Crane v. Chicago & N. W. Ry. Co.

20 F. 402, 1884 U.S. App. LEXIS 2223

• Court: U.S. Circuit Court for the Southern District of Iowa
• Decided: February 1, 1884
• Status: Published

Opinions

Shi ias, J.

The petitioner in the above cause filed in the circuit court of Pol; county, Iowa, a petition wherein he averred and set forth that he \va ¡ a resident and property owner in Polk City, Iowa; that the Des A oines,& Minnesota Railroad Company, formerly called the Des Moinc s & Minneapolis Railroad Company, is a corporation created and organ zed under the laws of the state of Iowa, for the purpose of construct mg and operating a line of railway from the city of Des Moines, in lov a, to the state line in the direction of Minnesota; that the original 1 ne surveyed and constructed passed through Polk City; that said i ompany caused the necessary steps to be taken to procure the votin;1 of a tax of 3 per cent, in aid of said railway in Madison township, wherein Polk City is located, the condition upon which said tax was a oted being that the line of railroad should be built from the city of Dei Moines via Polk City through Polk county; that the tax was voted and paid to the railroad company, which constructed and operated ts line through Polk City; that Polk county, through its board of su >ervisors, in consideration of the agreement of the company to build and operate its line through Polk county via Polk City, granted to sa d company some 15,000 acres of swamp lands belonging to the comí y; that many citizens of Polk City and county subscribed to the capit il stock of the company on condition that the line of said road shou. d pass through Polk City; that said company constructed its line of ra llroad from Des Moines through Polk City to Ames, in Story conn y, and operated the same until 1880; that in the year 1879 the Ghici '.go & Northwestern Railway Company leased said line of railway from the Des Moines & Minnesota Company, and thereafter chan red the line and location of the railroad, so that its main line pass* s about two miles east of Polk City, and not upon the line upon whic i it was originally constructed, whereby complainant and other prop ¡rty owners in Polk City have been greatly damaged.

TI e Des Moines & Minnesota Railroad Company and the Chicago & N irthwestern Railway Company were both made parties defendant i o the petition, and the prayer for relief is as follows:

““V lierefore, plaintiff demands that defendants be required to reconstruct and i perate the main line of said railroad upon the line originally constructed, runn mg from the city of Des Moines, in Polk county, Iowa, north, via Polk City, to Ames, in Story county, Iowa, making Polk City a station on said mail and continuous line of railroad from the city of Des Moines, Iowa, to .Ames, Iowa, and that the same be constructed and operated in full compliance with the terms and conditions upon which the taxes were voted and paid, swamp lands conveyed, and subscriptions paid as aforesaid, and prays a peremptory writ of mandamus, commanding the said defendants to forthwith comply with the above demands, and for such other remedy and relief as may be lawful and proper in the premises.”

Both defendants appeared in the state court and filed a joint answer, wherein they admit that the line of the railway as originally , built was located through Polk City, and that the tax aid was voted and the swamp lands were granted as charged in the petition. The defendants then aver that the Chicago & Northwestermhas leased the line of road in question of its co-defendant, and has become the owner of the stock, franchise, privileges, and property of the Des Moines & Minnesota Bailroad Company; that the line as originally constructed via Polk City was narrow gauge, badly built, with high grades and many curves; that the Chicago & Northwestern Bailway Company, •desiring to change the road to a broad-gauge line, and to improve it in other particulars, and to shorten the distance, and for other reasons, made overtures to the citizens of Polk City for liberty to change the location of its line, and finally e.ntered into a written contract with some 35 citizens of Polk City, wherein it was provided that the line might be changed upon certain terms and conditions in the con-iract set forth, all of which, with the acts of the company in fulfillment thereof, are set forth at length in the answer. Thereupon the Chicago & Northwestern Bailway Company filed a petition for the removal of the cause to the federal court, averring therein that complainant was a citizen of Iowa, the Chicago & Northwestern a corporation created under the laws of the ‘ state of Illinois; that the Des Moines & Minnesota Bailroad Company, a corporation created under the laws of the state of Iowa, was merely a nominal party in the ■suit, for the reason that the Chicago & Northwestern .Company was the owner of .all the stock and franchise of the Des Moines & Minnesota Company, and the lessee in perpetuity of said railway, and, as •such, is charged with the duty of operating said railway, and subject ■to the payment of all claims and demands made against the Des Moines & Minnesota Bailroad Company, and also solely liable to obey any orders and perform any judgment made in this cause; and that the controversy can be fully determined between complainant .and the Chicago & Northwestern Bailway Company, who are citizens of different states, without the presence of the Des Moines &, Minnesota Bailroad Company, and further averring that the amount •in controversy exceeds $500 in value. The state court granted the prayer of this petition, and the record has been filed in this court. The complainant moves to remand, on the ground that complainant .and one of the defendants, the Des .Moines & Minnesota Bailroad Company, are citizens of the state of Iowa, and were such when the •suit was brought.

