Union Pacific Railway Company v. Chicago, Milwaukee & St. Paul Railway Company/Dissent Shiras

Mr. Justice SHIRAS, dissenting.

To make arrangements with other railroad companies, whereby they are permitted to make use of the Missouri River bridge, and of the tracks and station houses within the cities of Omaha and South Omaha, may be fairly held to be within the range of the general authority of the Union Pacific Railway Company. Such contracts are not unusual, and are calculated to promote the convenience of the public and the welfare of the railroad companies which enter into them; and, if the contracts in question presented such a case, I should have no difficulty in affirming their validity. But, as I read them, they go far beyond such supposed arrangements, and contain covenants and stipulations which bring them within the condemnation of our previous decisions.

What is granted to the Rock Island Railway Company and to the St. Paul Railway Company is not a mere right or privilege, for a reasonable compensation, and subject to the rules and regulations of the Union Pacific, to run their trains over the bridge and into and out of the city stations, but 'the full, equal, and joint possession and use of the main and passing tracks' belonging to the lessor company, and extending from Council Bluffs on the east side of the Missouri river to the town of South Omaha, a distance of ___ miles. Nor is the power of control and management reserved to the Union Pacific Railway Company. The words of the contract, in that particular, are as follows:

'Schedules of rules and regulations for the movement of engines and trains over the several railways hereby let and demised shall be made for each railway by the duly-authorized officers of the lessor and lessee companies by which such railways shall at the time be operated. Such schedules shall, as nearly as may be practicable, accord equality of right, privilege, and advantage to trains of the same class operated by the lessor and lessee, and shall secure to neither any preference or discrimination against the other. They shall be executed, and all trains moved, under the immediate direction f the superintendent or the officer of the lessor company. If the parties cannot agree upon the adoption of any schedule, rules, or regulation, or as to the modification of any one existing, either party may demand a decision of such controversy by referees as hereinafter directed. The referees are hereby invested with power to prescribe schedules, rules, and regulations, and to modify existing ones; and, in case of willful disregard by either party of the rights of the other, to award damages to the party injured for injuries sustained because of such willful act.'

The legal effect of these contracts is to create a joint ownership, for 999 years, of an important portion of the Union Pacific's railroad and appurtenances, 'a full, equal, and joint possession of its tracks,' and a subjection to rules and regulations prescribed by the duly-authorized officers of the lessor and lessee companies, and, in case of disagreement, subjection to the decision of referees, mutually appointed, invested with power to prescribe schedules, rules, and regulations, and to modify existing ones.

These contracts, in my opinion, are plainly void, within the principles of the following cases: Thomas v. Railroad Co., 101 U.S. 71; Branch v. Jesup, 106 U.S. 468, 1 Sup. Ct. 495; Pennsylvania R. Co. v. St. Louis, A. & T. H. R. Co., 118 U.S. 290, 6 Sup. Ct. 1094; Oregon Ry. & Nav. Co. v. Oregonian Ry. Co., 130 U.S. 1, 9 Sup. Ct. 409; Central Transp. Co. v. Pullman's Palace Car Co., 139 U.S. 24, 11 Sup. Ct. 478. The doctrine of those cases may be sufficiently expressed by the following paragraph, taken from the opinion of Mr. Justice Miller in the case of Pennsylvania R. Co. v. St. Louis, A. & T. H. R. Co., 118 U.S. 309, 6 Sup. Ct. 1094.

'We think it may be stated, as the just result of these cases, and on sound principle, that, unless specially authorized by its charter, or aided by some other legislative action, a railroad company cannot, by lease or any other contract, turn over to another company, for a long period of time, its road and all its appurtenances, the use of its franchises, and the exercise of its powers, nor can any other railroad company, without similar authority, make a contract to receive and operate such road, franchise, and property of the first corporation, and that such a contract is not among the ordinary powers of a railroad company, and is not to be presumed from the usual grant of powers in a railroad charter.'

To which may be added the following observations of Mr Justice Gray in the very recent case of Central Transp. Co. v. Pullman's Palace Car Co., 139 U.S. 48, 11 Sup. Ct. 478:

'The clear result of these decisions may be summed up thus: The charter of a corporation, read in the light of any general laws which are applicable, is the measure of its powers, and the enumeration of those powers implies the exclusion of all others not fairly incidental. All contracts made by a corporation beyond the scope of those powers are unlawful and void, and no action can be maintained upon them in the courts, and this upon three distinct grounds: The obligation of every one contracting with a corporation to take notice of the legal limits of its powers; the interests of the stockholders not to be subjected to risks which they have never undertaken; and, above all, the interest of the public, that the corporation shall not transcend the powers conferred upon it by law.'

In commenting upon that clause of the contracts in which the Union Pacific Company 'lets the Rock Island Company into the full, equal, and joint possession and use of its main and passing tracks,' the opinion of the court states that 'the possession here spoken of was such possession as the Rock Island Company would have when its engines, cars, and trains were running over the tracks. The company had no possession before its trains came on the tracks, or after they had run off of them; and, while its trains were on the tracks, its possession was only of the particular part occupied, temporarily, while runn ng over them.'

