Railway Company v. Alling Denver and Rio Grande Railway Company/Opinion of the Court

A preliminary question, presented for our consideration, must be first disposed of.

These causes were determined in the Circuit Court, by final decree, Aug. 24, 1878. Upon stipulation between the parties they were submitted here on the 10th of January last. On the 20th of January it was represented to this court, in proper form, that the Pueblo and Arkansas Valley Railroad Company owned a railroad which, with its branches and extensions, is a continuation, in Colorado, of the line of the Atchison, Topeka, and Santa F e Railroad Company in Kansas; that certain contracts and arrangements had, with the consent of the appellees in both suits, and after the filing of that stipulation, been entered into between the Denver Company, the Atchison, Topeka, and Santa F e Railroad Company, and the Pueblo and Arkansas Valley Railroad Company, and had been in part executed after the filing of the printed arguments herein; that by said contracts and arrangements the Atchison, Topeka, and Sante F e Railroad Company had taken a lease of all the constructed lines of the Denver Company for thirty years from Dec. 1, 1878, and was then in the possession of and operating them; had purchased and received all the railroad supplies and materials of that company; had purchased and transferred to a trustee for its use a majority of all the shares of the capital stock of that company, with an agreement providing for a further purchase and ownership of the remainder of them, and with the further agreement that the Pueblo and Arkansas Valley Railroad Company and the Atchison, Topeka, and Sante F e Railroad Company should have the selection of a majority of the directors of the Denver Company, the other third being selected by the bondholders of the latter company; that those contracts and agreements were made with the intent and design of ending all controversies, and especially all competitive construction of railroad lines, between the Denver Company on the one part, and the Atchison, Topeka, and Santa F e Railroad Company and the roads operated by it, including the Pueblo and Arkansas Valley Railroad Company, on the other part; that, by reason of the premises, the Atchison, Topeka, and Santa F e Railroad Company, in its own right, and in connection with the Pueblo and Arkansas Valley Railroad Company, had become and was equitably the owner and entitled to the control of all the affairs, suits, interests, and property of the Denver Company, and especially to the discontinuance of all litigation hostile to the interests of the Atchison, Topeka, and Santa F e Railroad Company and the Pueblo and Arkansas Valley Railroad Company. Upon these grounds the Pueblo and Arkansas Valley Railroad Company (the present name of the Ca non City Company), and Alling and others, appellees, moved the court that the stipulation for the submission of these causes, upon printed arguments, be cancelled and discharged, such printed arguments withdrawn from the files, and the appeals dismissed. Upon the part of the Atchison, Topeka, and Santa F e Railroad Company a motion was submitted that it be allowed to intervene and take charge of these suits in the name of the Denver Company, and appear by its solicitor, on behalf of the appellants, that it may give consent, of record, to the dismissal of the appeals. The trustee referred to in the alleged contracts gave his consent to the motions, and their hearing was set for the 20th of March, this court, in the mean time, suspending any action upon the appeals. At that date the Denver Company appeared by its attorneys and resisted each motion.

