35 Kan. 236 | Kan. | 1886
The opinion of the court was delivered by
The facts in this case, as they appear from the record, are substantially these: The legislative assembly of the territory of Kansas incorporated,.in 1859, “The Atchison & Topeka Kailroad Company.” The company was authorized to survey, construct and operate a railroad, with one or more tracks, from Atchison, on the Missouri river, to Topeka, and to such point on the southern or western boundary of the territory, in the direction of Santa Fé, New Mexico, as might be most convenient and suitable for the construction
On December 16, 1885, John W. Fletcher, of the city of Detroit, Michigan, claiming to be the owner of 200 shares of the capital stock of the Atchison company, of the value of $17,000, commenced this action in the district court of Wyandotte County, in this state, for the purpose, among other things, of canceling the contract between the Atchison company and the Sonora company by which the Atchison company agreed to guarantee the interest on its bonds ; to discharge the Atchison company from all liability in respect to the guarantee; and to enjoin the directors and agents of the Atchison company from any further payment of interest on the bonds.
The most important inquiry is, whether the petition, taking all of its allegations to be true, shows that the contract of guarantee complained of was ultra vires. Upon the part of plaintiff below, it is'contended that this contract was entirely unauthorized by the charter of the Atchison company, and beyond the power of the directors of that company to consent to or to execute, and therefore wholly void and of no binding-force upon the corporation or its stockholders. On the part of defendants, the claim is that under the powers conferred upon the Atchison company by its charter, the subsequent legislation of this state, and the general principles of law applicable to corporations, the contract was and is valid in every respect.
The petition alleges that during the years 1882, 3-4 and 5, the operating expenses have been greater than the earnings, and but for the guarantee of the Atchison company, that the Sonora bonds would be worthless. The petition further alleges that if the Atchison company continues to operate the Sonora road and keeps the guarantee of its bonds good, it will be at the cost of the depletion of its treasury, and will render the dividends upon its stock less in amount than they otherwise would be. The question before us, however, is one of power. If the Atchison company had the authority to accept the stock of the Sonora company and guarantee its mortgage bonds, it is liable on the guarantee, whether the Sonora road be a sucker, sapping the very life of the Atchison.
Notwithstanding the terms of the charter of the Atchison company, the various provisions of the statute, and the unwritten law of comity that a corporation will be recognized and permitted to prosecute its lawful enterprises in every state which has not expressly refused its consent, the senior counsel representing the plaintiff insists that the Atchison company has no legal right by purchase, lease, or other arrangement, to operate its road or run its cars as part of its own system beyond the territorial limits of Kansas. The proposition of another counsel representing the plaintiff is, that while the Atchison company is not confined exclusively to the limits of the state, yet, that the road beyond the New Mexico line is operated with
It is well settled that a railway corporation may contract to carry beyond the terminus of its own line, and such a contract will be valid, although requiring transportation in another state or country. (Mo. PaC. Rly. Co. v. Beeson, 30 Kas. 298; Plutchinson on Carriers, §§144, 152.) The Narragansett Steamship Company was and perhaps is now a common carrier between New York and Fall River; it receipted for a trunk to be delivered at Boston; the trunk failed to reach its destination, and in an action against the company by the owner for its value it was decided that the company was bound to carry the trunk to Boston, the same as if its vessels went to that city, and was therefore liable for the loss. (Berg v. Steamship Co., 5 Daly [N. Y.] 394.) And the weight of authority is, that a railway company, deriving its powers to engage in business from its charter, which by the very terms thereof is limited to the road between certain designated points, can bind itself as a common carrier beyond its designated line. (Perkins v. Railroad Co., 47 Me. 573; Bissell v. Railroad Co., 22 N. Y. 258; Hutchinson on Carriers, § 153, and cases cited.) If railway corporations may contract for the transportation of freight and passengers in other states, and beyond their chartered termini, why may not such a company convey, in its own cars and trains, freight and passengers over connecting and continuous lines in other states, if it can make arrangements with such connecting and continuous lines so to do?
It is the necessary deduction from the principles announced in the foregoing decisions, that if the Atchison company is empowered by its charter and the statutes of Kansas to lease or by any other arrangement to run its cars outside of the state,
This brings us to the construction of the charter of the Atchison company, and the legislation of the state conferring rights and powers upon railroad corporations. In interpreting the powers possessed by a corporation, we must look to the intention of the legislature in the enactment of the statute. It is manifest the legislative assembly of the territory of Kansas, in granting the charter to the Atchison company, anticipated that some day the road would become a part of a transcontinental line, and thereby that Kansas, by reason of its geographical location, would have passing over it the great traffic of the country, east and west, north and south, because it provided for building its road in the direction of Santa Fe, and also of the gulf of Mexico.
