171 F. 480 | U.S. Circuit Court for the District of Western Oklahoma | 1909
(after stating the facts as above). The question of the jurisdiction of this court calls for first consideration. It must be held that diversity of citizenship is sufficiently alleged. The complainant is incorporated under the laws of the state of Missouri, and the defendants are citizens of the state of Oklahoma. The first section of the legislative act by its terms fixes the domicile in the state of every corporation transacting business in the state which complies with its Constitution and laws. It is not clear whether the complainant has complied therewith. If it be assumed that it has done so, as contemplated in this act, still it remains a foreign corporation so far as the jurisdiction of the federal courts is concerned. A similar statute was construed in the case, of Southern Railway Co. v. Allison, 190 U. S. 326, 23 Sup. Ct. 713, 47 L. Ed. 1078, where it was held that by compliance with the same a corporation “may be made what is termed a domestic corporation, or in form a domestic corporation,” but that it does not thereby become a citizen of the state “so far as to affect the jurisdiction of the federal courts upon a question of diverse citizenship.”
The argument is that both sections should be construed together, and that they authorize consolidation and the formation of a new corporation only, and that this was the necessary result of the transfers. Section 1028 provides that a railroad corporation may consolidate its stock, franchises, and'property with any other railroad corporation, whether within or without the territory, when they can be lawfully connected and operated together, etc., upon agreed terms by any name selected, which within the territory shall possess all the powers, franchises, and immunities, and be subject to all the liabilities, etc., of domestic corporations, etc.; the articles to be approved by the vote or assent of stockholders as specified, and a copy of the articles and the record of the proceedings to be filed with the Secretary. It further provides that any railroad corporation whose line is wholly or in part within the territory, whether chartered by or organized under the laws of the territory, or of any state or territory, or of the United States, may lease or purchase and operate the whole or any part of any other railroad, together with the franchises, powers, etc., when the roads may be lawfully connected or operated together, constituting a continuous line, etc., provided that the capital stock of the company formed by such consolidation shall not exceed the sum of the capital stock of the consolidating companies at par value, etc. Section 1067 provides that any railroad company owning any railroad in the territory (the words “and any railroad company organized under the laws of this territory owning a line of railroad either within or without the territory” being added by the amendment of 1901 [Laws 1901, p. 86, c. 11, art. 4, § 1]), may sell or lease its railroads, etc., or any interest therein, with all the property, rights, privileges, atid franchises thereto pertaining to any other railroad company of the territory, or of any state or territory, or of the United States, the lines being continuous, etc., “which such purchasing or leasing company shall have the right by contract or otherwise when completed to use or operate,” and that any railroad company of the territory or of any state or territory, or of the United States, purchasing or leasing a railroad in the territory/’ shall possess and enjoy all the rights, powers, privileges, franchises conferred by the laws of this territory upon a railroad corporation formed thereunder.”
It is not apparent why the two sections, even if they should be tVeated as parts of one act, do not,provide for different transactions, one a consolidation of railroad property and the formation of a new local corporation, and the other a conveyance of the railroad property, fran
However, complainant sets out another independent ground of jurisdiction — a controversy arising under the Constitution and laws of the United States. City Railway Co. v. Citizens’ R. R. Co., 166 U. S. 557, 17 Sup. Ct. 653, 41 L. Ed. 1114. Upon either ground — that is, diverse citizenship, or a controversy arising under the federal Constitution or laws — an amount in dispute, exceeding $2,000, exclusive of interest and costs being also alleged, the case falls within the provisions of Judiciary Act Aug. 13, 1888, c. 866, 25 Stat. 433 (U. S. Comp. St. 1901, p. 508). U. S. v. Sayward, 160 U. S. 493, 16 Sup. Ct. 371, 40 L. Ed. 508.
