Gulf, Colorado & Santa Fe Railway Co. v. Crawford, No. 2203

No. 2203 | Tex. | Mar 25, 1887

Stayton, Associate Justice.

On April 14, 1883, the charter of the appellant was amended under the general law, and in that it was provided, in addition to powers otherwise given, that it should have power “also to construct, own, operate, equip and maintain a branch of said railway, to be called the eastern branch thereof, commencing at a point on its main line in Burleson county, about two miles north of the Tegua, thence easterly through the counties of Burleson, Brazos, Grimes and Montgomery, to a point on the International & Great Northern Railroad, within three miles of the Lemuel Smith one thousand two hundred and eighty acre survey in Montgomery county, with the right to purchase the Central & Montgomery Railroad, and to own, operate, equip and maintain the same under this charter as a part of said eastern branch.”

The Central & Montgomery Railroad Company then owned and was operating a railroad from the town of Montgomery, in Montgomery county, to Navasota, in Grimes county; about twenty-eight miles in length, and running near to and nearly parallel with the proposed eastern extension of the appellant’s road, and making connection with the Houston & Texas Central Railway at Navasota.

A number of the stockholders of the Gulf, Colorado & Santa Fe Railroad, through one of their number and in his name, purchased all the stock and outstanding bonds of the Central & Montgomery Railroad, and destroyed the latter, intending to sell that road to the appellant. These stockholders, however, never bought the Central & Montgomery road, except as they may have acquired an interest in that road by the purchase of the shares of stock and bonds it had issued.

The matter thus standing, the stockholder in whose name all of the purchased stock stood, for the benefit of himself and those interested with him, made to the executive committee of the appellant the following proposition.

“Galveston, Texas, June 12, 1883.

“H. Rosenberg, Esq., Chairman Executive Committee Gulf, Colorado <f¡ Santa Fe Railway Company:

“Dear Sir—On the fifteenth day of June, 1881, your board of directors authorized a subscription of fifteen hundred thousand dollars in stock and three millions of bonds of your company at par for the purpose of the further extension of your road. The subscription was taken by the stockholders of record on the first day of June, 1881, thereby giving to them the right of all stock and bonds to be issued by your company until said subscription is canceled. Ascertaining that your company had determined to extend a branch road into eastern Texas for the purpose of reaching the timber country, and believing it to be advisable to prevent the competition of a competing line of road already in existence by procuring the same, I was authorized by the subscribers to your stock and bonds to make the purchase of the Central & Montgomery road, extending from Kavasota to Montgomery, a distance of about twenty-eight miles, and I now offer the same to your company, including all of its equipments, free from all debt, stock, bonds and otherwise, for the following consideration:

204 bonds of your company at par...................$204,000 00

With coupons attached to July 1..................... 7,140 00

Stock of your company.............................. 238,500 00

And cash.................... 29,455 22

In all............................................$479,095 22

“Asking your immediate action upon this proposition, I remain, very truly, “Geo. Sealy,

“jFor the subscribers to the 1,500,000 Stock, 3,000,000 Bonds."

And on the same day the proposition was accepted in writing by H. Rosenberg, on behalf of the executive committee, as follows:

“In accordance with the resolution of the board of directors, May 8, 1882, directing me to purchase the Central & Montgomery road at a cost not exceeding twelve thousand dollars in . bonds and eight thousand dollars in stock of this company, per mile, and this.propositi on being within that limit, we hereby accept the proposition of George Sealy, and recommend the board qf directors to approve of our action.

“For the Executive Committee,

“ H. Rosenberg, Chairman.”

This action was reported to the board of directors at a regular meeting held by them on the same day, and was ápproved and adopted by the board as its act, and all this was approved by the stockholders at a regular annual meeting held by them on October 3, 1882. The Gulf, Colorado & Santa Fe Railway Company took possession of the Central & Montgomery Railroad on June 15, 1882, and from that time continuously run, operated, repaired and maintained it, at its own expense, as a part of its line under its amended charter, and thereafter the Central & Montgomery Railroad Company ceased to exercise control over the road or to keep up its corporate organization, but its presideur made a report to the comptroller, as required by law, showing the condition of the company to the date last mentioned.

No further facts tending to show that the Gulf, Colorado & Santa Fe Railway Company acquired title to the Central & Montgomery Railroad are shown or claimed to have existed, except that the price named in the proposition to sell before mentioned was fully paid. Morris & Crawford subsequently obtained a judgment against the Central & Montgomery Railroad Company in the district court for Montgomery county, which was affirmed on writ of error at the present term. The cause of action on which the judgment was obtained accrued in part prior to June 12, 1882, and all grew out of the failure of the Central & Montgomery Railroad properly to transfer freight.

