Louisville & Nashville Railroad v. Commonwealth

97 Ky. 675 | Ky. Ct. App. | 1895

JUDGE LEWIS

DELIVERED THE OPINION OF. THE COURT.

The Commonwealth of Kentucky brought this action December 11, 1893, against Louisville & Nashville Railroad Company, Chesapeake, Ohio & Southwestern Railroad Company, Ohio Valley Railroad Company, Owensboro, Falls of Rough & Green River Railroad Company, Short Route Railway Transfer Company, and Paducah Union Depot Company, all-corporations created hv statute of this State, for an injunction, nature -and extent of which is shown by the judgment rendered in pursuance of prayer of plaintiff’s petition and now appealed from, in substance, as follows: 1. That Louisville & Nashville Company be perpetually enjoined from acquiring or assuming possession or control of the properties or franchises of either of the other companies made defendants, or of Elizabethtown & Hodgenville Railroad Company, or of the Union Depot at Seventh and Water streets, in Louisville. 2. That Louisville & Nashville Company be perpetually enjoined from bidding for or purchasing at any judicial sale or otherwise, the properties or franchises of either company mentioned in first paragraph, or being interested in' such bid or purchase, or being cestui que trust of any trustee, who may purchase or acquire same. 3. That Louisville & Nashville Railroad Company be perpetually enjoined from carrying out any contract between it and Illinois Central Railroad Company, dated Novembers, 1893, copy of which is made part of the record; or purchasing, paying fororusing any stocks, securities, interest in real estate or items of indebtedness mentioned in that contract, for the purpose of acquiring either sole or joint control or management of the properties or franchises of either company mentioned, or of the depot at Seventh and Water streets in Louisville. 4. Each of the other companies made defendant is perpetually enjoined allowing any of its stock to be voted or controlled by Louisville & Nashville Company, directly or by trustee or other person holding for its benefit; or any way combining or agreeing with that company, it may interfere with independent control or operation of the property of either of said companies; the judgment being that Louisville & Nashville Company can not lawfully hold or own stock of any of said companies. 5. That the judgment in tenor and effect embraces not only ■the several corporations made defendants, but also directors, officers and agents of each.

It is stated, substantially, in plaintiffs petition, as cause of action, that Louisville & Nashville Company owns and controls many railroads in this State, as respects which, railroads owned or controlled by the other companies named are parallel and competing. Yet, that defendants have made a contract and arrangement whereby Louisville & Nashville Company is about to, and unless enjoined will, become owner and acquire possession and control of capital stock, franchises and properties of the other companies to the great and irreparable injury of plaintiffs, and in violation of section 201of the constitution of this State asfollows: “No railroad, telegraph, telephone, bridge or common carrier company shall consolidate its capital stock, franchises or property, or pool its earnings, in whole or in part, with any other railroad, telegraph, telephone, bridge or common carrier company owning a parallel or competmg line or structure, or acquire by purchase, lease or otherwise, any parallel or competmg line or structure or operate the same; nor shall any railroad' company or other common carrier combine or make any contracts with the owners of any vessel that leaves or makes port in this State, or with any common carrier, by which combination or contract the earnings of one doing the carrying are to be shared by the other not doing the carrying.”

In an amended petition it is stated, in substance, that Louisville & Nashville Company was endeavoring to acquire capital stock and interest in real property of and mortgage securities against the other companies, defendants, so as to obtain control and ultimately purchase at judicial sale and become owner of their franchises and property.

Although that allegation was, in the form made, denied, the answer contained the affirmative statement that the purchase, of stocks and securities, referred to had already been consummated, and it was in effect admitted that Louisville & Nashville Company intended to purchase the franchises and properties at judicial sale. Besides, it appears that November 27, 189.3, C. P. Huntington and Newport News & Mississippi Valley Company, owning and controlling interest in the capital stock and real estate of and holding a large amount of outstanding mortgage bonds against those companies, made to Illinois Central • Railroad Company a deed therefor, which the latter, November 28, 1893, sold to Louisville & Nashville Company, reserving right to joint use of that portion of Chesapeake, Ohio & Southwestern main line between Paducah and Memphis. And that in the month of December, 1893 and January, 1894, very soon after these transactions,suits were filed in the United States Circuit Court against all the debtor companies to foreclose mortgages and subject their franchises and property to sale, the roads being in the meantime placed in hands of receivers, shows Louisville & Nashville Company made the contract for the purpose and to enable it to bid for and buy them, at judicial sales, which we are satisfied it combined with others to bring about.