The state being entitled to immunity from suit, objection is made to the jurisdiction of the court on the ground that the suit is one against the state. The question whether, when state officers are defendants, the suit is against the state, has been the subject of frequent decisions by the courts. The only difficulty in a given case lies in the application of the principles which have been judicially^ settled. The test is not always whether the state is named as a party. It may virtually be the real party,- if its officers are sued as representing the state’s action or liability. In such case, or where the officers proceeded against are charged with no duty relative to the statute which is assailed, the suit may not be maintained; but where the officers, under color of an unconstitutional statute, or assuming to proceed under a valid law, but going beyond the powers thereby conferred, threaten to commit an act of wrong and injury to the rights and property of another, a suit to enjoin them is not a suit against the state. Pennoyer v. McConnaugh ey, 140 U. S. 10, 11 Sup. Ct. 699, 35 L. Ed. 363; Reagan v. Farmers’ L. & T. Co., 154 U. S. 362, 14 Sup. Ct. 1047, 38 L. Ed. 1014; Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 418, 42 L. Ed. 819; Fitts v. McGee, 172 U. S. 516, 19 Sup. Ct. 269, 43 L. Ed. 535; Ex parte Young, 209 U. S. 123, 28 Sup. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932. The same objection was overruled in the recent cases of C., R. I. & P. Ry. Co. v. Ludwig (C. C.) 156 Fed. 152, and C. R. I. & P. Ry. Co. v. Swanger (C. C.) 157 Fed. 783. The authorities justify the conclu
(t will be observed that the forfeiture and revocation provided by the legislative act are rested upon but one cause- — the fact of a written declaration in a court of the slate of a domicile in another state. Evidently the act is aimed against the removal of causes from the state courts to the federal court on the ground of diversity of citizenship, because it is based on the assertion in court of a fact necessary to secure such removal. This is conceded; but does such removal of a case to a federal court furnish any justification for the consequences of the act ? It is claimed, in substance, as understood by the court, that the act is a rightful exercise of police power, based not on any specific authority to that effect, but upon precedents declaring analogous principles, and that inasmuch as residents and nonresidents had in the former territories the right of litigation only in the courts thereof— in the Indian territory in the United States- courts and in Oklahoma Territory in the territorial courts — no right of removal being there enjoyed, the state could, on a basis of nondiscrimination, by this means, put all litigants on a parity and confine their litigation to its courts. The police power of the state, it is true, is a broad and extensive power. It is the power “to prescribe regulations to promote the health, peace, morals, education, and good order of the state, develop its resources, and add to its wealth and prosperity.’ Barbier v. Connelly, 113 U. S. 27, 5 Sup. Ct. 357. 28 L. Ed. 923. But plainly the notion that: the subject of federal jurisdiction is within the limits of that power is a mistake. The right to resort to the jurisdiction of the federal courts, including the right of removal thereto, is a constitutional right conferred by the federal Constitution and the laws of Congress enacted in pursuance thereof. It is an absolute right that cannot be impaired or abridged by any statute of a state. Barrow Steamship Co. v. Kane, 170. U. S. 100, 18 Sup. Ct. 526, 42 L. Ed. 964; Butler Bros. v. U. S. Rubber Co., 156 Fed. 15, 84 C. C. A. 167. The right to litigate in the federal courts of this state has no qualification annexed; hut it is the same as in the other states. Enabling Act June 16, 1906, c. 3335, § 13, 34 Stat. 275 (U. S. Comp. St. Supp. 1907, p. 149). And, furthermore, it is competent, for Congress in exerting its constitutional power to vest the federal courts oí a state with the jurisdiction of proper cases theretofore pending in the territorial courts. Koenigsberger v. Richmond, 158 U. S. 48, 15 Sup. Ct. 751, 39 L. Ed. 889. The supposed cause assigned in the act is therefore quite the opposite of any support for its operation.
Nor is the. legislative act to be vindicated upon any reserved power of repeal of former legislation. It is quite unnecessary to consider whether, or to what extent, any such power may be vested in the Legislature, inasmuch as it has not attempted to act in the only manner given to it, namely as “that no injustice shall be done to the incorporators.” State Const. art. 9, § 47; Vicksburg v. Vicksburg Waterworks Co., 202 U. S. 453, 26 Sup. Ct. 660, 50 L. Ed. 1102; Noble State Bank v. Haskell (Okl.) 97 Pac. 602.
