Union Pacific Railway Co. v. Chicago, Rock Island & Pacific Railway Co.Union Pacific Railway Co. v. Chicago, Rock Island & Pacific Railway Co.
Lead Opinion
after stating the case, delivered the opinion of the court.
The questions to be considered are whether these contracts are within the corporate powers of the parties; were duly
It will be most convenient to consider the appeal in the case of the Rock Island Company. If the decree in favor of that company is affirmed, a like result must follow on the appeal in the case of the St. Paul Company. And we may remark in the outset that the main contention of the Pacific Company concerns the tracks between Council Bluffs and South Omaha, including the bridge.
1. Railroad corporations possess the powers which are expressly conferred by their charters, together with such powers as are fairly incidental thereto; and they cannot, except with the consent of the State, disable themselves from the discharge of the functions, duties and obligations which they have assumed. Can it be held that the contract with the Rock Island Company, judged by its terms, construed in the light of matters of common knowledge, of the evidence and of applicable legislation, was made in the assumption of powers not granted, or amounted to the surrender of powers that were?
The general rule is that a contract by which a railroad company renders itself incapable of performing its duties to the public or attempts to absolve itself from those obligations without the consent of the State, or a contract made by a corporation beyond the scope of its powers, express or implied, on a proper construction of its charter, cannot be enforced, or rendered enforceable by the application of the doctrine of estoppel. Thomas v. Railroad Co.,
But where the subject-matter of the contract is not foreign to the purposes for which the corporation is created, a contract embracing “whatever may fairly be regarded as incidental to, or consequential upon, those things which the legislature has authorized, ought not, unless expressly prohibited, to be held by judicial construction to be ultra vires.” Jacksonville Railway Co. v. Hooper,
Taking up the contract with the Rock Island Company, what is the nature of the undertaking of the Pacific Company? In several places in this instrument it is called a “ lease ” and the parties are called “ lessor ” and “ lessee; ” while, on the other hand, in the record of the proceedings of the executive committee of the Pacific Company and of its stockholders, it is called an agreement “granting trackage rights ” between Council Bluffs and South Omaha. But what it was styled by the parties does not determine its character or their legal relations, and in its interpretation the rule applies that “ the court is not only at liberty, but required, to examine the entire contract, and may also consider the relations of the parties, their connection with the subject-matter of the contract, and the circumstances under which it was signed.” Rock Island Railway Co. v. Rio Grande Railway Co.,
In Thomas v. Railroad Company,
And Mr. Justice Brewer, in his opinion on circuit, observed: “Neither the form of expression on the one hand, nor the name on the other, is conclusive. We must see what rights and privileges were in fact granted, what burdens and obligations assumed.”
The contract provided that the Pacific Company hereby “lets the Rock Island Company into the full, equal and joint possession and use of its main and passing tracks.” The possession here spoken of was such possession as the Rock Island Company would have when its engines, cars and trains were running over the tracks. The company had no possession before its trains came on the tracks or after they had run off of them, and while its trains were on the tracks its possession was only of the particular part occupied temporarily while running over them. Moreover, all trains were to be moved under the direction of an officer of the Pacific Company.
The Pacific Company in its answer said that it had offered and now offered “to accept and transport all the cars and trains of the complainant, freight and passenger, to and from all points on the line of the said defendant described in said supposed contract, and thereby enable the complainant to maintain its business at Omaha and South Omaha, and to carry on exactly the same business that it could have carried on by the operation of its own trains, by its own engines and by its own employés, as provided for in said supposed contract; and it says that it has offered, in the utmost good faith, to perform this service immediately and at all times, for the said complainant, at a reasonable compensation, to be fixed in any fair, usual and ordinary manner.” It thus appears that the Pacific Company could do what it had contracted to do, and that the contention resolves itself into the proposition that there is a fundamental legal difference between authorr izing the Bock Island to haul its trains with its own engines, and agreeing to haul them with the Pacific Company’s engines, though in either event they were to be moved under the train dispatchers of the Pacific Company — a difference we find ourselves unable to admit.
