Cumberland Valley Railroad v. Gettysburg & Harrisburg Railway Co.

35 A. 952, 177 Pa. 519, 1896 Pa. LEXIS 1012

Opinion

Opinion by

Mr. Justice Dean,

The Pennsylvania and Cumberland Yalley Railroads, the first extending east and west and the second south, had for years prior to 1882 maintained a connection at Harrisburg for the interchange of freight and passenger traffic. From Carlisle, a point on the Cumberland Yalley Railroad eighteen miles southwest of Harrisburg, the South Mountain Railway & Mining Company operated a railroad for eighteen miles to Pine Grove, hr a southeasterly direction; this road had a connection and interchanged traffic with the Cumberland Valley. In 1882, the Gettysburg & Harrisburg Railroad was incorporated to be built from Hunter’s Run, a point on the South Mountain Railway about ten miles from Carlisle, to the town of Gettysburg in Adams county, a distance of about twenty-one miles. This last company needed funds to build, and thereupon all four roads named, on 30th of September, 1882, entered into an agreement by which it was covenanted, they would, to promote their mutual interests, interchange traffic and cars on their respective roads; would sell through coupon tickets for passengers ; make through bills of lading for freight; and the joint earnings of the business coming from and going over the Harrisburg & Gettysburg road should be apportioned among the respective parties on a mileage basis thereafter to be agreed upon, and the •whole connecting system of the four roads should be operated in harmony in the development of traffic ; the South Mountain and Harrisburg and Gettysburg at the same time covenanting they would, so far as they lawfully could, send traffic to destination over the lines of tibe Cumberland Valley and Pennsylvania Railroads. In consideration thereof, these two last named roads covenanted to set apart fifteen per cent of the gross receipts of freight and passenger traffic to and from any points upon the South Mountain and Gettysburg and Harrisburg roads to and from any points on the Cumberland Valley and Pennsylvania roads, and pay the same to the trustee in a mortgage of $250,000 to secure bonds to be issued on such mortgage on the Gettysburg & Harrisburg Railroad, the bonds to be payable in thirty years with interest at six per cent, the trustee to appropriate the fund thus raised annually in the purchase of the bonds; it was further agreed the trustee should attach to each bond a memorandum of this provision of the agreement. The bonds were soon after all sold at par, and the road completed to Gettysburg in April, 1884. A prosperous business was built up; the Cumberland Valley paid, of the fifteen per cent set apart by it in the purchase of bonds in the first five years after the road was opened, $18,000, and the Pennsylvania, $19,000.

In May, 1891, the Philadelphia, & Reading Railroad purchased a controlling interest in the stock of the Gettysburg & Harrisburg road, and all of the stock of the South Mountain, immediately after, the boards of directors in each company were changed, and officers and employees of the Reading were put in their places, and the two roads consolidated under the name of the Gettysburg & Harrisburg Railway Company. About the same time, the Hunter’s Run & Slate Belt Railroad was incorporated to build a road from Pine Grove, the southern terminus of the South Mountain, to the slate quarries, a distance of about five miles; then, a traffic contract for the term of nine hundred and ninety-nine years was made between the different companies, and such leases made as were deemed desirable, with the stipulation that all traffic was to be sent to destination by the Reading and lines controlled or operated by its connections. At the date of these contracts, the contract with the Cumberland Valley and Pennsylvania of 80th of September, 1882, was known to all parties. Soon after, by orders of the general manager of the Reading, the connection between trains running on the Cumberland Valley and Pennsylvania was broken, through, billing of freight and the sale of coupon tickets were stopped; the theretofore agreement for apportionment of receipts on a mileage basis was also disregarded; in fact, the business accruing to'the Cumberland Valley and Pennsylvania under their traffic contract was practically extinguished, as concerned them. Thereupon these two companies filed this bill setting out these facts and praying: 1. For a decree of specific performance of the contract as against the* Gettysburg & Harrisburg Railway Company into which the two contracting roads had been consolidated, and 2. For an injunction against the Philadelphia & Reading Company and its receivers in aid of such decree. The answers filed by defendants really leave nothing in dispute as to the material facts which must control the decree; the right to relief as prayed for is denied.

