UNION PAC.RY.

co. 11. CHICAGO, R. I.

CHICAGO,

& P. RY. CO.

809

CO.

UNION PAC.

Ry. Co. et al. v. Ry.

R. 1. &

ST. P.

P.

Ry.

UNION PAC.

CO. 11. CHICAGO,

M. &

Ry.

CO.

(Circuit Court of .Appeals, Eighth Circuit. July 19,189a.}

No. 16.

L

RAILROAD COMPANIES-CONTRACT-ULTRA VIREs-J"OINT USE OF BRrDOI!l AND l'ERMINALS.

The general rule that a railroad company must itself exercise its powers and perform its public duties does not render ultra vires a contract by the Union Pacific Company, whereby, for 999 years, it let another company into the joint use and occupancy of its bridge across the Missouri river,and of its terminal at Omaha,together with about seven miles of its track, when such joint ,use does not interfere with the present or prospective use thereof by the lessor. or with the discharge of the duties it owes to the governmen,t under the provisions of its charter. 47 Fed. Rep. 15, affirmed. 2. SAME-REGULATIONS FOR JOINT USE-UNION PAOIFIC COl\tPANy-DUTIES TO GovERNMENT.

A prOVision in the contract that schedules of rules for the movement of engines and trains shall be made, which will accord equal rights and privileges to the trains of the same class belonging to each party, and, if not agreed upon, shall be fixed by referees, does not disable the Union Pacific Company from exercising any powers necessary to the discharge of its public duties, especially as it expressly reserves to itself the absolute control, through its own superintendent, of the operation of every train that enters upon these tracks.

&.

SAME-GHARTER POWERS-PUBLIOPOLIOY.

Act Feb. 24, 1871, (16 St. at Large, p. 430,) "for the more perfect connection of any railroads that are or shall be constructed to the Jl4:issouri river," authorizes the . Union Pacific Company, in constructing its bridge at Omaha, to issue bonds thereon, and declares that "for the use and protection of said bridge and property" the company "shall be empowered, governed, and limited" by the act of July 25,1866, (14 St. at Large, p. 244.) The latter act authorizes the building of a bridge across the Mississippi at Quincy, Ill., and declares that "all trains of all roads terminating at said river, at or opposite said point, shall be allowed to cross said bridge" for a reasonable compensation to its owners. Various other acts of congress the construction of bridges contain similar prOVisions for joint use. FIeld that, in view of the general policy thus evinced to promote continuous lines of transportation a",4 to,foster competition, the Union Pacific Company was fairly empowered to make the contract in question, especially as one main purpose thereof was to furnish a connecting link between the parts of a road owned by the other company. which would thus form a continuous line from Chicago to Denver. The charter of the Union Pacific Railroad Company (12 St. at Large, p.4119) declares (section 1) that "the stockholders shall constitute the body politic and corporate, " an,d provides that at. ,an,y, regUlar meet,in,'g called for that purpose they shall have power to make by-laws touching "all matters whatsoever which may appertain tO,the concerns of said company." In pursuance of this authority, the stockholders passed a by-law giving the board of directors the "whole charge and m.anagement of the property, " and, authorized it to delegate to the executive committee power to do any acts which the 'board itself might do. The board thereafter authorized the executive committee to exercise all the powers of the board when the board was not in session. Beld, that the executive committee had full authority to execute a contract letting another railroad into' the joint use of the company's bridge aoross the Missouri, e.nll its, terminals at Omaha; and such contract, having been approveq by the stockholders at aregular meeting, was binding on the com· pany, even though never ratifled by a formal resolution of the board of direotors; and it is immaterial that 5 ,of the 20 directors, are appointed by the government, and not by the stockholders. 47 Fed. Rep. 15, affirmed· The fact that this contract was Within the corporate powers of the Union Pacific Company, '\lnd was executed all proper formalities and delivered to the other complj,ny, together with a formal resolution of approval by the stockholders, con· stituted pr4.ma .facie evidence that it was executed,with laWful authority; a,nd after it out for seven mont!¥l. and tb..e, stipulated monthly rent'

·4.

SAME"':"EXEOl:l:rION OF CONTRACT-RATIFICATION BY DIRECTORS AND STOCKHOLDERS.

.5.

SAME-ESTOPPEL-PARTlAL PERFORMANCE.

als, and after the other company had made large expenditures on the faith thereof, the pacifl.,c Comp-any was e,s,t,op,ped t,o deny its validity, because it, was never formally approved by tlie .Mardof or because the calls f(jr the, meetings of the executive committee and of the stockholders, respectively, at which the contract was approved, gave no notice that this business would come up for considera." ,,' ' tion. . , '

II.

BAME-CONTRACT POR 11119

The fact that the contract was for 11119 years, while the charter of the plaintift company would expire in about 4O',years. did not render the contract vOld, esp&mally as the charter cont,ained a provision that it might be renewed from time to time, and as the contract was expressly made binding upon the Msigns and suo' cessors of the parties.

OF EXPIRATION OF ORA-RTBa. '

T.

SAME-CoNsIOERATION-To WHOM PAID.

'. Where oue railroad c@mpanyowntnilibstantlally all the stock and bonds,of another railroad company, a lease of the latter's line for rent to be paid to the former com'pany'is'not void for want of consideration, since the rent goes to the real owner· · 7 'Fed.:R.ep. 15, affirmed.

&S.uiz.,.:.SPBCIPlC PERFORMANCIIl-EVIDENOB-DIS01lBTION OJ' TRIAL OOVItT.

sburi'river between the states of Io\ft and Nebraska, it was within the discretion otthe trial court to derly a 'motion made atllnal arl!'ument, aftel' the testimony had been closed, to permit the intl'oductlon of evidence that plainti:lf bad never complied wltll'theNehraska statut6s,pl'escribing the conditions on which it was entitled to enter the state, and that, therefore, the contract was not mutually enforceable. .. &lIjj.;.,i!lriomo. PBRFOitMAiilo-. ' Thll.specUlc performallC6 of a contract, whereby one railroad lets another into the johit nee of Its bridgealld terminals, will not be l'efused because the acts to be perl'ot1ned arenumeroua and comillicateg! and are to extend through a long term of years' ,'JIY/I v. '('it'll ()J'Se.: !Louis, 138 u. 8. I, 11 Sup. Ot. Rep.24ll, followed. 47 Fed. Rep. 16" aftlr'Ined. ' ' ' 10. BAMB-PROnSIoN POR ARBITRATION. The generall'ule, that an agreement to submit a controversy to arbitration cannot. be aveeUical1y enfOrc8(l'wUl not the enforcement of the conlract between tlle twocOIilpooies; it appearing that the stipulation to submit to referees is not of 'the ,eSliellce \)1 the agreement, but relates merely to di:lference& that may arise repeCtlns'tbe IDinor detail. its execution. ' 11. OF CbNI!IDBR.&.TION. into, on the part of theUnlonPaclflc Company, b» bf l,Qnl!' 0,e in l'ailroada:lfail's, who had the best means of iuforthe sUbJ:ect-matter, at rentals named by them, acting in good , t:litl ,the construction Of a rival bddge then in q , C llte,IIlPil\t,ic:i,ij., the pli!.ltlt,l'ft. and' ano, ',C(Om p8n y , and tb,e. plaintlJToompany ,bavins over :H.ooo,OOO in the COnstruction of a connecting line. specifi.o perform'81we \If the contrlj,ct.,Wlll not be refused on the Kround of an alleged inadequacY of, 47 F8Il.Rep. 111;'aftil'med. '

)lant aRreed to let plailltl:lfcompany into the joint use of its bridge across the Mis-

''tn. suit ,ftir specific performa.nce of a contract, whereby defendant railroad com-

APPet4'ffom the "Circuit Court of the. United States for the District of Nebhwkli..' .Allirmed. " SANBORN, Circuit Judge: Thesewertl suits brought by the appellees in the district court of DouglaSCOlln\y, NeLJraska, hI January, Hl\H, to compel the'specific performanceof two cOntracts,. dated l\lay 1, 18UO. The sui ts wer,e imm"lliately removel.! of to circuit court for heard by BUEWER, and which these appeals are taken. To oneof,'theee ,conftacts tbeUn'.i9nPacific Railway Company, the (!)maha & RevutJlican¥lJ.tley Raihvay Company, and the Salina & Souththe Chicago, Rock western Railway Company lire parties Railway Compaoy,and, the Chicago, Kansas & Nebratlka tlw was between the Union PacificR;aHway,Company and the Chicago, Milwaukee & St. Paul Ra:ilwa,Cotnpttlly.lri"thilJstateili.'ent,'andin the opinion, the Union

UNION

CHiCAGO', R. 1:& P. BY. CO.