Upon the hearing of the motions it appeared, among other things, that on the first day of March, 1879, the Denver Company had issued 85,000 shares of stock, of which the plaintiffs in the motions claimed to own or control a bare majority,-42,510 shares. It was also shown that, at a meeting of the directors of the Denver Company, held on Feb. 7, 1879, a quorum being present, resolutions were unanimously adopted, declaring that these motions were hostile to the interests of that company; that the claims of the Atchison, Topeka, and Santa F e Railroad Company and the Pueblo and Arkansas Valley Railroad Company were unfounded, and their assertion for the fraudulent purpose of depriving the Denver Company, its stockholders and creditors, of valuable rights, interests, and property, without compensation. The resolutions instructed the president and the attorneys of the company not only to oppose these motions, but, by all legal means, prevent the dismissal of these appeals, or the intervention herein for any purpose of any company or person not a party to the record. They were also required to prosecute the appeals in this court with the utmost diligence. At the argument of the motions, copies of all the contracts, resolutions, and writings relied upon by the respective parties were submitted for our examination. Upon careful consideration of the suggestions of learned counsel, we do not doubt that it is our duty to decline any expression of opinion as to the effect or proper construction of the numerous documents which, it is claimed, give the plaintiffs in the motions the right to have the appeals of the Denver Company dismissed. It is apparent that there are serious differences among the stockholders of that company, not only as to its general policy in the future, but as to the validity and interpretation of the contracts and writings under which the Atchison, Topeka, and Santa F e Railroad Company and the Pueblo and Arkansas Valley Railroad Company claim to be equitably the owners, and entitled to the control of the affairs, property, and suits of the Denver Company. We cannot now enter that field of controversy. The present appeals are being prosecuted to final judgment by order of the directors or trustees of the appellant corporation. To them, by law, is committed the management of the property and concerns of the corporation. In all litigation involving the action of the corporation they are its representatives in court. In the discharge of their duties they represent not only the stockholders, but the bondholders and creditors, of the company. Their right, while in the exercise of their legitimate functions, to manage the affairs and suits of the company, ought not to be controlled or interfered with by this court, by reason of any thing which appears upon the pending motions. Upon their responsibility as directors and trustees they insist that these causes shall proceed to final judgment, in accordance with the stipulation heretofore made by the parties to the appeals. If, in prosecuting them to final judgment, they violate any trust committed to their hands, or any agreement which is binding upon the corporation and the minority stockholders, remedy may be sought in some court of original jurisdiction, into which, upon proper pleadings, all persons interested may be summoned. No such proceeding has been instituted, so far as we are informed, and we do not fell at liberty, upon the suggestion of strangers to the decrees appealed from, to go behind the official action of the board of directors or trustees, and, in plain disregard of their wishes, and their directions to counsel, dismiss the appeals, and thereby refuse to consider questions regularly presented for our determination.

The motions are, therefore, denied, and we proceed to an examination of the cases upon their merits, premising that our present duty is limited to a determination of the rights of the parties as they existed when the final decrees were rendered, and as they are manifested in the records before us. If, since these decrees were entered, the Atchison, Topeka, and Santa F e Railroad Company, or the Pueblo and Arkansas Valley Railroad Company, have, by valid contract, acquired a controlling interest in the property, rights, and affairs of the Denver Company, that interest can be asserted by appropriate proceedings, and will not be affected by any thing we may determine upon the issues presented by these appeals.

The several acts of Congress upon which the Denver Company and the Ca non City Company rest their respective claims to priority of right in the Big or Grand Ca non are cited, and the history of the organization of both companies given in the statement of the case. But there are other facts of an important character to which attention will be called in the course of this opinion.

The first question, upon the merits, necessary to be considered is, as to the proper construction of the act of June 8, 1872. In its determination, however, we should not overlook what had previously transpired in the history of the company to which was granted, by that act, a right of way over the public domain. In January and February, 1871, very shortly after its articles of incorporation were filed in the proper office of the Territory, the Denver Company caused a survey to be made of the route through the Grand or Big Ca non of the Arkansas, for the purpose, as declared by the engineer who conducted it, of retaining control of the ca non for that company. That survey, extending through the entire length of the ca non, is described by him as a 'close preliminary;' that is, a line very near location, without an actual location of the curves. But the location of the curves, he testifies, could have been made in his office away from the ca non. With that exception, he pronounces it to have been a complete survey. The line thus surveyed was marked by stakes every hundred feet, numbered consecutively, and at points where it seemed necessary, a plus or stake between the hundred feet was added. Of the work then done, a map and profile were made and returned to the chief engineer of the company, and estimates sent to its general manager. Upon the occasion of that survey, or shortly thereafter, employees of the company, under the direction of its engineer, removed several hundred yards of material, graded several hundred feet at the upper outlet of the ca non, and put up a retaining wall ten to fifteen feet high, and about one hundred yards in length. In January, 1872, the survey was continued west of the ca non for a distance of four or five miles. While these surveys were being made, the company was employed in the construction of its road from Denver to Pueblo, and completed it to the latter place, within a few days after, or about the date of the passage of the act of June 8, 1872. It may also be stated, in this connection, that it completed its road from Pueblo to Labran, within eight miles of Ca non City, about the 1st of October, 1872, and to Ca anon City in July, 1875. All this was consistent with a purpose, upon the part of the Denver Company, to avail itself ultimately, and within the time prescribed by law, of the granted right of way through the Grand Ca non.

