Jesup v. Illinois Cent. R., 43 F. 483

43 F. 483 | U.S. Circuit Court for the Northern District of Illnois | 1890

Mr. Justice Hablan,

after stating the facts in the foregoing language, delivered the opinion of the court.

With this general outline of the case, as disclosed by a very voluminous record, the court will proceed to consider the issues arising in the original suit.

\\e have seen that by the contract of September 18, 1867, between the Dubuque Company and the Illinois Centra] Railroad Company, the latter agreed to assume the lease made by the Cedar Falls & Minnesota Railroad Company to the Dubuque Company. If this assumption made the Illinois Central Railroad Company liable, as between it and the Dubuque Company, for the stipulated rental of the Cedar Falls road, during the whole period of 40 years for which it was leased to the Dubuque Company, and if the latter company, after, or when, taking back that road into its own possession, could not, to the prejudice of the Cedar Falls Company or its mortgage bondholders, discharge the Illinois Central Railroad Company from such liability, then the right of the trustee in the mortgage of September 22, 1866, to invoke the jurisdiction of a court of equity, in respect to any amount duo from the Illinois Central Railroad Company, cannot well be doubted. That mortgage refers to the lease by the Dubuque Company, and covers not only the not earnings of the Cedar Falls road, constructed and to bo constructed, but the rents and moneys payable by any person or company to the Cedar Falls Company for the use of said road and appurtenances. The agreement of the Illinois Central Railroad Company to assume the lease of the Cedar Falls road created no direct obligation on its part to the Cedar Falls Company, or to the trustee in the mortgage of September 22, 1866, that could bo auforced by an action at law. Only by a suit in equity, to which the Cedar Fails Company in some form was a party, could the trustee obtain the benefit of the assumption by the Illinois Central Railroad Company of the lease of the Cedar Falls road to the Dubuque Company. National Bank v. Grand Lodge, 98 U. S. 123; Keller v. Ashford, 133 U. S. 610, 620, 622, 10 Sup. Ct. Rep. 494. This point is referred to and determined, because the objection to the original suit as not being one of equitable cognizance, if sound, would be sufficient to dispose of the case as to the Illinois Central Railroad Company without reference to any other question.

It therefore becomes necessary to inquire as to the scope and effect of the agreement of the Illinois Central Railroad Company to assume the loase of the Cedar Falls road. As neither the Cedar Falls Company nor the trustees in the mortgage were parties to that agreement their understanding of its provisions, after or when its contents became known to them, cannot be of consequence. The inquiry must be restricted to the intention of the two corporations that executed it. Now, when the Illinois Central Railroad Company agreed to assume the lease of the Cedar Falls road, was it intended that it should become bound for the rent of the Cedar Falls road, after it had surrendered the possession of the Dubuque road, which constituted the link between the Illinois Central railroad and the Cedar Falls road? Of what use would the Cedar Falls road have been to the Illinois Central Railroad Company, after the surrender of the Dubuque road? It is so clear from the whole structure of the lease of September 13, 1867, that no such intention existed upon the part either of the Illinois Central Railroad Company or of the Dubuque Company that an analysis of its several provisions is unnecessary. Nor is there any ground to believe that the Cedar Falls Company or the trustees in its mortgage sujjposed that they could look to the Illinois Central Railroad Company for rents accruing subsequently to the surrender (whenever that might occur) of the Cedar Falls road to the Dubuque Company. If the Illinois Central Railroad Company had exercised its option to take the Dubuque road in perpetuity, the Cedar Falls Company and the trustees in its mortgage might, perhaps, have held the former liable for the rents of the Cedar Falls road during the whole term of 40 years for which it was leased to the Dubuque Companjn But that option was not exercised. The reasonable interpretation of the instrument of September 13, 1867, taking into view its words and the circumstances attending its execution, is that the Illinois Central Railroad Company, so long, and only so long, as it retained the Dubuque road as lessee, would meet the obligations imposed upon the Dubuque Company inrespect to the lease of the Cedar Falls road. And this construction is in no wise affected by the indorsement over the signature of the president of the Cedar Falls Company on the bonds secured by the mortgage of 1866. In respect to that indorsement, it may be said that it does not. impose any obligation upon the Illinois Central Railroad Company, even by way of estoppel. There was no act upon the part of that company, in respect to the bonds or that indorsement, from which an estoppel could arise. The indorsement was not made at the instance or by the direction of the Illinois Central Railroad Company. So far as the record shows, it was entirely the work of those interested in the negotiation of the bonds secured bj^ the mortgage of September 22, 1866. The facts set out in the indorsement are true. But if the parties making it, or causing it to be made, omitted to state the additional fact that the very instrument containing the assumption of the lease of the Cedar Falls road expressly provided for the termination of the lease of the Dubuque road at the end of 20 years, at the pleasure of the Illinois Central Railroad Company, the responsibility for such omission is up on them, and not upon the latter company.