In Chicago, Rock Island & Pacific Co. v. Denver & Rio Grande Co.,
Such being the nature of the contract, a contract frequently made between railroad companies, upon what reasonable ground should it be held invalid as an unlawful assumption of power?
The evidence shows that between the bridge and South Omaha some of the most thickly populated and densely settled portions of the city of Omaha are situated; that five railroads engaged in transcontinental traffic do their terminal business there, taking up and setting down passengers, collecting, unloading and delivering freight; that a large part of the territory is filled with the tracks of the Union Pacific and Burlington Companies, and that there is scant room, if
We think that it would be carrying the doctrine of ultra vires much too far to deny absolutely the competency of a railroad company,- being a public highway, whose use is common to all citizens, to contract to give another running rights over its tracks without express statutory authority; and that, under proper circumstances, such a contract may well be held within its implied powers.
In Lake Superior Mailway Co. v. United States,
But the determination of the existence of the power to grant running rights in this instance does not rest on these
The original charter of 1862 required the construction of the Pacific road from the east bank of the river, and so impliedly authorized the company to bridge it, and the amendatory act of 1864 expressly gave the corporation authority “ to construct bridges over said Missouri Piver.” The bridge contemplated was for the company’s use as a part of its road, and no provision was made for other roads or other business, nor were any special means provided for the construction of the bridge.
In 1871 several roads had been built from the East to Council Bluffs, and others were building and roads were in process of construction in Nebraska with Omaha as their terminus.
The Omaha Bridge act of February 24, 1871, e. 67,16 Stat. 480, was then passed, by which, “ for the more perfect connection of any railroads that are or shall be constructed to the Missouri Piver, at or near Council Bluffs, Iowa, and Omaha, Nebraska,” the company was authorized to issue bonds not exceeding two and one half million dollars, and to “ secure the same by mortgage on the bridge and approaches and appurtenances, as it may deem needful to construct and maintain its bridge over said river, and the tracks and depots required to perfect the same, as now authorized by law of Congress.” The bridge was “to be so constructed as to provide for ordinary vehicles and travel; ” and the company was authorized “ to levy and collect tolls for the use of the same.” The act further provided “ for the use and protection of said bridge and property, the Union' Pacific Pailway Company shall be empowered, governed and limited by the provisions of the act entitled ‘ An act to authorize the construction of certain bridges and to establish them as post roads,’ approved July twenty-five, eighteen hundred and sixty-six, so far as the same
The common object of both these acts plainly was the more perfect connection of roads running to the bridges on either side of the river. And this is in harmony with numerous acts, of Congress referred to in the opinion of the Circuit Court of Appeals; Act of February 21, 1868, 15 Stat. 37; Act of May 6.1870, c. 93, 16 Stat. 121; Act of June 30,1870, c. 176, 16 Stat. 173; Act of July 1,1870, c. 195,16 Stat. 185; Act of March 3,1871, c. 110, 16 Stat. 473; Joint resolution of March 3.1871, No. 48, 16 Stat. 599, and many others, all of them indicating a settled policy that all structures of this character should allow connecting roads to cross them with their cars, trains and engines. It is said that the reference to the act of 1866 should be confined to its second and third sections; but as the matters provided for in those sections were fully otherwise covered in the Pacific Bailroad acts, that does not commend itself to us as a reasonable construction. But it is argued that even if the Pacific Company were authorized to grant to the Bock Island Company the right to run its trains with its engines over the bridge, it was not empowered to grant the same rights over the tracks. The evidence shows.
The legislation of 1862 and 1861 in respect of the Union Pacific Bailway Company was under consideration in Union Pacific Railway Co. v. Hall,
On June 15, 1866, an act was approved, c. 121,11 Stat. 66, “ to facilitate commercial, postal and military communication among the several States,” carried forward as section 5258 of the Revised Statutes, which provided that “ every railroad company in the United States, whose road is operated by steam, its successors and assigns, be, and is hereby, authorized to carry upon and over its road, boats, bridges and ferries, all passengers, troops, government supplies, mails, freights and property on their way from any State to another State, and to receive compensation therefor, and to connect with roads of other States so as to form continuous lines for the transportation of the same to the place of destination.”