It is therefore to be determined whether the act may be upheld against the complainant upon the ground which is insisted upon that
“A state has power to refuse permission to a foreign insurance company to do business at all within its confines, and as it has power to withhold that permission once given, without stating any reason for its action, the fact that it may give what some may think a poor reason or none for a valid act is immaterial.”
But that there is an important qualification on the legislative power of a state in dealing with foreign corporations is pointed out in the former case, where it was said:
“No right of the complainant under the laws or the Constitution of the United States, by its exclusion from the state, is infringed; and this is what the state now accomplishes. There is nothing therefore that will justify the interference of this court.”
By the Constitution of the United States it is provided that no state shall impair the obligation of contracts or deprive any person of property without due process of law. Upon these grounds, among those relied upon, the complainant maintains that the legislative act enforced against it infringes its constitutional rights.
The rights asserted by the complainant had their origin prior to the admission of the state. The standing to be accorded those rights is well settled. The Indian Territory was not an organized territory, but Oklahoma Territory was provided with territorial government by its organic act of May 2, 1890. Without question, the United States had entire dominion and sovereignty, national and and municipal, and federal and state, over both territories. American Insurance Co. v. Canter, 1 Pet. 511, 7 L. Ed. 242; Shively v. Bowlby, 152 U. S. 48, 14 Sup. Ct. 548, 38 L. Ed. 331; Mormon Church v. U. S., 136 U. S. 42, 10 Sup. Ct. 792, 34 L. Ed. 478. And the included legislative power over these territories possessed by the states Congress was authorized to intrust to the territorial Legislature, subject to such limitations on its exercise as-Congress might impose and to abrogation by it in its’ discretion. The legislative power of Oklahoma Territory was by section 6 of its organic act extended “to all rightful subjects of legislation not inconsistent with the Constitution and laws of the United States,” etc. That power was coequal with that of a state within its limits. Simms v. Sims, 175 U. S. 168, 20 Sup. Ct. 58, 44 L. Ed. 115. In keeping with its authority, Congress could lawfully exercise the power of eminent domain in the territories and confer upon a corporation of any state or territory the right to construct and operate a railroad within the territories. Cherokee Nation v. Kansas Railway Co.,
. By certain acts of Congress a portion of the original constructing companies were granted the right to acquire and appropriate rights of way and to build, maintain, and operate their railroads, or were granted rights of way for the purpose of exercising those rights. Terms and obligations were imposed by these acts which are variant and not common to all; but among them may be mentioned special regulations respecting the acquirement of rights of way and payment therefor, obligations in the way of payments to Indians, liability to taxation for their benefit by Congress and the state, regulations with respect to transportation privileges and charges, local and foreign, crossings, carriage of the mails, etc. The rights of the remaining companies accrued under the laws of Oklahoma Territory, which extended generally the authority to construct and operate connecting railroads. Upon the faith of these laws, which were duly accepted, great outlays of capital were made in building and equipping these lines; the railroad property being largely permanent and immovable, and the use of the property being its chief value- — a component part of it and inseparable from it. By the laws of Oklahoma Territory also the purchase of railroads and franchises and the operation of such railroads by both domestic and foreign companies with connecting lines were expressly authorized. In the most of the cases, the original acts of Congress, by direct and indirect provisions, authorized the transfer of the corporate property and franchises of the constructing companies in the Indian Territory. It is alleged that these various lines with the accompanying franchises were transferred to the complainant, and that the purchases were made in consideration of great investments of capital, pursuant to the invitations, offers, and conditions of the federal and territorial laws. There is controversy relative to the legislative authority for the sale and purchase of a part of the property and franchises of the constructing companies in the Indian Territory, but none in Oklahoma Territory. Such controversy, however, need not he entered upon or decided. The proposal of the defendants under the legislative act here assailed is to put an end to the entire right of the complainant to carry on business in the state.