Of what the company had done, prior to the passage of the act of 1872, towards effecting the objects of its incorporation, Congress, it is fairly to be presumed, was not uninformed. It was aware, we must also presume, of the routes designated in the charter of the company, for the main road and its several branches, all so connected as to constitute, when completed, an extended railway system for that entire region. That Congress was so informed is quite clearly indicated by the terms employed in the act of 1872. That act must, therefore, receive the same construction which would be adopted had it contained a full or detailed description of the routes of the main line and branches. In this view, and having due regard to all the circumstances and condition of the company, when the act was passed, we do not doubt that the intention of Congress was to grant to the company a present beneficial easement in the particular way over which the designated routes lay, capable, however, of enjoyment only when the way granted was actually located, and, in good faith, appropriated for the purposes contemplated by the charter of the company, and the act of Congress. When such location and appropriation were made, the title, which was previously imperfect, acquired precision, and by relation took effect as of the date of the grant. The settled doctrines of this court would seem to justify that conclusion. Railroad Company v. Smith, 9 Wall. 95; Schulenberg v. Harriman, 21 id. 44; Leavenworth, Lawrence, & Galveston Railroad Co. v. United States, 92 U.S. 733; Missouri, Kansas, & Texas Railway Co. v. Kansas Pacific Railway Co., 97 id. 491.

It is here suggested by counsel for the Denver Company that the surveys made in the Grand Ca non in 1871 and 1872 constituted, without further action on its part, a sufficient location and appropriation of at least that part of the designated route. To this proposition we cannot yield our assent. The right of way through that pass was not, in itself, and separate from the right of way along the whole route, of any special value, except the company surveyed its line and located its road east and west of that defile. The grant was an entirety as to the right of way over all the lands lying on the route designated in the charter of the company, and it would be unreasonable to say that, as to a particular part of that route, a mere preliminary survey was in itself equivalent to a fixed location of the road and an appropriation of the way granted, while as to another part of the general route a similar survey would not be an appropriation of the way granted, unless followed by actual occupation and use for railroad purposes. Any such construction of the statute must be held altogether inadmissible.

When was there, then, an appropriation by the Denver Company of the Grand Ca non within the principle we have stated? In 1877 and 1878 it became evident that that pass was of vital importance to any company desiring to reach the trade and business of the country beyond it, whether to the west, northwest, or southwest. Discoveries then recently made of mineral wealth in Western Colorado gave it immense pecuniary value in railroad circles, since, as the evidence tends, to establish the occupancy of the Royal Gorge of the Grand Ca non by one line of railroad would practicaly exclude all competing companies from using it for like purposes, except upon such terms as the first occupant might dictate. From the date of the survey made in 1872, down to April 19, 1878, the record furnishes no evidence that the Denver Company actually occupied that defile for any purpose whatever. On that day, however, Congress having extended the time to ten years from the date of the original act within which to complete its road as far south as Santa F e, that company did, by its agents, occupy the narrow portion of the ca non known as the Royal Gorge, with the avowed intention of constructing its road upon the line of the surveys made in 1871 and 1872. But during the night of April 19, 1878, the board of directors of the Ca non City Company were convened, and Robinson and Strong, the chief engineer and manager, respectively, of the Atchison, Topeka, and Santa F e Railroad Company, were elected to the same positions in the Ca non City Company. They made preparations to take immediate possession of the ca non in behalf of the last-named company. Evidence of their diligence and activity in that direction is found in the fact that on the morning of the 20th, as early as four o'clock, a small squad of their employees, nine or ten in number, under the charge of an assistant engineer, swam the Arkansas River, and in the name of their company took possession of the ca non. Under the circumstances, it is not material that they failed to find a rival force in the ca non at such an unseasonable hour. That squad was followed the same day by a large and overpowering force of workmen under the control of Robinson. These movements were succeeded by a suit instituted the same day, in the State court, in the name of the Ca non City Company against the Denver Company, in which an injunction was obtained restraining the latter from occupying or attempting to occupy the ca non for railroad purposes, or from interfering with the Ca non City Company in the construction of its own road therein.