Section 201, in plain terms, makes.it unlawful for any two or more railroad companies owning parallel or competing lines or structures to consolidate their capital stock, franchises or property, or to pool their earnings in whole or in part, or for one of them to acquire by purchase or lease property or franchises of the other, it matters not whether the purchase be made at a voluntary or judicial sale, it being the manifest purpose to inhibit one such company acquiring, controlling or operating the road of another in any manner or to any extent whatever. And to foster competition and effectually forestall and prevent monopoly in the business of railroad transportation, framers of the constitution made that inhibition applicable not merely to the case of competing, but as welT to that of parallel lines, which, though not always competing lines, might become so by construction of a branch of one to a point on the other. For obviously the word “parallel” was not used according to its strictly accurate meaning of two railroads constructed equidistant apart throughout the whole extent,which would be impracticable, but in the sense of two conforming in their general direction.

The Louisville & Nashville Company was chartered about 1850, and constructed a road from Louisville by way of Elizabethtown and Bowling Green, Kentucky, to Nashville, Tennessee, which was completed about 1859, and still is one of the main or trunk lines of the vast system since ácquired by that company. About the same time was constructed a branch road from a point about seven miles south of Bowling Green, to the State line, that has been since extended and is now owned and operated by it to Memphis, Tennessee. Subsequently, it purchased and now owns a road called Evansville, Henderson & Nashville railroad, that extends from Edgeville, Tennessee, on its main line, ten miles north of Nashville by way of Hopkinsville, Kentucky, to Henderson, thence across Ohio river to Evansville, Indiana, and to St. Louis, Missouri. Still later it purchased and now owns what is called Owensboro, Russellville & Nashville Railroad, completed and in operation, not wholly, but from Owensboro to Adairsville, south of Russellville. It also owns and operates various branches in this State that diverge from the main line eastwardly, as well as Kentucky' Central road extending from Cincinnati southward and branches thereof; bút those parts of the system relate to-questions in this case only incidentally.

Of roads constituting what may be properly called the-Chesapeake, Ohio & Southwestern system, because owned or controlled by the corporation of that name, the first one-built extends from Paducah, Kentucky, to Elizabethtown, and for several years the company owning it was dependent for transportation of its passengers and freight, between. Elizabethtown and Louisville, upon the Louisville & Nashville road. But another road was finally built from Louisville to Cecilia Junction, six miles northwest of Elizabeth-town, the city of Louisville subscribing and paying one million dollars for that purpose, whereby was secured a continuous line therefrom to Paducah, independent of the Louisville & Nashville road. It is, however, proper to state the-entire line was afterwards sold under judgment of the district court of the United States, and that part between. Louisville and Cecilia Junction purchased from bidders at, that sale by the Louisville & Nashville Company. But by a subsequent lease, amounting practically to purchase of it, acquisition of the road from Elizabethtown to- Paducah and acquisition of a road from Paducah to Memphis, the Chesapeake, Ohio & Southwestern Company became, about 1881, ■ owner of a connected, continuous and independent-railroad from Louisville by way of Cecilia Junction and Paducah to Memphis.

It has controlling interest in and controls the following-railroads, although each still bears the name and is nominally held by the company that built it: 1. bhio Valley-road that extends from a point on the Ohio River, opposite-Evansville, Indiana, by way of Henderson and Princeton, Kentucky, where it crosses main line of Chesapeake, Ohio & Southwestern, to Hopkinsville. 2. Owensboro, Falls of Rough & Green River Road that extends from Owensboro to Horse Branch, where it connects with said main line. 3. Elizabethtown & Hodgenville road, which is practically an extension of what has become a branch of said main line •extending from Cecilia Junction to Elizabethtown. 4. Short Route Railway, extending from Preston street in Louisville, through the depot at Seventh and Water streets to Twelfth, where it connects with said main line.