An execution, the first and only one, issued on the judgment in favor of Morris & Crawford on March 27, 1884, directed to the sheriff of Grimes county, which was levied on the road bed, iron track, ties, switches and right of way of the Central & Montgomery Railroad.

This action was brought by the Gulf, Colorado & Santa Fe Railway Company to enjoin the sale of the Central & Montgomery Railroad under the judgment, execution and levy in favor of Morris & Crawford. A writ of injunction was issued, but on final hearing it was dissolved, and a judgment, giving ten per cent damages for delay was rendered against the plaintiff company. The injunction was sought, and is now claimed, on the theory that the facts we have stated passed title, at least equitable, in the Central & Montgomery Railroad to the Gulf, Colorado & Santa Fe Railway Company, and that it thereby became not liable for sale for the debt due Morris & Crawford.

It is not claimed that the Gulf, Colorado & Santa Fe Railway Company purchased the stock of the Central & Montgomery Railroad, nor could it well be so insisted under the facts. It is denied that the transaction operated a consolidation of the two railroads, and that they thereby became one under the charter of the Gulf, Colorado & Santa Fe Railway Company. It is also denied that the one was in any way merged in the other, and in all these propositions we concur with counsel for the appellant. It is claimed, however, that the Central & Montgomery Railroad corporation was dissolved by the facts stated, and that the property which it owned before dissolution became the property of the appellant company.

It is well settled that corporations organized for public purposes can not, by contract of sale, lease or otherwise, render themselves incapable of performing their duties to the public, or in any way absolve themselves from the obligation which forms the main considóration for giving them a corporate existence, unless this be done by consent of the State, given through the charter, or in some other manner. Hence, any contract through which such a corporation seeks to accomplish such a result is void, unless it has legislative sanction. (Thomas v. Railroad Company, 101 U.S., 71" court="SCOTUS" date_filed="1880-03-29" href="https://app.midpage.ai/document/thomas-v-railroad-co-90093?utm_source=webapp" opinion_id="90093">101 U. S., 71; Price on Railroads, 10; Taylor’s Law of Private Corporations, 305, 131-2; Morawetz on Private Corporations, 490, 485.) Authorities bearing on the various phases of this question are cited in notes given by the elementary writers here mentioned.

The stockholders of a strictly private corporation, acting in the mode prescribed by law for the transaction of its business, may dispose of its assets and thereby become unable to carry on further the corporation business, for the public has no interest in the continuance of such a business.

Do the facts show that the Gulf, Colorado & Santa Fe Railway Company has become the owner of the property of the Central & Montgomery Railroad Company, which it may operate under the charter of the latter, and hold freed from the debts of that company?

The first question arising On this inquiry is: Had the Gulf, Colorado & Santa Fe Railway Company any power to buy the property of the Central & Montgomery Railroad Company? This will depend upon whether the charter of the former gave it power to buy, or the charter of the latter gave it power to sell to the former.

Both corporations were chartered under the general law regulating the incorporation of such companies, in so far as any question involved is concerned. Whatever powers that law authorizes to be conferred upon them, through their charters, they had, and they had no more and no less; this, of course, carrying such incidental powers, not enumerated, as were neces-1 sary to enable them to exercise properly the powers expressly granted. Ro part of the general law authorizes one railroad company to buy the railroad of another, nor does it authorize a railroad company to sell its road to another company or to any person. The law authorizes railroad companies to borrow money to construct, complete, improve or operate their roads, and to give mortgages therefor. (Revised Statutes, Article 4319.)

These mortgages may be foreclosed through the courts, or sales may be made under powers contained in such mortgages, and title to the property will pass. They may become indebted, in the course of their business, and their property, including franchise, subjected to sale under judicial process to pay such indebtedness. But in such cases the corporation continues, and the purchasers become in effect new stockholders, the corporation property so purchased, however, being relieved from liability for debts not creating a prior incumbrance on the property sold. These are the means through which the laws of this State authorize the sales of railroads.

They do not contemplate that one railway company shall have the power voluntarily to buy from or sell to another. The purpose for which the incorporation of railroad companies is permitted under the general incorporation act determines largely the powers they may exercise. That Act provides that “any number of persons, not less than ten, being subscribers to the stock of any contemplated railway, may be formed into a corporation for the purpose of constructing, owning, maintaining and operating such railroad, by complying with the requirements of this chapter.” (Rev. Stat., Article 4099.)

They are authorized to incorporate for one purpose; to construct, to own, to maintain, and to operate such railroad—i. e., to own, maintain and operate, the" road the company may construct under its charter. Incorportion is not authorized for several and distinct purposes; as to construct a road for some other corporation; to maintain a railroad owned by some other corporation; to operate a railroad owned by some other corporation; nor to become the owner by purchase of a railroad constructed and owned by some other corporation. This is the only legitimate construction that can be placed upon the language used in the statute.

