Appendix — Landell v. Northern Pacific Railway Co.

47a -

APPENDIX D

IN THE

United States Court of Appeals

For tue District or Cotumsia Crrcuir

No. 12,428

GEORGE A. LANDELL, Executor et al, Petitioners,

Vv.

NORTHERN PACIFIC RAILWAY COMPANY,

Respondent,

Appeal From Summary Judgment of the United States District

Court for the District of Columbia

PET'TION FOR REHEARING BEFORE THE FULL COURT,

OR IN THE ALTERNATIVE, FOR MODIFICATION OF

OPINION

Petitioners respectfully request the Court for a rehearing

of the instant case before the full Court, sitting en banc,

or, in the alternative, for modification of the Per Curiam

opinion herein, dated April 14, 1955 and, as grounds

therefor, state as follows:

2

The District Court. whose decision was affirmed by this

Court, failed to accept the allegations in the complaint and

relied upon papers not in evidence and not properly considered

an ancient and concealed private, commercial, fraud fully con-

summated in 1896.

Il.

We believe that this Court, unaware that the District Court

had failed to accept the fundamental allegations of the com-

plaint as it was required to do, has misinterpreted the cause of

action stated in the complaint. The gravamen of the complaint

is not “that a reorganization of the railroad in 1896 was illegal”.

It is (a) that petitioners derive their rights from an existing

statutory contract now being violated. to which the federal

government, the captive Northern Pacific Railroad Company,

and petitioners, are parties; (b) that respondeni, through fraud

upon the court and systematic abuse of the judicial process,

has usurped and misappropriated petitioner's 3% statutory

share of the continuing franchises and assets provided in such

statutory contract: and (c) that the government and respond-

ent, through the use as final and conclusive upon petitioners of

certain consent decrees procured by fraud upon a court and

of adjudications of courts and opinions of Attorneys General

upon collateral matters, have effectively prevented. until now,

the presentation of petitioners’ case to the courts.

Il.

We respectfully insist that the proper administration of jus-

tice requires that this Court consider and deal in its opinion

with the serious charges of respondent's fraud upon the court

and systematic, continuing misuse of the judicial process to

accomplish and maintain its illegal seizure of the 43,000,000 —

acre land grant, 2500 mile right of way. and railroad franchises

vested by Congress in Northern Pacific Railroad Company, the

federal corporation, in which petitioners are stockholders.

IV.

The District Court's opinion ignores the reservation of deci-

- gion in United States v. Northern Pacific Railway Co. (311

U.S. 317, 342, 61 S. Ct. 264, 276) as to the validity of respond-

ent’s succession to jhe federal corporation.

3

DISCUSSION OF GROUNDS FOR PETITION

‘ (

The District Court's Failure to Accept the Allegations of the

Complaint and Its Reliance Upon Papers Not in Evidence.

Judge Tamm’s opinion relies upon and refers to Ex-

hibits of respondent which were nothing more than exhibits

for identification on the deposition of one of the petitioners.

(See 122 F. Supp. at pp. 254, 255, 257, 258, 259). These are

papers selected for ;.imting by respondent’s counsel and

marked as ‘‘ Defendant’s Exhibit No. ... for identification’’

(Transcript pp. 430, 638, 417, 447, 588). None has been

placed in evidence or tested by the rules of evidence. These

selected papers marked for identification are relied upon

by the District Court to reject the allegations in the com-

plaint. We submit that they merely reflect the views of

respondent’s counsel of what material might best be used

to divert attention from the real cause of action set forth

in the complaint. Such views are irrelevant and immaterial

to this case. They are, by no conceivable construction,

admissible as a basis for Summary Judgment under Rule

56 of the Rules of Civil Procedure. ie

Petitioners did not, unfortunately, discuss this point

in briefs or oral argument before this Court. Petitioners,

however, moved this Court under date of October 27, 1954

to exclude from printing in the appendix more than 500

pages of transcript designated by the appellee, respondent

Railway herein. Among these 500 pages were the exhibits

for identification relied upon by the District Court as a_

basis for its opinion. The motion to exclude was denied

November 19, 1954 after oral hearing before a pane! of

three judges of this Court.

The basic reasons for exclusion advanced in the motion

were that:

(a) To include same in the record would ‘‘unneces-

sarily burden the Court aud hinder its consideration

of this case’’ and

4

(b) ‘‘Ineluded in the transcript record are 2,971

pages, all marked as defendant’s exhibits for identifica-

tion on the Lishman deposition. More than 2,500 of

such pages are copies of printed briefs, records and

opinions in other cases handled by attorneys who had

been dismissed as counsel for plaintiff committee long

prior to the filing of the present complaint.’’

‘‘The appellants, in one of the affidavits submitted

to the District Court (Tr. 831-332), requested the Court

to exclude from the record 1,705 pages of such material.

It was shown to the District Court that such 1,705

— marked by defendant for identification

ad not been vouched for as correct, accurate or com-

plete or shown to be relevant or competent and to

admit them would ‘unnecessarily burden the record

with excessive material’. This objection was repeated

in plaintiffs’ points and authorities (Tr. 992). The

District Court did not rule on this objection.’’

Petitioner’s motion also informed this Court:

‘‘The basic purpose of the additional 500 transcript

pages designated by appellee is to support its claim

that appellants’ rights under a federal statute (the

Act of July 2, 1864) have been extinguished by the

passage of time, coupled with alle knowledge on

the part of appellants of the essential facts. By this

approach, appellee would in effect have the court va

the express terms of the federal statute giving appel-

lants, as stockholders in the federal corporation, rights -

in perpetuity. Since the material in question is not

properly before the Court on motion for summary

judgment, it is not proper that it be printed in the

Joint Appendix, thus adding wnnecessary confusion

and difficulty to the disposition of this case.’? (Em-

phasis supplied. See, Appellants’ App. 193-194).

This Court in its order denying respondent’s motion,

indicated that each party might file a separate printed

appendix. The Court did not, however, rule on the ad-

missibility of any of defendant’s exhibits marked for

identification.

5

It is contrary to due process of law for the District

Court to use as evidence against petitioners, material

selected and caused to be marked for identification by

respondent’s counsel, never tested in any way under the

rules of law and evidence, and inadmissible on a motion

for summary judgment under Rule 56.

By devoting its briefs and arguments before this Court

and the District Court not to the allegations in the com-

plaint, but to the 2,971 pages of ‘‘exhibits’’ it had caused

to be marked for identification upon the taking of the

deposition, respondent has succeeded in smothering the

factual allegations that it is breaching a federal statutory

contract and is guilty of misusing the judicial process,

all to the injury of petitioners. It advised Judge Tamm

that it was ‘‘not in order’’ for him to consider such al-

legations. (Main brief, pp. 36,17). Judge Tamm’s opinion

shows that he followed this advice,

The District Conrt in its opinion uses ‘‘ Defendants

Exhibit No. 100 for identification’’ to describe petitioners’

cause of action as one of a skillfully concealed fraud (122

F. Supp. at p. 259). There is no allegation of concealed

fraud in the complaint. That is not the basis or theory of

this case as the discussion under Point II hereof shows.

(See also Lishman deposition, Tr. 563, 578, where it is

testified that the complaint is not based upon any fraud,

except the fraud upon the court). The District Court’s use

of a 1916 lawyer’s letter marke¢ for identification as a

basis for characterizing the cause of action rather than

going to the complaint itself is utterly unfounded.’

Respondent in its brief and argument has cited no law

_ and no case giving it authority to operate Northern Pacific’s

1The serious errors of fact in Judge Tamm’s opinion have already been

called to this Court’s attention (Reply brief pp. 5, 9). This Court’s atten-

tion was also called to the affirmative misrepresentation of fact in respond-

ent’s brief herein (See Pctitioner’s reply brief pp. 2-4 and Tr. 458, Appel-

tants’ App. 8). The fact that the Hoover case opinion, relied upon by Judge

Tamm and by this Court, was obtained by suppression of records by both

parties has also been pointed out a oe 16, 38, reply brief pp. 5,

10, Tr. 146, 910).

-

we

6

main transcontinental line of railroad. Judge Tamm’s

opinion makes no mention of the lack of such authority

and contains no discussion of the statutory contract (See

Point IT below).?

4

Il.

The Cause of Action as Stated in the Complaint.

(a) The statutory contract.