It is impossible for us to ignore the great policy in favor of continuous lines thus declared by Congress, and that it is in effectuation of that policy that such business arrangements as will make such connections effective are made.
We are of opinion that it was within the powers of the Pacific Company to enter into contracts for running arrangements, including the use of its tracks, and the connections and accommodations provided for, and we cannot perceive that this particular contract was open to the objection that it disabled the Pacific Company from discharging its duties to the public. By the contract the Pacific Company parted with no franchise, and was not excluded from any part of its property or the full enjoyment of it. What it agreed to do was to let the Rock Island into such use of the bridge and tracks as it did not need for its own purposes. This did not alien any property or right necessary to the discharge of its public obligations and duties, but simply widened the extent of the use of its property for the same purposes for which that property was acquired, to its own profit so far as that use was concerned, and in the furtherance of the demands of a wise public policy. If, by so doing, it may have assisted a competitor, it does not lie in its mouth to urge that as rendering its contract illegal as opposed to public policy. Ability to perform its own immediate duties to the public is the limitation on its jus
The leading cases of Thomas v. Railroad Co.,
The argument is pressed that the Pacific Company might become disabled by reason of the increase of business in the future, but the defendant asserts in its answer that it is able to carry on the business of hauling complainant’s cars “ immediately and at all times,” if it may do so with its own engines and on its own terms, and be permitted in the meantime to repudiate this contract. The proof wholly fails to establish that the contract involves any present inability or any existing ground for apprehension in that regard, and shows that the bridge and tracks of the Pacific Company are fully adequate to meet much larger demands than are now, or within any reasonable time can be expected to be, made upon them under the contract. The country, as was said below, will grow in population and business, and the business of this particular corporation will increase, but with the increased volume of business come increased facilities for its transaction. Moreover, increase in the same ratio for the future as in the past is not to be expected, for new roads are constantly being built and other channels of transportation opened; and it cannot be conclusively assumed that the common means of transportation twenty years hence may not be quite different from what they are at present. It will not do to hold this contract void and allow defendant to escape from the obligations it assumed on the mere suggestion that at some time in the remote future there is a possibility that the suggested contingency might arise. Should it happen, however, the courts are competent
Objection is made that by reason of the provision for referees in case of difference- between the two companies as to the operation of trains, the full control of the Pacific Company of its road and franchises is taken away. If that stipulation were stricken out, the right of the Rock Island Company to use the tracks, subject to the reasonable management of the Pacific Company’s officers, would still remain, and the contract itself contained a provision contemplating the possible invalidity of some one of the stipulations not of the essence of the contract. There does not appear to have been any specific contention in the Circuit Court or in the Court of Appeals that that particular clause was invalid; and, if it were, the power reserved in the decree was sufficient to permit an application to the court for its modification and the substitution of the judgment of the court. We cannot hold that if the particular clause were objectionable the contract would be invalidated as a whole, and it is too late to ask a reversal on the ground that the elause itself is not enforceable.
We do not feel called upon to enter at length upon other objections urged by appellants’ counsel. One of them was that the Rock Island and St. Paul companies derived no power from the laws of Nebraska to enter into the alleged contract because they had not complied with the statutes of the State in that behalf. After the testimony was closed, and as the final hearing commenced, defendants moved the court to permit the introduction of the evidence upon which this contention is based. This was objected to by complainants, the objection sustained and defendants excepted. We concur in the view of the Circuit Court of Appeals, which held that there was no abuse of discretion in the court below in denying the motion, and did not consider the rejected evidence or the argument based upon it. The Rock Island Company built its road from South Omaha to Lincoln as vested with the corporate power to do so, and it contracted as in the possession of the power as a corporation existing in
Nor can the contract be held invalid because within its prescribed duration the charter of the Eock Island Company expired by its terms. The contract was carefully drawn in view of such expiration of the several corporate existences of the parties to it, who bound themselves to take such steps as might be necessary to continue the contract in force. And, as observed by the Court of Appeals, the contingency that the Eock Island Company “will cease to exist and leave neither assigns nor successors is far too remote to have any influence upon the validity of this contract.” 10 U. S. App. 192.
