Equitable Trust Co. v. Wabash R. Co.

DENISON, Circuit Judge (after stating the facts as above). Both the special master and the District Judge put the liability of the Wabash on the ground of an equitable obligation which made the money received by the Wabash “money paid for the use and benefit of” the Pere Marquette. Elaborate arguments are presented to us both in support of and against this theory; but we do not believe it necessary to decide that issue. [1] Both tribunals have rejected the theory of implied contract because they thought the services of the Pere Marquette were not rendered to or for the Wabash, or in discharge of any obligation of the Wabash, but were rather rendered directly to the department and at its request — so that the promise to pay would be implied, if at all, against the government and not against the Wabash. This conclusion rightly follows from the grounds so assumed; but we think the premise is wrong. This Cincinnati mail from Detroit and as far as Romulus was a part of that covered by the contract between the Wabash and the department for the Detroit-Chicago route. Under the contract between the Wabash and the department, as the matter existed in 1904, it would have been the duty of the Wabash to carry this mail itself, on its own trains, as far as Romulus, if it had been so directed, and without any additional compensation. By virtue of the weighing done in 1907, a duty to pay extra compensation for this mail was recognized and liquidated, but it was recognized as a duty to the Wabash, and the agreed price was continually paid to the Wabash. So far as concerns the paying of compensation, it was immaterial to the department whether the work was performed by the Wabash or by some lessee on the Wabash rails. The special direction that this mail be carried by the Pere Marquette pertained to the efficiency of the service and not to the contract for payment. After the weighing period of 1907, if not before, there is fair analogy to a case where the owner of property has agreed with one general contractor that certain work shall be done, but has reserved [70] the right to direct that particular' portions of the work shall be done by particular subcontractors, as might be determined with reference to the convenience of work that the same subcontractor might be elsewhere doing for the same owner. In view of the whole situation, we think it quite right to say that these services were performed by the Pere Marquette in discharge of an underlying liability of the Wabash, and substantially for the use and benefit of the Wabash, that the services were accepted by the Wabash, and that it received the benefit thereof, viz. the sums of money paid to it on this account. Here we find all the elements of an implied contract. [2] It it said that a contract to pay therefor will not be implied against one who receives the benefit unless he had an opportunity-to elect, and that a man cannot be forced to pay for what he has had no chance to refuse. Zottman v. San Francisco, 20 Cal. 96, 81 Am. Dec. 96. This may be conceded as a general rule, but it will not control in this case. It is true that the départment directed the Pere Marquette to carry this mail, and that the Wabash had no election in the specific thing; but it had voluntarily made the contract by which it had put the Pere Marquette in a position to be subject to this order, and out of which this order might have been anticipated, it had voluntarily participated in presenting; to the department the weights of this mail carried over this section of its Detroit-Chicago route as a part of the basis of its compensation for that route, and it had voluntarily collected and received from the department this very compensation. The case is quite barren of the element of compelling a man to pay for something which has come to him against his will, of not as the natural result of his own actions. [3] There is no room for any inference that the services were in-intended to be gratuitous. When another branch of the same subject-matter — the mail car pay — came to the attention of the parties, the Pere Marquette demanded that such pay be turned over, and the Wabash expressly admitted that the. demand was rightful and promised to comply; and it has continually performed this promise. There is no substantial distinction between the mail car pay and the weighed mail pay; and, when the latter subsequently came into existence, to say that there was an intention for the Pere Marquette to perform the service and for the Wabash to get and keep the pay, is inconsistent with the action of both parties. It appears that the entire running of trains by the Pere Marquette between Detroit and Toledo was pursuant to a contract between the Pere Marquette and the Cincinnati, Hamilton & Dayton, to enable the latter to'get its Cincinnati-Toledo cars through to Detriot, and by which contract the Cincinnati, Hamilton & Dayton paid to the Pere Marquette a stated monthly compensation and was entitled to all the net revenue. Objection was made to allowing the Pere Marquette receivers to recover as for money received by the Wabash for their use and benefit, because, it was said, they were not the real beneficiaries, since as between themselves and the Cincinnati, Hamilton & Dayton, the fund in question equitably belonged wholly to the latter. Counsel conceded that this objection would not have force if the obligation of [71] the Wabash to pay the Pere Marquette rested on contract between them; and- as we have adopted and approved the theory of an implied contract, this matter need not be considered. [4] At the time the Wabash receivers were appointed, $10,025.63 of the sum awarded below had accrued, mid, according to the view which we have taken, was then a debt from the Wabash to the Pere Marquette. The Wabash receivers claim that this was only an ordinary contract debt, and that they should not have been directed to pay it preferentially. The order made by the District Court for the Eastern District of Missouri, apparently in connection with the appointment of receivers, said: “Said receivers are hereby Authorized and directed from time to time, out of the funds coming into their hands, to pay * * * all ticket, traíEs and car mileage balances, car per diem and amounts for ear and equipment repairs, which are due or may become due to connecting or other railroads. !S * * ” We think this order clearly covered this debt. It was not only an authority, but a direction, to the receivers to pay it out of income. It is true, as urged, that the amount was not a traffic balance in the strictest and most common use of that phrase, but it cannot be substantially distinguished therefrom. If the Pere Marquette had carried Chicago freight from Detroit to Romulus and there delivered it to the Wabash, which had collected the freight money at destination, the division coming to the Pere Marquette would have been on one side of the account in striking the typical traffic balance. For the purposes of these trains the rails from Detroit to Romulus were Pere Marquette rails. The Wabash collected the entire contract price for carrying all the mail hauled over any portion of the Detroit-Chicago route, but part of the mail paid for was hauled part of the way bjr the Pere Marquette. Not only does the language used fairly cover the situation, but we find facts which would naturally and rightly give rise to this direction, thus specifically interpreted. Connecting railroads have current accounts, back and forth, covering traffic, car mileage, etc.; one side is offset against the other side; one side is due to the railroad going into receivership, and will be withheld unless the receiver will recognize and pay the correlative indebtedness. In this very case the Pere Marquette was becoming currently indebted to the Wabash upon the trackage contract, and the Wabash did in fact sometimes withhold payments of the railway mail car compensation until the Pere Marquette paid the trackage rental. Both of the two subject-matters were not only in fact, but were regarded by both parties as, parts of one debit and credit account, upon which the balance might be either way. The fact that by mutual mistake the item of compensation for the weighed mail was being omitted from the accounts as currently stated can make no difference in the interpretation of the order. It was also urged below, and is insisted here, that a debt of this kind could not be permitted to displace the security of the bondholders whose mortgage was underlying. The District Judge did not expressly pass upon this question. The record is insufficient to inform us whether the debt can be paid out of income, or whether resort to- the body of the property is necessary. If it is claimed that such resort [72] will be necessary, and that the mortgagees will therefore be prejudiced, we think the burden is on the Wabash receivers to bring this fact to the attention of the court and take its further direction. [5] Since this indebtedness of $10,025.63 was the result of operation's upon that part of the Wabash road within the Michigan jurisdiction, we think the application should be made to the court below, if it is independently administering tire property in its jurisdiction, and if it may be in a position to subject the body of the property in Michigan to its decree; otherwise, the application should be to the District Court in Missouri. The order below is affirmed, without prejudice to further proceedings in accordance with this opinion.