311

the IIPacific Company;" theOmaha& l:tepublican Valley Railwuy C9mpany; the "RepublicanValleyCompSlny;" theSalina&SouthwesternRailw'ayCompany, the "Salina Companyj" the Chicago, Rock Island & Pacific Railway Company, the "Rock Island CompanYi" the Chicago, Ka11sas & Nebraska'Railway Company, the <'Kansaa Company;" and the ChiCago, Milwaukee & St. Paul Railway Coinparly, the "StPaul Company." The Pacific Company owned neadyall the stock imdbonds, elected the directors, and built, controlled, and operated the railroads of the Republican Vaney and Salina Companies; and the Rock Island Company operated -thei-oads Of the Kansas Company under a lease, for 999 years; so that in reality the Pacific Company and the Rock Island Company were the only parties in interest in the Rock Island Company's The negotiations that led to these contracts commenced about the 1st of Mt\rch,1890, and the contracts were formulated and signed by the various officers, of the corporations, before, the middle of May in that year. '.' The Pa0ific Company at this time controlled' and operated more tha,ri5,000 miles ofraifroads; among others, a main line extending fromCouDcil Bluffs, Iowa, by way of Omaha and Valley Station, Neb., N Ogden, in Utah territory, a distance of abbUt 1,100 miles; a main line from Kansas CitS, Mo. ,by way of Topeka and Salina, Kan., to penver, Colo.; theRepublican Valley Railroad, extending from Valley Station"Neb., byway of Lincoln and Beatrice, in that state, to Manhatta9" ,Kan.; the Salina Company's railroad, ,extending· ftom Salinato McPherson, in Kansas; a railroad extending from Hutchinson, Kaq., to the southern border Of that state; and other lluxiliaryroads. The ROck ISland Company owned and operated a line of railway extending fr,orn Chicago,by way. of Davenport, to Council BhltlS; Iowa, and from Davenport to St. Joseph, Mo; As the owner of the latter line, and lessee of the railroad's of the Kansas Comt>any and other corporatioqs, it controlled nndoperateda 'through line of raihvayfllom Chicago,bywayof Davenport, Iowa, St. Joseph, Mo;, and Beatrice, Neb" to Qolorado Springs and Denver, Colo.; a line from' St. J,ooeph, Mo., by' vl'a:y"of Horton, Topeka, and Hutchinson, to Liberal, Kan.; and such other lines tnat'it controlled arid operated, in the aggregate, more than 3,000 miles ofrailway. Th{) St. Paul Company was operatand one of its lines extended ing more; tItan 6,000 miles of from Chicago to Council Bluffs, Iqwa. Earlydn 1890 the Rock Island. Company deterrninedto. .connect its line from' Ohicago to Council Bluffs with its more sontherly line to. Colorado springs by constructing a bridge across the Missouri river at Coun.eil a' tailroad from its terminus in that state,' by ,way of Ornaha,.Soutb Ornaha, and Lin,lioln to Beatt:ice, Neb., thereby shortening its line from Chicago tq Denver and, Colorado Springs; and Paul Company joined in the ,undertaking in order to extend line from Chicago to Council Bluffs on to Omaha and South Omaha. Toac<:op.lplish this pOl'pose, these companiescRused a corporation, with the ,nee.assary powers, to be created, obtained for it by act of congresstbenecI ·

312

.. , FEDERAL REI'ORTER,

vol. 51.

essary and operate the bridge, made the preliminary surveys and., estimates, showing the probable cost of construction to be about$2,5QO,OQO, and were proceeding to raise the necessary funds whentbe Pacific Company requested them to suspend operations, and proposed to make a trackage arrangement with them by which they could use the bridge and certain tracks of the Pacific Company between Coul:1cilBluffs!a./ld South Omaha for their terminal facilities in Omaha and SQutP..Omaha, andtq.completethe line desired by the Rock IslaOll.company. By directio/l of the president and at least two of the directors, of the Pacific Company, chief of construction and two of its direl'ltorsrequestedand obtain.ed. a ll1eeting with the presidents of theRooli Islnp.d .n,nd the St. Paul Companies, and there agreed with them upon the terms of the contracts'in question. From memoranda Company, the there tUlj.de,.by the chief of construction of the contractswerespbsequently drawn. They were examined and approved by the genetal.solicitor ofthePaciflcCompany at The execuqf the b,oard of directors,Of that company had a meeting on six oftbe seven members. of that commit.tee voted to approve of the contracts'and the presi4en(t6 execute them; ,but the custom ha4 \leen not to spetiify in the calls ·of the meetings of of the .tl;le so,bjects to be thereat" and the call of this of these contracts would be meeting did not statet:Qat the of the stockholders of this there OQnE!idered. . At :the oompanyllelp. ,op <1l1-yof April, 1890, at whi,ch mote than two lltock contracts and the action of the thirds·of. executive .committee were ,consi,dered, and resolutions unanimously a.pprqvi;lfg,and and the action of the committee authol'izin,g their exepution; but the call of this annual meeting did Ilot .state thll-t the subject-mll.tterof t:Qese would be considered thereat, but, !ltll.ted that certain other subjects were to be conwas '''for. the choice of directors for the sidered, a.ll-d that the; corniogyear, and th,e. trap-saction of any other business which may legally come before the The resoluti?n approving the contract . with the Rock Island Oompany read as follows:
"Resolved.thl!otthe,agrellment the Union Pacific Railway Company, the Omaha and Republican Valley Rail\yay Company, the Salina and Southwestern RailWaY Company, and theClHl;li.go. Rock Island and PacilicHailway Company, and the Chicago'- Kansas! & '[Nebraska Railway Compan,y, dated May I, 1890, (a COllY of Which is herewith sUbmitted,) granting to the twolast-named cornpaniestrackage rights over this company's lines from Council Bluffs to Omaha.· includinK the Om.aha bridge, and .the lines of th,ls comfrom Lincoln to BeatrIce, Nepany's Omaha and Uepublican braska, and provldipg; fllrther. for 'the use by this company of the Chicago. I,{a.nsas and NebraSka Railway Compariy's lines between McPherson anll South and the .line-from South Omaha to Lincoln, Neprovidediori be and is hereby approved, and the bl'aska, on the action of the committee in. authorizing the execution thereof is. hereby ratified, apprqyed, "nd ,

UNION PAC. BY. CO. ". CHICAGO, B. I. & P. BY. CO.

313

The president of the Pacific Company signed and acknowledged the contracts on behalf of that company, and the secretary attested them and affixed the corporate seal thereto. The contracts so executed, with copies of the resolution of the meeting of the stockholders approving and ratifying them, were immediately delivered to the Rock Island Company and the St. Paul Company, and the Pacific Company immediately entered upon the enjoyment of the portion of the contract beneficial to itself. It is conceded that the board of directors and the body of the stockholders of each corporation that is a party to these contracts, the Pacific' Company alone excepted, took proper action to a1lthorize or ratify the execution of the contracts of their respective corporations, and that the formal execution of the contracts by all the parties to them was sufficient. These contracts are long, and only those stipulations that are material to the determination of the questions presented here will be stated. The contract with the Rock Island Company provides that lithe Pacific Company hereby lets the Rock Island Company into the full, equal, and joint possession and use of its main and passing tracks now located and established, or which may be herearter located and established, between the terminus of such tracks in the city of Council Bluffs, in the state of Iowa, and a line drawn at a right angle across said tracks within one and one half miles southerly from the present passenger station of South Omaha, in the state of Nebraska, including the bridge on which said tracks extend across the Missouri river, between said cities of Council Bluffs and Omaha; connections with Union Depot tracks in Omaha, the side or spur track leading from its main tracks to the lower grade of the Pacific Company's sidings and spur tracks in Omaha, and such extension thereof as may be hereafter made; side -tracks in Omaha on which to receive and deliver to the Rock Island Company freight that may be handled through the warehouses or switched by the Pacific Company; the connections with the Union Stock Yards at South Omaha, and conveniently located grounds in South Omaha, on which the Rock Island Company may construct, maintain, and exclusively use a track or tracks three thousand (3,000) feet in length for the storage of cars and other purposes, for the term of nine bundred and ninety-nine (999) years, commencing on the first day of May in the current year; for which possession and Use the Rock Island Company covenants to pay to the order of the said Pacific Company monthly, during the continuance of said term, the sum of three thousand seven hundred and fifty dollars;" and a certain proportion of the cost of maintaining some of the tracks to be so used; and that the Pacific Company lets the Rock Island Company into the full, joint, and equal possession and use of its tracks, stations, and appurtenances along the line of railway of the Republican Valley Company from a point near the northern boundary of the city of Lincoln to the point where its tracks connect with those of the Kansas Company at Beatrice, Neb., for the same length of time, for which the Rock Island Company agrees to pay the Pacific CQmpany a certain rental computed on a percentage of

the tVlUQ6 of thfj
that.

l\

of<

of.