It is thus made apparent that if Louisville & Nashville Company be permitted to purchase the railroads and adjuncts mentioned, it will at once become owner and have control of: First, the Union Depot at Seventh and Water streets, a competitor of its own at Tenth and Broadway streets, and thereby acquire, virtually, a monopoly of depot privileges in Louisville. Second, main line of Chesapeake, Ohio & Southwestern system, extending from Louisville, by way of Cecilia Junction and Paducah, a distance of three hundred and ninety-two miles, to Memphis, which, in meaning of section 201 of the constitution, is a line parallel to its own line, extending from Louisville, by way of Elizabeth-town and Bowling Green, a distance of three hundred and seventy-seven miles, to Memphis,, and thereby would be stifled and destroyed active competition for railroad business not only to and from the two terminal points, but also for that originating and done wholly within limits of this State that does, and as long as the two roads are owned by distinct corporations will con tinue to, exist for the public good, except where earnings are, in violation of the constitution, pooled. Third, Ohio Valley Road, lying wholly within limits of this State and that competes with Evansville, Henderson and Nashville road for business between Hopkinsville and Evansville and intermediate points. Fourth, .Owensboro, Falls of Rough & Green River road, built and operated wholly in this State, and that competes with Owensboro & Russell-ville road, between Owensboro and Central City, where the latter crosses main line of Chesapeake, Ohio & Southwestern! system. Fifth, Elizabethtown & I-Iodgenville .road,, built and operated wholly within this State, and that,, connected as it is with the road from Cecilia Junction to Elizabethtown and said main line, competes with Louisville & Nashville main line between Hodgenville, ten miles east of it, and Louisville, and also between Elizabethtown and Louisville. In fact, if that purchase is made, Louisville & Nashville Company will own and operate, without competition, every road, with one exception, within that part of this State, bounded by Ohio river, its own main line, Tennessee-line, and that portion of Chesapeake, Ohio & Southwestern main line, extending from Paducah southward, -including the entire western coal fields. The exception referred to is Louisville, St. Louis & Texas road, which, if the alleged scheme is carried out, will probably become also a part of the Louisville & Nashville system; for it is .completed from Henderson only to Salt River, and, consequently, dependent upon Chesapeake, Ohio & Southwestern Company, as it will, in the event mentioned, be dependent upon Louisville & Nashville Company for access to Louisville.

The effect of acquisition by Louisville & Nashville Company of these roads, will be absorption of an entire system of parallel and competing lines between four hundred and six hundred miles in length, and substitution of a monopoly 15 of railroad transportation. And in view of the enormous sum of $4,500,000 paid, or agreed to be paid, by Louisville & Nashville Company for the capital stock of- the other companies, being major part thereof, -and for the mortgage securities mentioned, it would be idle to say it does not intend, having the power, to take possession and control, and ultimately purchase and own, the whole franchises and properties.

We need not say more in regard to the transaction than that, if consummated, an express provision of the constitution would be violated, and great injury to the public be done. The judgment in this case must therefore be affirmed, unless the grounds of defense are sufficient to defeat the action.

1. It is contended injunction is not the proper remedy. But it seems to us if the Commonwealth of Kentucky can sue at all for an act of ultra vires by a corporation, there is .no room for disputing its right to a preventive injunction in this case. For, according to very respectable authority, and, we think, upon principle, a court of equity has jurisdiction, and may, in an action by the State, enjoin a corporation from exceeding its chartered powers or doing acts otherwise illegal and injurious to the public. (Pomeroy’s Equity Jurisprudence, sec. 1093; Thomas v. West Jersey R. Co., 101 U. S., 71; Coosaw Mining Co. v. South Carolina, 144, U. S., 564; Langdon v. Branch, 37 Fed. Rep., 449; Stockton v. Central R. Co., 50 N. J., 52; Attorney-General v Railroad Co., 35 Wis., 524.)

As said in the last case, it may better serve the public interest to restrain a corporation than to proceed by indictment or by ordinary action to forfeit its charter. ■ In this action, however, the relief is asked upon equitable grounds that the remedy at law is> not plain and adequate, and that vexatious litigation will be prevented.

Under section 480, Civil Code, an action ordinary inav be brought to vacate or repeal charters. But when this action was commenced Louisville & Nashville Company had not done anything in relation to the matter of litigation, for ■which a proceeding under that section would lie;. It had not yet committed the act of purchasing and acquiring title to the parallel and competing lines in question; nor the act, equally unlawful, of taking possession of and controlling these roads, which purchase of capital stock gave it power to do. It had simply put itself in a position enabling and showing beyond question it was abou+ to commit the alleged unlawful acts.

