| Tex. | Jul 1, 1859
This is a suit in the nature of a quo warranto, instituted by the State of Texas against the Southern Pacific Railroad Company, claiming a forfeiture of its charter, upon various grounds specified in the petition and amended petitions. Exceptions, general and special, were filed to the petition, and sustained by the court below.
The first and most prominent objection to the action is, the want of authority on the part of the attorney-general of the state, and district attorney of the district, whose names are signed to the petition, to bring the suit in the name of the State. It is contended that the State, acting in its legislative capacity, has not authorized such a suit to be brought, either by any general law, or special enactment; and that, without such authority, it cannot be maintained. That the State not having in any manner manifested its wish to proceed against this corporation, the attorney-general and district attorney, or any other person, have no right to use the name of the State in prosecuting this suit, as they have done.
This objection does not seek to call in question the right of these officers to use the name of the State in prosecuting and defending ordinary actions, in which the State has an interest against individuals or corporations. But it assumes that this is an extraordinary proceeding, involving the “ life of the corporation;” that as the State, through its legislative department alone can call it into existence, that department alone can determine its existence. Or admitting that the constitution does not confine
It will be proper to consider these propositions separately, as they involve very different questions, though embraced in the same objection.
The first, is based on the section in the “ general provisions” of . the Constitution, which says, that “ two-thirds of the legislature shall have power to revoke and repeal all private corporations by making compensation for the franchise.” (Hart. Dig. 74.)
The history of corporations in the United States, exhibits the increasing tendency of capital to seek employment under their protection, as the only avenue left in this country of equal rights, to special and exclusive privileges; and the most persistent efforts to assert, maintain and perpetuate those privileges, in entire independence of the power and control of the State creating them, by appealing to the federal judiciary. Corporations have even contested the right of eminent domain in the State, and claimed an exemption from the operation of this high power, to which all other property is subject. To forestall, in part, such pretensions, this clause was inserted in the constitution. It is intended as a direct assertion of supremacy by the State, over them, at discretion, subject only to the conditions of a two-thirds vote of the legislature, and the payment for the franchise revoked. This Well-considered precautionary declaration of a reserved permanent right, cannot be construed into a limitation upon the power of the State, confining it to that mode of revocation alone; for there can be no reason to suppose, that it was intended that chartered privileges which should be abused, or let go into disuse, should be paid for, or be protected, by requiring a vote of two-thirds of the legislature to get rid of that which may have utterly failed to accomplish the object of its creation.
What, then, is the foundation of this claim of a corporation, to the additional exclusive privilege, over and above the rights of citizens and officers, of being responsible.alone to the legislative department, in determining and directing a forfeiture ? It is said, that the State may waive a forfeiture; that it may not choose to exact it, though the cause of forfeiture, prescribed by law, may exist; that there is always a discretion to be exercised by the State, (involving a great question of policy,) whether the forfeiture shall be claimed, or not; which discretion still vests and abides in the sovereign power, the legislature, as it has not been
The error of this position, it is believed, consists in the assumption, that a general or special statute, directing a suit of forfeiture to be brought, is necessary, in order that the will of the State may be known, as to whether or not a forfeiture shall be claimed. For whenever the State declares, by its legislature, that a particular act of malfeasance, or nonfeasance, done by a corporation, or its officers, shall be a forfeiture of its charter, the discretion is then exercised, and the will of the State, that the forfeiture shall be claimed, is then expressed. Such expression of its will continues in full force, until it is revoked by the legislature. It is obligatory, and imposes a duty upon all the officers of the State, who execute or administer the law. Those officers cannot suspend the law. Laws are made to be executed against those who infract them, and not to be held suspended in terrorem. The constitution has anticipated this, and provided for it, by saying, in the Bill of Rights, that, “no power of suspending laws in this state, shall be exercised, except by the legislature, or its authority.” (Hart. Dig. 53, § 20.)