The result is that, as the rentals due the Cedar Falls Company up to October 1, 1887, on which day its road was surrendered to the Dubuque Company, were fully paid by the Illinois Central Railroad Company before the commencement of this suit, there is no ground whatever for a decree against that corporation. As to it, the original suit must be dismissed, with costs against the plaintiff.

In respect to the jurisdiction of the court to proceed in the cross-suit after the dismissal of the original suit as to the Illinois Central Railroad Company, we are of opinion that a final decree may be passed determining the validity of the lease of 1866 as between the Dubuque and Cedar Falls Companies, and the right of the trustee in the mortgage of 1866 to the funds in court. The original suit is based upon that lease as a valid instrument for all the purposes embraced by it, and a part of the relief sought is a decree establishing the validity of the lease, and subrogating the trustee to all the rights of the Cedar Falls Company under it, with sole authority, in view as well of the default of that company and its embarrassed financial condition, as of its alleged failure to collect and properly apply the rents and profits accruing from the mortgaged property, to receive, sue for, and have possession of such rents and profits for the purposes expressed in the mortgage. Now the relief sought by the cross-bill is directly connected with the subject-matter of the original suit, and is of an affirmative character. The cross-suit strikes at the foundation of the trustee’s claim to the funds in court, namely, the lease of 1866, and asks a decree to protect the Dubuque Company from any suit upon it, either by the trustee or by the Cedar Falls Company. We perceive no difficulty arising out of the established rules of equity in the way of a comprehensive decree in the cross-suit that will determine finally, as between the Dubuque Company and the Cedar Falls Company, the efficacy of the lease of 1866, and therefore the right of the trustee, Jesup, to have and collect the rents arising from that instrument. Kingsbury v. Buckner, 134 U. S. 650, 676,677, 10 Sup. Ct. Rep. 638; Hurd v. Case, 32 Ill. 45, 49; Jones v. Smith, 14 Ill. 229-232; Lloyd v. Kirkwood, 112 Ill. 329, 336. In Story’s Eq. PI. § 399, note, it is said:

“A distinction should be drawn between a cross-bill which seeks affirmative relief as to other matters than those brought in suit by the bill, yet properly connected therewith, and a cross-bill which is filed simply as a means of defense, since there are rules applicable to one class which do not apply to the other. Thus a dismissal of the original bill carries the cross-bill with it, when the latter seeks relief by way of defense; but it is otherwise, and relief may still be given upon the cross-bill, where affirmative relief is sought thereby as to collateral matters properly presented in connection with the matters adjudged in the bill.”

So, in Chamley v. Dunsany, 2 Schoales & L. 718, Lord Eldon said:

“The defendant chargeable has a right to insist that he shall not be liable to be made a defendant in another suit for the same matter that may then be decided between him and his co-defendant, and the co-defendant may insist that he shall not be obliged to institute another suit for a matter that may then be adjudged between the defendants; and, if a court of equity refused so to decree, it would be a good cause of appeal by either defendant.”

Sec, also, Ladner v. Ogden, 31 Miss. 344; Worrell v. Wade, 17 Iowa, 96: Ragland v. Broadnax, 29 Grat. 401.

Nor is the right to make a final decree in the cross-suit affected by the circumstance that the Dubuque Company and the Cedar Falls Company are both Iowa corporations. As said in Schenck v. Peay, 1 Woolw. 175:

“A cross-bill will be sustained in a federal court, where a defendant is compelled to avail himself of that mode of defense in order to protect himself from an injustice resulting to him from the position in which the cause stands, although the parties, plaintiff and defendant, or some of them, are citizens of the same state, provided the defendants in such bill are already before the court, and are, as parties to the original bill, subject to its jurisdiction.”

