State of Texas v. Eastern Texas R. Co.

• Decision Date: 11 August 1922
• Docket Number: 323,325.
• Citation: 283 F. 584
• Parties: STATE OF TEXAS v. EASTERN TEXAS R. CO. et al. EASTERN TEXAS R. CO. v. RAILROAD COMMISSION OF TEXAS et al.
• Court: U.S. District Court — Western District of Texas

283 F. 584

STATE OF TEXAS v. EASTERN TEXAS R. CO. et al.

EASTERN TEXAS R. CO. v. RAILROAD COMMISSION OF TEXAS et al.

Nos. 323, 325.

United States District Court, W.D. Texas, Austin Division.

August 11, 1922

E. B Perkins, of Dallas, Tex., E. J. Mantooth, of Lufkin, Tex Daniel Upthegrove, of St. Louis, Mo., and W. B. Hamilton, of Dallas, Tex., for Eastern Texas R. Co.

The Attorney General of Texas, Walace Hawkins, Asst. Atty. Gen and I. D. Fairchild and John Redditt, both of Lufkin, Tex for the State of Texas, the Railroad Commission of Texas, and others.

WEST District Judge.

These two cases relate to identical issues of law and fact, and are considered together. The Eastern Texas Railroad Company, called 'Railroad,' on June 3, 1920, applied to the Interstate Commerce Commission for authority to abandon operation and to dismantle and remove its road. The state of Texas thereupon, July 14, 1920, entered suit against Railroad in a state court to enjoin such action, and a temporary writ of injunction was issued. The case was removed to this court by Railroad, and was here numbered 323. On December 2, 1920, the Interstate Commerce Commission granted the certificate authorizing abandonment of Railroad. The temporary injunction theretofore issued by the state court was dissolved by this court.

Railroad, on December 20, 1920, brought its independent suit in equity, numbered 325 in this court, against the Railroad Commission of Texas and others, seeking to enjoin defendants from interfering with Railroad's right to abandon, dismantle, and salvage its property, as granted by the Interstate Commerce Commission. On April 29, 1921, a temporary writ issued as prayed for, and, awaiting result of appeal in No. 323, no further action was taken. The state appealed to the Supreme Court of the United States. The case was there docketed and numbered 298. That court issued its order April 21, 1921, suspending this court's order dissolving injunction issued by the state court, and required that the status quo be preserved.

The state of Texas and others, on September 10, 1921, brought suit in the United States District Court for the Eastern District of Texas, against the United States, Railroad, and others, to annual the Interstate Commerce Commission's order and certificate of abandonment. Railroad's motion to dismiss was granted September 21, 1921, and an appeal was taken and filed in the Supreme Court of the United States October 1, 1921, docketed and numbered 563. The two cases appealed, Nos. 298(323) and 563, were considered together, and were both disposed of in the court's opinion of March 13, 1922 (258 U.S. 204, 42 Sup.Ct. 281, 66 L.Ed. . . .), each case being reversed and remanded for further proceedings; the Supreme Court holding that the Commission's order and certificate of abandonment, issued under authority of section 402, pars. 18, 19, and 20, of the Transportation Act of 1920 (41 Stat. 456, 477), was adequate to sanction a discontinuance of Railroad's interstate and foreign business; that the road was entirely within a single state, owned and operated entirely by a corporation of that state, not a part of another line, its operation solely in intrastate commerce, and its abandonment or discontinuance was a question of local concern; that in these circumstances the Commission was without authority over its purely intrastate business. Whether, apart from the Commission's certificate, the railroad is entitled to abandon its intrastate business, was not before the court.

Conforming to this opinion, Railroad, in case No. 325, on April 29, 1922, amended its bill and no longer relied on the Commission's certificate and order authorizing abandonment of its railroad properties in intrastate commerce. It declared that its property would be confiscated and taken without due process if denied the right to abandon operation in intrastate commerce, and to dismantle, salvage, sell, remove, and dispose of its property for the benefit of its stockholders, because contrary to the provisions of the Fourteenth Amendment to the Constitution of the United States, and also violative of the provisions of the Constitution of the state of Texas, and praying for injunction-- a temporary writ being granted on the same day.

In case numbered 323 Railroad filed its amended answer, counterclaim, and cross-action May 13, 1922, setting up in substance matters alleged in the amended bill in that case, and seeking relief by injunction. The Railroad Commission of Texas and others, defendants, by supplemental answer, took issue, May 29, 1922, and filed a joint motion to (1) dissolve the temporary injunction theretofore therein issued, and (2) to dismiss the complainant's suit.