In view of the legislation and transactions referred to, did complainant secure a “license or charter” for the conduct of railway operations within the state, of such character that it was subject to forfeiture and revocation by the Legislature at will without any cause, resulting in a great depreciation of the railroad property and visiting an,enormous loss upon all holdings and interests therein, and at the same time working an incalculable inconvenience and injury to the public, desirous or in need of -the facilities of railway transportation and travel over this railroad in the state? Or did complainant enter into such contracts now binding upon the state that the proposed termination of its right to continue its railway business and the use of its property within the state infringes its constitutional rights by impairing the obligations of those contracts and depriving it of its property without due process of law?
Whether the complainant be considered as having succeeded by transfer to direct grants made to the original companies of the right to construct, own, and operate their railroads and standing precisely in their relation to the state, or as having accepted and made its investments upon the faith of the proposals extended generally or specially by statutes conferring the same right upon it as a purchasing company, is not of consequence. In the light of the authorities, the same result was accomplished, and contracts were made. As was said in the case of Reagan v. Farmers’ L. & T. Co., 154 U. S. 392, 14 Sup. Ct. 1047, 1052, 38 L. Ed. 1014:
“In the famous Dartmouth College Case. 4 Wheat. 518, 4 L. Ed. 620. it was held that the charter of a corporation is a contract protected by that danse of the national Constitution, which prohibits a state from passing any law Impairing the obligation of contracts. The International & Great Northwestern Railroad Company is a corporation created by the state of Texas. The charter which created it is a contract whose obligations neither party can repudiate without the consent of the other. All that is within the scope of this contract need not be determined. Obviously, one obligation assumed by the corporation was to construct and operate a railroad between the termini named; and, on the other hand, one obligation assumed by tbe state was that it would not prevent the company from so constructing and operating the road.”
And in the case of New Jersey v. Yard, 95 U. S. 104, 24 L. Ed. 352:
“Unless forbidden by some exceptional constitutional provision, the same authority which can make a law can repeal it. The Constitution of the United States has imposed such a limitation upon the legislative power of all the states by declaring that no state shall pass any law impairing the obligation of a contract. * * * It has become the established law of this court that, a legislative enactment, in the ordinary form of a statute, may contain provisions which, when accepted as the basis of action by individuals or corporations, become contracts between them and the state within the protection of the clause referred to of the federal Constitution.”
In the case of Home of the Friendless v. Rouse, 75 U. S. 430, 19 L. Ed. 495, where it appeared that, in order to encourage the establishment of a charitable institution, it was' provided by the statute
“There Is no necessity of looking for the consideration for a legislative contract, outside of the objects for which the; corporation was created. These objects were deemed by the Legislature to be beneficial to the community, and litis benefit constitutes the consideration for the contract, and no other is required to support it. * * * We are of the opinion that the state of Missouri did make a contract on sufficient consideration with the Home of the. Friendless, lo exempt The properly of the corporation from taxation, and that the attempt made on behalf of the state through its authorized agent, notwithstanding this agreement lo compel it to pay taxes, is an indirect mode of impairing the obligation of the contract, and cannot be allowed.”
In the case of Powers v. Detroit & Grand Haven Ry., 201 U. S. 559, 26 Sup. Ct. 556, 558, 50 L. Ed. 860, a statute of Michigan was upheld which limited the taxes upon a railroad. The court said:
“Surely no clearer case of contract cun be presented Ilian one in which a Legislature passes an act in respect, to a particular corporation making special provision concerning taxation, and does so with a view of inducing large expenditures by the corporation and the completion of an unfinished road, whose completion is deemed of great importance, and where (he special provision is. as required, formally accepted, the expenditure made, and the road completed.”
In the case of Erie Railroad v. Pennsylvania, 153 U. S. 642, 14 Sup. Ct. 952, 957, 38 L. Ed. 846, the railroad company, incorporated in New York, was by the Acts of 1841. (P. L. 28) and 1846 (P. L. 179) of Pennsylvania, granted the authority to build partly in Pennsylvania its line projected from New York to Lake Erie, and certain terms, conditions, payments, and taxes were imposed. By Laws 1885 (P. L. 194) § 4, an additional tax on its indebtedness to residents of the state was required, and the Supreme Court of the United States, reversing a judgment of the state court upholding this tax, held:
“We are of the opinion that, the fourth section of the Laws of 1885, in its application to this railroad company, impairs the obligation of the contract between it atul ¡Pennsylvania, is disclosed by the ads of 1841 and 1840, and by what was done by that company niton the faith of those acts. * * * Consistently with those terms and conditions, Pennsylvania cannot withdraw the assent which it gave, upon a valuable consideration, to the construction, and operation of the defendant's road within its limits. Nor can the right of the company to enjoy the privileges so obtained be burdened with conditions not prescribed in the ads of 1841 and 1846, except such as the state, in the exercise of its police power for purposes of taxation, and for other public objects, may legally impose in respect to business carried on saiel property situated within her limits.”
