HANDY
V.
CLEVELAND & M. R. CO"
689
HANDY and another, Trustees,
v.
CLEVELAND & M. R. Co. and others.
8. D. Ohio, E. D. 1887.) 1. RAILROAD COMPANIES-RECEIVERS-DISCRIMINATION.
The receiver of an insolvent railroad company cannot unjustly discriminate in the charges imposed upon rival shippers over his road, in order to increase his revenues, and, if guilty of discrimination, may be removed by the court therefor.
2.
SAME-REMOVAL.
The Standard Oil Company having threatened to store its oil until it could lay' a' line of pipes to MarIetta, unless the receiver of a railroad company .should give it a special oil rate, the receiver agreed to carry its oil at 10 cents per barrel, to charge rival shippers 35 cents per barrel, and to pay 25 cents per ban'el of the sum collected from rival shippers to the Standard Oil Company. Held, to be such and wanton discrimination. on the part of the receiver as to 'require his removal.
690
,FEDERAL REPORTER.
"Mr. O'Day, manager of the Standard Oil Company, met the generalfreight W. L. E. RailrolW and our Mr. Terry at Toledo about February 12th, and made an agreement (verbal) to carry their oil at ten cents per barrel. But Mr. O'Day compelled, Mr. Terry to make a thirty-five cent rate on all other oil going to Marietta, and that we should make the rebate of cents per barrelonaJl oil shipped by other parties, and that the J;ebate should be paid over to them, (the Standard Oil CompanYi) thus giving us ten ce!1tsper barrel fQr alloilslilpped to Marietta, ,and the rebate of twentyfive cents per barrel going to the Standard Oil Company, making that company, say, twenty-five dollars per day clear money on Mr. Qeorge Rice's oil alone. " "In order to save the oil trade along our line, and especially to save the Standard oil trade, which would 'amount to seven times 8S much as Mr. Rice's, Mt. Terry. verbally agreed to the arrangement, which, upon his report to me, I reltictantly aC9,uiesced in, fee1i.ng tllat I could not afford to lose the shipment of seven hundred barrels of oil per day from the Standard Oil Company. But when Mr. Terry issued instructions that on and after February ::l3d the rate of oil would be thirty-five cents per barrel ,to !latietta, Mr. George Rice, who has a refinery in Marietta, very naturally calJed on me. Ytlllterday, and notified me that he :would not submit to the advance, because the business. would not and that .tlle move \vas Stl}nqard Oil, Company to crush him out. (Tootrue.) Rice'said: -.1 am willing to continue the 171 c. which i have belm payil:!g from pecember to this date.'. . .. "Now, the question naturally presents itself to my Jilill;d, if Mr. George Rice should see fittbprosecute the' calle' on the ground of unjust discriminw. tion, would the receiver be held, as the manager of this property, for viola. tion of, la.w?, While;1, am. determined to use all honorable means to. secw:e traffic for the company, I not, willing to do an illegllJact, (if this can be called illegal,) and lay thisc9mpam:liable for damageil." Mr, Terry is able to explain all minor questioI:\s relative to 'this matter.' ." ' , '. . , ' ' ", "Hoping for yOUr careful consideration of this matter and an earlyreply, I remain, sir, truly yours, P. PEASE, Receiver and General Manager." Totheforegokg req,Uest , Mr. :i;{apello, "after," as he says in letter returned hifl opinion, "carefully question," and "coo; suHiqg with hil;l partner, Mr.C.ole, and represeotative bondholders." made the following reply: ,,"32 NASSAU STREET, NEW YORK, .March 2, 1885., , "General Receiver Cleveland & Marietta Rail1'oad Companll,..-l,)EAR$IR;: My opinion is asked ,as. to the legality of yout making such ,an ,arrangement with the Standarq. <;Hl Cpmpany as set forth below. . "The facts,' as I understand them, are as follows:' The Standard Oil Company proposes to shIp, or ,control the shipping of, a large amount of oil ovet your roadi say a ql1antitysufficient to yield to you $3,000 freight per month. That the pipes through which oil is conveyed from the wells owned by individuals to your tailroad, except those pipes leading fron:a. the wells of Mr. George Rice, are his own. The company has, or can acquire, facilities for storing all its oil until such time as it can lay pipes t,O Marietta! thus depri vey?ur company of carriage of all its oil. The amount'O'f'Ollshlppedby Mr;Rlcdis comparatIvel?,smalli say a quan·tity sufficientfu $300 per month for freight. The Standard on Company threatenstol'ltore, and afterwards'pipe, all oil underit8 control, unlessyoli make thefollowihg arrangement, viz.: You shall make a uniform rate of thirty-fi ve cents per barrel for all persons excepting the Standard Oil Company; you shall charge them ten cents per barrel for oil, and also pay them
HANDY·V.dLEVELAND
& M. R. CO.