The Commonwealth had then either to bring this action or await commission of one of the acts mentioned, and then commence tedious and vexatious litigation, under section 180, with Louisville & Nashville Company in full possession of the roads in question, and probably armed with a deed as purchaser of the franchises and properties at a judicial sale.

It is too plain for further discussion tile Commonwealth had the right to bring this action.

2. It is contended that by section 3 of a statute of this State, approved January 17, 1856, right was given to .Louisville & Nashville Company to purchase and hold any and all railroads that then were, or might ever be, constructed within limits of Kentucky, whether parallel and competing lines or not; and that in virtue of section 10, article .1, of the Constitution of the United States, providing “no State shall pass any law impairing the obligation of contracts,” the right still exists, and may be exercised without hindrance or limit, notwithstanding both the State Constitution and public policy forbid. That section reads as follows: “That said company may, under provisions of the 13th section of this act, from time to time, extend any branch road and may purchase and hold any road constructed by another company or may agree on terms to receive the cars of other roads on their said roads., but shall charge for the same the usual freight.”

When the language of a statute is clear, unequivocal and capable of but one meaning, there is no room for construction, nor choice for a court but to enforce it as written. But when looking to the subject-matter and object of a statute, intention of a. legislature can be collected, words may be modified, altered or supplied so as to obviate any repugnancy or inconsistency with such intention. (Sutherland on Construction of Statutes, sec. 218.) And “all words, if they be general and not express and precise, are to be restricted to the fitness of the matter. They are to be construed as particular, if the intention be particular; that is, they must be understood as used in reference to the subject-matter in the mind of the legislature, and strictly limited to it.” Endlich on Interpretation of Statutes, sec. 86.)

Louisville & Nashville Company was authorized by its charter to construct a railroad from Louisville to the State line in direction of Nashville, but, without authority of Tennessee Legislature, subsequently given, could not have continued it farther.

Counsel refer us to an amendment of the charter passed by the legislature of this State in 1854, making it lawful for ■the company to “unite their said road with any oth^er road connecting therewith.” But as it does not appear to have been re-enacted by the legislature of Tennessee, nor to give authority to purchase or hold parallel or competing lines, we need not consider it. It was, however, followed by a statute of Tennessee, containing sixteen sections', and embodied in the statute of January 17, 1856, mentioned and described in first section thereof as follows: “That an act passed by the legislature of Tennessee, at the session of 1855, entitled an act to charter the Louisville & Nashville Railroad Company and the several acts amendatory of said act, passed by the legislatures of Kentucky and Tennessee, be and the same is re-enacted in the State of Kentucky, in the following sections and words.” Then come the -sixteen sections in which are provisions for issuing bonds, of the State of Tennessee to aid Louisville & Nashville Company to build a bridge across Cumberland River and to purchase railroad iron; also in regard to subscriptions to capital stock of the company by counties of that State; sec. 13 being as follows: “Provided nothing herein contained shall be construed to prevent Louisville & Nashville Railroad Company from admitting branch roads to connect with it at any point or points to be agreed upon between said company, and those who have or may subscribe stock for the construction of any branch road. . . . And said company is hereby vested with the power to issue its bonds under provisions of this act to obtain means to construct and equip any branch road, the bonds to express on their face the purpose for which they were executed; and to secure their payment may execute a deed of trust or mortgage, for payment of which the rights, credits, property and franchise procured for said branch by use of its means shall alone be liable. The credit, rights and profits of the main stem shall not be used to create means to construct, or make liable- for any debt or liability created to construct branch roads, etc.”

It will be observed that the subject matter of sec. 13 of the Tennessee statute is branch roads that Louisville & Nashville Company was thereby authorized to admit to connect with the main stem; but as State aid was to be furnished by Tennessee for building it, there was a special provision it should not be incumbered with cost of constructing such branch roads.