It is settled law that railroad land grants result in

contracts and that the Act of July 2, 1864 is such a con-

tract and is binding upon respondent herein. Northern

Pacific Railway Co. v. U. S., 320 U.S. 248, 67 S. Ct. 747,

752; Burke v. Southern Pacific R. Co., 234 U.S. 669, 680,

34 S. Ct. 907, 911.

The complaint pleads the statutory contract upon which

petitioners rely, viz, the Act of July 2, 1864. It is pleaded

in the complaint that the Northern Pacific Railroed Com-

pany duly filed its written acceptance with the President

of the United States of the covenants provided in such. -

Act and that petitioners duly accepted the offer contained —-

in the statute by subscribing to the stock of Railroad.

(Appellants App. 12-14).

Respondent as 97% stockholder in the federal corpora-

tion (which is party to this statutory contract), claims all

the benefits of such contract, while denying any of such bene-

fits to petitioners, who are holders of 3% of the stock in that

corporation. Yet both the 97% and the 3% interests

derive from a common source—the Act of July 2, 1864.

It is pleaded that respondent has and is today violating

the terms of the statutory contract and has facilitated its

violations by fraud on the Court and continuing misuse

of the judicial process. The underlying facts to support

these allegations are pleaded in detail.

“We emphasize herein the contractual nature of the statutory authoriza- |

tion for the Northern Pacific Railroad Company since that aspect of such

authorization was, apparently; net-sufficiently_covered_in our briefs.

7

It is further alleged in the complaint that this statutory

contract by its own terms is non-assignable.*

The statutory contract provides, as pleaded, that it may

be altered, amended, or repealed by only one of the part-

ies thereto—Congress. The complaint alleges that re-

spondent, in 1896, prior to the foreclosure sale of that

year, applied to Congress for an amendment of the Act of

July 2, 1864, to permit respondent, as 97% stockholder,

to be substituted for Northern Pacific Railroad Company, —

the federal corporation. Congress expressly refused such

substitution and has never authorized it. In Humbird v.

Avery, 195 U.S. 480, 25 S. Ct. 123, the Court pointed out

that Congress had passed legislation expressly refusing

to recognize Railway as successor to Railroad. (25 S. Ct.

at 126, 132).

Recognizing that the real party in interest is the federal

corporation, respondent keeps alive such corporation and

its 97% stock interest therein. All its mortgages contain

the extraordinary provision that it may, at any time, recon-

vey the mortgaged property back to the federal corpora-

tion_without-the-consent-of the mortgage trustes.— its

| so pleaded in the complaint.

) We have considered at length in our briefs the propo-

sition that laches cannot invalidate rights based upon a

statutory contract. We refer the Court especially to

District of Columbia v. Thompson Co., 346 U.S. 100, 114,

73 8. Ct. 1007, 1014, where the Supreme Court stated:

‘‘The failure of the executive branch to enforce a law does

not result in its modification or repeal—the repeal of laws

is as much a legislative function as their enactment.’’ See

also, Oregon & California R. Co. v. U. S., 238 U.S; 393,

35 S. Ct. 908, 922, 925.

3 Authorities establishing the non-assignability of the contract and of -

railropd franchises are cited in our main brief pp. 22, 25, 28-30. Acceptance

of the pleading (Appellants’ App. 33, Tr. 157) that the statutory contract

is non-assignable would have eliminated the present costly appeal and the

ee ee

ruled upon. at

8

(b) Fraud upon the Court.

After Congress had refused to amend the statutory con-

tract, and while it held 97% of Railroad’s stock, respondent,

in circumvention of the jaw and by fraud upon the Wis-

consin federal court (Appeilant’s App. pp. 35, 60,. 72,

main brief pp. 34-38), procured a consent foreclosure decree

in its favor against Railroad in proceedings to which

neither the United States nor petitioners were parties.

Also by fraud upon the court respondent procured a con-

sent, sequestration deficiency judgment against the federal

corporation. It has used and is using these decrees to

prevent the 3% minority from vindicating their statutory

contract interest (Appellants’ App. 72, 69, 8, 27, 33,

37-39, 42). In the present case, notwithstanding the

determination in Northern Pacific Railway Co. v. Boyd,

228 U.S. 482, 33 S. Ct. 554, that these decrees are void

as to non-parties, respondent imposes them upon this

Court as res adjudicata against the petitioners. (Answer,

Appellants’ App. 106, 107, 119).

No court or public official has ever adjudicated peti-

tioner’s claims. Rulings by attorneys general that these

claims must not be heard because they were attempts at

collateral attack upon decrees which were final and con-

clusive, are obviously not rulings that the claims have no

substance or merit.

ses ; 7 4

iA

(c) Respondent’s Systematic, Past and Present

Misuse of the Judicial Process.

Respondent has persuaded public officials that the consent

decrees it procured by fraud upon the Wisconsin federal

court are conclusive adjudications that it has succeeded

to Railroad’s franchises, land grant and other assets. The

Attorney General has accepted these decrees as not subject

to collateral attack. In government suits against Railway

and Railroad the Attorney General has alleged in bills of

complaint that by these decrees Railway has lawfully suc-

ceeded to Railroad, the federal corporation. In these suits

Railway has filed answers, and has caused its captive

—

9

Railroad to file answers admitting the truth of the allega-

tions in the government’s complaint that Railway lawfully

succeeded to Railroad under and by virtue of said

decrees.* (122 F. Supp. at p. 257, Appellants’ App. 189).

The Supreme Court. was unaware that the pleadings

before it were erroneous. Respondent thus secured the

advantage of having that Court treat as conclusive, decrees

which were void, having been obtained by a fraud upon

a Court. In certain cases the Court has referred to Rail-

way as the ‘‘successor’’ to Railroad.

Railway, respondent herein, unconscionably, and to the

past and present prejudice of petitioners, used and uses

the Supreme Court statements thus obtained, as conclusive

adjudications against petitioners. Respondent pleads these

statements as res adjudicata upon the question of its

succession to Railroad. Respondent has made this mis-

leading use of Supreme Court statements before this Court

and even before the Supreme Court ttseif. (Reply brief

p. 8, Appellants’ App. 189).°

It is pertinent to emphasize to this Court that the District

Court was persuaded to use against the petition rs certain

opinions of Attorneys General which had been overruled

in Northern Pacific Railway Company v. Boyd, 228 US.

482, 33 S. Ct. 554. As we have stated, that case held that

the decrees relied upon as conclusive by the Attorney Gen-

eral and by respondent were void as to non-parties. (Tr.

196)

Respondent’s improper use of court cases and opinions

of Attorneys General as conclusive adjudications, taken

together with the part played by the government, has

4 Railway also-eurrently causes Railroad to execute deeds and other papers

attesting that Railway is its lawful successor and thus continues its uninter-

rupted misappropriation of Railrvad’s assets. (Appellants’ App. 34).

5 Petitioners’ Points and Authorities quoted extensively some of these piead-

ings as taken from the records filed in the Supreme Court, Tr. 998-1000, See,

also Tr. 174, 189, 1112. Respondent’s reply brief in the Distriet Court

refused to discuss, these facts of record alleged in the complaint. Respond-

ent’s reply brief persuaded the District Court that ‘‘discussion of . . . those

questions is not in order.’’ (Tr. 1053).

10

effectively deterred, until now, the prosecution of peti-

tioners’ claims. This systematic misuse of the judicial

process and its deterrent affect upon the institution of

litigation, is pleaded in the complaint and must be accepted

as true upon a motion for summary judgment. (Appei-

lants’ App. pp. 72, 69).

It was manifest error for the District Court to refuse

to accept these important facts pleaded in the complaint

and to rule that these basic allegations were only ‘‘ plausible

argument’’. (122 F. Supp. at 255)

III.

We Respectfully Insist That the Proper Administration of Jus-

tice Requires That This Court Considor and Deal in Its

Opinion With the Serious Charges of Fraud Upon the Court

and Misuse of the Judicial Process, to Petitioners’ Detri-

ment, Which Are Made in the Complaint Herein and Sup-

ported by Affidavit and by Facts of Record Before the

Supreme Court. ‘

The authorities collected in our main brief pp. 34-37

show, we submit, that this Court is under a duty to inquire

into the allegations in the complaint and petitioners’ affi-

davit filed herein that respondent has been. guilty ofa

fraud upon the court and misuse of the judicial process

to the injury of the petitioners. These are not idle charges.

They are based upon allegations in the complaint and facts

of record in this case and facts of record in Supreme Court

cases, detailed references to which are contained in our

briefs. We believe that unless this Court makes due in-

quiry herein, the~true administration of justice will be

impaired.- The violator of a statutory, contract will be

permitted to deprive citizens of property vested in them

by the clear provisions of an existing statutory contract

\and to unjustly enrich itself thereby. Under the Con-

/ stitution, Congress itself could not confiscate these statu-

‘ tory property interests except for a public purpose and

upon payment of just compensation.

