210 U.S. 324
28 S.Ct. 732
52 L.Ed. 1080
DELMAR JOCKEY CLUB, Plff. in Err.,
STATE OF MISSOURI ON THE RELATION OF THE ATTORNEY GENERAL.
Argued April 29, 30, 1908.
Decided June 1, 1908.
The plaintiff in error was organized as a corporation under the laws of the state of Missouri on January 18, 1901, for the following purposes, stated in its articles of association:
'The purposes for which this corporation is formed are to encourage and promote agriculture and the improvement of stock, particularly running, trotting, and pacing horses, by giving exhibitions of agricultural products and exhibitions of contests of speed and races between horses, for premiums, purses, and other awards and otherwise; to establish and maintain suitable fair grounds and a race track in the city and county of St. Louis, with necessary buildings, erections, and improvements, and to give or conduct on said grounds and race track public exhibitions of agricultural products and stock, and of speed or races between horses, for premiums, purses, or other awards, made up from fees or otherwise, and to charge the public for admission thereto and to said grounds and track; to engage in pool selling, book making, and registering bets on exhibition of speed or races at the said race track and premises, as provided by law, and to let the right to others to do the same; to conduct restaurants, caf es, and other stands for the sale of food and other refreshments to persons on said premises; and to do and perform all other acts necessary for fully accomplishing the purposes hereinbefore specifically enumerated.'
In 1905 the attorney general of Missouri, ex officio, filed in the supreme court of the state of Missouri an information, in the nature of quo warranto, seeking to annul the charter of the company and forfeit all of its franchises and property, for the following alleged acts of abuse and nonuse of its corporate powers and franchises: First, engaging in book making, pool selling, and the registration of bets upon horse races, from the date of its incorporation up to June 16, 1905; second, during the same period selling pools and accepting and registering bets from minors upon the result of horse races run on the track of the corporation; third, engaging in book making, pool selling, and the registration of bets upon horse races after June 16, 1905, in violation of an act of the legislature of Missouri approved March 21, 1905; and fourth, failure to give any exhibition of agricultural products, or to give any exhibition of speed in races between horses for the purposes of improving the stock of trotting and pacing horses, or to establish or maintain any fair grounds in the city or county of St. Louis, or any other place.
The corporation demurred to the information upon nine grounds. In the first it was recited that, as the information did not charge that the defendant was not licensed to engage in the business of book making, etc., alleged to have been carried on prior to June 16, 1905, no violation of law was stated. The remaining grounds set forth reasons why it was asserted that the information in the second and third grounds, heretofore stated, did not charge violations of law or state facts upon which a judgment of ouster for such alleged acts could lawfully be based. After hearing argument, the supreme court of Missouri sustained the first ground of demurrer and overruled all the others, and granted defendant fifteen days in which to answer the remaining allegations contained in the information, viz., the second, third, and fourth grounds of alleged misuse and nonuse of the corporate franchises, heretofore referred to. 200 Mo. 34, 92 S. W. 185, 98 S. W. 539. Subsequently an answer was filed, of which (omitting title) a copy is in the margin.1
Respondent, Delmar Jockey Club, comes by its attorneys, and, for its answer to the information of the attorney general herein, admits that it is a corporation duly organized and incorporated under the laws of the state of Missouri, and denies each and every other allegation in said information alleged or contained.
Wherefore, respondent prays that it be hence discharged with its costs.
II. For its further answer to that portion of the information of the attorney general herein, wherein it is alleged that respondent has failed to exercise certain franchises claimed to be possessed by it, this respondent states that it has fully carried out and exercised all those provisions in its , Thereupon a motion for a final judgment of ouster, etc., on the pleadings, was filed, for the following reasons:
'First. That said return and answer fails to state facts showing any sufficient cause or excuse for, or any legal defense to, the nonuser of respondent's franchises, authorizing it to give exhibitions of agricultural products and exhibition of contests of speed or races between horses for the purpose of encouraging and promoting agriculture and the improvement of stock, and for the establishing and maintaining of suitable fair grounds in the city and county of St. Louis, as set forth and charged in the information herein.
'Second. It appears from the facts stated in said return and answer, and the second count thereof, that respondent is guilty of the acts of misuser and abuser of its franchises charged in the information herein filed, in this; to wit, that respondent engaged in the business of book making and pool seeling, registration of bets, and the acceptance of bets, in violation of the laws of this state:
'Wherefore, informant prays that final judgment of ouster be rendered against the respondent, as prayed for in the information in the case.'
A motion to strike from the files having been overruled, the motion was heard and granted, and judgment of ouster was entered, a fine of $5,000 was imposed upon the corporation because of nonuse, misuse, and violation of its franchises, and provision was made for the winding up of the affairs of the corporation. A motion for a rehearing was made, in which the protection of various clauses of the Constitution of the United States was invoked, the following only being material to the controversy arising on this record:
'Third. Respondent is charged with nonuse of its corporate franchise as to the right to hold fairs. The general denial of respondent applies to this charge, and there has been no trial as to that fact. Yet the judgment adjudges the respondent guilty without a hearing, thereby also violating the 14th Amendment to the Constitution of the United States.