It is also said that the contract was void so far as the Eepublican Talley Eailroad Company was concerned, because without consideration, inasmuch as the Eock Island Company was to pay the Pacific Company for the possession and use of the railway and appurtenant property between Lincoln and Beatrice to the Pacific Company, and so the Talley Company, as an independent corporation, received no compensation; but the stockholders of the Talley Company entered into the covenants in question, and as each of its incorporators was an oflicer or employé of the Union Pacific Company; its road was built with the funds of that company; every share of its stock ever issued was taken, held or voted by some officer or employé of that company in trust for it; the officers of the two companies had always been the same, and in their operation no distinction had ever been made between the two roads; and their earning3 had gone into and their expenditures been paid from a common treasury, we think there is no merit in the objection that for the reason given the Talley Company was not bound by its covenants.
But it is earnestly contended that the Pacific Company had no power under its charter as a Federal corporation to operate any other line of road than those lines which it was specifically authorized by Congress to construct, and that it was prohibited under the constitution and laws of Nebraska from
It does not appear that this point was called to the attention of the Circuit Court or decided by it, nor in the errors assigned to the decree of the Circuit Court in the Circuit Court of Appeals was there any error attributed to the decree in this particular; nor did that court pass upon any such question. It is indeed admitted that the point is raised for the first time in this court. We have to determine on this appeal whether in our judgment the Circuit Court of Appeals did or did not err, and affirm or reverse accordingly. It is true that our decision necessarily reviews the decree of the Circuit Court in reviewing the action of the Court of Appeals upon it, and, under the statute, our mandate goes to the Circuit Court directly, but it is, notwithstanding, the judgment of the Circuit Court of Appeals that we are called on primarily to revise. It will be seen then that the judgments of the Courts of Appeals should not ordinarily be reexamined on the suggestion of error in that court in that it did not hold action of the Circuit Court erroneous which was not complained of. We will, however, make a few observations on the point thus tardily presented.
The eighth section of the eleventh article of the constitution of that State provided that no railroad corporation of any other State or of the United States, doing business in Nebraska, should be entitled to exercise the right of eminent domain or have power to acquire right of way or real estate for depot or other uses until it should have become a corporation of the State pursuant to the constitution, but we do not see what that provision has to do with this question. The stipulations of the contract relating to the use of the Bock Island tracks between South Omaha and Lincoln by the Pacific Company did not embrace the acquisition of right of way or real estate, or the exercise of the power of eminent domain by the latter.
By the contract the Bock Island Company gave the Pacific Company “the right and privilege to move and operate its
These observations also apply to the clause of the contract in respect of the road between McPherson and Hutchinson, but it should be added that that reach of road was held and operated by the Kansas Company, which was a Kansas corporation. The Union Pacific Railway Company was formed by the consolidation of the Union Pacific Railway Company, a Federal corporation, the Denver Company, a Colorado corporation, and a corporation originally named the Leavenworth, Pawnee and Western Railway, afterwards called the Union Pacific Railway, Eastern Division, and lastly the Kansas Pacific Railway. The latter company by its first name was incorporated under the laws of the Territory of Kansas, and upon the admission of Kansas into the Union became a corporation of that State. The acts of Congress of 1862 and 1864 clothed it with new franchises, but did not deprive it of its powers as a State corporation, which could be exercised by the consolidated company in Kansas, so far as not in derogation of its Federal powers. And Kansas corporations were duly empowered to enter into leases and the like by the state laws. Gen. Stat. Kansas, c. 23, § 112, voL 1, 443.