The court below, after full hearing, decreed as follows:

“ And now June 26, 1895, the court does order and decree that the Gettysburg & Harrisburg Railway Company shall observe and perform those covenants in the agreement between the Pennsylvania Railroad Company, the Cumberland Valley Railroad Company, the South Mountain Railway & Mining-Company and the Gettysburg & Harrisburg Railroad Company, dated September 80, 1882, and recited in paragraph 2 of the bill, which are to be performed by the third and fourth parties thereto, especially in the following matters, as to the performance of which we adjudge that breaches have been shown.

“ Wherefor it is ordered and decreed that the Gettysburg & Harrisburg Railway Company shall do and perform as follows:

“ First. It shall issue coupon tickets to passengers who shall travel from its line via the Cumberland Valley Railroad and the Pennsylvania Railroad, or either of them.

“Second. It shall issue through bills of lading for freight which is shipped from its line via the Cumberland Valley Railroad and the Pennsylvania Railroad, or either of them.

“ Third. It shall send to destination all traffic controlled by it, via the Cumberland Valley Railroad and the Pennsylvania Railroad, except traffic destined to points not reasonably accessible by those lines.

“ Fourth. It shall receive and transport over its line, upon as favorable terms as it gives to any other railroad, all traffic interchanged by it with the Pennsylvania Railroad Company and the Cumberland Valley Railroad Company, or either of them.

“ Fifth. It shall furnish its agents with rates on freight via the Cumberland Valley Railroad and the Pennsylvania Railroad, and shall not charge local rates to Carlisle on shipments routed via the Cumberland Valley Railroad so long as such rates are not charged to all other lines.

“ Sixth. The cou'rt does further adjudge and decree that the Hunter’s Run & Slate Belt Railroad Company henceforth treat clause 5 (which is recited in the bill) of the lease and traffic contract of July 13, 1891, as inoperative, null and void in so far as it conflicts with the rights of the plaintiffs, under the agreement of September 30, 1882, and that it specifically perform the covenants of said agreement which are to be performed by the party of the third part thereto, as to business interchanged between the roads of plaintiffs and the leased road extending from Hunter’s Run to Pine Grove.

“ Seventh. The Philadelphia & Reading Railroad Company and Edward M. Paxson, Elisha P. Wilbur and Joseph S. Harris, receivers of said railroad company, their directors, officers and agents, are hereby perpetually restrained and enjoined from holding possession of and operating the road of the Gettysburg & Harrisburg Railway. Company in any wise to the detriment of the rights of the plaintiffs under the said agreement of September 30, 1882.

“ Eighth. It is ordered that the costs in this action be paid equally by the Gettysburg & Harrisburg Railway Company and the Philadelphia & Reading Railroad Company, or the receivers thereof.” s

From this decree, both plaintiffs and defendants have appealed. The plaintiffs assign twenty-nine errors to the decree, defendants, thirty-nine. As to those on either side which question the correctness of any finding of facts by the court below, they are dismissed; we discover no manifest error in any of these findings.

We are clear in our conclusion, that the South Mountain & Gettysburg & Harrisburg form in no reasonable view a parallel and competing line to the Cumberland Valley with which they connect; their line approaches Carlisle, the connecting point, almost at right angles; a glance at any railroad map shows this; from Gettysburg to Carlisle, the traffic along this line, when the contract of September 30, 1882, was made, was not one for which the Cumberland Valley could compete; the only competitors that these two short roads could have had at that date were country wagons on the ordinary highways. The contract was not, therefore, forbidden by the constitution. It was in fact an advantage to the public, as well as to the contracting parties, for it relieved the public of the inconvenience of transfer of goods, rebilling, provided for travelers close connections, and necessarily lessened the actual cost of transportation; and there is no evidence the contract was made with a view to increase charges to the shipper; the profits of the contracting parties were expected to result from a lessening of operating expenses to all of them. Any such contract inevitably tends to the advantage of the public, for the cheaper any product can be delivered at destination, the better able is the producer to meet in the market the same products brought to the same destination by other roads, which last always aim to reach and do reach the points where products are marketable. The contract really tends to accomplish the purpose of the general railroad law of 1868, which provides that railroads of a similar character shall have the right to connect upon such terms as may be agreed upon by those who have the management of such roads; and also of the constitution, which declares they shall have the right to connect, and then avows the purpose, that they may “ receive and transport each the other’s passengers, tonnage and cars, loaded or empty, without delay or discrimination.” We conclude, therefore, the contract was not between parallel and competing roads; nor was it unlawful in its ostensible purpose. Whether any of its provisions are unlawful, or whether because of the indefiniteness of others, it is incapable of specific execution, are altogether different questions, and these we now proceed to notice.