The last-named company now insists that it has the prior right to occupy and use the ca non for its line of road. In support of this claim, it contends that the other company had lost whatever rights it acquired in the ca non through the imperfect survey of 1871 and 1872, by its long inaction after the construction of the road to Ca non City, and by its failure, within a reasonable period, to follow up those surveys by actual location and occupancy for railroad purposes. The conduct of the Denver Company, it is urged, evinced a settled purpose upon its part to abandon its grant of a right of way through that ca non. The answer to all this seems very obvious.

The surveys of 1871 and 1872, although defective in some particulars, and not equivalent to an actual location or appropriation of the way, were quite as complete and extended as the survey which the Ca non City Company caused to be made in 1877. The evidence shows, beyond all question, that when the latter survey was made there was seen in the ca non all or very many of the stakes which the engineer of the Denver Company had put there in 1871 and 1872. Those who made the survey in 1877 undoubtedly knew when, by whom, and for what purpose those stakes had been there placed. Nor had they sufficient reason to suppose that the Denver Company had finally abandoned its purpose of constructing a road through the ca non. We have already referred to the completion of the road from Denver to Pueblo, and from Pueblo to Ca non City, by July, 1875. In 1873, the Denver Company commenced the construction of one of its branches,-the Denver and Southern Railway. Commencing at Pueblo, it completed that road to Cucharas, fifty miles from Pueblo, by February, 1876; to Garland, sixty miles from there, by August, 1877; and to the valley of the Rio Grande, by July, 1878. After July, 1875, the company, it is true, suspended active work upon the line west of Ca non City. But the cause of such suspension, as its officers testify, was the widespread depression in business and financial circles, and the belief, shared by all interested in the prosperity of the company, that the extension of the line southward from Pueblo gave promise of quicker returns and more immediate results in every way. They state that it was the purpose of the company to resume work upon its line through the ca non as soon as the necessary means therefor could be obtained, and that there was no intention at any time to abandon the route west of Ca non City. Their delay in the construction of the road west of Ca non City and through the Grand Ca non seems to have been in the interest of the stockholders they represented, and not inconsistent with an honest purpose, within the period fixed by law, to meet the objects for which Congress granted to it the right of way. Its surveys of 1871-72, followed by an occupancy of the ca non on the 19th of April, 1878, in advance of the Ca non City Company, for the purpose of constructing its road through that defile, was, in our judgment, a final appropriation of the way granted by Congress. The Denver Company then, if not before, came into the enjoyment of the present beneficial easement conferred by the act of June 8, 1872, and was entitled to have secured against all intruders whatever privileges or advantages belonged to that position.

But the important question remains as to the effect of the act of March 3, 1875, granting the right of way through the public lands of the United States to any railroad company duly organized under the laws of any State or Territory, except the District of Columbia, or by the Congress of the United States. The explicit language of that act leaves no doubt as to its object. It declares 'that any railroad company whose right of way, or whose track or road-bed upon such right of way, passes through any ca non, pass, or defile, shall not prevent any other railroad company from the use and occupancy of said ca non, pass, or defile, for the purposes of its road, in common with the road first located, or the crossing of other railroads at grade.' At the date of that act the road of the Denver Company, as we have seen, had not been located through the Grand Ca non of the Arkansas. But it had a subsisting grant of a right of way through that defile. According, therefore, to the act of March 3, 1875, the Ca non City Company, if it belonged to the class described in the first section of the act, might, for the purposes of its road, occupy and use that ca non in common with the Denver Company.

Upon this branch of the case, the first contention of the latter company is that the Ca non City Company was not 'duly organized' under the laws of Colorado, and, therefore, by the terms of the act of March 3, 1875, was not entitled to its benefits. But this objection is not well taken. The articles of incorporation filed by that company seem to be in substantial compliance with the statutes of Colorado. This objection need not be further considered.

But its right to claim the benefit of the act of March 3, 1877, is impeached upon the further ground that it was not organized in good faith, for the purpose of constructing a road for itself, but was the mere instrument of the Atchison, Topeka, and Santa, F e Company, by whom the real work of construction through the ca non was carried on. It is not to be doubted, under the evidence, that the Atchison, Topeka, and Santa F e Railroad Company is the active power behind all the movements made in the name of the Ca non City Company for the occupation of the ca non, and that the former company, or some of its stockholders, were deeply interested in the success of the movement to drive the Denver Company from the Grand Ca non. But the Ca non City Company is none the less a railroad company, duly organized under the laws of Colorado. It is, therefore, embraced by the very letter of the act of March 3, 1875. We are unable to perceive upon what sound principle the courts can go behind its regular and lawful organization, and exclude it from the rights granted by that act, because in the prosecution of its work it derives assistance or accepts aid from another corporation, with which it may choose to share the benefits secured under the act of Congress.