S

Y

é Po

11

IV.

The District Court’s Opinion Ignores the Reservation of Deci-

sion in United States v. Northern Pacific Railway Co. (311

U.S. 317, 342, 61 S. Ct. 264, 276) as to the Validity of Re-

spondent’s Succession to the Federal Corporation

In Northern Pacific Railway Co. v. United States, the

Supreme Court made an extraordinary reservation in its

decision—a reservation as to the validity, among other

things, of the legality of Railway’s right to succeed to

Railroad’s i::erest. (Appellants’ App., 192, 193, See

Tr. 994). This the Court did despite the fact that,

in his oral argument in the Supreme Court in that

case, the attorney for the United States stated that

the. United States did not question the right of the

Northern Pacific Railway Company to act as the lawful suc-

cessor of the Northern Pacific Railroad Company, although

the question had not been presented to the Court below for

decision and no testimony was ever taken before the master

or before the Court in support of Railway’s claim to be

such sueeessor. Judge Tamm’s ‘‘ particular attention’’ was

called to this reservation. (Tr. 194, 123).

Tf the instant case should be remanded for trial (which

we regard as unnecessary) we propose to ask respondent’s

counsel for an admission, under Rule 36 of the Rules of

Civil Procedure, that counsel for Railway in his oral

argument before the Supreme Court in Northern Pacific

Railway Company v. United States, 311 U.S. 317, stated

that the Reorganization Managers of Northern Pacific

Railroad Company had acquired the bonds and all the stock

of Railroad and that thereupon in constmmation of the

1896 plan of reorganization, the bonds, and all of the stock

of Railroad, had been exchanged for bonds and stocks of

Northern Pacific Railway Company. In fact, of course,

petitioners’ 3% interest had not been acquired.

We suggest: that, had the Supreme Court known that

unacquired shares of a dissident minority were outstanding,

it would have had even graver doubts of the validity of

a

12

Railway’s title than those which presumably caused the

reservation of its decision on that point. Among the nine

Justices now composing the Supreme Court, four were sit-

ting at the time of the aforesaid oral argument.

CONCLUSION

In 1947, as we have shown under Point II b«eof, the

Supreme Court held that respondent, Railway, is still

bound by the statutory covenants in the Act of July 2, 1865,

so far as the government is concerned. Yet this Court now

rules that covenants in the same.statutory contract are

not binding upon the shee cea so far as the petitioners

are concerned.

This, we submit, is not equal justice under law. If the

respondent’s claim is correct, which we deny (See, Point . |

V of our main brief), that to grant relief to petitioners

may injure innocent third persons, then respondent should

appeal to Congress, the contract and statutory source for

relief, and not to the courts. Congress is the party to the

contract which has the sole power to amend. Certainly

this Court, under the guise of laches invoked by a wrong-

doer should not undertake to amend or to annul the statu-

tory covenants between Congress and these petitioners.

Whether these covenants are wise or have outlived their

usefulness, is not a matter for the judgment of this Court.

Congress covenanted that the petitioners would have a

continuing 3% interest in the non-assignable railroad oper-

ating franchise and right of way through 2500 miles of the

federal public domain.

Congress did not provide that the benefits of the fran-

chises, right of way, land grant and covenants would run

to only 97% of the people of the United States who ac-

cepted the statutory offer.

Congress did not provide that the benefits and the cove-

nants would be permanent so far as the government is con-

cerned, but only temporary, so far as the 3% minority are

concerned. |

_ a

13

Congress, when asked by respondent to amend the con-

tract in the foregoing respects, refused to do so. Congress

has refused respondent’s requests to be substituted for the

federal corporation. (Appellants’ App. 33).

Under any rule of law, this Court should not undertake

te sanction respondent’s attempt to vary, through the

use of material not in evidence, the clear terms of the

statutory contract. .

The foregoing basic matters, pleaded with factual detail

in the complaint, and briefed with thoroughness, made no

impression upon the District Court. Its opinion discusses,

with no reference to the statute, a cause of ‘action not

presented in the complaint.

In the light of these facts we submit that this Court

should reverse its affirmance and adoption of the District

Court’s opinion and recognize, at the least, that the view —

of the nature of. petitioners’ cause of action taken by

Judge McLaughlin, who accepted the allegations of the

complaint, is the true law of this case.

Wuenerorg, it is respectfully prayed that this Honorable

Court» set this case down for rehearing before the full

Court sitting en bane, or, in the alternative, that it set

aside the summary judgment in favor of the respondent

and award judgment to petitioners, or enter such other and

different decree herein as to this Court seems necessary

and appropriate.

Respectfully submitted,

Rosert W. LisHMan,

Attorney for Petitioners,

412 Washington Building,

Washington 5, D.C.

Of Counsel:

Epwarp Brown WruiaMs

14

Certificate of Good Faith

L Robert W. Lishman, counsel for petitioners in the

above-entitled case, hereby certii'y that this foregoing pe-

tition is presented in good faith and not for delay.

Rosert W. LiseMan,

April 28, 1955.

Certificate of Service .

It is hergby certified that three copies each of the Peti-

tion fur earing were forwarcied by first class mail, |

postaye prepaid, to Bernard G. Ostmann, Esquire, Trans-

portation Building, Washington 6, D. C., attorney for re-

spondent, this twenty-eighth day of April, 1955.

RKorzrr W. Lisoman,

Attorney for Petitioners,

412 Washington Building,

Washington 5,D. 0. —

SEP 6 1955

Supreme Court of the United States

Ocroser Term, 1955.

No. 299

GEORGE A. LANDELL, et al.,

Petitioners,

OO ee

v.

NORTHERN PACIFIC RAILWAY COMPANY,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE DISTRICT OF

COLUMBIA CIRCUIT.

BRIEF FOR RESPONDENT IN OPPOSITION.

Porter R. CHANDLER,

15 Broad Street,

New York 5, N. Y.

Counsel for Respondeni.

M. L. Countryman, Jr.,

176 E. Fifth Street,

St. Paul 1, Minnesota.

Bernarp G. OsTMANN,

Transportation Building,

Washington 6, D. C.

Wruiam A. Kaynor,

15 Broad Street,

~~ New York 5, N. Y.

Of Counsel.

September 1, 1955

Pandick Press, Inc., 22 Thames St., New York 6. N.Y, U. S. A.

RRA cok

QuzsTion PRESENTED.

SraTEMENT 2

Backerounp or ¢He Lirication 4

Tae Petrrionsrs, THE Prepecessors anp THEIR

CounsEL 6

Activities In BEHALF OF THE Dusexrixo Spares:

1896-1906 .. s 8

Activities in BEHALF OF THE Dusartine Suanns:

1906-1950

ARGUMENT

ConcLusIon

ii

TasLe oF CasEs.

PAGE

Abraham v. Ordway, 158 U. S. 416, 418-421 (1895)... 21,

Arenas v. United States, 322 U. S. 419, 434 (1944)... 24

Brennan v. Hawley Products Co., 182 F. 2d 945 (7th

Cir.), cert. denied, 340 U. S. 865 (1950).................... 23

_ Boone County v. Burlington & Missouri River Rai-

road, 139 U. S. 684, 692-694 (1891) 21

‘Central Transportation Co. v. Pullman’s Palace Car

Co., 189 U. S. 24 (1891) 23

Dizon v. American Telephone & Telegraph Co., 159

F. 2d 863 (2nd Cir.), cert. denied, 233 U. S. 764

(1947) 21

DuPont v. Northern Pac. R. Co., 18 Fed. 467.............. 9

Eccles v. Peoples Bank of Lakewood Village, 333

U. S. 426, 434 (1947) 24

Ewert v. Bluejacket, 259 U. S. 129 (1922)...................- 21

Farmers’ Loan & Trust Co. v. Northern Pacific R.R.,

72 Fed. 26 (1896)....... 4

Hanover Star Milling Co. v. Metcalf, 240 U. 8. 403,

419 (1916)

Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322

U. S. 238 (1944)...

Hays v. Port of Seattle, 251 U. S. 233, 239 (1920)...... 21

Johnson v. Waters, 118 U. S. 640, 667 (1884)... 22

Johnson v. West India Transit Co., 156 U. S. 618, 647-

649 (1895) ame FT

Kennedy v. Silas Mason Co., 334 U. S. 249, 256-257

(1948) es

Menendez v. Holt, 128 U. S. 514 (1888)... 23

Oregon &¢ California Railroad v. United States, 238

U. S. 393 (1915) ; 243 U. S. 549 (1917).

iii

PAGE

Palmer v. Chamberlin, 191 F. 2d 532 (5th Cir. 1951)... 24

Penn Mutual Life Insurance Co. v. Austin, 168 U. 8.

