17 Minn. 372 | Minn. | 1871
By the Court.
The Lake Superior and Mississippi Railroad Company is a corporation created under the laws of this state, and owning and operating a railway from St. Paul to Duluth. The appellant (The Erie and Western Transportation Company) is a corporation created by the laws of Pennsylvania, and engaged in the business of transporting by steamboats and other craft passengers and freight upon lakes Erie, Huron and Superior, and connecting waters,
The particular clauses of the contract to which exception is taken by the plaintiff form but a small portion of its entire text; but as the general scope .of the contract appears to us to be involved in' the present inquiry, we deem it desirable, if not indispensable, (notwithstanding the space required,) to quote from it at sufficient length to present all such portions as tend to show what its.real character and purpose are. The contract, then, so far as we deem it material in this view, reads as follows:
“ Memorandum of an agreement', made this twenty-fourth day of May, in the year of our Lord one thousand eight hundred and seventy, (1870,) by and between The Lake Superior and Mississippi Railroad Company, a corporation of the state of -Minnesota, hereinafter designated as the party of the first part, and The Brie and Western Transportation Company, a corporation of the state of Pennsylvania, hereinafter designated as the party of the second part.
“Whereas, it is believed that the public convenience as well as the interests of the parties hereto, will be promoted by the establishment of an efficient line of steam vessels, to ply between the Lake Superior terminus, at Duluth, of the railroad
“ First. That the party of the second part shall provide and have ready for use, whenever and as soon as the railroad of the said party of the first part is open for freight traffic between St. Paul and Duluth, in the state of Minnesota, at least six steam vessels, of an average capacity of not less than six hundred tons each, and shall thereafter, from time to time, provide such additional steam vessels as may be required for the transportation of freight and passengers between the railroad of the party of the first part and Detroit and the said other Lake Erie ports, and shall keep the said vessels, or so many of them as can be adequately supplied with either freight or passengers, or both, on either their eastward or westward trips, running regularly in connection with the railroad of the party of the first part between Duluth and Detroit and the other Lake Erie ports.
“ Second. That the party of the first part shall furnish prompt and suitable transportation from or to Duluth, on the line of its railroad, for all passengers and freight destined for or delivered from the said steam line of the party of the second part, and shall guarantee to the party of the second part that sufficient docks, grain elevators and warehouses shall be provided and maintained at Duluth, to supply the requirements of the interchangeable business under this contract of the parties hereto; the said docks and elevators to be in water of sufficient depth to be accessible to vessels of the deepest draft which can pass between Lake Superior and Lake Erie.
“ Third. That the party of the second part shall furnish prompt and suitable transportation to or from Duluth, by its
“ Fourth. That the sums received for transportation of freight and passengers, partly on the railroad of the party of the first part, and partly on the steam line of the party of the second part, shall be divided between the parties hereto, so that the party of the first part shall receive thirty per centum, and the party of the second part seventy per centum thereof, irrespective of the distance over which the said freight or passengers shall have been transported. It being understood and agreed, that the through rates on freight and passengers received by the party of the first part for transportation eastward, via the railroad of the party of the first part, and via the steam line of the party of the second part, shall be fixed by the party of the first part, and that the through rates on freight and passengers, received by the party of the second part for transportation westward, via the steam line of the party of the second part, and the railroad of the party of the first part, shall be fixed by the party of the second part, and that these through rates shall, so far as the competition of rival lines will permit, be made fairly remunerative to both parties. It being understood and agreed, however, that unless by mutual consent of the parties hereto, the rates on such westward bound freight and passengers shall be rates high enough to yield at least two dollars and twenty-five cents per ton of two thousand pounds to the party of the first part, and four dollars per passenger for full price first-class passengers, and two-thirds of four dollars per passenger for full price second-class passengers, and the rates of such eastward bound freight and passengers shall be rates high enough to yield at least five dollars and twenty-five cents per ton of two thousand pounds, and nine and one-third dollars per passenger for full price first-class passengers, and two-thirds of nine and one-third dollars per passenger for
“ Fifth. That the party of the second part shall guarantee to the party of the first part, that the party of the first part shall receive its thirty per cent, out of seven-twelfths of every sum received in payment of a through rate on freight and passengers transported on the railroad of the party of the first part, and the steam line of the party of the second part between New York and any point on the railroad of the party of the first part, via Erie, and that on freight or passengers transported as aforesaid, between New York, Philadelphia or Baltimore, and any point on the railroad of the party of the first part, the party of the first part shall receive in division between the parties hereto the same sum which the party of the first part would have received if the said freight or passengers had been transported, in manner aforesaid, between a point on the railroad of the party of the first part and New York, via Erie. It being clearly understood, that in thus guaranteeing to the party of the first part thirty per cent, of the above mentioned seven-twelfths, the party of the second part also guarantees to the party of the first part the minimum rate of two dollars and twenty-five cents per ton of two thousand pounds of freight, four dollars per passenger for full price first-class passengers, and two-thirds of four dollars per passenger for full price second-class passengers, out of through rates on westward bound freight or passengers, fixed by the party of the second part, as provided in the fourth section of this agreement.