Our next inquiry is as to the extent to which the rights of the Denver Company were affected or modified by the act of March 3, 1875. When that act was passed, its grant of the right of way by the act of June 8, 1872, had not been acted upon as to the Grand Ca non of the Arkansas. There had not been, on March 3, 1875, an actual location of its line through that defile, nor any occupancy thereof, in good faith, for the purpose of constructing its road. The five years originally given to that company, within which to complete its railway to a point on the Rio Grande as far south as Santa F e, expired on the 8th of June, 1877. Before, however, the expiration of that period, the time was extended to ten years from the passage of the original act. Now, it is solely by reason of such extension that the Denver Company had the right, on the 19th of April, 1878, to take possession of the Grand Ca non, and prepare for the final location and construction of its road through that pass. When, therefore, it accepted the benefits of the act of March 3, 1877, it must be held to have assented to the provisions of the act of March 3, 1875, whereby it was declared, in the interest of the public, that any other railroad company duly organized under the laws of any State or Territory might use and occupy the ca non, for the purpose of its road, in common with the road first located. At the time of the passage of the act of March 3, 1875, Congress had become convinced of the importance to the country, and particularly to the Western States, of preserving ca nons, passes, and defiles in the public domain for the equal and common use of all railroad companies organized under competent State or territorial authority, and to which might be granted by national authority the right of way. We may well presume that the extension of time accorded to the Denver Company by the act of March 3, 1877, would not have been given except subject to the conditions contained in the act of March 3, 1875. This conclusion renders it unnecessary that we should, in this case, consider whether Congress might legally have subjected the Denver Company, without its consent, to the provisions of the act of March 3, 1877, had that company actually located and constructed its road in or through the Grand Ca non within five years after the passage of the act of June 8, 1872.

It results from what we have said, that the court below erred in enjoining the Denver Company from proceeding with the construction of its road in the Grand Ca non. The decree, as entered, can only be sustained upon the assumption that the Ca non City Company had by prior occupancy acquired a right superior to any which the Denver and Rio Grande Railway Company had to use the ca non for the purpose of constructing its road. But that assumption, we have seen, is not sustained by the evidence, and is inconsistent with the rights given by the acts of Congress to the Denver Company. The Denver Company should have been allowed to proceed with the construction of its road unobstructed by the other company. Where the Grand Ca non is broad enough to enable both companies to proceed without interference with each other in the construction of their respective roads, they should be allowed to do so. But in the narrow portions of the defile, where this course is impracticable, the court, by proper orders, should recognize the prior right of the Denver and Rio Grande Railway Company to construct its road. Further, if in any portion of the Grand Ca non it is impracticable or impossible to lay down more than one road-bed and track, the court, while recognizing the prior right of the Denver Company to construct and operate that track for its own business, should, by proper orders, and upon such terms as may be just and equitable, establish and secure the right of the Ca non City Company, conferred by the act of March 3, 1875, to use the same road-bed and track, after completion, in common with the Denver Company.

The decrees in these causes are, therefore, reversed, with directions to set aside the order granting an injunction against the Denver and Rio Grande Railway Company, and also the order dissolving the injunction granted in its favor, and dismissing its bill. By proper orders, entered in each suit, the court below will recognize the prior right of that company to occupy and use the Grand Ca non for the purpose of constructing its road therein, and will enjoin the Ca non City and San Juan Railway Company, its officers, agents, servants, and employees, from interfering with or obstructing that company in such occupancy, use, and construction. It may be that, during the pendency of these causes in the court below, or since the rendition of the decrees appealed from, the Ca non City and San Juan Railway Company has, under the authority of the Circuit Court, constructed its road-bed and track in the Grand Ca non or in some portion thereof. In that event, the cost thus incurred in those portions of the ca non which admit of only one road-bed and track for railroad purposes may be ascertained and provided for in such manner and upon such terms and conditions as the equities of the parties may require.

The court will make such further orders as may be necessary to give effect to this opinion.