691
1iv·e cents per barrel out of the thirty-five cents collected from other shippers. "It. may render the sUbject less.diffioult of consideration to determine, first, those acts which you cannot with propriety do as receiver. You are by the decree vested with all the powers of receiver, accordingto the rules and practice of the court, are directed to continue the operations of the railroad, and can safely make disbursements from such moneys as come into your hands for such purposes only as the decree directs. viz., wages, interest, taxes, rents, freights, mileage on rolling stock, traffic balances, and certain debts for supplies. In my opinion this would not protect you in .collecting freight from one shipper and paying it over to another. All moneys received, therefore, from any person for freight over your road must pass irito your hands, and there remain, to be disbursed by proper authority. After an examination of your statutes, however, I find no prohibition against your allOWing a discount, or charging a rate less than a schedule rate to a shipper on account of the large amount shipped by him. As you are acting, therefore, in the interest of the company, ;mdendeavoring to increase its legitimate earnings as much as possible, I find nothing in the statutes to prevent your making a discrimination, especially where the circumstances are such that alarp;e shipper decUnes to give your 'road his freight unless you allow him to ship at less than sdhedule rates. Therefore there is no legal objection to the 'making an arrangement which, in practical effect, may be the same as that proposed, providedtbe objections pointed out above are obviated·. "You may, .with propriety, allow the Standard Oil Company to charge twenty-five cents per barrel for all oil transported through their pipes to your road; and I ullderstandfrom Mr. Terry that it is practicable to so arrange the details that the company can, in effect, collect this direct, without its passing through your hands. You may agree to carry all such oil of the Standard or of others, delivered to your road ,throuB\h their pipes, at ten 'Oil cents per barrel·.. You may also charge all other. shippers thirty-five cents per barrel freight, even though they deliver oil to your road through their o,wn pipes; and this, I gather from your letter, and from Mr. Terry, would inc4Ide Mr. Rice. .. "You are at liberty, also, to arrange for the payment of a freight by the' StahdardOilCompany calculated upon the following basis, viz: l:)uch company to be charged an amount equal to ten cents per barrel, less an amount eqUivalent to twenty-five cents per barrel upon all oil shipped by Rice, the agreement between you and tb,e company thus being that the charge to be paid by them is a certain SUIll ascertained by such a calculation. If it is i1npracticable so to arrange the business that the Standard Oil Company shall, in effect, collect the twenty-fiv'e per barrel from those persons using the company's pipes from the wells to the railroad without its passing into your hands, you may properly, also, deduct from the price to be paid by the com·pany an amount equal to twenty-five cents per barrel upon the oil shipped by such persons. Provided your accounts, bills, vouchers, etc., are consistent with the real,arrangement actllally made, you will incur no personal responsipility by out such an arrangement as I suggest. "It 'is possible that, by a proper application to the court, some person may ,prevent you, i.nfuture, from perrilitting any discrimination. Even if Mr. Rice should compel you, subsequently, to refund to him· the excess. charged over the Standard Oil result would not be a loss to your rQad, taking into consideration the reQj:lipts from the Standard Oil Company, if I however, in my opinunderstand correctly the figures. There is no lIm, under the, decisions ofthecouI;ts relating. to this subject, upon which, for the purpose, an action could be successfuHy maintained in this instance. . "Yours, t r u l y , · EDWARD S. RAPELLO."