685, 697, 700 (1898)

Pennsylvania Railroad v. St. Louis, ete. Railroad,

118 U. S. 290 (1886)

Root Refining Co. v. Universal Oil Products Co., 169

F. 2d 514 (3rd Cir.), cert. denied, 296 U. S. 626 -

(1948)

Schaffer v. Rector Well Equipment Co., 155 F. 2d

344 (5th Cir. 1946)

Schmidt v. United States, 102 F. 2d 589, at 591, 592

(9th Cir. 1939)

Stoddard v. Chambers, 2 Howard 284, 318 (1844)......

Southern Pacific Co. v. Bogert, 250 U. 8. 483 (1919)...

Southern Oregon Co. v. United States, 241 Fed. 16

(9th Cir. 1917), app. dismissed, 249 U. 8. 589

(1919)

Shee ee

U. S. 317, 324-328 ( ang EN ER 4, 5, 15, 18, 29

United States v. Southern Pacific Co., 259 U. S. 214,

234 (1922) 23

Young v. Southern Pacific Co., 34 F. 2d. 135 (2d

Cir.), cert. denied, 280 U. 8. 597 (1929)

TTP eee ewe eeeeeene

Srarures.

Act of July 2, 1864, 13 Stat. 365...

Act of June 25, 1929, 46 Stat. 41

Joint Resolution of March. 1, 1869, 15 Stat. 346

Joint Resolution of May 31, 1870, 16 Stat. 378

Joint Resolution of June 5, 1924, 43 Stat. 461

eee eee

wet eeeweeee

IN THE

Supreme Court of the United States

Ocroser Term, 1955.

ae

No. 299

—_—

Groner A. Lanvetn, et al.,

Petitioners,

v.

NorrHern Paciric Ratway Company,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

: STATES COURT OF APPEALS FOR THE DISTEICT OF

COLUMBIA CIRCUIT. :

BRIEF FOR RESPONDENT IN OPPOSITION.

Question Presented.

Petitioners, minority stockholders of Northern Pacific

Railroad Company, commenced this action in 1950, attack-

ing as illegal mortgages placed on the Railroad’s properties

between 1879 and 1889 and a reorganization and foreclosure

* of those mortgages carried out under court decrees between

1896 and 1899, pursuant to which the Railrdad’s properties

were transferred to Northern Pacifie Railway Company.

On motion for summary judgment below, it was established

by undisputed documentary evidence coming largely from

a

2

petitioners’ own files: (a) that petitioners or their prede-

cessors had declined an offer to participate in the reorgani-

zation upon the same terms as all other stockholders, (b)

that. petitioners or their predecessors had knowledge or

notice, for at least 50 years before this action was brought,

of the facts and legal theories upon which their present

claims are based, and had repeatedly and ineffectually

pressed their ‘‘public interest’’ arguments upon the Execu-

tive and the Congress, (c) that similar prior litigation

begun in 1900 was dismissed for lack of prosecution in 1939,

(d) that every participant in the transaction has long since

died and (e) that the position of respondent, its creditors

and its stockholders and the properties of respondent have -

changed almost beyond recognition in the intervening half

century.

In the opinion of respondent the sole question is whether

under these circumstances petitioners are barred by (1)

laches or (2) the statute of limitations. ;

Both courts below held—we submit correctly—that the

action should be dismissed for laches, and found it unnec-

essary to consider the question of limitations.

Statement.

The substance of the complaint (App. 2-77*) is that

mortgages placed on the Northern Pacific Railroad’s prop-

erty between 1879 and 1889 and aggregating more than

$100,000,000 were illegal and void, and that the 1896 reor-

ganization and foreclosure of those mortgages under which

the Railroad’s properties passed into the ownership and

* Petitioners’ appendix in the Court of Appeals is numbered

from page 1 to 270. Respondent’s appendix in that Court is num-

bered consecutively, starting at page 271. Citations to both appen-

dices will be in the form of App. ................ herein.

3

possession of the Railway, were likewise illeg:i and void.

The prayer is for a declaration of nullity, a restoration of

the properties, and an accounting.

Defendant Railway first moved to dismiss the complaint

on the grounds of (i) absence of a necessary party (the old

Railroad), (ii) improper venue and (iii) invalidity of ser-

vice of process in the District of Columbia. When this

motion was denied by J udge McLaughlin (98 F, Supp. 479;

App. A to petition, p. la) the Railway answered the com-

plaint and took the deposition of the principal plaintiff |

Robert W. Lishman, who is also of counsel for petition-

ers. In connection with his deposition there were marked

as exhibits a number of documents coming chiefly from

petitioners’ files. On the basis of that deposition, those

documents and three affidavits establishing (a) the death of

all concerned in the original transactions and (b) the sub-

stantial changes which have occurred in the Railway’s posi-

tion and properties since 1896, the Railway moved for sum-

mary judgment under Rule 56 on the ground of (1) statute

of limitations and (2) laches.

The District Court in a careful opinion (122 FP. Supp.

253, App. A to Petition, pp. 8a, 17a) held:

‘Granting the relief prayed for by the plaintiffs

would create a concentric chaos aifecting the rights

and equities of thousands of stockholders and cred-

itors, most of whom were not even in existence at

the time of the alleged fraud.*** — - ee Nas

This Court must find that the alleged rights of -

the minority stockholders are buried in the grave

created by their inexcusable lack of diligence in not

Sooner asserting these claims in the courts.’’

The District Court accordingly dismissed the complaint

for laches and found it unnecessary to pass upon the ques-

4

tion of limitations. The Court of Appeals affirmed per

curiam (223 F. 2d 316, App. A to Petition, p. 18a) on the

basis of the District Court’s opinion. _

Background of the Litigation.

The Northern Pacific Railroad Company was chartered

by the Act of July 2, 1864 (13 Stat. 365, App. 198). Its

early history is summarized by Mr. Justice Roberts in

United States v. Northern Pacific Railway Co., 311 U. S.

317, 324-328 (1940). The original Act permitted only public

subscriptions to stock and prohibited the issue of mortgage

bonds without the consent of Congress. When it became

apparent that sufficient funds could not be raised in that

way, Congress duly gave its consent to the issuance of

bonds and the right to ‘‘secure the same by mortgage on

its [the Railroad’s] property and rights of property of

all kinds and descriptions * * * including its franchise as

a corporation.’’* A bond issue of $30,000,000 was floated

in 1870. During the panic of 1873 the Railroad became

insolvent; and by a reorganization in 1875 this bond issue

was paid off in preferred stock (App. 16-17). With the

help of subsequent mortgage bond issues (i.e. those now

attacked as void) the Railroad was finally completed in

the 1880’s.

A short period of relative prosperity followed; but in

the panic of 1893 the Railroad was again unable to meet —

payments on some of its bond issues. A decision of four

Supreme Court Justices (Farmers’ Loan & Trust Co. v.

Northern Pacific R.R., 72 Fed. 26 (1896)) resolved con-

flicting applications for receivership and fixed primary

jurisdiction in the Circuit Court for the Eastern District

* Jomt Resolutions of March 1, 1869, and May 31, 1870, 15 Stat.

346 and 16 Stat. 378; see App. 212-214.

°

> oT * oil , ‘s ne + " Berne. x r opt =

PiEPtIIer a SSSR di nierS Yeehm RNR em DI tr eR DUETS EF RAN 795 LENIN ORR PNR

5

of Wisconsin. Pursuant to foicclosure proceetings which

followed in that Court, the present®’Northern Pacific

Railway Company ‘‘acquired title to the railroad, the land.

grant, and all other property of the original corporation :

and has since operated the road and obtained patents for _

millions of acres under the land grants.” (U.S. v. Northern

Pacific Railway Co., 311 U. 8. at 328).

During the receivership protracted negotiations were

carried on by representatives of the stockholders and bond-

holders te develop some plan of reorganization which would

scale down fixed charges to accord with income and at the

same time preserve so far as possible their relative rights,

Such a plan was finally agreed on and publicly presented to

all the Railroad's security holders in March 1896 (App. 7-8,

23, 385; Def. Ex. 4, App. 295, 498). It provided for the

acquisition by J. P. Morgan & Co., as reorganization man-

agers, of substantially all the outstanding stock and bonds

of the Railroad in exchange for securities of the successor

corporation—Northern Pacific Railway Company—and the

use of the old securities as the medium of payment for the

purchase at judicial sale of all the properties (whether or

not covered by mortgage) of the Railroad.