It cannot be presumed that the legislature would make an act a cause of forfeiture, which did not, in its judgment, involve such an abuse or dereliction, as to merit a revocation of the franchise. Nor can it be said, that it does not wish a forfeiture to be enforced, as the legal consequence of such abuse or dereliction, when it has so declared it shall be. When such a law has been passed, the only questions are, has the law furnished a remedy, to enforce it ? and, are there officers appointed, upon whom the duty devolves, to enforce it ? The will of the State, that it ought to be, and shall be enforced, is expressed in the passage of the law.
In the adoption of the common law, we adopted the remedy of quo warranto, against corporations. From that system, we derive the attributes and responsibilities of a corporation, when created. (1 Blackstone, 467, 485; Dallam, 507; 2 Tex. 158" court="Tex." date_filed="1847-12-15" href="https://app.midpage.ai/document/wright-v-allen-4886949?utm_source=webapp" opinion_id="4886949">2 Texas Rep. 158; 4 Id. 406; 5 Wheat., 291" court="SCOTUS" date_filed="1820-03-08" href="https://app.midpage.ai/document/wallace-v-anderson-6608006?utm_source=webapp" opinion_id="6608006">5 Wheaton, 291.) The governor, attorney-
The statute makes it the duty of the district attorney, to attend all terms of the District Court, “ to conduct all prosecutions for crimes and offences cognisable in such court, to prosecute and defend all other actions in which this State is interested, and to perform such other duties as may be prescribed by the constitution and laws of the State.” (Hart. Dig. 226.) In England, the king could direct and control the bringing of suits, by his direct control over the officer who might be attorney-general. In this state, such direct control, as a legal power, is cut off by the independence of the law-officers of the State. Still it does not follow that all official connexion is severed between the supreme executive officer of the State, and those who represent the State in our courts. The power of the governor may be advisory or suggestive of duty in this case, as it is in many of his functions. And, although absolute subjection does not exist, harmony between executive officers, who are impelled by a common duty, is to be expected generally, unless a difference of opinion should exist as to the proper course to be pursued. That is an inconvenience, which is consequent upon maintaining' the independence of the inferior officers. Its only effect may be, to prevent suits from being brought occasionally, which might otherwise be brought. But this want of subjection, and the consequent possi
The district attorney, as we have seen, is required, as a duty imposed on him, to prosecute all actions in which this State is interested, in the District Court. Bringing the action by filing a petition, is a part of its prosecution. There is no limitation to his duty, in prosecuting suits in the District Court, but the interest of the State. This is an “ action in which this State is interested.” It has, by a charter, vested certain franchises in a railroad company. These constitute property previously belonging to the State, which, by the grant, is now possessed and enjoyed by the company. The State has declared, by its laws, that upon the happening of certain events, or the omission of certain things, this property, the franchise, shall be forfeited. The State is interested, in a legal sense, that it shall be forfeited, if the contingency has happened. It is interested, because the company has property of the State, (the franchise,) and the consideration of the grant has failed, or the condition upon which it was granted has been broken. The State is interested in reclaiming and recovering its own, whether it be a forfeited franchise, a penalty, a debt, or other property. The district attorney has as much right to bring the suit in one case, as in the other. His only warrant, in either case, is, that the State is interested.
It is no answer to this, to say, that the district attorney must exercise an important privilege, in determining when the right of the State to bring the action, has accrued. That must be determined, in all suits brought by him; on bonds of officers, on debts due to the State, penalties incurred, informations, and all other suits, not specifically directed by statute. This same privilege would have to be exerted by him, if this duty was imposed on him by a statute, directing such a suit, and defining the contingency upon which it must be brought. This privilege arises out of the very nature of an executive office, and is an incident to its duties. Establish the duty, and the incident fol
It is unnecessary to comment on the respective powers of the attorney-general, and district attorney, as they have joined in bringing this action. While our statutes seem designed to make a division of powers and duties between them, in representing the interest of the State, in the several courts, they evidently contemplate a correspondence, for advice and information, between them. So far as their duties are expressed in the statute, it seems to fall, more appropriately, within the province of the district attorney, to prosecute this, or any other suit for the State, in the District Court.