692
FEDERAL
From thiscorresJ?ondence'it appears that the Standard Oil Company and George Rice were competitors in the business of refining oil; that each obtained supplies in the neighborhood of Macksburg, a station of said railroad, from whence tIle sarrie was carried to Marietta or Cleveland, and that for this service both were equally dependent on the railroad then in the hands of the receiver. It further appears that the Standard Oil Company desired to "crush" Rice and his business, and that, under a threat of building a pipe for the conveyance of its oil, and withdrawing its patronage from the receiver, O'Day, one of its agents, "compelled Terry," who was acting for and in behalf of the receiver, to carry its oil at ten cents per barrel, and charge Rice thirty.five cents per barrel fora like service, and pay it cents out of each thirty-five cents thus exacted from Rice; "making," in the judgment ofthereceiver, "$25 per day clear money" for it "on Rice's oil alone." But it is due to the receiver to say that,notwithstanding his admitted "reluctant acquiescence" in the made by Terry on his behalf,and the ind9rsement thereof by Rapello, and the further conceded fact that he charged the Standard Oil Company ten cents and Rice thirty-five cents per barrel, as aforesaid, he denies that he ever paid to the Standard Oil Company any part of the lI\oney received from Rice. We will therefore, for the present, accept his affirmation touching this matter as true. But why should Rice be required to pay 250 per cent. more for the carriage of his oil than was exacted from his competitor? The answer iS,that thereby the receiver could increase his earnings. This pretense is not true. But, suppose it was, would that fact justify, or even mitigate, the injustice done to Rice? Maya receiver of a court, in the management of a railroad, thus discriminate between parties having equal claims upon him, because thereby he can accumulate money for the litigants? It has been repeatedly adjudged that he cannot legally do so. Railroads are constructed for the common and equal benefit of all persons wishing to avail themselves of the facilities which they afford. While the legal title thereof is in the corporation of individuals owning them, and to that extent private property, they are, by the law and consent of the owners, dedicated to the public use. By its charter, and the general contemporaneous laws of the state, which constitute the contract between the public and the railroad company, the state, in consideration of the undertaking of the corporators to build, equip,keep ip repair, and operate said road for the public accommodation, authorized it to demand reasonable compensation, from everyone availing himself of. its· facilities, for the service .rendered. But this franchise carried with it other and co-relative obligations. Among these is the obligation to carry for every person offering business, under like circumstances, at the same rate. All unjust discriminations are in violation of the sound public policy, and are forbidden by law. We have had frequent occasions to enunciate and enforce this doctrIne in the past few years. If it were not so the man· agers of railways, in collusion with others in command of large capital, could control the business of the country, at least to the extent that the
HANDY V. CLEVELAND & Y. R. CO.
693
business was dependent on railroad transportation for its success, and make and unmake the fortunes of meil at will. The idea is justly abhorrent to all fair minds. No such power can be tolerated. Except in the mode of using them, every citizen has the same right to demand the service of railrfJads on equal terms 'that they have to the use of a public highway or the government mails; and hence when, in the vicissitudes of business, a railroad corporation becomes insolvent, and is seized by a court, and placed in the hands of a receiver, to be by him operated pendinp; the litigation, and until the rights of the litigants can be judicially ascertained and declared, the court is as much bound to protect the public interests therein as it is to protect and enforce the rights of the mortgagors and mortgagees. But after the receiver has performed all obligations due the public, and to' every member of it,-that is to say, after carrying passengers and freight offered, for a reasonable compensation, not exceeding the maximum authorized by law, if such maximum rates shall have been prescribed, upon equalterms to aU,-he may make for the litigants as much money as the road, thus managed, is capable of earning. But aU attempts to accumulate money for the benefit of the corporators or their creditors, by making one shipper pay tribute to his rival in business at the rate of twenty-five dollars per day, or any greater or less sum, thereby ellriching one and impoverishing another, is a gross, illegal, and inexcusreprehension. able abuse of a public trust, that calls for the The discrimination complained of in this C8.8e is so wanton and oppressive it could hardly have been accepted by an honest man, having due regard for the rights of others, or conceded by a just and competent receiver, who comprehended the nature and responsibility of his office; and a judge who would tolerate such a wrong, or retain a receiver capahIe of perpetrating it, ought to be impeached and degraded from his position. A good deal more might be said in condemnation of the unparalleled wrong complained of, but we forbear. The receiver will be removed. The matter will be referred to a master to ascertain and report the amount that has been as aforesaid unlawfully exacted by the receiver from Rice; which sum, when ascertained, will be repaid to him. The master will also inquire and report whether any part of the money coUected by the receiver from Rice has been paid to the Standard Oil Company, and, if so, how much, to the end that, if any such payments have been made, suit may be instituted for its recovery.