So far as the stockholders were concerned, the condi-

tions of participation, which were open to all (App. 7; Def.

Ex. 4, App. 295, 408), provided for the exchange share for q

Stare of old Railroad.stock for new Railivay stock uponpay-~,

ment of $10 for each share of preferred and $15 for each

share of common. Substantially all the bondholders, and

over 95% of the stockholders, joined in the- plan. The

predecessors of the petitioners were among the small minor-

ity of stockholders who refused to participate.

By foreclosure decree dated April 27, 1896, and judicial

sales and supplemental decrees in July, August and Sep-

tember of the same year, the Railway acquired, as contem-

b: win eee m ay wert ts aa: i a a aAS he Sear A EY :

Sat RT Sete Tyree ans Henman ine ic tt tone Senta ae NOUN SRR TR REE sani

Ty

6

plated by the Reorganization Plan, all the mortgaged prop.

erties of the Railroad, constituting the substantial bulk

of its assets. By sequestration decree in 1899 the Railway

similarly acquired the remaining unmortgaged properties,

Since then the old Railroad has been an empty corporate

shell, and all its former properties have been openly owned

and operated by the Railway.

The Petitioners, their Predecessors and their Counsel.

From the first the proposed Reorganization Plan was

opposed by a small but vocal minority of shareholders,

losated mainly in the Philadelphia area. Printed and

apparently widely distributed correspondence between the

Philadelphia law firm of Biddle & Ward (representing Rail-

road shareholders sent to them by the Philadelphia broker-

age firm of Brice Monges & Co.) and Brayton Ives, president

of the Railroad, heralded the formation of the petitioners’

Committee of minority shares even prior to the foreclosure

decree of April 27, 1896 (Def. Exs. 4-6, App. 295-7, 408-17).

The final letter in this exchange of correspondence (April

15, 1896), after expressing dissatisfaction with Mr. Ives’

position, states (App. 417):

‘‘We feel that under existing circumstances the -

stockholders of the Company will have to co-operate

for the protection of their own rights without rely-

ing upon the Company.’’

In November 1898 a self-perpetuating stockholders’

protective committee was created under an agreement

which specifically contemplated litigation (Def. Ex. 1, App.

292, 403-4). Under this agreement some 30,000 shares,

mainly common, were deposited. The present petitioner

committee is acting under a redraft of the 1898 agreement

.

EL LEY REN TIERS POETS HIO WEIN! PR ROE TN

7

executed in 1906, which likewise specifically contemplated

litigation (App. 288).

Mr. Charles Fearon of Philadelphia, by far the most

active and influential member of the Committee, served

from 1898 until his death in 1943. Two of the present

members of the Committee, Messrs. Freeman and Welsh,

are connected with the minority shares primarily by their

friendship with Mr. Fearon (App. 380). The third, Robert

W. Lishman, is the husband of Mr. Fearon’s niece (App.

290), and is of counsel for petitioners as well as a party to

this action in the dual capacity of a member of the Com. -

mittee and trustee of his wife’s holdings. The final peti-

tioner George A. Landell, as executor for E. A. Landell,

has been a ‘‘family friend for many years’’ (App. 291).

The Committee was represented during the years of

its early activity by John G. Johnson, one of the outstand-

ing members of the Philadelphia bar, who served until

forced to withdraw because of a conflict of interests (App.

311, 340), and by Joseph C. McCullen, who represented the

Committee as late as 1925, except for his period of service

on the Bench in Philadelphia (App. 301, 498). Mr.

McCullen, characterized on deposition by Mr. Lishman ‘‘as

about as diligent a counsel as one could hope to have”’ (App.

304), was ivilowed during the 1920s and 1930s by Thomas

Boylan, formerly Mr. McCullen’s law clerk (App. 345).

This Committee, its counsel and associated holders of

minority shares have engaged in varying degrees of activity

throughout the period following the 1896 reorganization.

During the decade preceding this suit the Committee

appeared to be more or less moribund; and for over 30

years it has sent no circulars of advice to the minority

shareholders whom it claims to represent (App. 329).

8

Petitioners base their attempt to overturn the 1896 reor-

ganization on two major points. “hey assert (a) that the

1896 transfer to the Railway was invalid because the mort-

gages. foreclosed were illegal and ‘‘void’’ since Congress

had not eonsented to them and (b) that the foreclosure

proceedings themselves were void because procured by a

‘fraud upon the court’’ consisting of (i) misrepresenta-

tions as to the compliance of the Railway with the laws of

the States through which the Federal right-of-way. passed

and (ii) misrepresentations as to the ‘‘independent”’ status

of the Railway as a purchaser at the 1896 foreclosure sales,

Each of these points is presented now, as it was pre-

sented below, on the theory that it constitutes both a reason

why petitioners should succeed on the merits and a reason

why the action should not be dismissed for laches. We are

concerned with them at this time only from the latter view-

point, and shall consider them only to the extent necessary

to show that they are identical with the claims which peti-

tioners or their predecessors have been raising in various

quarters, with uniform lack of success, for almost 60 years.

Activities in Behalf of the Dissenting Shares: 1896-1906.

During this decade petitioners or their counsel came into

possession of every fact upon which they now rely and

developed all of the claims and legal theories whicli they

now advance. ; :

Throughout this period they were active in many quar-

ters, pressing their claims at meetings of the shareholders

of the Northern Pacific Railroad, raising objections to —

officers of the Railway, the executive departments and the

Congress, examining the records of the reorganization and

—in one instance—instituting legal proceedings which were

——

quickly allowed to lapse into inactivity. The antiquity of

their present claims can thus be easily traced.

For example, pages 6-8 and 18-21 of the present petition

assert that Congress in 1870 gave consent to only a single

mortgage, that the mortgage powers of the Railroad were

therefore exhausted by the original mortgage of 1870, and

that all subsequent mortgages were void. This same con-

tention appeared in the Biddle and Ward letters of April 6

and April 15, 1896 (Def. Exs. 4 and 6, App. 295, 297, 408,

415). It had in fact been rejected as early as 1883 by the

United States Cireuit Court for the Southern District of

New York (DuPont v. Northern Pac. R. Co., 18 Fed. 467).

"4

Page 42 of the present petition asserts that the failure

to obtain express Congressional approval of the 1896 Reor-

ganization Plan supports petitioners’ argument that the

Railway is without capacity to take or hold the Railroad’s

property. The same argument appeared in a printed cir-

cular distributed in 1896, as part of the original attempt to

organize a protective committee (Def. Ex. 2, App. 292, 405).

These initial protests were rejected and the Reorgani-

zation Plan was executed, the present respondent Northern

\, Pacific Railway coming into open and notorious possession

‘of all properties of the old Railroad Company, including

its\rail system, franchises and land grant. A public state-

ment, to that effect was given to the New York Stock

“Ex ge on December 1, 1896, and is quoted in the Com-

plaint (App. 25).

Soon ‘after the 1896 foreclosure there began a long

series of somplaints, The first of these were addressed

to the Secretary of the Interior, who was in charge of

issuing patents under the original land grant made by

Congress in 1864. He referred the matter to the Attorney

General, who on February 8, 1897, handed down a formal

opinion in which, after reviewing the facts, he concluded :

\

aT

10

‘*You [Secretary of Interior] should act upon appli-

cations for patents by the new company upon exactly

the same considerations which would govern you in

case there had been no foreclosure and the appli-

cations were made by the old company”’ (21 O. A. G.

at 491).

In reaching this conclusion, the Attorney General con-

sidered and rejected the argument that the unsuccessful _

attempt to obtain Congressional sanction of the foreclosure /

destroyed the validity of the reorganization. He ruled’

that Congress, by its Joint Resolutions of 1870, had givgn

its consent to the transfer of the Railroad’s properties and

franchises upon any foreclosure of its mortgages. Whether

President Cleveland’s Attorney General was right or wrong,

his opinion establishes at least the antiquity of the argu-

ments advanced in the present petition. —- ~ :

The dissenting shareholders next turned their attention

to the annual meetings of shareholders of the Railroad,

appearing and objecting at each meeting from 1898 to 1905.°

Their prviests were in each instance defeated by the —

respondent Railway, which held more than 95% of the Rail-

roai stock pursuant to the 1896 reorganization.

Thus, at the 1899 shareholders’ meeting, counsel for the

Committee offered a resolution charging that the sales and

proceedings by which the Railway had become possessed of

the Railroad’s property were ‘‘irregular, fraudulent, and

void’’ (App. 435). At the 1900 meeting a resolution was

offered reciting that the property of the Railroad had been

‘irregularly and fraudulently’’ acquired by the Railway,

and demanding the institution of legal proceedings against

the Railway and all other persons responsible (App. 440).