There are very few statutes requiring the district attorney, specially, to bring suits for the State. They most usually indicate, that suits are to be brought, and defended in the District Court, leaving it to be determined from the nature of his office, and the province and scope of his duty, that he will act as the attorney for the State. An instance of that kind, is to be found in the Act of the Legislature of 1857, in which provision is made for “special proceedings against railroad companies.” (7th Legislature, 244.) This act authorizes suits or prosecutions against railroad corporations, for wilful neglect of duty, as prescribed by law. They are to be brought in the name of the State, in the District Court of any county, through which said •road may pass, or at the point of its commencement or termination, and are to be regulated by the rules which govern civil
It is provided, in the same connexion, that this shall have “ no reference to cases where any act or omission of a railroad company operates as a surrender or forfeiture of its charter.” From this, it is contended, that the legislature intended to withhold the power to prosecute for forfeiture of the charter. It is believed, that the object of this enactment was to provide adequate remedies for breaches of duty, in counties where they happened, whether that should be where the company had its principal office or not. The implication drawn from this enactment, cannot be, that the district attorney shall not bring the suit of forfeiture, for he is not mentioned in it. If it is to be indulged at all, it is a prohibition against bringing the suit, by any one, for the State. Neither the words nor spirit of the enactment require such a construction. For the last six or eight years, the legislature have been enacting laws creating and regulating railroads, and during that time, have repeatedly, in the most deliberate legislation, provided that upon the commission and omission of certain acts, their charters should he forfeited. These are vain and idle threats, if, during all this time, the power has been reserved by the legislature, from those, whose duty requires them to execute the laws. It would require a plain and positive enactment to justify a conclusion, so unusual, in reference to laws generally, so inconsistent with the repeated acts of the legislature, and so far out of harmony with the principle of our government ; that law holds the sceptre of rule over all alike, ever ready to strike down those who violate, and to support those who obey, its commands.
If we look beyond our own state, we find nothing in the decisions of other sister states, which favors the view, that the right to bring this action is not vested in the attorney-general, or district attorney; but on the contrary, much, inferentially, to establish that it is the judicial sentiment of the whole country,
However much credit may he due to corporations, in developing the resources of the country, in the various industrial pursuits, it would be a strange doctrine to be recognised as existing in our government, that an artificial person, created by the State, “ without soul,” and without body, except by legal intendment, should not be responsible to the laws of the State, to be executed against them, as they are executed against citizens, in whom is vested the sovereign power, and whose rights are specially protected by the fundamental law of the land.
We think the objection, that neither the attorney-general nor district attorney had a right to use the name of the State, in bringing this suit, is not tenable.
We think, also, that there is one good ground of forfeiture, properly alleged in the amended petition; that is, the failure of the president or vice-president, and a majority of the directors of the railroad corporation, to reside in this state after the 19th of June, 1858, as required by the Act of 1857, (7th Legislature, 26.)
By that act it is provided, “ that at least a majority of the directors, and the president or vice-president, treasurer, and secretary, of every railroad company, entitled to the benefits and privileges of an act, entitled “ An Act to encourage the construction of Railroads by a donation of land,” approved January 30th, 1854, or of “An Act to provide for the investment of the Special School Fund,” passed August 13th, 1856, shall reside within the state of Texas. The period of six months was allowed for this section of the act to be complied with; and if not complied with in that time, it was declared that the charter of said company should be forfeited.
It has not been denied, that this railroad company belongs to the class of roads referred to in this section, entitled to the benefit of the loan and donation of lands under these statutes.