2. Was the contract, if within its powers, duly authorized by the Pacific Company? No question arises but that the contract was executed in due form, and, as to the manner in which its execution was authorized, the facts appear to be: On April 22,1890, the executive committee passed the resolution approving the contract and authorizing the president of the company to execute it, and on the thirtieth of the same
"When by the charter of a corporation its powers are vested in its stockholders, and this was the common law rule when the charter was silent, the ultimate determination of the management of the corporate affairs rests with its stockholders, and the charter of the Pacific Company did not commit the exclusive control to the board of directors.
By the first section of the act certain persons named, together with five commissioners to be appointed by the Secretary of the Interior, were with their successors created a body corporate and politic with certain powers, which were to determine after the company was fully organized, “and thereafter the stockholders shall constitute said body politic and corporate.” It was further provided: “ Said company, at any regular meeting of the stockholders called for that purpose, shall have power to make by-laws, rules and regulations
Acting under the authority conferred upon them by the •charter, the stockholders of the Pacific Company adopted bylaws for the government of the corporation and for the regulation of its business affairs. By section two of article four of the by-laws it was provided: “The board of directors shall have the whole charge and management of the property and effects of the company and they may delegate power to the executive committee to do any and all of the acts which the board is authorized to do except such acts as by law and these by-laws must be done by the board itself.” Thus the stockholders authorized the board of directors to delegate the power to the executive committee to do any and all acts which the board itself was authorized to do. The executive committee derived its authority from the stockholders through the board of directors. By section two of article five of the by-laws it was provided: “The executive committee shall have, and may exercise by a majority of its members, all the powers and authority which from time to time may be delegated to said committee by the board of directors.” As early ns March 15,1877, the board of directors adopted a resolution, “that while the board of directors is not in session the full power thereof, under the charter and by-laws, is hereby conferred upon the executive committee, and the proceedings of said committee at its last meeting are hereby ratified and eon-
The contracts in question were in the proper form, signed and executed by the proper executive officers and attested by the corporate seal; they were approved and authorized by the executive committee, which committee had all the powers of the board, and were ratified, approved and confirmed by the stockholders at their regular annual meeting. This was sufficient to bind the Pacific Company although no formal action by the board was had. But it is argued that this cannot be so because of the peculiar relation which the government directors of the Pacific Company bore to the corporation, differing from that of other directors; and the absence of the government director, who was a member of the executive committee, from the meeting which approved and authorized the contracts, is also commented on as if thereby the action of the executive committee in that behalf was rendered ineffective.
By the first section of the act of 1862 not less than thirteen directors were to be elected and two to be appointed by the President of the United States, “who shall act with the body of directors, and be denominated directors on the part of the government.”
The thirteenth section of the act of 1861 is as follows:
“ That at and after the next election of directors, the number of directors to be elected by the stockholders shall be fifteen ; and the number of directors to be appointed by the President shall be five; and the President shall appoint three additional directors to serve until the next regular election, and there
"We see nothing in the provisions relating to government directors which makes it indispensable that the board should formally authorize such contracts as the one under consideration. Congress did not vest in the government directors any peculiar powers. They had the same powers as other directors and no more, but as government directors they were to make reports to the Secretary of the Interior in respect of the affairs and matters mentioned in the act of 1864. They could not either by a negative vote or by absenting themselves from the meetings prevent the transaction of the necessary business of the company, in which they were entitled to participate on the same terms as their associates. Congress did not look to any action of theirs for the protection of the public interests but sought to secure those interests by specific legislation. Thus it was provided by the act of 1862 that patents for lands and government bonds should not be issued to the company until the road had been constructed, examined and approved by the commissioners and the facts certified to the President and Secretary of the Treasury; and a forfeiture of the rights belonging to the company and the lands granted to it in case of default on its part to redeem the bonds or any of them when required to do so by the Secretary of the Treasury in
The joint resolution for the protection of the interests of the United States, 16 Stat. 56; the appropriation act of March 3, 1873,17 Stat. 185, 508; the Thurman act, 20 Stat. 56; the act amendatory of the fifteenth section of the act of 1862,18 Stat. Ill; the act providing for a commission to investigate the transactions of the company, 21 Stat. 188; are examples of such legislation, and it was through them and not through the agency of the government directors that Congress sought to protect the interests of the government and the public. We regard the position as wholly untenable that this provision for government directors took the corporation out of the general rule that except in cases where the charter imposes a limitation the stockholders are the proper parties to take final action in the management of the corporate affairs.