It is alleged by defendants the contract attempts to exclude other railroads from any use of the roads controlled by the contracting parties. This is only inferential; there is nothing in the contract expressive of such intention. The 5th section of the agreement provides that: “ The parties of the third and fourth parts (the South Mountain and the Gettysburg & Harrisburg roads) hereby respectively covenant and agree that they will, so far as they lawfully can, send to destination all traffic controlled by them via the lines of the parties of tbe first and second parts hereto.” Then further, the sixth section: “It being the intention of the parties hereto that their lines shall be worked as far as possible in harmony with each other;” the two stronger roads covenanting that they will, so far as they can consistently with obligations to other parties, promote the development and interchange of traffic, and carry it at as favorable rates as they accord to any others. Up to this point there is nothing even hinting at a course of conduct violative of either the common or statute law. Nor is the eighth obnoxious to the law. It is as follows: “Nothing in this contract shall be so construed as to give the use of the roads and facilities of the parties of the first and second parts hereto (the Cumberland Valley and Pennsylvania) to any parties whose interests may be at variance with or unfriendly to said parties, nor shall the same be used hereunder to divert from the parties of the first and second parts, traffic properly tributary to the lines controlled by them.” The object of this provision, it is clear, had no application to circumstances as they existed when the contract was made September 30, 1882. The Philadelphia, Harrisburg & Pittsburg Railroad, running from Shippensburg to Harrisburg and crossing the Gettysburg & Harrisburg road six miles south of Carlisle, was not opened for nearly ten years after the date of this contract; it is leased and controlled by the Philadelphia & Reading, and not only is a parallel and competing road with the Cumberland Valley, but was probably intended to be such by its promoters. This section of the contract had in contemplation, doubtless, the construction of this or any other road to be thereafter built; but its provisions could not legally prevent either the one party or the other, after a connection was established as provided by law, from interchange of traffic, nor could it prevent shippers from routing freight to destination over any lines they selected, no matter what the point of shipment or destination. All that can be said of this section is, it may have contemplated a violation of law; if it did, no such violation is shown, although the contract was in operation for years. As it is capable of a wholly different and lawful interpretation, we cannot assume it was intended to unlawfully exclude traffic.

It seems to us, the argument and the authorities cited to show the illegality of the contract bear on a state of facts other than those found in this case. If this agreement was intended to give a preference to a certain class of shippers or transporters, and to exclude others, shipping and transporting under like circumstances, it would be void, and Sandford v. Railroad Co., 24 Pa. 878, and like cases would be in point. But it is wholly between connecting roads, not competing or parallel, for interchange of traffic upon terms agreed upon; and they expressly disclaim any intention to violate the law by stipulating to promote their mutual interests so far as they lawfully can.

Before the construction of the Gettysburg & Harrisburg road, plaintiffs agreed to set aside fifteen per cent of certain gross receipts for purchase of the bonds of that road, which had thirty years to run; that at once gave them a value to the investing public, who, it is to be presumed, now hold them; they have thirty years to run; to every one of them, by full authority of plaintiffs, was appended a memorandum of this agreement; the road was constructed from the money thus received; by virtue of this stipulation, already nearly $40,000 has been set aside and appropriated to the purchase of these bonds, and the action of these plaintiffs, having made this part of the contract, in effect, a contract between them and the bondholder, their liability by the contract will continue until the last bond has been paid; that is, nothing the obligor in the bond, the Gettysburg & Harrisburg road, may do in violation of the contract, can relieve plaintiffs from, in substance, their contract with the bondholder to continue to set aside fifteen per cent of the gross receipts for purchase of bonds. The South Mountain and Gettysburg roads having received in large part the consideration for entering into the contract, and the contract not being in violation of law, it ought to be enforced specifically, if it be of such terms as that it is capable of enforcement in equity, and if the parties, as they now stand in relation to each other, can be brought within the jurisdiction of equity, so that the hand of a chancellor will reach them.

