Central Transportation Company v. Pullman's Palace Car Company

This was an action of covenant, brought September 21, 1886, by the Central Transportation Company, a corporation of Pennsylvania, against Pullman's Palace Car Company, a corporation of Illinois, to recover the sum of $198,000, due for the last three-quarters of the year ending July 1, 1886, according to the terms of an indenture of lease from the plaintiff of all its personal property to the defendant, dated February 17, 1870, and set forth in full in the declaration. The defendant filed several pleas, one of which was 'that said indenture of lease was void in law as between, the parties thereto, for the want of authority and corporate power on the part of the parties thereto to make and enter into said indenture of lease; and for that the same was in excess and in violation of the charters conferring the corporate powers on said plaintiff, and of the purpose of their incorporation.' The plaintiff filed a replication, traversing the averments of this plea. The plaintiff was originally incorporated December 26, 1862, by a certificate or charter, made, acknowledged, recorded, and filed in the office of the secretary of the commonwealth, as required by the general laws of Pennsylvania, which authorized companies to incorporate themselves, by voluntary act of the associates, 'for the purpose of carrying on the manufacture of woolen, cotton, flax, or silk goods, or of iron, paper, lumber, or salt,' or 'for the manufacture of articles from iron and other metals, or out of wood, iron, and other metals,' within the state, for a term not exceeding 20 years; and provided that every corporation so formed might by its corporate name purchase, hold, and convey real or personal property, 'necessary or convenient to enable the said company to carry on the business or operations named in such certificate;' and that its stock, property, and affairs should be managed by a board of directors, a majority of whom in all cases should be stockholders therein and citizens of the state; and authorized the directors, subject to the revision and approval of the stockholders, to make such by-laws for the management and disposition of its stock and affairs, 'and for carrying on all kinds of business within the objects and purposes of such company;' and forbade the company to use any part of its capital stock or other funds in the purchase of stock in any other corporation. St. Pa. April 7, 1849, No. 368, §§ 1, 3, 4, 8; Id. April 1, 1853, No. 186, § 2. In accordance with the requirements of those statutes, the plaintiff's certificate of incorporation or charter stated the object for which it was formed, 'the transportation of passengers in railroad cars constructed and to be owned by the said company in accordance with the several letters patent,' four in all, described by numbers and dates; the place where its chief operations were to be carried on, Philadelphia; the amount of its capital stock, $200,000; and its term of continuance, 20 years, the extreme limit allowed by the statutes. By a special act of the legislature of Pennsylvania of February 9, 1870, No. 94, entitled 'An act to extend the charter of the Central Transportation Company, to empower them to lease their property and increase their capital stock,' the plaintiff's charter was extended for 99 years from its expiration; and 'said company are hereby empowered to enter into contracts with corporations of this or any other state for the leasing or hiring and transfer to them, or any of them, of their railway cars and other personal property,' as well as 'to increase their present capital stock two hundred thousand dollars.' On February 17, 1870, eight days after the passage of that act, the indenture sued on was made by and between the plaintiff and the defendant, which had been incorporated three years before, with a capital stock of $100,000, by a special act of the egi slature of Illinois of February 22, 1867, (declared to be a public act,) 'to manufacture, construct, and purchase railway cars, with all convenient appendages and supplies for persons traveling therein, and the same' to 'sell or use, or permit to be used, in such manner and upon such terms as the said company may think fit and proper.'