'But without this, the plea of estoppel interposed by the respondent to the charge of nonuse does not deprive respondent of the benefit of its general denial of that charge. Even at common law, and certainly since the statute of Anne, a plea of estoppel may be united with a general denial in a quo warranto proceeding.
'Fifth. The judgment of ouster ought not to be entered in this case in the present state of the pleadings, for the reason that, even though the power conferred by the charter of the respondent to engage in book making and pool selling be regarded as taken away by the repeal of the breeder's law, and even though respondent has lost its charter privileges to conduct fairs by failure to exercise those privileges, nevertheless, respondent has other privileges, conferred by its charter which are not contrary to any law of this state or to the policy of the state, and which have not been lost by nonuser, among which privileges is the right to conduct horse races for prizes or purses or at pleasure, and which the judgment of this court deprives respondent of without respondent having, in any manner, lost the right so to do; and in this respect, also, the judgment deprives the respondent of its property without due process of law, contrary to the guarantees of the 14th Amendment to the Constitution of the United States, which respondent here invokes.'
The motion for a rehearing was granted, and, upon a reconsideration of the cause, the motion for judgment on the pleadings was again sustained upon the ground of nonuser of the corporation franchises, and judgment was entered, ousting the corporation of all of its franchises and charter rights, and adjudging that the same be forfeited to the state, and the corporation dissolved, 200 Mo. 34, 92 S. W. 185, 98 S. W. 539. A motion for a rehearing having been filed and overruled, the cause was brought here by writ of error.
Messrs. John Kennish and Herbert S. Hadley for defendant in error.
[Argument of Counsel from Page 331 intentionally omitted]
Mr. Justice White after making the foregoing statement, delivered the opinion of the court:
Soon after the filing of the record in this court, the attorney general of Missouri submitted a motion to dismiss the writ of error, or to affirm, and the determination of the motion was postponed until the hearing on the merits. The cause having been argued, the motion to dismiss or affirm must now be disposed of.
We are of oinion that the record does not present any Federal question, and that the motion to dismiss must be granted.
The supreme court of Missouri, in the opinion delivered by it on the rehearing, considered three propositions: First, the effect of the general denial, contained in the first paragraph, and the plea embodied in the second numbered paragraph of the answer; second, upon what grounds a forfeiture of a corporate franchise might be declared; and, third, whether or not, in addition to ousting the corporation from its franchises, the court could and should 'appropriate a part of its substance to the use and benefit of the state.' These propositions were determined after an elaborate consideration of the subject and a review of many authorities. It was decided that the plea following the general denial in the answer amounted to a plea of confession and avoidance; that, in consequence, the general denial first pleaded raised no issue, and hence 'the motion for judgment upon the ground of nonuser should be sustained.' It was next determined, after declaring that it was the duty of the court to act with great caution in decreeing a forfeiture, that forfeiture of the corporate franchises might be declared 'where there is either wilful misuse or wilful nonuse of the franchise or franchises, which are of the essence of the contract with the state, and those in which the state or public is most interested, then a forfeiture of the whole charter should be and will be declared. When a corporation receives from the state a charter granting certain franchises or rights, there is at least an implied or tacit agreement that it will use the franchises thus granted; that it will use no others; and that it will not misuse those granted. A failure in any substantial particular entitles the state to come in and claim her own, the rights theretofore granted, and this through a judgment of forfeiture in a proceeding like the one at bar.' On this branch of the case the court concluded as follows: 'The right to construct and maintain suitable fair grounds in the city and county of St. Louis, and to give exhibitions of agricultural products thereat, is one of the essence of this contract between the state and the respondent. It was and is the franchise in the exercise of which the state and general public have the most interest and concern. A failure to exercise this franchise was a failure to perform the very thing which was of the essence of the contract. That this failure was wilful is shown by the length of time of the admitted nonuser as well as by other things made apparent by the pleadings. So far as the state and general public are concerned, this right or franchise, so long neglected, was leading and uppermost in interest. No legal excuse is offered for respondent's failure. It would appear, at least by inferences deducible from the pleadings, that respondent was alert in promoting that incidental feature of its charter,—gambling upon horse races, and furnishing its gamblers with refreshments, both liquid and solid,—but extremely indifferent as to doing the things, moral in character, which it had, by receiving its charter, tacitly agreed to do, and the only things in which the state and the public had any special interest.
'Such a flagrant and wilful nonuser of franchises which are of the very essence of the grant demand, in our judgment, the forfeiture of all the rights and franchises granted; and we therefore hold that there shall be a judgment decreeing a forfeiture of all the rights and franchises granted to respondent by its charter, and a dissolution of said corporation.'
As to the third proposition, the court was of opinion that no further fine or punishment than that of ouster should be inflicted.