This raises the question of how far railroad corporations may be regulated and controlled, by enactments of the legislature- of the State, passed after the grant of the charter. There is nothing said in the charter about where the president, vice-president, or directors, shall reside, or about a report of the transactions of the company being made to the comptroller, or any other officer of the State. The laws requiring these things, it is contended, add new stipulations to the contract, which do not bind the company, as they have not consented to them. This is founded on the fallacious view, that the charter is a contract, as between two private persons, containing all the terms of the agreement, and that the State has no right to do anything in relation to the terms or subject-matter of the contract, which will require the company to do anything which is not required of it by the charter. The correct view of the subject is, that the charter is. a grant of franchises by the State, and the rights granted to the company, are limited by the charter. They have a right to be a corporate body—that is, a franchise; they have a right to construct a public railroad, and charge for its use; (incidental powers are conferred to accomplish these objects;) these constitute a franchise. These franchises are the private property of the company; as such, it is subject to general laws, as other property, unless the charter contains a stipulation to the contrary; and as other property, it may be regulated, though not destroyed, by subsequent legislation. There is no restric
A consideration of the well settled principles of law, in reference to the design and objects of the charter, will establish this view of the subject. First, then, this railroad is a great public highway, laid out by the State for the purpose of facilitating the public, both in the travel and in the transportation of the commerce of the country. It is only on this idea, that it is a public highway, that the State can taire, or authorize the company to take, for its track, the lands of individuals on its route. The State has no constitutional right to take the land of one person and give it to another, to remain private property. (Railroad Company v. Chappel, 1 Rice, Law Rep. 388; 2 Dev. & Bat. Law Rep. 468, 469; Erie & N. E. Railroad Co. v. Casey, 2 Casey, Rep. 308. The State has reserved to itself the right, in its constitution, to repeal the charter by a two-thirds vote of the legislature, and by paying for the franchise. (Const. § 31; Hart. Dig. 74.) A general law has since been passed, authorizing the State to resume the franchises, upon full compensation. (Laws, 4th Leg., Extra Sess. of 1853, p. 58.) To encourage this public work, the State has provided for a loan of $6000 per mile, and has made a generous donation of sixteen sections of land per mile. The creation of this company, its progress with the road, and its use as it is completed, will engender rights and liabilities, as to third persons, for and against the company, which may demand regulation, and must impose a burden on the government. These are the great interests of the State in this public enterprise. The State might undertake the work itself; or it may, as it has undertaken
This blending of a private investment, for private gain, upon a public work, was well considered in the case of the Railroad Company v. Davis, by the Supreme Court of North Carolina. (2 Dev. & Batt. Law Rep. 469.) They say, that “ an immense and beneficial revolution, has been brought about in modern times, by engaging individual enterprise, industry, and economy, in the execution of public works of internal improvement. The general management has been left to individuals, whose private interests prompt them to conduct it beneficially to the public; but it is not entirely confided to them. From the nature of their undertaking, and the character of the work, they are under sufficient responsibilities, to insure the construction and preservation of the work, which is the great object of the government. The public interest and control,; are neither destroyed nor suspended. The control continues, as far as it is consistent with the interests granted, and in all cases, as far as may be necessary to the public use. The road is a highway, although the tolls may be private property, by force of the grant of the franchise to collect them. It is a common nuisance, to allow it to become ruinous, or to obstruct it. The government may, upon sufficient cause, claim a forfeiture of the charter, or compel the execution and repairs of the road, by those undertaking them, by any means applicable to other persons, charged with like duties, in respect to other highways. The difference is, that the corporation, in lieu of the sovereign, has the custody and property of the road, and the collection of the tolls, in reim
Again, considering the charter as a contract, in conformity with what is now the general doctrine, the franchises are protected by the clause in our constitution, which prohibits the enactment of “any law impairing the obligation of contracts.” When viewed in the light of a contract, it is not as an executory, but as an executed contract,—as a grant to land; and stands upon the ground, that a grant of land, or the grant of a franchise, implies a contract, not to re-assert the right to it. (Fletcher v. Peck, 6 Cranch, 136,137; Dartmouth College v. Woodward, 4 Wheat. 652, 653.) But whether protected as property, or as a contract, these franchises can only be protected, so far as they may be granted; and the charter constitutes the limits of the grant. A reference to a few decided cases may explain this.
In the leading case of Fletcher v. Peck, an act of the legislature of the state of Georgia, was held to be unconstitutional, under the clause in the constitution of the United States, prohibiting the states from passing laws, impairing the obligation of contracts; because it sought directly, to annul a grant of land, made by a previous act of its legislature. Here, the subsequent act, sought to take back and utterly destroy what was previously granted, without condition or qualification. It was not a regulation of property, or of the persons claiming it, but a deprivation of it.