694
FEDERAL REPORTER. SHROPSHIRE and another v. LYLE. ','
(Oircuit Oourt, B. 1.
O. D. June 29,1887.)
VENDOR'S LmN-"ERBAL CONTRACT-CONVEYANCE AFTER SUIT.
Under Code Iowa, section 1940, an unreoorded lien for unpaid purchase money cannot be enforced by the vendor after a conveyance by the vendee. unless such conveyance is made after suit brought by the vendor. Held. that a verbal centract for the sale of hind was not a conveyance, within the meaning ofthis section,and did not defeat the lien of the vendor, where there was a subsequent conveyance, within the meaning of the section, in accordance with the,terms I)f the contract, after suit brought by the vendor.
SAME-'.:.:CONVEYANCE AFTER PETITION ]j'ILED.
In such (laSe the conveyance was executed after the petition was filed in the cO\lnty which the land was' situated, but before service of notice upon the defendant in the action. Held, that the conveyance was made after suit brought, within meaning of section 1940, it being expressly provided by section 2628 of the Iowa Code that, when a petition has been filed affecting real estate, the action is pending SQ as to charge third persons with notice of its pendenc;y, and that while so pending no interest can be acquired by third persons in the subject-matter thereof, as against the plaintiff's title. if the real property affected be situated in the county where the petition is filed.
8.
SAME-JURISDICTION OF CIRCUIT COURT.
A purchaser after suit brought in such a case is not a necessary party to the suit, and the 'fact that he is a citizen of the same state as the complainant will not defeat, the jurisdiction of the circuit court.
4.
SAME-EQUITIES 011' PURcHASER-INTERVENTION.
The fact of ,his citizenship would not prevent such purchaser from intervening in the suit in the circuit court for the protection of his equities, and a decree will not, therefore, be denied upon the motion of the defendant, when it appears that the purchaser had f1,ll1 notice of the pepdency, of the suit, on the ground that such purchaser might, if he chose, be able, to assert an equity, by shoWing that he made a part payment on the land ,before the execution of the conveyance and the filing of t'be petition. : ,
InEquity. Bill for accounting, and to establish vendor's lien. PhilJ,ips &: DW!j, for complainants. Oale, Me Vey &: Clark, for defendant. ,SHIRAS, J. The bill in this cause was filed for the purpose of establishing the fact that the defendant, John Lyle, held the title to certain realty situated.in Jasper county, Iowa, as security in the nature of a roortgage, the owner thereof being' Lorelta Shropshire; to ascertain the amount due to Lyle; and finall;y, the land having in the tn,ean time been sold by consent to Lyle, to determine the am0unt due to Mrs. Shropshire after deducting the sums found due to Lyle, and chargeable against the land, and to establish a vendor's lien for the amount found due against the land sold. The suit was originally brought in the district court of Jasper county, the petition beinp;filed February 26,1883, and was thence removed into this court. Upon previous hearil1p;s of the cause, it has been adjudged and decreed that the defendant, Lyle, originally held the title by way of security only; that he was accountable for the agreed price at which the land was finally sold to him; and that, after deducting the amounts coming to him, he was indebted to Mrs. Shropshire in the sum of $10,810.46,