3. The jurisdiction of courts of equity to decree the specific performance of agreements is of a very ancient date, and rests on the ground of the inadequacy and incompleteness of the remedy at law. Its exercise prevents the intolerable travesty of justice involved in permitting parties to refuse performance of their contracts at pleasure by electing to pay damages for the breach.
It is not contended that multiplicity of suits to recover damages for the refusal of defendants to perform would afford adequate relief, nor could it be, for such a remedy under the circumstances would neither be plain nor complete, nor a sufficient substitute for the remedy in equity, nor would the interests of the public be subserved thereby. But it is objected that equity will not decree specific performance of a contract requiring continuous acts involving skill, judgment and technical knowledge, nor enforce agreements to arbitrate, and that this case occupies that attitude. We do not think so. The decree is complete 'in itself, is self-operating and self-executing, and the provision for referees in certain contingencies is a mere matter of detail and not of the essence of the contract.
It must not be forgotten that in the increasing complexities
"We regard the case of Joy v. St. Louis,
This case was cited with approval in Franklin Telegraph Co. v. Harrison,
The same rule was laid down in Prospect Park & Coney Island Railroad v. Coney Island & Brooklyn Co.,
In Railroad Co. v. Alling,
In The Express cases,
It was objected in Joy's case that the court was proposing to assume the management of the railroad “to the end of time,” but Mr. Justice Blatchi'ord, speaking for the court, responded that the decree was complete in itself, and that it was “not unusual for a court of equity to take supplemental proceedings to carry out its decree and make it effective under altered circumstances.” And the court applied the principle that considerations of the interests of the public must be given due weight by a court of equity, when a public means of transportation, such as a railroad, comes under its jurisdiction. “ [Railroads are common carriers and owe duties to the public,” said Mr. Justice Blatchford. “ The rights of the public in respect to these great highways of communication should be fostered by the courts; and it is one of the most useful functions of a court of equity that its methods of procedure are capable of being made such as to accommodate themselves to the development of the interests of the public, in the progress of trade and traffic, by new methods of intercourse and transportation. The present case is a striking illustration. Here is a great public park, one of the lungs of an important city, which, in order to maintain its usefulness as a park, must be as free as possible from being serrated by railroads; and yet the interests of the public demand that it shall be crossed by a railroad. But the evil consequences of such crossing are to be reduced to a minimum by having a single right of way, and a single set of tracks, to be used by all the railroads which desire to cross the park. These two antagonisms must be reconciled, and that can be done only by the interposition of a court of equity, which thus will be exercising one of its most beneficent functions.”
Clearly the public interests involved in the contracts before us demand that they should be upheld and enforced.
4. Doubtless a court of equity may refuse to decree the specific performance of a contract, if it be unconscionable;
Decrees affirmed.
Dissenting Opinion
dissenting.