Jones v. Andrews, 10 Wall. 333; Krippendorf v. Hyde, 110 U. S. 276, 4 Sup. Ct. Rep. 27; Coved v. Heyman, 111 U. S. 176, 179, 4 Sup. Ct. Rep. 355; Pacific Railroad Co. v. Missouri Pac. R. Co., 111 U. S. 505, 522, 4 Sup. Ct. Rep. 583; Gumbel v. Pitkin, 124 U. S. 131, 144, 8 Sup. Ct. Rep. 879; Johnson v. Christian, 125 U. S. 642, 646, 8 Sup. Ct. Rep. 989, 1135.

Is, then, the Dubuque Company entitled to a decree requiring the surrender and cancellation of the lease of 1866? To what extent the Cedar Falls road, when completed, would bring business to the Dubuque road, and what was the probability of the construction of roads in Minnesota that would connect that toad over the Cedar Falls road with the cities of St. Paul and Minneapolis, were matters in respect to which all parties connected with the lease of 1866 had equal opportunity for information. Indeed, they were matters about which neither party could well mislead the other. Standing in the light of the actual results of the lease, as now depicted, it is easy to see that those representing the Dubuque Company in making that lease would have done well, if, out of abundant caution, they had made its continuance dependent upon the construction, within a reasonable or fixed time, of a road or roads directly connecting Mona with St. Paul or Minneapolis. But such error of judgment, if it can be so called, upon the part of the directors of the Dubuque Company, does not justify the cancellation of the lease. The evidence of their failure in that particular mode to guard its interests, if at all pertinent to the present inquiry, can only be so in its remote bearing upon other propositions embodying the principal grounds upon which the cancellation of the lease is sought. Those propositions are that the individuals chiefly instrumental in fastening the lease of 1866 upon the Dubuque Company for the term of 40 years were prevented from exercising a sound or impartial judgment in its behalf, by reason of their personal interest in, and their relations with, the Cedar Falls Company; that they occupied at the time such relations of trust to the Dubuque Company as forbade them from representing it in a matter in which their private interests would be promoted in proportion as the terms imposed were hard on that corporation and beneficial to the Cedar Falls Company; that the contract in question, nominally one of lease, was yet one that cannot properly be enforced at law or in equity, being in its inception fraudulent and against public policy, and therefore one against which the affirmative relief asked should be given, all parties in interest being before the court.

This proposition, so far as it imputes actual fraud in the matter of the lease, is not sustained by the record. We are of opinion, upon a careful review of all the evidence, that those who participated in the making of die lease, whether on the one side or the other, believed in good faith that the completion of the Cedar Falls road to the Minnesota slate line, and the leasing of it by the Dubuque Company for a term of years, at a reasonable rental, was important to, if not imperatively required by, the interests of both companies, each of which was at that timo in such financial condition as to excite uneasiness in the minds of parties interested in their prosperity. We cannot perceive that there was any purpose upon the part of those to whom fraud is now imputed either to wreck the Dubuque Company, or to impose unnecessary burdens upon it for the purpose of giving increased value to the bonds and stock of the Cedar Falls Company. No one at that time doubted that the Cedar Falls road, if completed, would be a valuable feeder of the Dubüqueroad. And there was a hope, which unfortunately for all concerned was not realized, that the Cedar Falls road would shortly or ultimately form a link in a continuous liue of road or roads connecting the Dubuque road directly with the cities of St. Paul and Minneapolis. The only matter that was the subject of serious discussion was as to the amount of rent to be exacted from the Dubuque Company for the use of the Cedar Falls road. And that question was not determined in a corner, or without full opportunity to consider it. In the face of the report made by Mason and Blaekstone, disinterested and competent exports, as to what would be a reasonable rental to be paid by the Dubuque Company, upon the basis of a completed road in good condition, the presumption of fraud should not be indulged, simply because it may now appear, as the result of circumstances not foreseen, or not deemed at the time of sufficient importance to be guarded against, that the rent stipulated in the lease is larger than the business over the Cedar Falls road really justified.

