Boisot v. Amarillo St. Ry. Co.

JACK, District Judge (after stating the facts as above). The order appointing the master did not in terms provide that he should report his findings of fact and conclusions of law, but he was authorized to “hear evidence and seasonably make his report thereon,” and it was evidently so understood at the time by the parties themselves, as evi.denced by the fact that at the beginning of the taking of the evidence the master, when asked by counsel for the receiver as to whether or [841] not the documents filed should be copied into the record, replied that the transcript should contain sufficient data to show what his findings were based on; that the original documents might go up with the transcript, but that he wanted the record “full enough to show that his findings have some basis in the evidence.” Again, later in the examination, when adjourning to await the production of certain documents, the master announced that he wanted definite data for definite findings, if he could get it. Although counsel thus had notice that the master would make findings; no objection was made to his authority to do so, nor was any objection made until the master’s report was filed. [1] It is well settled that, where a master is appointed with the consent of all parties to hear evidence and report his findings of fact, such findings of fact are conclusive, unless unsupported by any legal evidence or contrary to all the evidence, and that only the master’s conclusions of law, under the circumstances, are reviewable on exceptions. Hattiesburg Lumber Co. v. Herrick, 212 Fed. 834, 129 C. C. A. 288. This rule, however, based on the prior consent of all parties, cannot be extended to cover findings of fact on issues not at the time made by the pleadings. The answer of the defendant admitted all of the allegations of plaintiff’s bill, and the petition of intervention made no attack on the validity of the plaintiff’s claim, but merely asserted the superior right of the city. Therefore the findings of the master, in so far as they relate to the bonded indebtedness of the plaintiff company, the amount of its capital stock subscribed and paid in, and the validity of the claim of plaintiff, should be stricken out. As stated by the master, the record is very confusing as to the nature of the purchase by Daugherty & Co. In a general way, it was testified that Daugherty & Co. bought the bonds, stock, and physical properties, but no deed from the company of its physical properties was produced. Nobles, one of the chief original stockholders, first testified that the bonds were paid when the property was sold; but later, after refreshing his memory and examining the books of the company, he testified that the bonds themselves were sold, and, as a matter of fact, they have never been canceled, which of itself tends to negative the idea of payment. The defendant company is the same corporation that it was then and it apparently still owns its railway. The reasonable conclusion .from the testimony is that the stockholders, who were likewise bondholders, sold Daugherty & Co. the stock and bonds, and, indirectly, they thus acquired control of its physical properties. I am therefore of the opinion that the bonds outstanding, to the amount of $98,500, are binding obligations of the company. Really, however, the matter is of little importance, for the reason that the Daugherty interests own all the stock of the railway' company, and also own, or did own, the bonds — if they are in fact valid existing obligations — as well as practically all other outstanding indebtedness due by the railway company. The city has no interest to contest plaintiff’s claim, which is admitted by defendant, because, if established, it is secured by a lien of superior rank to the mortgage indebtedness. [842] . No objection was made to the master’s finding that the cost of the extra subbase was not included in the assessment, and that the city therefore has no lien for same. Thus, the only claim now urged by the city is its lien for the paving of the space occupied by the track, with material of the same character and to the same uniform depth as that used in the paving of the remainder of the street. [2] The receiver, the plaintiff, and the defendant, in opposition to the claim of the city, urge that the paving ordinance of the city is unconstitutional, because it requires the paving to be done by the street railway company, and no provision is made by which the city may either waive the requirement of the company, or lessen the cost of it, even though the assessment should operate unjustly- to the company, and that the street railway company, being insolvent, could obtain no benefit from the paving, and the burden imposed would therefore be unreasonable and unwarranted. Counsel further urges that the charter of the city of Amarillo, in effect at the time the franchise was granted to the street railway company, provided for an assessment of three-fourths of the cost of street paving against the’ abutting property on the front-foot plan, unless, in the opinion of the city commission, such rule should operate unjustly in particular cases; but that no such exception was made in the charter as to the assessment against the street railway company, which was arbitrarily required by the charter to pave the entire space between the rails and for two feet beyond. As this provision, however, was in the charter at the time the franchise was granted and accepted, the street railway company has now no cause for complaint. Not only was this provision in the city charter, but the street railway company expressly and specifically assumed this obligation by the very terms of its franchise and by the terms of the ordinance extending the life of the franchise. It did not have to accept the franchise, nor the subsequent extension, but, when it did do so, the above-quoted provision of the city charter, and the paving provisions of the ordinances granting and extending the franchise, respectively, became valid and binding obligations. . In the work of Paige & Jones on Taxation by Assessment, par. 599, the law is thus stated: - “The charter offered to a street railway company operating its cars on the surface often requires such company to pave between its tracks, and in some cases for a certain distance on either side. If the stréet railway company accepts and acts under such charter, it is bound to pave, or pay the cost of paving as so provided.” Citing Worcester v. Worcester Consl. St. Ry. Co., 196 U. S. 539, 25 Sup. Ct. 327, 49 L. Ed. 591. affirming City of Worcester v. Worcester Consl. St. Ry. Co., 182 Mass. 49, 64 N. E. 581; New Orleans City & Lake R. R. Co. v. La. ex rel. City of New Orleans, 157 U. S. 219, 15 Sup. Ct. 581, 39 L. Ed. 679; State ex rel. City of New Orleans v. New Orleans, C. & L. R. Co., 42 La. Ann. 550, 7 South. 