To make arrangements with other railroad companies whereby they are permitted to make use of the Missouri Biver bridge and of the tracks and station-houses within the cities of Omaha and South Omaha may be fairly held to be within the range of the general authority of the Union Pacific Bail-way Company. Such contracts are not unusual, and are calculated to promote the convenience of the public and the welfare of the railroad companies which enter into them. And if the contracts in question presented such a case, I should have no difficulty in affirming their validity. But, as I read
"What is granted to the Rock Island Railway Company and to the St. Paul Railway Company is not a mere right or privilege, for a reasonable compensation, and subject to the .rules and regulations of the Union Pacific, to run their trains over the bridge and into and out of the city stations, but “ the full, equal and joint possession and use of the main and passing tracks ” belonging to the lessor company, and extending from Council Bluffs on the east side of the Missouri River to the town of South Omaha, a distance of — miles. Nor is the power of control and management reserved to the Union Pacific Railway Company. The words of the contract, in that particular, are as follows :
“Schedules of rules and regulations for the movement of engines and trains over the several railways hereby let and demised shall be made for each railway by the duly authorized officers of the lessor and lessee companies by which such railways shall at the time be operated. Such schedules shall, as nearly as may be practicable, accord equality of right, privilege and advantage to trains of the same class operated by the lessor and lessee, and shall secure to neither any preference or discrimination against the other. They shall be executed and all trains moved under the immediate direction of the superintendent or other officer of the lessor company. If the parties cannot agree upon the adoption of any schedule, rules or regulation, or as to the modification of any one existing, either party may demand a decision of such controversy by referees as hereinafter directed. The referees ai’e hereby invested with power to prescribe schedules, rules and regulations, and to modify existing ones; and, in case of wilful disregard by either party of the rights of the other, to award damages to the party injured for injuries sustained because of such wilful act.”
The legal effect of these contracts is to create a joint ownership, for 999 years, of an important portion of the Union Pacific’s railroad and appurtenances, “ a full, equal and joint
These contracts, in my opinion, are plainly void within the principles of the following cases: Thomas v. Railroad Company,
“"We think it may be stated, as the just result of these cases and on sound principle, that, unless specially authorized by its charter, or aided by some other legislative action, a railroad company cannot, by lease or any other contract, turn over to another company, for a long period of time, its road and all its appurtenances, the use of its franchises, and the exercise of its powers, nor can any other railroad company without similar authority make a contract to receive and operate such road, franchises, and property of the first corporation, and that such a contract is not among the ordinary powers of a railroad company, and is not to be presumed from the usual grant of powers in a railroad charter.”
To which may be added the following observations of Mr. Justice Gray in the very recent case of Central Transportation Co. v. Pullman's Car Co.,
“The clear result of these decisions may be summed up thus: The charter of a corporation, read in the light of any general laws which are applicable, is the measure of its powers, and the enumeration of those powers implies the exclusion of all others not fairly incidental. All contracts made by a corporation beyond the scope of those powers are unlawful and void, and no action can be maintained upon them in the
In commenting upon that clause of the contracts in which the Union Pacific Company “lets the Eock Island Company into the full, equal and joint possession and use of its main and passing tracks,” the opinion of the court states that “ the possession here spoken of was such possession as the Eock Island Company would have when its engines, cars and trains were running over the tracks. The company had no possession before its trains came on the tracks or after they had run off of them, and while its trains were on the tracks its possession was only of the particular part occupied temporarily while running over them.”
But this view, I submit, overlooks the necessary meaning of the language of the contracts. The possession, whose right is given, is described as full — that is, entire, not imperfect, or insufficient; as equal— that is, as great as that of the lessor company; as joint — that is, united in interest and obligation with the other party. If doubt could be entertained of the meaning of language so explicit, such doubt would be removed by the other express provisions that the “schedule of rules and regulations shall, as nearly as may be practicable, accord equality of right, privilege and advantage to trains of the same class operated by the lessor and lessee, and to trains of a superior class operated by either a preference over trains of an inferior class operated by the other — all rules and regulations shall be reasonable and just to both lessor and lessee, and shall secure to neither any preference or discrimination against the other.”
Again, the opinion states that “ moreover, all trains were to be moved under the direction of an officer of the Pacific Company. The Eock Island trains coming upon a Pacific track immediately passed from the control of the Eock Island Com
I am unable to so read any provision of the contract. On the contrary, as already stated, it is expressly stipulated that “ the schedules of - rules and regulations for the movement of engines and trains over the several railways hereby let and demised shall be made for each railway by the duly authorized officers of the lessor and lessee companies by which such railways shah at the time be operated; ” and if the parties cannot agree upon such rules and regulations, then mutually appointed referees shall exercise authority to “prescribe schedules, rales and regulations and to modify existing ones.” The plain meaning, as I think, of these contracts is that the Union Pacific Railway Company has thereby parted with its sole and absolute control of those portions of its road and tracks that are embraced within the scope of the contracts, and with the sole and absolute power to exercise its franchises to occupy, possess and operate such portions of its road, and has agreed to participate, for a period of 999 years, with other railway companies, in the full, joint and equal possession of those portions of its road, in their physical aspect, and to confer upon such other companies the right to join, on equal terms, in the making of all rules and regulations pertaining to the use and management thereof. When a contract provides for the possession of a railroad and for its operation by rules and regulations it has covered everything that exists — the road as a physical structure, and the franchises to operate it by rales and regulations.