the (u,n, a.pd aJong'the, liQe8 ,:of the, from to the same: length of tj.rgt:!<fQr. a, rlilpt!lJ,tobe computed iu ,way; that the.. Rock Islarld aud demises to Pacific Complli.l1y-;for a like , j ;!;ommenqia,g :Octo 1, 18 to m 6v,e: over !tlw 'hei ra.ilwax it propose$to,construct beLincoln, in the state trlj\ip,i}f epgines" and of, aU classes, for, a trains;, thaj;:eacp p.arties t9 shalltlj.kfl :such steps It\ihwillbe ,contin Ufl all 11:1e stipp14;ti.Ql;lS, of; th,e c9Q.:traQt ip ijlat each contract of, shall taellltQ that Qf ,dluing corporate existence, tb,e,rfW,[., ,Q,nd ,such ,existences by ,r.enewal ,or QtbetWMle;i [C9ptrnctlf bind ,thereto, their S\1cetlllsgra,graQtfles; schedules regula-; tiona ;el)gipes' /lpd trains over the be :1l;),aq.e for each rnil"'ll;Y by th.e d uly-auof ,les,see..c0IIl panY1?Y wh,ich sa,id railways shaU't\t :Suchf!Gbedules shall, as nearly as may ofrigl}h privilege, anci advaI.ltage to trains of Sll the le8s,oI:, alld lessee, :and to, of. a supetior e).aMopt>,rated, by, ,a, pver trains ()f ll,ll inferior' class by, tl;1eother.: An rulesansl, be reasonable and j,l1st lessQr ,and lRssee, and secure to neither any preference or ·diacrimim,itiQll "against ,the other. They shall ,be eX,ecuted and all trains l;\pder the, of the au perintendent other officer!of !.Pre the parties cannot agree upOn the adopJnoQ.ofany rjJ,le, or as to the modi ficaAl41Y. demand a decision of such controve.rsyby p,toyided.1'he referees are hereby ,with;power to prescribe scpedlfles, and regulations, and to jn ofwillful disregard by either party of the rights Qfrtbe, award <;lamages to the party injured for indudes becauS,e: 1l1-ctj" a!1d referees shall bellplJointe<;l w:hen l¥led!¥l by the selection of ooeby each, party, and the of the chosen" with further provision incllse Qf not here. ,. for their This upon thEl. POnstru,<;)tipn of its proposed line from. South Omakato ,Li,ncoln gave: the Rock Isl\l,nd. Company, access to OI)1aha and South Oml:llha, ,and a shorter continuons line from Chicago to Denver, by way gf,Q:lQnCil Lincoln,. ,and. than it had by its morI>ISQuthflrli!:i:foutej by the USe of the, proposed railroad from South 0lPaPar:to it gaye, l!o line from ,Omahaito,l"inQQln audrB.eatrice abont,40 its former "l1Oute,by,w8.>Y of.YaUey Station, andb.y its usepf,the.railway from Me-

UNION PAC,·RY.CO.

v.

CHICAGO, R.I: & P. RY. CO.

S1S

Pherson to Hutchinson it filled the gap in the pacifib Company's line there, gave it It continuous line from Omaha, by way of Salina, tc\ the southern boundary of Kansas, and a rental a year. ' . The contract with' the St. Paul Company lets it into the joint and equal use of the bridge and tracks of the' PaCifio Company between Council Blutfsand 80Mh Omaha, forthesame time and on,the same terms named in the contract with the Rock Island! Company. Themain tracks of the Pacific Company covered by this contract were two, extending a distance of about seven miles from Council Bluffs across the and throughtbe city'ofOma.ha to South Omaha; Under the contract with the Rock Island Company the Pacific Company immediately entered upon and continued to use the tracks of the Rock Island Company between McPherson and Hutchinson until some time in January, 1891, and the Rock Island Company'before December 1, 1890, constructed its railroad from South Omaha to Lincoln and such depots and buildings at those cities as were necesf'aryand useful only in connection with the use of the Pacific Company's railroads at South Omaha and Lincoln in the way provided in this contract; and the St. Paul Company under its contract entered about June 1, 1890, upon and continued to use the bridge and tracks between CouncH Bluffs and South Omaha, until some time in January, 1891. Early in January, 1891, the Pacifio Company forcibly prevented the use by the Rock Island Company and St. Paul Company of its tracks at Omaha, which they were entitled to use under the contract, and absolutely refusEid to perform the contradt. Thereupon these suits were commenced. These contracts are not inequitable or unconscionable. The president 'of the Pacific Company instructed his agents who negotiated them to ask but $50,000 rental per annum for the privileges granted by each of these contracts, and further instructed them not to fail to make the contracts if they could get a rental of $45,000 per annum. This they di.d get. The complete performance of these contracts does not, and will not, at least for many years, if ever, prevent the Pacific Company from discharging every duty to the government and the public imposed by its charter or deulRnded by public policy; its facilities are ample to transport all the freight and passengers it can obtain, and to perform these contracts to the letter, without delay or serious inconvenience to itself or the public. The chatter of the Rook Island Company will expire in the year 1930, if not renewed; but reserves to the company the right to renew its charter from time to time, "as may be provided by the laws of the states of Illinois and Iowa." The defenses to these suits and objections to these decrees therein now urged are - First, that these contracts are ultra mreB of the Pacific Company; 8ecO'ltd, that the Pacific Company is not bound by them, because they were not authorized by formal action of its board of directors; third, that the contracts are ultravireB of the Rock Island Company and of the St. Paul Company; fourth, that the contract with the Rock Island Company is void, because its charter expires in

816

FEI»l:RAL

:aEPOBTEB, voL 51.

1930, ar,td it could not contract beyond the stated period of its own existence; fifth, that the contract .with the Rock Island Company is void as to the Republican Valley Company, because it does not provide for the payment to that comp!lny of any consideration for the tlse of its that speciqcpl'lrformance of these contracts cannot be decreed in .equit:y, because acts to be performed under them are so numerOUlj and complicated, and to be performed through such a long termofye(l.):'s" that it is impracticable for a court of equity to supervise andenfQrce their provisions; seventh, that the contracts are inequitable and were improvillently made, and no court of equity ought to enforce them. The opinion' of Mr. J.ui\ticeBBEwER upon the hearing below is reported in 47 Fed. Rep. 1<5. All the objections urged against the contract and dl:lcree.inyolved in the suit by the St. Paul Company are urged llgainst,and'eql:jally a,ffect the contract and decree in the suit brought ily the :&Qck Island Company, and the latter only will be considered in the opinion. _, John M. Thurston and A. L. Williams, (John F. Dillon, of counsel,) for apPellants. ,Po Withrow and J. M.Woolworth, (A. J. Poppleton, M. A. Low, John W. Oo,r'}j" and JohnT. Ii'ish, of counsel,) for appellees. Before CALDWELL and SANBORN, Circuit Judges, and SHIRAS, District Judge.,
,

SANB01l,N,Circuit Judge, after stating the facts as above, delivered the opinion of the court. Theprincipal'question,iu this case is whether this contract of May 1, 1890, is 11ltra vires of the Pacific Company. '.I,'he Union Pacific Railway Company is a,consolidation, under authority of the act of congress of July of the Union Pacific Railroad Company, the Kansas Pacific Railway,j;Jompany,and the Denver Pacific Railway & Telegraph to all the rights and powers/granted to the Company. Ithas Union Pacific Railroad Cornpany by the acts of congress of July 1, 1862, (12 S.t. at Large, p.489,) July 2,1864, (13 St. at Large. pp. 3.56, 362,) February 24, 187:1, (16 St. at Large, p. 430,) and the various acts amendatory thereof; Rtlc.ljndetermining the extent of its powers and the validity of this contract these acts of congress must be read in the light of any general legislation fliirlyapplicable. Central Transp. Co. v. Pullman's Pal4ce Oar CQ., 139, U. S. 24,48,11 Sup. Ct. Rep. 478. It is conceded that th!! powers thus granted, together with those fairly incidental thereto, are the only powers of this corporation, and that all powers Dot thus grantlld are reserved to the state. Corporations created under statutory authority are the creatures of the statute. By it their powers are measured, Beyond.the limits of the powers there granted, and those fairly incidental thereto, they may not act; they may not agree to aot. Their contracts for ,the just exercise of these powers are binding and enforceable; but their contracts beyond the scope of these granted powers are nuII,-are as though they had not been. They are void as

mUON PAC·. BY., CO.

v.

CHICAGO, B. I. & P. BY. 00.