In the celebrated Dartmouth College Case, a corporation for literary purposes, had been created by the king of England, by
These are the leading cases, of the class relied on by the company. The distinction between them, and the case now under consideration, is obvious, and may be made more so, by reference to another class, of equally high authority.
In Massachusetts, the Charles river bridge, was incorporated as a toll-bridge. The charter was in ordinary form, and stipulated that the charter should exist seventy years. Long before that time expired, the Warren bridge was incorporated, to be erected very near the former. By the terms of its charter, it very soon became a free bridge, by which the profits of the Charles river bridge, were entirely taken away from it. It was decided by the Supreme Court of the United States, that the act of the legislature, granting the last charter, did not impair the ^obligation of the contract, contained in the charter of the first. They said, as to the rule of construction, “that nothing passes by implication,” and that “ in charters of this description, no rights are taken from the public, or given to the corporation, beyond those which their charter, by their natural and proper construction, purport to convey.” And as to the extent of the powers granted, they say, that “in order to entitle themselves to relief, it is necessary to show, that the legislature contracted not to do the act of which they complain; and that they im
In the case of Providence Bank v. Billings and Pittman, 4 Pet. 514" court="SCOTUS" date_filed="1830-03-22" href="https://app.midpage.ai/document/providence-bank-v-billings-85714?utm_source=webapp" opinion_id="85714">4 Pet. 514, it was held, that a law imposing a tax upon the bank was valid. The charter was silent on the subject of a tax, and it was argued that, if the State had the right to tax, it might tax so heavily as to render the charter useless and of no value. The act imposing the tax, though passed subsequent to the charter, was sustained as not impairing the obligation of the contract.
A State may take a corporate franchise, for public use, upon rendering compensation, without impairing the obligation of the contract.' (6 How. Rep. 529; Backus v. Lebanon, 11 New Hampshire Rep. 22.)
The doctrine that a private corporation is strictly confined to its charter, in ascertaining the rights and privileges granted by it, is well settled in the English courts. (Stourbridge Canal Company v. Wheeley, 2 Barnewall & Adolphus, 334.)
In the case of the Ohio Life Insurance and Trust Company v. Debolt, 16 How. Rep. 437, it was decided that a State had a right to prohibit, under a penalty, the issue of small notes by a bank, by a law passed subsequent to the grant of the charter. The charter granted the general power to issue bills and notes. Chief Justice Taney, in this case says, that “ the general power to issue notes and bills, without any express grant as to small notes, is subordinate to the power of the State, to regulate the amount for which they may be issued.” This case establishes the right of the State to regulate banks in their issues, so as to make them conform to its general policy as to a sound currency. And as the banks had not anticipated and guarded against this change of policy, by a restriction upon the State in their charters, they had no right to resist it.
In the same state, a statute prohibiting banks from collecting their debts from the time the information, in the nature of a quo warranto is filed, until its determination, was sustained as constitutional. (Commercial Bank of Rodney v. State of Mississippi, 4 Sm. & Marsh. 440.) So, also, a statute changing the common law liability of bank-debtors, upon the dissolution of the corporation. (Nevitt v. Bank of Port Gibson, 6 Sm. & Marsh. 521. See also, Bank of Columbia v. Attorney-General, 3 Wend. 609, 610.)
So, a statute in Massachusetts, imposing a penalty of two per cent, per month on the amount of bills of any bank, of which
These authorities will suffice to indicate the general doctrine, that a State, upon granting a charter, is presumed to retain its general power of legislation. Those who claim an exemption from this general power, must show either its relinquishment of the right to pass the law in question, in the charter, or that it is inconsistent with, and destructive of the particular rights, privileges or franchises therein enumerated and granted. The State, in this case, has not relinquished the right, by anything set out in the charter, to require of this company to make a report of its transactions, as provided for in the Act of 1853, or to require a portion of its officers to reside in the state, as provided for by the Act of 1857. An exemption from these requisitions, is not necessary to enable them to carry out the objects of the charter, which, as to the company, are to build and run the road, for their own profit. They are not inconsistent with or destructive of any grant of right contained in the charter. Dispensing with them, might be a matter of convenience to the company—that is all; and that convenience to themselves they have not secured in their charter.