It is true that the contract provides that the rales and regulations “shall be executed and all trains moved under the immediate direction of the superintendent or other officer of the lessor company.” But the duties of such an officer are subordinate. He is to carry out the rales and regulations prescribed jointly and equally by the lessor and the lessee companies, and the meaning and effect of the provision in question is to prevent the confusion that would result if there were two superintendents to enforce the same rules over the same portions of railroad.
But the reason why the contracts in those cases were held void was not because they embraced all the property of corporations, but because the companies sought to part with the possession and control of their property without legislative authority for doing so. Can that be a sound view which, while admitting that the Union Pacific Railway Company is forbidden to lease the possession and control of its road to another company without authority expressly given, yet would hold that that company may, without such authority, part with the possession and control of one half or of any appreciable part of its road ? Can it be maintained that, while the Union Pacific Railway Company cannot lease its railroad from Council Bluffs to Ogden, it may contract with the Rock Island Railway Company to give it joint and equal possession and management of its road between those points ? And, in point of principle, if such a contract would be void if embracing the road between Council Bluffs and Ogden, how could it be declared valid if embracing the road between Council Bluffs and South Omaha ?
The views of the majority seem to me to overlook the essential question, and that is, the power of the Union Pacific Railway Company to part with its road and franchises, temporarily or forever, in whole or in part. A contract by that company to share its road and those powers, called franchises, which are necessary to operate it, is just as much forbidden by the principle of the cases as a contract to lease its road as an entirety. The objection to an irrevocable contract for 999 years that the Union Pacific Railway Company may hereafter need to use its tracks and franchises in their entirety, is not satisfactorily met by the suggestion that, in such event, the courts can, in some way, relieve the company from the contract. It is not easy to see how an engagement now held valid can be hereafter dispensed with.
The Union Pacific Railway does not hold and exercise tho
Other provisions of these contracts which seek to subject the Omaha and Republican Talley Railway Company and the Salina and Southwestern Railway Company to the use of the Rock Island and St. Paul companies, and which render the Union Pacific Railway Company liable as lessee of railroads owned by the Rock Island Company, are, in my judgment, equally without authority of law.' But it is scarcely worth while to consider them minutely. As this is a proceeding to enforce specific performance of the entire contract, invalidity of any important part of the contract, but for which it would not have been entered into at all, is enough to defeat the bill.
It is scarcely necessary to say that if these contracts were void for the reasons given, no action taken under them would justify a court of equity in enforcing them. As was said in Thomas v. Railroad Co., above cited: “ In the case of a eon-tract forbidden by public policy and beyond the powers of the defendant corporation, it was its legal duty — a duty both to the stockholders and the public — to rescind and abandon the contract at the earliest moment, and the performance of that duty, though delayed for several years, was a rightful act when done, and could give the other party no right of action, and that to hold otherwise would be to hold .that any act performed in executing a void contract makes all its parts valid, and that the more that is done under a contract forbidden by law, the stronger is the claim to its enforcement by the courts.”
“ A contract ultra vires being unlawful and void, not because it is in itself immoral, but because the corporation, by the law of its creation, is incapable of making it, the courts, while refusing to maintain any action upon the unlawful contract, have always striven to do justice between the parties, as far .as could be done consistently with adherence to law, by
I think that the judgment of the Circuit Court of Appeals should be reversed and the cause remanded to the Circuit Court with directions to set aside its decree and dismiss the bill