Much stress, in this connection, is laid upon the evidence tending to prove that the amount of bonds and stocks allowed by the Cedar Falls Company to those constructing its road was largely in excess of the actual cost of construction. Whether such be the fact or not, we need not stop to inquire. That is a matter between the Cedar Falls Company and those receiving its bonds and stock in payment for construction. It does not, in any wise, concern the Dubuque Company, nor elucidate the real issues in the present case. If it were true that, under all the circumstances as they existed in 1866, including the depreciated value of the bonds and stocks of the Cedar Falls Company, the amount allowed by it for construction was too large, that fact would not show that the Dubuque Company is entitled to a decree canceling the lease which it made of the Cedar Falls road. The question before the Dubuque Company in 1866 was whether, in justice to its stockholders, it could afford to pay the proposed rent for the use of the Cedar Falls road. The decision of that question did not depend upon the amount the Cedar Falls Company might pay, in stocks and bonds, for the construction of its road, but it did depend upon the amount of business that would probably be done on the Cedar Falls road after it passed, under the lease, to the control of the Dubuque Company, and after its completion to Mona. There was no concealment or misrepresentation as to the business done over the 14 miles of road constructed before the lease was made. And as to the business that would be done on the entire line when completed to Mona, and as to the probability of ultimate connection over other roads with St. Paul or Minneapolis, these were matters about which differences of opinion would exist, and were to be determined in the light of what is called “railroad experience.”

Looking at all the facts and circumstances, we are of opinion that the directors of the Dubuque Company, including those who,, at the time, were holders of the bonds and stocks of the Cedar Falls Company, and expected to become interested in constructing the Cedar Falls road to Mona, were not guilty of actual fraud in leasing the Cedar Falls road upon the terms prescribed in the instrument of September 27, 1866. The lease seems to have been made in the exercise of an honest judgment upon their part as to what, under all the circumstances, the best ■ interests of both Companies absolutely demanded. The excess, if any, of the rents agreed to be paid bj the Dubuque Company, over what the business of the Cedar Falls road justified, is not such as to raise a presumption of fraud upon the part of those causing the lease to be made. At most, it would only show error of judgment in respect to a matter of business.

Recurring to the main proposition advanced by the Dubuque Company, we next inquire whether the lease of 1866 should be adjudged void upon grounds of public policy arising out of the relations of trust which Jesup and others, at the time, held to that company. Without stating in detail the proceedings of the various meetings of the board of directors of the Dubuque Company at which the subject of the lease was mentioned' or discussed, it is sufficient to say that the lease was approved by nine directors. Of that number, five, Morton, Knox, Stout, Schuchardt, and Robb, bad no interest whatever in the Cedar Falls Company as stockholders, bondholders, or creditors, and all of that five, unless Robb was an exception, were large holders of the stock of the Dubuque Company. Of the remaining directors, Jesup, Frost, Smith, and James, were at the time holders of outstanding bonds and stock of the Cedar Falls Company, the value of which would be increased by the completion of the road. Indeed, it is a fair inference from the testimony that the directors of the Dubuque Company who were not interested in the Cedar Falls Company looked to Jesup, James, Frost, and Smith, or some of them, to provide the means for the completion of the Cedar Falls road to the state line. It is also true that the four directors last named expected to become holders of the bonds and stock issued on account of the additional road to be constructed'from Waverly to Mona. While two o.f that number, Jesup and James, were large holders of the stock of the Dubuque Company, their interests in the Cedar Falls Company were greater than in the-other company. It is not, therefore, to be questioned that, when the lease of 1866 was made, Jesup, Frost, Smith, and James wore in a position where their private interests in connection with the Cedar Falls Company might conflict with their duty as directors of the Dubuque Company. They were on both sides of the question as to the lease of the Cedar Falls road upon the terms stipulated. As stockholders- and bondholders of the Cedar Falls Company, they were interested in binding the Dubuque Company to pay the highest possible rent. As-directors of the Dubuque Company, their duty was to protect it against burdens that could not be prudently or safely assumed, and to advance its interests in every proper way.