317

against the bec!1use they are unlawful usurpations of powers reserved by the They are void as against other parties to the contracts, because they are bound to take notice of the law, of the limits of corporate powers there found; and no formal assent of corporations or officers, no alleged estoppel, can give validity to such contracts, or inducethe cou;rts to enforce them, against of the citizen or the state. Another settled proposition is that the consideration derived by the state from the grant of a railroad franchise is the performance of the functions pertaining to the exercise of the powers so granted. So far as the state and the public are concerned, the sole purpose of the grant is to obtain from the corporation a performance of these functions and a proper ex?rcise of these POWerSj hence any contract or of the corporation by which, without legislative authority, it disables itself from the perform!!-nce of these functions and from the exercise of corporate powers is against public policy and void. Such a corporation may not accept the privilege and benefit without accepting the burden and duty imposed by the franchise. It may not absolve itself from the performance of those duties to the public whose performance is the only rem.uneration to the state for the franchise granted. Thomas v. Railroad 00., 101 U. S. 7lj Pennsylvania R. Co. v. St. Louis, etc., R. Co., 118 U. S. 290,6 Sup. C1. Rep, 1094; Oregon Ry. &- Nav. Co. v. Oregonian Ry. 00., 130 U. S. 1,9 S\lp. Ct. Rep. 409; Central Transp. 00. v. PuUman's Palace Car Co., 139 U. S. 24, 11 Sup. Ct. Rep. 478. Upon principles and authorities is based the contention that this. contract is void·. The clause of the contract deemed most obnoxious is that which lets the Rock Island Company. into, the equal joint possession and use of the two main tracks of the Pacific Company between Council ,Bluffs and South Omaha for 999 years, and it is argued that by this contract the Pacific Company has attempted to abandon or alienate a part of its fmnchise, and that this attempt avoids this contract. Let us. examine these authorities, and see if t?ey warrant this conclusion. In the leading case of Thomaa v. Railroad Co., 101 U. S. 79, a railhad leased its railroad and all its appurtenances and road franchises, including the right to do the business of a railroad and collect the proper tolls therefor. Mr. Justice MILLER, delivering the opinion of the court, says: "The provision for the complete possession, control and use of the property of the company and its franchises by the lessees was perfect. Nothing was left to the lessor but the right to receive rent. No power of control in the management of the road or in tbe exercise of the franchises of the company was reserved;" and the court held the lease void, because it totally disabled the lessor from performing any of the functions pertaining to the exercise of its corporate powers. . In PennsylvaniaR. Co. v. St. R. Co., 118 U. S. 290,309,6 Sup. Ct. Rep. 1094, a lease by a railroad corporation, by special legislative autilority, of its entire railroad and appurtenances to a railroad corpo-

lib!:
nounce'd: artierJileferring td' ,

" ,:'·,i.!:,'! _ ':::

(ii, '

td :of the

' :

'a' lease, held'void principle, which be an;. decisions: '
(:r;, '",

spe,ciall;r P1, legislatl a railroad cbllipanycahnot,by lease ot 'any'otber contra'ct,-turti over to another COll)' pany fora long period of time its road and all its appurtenances. the {Ise of its the exercise of ,Its powers jnor: aqy other railroad company., a contract ve ,and operate s\Joh road, ,and, propertr qf' first In OregMl, "'R1/o &: Nav. 0,,,; v; ()'/'egoniari 9://: Cd.,' 130 U. S. 1, 2a-; 9 Ct. 409,8 'leas6'by the Oregonian ,Railway Company, Limit'ed,oNts' entire railroad' 'dnll 'all its fraMhises for 96 years was held voidontbe'same. W'ound,:viit.:; 'that it disabled the lessor toperlorm its (Jo'!:porMe furiot,ions.: In Oentral 'J'ransp: Co.' v. Pullman's Palace Car Co., 11 Sup: 'Ct. Rep. 478, the Central Transportation Company was incorporated fof Uthe transportation :of passengers in road cars, ,constt'ucteda.'rid to be owned by the said camp,any." It erected suitable buildifigsand entered up&u the manufacture and operation of sleeping cars; After some yeltrs l't made a contract witi:l the Pullman Car CompanY'" bywhichit,trarisferted and to the Pullman panyall, of personal patents. and contracts for '99 years, andcovemtntednot to in the prosecution of which it was incorporateddurlrig that time. With delightful clearness and brevity Mr. Justice GRAY reviewed the decisions of the supreme court, and 'held the contra(Jt void,becauseit deprived the transportation of time of the power to perform its corporate company functions."'" It is idle to review the authorities referred to in these decisions in 'snpport'ofthis proposition; '6rthe bases involving the telegraph chises of tl1ePiicific 'Compariy,'to which reference is made by counseL It issuffitlient. to say that in' every case to which the learning and research of counsel has been able to refer us" where such a contract has beenhEl!dvoiff, an was made to transfefabsolutely, or for a long tertn' at'years, either the entire property and frallChises of the corporation, OISq large and sUbsta.ntial' a part of them that it disabled the corporatiol1 ;frdin,the performance of'its obligations and duties to 'the ", · governm'entattil to the Clearl'y;thecontract here, in question does· 'not come under the ban dFthesededsions. So far: the main line :oftp,e Pacific Company's roadfroIn\'Oouucil Bluffs to Ogden is concerned; this contract covers but about seven miles of on a line of 1.032 miles, part ofa system of over 5,000 'miles of railroad operateuby this compaU)T. These tracks'are aton,e of iteVterminals, at the' junction of three great systems' of'tailrolid, -more' than 14 ,600 miles in ext lIit, at the crossingofthe Missouri river where three large cities stand. Courts cann'at be blind to the fact that every l'ailroadcompany cannot have

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enb'an(le,toour great ()W,Q, or to tIle fact that raildo, and that wilke prppercontracts for the road$of each other. schedules of rules for the n19veThe prov.isip,uio, thi!! ment of' and, train.s! spall be made ,by which will Iilccord,equalrights, and privileges to the trains of thesajIle class belpnging.tQeach party, and if not;,M,reed IiJhaIl be .fixed by referees, the, fromJhe ex'ercille, of no to the discl:uwgj:l ofits pUblic It is but ,the USl;la) 1J,ud necessary provision QOmmonly found iJl: contracts for terminalJacilities. The samepr.ovisiQnrequires such ruJesand reglll!,l,tiqns to be"reasonablean,d jUl?t,", and tIlls ,puts their d,etermin.tioupeculiarly the, pro,vince or:a court of equity,.whereinNstice will not);ledone·. Joyv. Oityw: St. Louis,,188:U, S. 43, 11 Sup.JJt.Rep.243; :BriJum v·. B,ell(Jw8, 4 Pick. MighreU, 18 Yes. 32& j Pity .oj Prqv1.dence v· St. Juhn 1 s 57; Dike v. Greene,4"lkI.285".Oqly abQut aIle of, these, tracks waeul'lE/d, in 1891, and thefuU of both contracts will not t4eir capacity or deprive1he!Pl1-c,Hic Company of allY facility neqessary for. the discharge of to the goverIllnentor the public; nor will ,the speculative day the fullperformallce of these con,. possibility tljlat at some tracts may ,Wl'ong some one prevail tq, do injustice to either partyuQw. It is by no means clear that thetolls of the Pacific CouncY and SO,\lthQmaha will be diminished allY mOrel;>y t,he performance contract than ,they would be by theoperatioll pythe RockIlll!llld Company of a parallel ;railroadof its it is certain that the own constnwtioll. between,tllOse.cities; Pacific Company will receive under .the two contracts 890,000, num that not obt:;t.in in that event. That of the.oonviciQUS or hurtful in tract is, Jongmightweigh as aQ objEjction if itself, but,M to the,parties alld! beneficial to the public interel:]ts, its lellgth is but aU!l:dd;Eid argument in its favor. By this contract the Pacific Company does or transfer any part of its ,road or property;. On the other hand, it retains their possession, and reser.ves to itself, ,by the oCthe contract, the absolute con,tJ;'ol, the operation of every train of every company that enters upon " , That the Pacific Railway Cqmpany Acts reserved to the governrpent the Jhe l;lSe (lithia is not material to this discussion, for if the entire use of the:Pacific Company was sU9ject to this provision, the jointapd equal use, whic,h that compar:rY lets, must be; and that the, record satisfies us:thatwithithe contracts in operation the Pacific (Jompany still retainsevery.,facility necessary to the dischlj.rge of its corporate Qbligations.to the, government and all its other patrons. That theileactB;fequire the Pacific Comp.any to maintain and operate the Ornaha.bridge as a, plj.rt of a contipuoqs lineal railroad from

