Mountain Railroad.

Civil Procedure Rule 81(b), 28 U.S. C.A. following section 723c, abolished the writs of scire facias and mandamus, but provided that relief theretofore available by those writs may be obtained by appropriate action, or by appropriate motion under practice prescribed in the rules. Substantive rights are still governed by the principles formerly applied in mandamus cases. Youngblood v. United States, 6 Cir., 141 F.2d 912, 915. Rule 35 of the rules of this court April 1, 1948, Edition provides that the writ of mandamus will not be issued, but that on proper showing an order to show cause will be made. The rule provides further that a petitioner desiring a writ of mandamus shall file his petition therefor and showing in support thereof together with such brief or memorandum as he may desire. Notice need not be given, but a cost deposit is required and the clerk is directed to enter the application on his docket and informally submit the papers to the court. The petitioner has complied with this rule. The rule further provides that if the court is of opinion that the application justifies a hearing, a show cause order will be entered, returnable as promptly as the situation permits; but if the court is of contrary opinion, an order of denial will be made.

Inasmuch as the averments of the petition, if true in material detail, show that reversible error has been committed by the district judge, we deem it appropriate to write an opinion pointing to applicable law, so that the district judge may be fully advised as to our views when responding to the show cause order, and may point out to us any erroneous deduction which, in his judgment, we may have drawn. He will, of course, traverse any erroneous statement of fact made in the State's petition, which is sworn to by one of the relators.

Our narrative herein is based solely upon the factual allegations made by the petitioner which we, of course, are not adopting but are merely accepting as we must when acting upon its petition for a show cause order.

The Smoky Mountain Railroad obtained its charter from the State of Tennessee on August 12, 1926, for the purpose of operating a railroad from Knoxville to Sevierville, Tennessee, a distance of some twentynine miles. This corporation acquired the roadway, trackage and equipment of a railroad company which, as a live corporation. had operated the railroad from 1909 to 1923, and subsequently from the latter year in receivership and reorganization down to the time of its acquisition by the Smoky Mountain Railroad.

In December 1937, the entire capital stock of the Smoky Mountain Railroad was purchased by Midwest Steel Corporation of Charleston, West Virginia, and its associates. In a report to the Interstate Commerce Commission for the year 1941, the Smoky Mountain Railroad declared that its 750 shares of stock were owned, as follows: Midwest Steel Corporation, 653 shares; Joe L. Silverstein, 96 shares; Max Kesselman, 1 share. The Silverstein and Kesselman families were closely linked in the ownership and control of the Midwest Steel Corporation, originally established by Alex P. Silverstein who began as a small salvage dealer in scrap iron. The corporation broadened its operations so as to deal in used rails and railway equipment, as well as in mining machinery, scrap metal and paper. Its principal activity for several years was the purchase and reconditioning for resale of rail equipment used in mines.

In an ad valorem tax report filed by the Smoky Mountain Railroad on March 30, 1938, with the Railroad and Public Utilities Commission of Tennessee, the Smoky Mountain Railroad stated: "This line was sold December 2, 1937, to a scrap iron dealer and it is worth no more than scrap value." In a similar report on April 7, 1942, filed with the Commission, the Railroad Company stated: "Stock of this line bought on Dec. 2, 1937, by second hand dealer for purpose of scrapping same. Permission to abandon was never obtained, worth no more than scrap value." Likewise, on June 1, 1945, the carrier stated in its report to the Commission: "Stock of this line bought Dec. 2, 1937, by a new group of stockholders who paid no more than scrap value." It was, therefore, perfectly obvious from the beginning that the purpose of the Midwest Steel Corporation and its associates in purchasing the stock of the Smoky Mountain Railroad was to abandon operation of the railroad and salvage its used rails, railway equipment and scrap metal. Indeed, shortly after acquisition of the Smoky Mountain Railroad's capital stock by the Midwest Steel Corporation and its associates, that railroad applied to the Interstate Commerce Commission for a certificate of convenience and necessity to abandon its operations. The Commission denied the application.

A second application for abandonment was filed by the Smoky Mountain Railroad with the Interstate Commerce Commission in December 1940. A hearing was had on this application on May 12, 1941. The Tennessee Valley Authority in September 1941 was permitted to intervene in the proceedings for the purpose of requesting that the case be reopened and a further hearing had. Following this intervention, Smoky Mountain Railroad requested on February 12, 1942, that it be permitted to withdraw its application for a certificate of convenience and necessity for the abandonment of the operation of the railroad.

Still persistent in its original purpose, the Smoky Mountain Railroad filed with the Interstate Commerce Commission, on March 14, 1947, a third application for abandonment of its entire line of railroad. This last application was duly docketed and is still pending before the Interstate Commerce Commission.

The Smoky Mountain Railroad suspended its operations on or about January 28, 1947, when one of the fills on the main line right-of-way was washed out and was not repaired. Connecting carriers and shippers were notified by Kesselman and Silverstein of the discontinuance of the operation of the railroad as a common carrier. Kesselman appeared personally before a meeting of shippers and told them that the operation of the railroad had been abandoned, and that the Interstate Commerce Commission would be asked to ratify such action; whereupon, the shippers enlisted the aid of the Railroad and Public Utilities Commission of Tennessee in an effort to bring about a restoration of the transportation service. The effort failed. The State District Attorney General was then requested to institute a quo warranto proceeding under section 9336 et seq. of the Tennessee Code in the Chancery Court for Sevier County, Tennessee, against the railroad and its owners, to procure a receivership and a forfeiture of the railroad company's charter. The District Attorney General agreed to comply with the shippers' request.

The petition alleged that "the owners and their counsel having in some way discovered that a bill for that purpose was being prepared for filing rushed into the United States District Court with their so-called reorganization bill on March 20, 1947 in order to circumvent the State of Tennessee from taking possession of the property and operating it under the authority of the quo warranto Act; and when the State filed its bill in the Chancery Court of Sevier County on March 27, 1947, the receiver appointed by the Chancellor and all other parties were enjoined from taking further steps in that proceeding."

The bill, filed by the State of Tennessee through its District Attorney General on the relation of eleven shippers, brought to the attention of the state-court Chancellor the cessation of operations by Smoky Mountain Railroad and its failure and refusal to repair the effects of the washout, which it was averred would cost between $500 and $2,000; and charged that the original purpose of the present owners of the Smoky Mountain Railroad was not to operate an efficient and serviceable railroad as a going concern, but was from the outset to effectuate "an abandonment as soon as possible and put the railroad out of business," using every opportunity to let its facilities fall into neglect so that the rails and other iron might be sold for salvage.

The bill in the state court charged that the Smoky Mountain Railroad and Silverstein and Kesselman, its principal stockholders and president and manager, respectively, who were also joined as defendants, had shown absolute...