The indenture, after the statement of the names of the parties, began with the following recitals: 'Whereas, the parties hereto are engaged in the business of manufacturing railway cars, generally known as sleeping-cars, under certain patents belonging to them, respectively, and of hiring the same to railroad companies under written contracts, to be used and employed on and over the lines of the roads of said railroad companies, and receiving therefor income and revenue by the sale to passengers of the berths and accommodations therein; and whereas, the demands of the public for increased means of personal comfort and convenience in traveling, of avoiding repeated changes of cars over long routes of railroad, the necessity for affording, at fair and reasonable rates, these advantages, which cannot be extended by railroad companies themselves, require that every possible means should be adopted to meet such demands by avoiding the inconvenience and curtailing the expenses incidental to the maintenance of the business management and organization of two separate corporations.' It further recited that the parties (professing to act under the powers conferred upon them, respectively, by the special acts of the legislatures of Pennsylvania and of Illinois, above mentioned) had agreed that the plaintiff should demise, transfer, and set over to the defendant, and the defendant should take, all the plaintiff's railway cars, contracts, patent-rights, and personal property. By that indenture, accordingly, the plaintiff 'granted, demised, transferred, and set over' 119 railway sleeping-cars, with their equipment, its contracts with 16 railroad companies, (copies of which were annexed to and made parts of the indenture,) all its patent-rights, (an assignment of which, including the four specified in its charter and 13 others, was also annexed to the indenture and made part thereof,) and all its 'personal property, rights, credits, moneys, and effects, rights of action, money due and to become due from licenses heretofore granted,' to the defendant, its successors and assigns, 'to have and to hold the above demised property, and all income, revenue, and profit to be derived therefrom,' for the term of 99 years from January 1, 1870, except so far as the contracts, patents, and licenses should expire sooner; and the plaintiff expressly covenanted that it would use its influence to obtain renewals or new contracts in the defendant's name from the railroad companies; and that it 'shall and will not engage in the business of manufacturing, using, or hiring sleeping cars' while the indenture should remain in force. The defendant, on its part, covenanted to pay to the plaintiff annually the sum of $264,000, in equal quarterly installments, 'during the entire term of ninety-nine years, unless, upon a diminution of the revenue received from the railroad companies, the indenture should be declared void by the defendant, or the annual sums payable by the defendant be reduced, as therein provided; also to pay all the plaintiff's debts up to January 1, 1870, according to a schedule annexed, by which they were not to exceed the sum of $63,998.69, that being the amount of cash transferred by the plaintiff to the defendant; to continue and carry on the business as authorized by its charter, during the existence of the assigned contracts or other like contracts with the same railroad companies; to keep in repair the cars and their equipment, and to renew and reconstruct them when needful; not to assign the indenture without the plaintiff's assent, nor to create any lien or mortgage upon the property that should impair the plaintiff's rights under the indenture; that, upon the defendant's filu re to make any quarterly payment for 30 days after due, the plaintiff might avoid the indenture, and thereupon the defendant should surrender the cars and equipment, assign to the plaintiff the contracts with the railroad companies and any unexpired patent-rights, and cease to run or employ cars on the same lines of railroad; and, at the end of the 99 years, to deliver to the plaintiff the cars and equipment in good order, and assign to the plaintiff any unexpired contracts with those railroad companies.

At the trial, in May, 1888, the plaintiff offered in evidence its original charter, the statute of Pennsylvania of February 9, 1870, and the indenture of February 17, 1870, as well as evidence tending to show that the defendant, under that indenture, entered into possession of the plaintiff's property, and continued in possession during the period covered by the declaration.

To the admission of all this evidence the defendant objected, 'on the ground that it was beyond the power of either corporation to make the contract; and also because it was null and void by reason of its being in restraint of trade, and against public policy as preventing competition.' The court sustained the objection, and excluded the evidence, and the plaintiff excepted. The plaintiff then offered to prove, in addition to the above evidence, that in pursuance of the indenture of February 17, 1870, the plaintiff's cars, contracts, and patent-rights were delivered to the defendant, and continued in its possession under the indenture, and the defendant insisted on retaining them until July 1, 1886, and the defendant then for the first time tendered them to the plaintiff, and declared the indenture void, in accordance with its provisions. The defendant objected to this evidence; the court sustained the objection, and excluded the evidence; and the plaintiff excepted. The defendant thereupon moved for a non-suit, and the court granted the motion, and ordered a nonsuit, and refused a motion of the plaintiff to take it off: and the plaintiff again excepted. A judgment of nonsuit was entered accordingly, and the plaintiff tendered a bill of exceptions, which was allowed by the court, and sued out this writ of error.

J. G. Johnson, for plaintiff in error.

[Argument of Counsel from pages 29-38 intentionally omitted]

''Edwd. S. Isham and Wayne MacVeagh'', for defendant in error.

Mr. Justice GRAY, after stating the case as above, delivered the opinion of the court.