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Council Blaffs til Ogden to question", because this coritract goes not deprive it of that power; and it cannot be 'successfully ebntended that,'after the through traffic upon this coritinu!>us line is fully accommodated"it' has not also authority to use this pridge "or any other part of its line for local 'The Pacific Company in its answer offered to transport all the cars and trititisbf Island Company to andfrorri all pointsoh its lines describediti the contract, and alleged that it " thereby enabled 'the com plainant to rml.intain its business at Oinaha and South Omaha, and to carryon exactly the same business that it could have carried on by the operation of its own trains, by its own erigines,and by its own employes, as proin said supposed contract." , This would seem to reduce the contentionto this: that the use of these tracks of this railthe trains of the Rock Island Company by road, for the itS6wnimgines fsan unlawful alienation of a part of the Pacific Compapy's'franchise; but permitting the use of the tracks, crews, and engines'of the Pacific Company for the traction of the same trains is a lawful exercise of its powers. The truth is-and the absurdity of this positIon well illustrates'it-th'at by this contract no part of the franchise is or atterrip'ted so to be; the Pacific Company still retains andl the power to operate its trains and collect its tolls between CouricilBluffs arid South Omahllto the same extent as before the contract'Was made. The franchise to operate its trains and collect its tolls between these poitits, which the Rock Island Company exercises, is ri\'l'ed, not from the Padfic from the state. It had this power beforA the contract; it might have exercised it ona parallel railroad built by itself; being allowed the use of the Pacific Company's tracks, it exercises it on those tracks. The general'proposition that a railroad corporation must itself dse itspOwEirs and perform its public duties is'sound in principle and settled byauth,orit'Y, but this rule does not require it to do every' act itself'tnatit lawfullY'do, or prohibit it, after the full performance of thosed'uties, from utilizing all the surplus property it has necessarily acquired for the put:poses of its incorporation. Thus it is within the powers of thiscorporatibn to build' its own cars and engines, but it is not required so to do; it may hire them huilt; it may buy them; it may rent them. It is within its powers to sell all its tickets, mllke all its .contracts for freightage, and collect all its tolls itself, but it is not required so to do; and it is equally whhin its powers to delegate to other corp6rations or parties the right to make these contracts. It was undoubtedly witliinth,e powers of this corporation in this case to permit the use of its engines, crews, and tracks to the Rock Island Company for the transportation of its trains over tliese tracks; but it was equally within those powers to permit the use of these tracks for the transfer of the trains when propelled by the engines of the Rock Island Company·. In which way in this case these 110werssnould be exerCised Was left tutne determination of themll,nhgers of the corporation. It was a

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mere question of method, not of authority, and whether in this case these managers have determined this question wisely or not is not material to the determination of the question we are now considering. If, in the conduct of its corporate business, a railroad corporation necessarily acquires engines and cars that at certain seasons of the year are not required for its own use, it is not then required to operate them; it is not required to hold them in idleness; it may rent them; it may sell them; and, if it necessarily constructs or acquires for its corporate purposes bridges, tracks, and depots at its terminals whose capacity is greater than its corporate use, the interest of its stockholders and creditors, the value of whose property will be thereby enhanced, and the interest of the public, who will be thereby provided with increased facilities for transportation, alike require that such surplus use shall not be left to idle waste. Brown. v. Winnisimmet Co., 11 Allen, 326,334; Midland R. Co. v. Great Western R. Co., 8 Ch. App. 841,851; Simpson v. Botel Co., 8 H. L. Cas. 712; Hendee v. P.inkerton, 96 Mass. 381, 386. The result is that it is riot beyond the powers of a corporation authorized to· construct, maintain,and operate a railroad and its appurtenances to let by contract to a like corporation its surplus rolling stock, or the surplus use of its terminal tracks, depots, and bridges, which it has necessarily acquired for the purposes of its incorporation: provided, always, that such contract in no way disables it from the full performance of its obligations and duties to the state and the public. The contract here in question is clearly within this rule, and is not ultra vires of the Pacific Company. There is another ground upon which this contract must be held to be within the powers of this corporation. By the first section of the act of July 1, 1862, (12 St. at Large, p. 489,)the Union Pacific Railroad Company was authorized to construct, maintain, and enjoy a continuous railroad and telegraph from a point on the one hundredth meridian of longitude west from Greenwich to the western boundary of the territCfry of Nevada. By the fourteenth section of the act that company was authorized and required "to construct a single line of railroad and telegraph from a point on the western boundary of the state of Iowa, * * * so as to form a with the lines of said company at some point on the one hundredth meridian of longitude aforesaid from the point of commencement on the western boundary of the state of Iowa." Other provisions were made for eastern connections with St. Louis and Sioux City. In Railroad Co. v. HaU, 91 U. S. 345, speakIng of these provisions, the supreme court said: "Thus provisions were made for the Iowa eastern branch of the main line. It was doubtless intended to render possible a connection with any railroad that might thereafter be construeted from the western boundary of Iowa eastward. ... ... ... The scheme of the act of congress, then, is very apparent. It was to secure the connection of the main line, by at least three branches, with the Missouri and Iowa railroads. and with a railroad running eastwardly from Sioux City, in Iowa, either through that state or through Minnesota." v.51F.no.7-21

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And,agairi: ,; -'/.':',. "From it [that·is to say, thePllcific Company's charter] may rl'asonably be provide for c0l'loection of the mai\J: iJiI/-,e IJ:nion Pacificroaq withra,ilroads running tes !lfl.l! pI aJJ,9 for those'con-, nect!oJ?s within those states, atpdhits at or 'near their western

eiteh of tpe the:eintp. bri1ge$ oyyr Missouririver, and the fifreguire4 under pel .· .' act of. ,Ml;lfCh ,(16 St. 430,) It IS provIded: .;' railroads, that are, or shall be, Jhe ,rIver, at or near CoulIcII BlUffs, Iowa, and Onill'ha,N):lb., 'thll Unipn 'Pacitlc Railroad Cqtnpany be, :and it is hereLy', authorizM,to'issue"such"bdMs, arid' to secUre'the same by mortgage on the bridj(e, and approaclies.arid'appurtenll.nces, as1t .may deem needful to conits, bridge,(,t,Yllf saId 1'iver, :thlltracks and depots quired to ,n,o,w', by .law c<:!ugl'ess; and said· sp lR prpvicJ,e for the of ordinary vehlCles. and 'company may levy and collect, tolls and charges the use and protection of said bridge and fo'rthe 1I1;1e of pl'bperty, the VrlhjiiPllcificRIlUwa,Y Company'shall beempowel'ed, governed, and'lirnited:'by,tM prOVisions oHh.e act entitled ·Anaet,to authorize the construction of a;.o,d to 'PQst roads,' llpproveq and siXty-aix, so Ji\r as the same is ap. , plicable thereto." The act of 'Jnly25, 1866, (14 St. at Large, p.244,)' provided by its' first section: "That it 'shaUl)e lawfulfol' ,a,pyperson or persons, company or corporation,havIng lII-\th.ority from;h'll states of Illinois and Missouri fOI' such purpqse, ,to a bridge, acr;o!,\s, the Mississippi river at Quincy, Illinois, and, to ,lay op".and over, !laId bridge railway tracks, for the more perfect c,onnection bf' any railroadS' Ilre 01" shall be' constructed to the said river at or opposite said point;'Rnd'that when constl"ucted all trains of all roads terminating atsaid,ti'ver' ,at'or opposite said point shall be allowed to cross said bddge, for reason,al)le c6mpenaatiun to bernade to the owners of conditions hereinafter provided." said bridge. qnder: By sections 4, 5, 6,:7,8,9" and 10 of this act certain parties are authorized to construct,bridges at:Burlington, Iowa, Hannibal, Mo., Praine du Chien, i\Vis, , Keokuk, Winol1a,.Minn., Dubuque, Iowa, and Kansas City, Mo., 'On th&',sauletetm's and subject to the same restrictions. "By act ofcong,ress approved Febl'Uary 21,.1868, (15 St. at Large, p. 37,) the Southern:iMinnesotaRailroa(ijCompany was authorized to build and operate 'a'talli'd,ad bridge acro$s'the Mississippi riv{jr, subject to the pro30,1870, St..at p.173,) Il-,.o, IIoqt araI1rol;l.d rIver proYlqed that ,the l?aid bridge shall have and be entitled to equal rightS and privileges in the passage of the same, and in the use of the machinery and fixtures thereof, and of all the ap-