* 1898—Def. Ex. 8, App. 298, 417-23; 1899—Def. Ex. 10, App.

304, 435-6; 1900—Def. Ex. 24, App. 306, 440-1; 1901—Def.

25, App. 308, 441; 1902—Def. Ex. 26, App. 308, 441; 1903—Dei.

Ex. 66, App. 347, 513; 1904—Def. Ex. 67, App. 348, 517; 1905—

Def. Ex. 35, App. 326, 474.

ll

Whether the defeat of these and other similar resolu-

tions was right or wrong, the fact of that defeat establishes —

the antiquity of the present claims, and should have served

at the fime‘as a warning to petitioners that if they desired

redress they should proceed promptly in the courts.

In fact, a representative suit in equity, based on the same

- claims as the present complaint, was begun in the Southern

District of New York in November 1900. The plaintiff was

Joseph Hoover, who had been a member of the opposition

. slate of directors nominated on behalf of the Committee in

1898 (App. 420). His complaint stated that he was suing

‘‘on behalf of himself and such other stockholders of the

Northern Pacifie Railroad Company as may intervene’

(App. 423). The defendants were the Railroad, the Rail-

way, the directors of both, members of J. P. Morgan &

Company and others. Plaintiff Hoover was represented by

Mr. Johnson and Mr. MeCullen (App. 434), who were also

counsel for the Committee.. While the Committee was not

formally a party to the suit, it was looked to for guidance

(App. 170-1; Def. Ex. 37, App. 327, 476) and was generally

‘familiar with the progress of the Hoover suit” and **kn

of [its} pendengy’’ (App. 144, 300). seed

Hoover’s lengthy bill of complaint (App. 423-34) recited

generally the circumstances of the 1896 reorganization. It

alleged that the reorganization managers and the Railway,

by acquiring control of the majority of the Railroad’s stock,

had entered ‘‘into the domination” of all its affairs (App.

429). The relief asked was a full and complete discovery,

a declaration of trust and an accounting (App. 433).

The enswer of the Hoover defendants was filed on

February 1, 1901. Depositions of some of the individust””

defendants were taken during 1903. As the docket entries

in the Hoover case show (Def. Ex. 70, App. 359, 520), noth-

ing else hanpened between July 24, 1903, when the last

a

12

deposition was filed, and November 1, 1937, when a motion

was made to substitute Hoover’s executor as party plaintiff.

Even while the Hoover case remained active, MeCullen

found time to pursue other ‘‘remedies’’, At the 1902 annual

meeting he requested the management to ‘‘assist fully in

every way’’ in @ forthcoming Congressional investigation

(Def. Ex. 26, App. 308, 446). His proposed resolution

asserted as grounds for the investigation several points now

asserted half a century later in this litigation, including the

claim that the Railwey Company ‘‘had been consolidated

with and merged in the Railroad Company’’ and that the

issue of mortgage validity ‘‘was left undetermined anc. in

dispute, such purchase being had and made by agreemnt”’.

We thus find as early as 1902 the same alleged ‘‘lack of

independence’’ of the Railway which serves as a basis for

the ‘‘fraud upon the court’’ argument advanced at page 22

of the present petition. Petitioners indeed admit that the

facts upon which they base that claim of ‘‘fraud upon the

court’’ have been ‘‘open and known or discoyerable”’

throughout the period under discussion (Petition p. 22, n. 1).

Acting under the prayer for discovery in the Hoover

complaint, McCullen and his eo-counsel Mr. Davenport

turned in 1903 to an investigation of the books and records

of the Railroad and Railway Companies, and secured a sub-

stantial amount of additional materia] (Def. Exs. 68, 108,

109, App. 158-163, 389, 554-5).

They then apparently abandoned the Hoover ease, and

turned instead to appeals to the Hxecutive Departments

and to Congress. In 1904 MeCullen began a correspond-

ence with the Interior Department (Def. Ex. 28, App. 321,

448 et seq.) in which he sought to overturn the Attorney

Genera]’s opinion of 1897 which had recognized the Railway

as successor to the Railroad.

His efforts led to a hearing at which McCullen eubmitted

briefs to the Department and a memorandum to the Attor-

ney General. Excerpts from these papers appear in Def.

Exs. 30-33 (App. 321-25, 458-72). The now familiar points

relating to the invalidity of the mortgages (App, 461, 463-4,

471) and the nullity of the decrees (App. 464, 469) were

again advanced. These hearings resulted in the Attorney

reneral’s formal advice to the Secretary of the Interior

that ‘‘the decision of my predecessor was.¢orrect, and

accordingly I have to advise you that, in my Opinion, you

should continue to be governed’’ by the earlier opinion

(25 O. A. G, 401, April 12, 1905),

The District Court thus comments on the 1897 and 1905

opinions of the Attorneys General (Appendix A to Peti-

tion, p. 14a) : , |

“It would seem that long ago plaintiffs should

have been cautioned by the unproductive results of

their protests to the non-judicial branches of the

government * * *. [citing 21 0. A. G. 486 and 25

0. A. G. 401.) Thus, twice executive officers with

responsibility of guarding the public interest put

plaintiffs on notice that nO support would be forth.

coming from that branch of the government.”’

Activities in Behalf of the Dissenting Shares: 1906-1950.

With a few significant exceptions, the events of the

49-year period which began in about 1906 and ended with

the filing of the present complaint, parallel closely the

activities in behalf of the dissenting shares before 1906,

and need not be set forth at le “4

* See Def. Ex. 34, App. 825-6, 473; Def. Exs. 39-41, App. 330,

477-87; Def. Exs. 44-51, App. 336-7, 488-96; Def. Exs. 35-62, App.

341-8, 497-509; Def. Exs. 71-85, App. 364-73, 522-44; Def. Ex.

89A, App. 374, 544-5; Def. Exs. 91 and 93, App. 375, 546-8.

14

These activities included :

Repeated protests and demands for legislative and other

action at meetings of the stockholders of the Railroad.

Unsuccessful sponsoring of Congressional resolutions,

with attendant publicity.

__ Correspondence with the Interior Department, the Inter-

state Commerce Commission, the Director General of Rail-

roads during World War I, members and prospective

members of Congress, and officials of respondent Railway.

Especially significant was the activity—or lack of activ-

ity—on behalf of the minority shares with respect to two

matters of litigation, the Hoover and Land Grant cases.

(a) Correspondence in the Hoover Case. Beginning

with a letter of April 1, 1904 in which MeCullen advanced

the excuse that certain printing has been delayed ‘‘ because

we have not yet conferred with the Committee we repre-

sent’’ (quoted in Def. Ex. 123, App. 170-1, 402)—counsel

for Hoover displayed an entire disregard for the diligent

prosecution of the action, which led Mr. Stetson (counsel

for the Hoover defendants) to warn them and the Commit-

tee in ever stronger terms that their continued delay would

lead to their claim becoming barred by laches.

Specific warnings to this effect were given to members

of the Committee at the 1906 and 1909 stockholders’ meet-

ings (Def. Exs. 37 and 106, App. 327, 388-9, 476). They

were repeated in 1909 to Mr. Davenport, Hoover’s co-coun-

sé] (App. 172).

On November 24, 1914 Mr. Stetson wrote Mr. McCullen

as follows (Def. Ex. 43, App. 251, 332-3) :

“‘T understand that you have never had printed

the minutes of the Hoover suit as undertaken by you

many years ago, despite my repeated notices to you

_ ff & j

15

and your clients that I should insist that your delay

constituted such laches as would bar the further

prosecution of thal suit.* I have advised you also that

I have found that Mr. Hoover, who is now dead, had

consented to and participated in the reorganization

of 1896.’’

On March 28, 1916, he wrote McCullen once more along

the same lines (Def. Ex. 98, App. 381, 552). McCullen

replied a few days later (Def. Ex. 100, App. 381, 553) :

“That a great wrong has been done them has

always been believed in but discovery of the breach

of trust and of the perfidy of the fraud perpetrated

against them was not had until now, the facts having

been most skillfully concealed from government

officials, from the Court and from the public.’’

A further delay of thirty-four and one half years fol-

lowed this ‘‘discovery of the breach of trust’’ before the

Complaint in this action was filed.