In case No. 323 the state of Texas asks that Railroad be enjoined from abandoning operation and dismantling its road, and be required to continue operation. Railroad by cross-action seeks injunction preventing interference with its right to abandon and dismantle. In No. 325 Railroad asks that the Railroad Commission of Texas, the Attorney General of Texas, and others, by injunction be prevented from interfering with Railroad abandoning and dismantling its road.

Railroad contends that it has the right to abandon operation of its road, and to dismantle it and dispose of its physical properties by sale or otherwise, to the best interest of its stockholders, because it is insolvent, and the revenues derived from operation are not sufficient to meet expenses and allow a fair return upon the investment, with no reasonable future prospect of such revenues, and says that to compel it to continue operation and to prevent it from dismantling would be to take its property without due process of law, contrary to the Fourteenth Amendment to the Constitution of the United States, and, likewise, contrary to article 1, Sec. 17, of the Bill of Rights, and article 10 of the Constitution of the state of Texas. The state of Texas and its Railroad Commission contend that, by virtue of the charter contract entered into with the state and because of express provisions of its statutes, Railroad must maintain and operate its road in any event, and that the Fourteenth Amendment is without present application; also take issue with Railroad on the facts.

The Interstate Commerce Commission's certificate of public convenience and necessity authorized Railroad 'to abandon the operation of all of its lines of railway now owned and operated by it, and to take up, dismantle or remove any part or all of the property of said company, and in any lawful manner to dispose of any or all parts of said property so taken up, dismantled, or removed, or as it is now situated. ' The Supreme Court, in State of Texas v. Railroad, supra, as noted, holds that this certificate was sufficient to 'sanction a discontinuance' of Railroad's interstate and foreign business only, and the questions (1) whether the state of Texas, operating through its Railroad Commission, and by force of its statutes and the charter contract, can compel reconstruction and operation of the road as an intrastate carrier, or (2) whether Railroad may 'abandon and dismantle' as to intrastate commerce, are to be answered.

Statement of Facts.

The Interstate Commerce Commission, considering the same issues in question here, found facts-- admitted by the state's counsel to be true-- as follows:

'The Eastern Texas extends from Lufkin, Tex., in a westerly direction 30.3 miles to Kennard, Tex., and has in addition to its main line track about 4 miles of switchyard and passing tracks. At Lufkin. its tracks connect with those of the St. Louis Southwestern Railway Company of Texas, hereinafter called the Cotton Belt, the Houston, East & West Texas Railroad, the Groveton, Lufkin & Northern Railway, the Texas Southeastern Railroad and the Angelina & Neches River Railroad. It has no other railroad connections. It maintains a joint agency with the Cotton Belt at Lufkin, has agency stations at Ratcliff, Tex., and Kennard, and has six sidetracks at other points, where carload freight may be received or delivered. It owns one combination passenger, mail, and express car but no other rolling stock. It rents one light locomotive from the Cotton Belt, and pays per diem under the code rules for foreign cars while on its line. The only regular service it maintains is one mixed freight and passenger train daily, except Sunday, between Lufkin and Kennard.

'The Eastern Texas was incorporated November 8, 1900, for 25 years, under the general railroad incorporation laws of Texas, to construct a railroad from Lufkin to Crockett, Tex. Its line was constructed to Kennard in 1901 and 1902, and has been continuously operated since, though it has not been extended to Crockett. The company was promoted and financed by individuals interested in the Texas-Louisiana Lumber Company, hereinafter called the Lumber Company, which is a subsidiary of the Central Coal & Coke Company of Kansas City, Mo. A substantial amount of applicant's right of way was donated to it by the owners of the land. It never received a land grant from the state, nor exercised the right of eminent domain. It was originally authorized to issue $150,000 capital stock, which amount was increased in 1902 to $1,000,000. Shares of stock with a par value of $454,500 but no bonds have been issued. On September 1, 1916, all outstanding stock of the Eastern Texas was acquired by the St. Louis Southwestern Railway Company, which, except for the directors' qualifying shares, still holds it. There is substantial identity between the officers of the Eastern Texas and the Southwestern.

'This line was constructed primarily to serve the Lumber Company, which then owned 116,000 acres of pine timber land near Kennard, and

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