“ Sixth. That the party of the second part shall have the right to use all proper and lawful efforts to have freight and passengers destined to or from the railroad of the party of
“ Seventh. That in consideration of the risks and responsibilities herein assumed by the parties hereto respectively, and to diminish, as much as possible, the chance of loss to either, in the experiment of establishing a new line of communication, each, party hereto agrees with the other, that during the term of this contract it will, by all lawful means, endeavor to secure to the other the transportation of all the freight and passengers entrusted to it for transportation by water eastward, in the case of the party of the first part, and westward by rail in the case of the party of the second part, and the party of the first part agrees, that after its railroad shall have been opened through from St. Paul to Duluth, and the steam line oí the party of the second part shall be prepared to transport freight and passengers between the lake terminus of the railroad of the party of the first part and the Lake Erie ports, it (the party of the first part,) shall and will pay to the party of the second part, on all freight and passengers which it (the party of the first part,) shall transport over its railroad, under through tickets or through bills of lading, for transportation over the railroad of the party of the first part, and any line of steam vessels other than that of the party of the first part, plying between Lake Erie ports and the lake terminus of the railroad of the party of the first part, the following sums, viz : One dollar and fifty cents ($1.50) for each first-class passenger transported a distance of seventy-five miles and upwards, over the railroad of the party of the first part; seventy-five cents (75-100 dollars) for each first-class passenger Iraus
“ Eighth. That neither party shall be responsible for injury to passengers, or for loss of or damage to freight transported under through tickets, or through bills of lading, partly on the railroad of the party of the first part, and partly on the steam
***********
***********
“ Sixteenth. That this contract shall take effect on the first day of June, eighteen hundred and seventy, and shall terminate on the first day of January, eighteen hundred and ninety, if either party shall have given one year’s previous notice, in writing, to the other, that it shall then terminate; but if neither party shall have given the said notice, then the contract shall continue from year to year until the expiration of one year from the date of written notice that it shall terminate, given by either party to the other, when it shall terminate
“ It being understood, however, that although the said contract shall have terminated as to future transactions, all past transactions shall be settled in accordance with its provisions.
“ In witness whereof,” &c.
' His objection to the fifth and sixth articles is that they “ are plainly designed to bind the parties mutually to give each other favors not extended to other parties,• and to require an exercise of the corporative powers, with a partiality not authorized by their charters, and against law.”
To the seventh article he objects that “ after«requiring each party by all lawful means to endeavor to secure to the other a monopoly, it binds the railroad, company to pay to the transportation company, certain sums of money on all freight and passengers which it, the railroad company, shall transport over its railroad under through tickets or through bills of lading, for transportation over its railroad, and any line of steam vessels other than the Erie & Western Transportation Company.”
He argues that “ the simple effect and meaning of all this is that the railroad company shall, by use of its corporate powers and strength, secure to the transportation company a monopoly of the transportation upon the lakes, of all freight and passengers to and from this state, by that route, or pay the transportation company a penalty for not securing it to them.”
As notorious and public facts outside of the contrae^, constituting part of the public history of the state, and its legislative policy as he understands the same, the counsel says that “ Such is the geographical position of the state of Minnesota, and such the character of her industries and products, that it is, and always has been, a leading object of her legislation to provide new and cheap routes and modes of transportation, and to invite and stimulate, and so far as is possible by legis•■'ion, produce rivalry and competition in the business of
In the spring of 1870, (the contract purports to have been executed in May, 1870) the Lake Superior & Mississippi Railroad Company had completed its road to Hinckley, a point
Without facilities for making proper connections at the lake it would be difficult, if not impossible, for the company to transact any considerable amount of through business, either in transporting passengers or freight. It was therefore of great importance to the- pecuniary interest of the company, as well as to the public interest, that in some way provision should be made for securing safe, speedy and regular transportation to and from the east in connection with the company’s road, at reasonable prices and by responsible parties. Without such transportation under such conditions, it is not and cannot be denied that the great object of chartering the railroad, and of endowing it with lands and money, would be frustrated. For it may be added to what has been already said, that besides the purpose of securing a new outlet for exports, and a new inlet for imports, it was believed, and apparently upon good grounds, that the projected railroad of this company as part of a route would, in consequence of a short land carriage to lake navigation, be able to furnish through transportation to and from the east at lower .rates than could be afforded elsewhere. The appellant claims that it was for such reasons and purposes that the contract under examination was entered into.