First, as to the Gettysburg & Harrisburg Railway, which by the consolidation now stands as the representative of the South Mountain and Gettysburg & Harrisburg Railroad Companies : A controlling interest in the stock of the two merged and consolidated roads was obtained by the Philadelphia & Reading, which controlled the Philadelphia, Harrisburg & Pittsburg .Railroad, a parallel and competing line with the Cumberland Valley, constructed long after the contract. It was manifestly, therefore, to the Reading’s interest as the practical owner of a competing line, to break the contract with the plaintiffs. It proceeded to do so without hesitation, acting nominally through the new boards of management in the roads over which it had secured control.' But a change of persons in a corporation board of directors does not change the identity of the corporation, nor its contract liability; nor is the obligation of the other party to the contract affected ; such change can no more relieve the corporation from its contract liability than from the $250,000 mortgage on its corporate property. What effect the dissolution of the corporation under judicial decree or the sale of its franchise and property under proceedings in bankruptcy would have on unsecured contracts are altogether different questions. Here, the two corporations, at the instance of stockholders having full knowledge of the prior contract, were consolidated under a new name and different management; but for juridical purposes, the new managers and new name present no obstacle to a judicial decree for performance of a contract. Equity deals with the substance, not the form, when it seeks to enforce its decrees. This was in effect held in Bald Eagle Valley Railroad v. Nittany Valley Railroad, 171 Pa. 284. Counsel are mistaken in assuming the decision in that case was based solety on Tulk v. Moxhay, 2 Phil. 774. The court below, in the case first cited, had based its decree on Spencer’s case, and Keppell v. Bailey, 2 Myl. & K. 517; Tulk v. Moxhay was cited by us as overruling Keppell v. Bailey, and deciding that where the covenant was, the purchaser and his assigns would use or abstain from using the land in a particular manner, that equity would enforce the covenant against all purchasers with notice of it. The doctrine of that ease has been applied in later eases in England only to restrictive covenants. But this court has not so limited the principle, by confining the administration of equity in like cases to a restraining order; to accomplish equity, where there is no adequate remedy at law, often demands mandatory orders : Thou shalt do, as well as, thou shalt not. True, the restrictive order is generally more easily enforced than one purely mandatory; in practice, often, the latter is incapable of enforcement; but where such order can be enforced in aid of an equitable decree it will be issued, and ought to be. In the mere change of name and personnel of the boards we see no serious obstacle to a mandatory writ in aid of a restraining order.

It is further argued that as the term for which the contract Was made is not fixed, therefore it continued only during the will of the parties, and might be revoked by either on notice. This, as a general proposition, if the fact were as stated, is correct, and it is so held in Phila. etc. Railroad v. River Front Railroad, 168 Pa. 357, and the authorities there cited. But the term in this contract is fixed by the plainest implication; the bonds to be purchased ran for thirty years ; the obligation of plaintiffs was to set aside annually fifteen per cent of the gross receipts, to be used in annual purchase of the bonds. The term of defendants’ obligation under the joint contract must be coextensive as to time with plaintiffs’ obligation to set aside and pay ; that is, thirty years.

Nor is the contract so indefinite in its terms that performance cannot be decreed; for nine years they operated their roads under the agreement without, so far as appears, finding it necessary to resort to the arbitration clause in case of dispute; its indefiniteness is first alleged when a motive exists for breaking the contract. While the exact details by which each shall receive and transport promptly the other’s traffic, and how the joint earnings shall be apportioned on a mileage basis, cannot now be particularized by the court, the primary stipulations of the contract are definite, and as to them has been entered a decree that they shall be performed specifically; the purpose of defendants to stop the interchange of traffic under the contract has been arrested by this decree; the contract is now obligatory upon all the parties, and is to be performed according to its manifest intent; when this is done in good faith, the daily operations of the respective roads alone can determine the exact details necessary to effective obedience of the decree. In case of dispute as to the particular methods, either can call into opera,tion the arbitration clause, or if this be unavailing, either can, on proper proof, secure from the court below a supplementary decree, which in the light of the evidence that may then be adduced will carry out fully the decree already made. While parties to such contract can agree definitely that they will promote and facilitate tbe interchange of cars and business between their respective roads, and that the earnings from the joint business shall be apportioned on a mileage basis, it would be practically impossible to enumerate in the agreement all the details by which it should be carried into effect; these would necessarily have to be postponed until the daily operations of the road suggested what would best promote their convenience and that of the public.

As to the appeal of the Gettysburg & Harrisburg Railway Company, it is dismissed and the decree affirmed.

For the reasons given by the court below, the decree as against the Philadelphia & Reading Railroad Company, the Hunter’s Run & Slate Belt Railroad Company and the receivers of the Philadelphia & Reading Railroad Company is affirmed, and their appeals dismissed.