On t3 e part of the Chicago & Northwestern Eailway Company it is ■claimed that the Des Moines & Minnesota Company is merely a nominal pa. 'ty to the suit, whose presence as a co-defendant does not defeat tin; right of the Chicago & Northwestern Company to a removal of the lontroversy from the state to the federal court. It is not claimed that there is a separable controversy wherein complainant and the Chicago & Northwestern are alone interested. There is but one coi troversy involved in the matters set forth in the pleadings; and thereto 'e, to justify a removal to this court, it must be held that the Des Moines & Minnesota Eailroad Company is not a material, but only a nominal, party defendant to the petition. The contract for the coi struction and operation of the line of railway through Polk City, fi r the alleged breach of which this suit is brought, was entered into bj the Des Moines & Minnesota Company. It was that company hich received the tax aid and’the swamp lands, which, according to the averments of the petition, were given it in consideration of the agreement on its part to construct and operate the line of railroa l through Polk City. The prayer of the bill in the first instance is for a decree enforcing specific performance, and, failing in that, f< r such other relief as may be proper. To obtain relief in either form i, is incumbent upon complainant to prove that he had a contract o; agreement with the Des Moines & Minnesota Eailroad Company v hereby that company was and is bound to construct and operate the mi dn line of its road through Polk City. The whole equity and right c f complainant is based upon the existence of such an agreement, and therefore its existence, its validity, the true construction tliereo , and the rights and equities conferred thereby, are matters absolu ,ely and essentially necessary to be shown on behalf of com-plaina it. A decree to the effect that the Des Moines & Minnesota Eailro id Company had bound itself to construct and operate the main ine of its road through Polk City would certainly affect the rights and interests of that company. That company is still the owner of the road, subject to the lease executed to the Chicago & North vestern Eailway Company. A decree requiring a change in the pi ssent location of the railway would affect the property, therefore, tf the Des Moines & Minnesota Eailroad Company. The contract 1 ¿hich is sought to be established and enforced is the contract of the latter company, and that company has an interest in the property t< i be affected by the decree. As is said by the supreme court of the United States in Mallow v. Hinde, 12 Wheat. 193:

“Ho w can a court of equity decide that these contracts ought to be specifically ( eereed without hearing the parties to them ? Such a proceeding would be eon ,rary to the rules which govern courts of equity, and against the principles if natural justice. ”

It i s urged in argument that, by reason of the leasing of the property i i perpetuity to the Chicago & Northwestern Company, the Des Moin< s & Minnesota has parted with all interest in the property. The fact that it isx a lease and not an absolute sale of the property shows that the Des Moines & Minnesota Company still retains a title and a legal interest in the property. The court cannot know but what the Chicago & Northwestern Compay may in the future -forfeit the lease, so that the possession and use of the property may revert to the lessor and owner. It'does not appear but what the Des Moines & Minnesota is still vitally interested in the management and success of the road, as the' rental paid may be dependent upon the amount of the earnings and expenses, and these will, in all probability, be affected in some degree by the result of this litigation. But, aside from these considerations, the fact remains undoubted that the very foundation of complainant’s case is the existence of the alleged contract with the Des Moines & Minnesota Railroad Company, binding that company to operate its main line through Polk City; and the necessity of establishing this contract imposed the duty on complainant of making the company that is alleged to have made it, a party defendant to the suit.