These facts being admitted or proven, the inquiry yet remains, to what extent do they affect the validity and binding force of the lease or justify a decree of cancellation? The attention of the court has been called to Wardell v. Railroad Co., 108 U. S. 651, 658. That was a case of a contract authorized by railroad directors pursuant to a scheme by which they were to share with the other party large sums to be realized from the contract. The court said :

“It is among the rudiments of the law that the same person cannot act /'or himself, and at the same time, with respect to the same matter, as the agent of another whose interests are conflicting. * * * The law, therefore, will always condemn the transactions of a party on his own behalf, when, in respect to the matter concerned, ho is the agent of others, and will relieve against them whenever their enforcement is seasonably resisted.. Directors of corporations, and all persons who stand in a fiduciary relation to other parties, and are clothed with powor to act for them, are subject to this rule. They are not permitted to occupy a position which will conflict with the interest of parties they represent and are bound to protect. They cannot, as agents or trustees, enter into or authorize contracts on behalf of others for whom they are appointed to act, and then personally participate in the benefits, lienee all arrangements by directors of a railroad company, to secure an undue advantage to themselves at its expense, by the formation of a new company as an auxiliary to the original one, with an understanding that they, or some of them, shall take stock in it, and then that valuable contracts shall be given to it, in the profits of which they, as stockholders in the new company, are to share; are so many unlawful devices to enrich themselves to the detriment of the stockholders and creditors of the original company, and will bo condemned whenever properly brought before the court for consideration.”

The case from which the above extract is made, and others of like character, arc cited as requiring a decree canceling the lease in question, as void upon grounds of public policy.

We do not think that the cases referred to justify such a decree in this case. A contract, in the name of a corporation, by its board of directors, is not void, if otherwise unassailable, simply because some of the directors, constituting a minority, used their position with the effect, or even for the purpose, of advancing their personal interests to the injury of the company they assumed to represent. The lease here in question, as we have seen, was approved by the nine directors of the Dubuque Company, five of whom had no personal ends to subserve by imposing upon the company a lease that was unreasonable or harsh in its terms. On the contrary, as already stated, at least four of that five were holders of the stock of the Dubuque Company, and therefore interested to guard it against unnecessary or improper burdens. We need not inquire as to the extent of their information touching the facts bearing upon the question of the proposed lease. It is sufficient to say that they approved it, and that their approval was not, so far as the record shows, obtained through misrepresentation or concealment by their co-directors, who, in view of their-personal interest in the Cedar Falls Company, ought not to have participated in deciding the question of lease or in the making of the lease. An instructive case upon this point is U. S. Rolling-Stock Co. v. Atlantic & G. W. R. Co., 34 Ohio, 450, 465. That was a spit upon a contract by á railroad company for rolling stock. The contract was approved by eight directors of the former company, (the whole number of directors being thirteen, but only eight acted,) two of the number acting being also directors of and interested in the rolling-stock company. The defense was that- the rent was not fair, nor the contract binding, because of the interest which some of the directors had in the rolling-stock company. The court said:

“If it be granted that the confirmation of the contract by the defendant’s board of directors, at the meeting of August 2, 1872, was voidable in equity at the election of the company, for want of the presence at that meeting of the board of a quorum of directors who were not directors of the plaintiff, it nevertheless appears that the board was composed of thirteen persons, a clear majority of .whom were affected with no incapacity to act for the best interests of the company, and who sustained no fiduciary relation to the plaintiff whatever. This majority possessed ample power to restrain and control the action of the minority, and, if the contract was voidable at the option of the company, it had full power to express the company’s election if it saw fit to avoid the contract. The fact that some of the persons composing this majority might vote with those who were members of both boards, and thereby create a majority in favor of the contract, would in no wise affect the validity of the transaction, nor relieve the board from the duty to move in the matter if they desired the company’s escape from liability. We have not, upon the most diligent research, been able to find a ease holding a contract made between two corporations by their respective boards of directors invalid, or voidable at the election of one of the parties thereto, from the mere circumstance that a minority of its board of directors are also directors of the other company., Nor do we think such a rule ought to be adopted. There is no just reason, where a quorum of directol-s sustaining no relation of trust or duty to the other corporation are present, participating in the action of the board, why such action should not be binding upon the company, in the absence of such fraud as would lead a court of equity to undo or set aside the transaction. If the mere fact that the minority of one board are members of the other gives the company an opportunity to avoid the contract without respect to its fairness, the same result would follow where such minority consisted of but one person, and notwithstanding the board might consist of twenty or more. In our judgment, where a majority of the board are not adversely interested, and have no adverse employment, the right to avoid the contract or transaction does not exist without proof of fraud or unfairness; and hence the fact that five [out of thirteen] of the defendant’s board of directors were members of the plaintiff’s board, whatever may have been its opinion of defendant’s right to disaffirm or repudiate the contract, if exercised within a reasonable time, did not disable the defendant from subsequently affirming the contract, if satisfied with its terms, or rejecting it if not; nor did it relieve it from the duty to exercise its election to avoid or rescind within a reasonable time, if not willing to abide by its terms. That it did not do this, nor take any steps towards its disaffirmance, but continued to act under it lor nearly two years and a half, receiving the rolling stock, for the use of which it stipulated, and with which it operated the whole of its road for the whole of said period, making payment for sueli use in accordance with the rate fixed by the contractors, very clearly appeals from the admitted facts. * * lienee the conceded facts clearly establish a ratification of tho contract, and prevent the t.lie defense from denying its validity.”