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proaches thereto." And'5n'the Statutes' at La,rge, from. the seventeenth volume to the present time, is found a large number of statutes of this character, in nearly, if not quite, all· of which this or a similar provision is found. By an act of congress a.pproved June 15, 1866, (14 St. at Large, p. 66,) it was provided: . . . . "That every railroad company In the U,nited 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 pa8sengers, troops, government .supplies, mails, freight. and, property on their way from any state tp another state, and to receive compenflation therefor, and to connect with roads of other states so as to form continuous lines for the transportation of the Same to tIle place of destination.... An examination of these statutes clearly shows that the purpose and policy of the congress has been constantly to promote, and often to require, the formation and operation of continuous lines of transpOl'tatioD; that almost without exception it has authorized, and generally has required, the owners of railroad bridges built under its authority to allow the use of their brirlges and tracks for the passage of trains of connecting companies. It is seen that the bridge act of 1866, by which the Pacific Company, so far nsthe same was applicable. was" empowered, governed, and limited" for the use and protection of its Omaha bridge, was an act whose restrictions and conditions have been made applicable to at least eight bridges; and that the expressed purpose of the act of February 24, 1871, was" lor the more perfect connection of any railroads that are or shall be constructed to the Missouri river." In Union Pac. Ry. Co. v.U. S., 117 U. S. 355,361, 6 Sup. Ct. Rep. 772, the supreme court. speaking of the act of 1871. which they there held did not change the rates of compensation expressly fixed in the act of 1862 for the transportation of mail, troops, and government supplies across the Omaha· bridge, said: "The reference in the last·named act to the act of 1866 was for the purpose of extending the provisions of the latter act as far as necessary to confer additional powers upon the railway company for the use and protection of the bridge. " In Pitt.9burgh, etc., Ry. Co. v. Keokuk H. Bridge Co.,131 U. S. 371, 9 Sup. Ct. Rep. 770, Mr. Justice GRAY, speaking for that court, says: "Where the charter of a railroad corporation, or the general laws applicable to it, manift'st the intention of the legislature for the purpose of securing a continuous line of transportation, of'which its road forms a part. to confer upon it the power of makmg contracts with other railroads or steamboat corporations to promote that end, such contracts are not ultra vires." (lreen Bay & M. R. Co. v. Union Steamboat Co., 107 U. S. 98, 2 Sup. Ct. Rep. 221. The great purpose of the contract here in question was to fill the gap in the line of the Rock Island Company between Council Bluffs and Beatrice, and thus establish a continuous line of railroad from Chicago, by the way of Omaha and Beatrice, to Denver, Colo. It is true that that line would be acornpetitor of the Pacific Company, but the course

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and decision, the public policy. of this nation, is to not repress, competition; it is to promote, not repress, continuoqs Unli\s of transportation; and, reading the charter of this company in general legislation to which we ha\Te referred, we are constrained to hold that the Union Pacific Railway Company was thereby fairlY!3rnpqwered to this. contract. defense.to this suit and objllction to this decree is that this contract wae never authorized to be executed by proper action of the board, of directors of the Pacific Company. The contention is that in the ib0ard of directors was vested the whole charge and management of the property aIld effects of the Pacific Company; that the action of the executive committee of the board ,vas futile, because the power to make this contract could not be delegated; that the action oLthe stockholders' meeting was futile, because. the action of the body of the stockholders is never a substitute f()r the action of ,the board of directors where the power of management has been vecated in that board; that this rule applies with peculiar force itO this case, because, by the charter of the Pacific Company, 5 of its 20 directors are appointed by the government, and are. not. stockholdersl and that, in any event, the action of the meeting oithe executive cOJ;llmittee and of the stockholders' meeting on this subject was void, because the calls for those meetings gave no notice that thesubject-m.atter of this contract would be there considered. Section 13, ofthe act of July 2, 1864, (13 St. at Large, p. 361,) provides that 5 oitha 20 members ofthe board of directors of the Pacific Company shall be appointed by the government, and that at least one of the government db-ectors shall be placed On each of the standing committees. The fact thl1tthe congress, when it had the power to control this corpo:" ration bytheappointment.of a majority of this board, refused to exercise that power, and limited the number of government directors to so powerless a minority, strongly indicates that in the management of the their power. was not intended to be much affairs of a corps of observation.' Much has been said in greater ment of the rights and privileges of these government directors, much claimed from the fact that the government director who was a member of the exooutive committee was absent when that committee approved of this there is no provision of the Pacific Railway Acts which gives any greater powerto the act or vote of a' government director than to that of'aIlY other director, Or that, declares that the action of the corporatioIj.,its'qoard of direotors or executive committee, shall be governed by any other than the general rules of law applicable to such cases because of the presence or absence of such director. Hence this unique feature of. this charter is not lllaterial to the determination of the questions now to be considered, and it will not be further noticed. ,The ao.;I1;Iin,istrfl,tiQn of the corporate powers of this company was vested in the body of .the stockholders, un,less it had been delegated to some otherboqy. Dartmouth College Case, 4 5.18, 677; Attorney General v. Atk. 212; ,Angell &,A. Corp.§§ 277, 327; Grant. Corp.

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By section 1 of the act of July 1,1862, (12 St. at Large, p. 491,) provision was made for the incorporation of the Union Pacific Railroad Company, the receipt of subscriptions to the capital stock, and a meeting of the subscribers for the purpose of electing 13 directors, and then the section provides that "thereafter the stockholders shall constitute the body politic and corporate." The only powers granted by the act to the board of directors are to appoint engineers, agents, and subordinates to do all acts and things touching the location and construction of said road and telee graph, and to require payment of subscriptions to the capital stock'. Not only this, but the same section provides that "said company, at any regular meeting of the stockholders called for that purpose, shall have power to make by-laws, rules, and regulations as they shall deem needful and proper touching the disposition of the stock, property, estate, and effects of the company not inconsistent herewith, the transfer of shares, the term of office, duties, and conduct of their officers and servants, and all matters whatsoever which may appertain to the cohcerns of said company." Thereupon the body of the stockholders made a by-law which provided that" the board of direc.ors shall have the whole charge and management of the property and effects of the pany, and they may delegate power to the executive committee to do any and all acts which the board is'authorized to do, except such acts as by law or these by-laws must be done by the board itselU' The same body made another. by-law, which provided that "the executive committee shall have, and may exercise by a majority of its all the powers and authority which from time to time may be delegated to said committee by the board of directors." The only acts that by any law or by-law" must be done" by the board itself were the appointment of. engineers, agents, and subordinates, the acts and things touching the location and construction of said road and telegraph, and the collection of the subscriptions. The charter,therel fore, vested the power to consider and act upon this contract iIi ,the body of the stockholders, with authority, through the enactment of by" laws, to delegate that power. By the by-laws cited above that body did delegate this power to the board of directors, and in the same expressly authorized that board to substitute for itself the executive committee in the execution of this and every other power delegated to the board. No words more apt to grant this complete power of sub" stitution could have been used. Under this authority, in the year 1880,' and annually thereafter, the board of directors passed a resolution, which provided that, "while the board of directors is not in session, the full power thereof, under the charter and by-laws of the company,be,' and is hereby, conferred upon the executive committee;" and the ex': ecutive committee has constantly exercised that power since that date whenever the board was not in session. This resolution, through the power of substitution cited, effected a lawful delegation to the executive committee f)f the entire power of the corporation to consider and authorize the execution of this contract; and since the executive committee and the body of the. stockholders at their respective meetings approved and

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anditsexecutioll, the defense that the corporation is notbound)y this cOl)tract, because no formal resolution of the board thE! waspttSsed, cannot be maintained. There, ds ,why neither this defense nor the objection that the calls ,{orthe of the GommHtee and st9ckholders gave no notice tqat this sUl>ject would be there considered is 1'lot now open to the Pacific Com Pany . This contract was within the general powers of the qorp9rationj the charter originally vested the power to authorize it in. the body of thestookholdersj the Pacific Company ,by its action and by its acquiescenoe,illduced the complainant tohelieV'e, and to act on the, OOlief, that its, El:ll::Elcution of ,this contract was duly authorized. No corporation can, by thE! formal execution and celiveryof a contract within its CQrporate by long acquiescence therein, and by itself entering upon the performance and taking the benefits thereof, induce the other. party to the contract to expend large sums of mouey or incur onerouslililbilities, otherwise unneceS$ary, in reliance upon, and in part performance of, the cpl;l,tract, and then repudiate it, and escape liability thereon, on the ground that.in obtaining authority for its execution it did not itself comply with some formal rule or regulation, with which it might have complied, bpt which it chose to disregard. The perpetration ofsucp. an injustioe is no more permitted to a corporation than to an individual. I In Zabriskie v.. Raur0a4 Co., 23 How. 381, the defendant corporation indorsed its guaranty bonds of another railroad company, acting unde.r ap,thority of an act of the legislature of. Ohio, which provided that any existing company might accept of any of its provisions, and when so accepted, and a certified copy of their acceptance filed with the secretary of state, those portions of their charters ineonsistent with the provisionll of the act should be repealed. The defendant corporation had never accepted this act, or filed any acceptance thereof, and the call of the stockholders'meeting, at which the corporation was authorized to make the guaranty, did not give notice that this matter would he there considered. On these grounds the plaintiff, who was a stockholder, claimed the guaranty was void, and sought to enjoin the corporation from paying intere::lt thereon. Some of the holders of the honds were joined as defendants. Mr. Justice CAMPBELL, speaking of the first ob· jection and the corporation's failure to accept the provisions of the act of the legislature, said: "The corporation have executed the power and claimed' the privilE'ge con· ferred by them, and they Cannot exonerate themselves from the responsibil. itY by asserting t'hat they have not Illed the evidence required by the statute to evince their decision. "Page 397. After reviewing the facts regarding the call for the stockholders' meeting, he said: "But we lire to regard the conduct of the corporation from an external position. The community at large must form theil' judgment of it from the acts and reso),utions adopted by the authorities of the corporation and the

