Terminal Shares v. Chicago, B. & QR Co.
| Decision Date | 06 May 1946 |
| Docket Number | No. 3573.,3573. |
| Citation | 65 F. Supp. 678 |
| Parties | TERMINAL SHARES, Inc., v. CHICAGO, B. & Q. R. CO. |
| Court | U.S. District Court — Eastern District of Missouri |
Samuel H. Liberman, B. L. Liberman, and Donald J. Meyer, all of St. Louis, Mo., for plaintiff.
Andrew C. Scott, of Chicago, Ill., William S. Hogsett and Hale Houts, both of Kansas City, Mo., Wilder Lucas, of St Louis, Mo. (J. C. James, of Kansas City, Mo., and Walter McFarland and Eldon Martin, both of Chicago, Ill., of counsel), for defendant.
This is an equity suit in which plaintiff seeks injunctive relief and damages in the sum of five million dollars. The action is based upon a claim that plaintiff and defendant were engaged in a joint adventure and that defendant violated its obligation to the joint adventure by prosecuting certain condemnation proceedings to acquire property used in the joint adventure and plaintiff sustained damages as a result of such action. Plaintiff seeks to enjoin further prosecuting the condemnation cases. Defendant has filed a motion for summary judgment. It is now before the Court for ruling.
The controversy arose out of stock ownership of plaintiff and defendant in corporations holding title to real property in Clay County, Missouri, located north of the Missouri River, and referred to as the North Kansas City properties. Prior to 1903, Armour Packing Company and Swift Packing Company acquired the tract of land, consisting of some three thousand acres. Various corporations, among which is the North Kansas City Development Company, hold title to respective parts of the tract. In 1903, Armour and Swift decided to develop part of the area for industrial and terminal uses. Concluding their plans would be served by offering to prospective purchasers of industrial sites trunk line railroad service, they interested defendant in the enterprise. Defendant acquired one-third of the stock of the corporations which held title to the land. Armour then held one third and Swift one third. Defendant, Armour and Swift, each contributed funds, in equal parts, which were used in developing the property. Commencing in 1912, lead tracks were constructed to serve industries located on the tract. These lead tracks were served by the defendant until 1921 without payment of rent; from 1921 to 1944, under a lease from the development company, providing for a stated rental. In October, 1944, the lease was cancelled, and since that time the defendant has operated over the tracks at a rental to be fixed by suit now pending in the Federal Court in Kansas City. There is no record that defendant, Armour and Swift ever reduced to writing their understanding for development of the industrial site. It is now plaintiff's position that after defendant purchased a third of the stock of the holding corporations, the agreement, by implication, under which defendant, Swift and Armour operated and developed the North Kansas City property, created in law as between them a joint adventure.
In 1929, Armour and Swift signed a contract with the Geneva Corporation, nominee of the Allegheny Corporation, for the sale of the stock owned by them in the holding corporations. Title was taken in plaintiff, as one of the Allegheny Corporation's subsidiary companies. This purchase of a two-thirds stock interest by plaintiff was kept secret from the defendant. Defendant claims it did not learn of the identity of the purchaser until 1933. Plaintiff claims defendant received information prior to that date. The true date is not material. Plaintiff purchased the stock interest as a part of its plan to sell the stock to the Missouri Pacific Railroad. The Allegheny Corporation was at that time acquiring stock of the Missouri Pacific Railroad.
Plaintiff states its position: "that it acquires its rights as a joint adventurer (not) by and through the mere acquisition of stock in the North Kansas City companies, but on the contrary there was an independent agreement for joint adventure entered into in 1903 by and between Armour, Swift, and the Burlington, and that such agreement was not terminated by the sale from Armour and Swift to plaintiff, but continued as between plaintiff and the defendant, as a result of the defendant's consent thereto implied from its conduct and the facts and circumstances." (From plaintiff's brief.)