If, however, there could be doubt as to this, the matter is made too clear by subsequent provisions of the law. The law requires articles of incorporation to be adopted, signed and filed in the office of the Secretary of State, and these are required to give information on specified subjects, and among others to state the identical thing the contemplated corporation proposes to do. They must state “the places from and to which it is intended to construct the proposed railroad, and the intermediate Counties through which it is proposed to construct the same.” (Rev. Stat., art. 4101.) “When the articles of incorporation have been filed and recorded as herein provided, the persons named as corporators therein shall thereupon become and be deemed a body corporate, and be authorized to proceed to carry into effect the objects set forth in such articles in accordance with the provisions of this title.” (Rev. Stat., art. 4105.)

Thus is the power which such corporations may have when incorporated under the general law, declared.

It may be urged, however, that if the power of the one corporation to buy the road of the other was not given under the original charters of either corporation, yet that such a power was acquired through the amendment to the charter of the Gulf, Colorado & Santa Fe Railway Company, which provided, in effect, that it should have the “right to purchase the Central & Montgomery Railroad and to own, operate, equip and maintain the same under this charter as a part of said eastern branch.” The law providing for the amendment of railroad charters nowhere intimates that such a corporation may acquire rights or powers through an amendment which it could not have acquired under its original incorporation.

One of the leading purposes intended to be subserved through an amendment to a railroad charter under the general law, was to enable them to change or extend the line of road to be constructed, and not to enable them to acquire powers of a character different to those they might acquire ¿through the original Act. of incorporation. This is illustrated by Article 4113, Revised Statutes, which is the only part of the law regulating amendments, other than such as put restrictions on the right to amend, that indicates the character of amendments that may be made. It provides that “any railroad corporation may, by amendment to its charter project and provide for the locating, constructing, owning, maintaining and operating a branch line to its original or trunk line of railroad, from any point on the said original main or trunk line to any other point in this State, by a branch line to the main line, making an angle with said main line of at least twenty-five degrees in the general course of said branch line, and also so projected that said branch line shall in no case be so located as to be or become such a line of railroad as that, if the same were owned by another corporation, the corporation owning the main line or any one of the other branches thereof would be forbidden by the Constitution and laws from consoldidating therewith on account of the lines being parallel or competing lines.”

The succeeding Article provides how much of a line, authorized to be built by an amendment, shall be completed and put in running order within given periods. Ro one can acquire a power or right under a law which the law itself does not provide he may have, by a compliance with it. The articles for incorporation under the general law are required to be passed upon by the attorney general before they can be filed and incorporation be accomplished; but the law does not confide to the attorney general nor to the incorporators the power to determine for what purpose incorporation may be had, or what powers the corporation may acquire by the Act of incorporation. That is determined by the law which permits the incorporation.

The rule that a corporation has power to do only such acts as its charter, considered in relation to the general law, authorizes it to do, applies to every class of corporations. The powers need not all be express, for such will be implied as are necessary to enable the corporation to carry out the powers expressed or necessary to accomplish the general purposes for which the corporation is created. Power to buy a railroad can not be implied from an express grant of power to construct, own, maintain and operate a railroad, to be constructed by the corporation to which those express powers are given, for the existence of such a power is not necessary to accomplish the object specified.

The one corporation having no power to purchase the railroad of the other, it must be held that the appellant eompany acquired no title to the property-levied on; and it therefore becomes unnecessary to consider any equities that may grow out of the transaction between the parties to it. The Central & Montgomery Railroad Company is an existing corporation, so far as appears from the record before us, and such person or persons as may hold its stock have it within their power to complete a reorganization. As held at the present term in the case of the Central & Montgomery Railroad Company v. Morris & Crawford, that company and its property are liable for any matter of indebtedness incurred, in the management of whomsoever the railroad may have been.

[Note.—This case was not accessible when it should have been reported among the opinions of the Galveston term.—Reporter.]

The issuance of an execution first to a county other than that in which the judgment was rendered was an irregularity; but of this no one not having an interest in the property levied upon can take advantage. ' *.

The injunction was," therefore, properly dissolved.

The statute permits the assessment of ten per cent damages on the dissolution of an injunction when it appears that the injunction was obtained for delay only. We are of the opinion that the facts of this case, considering the nature of the questions involved, do not show that such was the purpose for which the injunction was obtained.

The judgment will therefore be reversed, and so reformed as to dissolve the injunction without giving damages. It is so ordered.

JReversed and reformed.

Opinion delivered March 25, 1887.