Section one of said charter reads :
“That C. K. Holliday, Luther C. Challiss, Peter T. Abell, . . . with such other persons as may associate with them for that purpose, are hereby incorporated, a body politic and corporate, by the name of the Atchison & Topeka Railroad Company; and under that name and style shall be capable of suing and being sued, impleading and- being impleaded, defending and being defended against, in law and equity, in all courts and places; may make and use a common seal and alter or renew the same; be capable of contracting and being contracted with; and are hereby invested with all powers and privileges, immunities and franchises, and of acquiring by purchase or otherwise, and of holding and conveying real and personal estate, which may be needful to carry into effect fully the purposes and objects of this act.”
Section 20 of said charter gives express authority—
“To make such contracts and arrangements with other railroads which connect with or intersect the same, as might be mutually agreed upon by the parties, for leasing or running their roads, or any part thereof, in connection with roads in other states, and to consolidate their property and stock with each other; . . . and to have all the powers, .privileges and liabilities that they may hold by their several charters.”
“ That any railroad company shall have power to lease its road and appurtenances to any railway corporation organized under the laws of this state, or of any adjoining state, when the road so leased shall thereby become, in the operation thereof, . a continuation and extension of the road of the company accepting such lease.”
The only difficulty in the construction of this section arises from the words “or of any adjoining state;” but it may be that these words refer to a corporation of an adjoining state that has come into the state and leased a Kansas road, under the terms and conditions of the statute. If, however, the legislature was inadvertently legislating in said § 3 for a railroad company of another state to lease a road not touching Kansas, we do not think this would vary the construction ■we have given to the other portions of the section. In the second section, the law allows the road of an adjoining state to come in and lease a Kansas road, and a Kansas company to lease the road of another Kansas company; and then the broad authority is given in § 3 for any railway company organized under the laws of this state to lease the road and appurtenances of any other railway corporation, when the road so leased shall thereby become, in the operation thereof, a continuation
In 1873, the legislature passed a further act, which reads:
“That it shall be lawful for any railroad company created by or existing under the laws of this state, from time to time, to purchase and hold stock and bonds, or either, or to guarantee the payment of the principal and interest, or either, of the bonds of any other railroad company or companies, the line of whose railroad, constructed or being constructed, connects with its own.”
Something has been said about the contract between the Atchison and Sonora companies being void because the Atchison company was not actually connected at Nogales at the time of the execution of the guarantee. Even if there was anything in the proposition, in view of the terms of the statute of 1873, providing for the guarantee by one railroad company of the bonds of another company, whose road was being constructed so as to connect with its own, we are clearly of the opinion that as to the bonds marketed and. in the hands of bona fide holders, the contract between the companies is binding. “Where the statute confers express authority upon the company to guarantee the bonds of another company, a mere failure on the part of the guaranteeing company to pursue the mode specified in the statute, will not invalidate such guarantee in the hands of the bona fide holder.” (Wood’s Railway Law, §188; Arnot v. Erie Railway Co., 67 N. Y. 315; Parish v. Wheeler, 22 N. Y. 494; Thomas v. Railroad Co., 101 U. S. 86; Field on Corporations, §§ 263-267; Bradley v. Ballard, 55 Ill. 413; Field on Ultra Vires, 185; Town of Coloma v. Eaves, 92 U. S. 484; Peoria &c. Rld. Co. v. Thompson, 7 Am. & Eng. Rld. Cases, 101, 118; Gelpcke v. City of Dubuque, 1 Wall. 175; City of Lexington v. Butler, 14 id. 282; Supervisors v. Schenck, 5 id. 772; National Bank v. Globe Works, 101 Mass. 57.) The Sonora road was com
As to the equities in this case, nothing is disclosed beneficial to the plaintiff. If he was a stockholder of the Atchison company in 1881, at the time of the execution of the contract of guarantee with the Sonora company, he appears before the court as a participant, watching the venture, and, if successful, willing to enjoy the fruits thereof; but as the experiment, in his opinion, has failed, he turns to the court for assistance to
It was said upon the argument by counsel for plaintiff, that it is gross injustice to its stockholders for the Atchison company to plant its money or property in a foreign country. To this it may be answered: The stockholders control the company; the directors are elected or chosen by the stockholders; and it goes without saying that the stockholders, as well as the directors, should have at heart the highest interests of the company. Of course the dh’ectors must have some power to determine what is for the best interest of the company, and some discretion must always be left for them to exercise. Matters of policy and expediency, within the terms imposed by the charter and the statutes of the state, are for their consideration and determination, subject to the will of the stockholders, to whom they are responsible and by whom they are elected.
“Railroads, as all know, are things of growth. They enlarge with the development of the country.” (C. B. U. P. Rld. Co. v. A. T. & S. F. Rld. Co., supra.) And railroading is a
In concluding this part of the subject, we may say further, that the petition nowhere charges the directors of the Atchison company with incapacity, collusion, corruption, or fraud. It attacks the integrity of the system of the Atchison company beyond the limits of the state, but not the integrity of its officials.
The order granting the temporary injunction will be reversed, the injunction will be wholly dissolved, and the case remanded for further proceedings in accordance with the views herein expressed.