In Findlay v. Hinde, 1 Pet. 241, it was ruled that “to a bill for specific performance of a contract to convey land the vendor is a necessary party, though he has parted with his title and his grantees are made parties.” In that case it was claimed that one Garrison had bound himself to convey certain land to William and Michael Jones, and that he had afterwards conveyed the land to other parties. The latter parties were made defendants to a bill for specific performance, and it was pleaded that there was a defect of parties, because Garrison was not a party. In answer thereto it was urged that as Garrison had conveyed the land to others, and as these parties were defendants, and the decree for conveyance of title would operate against them, it was not necessary to make Garrison a party to the bill. The supreme court held that he was a necessary party, saying that complainant “can have no claim to it in equity but through and under the executory contract of Garrison with the Joneses. Garrison has a right to contest the equitable obligation of that contract. No decree can be made for the complainants without first deciding that the contract of Garrison ought to be specifically decreed. He might insist that the purchase money had not been paid, or make various other defenses. It is not true that if he were made a party no decree could be made against him. It might not be necessary to require him to do'any act, but it would be indispensable to decide against him the validity of his obligation to convey and overrule such defense as he might make.”

Under the doctrine thus announced it is clear that, in the present case, the Des Moines & Minnesota Company has the right to contest the existence of the contract alleged against it. As already said, the existence, the true construction, and binding force of the alleged contract, and the right of complainant to demand a specific performance of its terms, are the questions material to the determination of this litigatit n, and their decision requires the presence of the party who, it is al cged, made and entered into the contract and against whom it is so ight to be enforced.

Whe i the petition for removal was filed, the Des Moines & Minnesota B; ilroad Company had appeared in the cause, and, by joining in the an iwer filed, had put in issue complainant’s right of recovery. The re :ord shows upon its face that there was then pending a con-trovers y between complainant and-the Des Moines & Minnesota Company. In that controversy the latter company would be entitled, if the profs and the law justified it, to a decree in its favor, and the eompli inant, in like manner, would be entitled to a decree establishing tin existence of the contract, its breach, and for the appropriate remed •. Under these circumstances it cannot be hold that the Dos Moine , & Minnesota Company is merely a nominal party. The decree sought affects its rights, and on principle it should be heard before a decree is passed affecting those rights. Having been made a party, the reí ord idiows that it is seeking to defend itself, and to that end is seekin ; to defeat the entire claim and remedy sought by complainant. it is, therefore, both a proper and an active party to the con-troveri y. The fact alleged in the petition for removal, that the Chicago i; Northwestern Bailwav Company owns the stock and other propei ty of the Des Moines & Minnesota Company, cannot change this ri suit.

It ii not claimed that there has been a merger of the one corporation ii lío the other. The Des Moines & Minnesota Company is still a disti act and separate company, and the court cannot take cognizance, upon questions of this character, of the ownership of the stock in the corporation. The Chicago & Northwestern Company may sell all tlr! stock owned by it in the Des Moines & Minnesota Company, hut th it would not change the legal status of the latter company. The contri versy of complainant is with the company, and not with its stockl olders.

Ha ing reached the conclusion that the Des Moines & Minnesota Bailri ad Company cannot be hold to be a nominal party in this con-trovei sy, bat, on the contrary, is a material and active participant therei a, it follows that this case is not ono properly removable into this o- mrt, and the motion to remand must be sustained; and it is so order d.

Me jeaby, J., concurs.