Defendant brought suit in 1938 in the Federal Court in Kansas City to condemn nineteen of the lead tracks constructed to serve the industries which had located on the North Kansas City property. The defendant in the case was the North Kansas City Development Company. It resisted the power of the defendant to condemn, but without success. Chicago, B. & Q. R. Co. v. North Kansas City Development Co., 8 Cir., 134 F.2d 142, certiorari denied 319 U.S. 771, 63 S.Ct. 1437, 87 L.Ed. 1719. The judgment on damages was reversed and the cause remanded for new trial solely on that issue. This case is now awaiting retrial in the Federal District Court in Kansas City. After the condemnation suit was remanded, defendant in that case filed an action against the Burlington for the purpose of securing access to certain records showing defendant's earnings from freight which had moved over the lead tracks, on the theory that such was a part of the damages it was entitled to in the condemnation suit. The District Court denied discovery and overruled plaintiff's (in that case) theory of measure of damages. 64 F.Supp. 772. The ruling was affirmed on appeal. 8 Cir., 147 F.2d 161, certiorari denied 325 U.S. 867, 65 S.Ct. 1405, 89 L.Ed. 1986. In 1944, the Burlington brought another condemnation case to condemn additional lead tracks not included in the original suit. That case is now pending for trial in the District Court in Kansas City.
In March of 1940, plaintiff entered into a contract with the trustee in bankruptcy of the Missouri Pacific Railroad, for the sale to the railroad of the two-thirds stock interest owned by plaintiff in the corporations holding title to the North Kansas City properties, for a consideration of six million dollars. The contract of sale was conditioned, among other things: "To the condition that a certain condemnation suit instituted by the Chicago, Burlington & Quincy Railroad Company for the condemnation of certain properties of North Kansas City Bridge and Railroad Company, pending in the District Court of the United States at Kansas City, Missouri, shall be finally terminated adversely to the plaintiff or by it voluntarily dismissed, with prejudice, or, if dismissed without prejudice, it shall have been finally determined in a court of competent jurisdiction, by declaratory judgment or otherwise, that said Chicago, Burlington & Quincy Railroad Company has no right to condemn the properties involved in said condemnation suit."
Plaintiff asserts that as a direct and proximate result of the act of defendant "in prosecuting the said condemnation suits and obtaining a decree and adjudication it is entitled to condemn, the plaintiff has lost the value of the said contract" with the Missouri Pacific Railroad, "and been damaged in the sum of Five Million Dollars." (See Complaint.) Plaintiff alleges, as the basis of its complaint against defendant, that defendant's conduct in prosecuting the condemnation actions constitutes a "gross violation of the fiduciary obligation owed by the defendant to the plaintiff as a party to the joint adventure of promoting the North Kansas City properties." (From plaintiff's brief.)
Defendant's motion for a summary judgment, based upon seven points,1 assumes that under the pleadings, depositions, admissions and affidavits in the present record, there is no genuine issue of fact to be tried.
I. Plaintiff challenges defendant's position that there is no real issue of fact as to the existence of a joint adventure between Terminal Shares, Inc., and the Burlington Railroad. There are many undisputed facts in the record inconsistent with the relationship of joint adventure between plaintiff and defendant. They speak in no uncertain terms in support of defendant's claim that prior to the institution of this suit neither party recognized the existence of such a status. These facts raise a serious question as to plaintiff and defendant ever embarking on a joint adventure. For example, plaintiff cannot designate the place nor fix the time of the birth of the joint adventure agreement, either as between defendant, Armour and Swift, or as between plaintiff and defendant. Regardless of the relationship of Armour, Swift and defendant, it is clear defendant did not consent to the sale of the Armour and Swift interests to plaintiff, prior to or at the time of the sale. Defendant had no knowledge of the sale. An interest in a joint adventure cannot, as such, be transferred without the consent of the owner of the remaining interest, any more than one partner can substitute a stranger in its place in the partnership without consent of the owner of the remaining interest.2 The relationship of joint adventure is necessarily one of intention, and such an intention must be determined in accordance with the ordinary rules governing the interpretation and construction of contracts.3
We have read the contract of sale between plaintiff and Armour and Swift. It contains no reference, express or implied, to a joint adventure concerning the property transferred. Armour and Swift represent in the contract that they "are the owner of shares of stock" in the corporations "whose stock is being sold." The sellers agree "to deliver" the shares of stock. Nothing else. They agree to operate "in the usual manner" the business of the companies prior to closing of the sale. They could control the companies as majority stockholder. This contract is dated October 16, 1929. Ten years later, when plaintiff contracts to sell the same "stock" to the Missouri Pacific Railroad trustee, the contract of sale is again silent, by express reference or by implication, on the...
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Harrington v. Sorelle, 7110.
...is no question but that such good faith was required between the parties here. Similarly appellant cited Terminal Shares, Inc. v. Chicago, B. & Q. R.R., 65 F.Supp. 678 (E.D.,Mo.), which concerns primarily the sale of joint adventure interests; Libby v. L. J. Corporation, 247 F.2d 78 (D.C.Ci......