In American Smelting Co. v. Colorado, 204 U. S. 103, 27 Slip. Ct. 198, 51 L. Ed. 393, the company, a corporation of New Jersey, had paid the fees required by the laws of the state of foreign corporations, as a condition precedent to transacting business in the state, and by those laws they were subject to the same liabilities as domestic corporations. It then made an investment of $5,000,000. Eater an additional tax was imposed upon foreign corporations, which this company resisted, and a judgment of forfeiture therefor, affirmed by the Supreme Court of the state, was reversed by the Supreme Court of the United States, where it was held that the company obtained the
In Chicago, R. I. & P. Ry. Co. v. Swanger (C. C.) 157 Fed. 783. appeared that by the laws of the state railroad corporations of adjoining states were authorized to build or acquire continuous lines in the state and were to be subject to the same regulations as corporations of the state. A later act was passed which provided that, if a railway corporation doing business between points in Missouri should without the consent of the other .party remove a case from a state court to an United States court, its license to do business in the state should be forfeited and penalties added. The court said: ;
“It is stoutly denied that there is any contract, and, of course, there must be a contract before the obligation of one can be impaired. What was the contract? The state gave it the power of eminent domain. In' many instances it gave it pecuniary aid. It gave it the rights of a common carrier. It gave it the right to charge reasonable prices for its services. It promised it the equal protection of the laws as to taxation, and equal protection with others against all who might seek to injure its property or earning power. The state in effect said: ‘Make your investments, and we will give you these rights.’ The company accepted the offer and made the investments, and now cannot remove if it so desired, because it has a contract in perpetuity to serve the people as a common carrier and to give efficient service for reasonable remuneration. That there is a contract is easily discerned.”
According to the principles of the adjudged cases, while they differ in their facts, it is- established that by the purchase of these railroads, pursuant to the laws applicable and upon the terms, obligations, and considerations shown, contracts were made, obligations of which are that the state, succeeding to the domain of the territories, should respect and not destroy the vested right of the complainant to the use and benefit of its property in carrying on its railroad operations within the state and should not vary the terms of the exercise of that right beyond the legitimate scope of its police powers.
The act, so far as it has application to the complainant, proposes the revocation and forfeiture of valuable rights and privileges amounting to franchises. There being, as already shown, an-absence of legislative power reserved or properly exercised to that end, this could not ,be accomplished by legislative declaration, and in no event except upon adequate grounds, by judicial proceedings regularly instituted for that purpose, and it is not the subject of collateral inquiry. 2 Clark & Marshall, Pri. Corp. § 313; 1 Elliott on Railroads, §§ 47, 48, 55. It is clear therefore that the enforcement of the act against the complainant would not only impair the obligations of contracts, but also deprive it of its property without due process of law.
The complainant challenges the act for other reasons. It is asserted that it is an interference with interstate commerce — a subject committed by the federal Constitution to congressional regulation. The language of the act confines its operation to “transacting business within said state of Oklahoma.” If it extends to the interstate transactions
Further grounds are also urged against the validity of the act; but a decision thereon is not essential, and for that reason, and not for want of merit, they may be withheld from present consideration.
It remains to be determined whether the foregoing propositions are controlling, in view of certain grounds advanced by the defendants in support of a contrary ruling.