(b) The Land Grant Case.** For many years contro-

versies had arisen between the United States and the

Railway regarding the nature and scope of the latter’s —

land grant rights as successor to the old Railroad. On

June 5,.1924 Congress established a joint committee

‘o investigate the whole problem (43 Stat. 461). Five

»-%rs of study and hearings resulted in a bill, enacted June

45, 1929, by which the Attorney General was authorized

to institute an action to obtain “‘a final and complete

determination of the respective rights * * * to the end that

the grants shall be finally adjusted and the interests of the

United States and the grantee shall be fully protected * * *”

* Italics ours throughout this brief.

** United States v. Northern Pacific Railway Company, et al.,

311 U. S. 317 (1940). '

16

(46 Stat. 41, 43 U. S. C. Sections 921-929). The hearings

preceding this enactment were followed continuously by

an attorney for the Stockholders’ Committee (Mr. Boylan) ;

and the attention of Congress was ‘‘directed to the existence

of these non-assenting shares’’ (App. 360).

The Attorney General in 1930 brought an action in the

District Court for the Kastern District of Washington,

challenging in certain particulars the foreclosures of 1875

and 1896 but nevertheless alleging that the Railway Com-

pany had succeeded to the rights granted under the original

1864 charter.* Mr. Lishman testified that Mr. Boylan,

counsel for the Committee, ‘‘cooperated with the Govern-

ment in the preparation of its case’’ (App. 346).

The case was referred to a Special Master, who made

reports on May 31, 1933 and July 26, 1937. It was not

until August 25, 1937 that the minority shareholders ‘filed

without leave of court to intervene, a motion for an exten-

sion of time to file exceptions to the Special Master’s

report’’. After other procedural moves, they filed on Janu-

ary 20, 1938 a petition to intervene and took other steps

designed to inject themselves into the Land Grant proceed-

‘ings (102 F. 2d at 589, 591).

One of the stockholders joined in these efforts was

George A. Landell, as executor of E. A. Landell, who in

the same capacity now lends his name to the present action

(App. 271). The Committee of minority stockholders,

although—as in the Hoover case—not formally joined as a

party, were fully aware of the attempted intervention (App.

357-8). Counsel for the intervenors included Mr. Boylan,

the counsel for the Committee who had attended the Con-

gressional hearings. The expenses and fees involved were ° |

* The course of the litigation is semmarized by Judge Wilbur in

Schmidt v. United States; 102 F. 2d 589, 591, 592 (9th Cir.’1939),

and by Judge Schwellenbach in United States v. Northern Pacific

Railway, 41 F. Supp. 273, 280-282 (E. D. Wash. 1941).

17

paid by Mr. Fearon, who had been the most active member

of the Committee since 1898 (App. 345, 357).

The contentions advanced in the petition to intervene

were only a rehash of the claims the minority stockholders

had by that time been making for 40 years. Among other

things, the foreclosure of 1875, the mortgages placed on

the property after 1875, the reorganization and foreclosure

of 1896, and the title of the Railway to the Railroad’s

properties thereunder were all alleged to be invalid. (See

102 F. 2d 589 at 593). On March 9, 1938 the District Court

denied the motion to intervene.

An appeal was taken to the Ninth Circuit Court of

Appeals which, on March 17, 1939, affirmed the order deny-

ing intervention on alternative grounds, one of which was

the seven years’ delay by the stockholders before seeking

intervention (102 F. 2d 589 at 595-6).

This Court’s denial in October 1939 of certiorari to

review this decision (308 U. 8. 509) did not end the efforts

of the minority shareholders to inject themselves into the

Land Grant case. Before the argument and again before

the reargument in 1940 of that case in this Court, the minor-

ity stockholders moved fer leave to appear, which was

denied on each occasion (309 U. S. 626; 311 U. S. 613).

Following the 1940 decision of this Court (311 U. 8. 317),

upon remand to the District Court the Land Grant case

was settled, and all disputes between the Government and

the Railway were terminated, with the. approval of the

Attorney General and the Cour’, after notice had been

given to other interested executive departments and to both

houses of Congress and no objections had been received.

The terms of the settlement are set forth in the District

Court’s opinion, which also denies a final attempt by the

minority shareholders to intervene (41 F. Supp. 273 at 280).

a

Zs

18

9s tee te oe - ~

a 6253 bee Bae!

ED [SS es. joe os Se

3. Final dismissal of the Hoover rs Fs éWdehed- bén)

temporaneously with the fruitless maneuvers described _

above, Mr. Boylan took steps to revive the Hoover case,

which, by that time, had been inactive for almost 35 years.

Plaintiff Hoover and all of the original counsel were dead,

as well as all but six of the 39 individual defendants. Mr.

Boylan, whose fees were again paid by Mr. Fearon (App.

302, 345), first obtained an ex parte order substituting

Hoover’s executor as plaintiff in 1937. Then, following

dismissal of the case in 1938 for failure to answer a cal-

endar call, he moved to restore it to the trial calendar.

__ Judge Hulbert denied this motion, in an unreported opinion

dated March 15, 1939 (Def. Ex. 123, App. 165-73, 402). He ~

quoted at length from the letters discussed above (pp. 14-15) _

in which Mr. Stetson had repeatedly warned that continued

delay would result in the’action becoming barred by laches.

Judge Hulbert noted that no sufficient excuse had been pre-

sented to explain the thirty-five year delay, and referred to

the obvious physical changes that had occurred in the opera-

tion of the Railway since 1896. He denied the motion on

the ground that (App. 173):

act!

‘¢ <The mere institution of a suit does not of itself

relieve a person from the charge of laches; and if

he fail in its diligent prosecution, the consequences

are the same as though no action had been begun.’

(Johnson v.. Standard Milling Company, 148 U. 8.

"The ‘Court does not feel there is any justification

for the restoration of this cause to the calendar .

because of inexcusable laches in its prosecution, and

the motion is accordingly denied. * * **?—

No appeal was taken from Judge Hulbert’s order.

Following the failure of his efforts in the Land Grant

and Hoover cases, Boylan turned to attempts to obtain a

aa :

Beye

J

6 4 8 ta ed Sts en Rg

> gettlement (App. 369-372). Whe ilidde failed he wrote the

Railway on June 26, 1941 (Def. Ex. 77, App. 370, 534) :

““* * * we are now preparing the pleadings in a

proper proceeding to be promptly instituted for the

enforcement and protection of all the rights of our

clients.’’

Nine and one-half more years—marked only by desultory

correspondence (Def. Exs. 89-A, 93, App. 374-5, 544, 547)

by Mr:-Lishman, who replaced Boylan as counse! for the

Committee in 1942—were to elapse after this threat of

“‘prompt’’ action, before the present complaint was filed

.in_December 1950.

%

All of the foregoing facts are undisputed. Nearly all

of them are established either by documents from peti-

tioners’ own files or by the deposition of Mr. Lishman, one

of the petitioners and also their counsel. We have set them

forth at length because they furnish the basis upon

whi th courts below acted in dismissing the complaint,

_Atid because they have been largely disregarded or passed

over in the petition.

ee

Argument. Nag

ee

= z r tee

What the facts set out meee Secioelttteien what

petitioners indeed now admit—is simply this: they or their

--- predecessors have known-all about their present claims for

at least half a cen but have deliberately refused to

bring suit until every participant and witness had died and

the position of the respondent had changed beyond recog-

nition. This situation, entirely of petitioners’ own making

w .

a

and scarcely a reason why the docket of this or any other

court should now be burdened with their claims, is entirely

unique, To our knowledge there is no other reported case

involving laches in which the facts were so extreme or iv

which the decision seems less likely to serve as a precedent.

The closest case on facts that we have found is Foung v.

Southern. Pacific Co., 34 F. 24. 135 (2d Cir.), cert. denied,

980 U. 8. 597 (1929) which involved an attempt by share-

holders in the old Houston & Texas Central Railway Com-

pany, at the time of the suit an empty corporate ‘‘shell’’

— the Northern Pacific Railroad, to litigate a reor-

" ganization which had taken place under court decree in 1888.

Their suit, instituted in 1926, was dismissed on demurrer for

laches.* But even the nearly 40-year delay by the plaintiffs.

in the Young case falls short by more than a decade of

approaching the half century during which present peti-

tioners have procrastinated in asserting their claims.