in determining the weight to be given to the considerations of public policy that have been pressed with so much force, the court cannot ignore the fact that more than 20 years elapsed after the lease in question was made before any action was taken by or in behalf of the Dubuque Company to have it canceled. During that long period no warning was given by it, or by its officers or stockholders, that any question could or ever would be made as to the integrity of the lease of 1866. On the contrary, at a meeting of its stockholders held March 15, 1869, a resolution approving and ratifying the lease of September 27, 1866, was confirmed by a unanimous vote of those present in person or by proxy, 27,894 shares being represented at the meeting. These proceedings were spread at large upon the records of the Dubuque Company. Now, it is said that during the whole period of 20 years while the Cedar Falls road was controlled by the Illinois Cení ral Railroad Company, Jesup was either president or in control of the Dubuque Company, had possession of its records and papers, and dominated its proceedings, and that, it was not until he and the directors whom he controlled resigned in 1887 that tho Dubuque Company was in a position, or was able, to ascertain the facts, and take such steps as would right the wrong alleged to have been done to it in 1866. What facts? It is inconceivable that the 1'aet of tho lease of the Cedar Falls road to the Dubuque Company, as well as the terms of the lease, were not known, or could not easily have been known, to every director and stockholder in the Dubuqüe Company. If directors or stockholders of that company were ignorant for 20 years of the terms of the lease, it was because they were guilty of the grossest negligence in not making inquiry on the subject. So far from the directors or stockholders of the Dubuque Company being kept in ignorance of the lease or .its terms, the company disclosed the exact situation in its annual, report of January 1, 1867. In that report it was said:

“ Since the last annual report, this company has leasod the Cedar Falls and Minnesota Railroad, constructed a distance of fourteen miles from the junction to Waverly, and to be constructed sixty-two miles from Waverly to the state line, for forty years from tho 1st of January, 1867, at a rent of $1,500 per mile, and the further sum of 85 per cent, of all gross earnings exceeding $3,500 and not exceeding $7,000 per mile per annum, and 80 per cent, of all gross earnings exceeding the sum of $7,000 per mile per annum. This road has already been a valuable contributor in bringing business upon your road. W averly receives and forwards more freight than any station west of Dubuque. ”