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meeting of the stockholders, and by their acquiescence in them. These negotiable securities have been placed on sale' in the community, accompanied by these resolutions and vot,es inviting public confidence. , They have circulated witbou t an effort on the part of the corporati"n 'or the corporators to restrain them or to disabuse those who were influenced by these apparently official acts. Men have invested their money' on the assurance they have afforded. A corporation, quite as much as an individual, is held to a careful adherence to the truth in their dealings with mankind, and cannot, by their representations or silence, involve others in onerous engagements, and then defeat the calculatiolls and daims their ownco,nduct had superinduced;" Pages 400, 401. The"Pacific Company delivered this contract, signed by its president and secretary, and sealed with its corporate seal, to the Rock Island Com pany . This was prima facie evidence that it was executed on behalf of the corporation by la,wfnl authority. Burrill v.Nahant Bank, 2 Mete. (Mass.) 1M, 166,167; Canan(ja,rquaAcademy v. McKeChnie, 90 N.Y. 618, 629; Wood v. Whelen, 93 Ill. 153, 162; Southern Oal.,etc.,Ass'nv; Bustamente, 52 Cal. 192. Itde1jvered to that company a formal resolution, unanimously passed by the body' of its stockholders at their annual meeting, at which two thirds,of its stock was approving the contract and ratifying its execution; This resolution was presumptive evidence that the meeting at which it was adopted was legally called, and that the action of the executive committee therein referred to and ratifier! was at a meeting lega:Ily called. Chouteau Ins. Co. v. Holmes, 68 Mo. 601; Sargent v. Webster,13 Metc; (Mass.) 497,504; Lane v. Brainerd, 30 Conn. 565.577; People v. Batchelor, N. Y. 128. On May 17,1890, the Pacific Company requested, and shortly after obtained, and until January, 1891, continued to enjoy, tpe use of the line of the Rock Island Company from McPherson to Hutchinson under this contract. No note of warning, no notice that this contract was executed without authority, came from the Pacific Company for seven months. "'When a contract is Illade by any agent of a corporation in its behalf, and for a purpose authorized by its charter, and the corporation receives the benefit of the contract, without objection, it may be presumed to have authorized or ratified the contract of its agent." Pittsburgh, etc., Ry. Co. v. Keokuk & H. Bridge Co., 131 U. S. 381,9 Sup. Ct. Rep. 770; B(tnkof Columbiav. Patterson, 7 Cranch, 299; Bank of United States v. Dandridge, 12 Wheat. 64; Zabriskie v.Railroad Co., 23 How. 381; Gold Min. Co. v. Na,tionalBank, 96 U. S. 640; Pneumatic Gas Co. v. Berry, 113 U. S. 322, 327, 5 Sup. Ct. Rep. 525. On this contract, this resolution, this action and acquiescence of the Pacific Company, the Rock Island Company had a fight to rely. In reliance thereon it constructed during those seven months the proposed railroad frorp South Omaha to Lincoln, mentioned in the contract,at an expense of over a million dollars, and, under a joint arrangement with the Pacific Company, it constructed a depot at Lincoln, on the grounds of the RepUblican Valley Company, to be used at the junction of this new road with the Pacific Company's line at that point. The great purpose of this expenditure was, by the use of this road and in ,

FEDERAL, REPORTER t

vol. 51.

thQpe.rfurmance of this contract, to obtain a continuous line from Chieagoto Denver, and the repudiation of the contract would frustrate this pu.}1' '. a.nd gr.eatly depreci.ate. t he value of this new road and its ap. .· . ptl'rteJ,flmces. Under these circumstances, to permit this company now to repudiate this contract WOJlld violate every principle of equity and fair dealinll;. By its presentation to the Rock Island Company of this contract, and this resolution, acts apparently official, by its acceptance of a part of the benefits ·of the contract, by its silence for seven months while this large expenditure of money was being made in reliance on it void, either because its board this contract, it is estopped to of direcwrs failed to pass aformal resolution approving it, or because its seqrEltary failed to state in his calls that this contract would be considered,llt the meetings that unanimously authorized and ratified it. The Pacific Company is bound by .the contract. St. Louis, V. & T. H. R. 00.; Terre Haute&I. R. 12 Sup. Ct. Rep. 953, 956; Centml Tranap. p(>.v. PuUman'8 Palace (hr Co., 139 U. S. 60, 11 Sup. Ct. Rep. 478; JJeec.her v. Rolling K'IlJ, Co., 45 Micp. 103, 109,7 N. W. Rep. 695; Davia y. ;Railroad 00., 131 Mass. 258, 260; Thomas v. Railway Co., 104 Ill. ,462,467 · J The third.. objection urged is that this contract is ultra vires of the Island Company. The contention is that the R.ock Island Companyhad not complied with the statutes of the state of Nebraska, with comply ill order to derive power to operate a railway in phat state as provided by the contract; that on this account the contract ,not be enforced against the Rock Island Company; and therefore that cannot enforce it against the Pacific Company. After the testimony had been closed, and at the final argument, the defendants moved the court to permit the' introduction of the evidence on which alone this contention is based. The complainant objected on the grounds that the testimony had been closed, that no good reason was shown for its introduction at that time, and that it was incompetent, irrelevant, and immaterial. The court overruled the motion, sustained complainant's objections, and defendants excepted. It was discretionary with the court below to grant or refuse this motion. To refuse it was certainly no abuse of this discretion, and we do not feel authorized to consider this rejected evidence, or the argument based upon it. Without the rejected evidence, the record proved this contract to be within powers of the Rock Island Company. Railway Co. v. McCarthy, 96 U. S. 267. The fourth objection is; .that this contract is void because the charter of .the Rock Island Company expires by its terms in 1930, and that company could Dot contract beyond the stated period of its own existence. This objection cannot be. sustained. A lease for a time certain, if the lessee sballlive so long,hl\-s always been held valid, .and a lease for 999 years, if the lessee shall be in existence so long, is likewise valid. Wood Lllndl.&Ten. § 61, p.144; Gere v. Railway Co., 19 Abb. N. C. 193, 203. A:gain,this contract provides that it shall attach to that portion of each ,railway and shall bind the grantors, and the assigns and sue-:

v.

UNION PAC. RY. CO. t1. CHICAGO. R. I. & P. BY. CO.

329

cessors of each party to it, during the existence of their several corporate existences, and that each party shall take such steps as may be necessary to continue the contract in force. The charter of the Rock Island Company provides that its existence" may be renewed from time to time as may be prodded by the laws of the states ofIllinois and Iowa." The contingency that this corporation will cease to exist, and leave neither assigns nor successors, is far too remote to have any influence upon the validity of this contract. : Nor can the fifth objection urged to this contract be sustained. It is that the contract is void as to the RepubHcan Valley Company, because it does not provide for the payment of any consideration to that companyfor the use of its railroad. The contract, however, does that the consideration for the use of this railroad shall be paid to the Pacific Company. Now a contract by an individual to perform ceri tain services for B. for a consideration to be paid to C. is a valid <!op,tract. The only reason why such a contract by the officers of a corporatiQn on its behalf may not be valid is because they are· the trustees of th{stockholders of the corporation, and they may not make a contract on its behalf depriving it of any right or property, unless the benefit que tru8tent. In this case the Pacific therefrom' inures to their CGmpany had furnished the money to construct the railtoadOf the publican Valley CompanYiit owned substantially all its bonds; it owned substantildly all its stock,-all of it that had ever been represented 'at any stockholders' meeting; and from the construction of its railroad to the date of this contract the Pacific Company controlled and operated,as the sole ,owner of its stock and bonds, the railroad of the Republican Valley Company. Under these circumstances, the Republican Valley Com pany and its officers held all the property of that corporation in trust for the Pacific Company, and that they reserved the consideration of this contract to their cestui que tru8t, to whom it belonged, and to whom the law required it to be paid, instead of to that corporation, is no objection to its validity. When the reason ceases, the rule also ceases. That at some future time the ownership of this stock, and the right to receive this rental, may become separated, is not material here. It is sufficient that now the contract provides that the consideration shall be paid to the party to whom it belongs, and the presumption is that any future seller or· purchaser of the stock or the right to this rental will make his price with due regard to the terms of this contract. The next objection made to this decree is that this contract is not one of which specific performance can be enforced in equity; that the actsto be performed under it are so numerous and complicated, and their performance is to extend through so long a term of years, that it would be impracticable for any court to supervise and enforce such performance. The question hereipresented is no longer open for consideration in the federal courts. It is settled adversely to the appellants by the decision in Joy v. City of St. Louis, 138 U. S. 1, 11 Sup. Ct. Rep. 243, and we affirm, and adopt upon this question, the following quotation from the : opinion of Mr. Justice BREWER, in the case at bar:

vol. 51.
Is thls one of·wNchacourt of equity may cO)llpel specific Fortunately, a recent decision of the supreme court in the case:d,t -'joy v. Oityof St. Louis, 138 U. S. 1. 11 Sup. Ct. Rep. 243. relieves from any-embarl'assment.. ' case WllS originally heard before me while I wasciteuit judge; and after a careful examination, and thdugh in the face of adverse preeedElIlts. I decreed specific performance of a contract for the joint lIse of track. That decree was affirmed by the unaninioull opinion of the supn'we court.. j\.lllhe objections which are here made were presented there and overruled, and the necessity of the interposition of a court of equity in cases ,of this kind clearly shown by Mr. Justice BLATOHFORD in the opinion of the court. The spirit of that decision is expressed in this quotation: ·Railroads are c!>l1lmon carriers, and owe duties to the public. The rights of the public in respee.tto these great methods of communication sllould be fostered by and it is one of the, most useful functions of. a court of equity that its methods of capable of bp.ing made. such as to accommodate to developlllent of the interests of the public, in the prog..ess of tHtda arid by new· methods of intercourse and transportation.: .. 47 Fed;· Rep. 25. ' .
i