It is not contended in this case that the railroad company does not possess authority to enter into arrangements and contracts with other connecting carriers by land or water for the
The .denials contained in the foregoing extracts from the answer, are denials of corresponding allegations of the complaint, and it will be at once perceived that together with the new matter set up they will present important questions of fact to be investigated, perhaps, hereafter, but for the purposes of the present appeal to be assumed to be answered in favor of the defendant.
We are now prepared to take up the contract to which the action relates, and to consider the general and special objections made to the same by the plaintiff.
His general objections to the contract are that it is ultra vires of the railroad company, and against public policy. We have already determined that it is competent for the railroad company to enter into contracts with connecting carriers for the purpose of providing for through transportation over its road and the routes of such carriers, such contracts to be made with a Iona fide purpose to regulate traffic in a reasonable and just manner; that it is not only the right, but the duty of every railroad company, so far as its authority permits, to increase its business by all usual and customary means, and to furnish
In determining, then, upon the character of the contract in this instance, it is of the first importance to keep in mind that both upon the ground that neither fraud nor illegality are to be presumed, and upon the negative and affirmative allegations of the answer, the contract is to be assumed to have been made bona fide, with the purpose which appears on the face of it, and not colorably for any other. G. N. Railway Co. vs. S. Y. Railway Co., 9 Exch. 55; Ib. 641.
Bearing in mind, then, first, the competency of the railroad company to enter into an arrangement with the appellant as a connecting carrier, with a bona fide purpose to regulate traffic' in a reasonable and just manner, and second, that it is to be assumed in this case that this contract was made bona fide, with the purpose appearing upon the face of it, and not colorably for any other, how can this court say that.it is ultra vires of the railroad company ? We are not now speaking of the question of monopoly or public policy, so far as that question is distinct from the question of ultra vires. How, in view of these principles, can this court say that the respondent is justi„fied in objecting to the contract because it provides in its fourth article “ for the division oí the sums received for the transportation of freight and passengers, partly on the railroad and partly on the steam line of the transportation company, irrespective of distance?” The contract relates to through transportation exclusively. Looking at the contract itself, and, so far as we can notice 'them, at the circumstances under which it was made, upon what ground can this court say that this contract, presumed to have been made with a bona fide purpose to regulate traffic, was not made in a reasonable and just manner, and is not reasonably calculated to accomplish such purpose ? The plaintiff contends that it is not, and the
And this question of the appropriateness of the means to the end is then, as we have before remarked, not one of law, but of fact, or of mixed law and fact. We are not to be understood as holding that a railroad company is authorized to embark in business entirely foreig-n to the objects of its incorporation. What we have said is, of course, to be taken as said with reference to the questions presented in the case as to the validity of the traffic arrangement provided for by the contract under consideration. So much for the plaintiff’s objections to the contract as being- ultra vires.
We pass now to consider the plaintiff’s objections to the contract on the ground that it is against public policy as creating and tending to create a monopoly. This objection of counsel is also based upon the fourth, fifth, sixth and seventh clauses of the contract “the simple effect and meaning” of which is, as the counsel argues, “that the railroad company shall, by use of its corporate powers and strength, secure to the transportation company a monopoly of the transportation upon the lakes, of all freight and passengers to and from this state, by that route, or pay the transportation company a penalty for not securing it to them.” Much of what has been said upon the other branch of the case is applicable to this. It is of first importance here, as ■ there, to bear
The contract in this case does not exclude other lines of boats than that of the appellant from a participation in the benefits of the railroad. The railroad company has not by this contract bound itself, or attempted to bind itself, not to suffer other lines of boats to run in connection with its road, or to receive passengers and freight from it, or bring them to it. Other lines of boats are at liberty to do these things at pleasure. But while it could hardly be claimed that any monopoly, in the sense of exclusive privilege of carrying to and from the railroad, is in terms provided for in this contract, the plaintiff contends that the practical effect of the contract is to confer such monopoly upon appellant. This objection brings up anee more the propositions which we have so often reiterated as of paramount importance in this case, viz.: first, that it is Competent for the railroad company to enter into contracts with connecting carriers for the purpose of providing for through transportation over its road and the routes of such carriers, such contracts being made with a Iona fide purpose to regulate traffic in a reasonable and just manner ,• and, second, that this contraot is upon this appeal to be assumed to have been made bona fide, and with the purpose of providing for through transportation over the connecting routes of the contracting parties. Now admitting, as appears to be the fact, that the contract in this case, though not conferring upon the appellant a monopoly of running in connection with the railroad, does secure to and confer upon the appellant special
So far as these two branches of the case are concerned, our conclusion, then, is that upon this appeal the contract involved in this case cannot be held to be void, either as ultra vires of the Lake Superior and Mississippi Railroad Company, or as against public policy.