'Che proof satisfactorily shows that this report went to the stockholders of the Dubuque Company. But if there was no proof on the subject, it.would be presumed at this late day that it was known to them, or-that every stockholder could know, if he tried to know, all the facts.' During all that time the Dubuque Company, its officers and stockholders, have remained silent, not only leaving the Illinois Central Railroad Company to treat the lease of September 27, 1866, as valid and binding, upon the Dubuque Company, and therefore to be assumed by the former company during its possession of the Cedar Falls road, but inducing, as-may be reasonably inferred, the holders of the stock and bonds of the Cedar Falls Company to believe- that the rental agreed to be paid by the Dubuque Company could be looked to as a securit}*- for the full term of 40 years. This silence and delay upon the part of the Dubuque Company cannot be excused upon the ground suggested in its answer, namely, that so long as the Illinois Central Railroad Company agreed to pay, and paid, the rent of the Cedar Falls road, it was of “no moment” to the stockholders of the former company what was the amount of such rent. That suggestion assumes that the question of the continuance of the lease concerned only the Dubuque Company. But it was of moment to the Cedar Falls Company, its bondholders and creditors, to say nothing of its stockholders, to know whether that lease was to be carried out according to its terms, and whether the Dubuque Compan3 intended to dispute its binding force. If, at the instance of the latter company, or of its stockholders, the lease had been abrogated shortly after it was executed, it may be that the Cedar Falls Company could have made with other railroad corporations arrangements quite as favorable as those set forth in that lease. The Dubuque Company had no right, therefore, to treat it as a valid lease, to be respected .by the Cedar Falls Company and by the Illinois Central Railroad Company, so long as the latter retained possession of the Dubuque road, but to be repudiated as soon as the Illinois Central Railroad Company ceased to be under .an obligation to assume it.

The suggestion that the facts entitling the Dubuque Company to a decree canceling the lease could not have been discovered by it until its own road was turned back to it by the Illinois Central Railroad Company, and until after the election of new directors in 1887, has no substantial ground upon which to rest. Here is a lease of a railroad, which was treated as valid, and acted upon by all the-parties concerned for more than 20 years. At the expiration of that long period the lessee company asks a cancellation of the lease because of certain facts which it claims to have just found out, but which its stockholders and directors either knew or could easily have ascertained at any time -within the past 20 years. It- may- be literally true, as alleged, that the particular individuals in control of the Dubuque Company, when the cross-suit was commenced, as well as those now holding the majority of its stock, did not acquire knowledge of all the facts connected with.the making of the lease until shortly before the commencement of the present litigation. After the surrender of the Dubuque road by the Illinois Central Railroad Company, the latter company, with information as to every fact bearing upon the question of the reasonableness of the rental fixed in the lease. of 1866, purchased, in its own name, or in the name of others, a part of the stock of the former company, and a now board of directors was elected friendly to it or in its interest. And before the cross-bill was filed the Illinois Central Railroad Company had become the owner of nearly all the stock of the Dubuque Company, with full knowledge upon its part of every fact now relied upon for the cancellation of the lease of 1866. In short, that company, after running the Cedar Falls road for 20 years, and thereby ascertaining, to its own satisfaction, that the business on and over it did not justify the rental the Dubuque Company agreed to pay, acquired substantially the whole of the stock of that company, and is the beneficial party in interest seeking the cancellation of the lease. Of the right of the Illinois Central Company to purchase the stock of the Dubuque Company, no question is made. But when the latter company alleges its ignorance, until after the now board was elected in 1887, of the facts connected with the lease of 1866, it must be taken as referring to those now in control, and io those who are now its stockholders. Even if such ignorance existed upon the part of some of those who became stockholders of the Dubuque Company after that corporation resumed possession of its road, that circumstance cannot shut out of view' the fact that those wlio were in any wise interested in the Dubuque road, either as directors or stockholders, when the lease of 1866 was made and for 20 years thereafter, knew', or could easily have ascertained, all the circumstances attending the execution of that instrument, as well as the nature of its terms and conditions.