Thegeneral by QOUpsel for the Pacific COJ;npany that an agreement to submWa cQntroversy to arbitration cannot be specifically enforced in equity has noapPl1cation to this case, be.ClLuse the stipulations in this contract .to submit to referees are not tbe. essence of the agreement, but;, relate to Qlinor details of its performanc13, and are merely to the principal contract, and because the contract has been Company has accepted some of its benpartly. perfo:t:med, the efits, the ROck Island Company has made large expenditures in reliance upon it, .and a failure to enforce it would result in gross injustice. Tscheider v. Biddle, 4 DilJ·.55, 60, 61; Gregory v. Mighell. 18 Ves. 333;
8OnV. Jaclc8on, 1 Smale&: (X. 184. . .. Finally, we are urgedtO,reverse because it 1s said that the made, and is inequitable" and a court of contract was; equity ought not to enforce it. There is no doubt that the powers of a court of equity ought not to be exercised to enforce a contract that is hard and unconscionable, where such action would work great injustice to the defendant, alth()ugl;l.he mllY have been guilty of a breach of the are that this contract was just and contract;, hut in this fair,and. that it was made on behalf of the Pacific Company by men of and familiarity with its subject-matter. The two great corporations that brought these suits in a great illeasure 'controlled the trade that was done over the Omaha pridgej they were raising tbemoney to construct a rival bridge and railJ:Oad at Omaha. The conlltruction ofsuch a bridge meant a diversion from the bridge of the Paeifiy.Company of the traffic the complainants controll(jd. To avert the.constructionqfthis bridge..apd the diversion of this was the grt1atpurpose of thts contract on the part of the Pathe complainant companies desisted from cific their. eflorts to :their bridge, andmadEl this contract. All the carrying trade of all at Omaha had been passing over the bridge of the PacificCompany.for years. The olfieers of that company

Black v.Rogcra, 75 Mo.

449j Oolea v. Peck, 96 Ind. 333,341; Jack-

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331

had the best means of information and undoubtedly the most accurate knowledge regarding the subject-matter of this contract. They were men of high intelligence, whose long experience in railroad management had ripened their judgment and peculiarly fitted them to deal wisely with the subject here presented. They fixed their own price for the use of their bridge and tracks at Omaha, and that price was inserted in the contracts. In their opinion, the contracts were fair and just; the best interests of the Pacific Company demanded their execution; they advised and caused their execution by that company; and, in our opinion, the evidence in this case amply vindicates their judgment. The result is that the Pacific Company has accomplished its great object in making this contract; it has prevented the construction of the rival bridge; it has averted a diversion of the traffic from its own bridge and tracks. in making the contract The main object of the Rock Island was to get the use of the Pacific Company's bridge from Council Bluffs to Omaha, and its tracks from Council Bluffs to South Omaha, and from Lincoln to Beatrice, to fill the gap in its continuous line from Chicago to Denver. To accomplish its purpose, the Pacific Company made this solemn contract to permit this use; it delivered that contract to the Rock Island Company with a formal resolution of the body of its stockholders, showing its apparently official character; it demanded, obtained, and enjoyed a part of the benefits of the contract for seven months; it gave no warning or notice that it would not perJorm its contract on account of its invalidity or for any other reason until the Rock Island Company had built its proposed railroad from South Omaha to Lincoln, to be used as a part of its continuous line, at an expense of more than a million dollars, and then, for the first time, it utterly refused to perform its contract, and left the Rock Island Company without a bridge or the use of one, without its continuous line, with nothing but this fragment of a road from South Omaha to Lincoln, and even that the Pacific Company prohibited it from connecting with its tracks. For such a breach of such a" contract no jury, no court, could justly measure the damages; no action at law could give adequate remelly. There was but one etfective remedy, and that was the enforcement of this contract. That this remedy should be here applied. the wrongs orthe Rock Island Company, the interest of the public in rapid aIl11 speedy transportation over continuous lines at the least expense, and its higher interest in that wise administration of complete justice, which is the great of civilized it, and le"lt these wrongs unsociety, alike demanded. To have redressed, would have been neither just nor equitable. The contract was within the corporate powers of each of the parties to it; each of them by its own acts became leglllly bound to perform it; the powers of the court below were ample to en:orce it; those powers were wisely exercised in granting its decree; and that decree is hereby affirmed, with costs. .The questions involved in the case of the Union Pacific Railway Company, Appellant, VB. Chicago, Milwaukee St. Pau), Railway Company, Appellee, are decided by the foregoing opinion, and the decree in that case is also affirmed, with costs.

I'EDEau,

vol. 51.

GIRARp "LIn

INSURANCE, ANNUITY

&

TRUST CO. tit

al.

fl. CoOPER

It al.

'(Oircu'U Oou.n

0/ ..4.ppea18. E4Ihth OW-cui&. July 6,1892.)
No. log.

L

JtBFBlt1mCll-CON8TRUOTI01'r OJ'

, On'. petition by contractors against the receivers of a railway to secure payment for ttJ,!lell6otion of a building, the court referred the cause to a master to ascertain

the receivers and the builders, refused to hear evidence as to value, and reported ',the,contract price as the amount due. The oourt, after a hearing- on exceptions, oonfl.rmed the report, and entered judgment thereon. Held, that while the order of; reference was open to the constructiolltha1; the actual value of the work and lQaterlal was to be ascertained, yet as the trial oourt had held that it was not in,. \etJdedto bear so broad a construction, and had confirmed the report, an appellate :. would not be justified in holding the Contrary, where no injustice had resulted.

I

Whiie'oortain railroad buildings were in course of construction, a foreOlosure suit was' instituted against the railroad company, and two receivers were appointed. Shortly e,fterwards, by a joint letter, the receivers notified the builders to stop work,8tatfug that they would later furn,ish designs and directions for oompleting the work, "and rou will name a gross sum for the performance of the same, which . will be submitted to the oourt for approvl,\l." New plans and specifications were then prepared and approved by the oourt, and an order was entered directing tbat , the build!ngs becompleted'in accordance therewitb. The receiver in active cbarge .ofth8,1; portion of the road, notified the builders of this order, and soon afterwards they-answered by letter a bld for.,which they would oomplete the work on th,e new plans. The active recelvertestill.ed that the receivers accepted the bid, and:tbat. a formal contraot was prepal-"ed, and was sig-ned by the builders, but was never trig-ned by the receivers. Relying on tbis contrac1;the buildera oomJlleted the work. The otbel-" reoeiver testified tbat he knew nothing of tbe bid, but tbat be ,afterwards sawt1;le work going on, and assumed it waswitb bis colleague's concurrence,' and without any estimates or contract. Held, that these facts were ;! ,SUffiCient to justify the JDaster in tlnding tbat the work was completed under a , .binding contract with tbe 1'6ceivers. II; 0" PENDING CONTRAOTS. . ,. builder wbo is engaged, under oontract, in erecting a building for a railroad company at the time that reoeivers appointed for tbe road, is entitled to ramUljeration on tbe basis of the contract prioe for the work done after the receivers are, appointed, and before tbey make a new arrangement with him or notify bim to atop work. '
.'

TO ESTABLISH-MAsTER'S FINDINGS.

"1'6

, i

sppelllintS; , ' P. Sandela and A.,G. M08eley, (Sandels &- H'Jl, on the brief,) for " Before CALDWELL an<fSANBORN. Circuit Judges, and SHIRAS, Dis' .

J. W. ,McfiYUd and 8. A. Gilbert, (Samuel Dickson, of counsel,) for

A,.ppeaJ. from the United States Court in the IndianTerritory. Affirmed.

',SHtRis, District ,The Choctaw Coal &; Railway Company, a c6rporation created under the laws of the state of Minnesota, with the rl,ght, 'among other things" to build and operate railways and to Own and develop coal mines, was authorized by the acts of Congress approved 18, 1888, and February 13, 1889, to construCt a railway within the Territory.. ,In connection with the building and operation oHM line of railroad'. the development of itS mining interests, the e<>mpll;ny ,in May. 1890. undertook the erection. at South McAlester. in