The subject matter in mind of the legislature'of Kentucky when enacting section 3 of the statutel of January 17, 1856, was likewise branch roads, it being there provided that said company might, from time to time, extend any bramch road. And as the words of that section immediately following which it is contended confer the right claimed, viz.: “And may purchase and hold any road constructed by another company,” are general and not express and precise, they should, according to the rule of construction referred to, being simply a rule of common sense and common fairness, be restricted to the fitness of the matter. And that such was intention of the legislature is plainly shown by the words, next following, “or may agree on terms to receive the cars of other roads on their said road;” for a beneficial interchange of cars could and would be reasonably expected to take place between a main line and connecting branch, or even between two roads that meet and form a continuous line; but not between two parallel or competing lines. Exercise of the power conferred upon Louisville & Nashville Company to admit branch roads to connect with the main stem, or to extend branch roads, which was intended to mean practically the same, was, at date of the statute of January 17, 1856, as now, regarded as beneficial to the public, and construction of one or more by local aid as not improbable, for both the Memphis and Lebanon branches were constructed not long after completion of the main road to.Nashville. But the power to purchase and hold parallel and competing lines was manifestly not asked nor intended to be given. For, instead of seeking legislative authority to purchase such roads Louisville & Nashville Company was at that time without adequate means to complete its own. Though the company had in 1856 been organized five years only thirty-one of one hundred and eighty miles of its road was then made, and it could not have been completed without incum,bering it with mortgage debts, and was not until about nine years after the charter was granted.

That the legislature then regarded it contrary to the public good and did not intend to give the power in question is made further manifest by “An act to authorize railroad companies to make certain contracts with each other,” approved January 22, 1858, which provides that all railroad companies in this State shall have power and authority to make with each other, contracts of the following character: 1. For the consolidation of either the management, profits or stock of any two or more companies, the roads of which are or shall be so connected as to form a continuous road. 2. For leasing of the road of one company to another; provided the roads so leased shall be so connected as to form a ■continuous line.

The construction of that act was involved in the case of Hancock v. Louisville & Nashville Railroad Company, 145 U. S., 409, the Supreme Court using this language: “The evil which was intended to be guarded against by this limitation was the placing of parallel and competing lines under one management, and the control by one company of the general railroad affairs of the State through the leasing of roads remote from its own, and with which it has no¡ physical or direct business connection.

Though, thirty-eight years since the passage of the act of 1856 and thirty-six years since the act of 1858 had elapsed when this action ’was commenced, Louisville & Nashville Company never before claimed or attempted to exercise the right to purchase and hold parallel and competing lines, except about 1878, when it purchased the road from Louisville to Cecilia Junction, which was held only a short time and then sold to Chesapeake, Ohio & Southwestern Company.

To construe the statute as counsel urge, we must disregard the established rule that franchises and privileges not in clear and express terms granted are to be taken as withheld, assume the legislature granted the extraordinary and dangerous privilege in intentional disregard of public policy, and that it deliberately betrayed the State of Tennessee, which had given State aid to Louisville & Nashville Company, when it was not, and upon faith it would never be, invested with power so detrimental to its own interest and that of its citizens.

But there is an obstacle to the proposed purchase, even if Louisville & Nashville Company had statutory power. The charter of Chesapeake, Ohio & Southwestern Company prohibits consolidation of its capital stock with that of any company whose lines are parallel and competing, as those of Louisville & Nashville Company are. And for the latter to purchase and hold the road of the former would be as much an unlawful act as if done in violation of an express provision of its own charter.

But it is contended the question of right involved in this-case is controlled by that clause of the constitution of the United States which provides that “congress shall have power to regulate commerce arising among the States.” The power of a State by proper enactments to foster competition and prevent monopoly within its own limits of the business of railroad transportation, has never been made a question in the Supreme Court of the United States, notwithstanding nearly two-thirds of the States have, and for years have had, provisions on the subject of the same character, and quite as stringent and comprehensive as that of section 201. Moreover, in several of them, the validity of such provision has been directly adjudicated and sustained. That there should be such consensus of opinion and hitherto no dispute of, the right and necessity for State enactments on the subject is persuasive of their validity and at same time convincing of their necessity.

In our opinion they are not in a proper sense regulations of interstate commerce, nor does their enforcement infringe, upon the power of congress to regulate commerce between the States. Whether Louisville & Nashville Company does or not acquire the roads in question, will not affect traffic or business on those roads that are now in operation and will continue so irrespective of its right to purchase and hold them, that the legislature of this State only can give.

The purpose and effect of section 201 is simply to prohibit, because against public policy, the acquisition and control of those roads by any company that will use and operate them so as to hurt the public.

It was not intended to regulate the commerce of which these roads are mere vehicles, nor to prescribe rules by which that commerce is to be carried on.

Judgment affirmed.