Taking ail the evidence together, the court must proceed upon the ground that means of knowledge, plainly within reach of stockholders by the exercise of the slightest diligence, is in legal effect equivalent to knowledge, and that the fact of the lease, as well as its terms, were fully known to each stockholder and to every officer of the Dubuque Company for 20 years and more prior to this litigation. Wood v. Carpenter, 101 U. S. 135, 143; New Albany v. Burke, 11 Wall. 96, 107. The fundamental error in the argument for the Dubuque Company is in the assumption that the lease was absolutely void by reason of Jesup and other directors, who were interested in the Cedar Falls Company, having participated in the making of it. We have already indicated that, so far as the lease depended upon the action of tlio board of directors, its technical validity was placed beyond question by the approval of the majority of the directors, no one of whom then or ever had, so far as 1he record shows, any interest in the Cedar Falls Company. But to avoid misapprehension it is well to say that, in the judgment of the court, the lease would not have been void, even if a majority of the directors of the Dubuque Company occupied the same relations to the Cedar Falls Company that Jesup, Janies, Frost, and Smith did when the lease was made. It would, at most, have been simply'voidable at the election of the Dubuque Company, or, in a proper case, at the suit of its stockholders, and that election must have been exercised, or the suit brought, within such time as was reasonable, taking into consideration all the facts and circumstances of the case, including the nature of the property that was the subject of the lease. This last principle is illustrated in Oil Co. v. Marbury, 91 U. S. 587; Gas Co. v. Berry, 113 U. S. 322¹; and Leavenworth Co. v. Railway Co., 134 U. S. 688, 704, 10 Sup. Ct. Rep. 708 et seq. If, as was expected, the completion of the Cedar Falls road had been followed by the construction of roads in Minnesota connecting Mona with the cities of St. Paul and Minneapolis, it may be that the lease ofT 866 would have been very profitable to the Dubuque Company; in which event the courts would not have listened readily to an application by the Cedar Falls Company, after an unreasonable delay upon its part, to set aside the lease upon the ground that some of those representing it were at the time directors or stockholders of the Dubuque Company. So, if the lease had been in fact beneficial to the Dubuque Company, and if, for that reason, a majority of its directors and stockholders had desired to hold onto it, the court would not necessarily, at the instance of a minority of directors and a minority of stockholders, have set it aside simply because some of its directors were at the time personally interested in promoting the welfare of the Cedar Falls Company; though the fact that such directors, constituting a 'minority of those acting, participated in making the contract, would cause the whole transaction to be closely scrutinized to the end that the rights of complaining stockholders, however small in number, might not be sacrificed by those who were bound to protect their interests. This shows that the lease was not void because of the relations of some of the directors of the Dubuque Company to the Cedar Falls Company, and that it would not have been absolutely void if the majority of such directors approving the lease held such relations to the lessor company.

The rule is a wholesome one that requires the court, in cases of merely voidable contracts, to withhold relief from those who, with knowledge of the facts, or with full opportunity to ascertain the facts, unreasonably postpone application for relief. A contract not wholly invalid when executed, nor prohibited by law as relating to some illegal transaction, and which is therefore voidable only, may become, by the acts of the parties or by long acquiescence, binding upon them, especially where the nature of the property which is the subject of the contract is such that its value may be affected by its relations to other property of like kind, and by the changing business of the country. If, after the making of the lease of 1866, the directors and stockholders of the Dubuque Company had held a meeting, and, with knowledge of the facts, or with the means of ascertaining them, had declared, in words, that they would postpone application to have the lease set aside until they found out by operating the Cedar Falls road whether it was remunerative or not to them, or until the Illinois Central Railroad Company ceased to be under obligation to pay the stipulated rent, the case would not have been in point of law materially different from what it appears to be from the record before us. In so holding the court does not depart from the salutary principles announced in Wardell v. Railroad Co., and approved in numerous cases. On the contrary, while that ease holds that the law will always condemn the transactions of a party in his own behalf when in respect to the matter concerned he is the agent of others, it also declares that the court will relieve against them “'whenever their enforcement is seasonably resisted.” Seasonable resistance cannot be predicated of a case of a merely voidable contract, whore the party complaining has not simply boon silent for 20 years, but with knowledge of the facts, or with full opportunity to ascertain them, has enjoyed the fruits of the contract, and treated it as valid.

The court is of opinion that, independently of any question as to the statute of limitations of Iowa, in which state the contract of lease was made, and was to be executed, the Dubuque'Company is estopped to dispute the binding force of the lease of September 27, 1866, and, therefore, is not entitled to a decree of cancellation.

Other points than those above discussed are raised by the cross-bill, but they are not insisted upon in the printed arguments, and are not, in the judgment of the court, of sufficient importance tobe noticed.

Lv)t a decree be prepared and submitted to the court, recognizing the right of the plaintiff, Jesup, as surviving trustee in the mortgage of September Id, 1866, to receive the funds now in the registry of the court, and containing such other provisions as may be proper and not inconsistent with this opinion.

Judge Blodgett, who participated in the hearing and decision of this case, concurs in the views expressed in this opinion.

1 5Sup. Ct. Rep. 525.