The argument is made that, because of the public nature of the business of a railway company, it is a joint enterprise, and that the state may deprive it of- its public property. The inquiry is submitted: “Why may not the public, a partner in the industry, prohibit the further prosecution of the joint enterprise?” The question has already been answered. The contract relations involved are such that the state is bound to adhere to the obligations imposed by them. A different answer is said to be found in the case of Myers v. Manhattan Bank, 20 Ohio, 302, which is supposed to hold that a state may prohibit foreign corporations in the further use of a banking franchise granted before statehood; but that case decided that an act of a voluntary state Legislature of Michigan, before the admission of the state, and during the existence of, the territorial government, incorporating and authorizing 'the bank to do a banking business at Manhattan, in Lucas county, was void, and that even if duly incorporated by the law of Michigan, yet, the privilege or contract being in conflict with the laws of Ohio, it was not valid therein after the transfer to Ohio of Lucas county.
Another contention of the defense is that, as the state has succeeded to the power of eminent domain within its limits, the complainant, not havitig complied with section 31 of article 9 of the state Constitution, is excluded from the use and benefit of its right of way. That section provides that no railroad corporation organized under the laws of any other state or of the United States shall be entitled to the benefit of the right of eminent domain in the state until it shall become a body corporate pursuant to or in accordance with the laws of the state. It is to be assumed that the state has succeeded to this power upon an equality with the other states of the Union. Still, the proposition is subject to fatal objections. If there were prior contracts whereby the use and enjoyment of the right of way were vested in complainant, that section, if given the application contended for, would be, as has been shown, obnoxious to the federal Constitution; but regarding the language of the section, and in the absence of the expression of a contrary intention, it would seem plainly intended to refer only to future applications for the benefit of the right. Such is fhe rule of construing Constitutions. Cooley, Const. Lim. (7th Ed.) 97. Furthermore,
“The entire instrument is to be examined in arriving at the meaning of any part thereof, and to be construed as a whole. Effect is to be given, if possible, to each section, clause, and word; and, if any part be doubtful, it must be interpreted with every fair intendment to harmonize with the main purpose and not to defeat it.”
It is also contended that the complainant itself surrendered its right to carry on interstate or intrastate business by acquiring its railway property from several companies which under a joint ownership by its stockholders ceased to be in active competition for trade and commerce, in violation of the Anti-Trust Act of Congress of July 2, 1890 (Act July 2, 1890, c. 647, 26 Stat. 209 [U. S. Comp. St. 1901, p. 3200]), as applied in the case of Northern Securities Co. v. U. S., 193 U. S. 197, 24 Sup. Ct. 436, 48 L. Ed. 679, and the anti-trust laws of the state, and that this defense may here be availed of upon the doctrine of the case of Continental Wall Paper Co. v. Voigt, 212 U. S. 227, 29 Sup. Ct. 280, 53 L. Ed.-. In the former case it was said:
“What the government particularly complains of, indeed, all that it complains of here, is the existence of a combination among the stockholders of competing railroad companies which, in violation of the act. of Congress, restrains interstate and internátional commerce through the agency of a common corporate trustee designated to act for both companies in repressing free competition between them.”
The contention is not based upon any facts alleged in the amended bill. It does not appear that competitive lines were acquired, or that there was any combination of stockholders. There is no dccasion to pass upon these purely abstract questions of law upon the subject of either national or state anti-trust legislation. -
With reference to the supposed application of section 8 of article 9 of the state Constitution, proscribing and limiting the right of foreign and federal corporations to consolidate with, lease, or purchase parallel or competing lines, and of section 9 of 1;hat article, prohibiting domestic corporations from consolidating with or selling their property to such corporations, it is sufficient to say, without intimating any further opinion, that by the language of those sections and the settled principles of construction they do not apply to past transactions.
Another contention is that the congressional acts which granted the corporate rights to the original companies contained- terms relative to maximum transportation charges amounting to conditions, and that the complainant being bound to plead a performance of those conditions, but having departed from such rates, and thus violated and forfeited its contracts, has no standing to insist upon them. Assuming, but not deciding, that these rates have not been superseded by subsequent legislation, it is clear that no burden of pleading an adherence to them can rest upon the complainant, because such an issue could not be inquired into collaterally, and hence is no proper subject to be set out in any pleading in this suit.
The demurrer will be overruled.