But then these requirements of our general railroad law of 1853, as amended by that of 1857, stand upon still higher ground. The State has an interest, that the franchises granted shall be faithfully exercised, as a public trust, in the hands of the company, so that the work shall progress; so that the road shall be used, as it may progress, for the benefit of the public, in travel and transportation. It is interested in the honest appropriation of its bounty and loan, to which the road is entitled under the laws. It would be derelict in the protection of these great interests, if it did not require such reports of the company, as would furnish full information of its transactions, as required by the Act of 1853. And considering the rule, that the residence of a corporation is in the state creating it, (13 Peters, 588,) and that that is the proper place for its corporate business to be transacted, (Angell & Ames on Corp. § 104,) the policy of the State,
The ground of forfeiture, that the company had failed, after notice, to make the report required by the Act of 1853, is not sufficiently stated in the petition, because it is not alleged that the comptroller issued^the notice.
The petition does not allege any meeting of the directors out of the state, since the 19th of June, 1858; and the meeting of the stockholders out of the state has not been made a statutory ground of forfeiture.
The count setting up the insolvency, is too general. (Bank of Columbia v. Attorney-General, 3 Wend. 593.) It does not give the data, upon which it could be concluded, that the col pany were certainly unable to carry out the objects of the charter.
The count as to the sale of the road under the deed of trust, is insufficient, because it does not show that the company executed the deed in any manner to bind them, or what are the terms of the deed. It presents rather the outside facts of a public sale, proclaimed to be made under a deed of trust, &c. It has, therefore, not become- necessary, to consider the effect of the alleged sale, either by itself, or in connexion with any other facts.
These common law grounds of forfeiture, must have reference to the general objects of this public enterprise, for which the franchises were granted. Whenever facts are presented, which conclusively show, that the high public trusts involved in them have been grossly abused, to the public detriment, or that the company has placed itself, or is placed, in such irretrievable embarrassment, as to be certainly unable to progress with the enterprise, as contemplated by the charter, then the State has a
Reversed and remanded.
Note.—In the decision of this case, it is not necessary to examine a question which has been settled by the highest authority in this country, and seems to be acquiesced in generally; that is, whether or not the charter of incorporation is a contract, within the meaning of that clause of the constitution, which prohibits any law from being passed, “ impairing the obligation of contracts.” (Bill of Rights, § 14, Hart. Dig. 52.) I desire to express it as my own opinion, that it is not.
That clause is borrowed from a similar one in the Constitution of the United States. It was there inserted to meet and prevent a prevalent evil, which was well known at the time, and had reference to executory contracts. A grant of a franchise is like a grant of land. It may be construed into a contract, but it is the work of construction. It is not treated of as a contract, and was never, as it is believed, spoken of in that connexion, by those who taught or administered the laws, up to the time of the adoption of the constitution; nor, indeed, up to the time of the leading cases of Fletcher v. Peck, and The Dartmouth College v. Woodward.
This construction met with dissent, when first adopted. Its application to .new cases, as they have arisen, has met with increasing disagreement and dissent. If carried to its legitimate conclusion, to the full extent, the State government may, by improvident legislation, be deprived of many of its important powers, ceded, by contract, to the numerous corporations that are filling the country, without the capacity to reclaim them, except by a revolution. I shall content myself now with citing some of the cases in which the difficulties arising out of this great question may be seen. (Dodge v. Woolsey, 18 How. Rep. 362 ; The State Bank of Ohio v. Knoop, 16 Id. 393-405 ; 6 Id. 529, 549 ; Charles River Bridge v. Warren Bridge, 11 Peters’ Rep. 511-582 ; 4 Id. 558; 4 Wheaton, 624, 654, 665, 713 ; 6 Cranch, 143-145.)—Roberts, J.