606; Sioux City St. Ry. Co. v. Sioux City, 138 U. S. 98, 11 Sup. Ct. 226, 34 L. Ed. 898; Springfield v. Springfield St. Ry. Co., 182 Mass. 41, 64 N. E. 577; City of Benton Harbor v. St. Joseph & Benton Harbor Street Ry. Co., 102 Mich. 386, 60 N. W. 785, 26 L. R. A. 245, 47 Am. St. Rep. 553; City of Rochester v. Rochester St. Ry. Co., 182 N. Y. 99, 74 N. E. 953, 70 L. R. A. 773; Storrie v. Houston St. Ry. Co., 92 Tex. 129, 46 S. W. 796, 44 L. R. A. 716. [843] Furthermore, it is well settled that a city, independent of such charter provisions, may stipulate in a franchise granted a street railway company a provision that the company shall pave the part of the street on which its tracks are located at its own expense, or pay for such pavement if done by the city, and such a provision, when a franchise is accepted, becomes a binding contract between the city and the railway company. Washington & Georgetown Railway Co. v. District of Columbia, 108 U. S. 522, 2 Sup. Ct. 865, 27 L. Ed. 807; Chicago v. Sheldon, 76 U. S. (9 Wall.) 50, 19 L. Ed. 594; Perine v. Forbush, 97 Cal. 305, 32 Pac. 226; Schmidt v. Market Street, etc., 90 Cal. 37, 27 Pac. 61; New Haven v. Fairhaven, etc., 38 Conn. 422, 9 Am. Rep. 399; West Chicago Railroad Co. v. Chicago, 178 Ill. 339, 53 N. E. 112; State ex rel. Keith v. Common Council of Michigan City, 138 Inch 455, 37 N. E. 1041; Marshalltown, etc., v. Marshalltown, 127 Iowa, 637, 103 N. W. 1005. The consideration for such a contract may be the granting of the franchise or the extension of one previously granted, as was the case in West Chicago Street Railway Co. v. Chicago, 178 Ill. 339, 53 N. E. 112. The acceptance of such a franchise completes the contract. The defendant’s contention that the' assessment against it for street paving was invalid for the reason that it was insolvent, that it was operating at a loss, and its tracks would have to be torn up and sold, and that it could, therefore, receive no corresponding benefit, is not sound. [3] The company’s liability is independent of the paving statute authorizing special assessments for local benefits. It rests on the contractual obligation of the company, and the many cases cited by learned counsel holding that assessments made without regard to special benefit aie violative of the Constitution have no application. [4] As the company is insolvent, the only parties really in interest are the city of Amarillo and the plaintiff. The latter acquired the bonds sued on subject to the paramount right of the city under its contract, and has no cause for complaint now that the city insists on a strict compliance with that contract. The insolvency of the defendant corporation does not release it from its obligations. If it made a bad contract, like an individual it must suffer the consequences. Counsel cite a number of cases holding that mandamus will not issue to force a street railway company to perform a public duty where it has not and cannot obtain the funds necessary to do the same. This is very true. The courts will not do a vain thing. Mandamus is not the proper remedy; but there is nothing in the cases cited to warrant the conclusion that the railway company is therefore released from such obligation. The obligation nevertheless continues to exist, and it is only a question of the city’s remedy. [5] Finally, it is urged that the city has never matured its lien by completing its paving of a portion of the street occupied by its track, and that, if it has any remedy, it is in a suit for the cost of the paving after the same shall have been put down by the city. It was the duty, as we have seen, of the street railway company itself to put down the paving instead of merely filling in the excavation with loose gravel pending the termination of this litigation. The paving was not done [844] by the city because of this very receivership and the demand herein urged that the receiver be ordered to have the work done. The court, under these circumstances, will order the street railway, and all of the properties, assets, and franchises of the street railway company, sold to pay and satisfy the mortgage bonds sued on, to the extent of $98,-500, with interest and costs, with a recognition of the prior lien of the city of Amarillo to the amount of its claim, $6,050, that amount to be held out of the proceeds of the sale to be paid to the city on completion of the paving. In the meantime the request of the receiver to stop the operation of the cars is denied. [6] The receiver and plaintiff have not asked that the franchise be sold, believing the same of no value, and taking it for granted that the purchaser would prefer to tear up the tracks. It is by no means certain, however, that such a course would be thought advisable by the purchaser, despite the fact that the railway is now being operated at a loss. It might be considered good business to continue to operate notwithstanding present losses, taking chances on making a good profit with the future growth of tire city. Pretermitting, at this time, any discussion of the right of the city to demand that the purchaser at such sale continue to operate the cars in compliance with the defendant company’s franchise obligations, the sale of the properties and franchises is ordered to be made without prejudice to such right as the city may have in the premises.