In substance, the contention of plaintiff in error is that the plea, contained in the second paragraph of the answer, merely presented a question of estoppel, which did not waive the prior general denial, and that the judgment of the supreme court of Missouri destroyed, 'without a trial or a hearing, and by an unequal and unjust enforcement of the law, vested property rights, both of plaintiff in error and its stockholders, in the face of Federal immunities which the record shows to have been specially set up and claimed.' In effect this is but asserting that the judgment of the supreme court of Missouri was so plainly arbitrary and contrary to law as to be an act of mere spoliation. But we fail to perceive the slightest semblance of ground for such a contention. In determining the scope and effect of the allegations of the answer, and in reaching the conclusion that the charges of nonuser contained in the information stood as confessed under the pleadings, the supreme court of Missouri followed its conception of the rules of pleading, as expounded in many of the previous decisions of that court, and the question of the extent of the power to take from the corporation its charter grant of franchises was determined as a question of general law. The determination of those matters did not involve a Federal question. San Francisco v. Itsell, 133 U. S. 65, 33 L. ed. 570, 10 Sup. Ct. Rep. 241. Manifestly, the proceeding constituted due process. Caldwell v. Texas, 137 U. S. 692, 34 L. ed. 816, 11 Sup. Ct. Rep. 224; New Orleans Waterworks Co. v. Louisiana (where the subject of the power of a state to forfeit corporate franchises is considered), 185 U. S. 336, 344, 46 L. ed. 936, 941, 22 Sup. Ct. Rep. 691. And if the fact was, which we do not intimate is the case, that the court below erred in the conclusions reached by it in respect to the propositions which it determined, the error would not afford a basis for reviewing its judgment in this court. Central Land Co. v. Laidley, 159 U. S. 103, 112, 40 L. ed. 91, 94, 16 Sup. Ct. Rep. 80, and cases cited; Ballard v. Hunter, 204 U. S. 241, 259, 51 L. ed. 461, 473, 27 Sup. Ct. Rep. 261; Patterson v. Colorado, 205 U. S. 460, 51 L. ed. 880, 27 Sup. Ct. Rep. 556.
The asserted Federal questions were so plainly devoid of merit as not to constitute a basis for the writ of error ( Wilson v. North Carolina, 169 U. S. 586, 595, 42 L. ed. 865, 871, 18 Sup. Ct. Rep. 435), and the writ of error is, therefore, dismissed.
charter authorizing it to give exhibitions of agricultural products and exhibitions of contests of speed and races between horses for the purpose of encouraging and promoting agriculture and the improvement of stock, and has provided suitable fair grounds for the same, in this: That between the 18th day of January, 1901, and the 16th day of June, 1905, in pursuance of the provisions and requirements of §§ 7419 to 7424, inclusive, Revised Statutes of Missouri, 1899, respondent duly paid large sums of money into the treasury of the state of Missouri, which were placed by the treasurer of the state of Missouri to the credit of the state fair fund, the same being a fund created by § 7424, Revised Statutes of Missouri, 1899
for the development and advancement of the industrial interests of this state under the direction of the state board of agriculture, and that all of said money so paid into said fund was received, used, and appropriated by the state of Missouri for the purpose of holding and giving annual exhibitions of agricultural products and stock of every kind and description at the city of Sedalia, state of Missouri, and that the said sums of money paid by respondent into the treasury of the state of Missouri under the terms of §§ 7419 to 7424, inclusive, were used and appropriated by the said state of Missouri and its said state board of agriculture solely for the maintenance and support of said Missouri state fair held annually at Sedalia, Missouri, and for the further purpose of providing, constructing, improving, and equipping all grounds, stands, and buildings necessary for the holding and giving of said fair
Respondent further states that, by exacting and receiving the said sums of money for the above-mentioned purposes, the said state of Missouri intended to and did accept the same as full and complete performance and use by respondent of its franchise to give exhibitions of agricultural products
and stock, and the said state of Missouri thereby intended to and did waive any other or further exercise of such franchise on the part of respondent.
Further answering the allegations of nonuser from June 16, 1905, to the date of the filing of this information, to wit, July 28, 1905, respondent states that the franchise of giving exhibitions of agricultural products and stocks is not one which can be exercised continously and at all times, from the beginning to the end of the year, but is one, owing to its peculiar character, which can only be exercised during the harvest season of each year. For these reasons respondent was not required to exercise such franchise between the above specified dates, but respondent further avers that it has, in good faith, endeavored at all times to exercise the franchises granted to it by its articles of incorporation in the manner and for the purposes intended by such grants, and that such is its purpose in the future, and respondent intends in every way to comply with and perform, according to law, all the obligations which it assumed upon the grant of the aforesaid franchises to it by the state of Missouri, and respondent again specifically denies each and every charge, allegation, or assertion of a contrary purpose on its part, contained in the information filed herein.
Wherefore, respondent prays that it be hence discharged with its costs.
Thomas Bond and Henry W. Bond for plaintiff in error.
[Argument of Counsel from pages 329-331 intentionally omitted]