We have not deemed it necessary to consider particularly the provisions of the contract, fixing minimum rates of transportation, or that by which the contract is continued in force for twenty years. We are unable to perceive why the objections to these are not disposed of by the general consider
It remains to consider sundry objections urged to the competency of the plaintiff (who sues as a single stockholder in the Lake Superior and Mississippi Railroad Company, and for himself alone) to maintain this action. So far as these objections rest upon the ground of a defect of parties because the plaintiff sues alone, instead of suing also for all other stockholders similarly interested, they cannot be heard, since having been taken neither by demurrer nor answer they are waived. Gen. Stat. ch. 66 § § 73, 78.
If a corporation is employing its statutory powers, funds, &c. for purposes not within the scope of its institution, a court of equity will upon the application of a single dissentient stockholder interfere by injunction. Dodge vs. Woolsey, 18 Howard 331; Addison on Contracts, 6th Eng. ed. 703, and citations; Gifford vs. N. J. R. R. Co., 2 Stockton 174; Ward vs. Soc. Att’ys 1 Coll. 379; Kean vs. Johnson, 1 Stockton Ch. 400; Stevens vs. B. & R. R. R. Co., 29 Vt. 545; Angell and Amos on Corp. § 393. The right of the stockholder to this interference seems to be placed upon the ground, that from the fact that the corporation was created for certain purposes there is an implied contract that it shall not divert its powers or funds to other purposes, and that such diversion would be a species of breach of trust, [Stevens vs. B. & R. R. R. Co., supra] as well as a violation of law which might endanger the existence of its charter. Manderson vs. Com. Bk. of Penn. 28 Pa. State 379. But it is to a dissentient stockholder that the relief is granted, and to a stockholder who comes with diligence to assert his rights. If a stockholder assents to acts ultra vires, or although not originally or expressly assenting has for an unreasonable time acquiesced and has permitted them to go un
In this case it is alleged in the. answer that the plaintiff assented to the contract which he seeks to have adjudged void and enjoined. Upon the motion made below, to which the present appeal relates, this allegation must be taken to be true; and if so, the plaintiff is not entitled to the relief which he seeks, so far as he rests his claim to it upon the ground that the contract is ultra vires. And acquiescence on plaintiff’s part without original or express assent may have the same effect, though we discover no distinct allegation in the pleadings upon the point of such acquiescence in this case.
But in this case it is claimed that the contract sought to be adjudged void, and enjoined, is not only ultra vires of the railroad company, but that it is illegal and against public policy as providing for and creating a monopoly. And it is argued that under such a state of facts, the plaintiff, although in delicto, is not in the eye of equity in pari delicto with the defendant, the transportation company, even though the contract was consummated with his assent, since there is on the part of the court a necessity for supporting and vindicating the public interest. 1 Story’s Eq. Juris. § 300 et. seq. But we think the weight of authority is in favor of the doctrine that acts ultra vires of a corporation are illegal. Taylor vs. Chichester & Midhurst Railway Co., Law Reports 2 Ex. 356; Bissell vs. The M. S. & N. J. R. R. Co., 22 N. Y. 258, Opinion Selden, J. And such would clearly seem to be the law of this state under the provisions of sections 5 and 6, ch. 76 Gen. Stat. If this is so, there is no good reason, of which we can conceive, why the
Defendant’s objection, that the complaint does not state a cause of action in plaintiff, because no facts are alleged going to show that he will suffer any pecuniary damage in conso■quence of the contract complained of, is not well taken, not only because the complaint alleges that the effect of the contract, if carried out will be to render plaintiff’s stock worthless, but because if the contract is illegal as alleged it may lead to a total forfeiture of the charter of the company in which
The further position that upon the pleadings it must be assumed that the railroad company repudiates the contract, refusing to be bound by it, or act upon it, and that it does not intend to and will not act upon the same, and that therefore there is no occasion for the plaintiff as a stockholder to commence proceedings to prevent the contract from being carried into practical operation, is, we think, well taken for obvious reasons.
A court of equity does not interfere to prevent imagined wrongs which there is no ground for apprehending.
These considerations dispose, we believe, of all the important questions in this case, and the result is that the judgment appealed from is reversed.