We submit that the dismissal of the complaint for laches ,

by both courts below was clearly correct. No extensive

analysis of eases is necessary to establish that an unreason-

able and unexplained delay in bringing action, accompanied

by death of witnesses and change in position of defendant,

bars absolutely the assertion of a claim by those with full

knowledge of the facts, e. g., Johnson v. West India Transit

* The theory of the complaint in the Young case is identical with

that litigated in Southern Pacific Co. v. Bogert, 250 U. 8. 483 (1919)

in which other and more diligent stockholders of the old Houston

& Texas Central Railway Company were successful, after protracted

litigation in several different courts, in gaining a favorable decision

in this Court. Petitioners’ reliance on the Bogert case (Petition 11,

12, 27, 28) is misplaced. In that case, unlike the present one, the

plaintiffs had been given no opportunity to participate on equal

terms and had been actively and continuously engaged in litigation

from the outset to vindicate their rights. The total period elapsing

between the acerual of their cause of action and the entry of final

judgment in their favor was less than half the time that has elapsed

here. Even so, the lower court alluded to the ‘long and unusual

delay’’ (244 Fed. 64) and indicated that the statute of limitations

would have been a bar if defendant had not waived it (244 Fed.

65-6).

es

21

Co., 156 U.S. 618, 647-649 (1895). Laches is a perfectly

effective defense whether it is alleged that transactions are

‘‘void’’, e. g., Abraham v. Ordway, 158 U. S. 416, 418-421

(1895), or judgments and deeds are attacked on the grounds —

of fraud, e. g., Boone County v. Burlington & Missouri

River Railroad, 139 U.S. 684, 692-694 (1891). Mere repeated

objections unaccompanied by positive action to assert a

claim will not excuse delay. E. g., Penn Mutual Life Insur-

, ance Co. y. Austin, 168 U. 8. 685, 697, 700 (1898). It was

well settled under the old Equity Rules that laches could

properly be raised by motion in advance of trial, e. g., Hays

v. Port of Seattle, 951 U. 8. 233, 239 (1920). This is also

true ander the Federal Rules of Civil Procedure. Dizon v.

“American Telephone & Telegraph Co., 159 F. 2d 863 (2d

~~Cir.), cert. denied, 233 U. 8. 764 (1947) (laches properly

raised on-motion for summary judgment).

None of the above-cited cases is discussed in the petition,

which advances, as the major ground for granting certio-

rari, alleged conflicts between the decisions below and a

number of decisions in this Court and other courts in which -

laches was held not to be a bar. No such conflict exists;

and none of the cases cited deals with a fact situation even

remotely analogous to that presented here. 3

Petitioners argue initially that laches cannot bar an

avtion on wneir s<-called ‘‘statutory contract”’, citing Oregon

€ California Railroad v. United States, 238 U. &. 393 (1915) ;

243 U. S. 549 (1917), (Petition 11, 14-19).. The short and

complete answer is that in that case the United States was

plaintiff and, of course, laches is not imputable to the

sovereign.*

*In Southern Oregon Co. v. United States, 241 Fed. 16 (9th

Cir, 1917), app. dismissed, 249 U. S. 589 (1919), cited in support of

the same proposition (Petition 11, 15), the United States was also

plaintiff. Ewert v. Bluejacket, 259 U. 8. 129 (1922), cited in the

' Same connection on pages 11, 16 and 19 of the petition, holds

that a delay of 7 years by Indian ‘‘wards of the nation” would

not bar an action to enforce rights arising from a statute passed

their specific benefit.

22.

Petitioners’ second argument is that they are entitled

to litigate-their-claims-after a—50-year delay because ‘of

alleged ‘‘fraud on the court’? which entered the decrees.

of foreclosure-in- 1896—a ‘‘fraud’’ which by petitioners’

_own admission has been ‘‘open and known or discoverable’’

ever since. Root Refining Co. v. Universal Oil Products Co.,

169 F. 2d 514 (3rd Cir.), cert. denied, 296 U. ‘>. 626 (1948),

mainly relizd on in support of this theory, decided only

that in a case involving the integrity of the courts a delay

possibly fatal to a private litigent in ordinary circumstances _

wouid not bar the correction of a judgment tinged- with |

serious fraud. A consideration of the nature ‘of the fraud

there involved-—the bribery of a judge ofa Court of

Appeals—and of the relatively short delay involved makes

it clear that there is no inconsistency with the decisions

below.* ; .

Assuming arguendo that recovery for past wrongs is

barred by laches, petitioners next turn their attention

at pp. 36-41 to their ‘‘alternative theory’’ of relief, which

is seid to be for ‘‘ violation of their existing and continuing

present and future rights.’’ They assert under this theory

that the decisions below are in conflict with several deci-

sions cited erroneously as holding that delay can never

bar injunctive relief for continuing violation of trade-mark

- and patent rights, although an action to recover damages

for past violations may be foreclosed. The District Court

is criticized for failing ‘‘to meet these separate issues

squarely’’ (Petition 36,53). This seems an unfair criticism

*In this connection petitioners also cite Hazel-Atlas Glass Co.

v. Hartford-Empire Co., 322 U.S. 238 (1944). This case, dealing

with active fraud before the Patent Office and the courts established

by undisputed affidavits and uncovered at most nine years before

action was brought, is also be ed on such different facts as to raise

no possible question of conflict. In Stoddard v. Chambers, 2 How-

ard 284, 318 (1844) and Johnson v. Waters, 118 U. 8. 640, 667

(1884), ee 11, 22), the question of laches does not =

to have been raised or discussed at all.

wes

—

N

EE —

23

* of the thorough opinion of the District Court since peti-

\

tioners did not press this point to any appreciable extent

below. Moreover, the cases cited by petitioners do not

support their contentions. While Menendez v. Holt, 128

\U. 8. 514 (1888) (Petition 47-48) does hold that the right.

to.an injunction against future infringement of a trade-

mark was not lost on the facts presented in that case

though an action for damages based on past infringement

had become*barred, the opinion points out that an injune-

_ tion may be barred by delay if it has been ‘‘continued so

long and under such circumstances as to defeat the right

itself’? 128 U. S. at 523. Even less persuasive is Hanover

Star Milling Co. v. Metcalf, 240 U. S. 403, 419 (1916) which

holds, directly concrary to the incorrect statement on page

48 of the petition, that 40 years of non-use of a trade-

mark will bar an injunction for infringement as effectively

as an action for past damages. The other cases cited in

pages 44-50 of the petition add nothing of substance to

these arguments of ‘‘continuingywrong’’.*

Finally, petitioners contend that they should have been

afforded a full trial and that summary judgment was.

improperly granted by the District Court, because of the

‘important public issues involved”’ (Petition 50-54). Signi-

ficantly, they do not contend that there is any dispute as

to the material facts upon which their, complaint was dis--

missed for Jaches. There are two answers to this final

point. First, the propriety of the summary judgment pro-

cedure was not questioned in either court below. On the

contrary, each mcin brief of petitioners heretofore sub-

mitted has closed with a prayer that summary judgment

be entered in their favor on the merits. Second, and despite

the desultory arguments which plaintiffs and thein pred-

ecessors have been advancing since 1896, no public inter-

ests are involved. The same ‘‘public interest’’ claims

which they advance in their present petition were rejected _

by President Cleveland’s Attorney General in 1897, by

President Theodore Roosevelt’s Attorney General in 1905,

by Congress in 1908 (App. 477-87) and by the Courts which

denied the attempted interventions in the Land Grant case

in the period 1938-40.* The interest, if any, of the public

in the 1896 reorganization was raised and litigated by the —

Government in the Land Grant case, and any such questions.

were finally settled upon the remand of that case to the

District Court (supra, p. 17).

* Kennedy. v. Silas Mason Co., 334 U. S. 249, 256-257 (1948),

cited by petitioners on the summary judgment point, involved not

only issues of national importance—an interpretation of the Fair

Labor Standards Act involving the claims of many thousands of

defense plant employees—but also disputed issues of fact going to

the merits of the case. peter te wating beady kn

inapplicable. Eccles v. Peoples. Bank of Lakewood Village, 333

U.S. 426, 434 (1947) was concerned solely with whether the con-

in issue was ‘‘justiciable’’. Arenas v. United States, 322

troversy

U.S. 419, 434 (1944) was remanded to the District Court for neces -

findings of fact. Palmer v. Chamberlin, 191 F. 2d 532 (5th

sary

Cir. 1951) holds merely that on its particular facts summary judg-

ment was properly granted. All of these cases are consistent with

the use of summary judgment on the motion to dismiss for laches

in this case.

—

|

|

|

The decisions of both courts below were obviously cor-

rect and in accordance with long-settled principles. The

petition should be denied.

Dated: September 1, 1955.

Respectfully submitted,

Porter R. iia

‘ 15 Broad Street,

, New York 5, N. Y., /

Counsel for Respondent.

M. L. Countryman, Jr.,

176 E. Fifth Street,

St. Paul 1, Minnesota,

-Bernarp G. Ostmann,

Transportation Building,

Washington 6, D. C.,

- Wma A. Kaynor,

15 Broad Street,

New York SX: F.,

Of Counsel.