But this view, I submit, overlooks the necessary meaning of the language of the contracts. The possession whose right is given is described as full-that is, entire, not imperfect, or insufficient; as equal-that is, as great as that of the lessor company; as joint-that is, united in interest and obligation with the other party. If doubt could be entertained of the meaning of language so explicit, such doubt would be removed by the other express provisions that the 'schedule of rules and regulations shall, as nearly as may be practicable, accord equality of right, privilege, and advantage to trains of the same class operated by the lessor and lessee, and to trains of a superior class operated by either a preference over trains of an inferior class operated by the other. * *  * All rules and regulations shall be reasonable and just to both lessor and lessee, and shall secure to neither any preference or discrimination against the other.'

Again, the opinion states that, 'moreover, all trains were to be moved under the direction of an officer of the Pacific Company. The Rock Island trains, coming upon a Pacific track, immediately passed from the control of the Rock Island Company into that of the Pacific, and its officials were subject to the orders of the Pacific's officers.'

I am unable to so read any provision of the contract. On the contrary, as already stated, it is expressly stipulated that 'the schedules of rules and regulations for the movement of engines and trains over the several railways hereby let and demised shall be made for each railway by the duly-authorized officers of the lessor and lessee companies by which such railways shall at the time be operated'; and, if the parties cannot agree upon such rules and regulations, then mutually appointed referees shall exercise authority to 'prescribe schedules, rules, and regulations, and to modify existing ones.' The plain meaning, as I think, of these contracts, is that the Union Pacific Railway Company has thereby parted with its sole and absolute control of those portions of its road and tracks that are embraced within the scope of the contracts, and with the sole and absolute power to exercise its franchises to occupy, possess, and operate such portions of its road, and has agreed to participate, for a period of 999 years, with other railway companies, in the full, joint, and equal possession of those portions of its road, in their physical aspect, and to confer upon such other companies the right to join, on equal terms, in the making of all rules and regulations pertaining to the use and management thereof. When a contract provides for the possession of a railroad, and for its operation by rules and regulations, it has covered everything that exists,-the road as a physical structure, and the franchises to operate it by rules and regulations.

It is true that the contract provides that the rules and regulations 'shall be executed, and all trains moved under the immediate direction of the superintendent or other officer of the lessor company.' But the duties of such an officer are subordinate. He is to carry out the rules and regulations prescribed jointly and equally by the lessor and the lessee companies, and the meaning and effect of the provision in question is to prevent the confusion that would result if there were two superintendents to enforce the same rules over the same portions of railroad.

The opinion of the court disposes of the cases hereinbefore cited by the observation that they arose upon instruments which dispossessed the corporations of all their property, and of all capacity to perform their public duties, and that such is not the case here.

But the reason why the contracts in those cases were held void was, not because they embraced all the property of corporations, but because the companies sought to part with the possession and control of their property without legislative authority for doing so. Can that be a sound view which, while admitting that the Union Pacific Railw y Company is forbidden to lease the possession and control of its road to another company, without authority expressly given, yet would hold that that company may, without such authority, part with the possession and control of one-half or of any appreciable part of its road? Can it be maintained that, while the Union Pacific Railway Company cannot lease its railroad from Council Bluffs to Ogden, it may contract with the Rock Island Railway Company to give it joint and equal possession and management of its road between those points? And, in point of principle, if such a contract would be void if embracing the road between Council Bluffs and Ogden, how could it be declared valid if embracing the road between Council Bluffs and South Omaha?

The views of the majority seem to me to overlook the essential question, and that is, the power of the Union Pacific Railway Company to part with its road and franchises, temporarily or forever, in whole or in part. A contract by that company to share its road and those powers, called 'franchises,' which are necessary to operate it, is just as much forbidden by the principle of the cases as a contract to lease its road as an entirety. The objection to an irrevocable contract for 999 years, that the Union Pacific Railway Company may hereafter need to use its tracks and franchises in their entirety, is not satisfactorily met by the suggestion that, in such event, the courts can in some way relieve the company from the contract. It is not easy to see how an engagement now held valid can be hereafter dispensed with.

The Union Pacific Railway does not hold and exercise the powers conferred on it by congress, subject to the control and approval of the courts. Nor is it competent for the courts to enforce or relax, at their will, and according to their views of expediency, the obligations of contracts into which the railway company may have entered.

Other provisions of these contracts which seek to subject the Omaha & Republican Valley Railway Company and the Salina & Southwestern Railway Company to the use of the Rock Island and St. Paul Companies, and which render the Union Pacific Railway Company liable as lessee of railroads owned by the Rock Island Company, are, in my judgment, equally without authority of law. But it is scarcely worth while to consider them minutely. As this is a proceeding to enforce specific performance of the entire contract, invalidity of any important part of the contract, but for which it would not have been entered into at all, is enough to defeat the bill.

It is scarcely necessary to say that, if these contracts were void for the reasons given, no action taken under them would justify a court of equity in enforcing them. As was said in Thomas v. Railroad Co., above cited: 'In the case of a contract forbidden by public policy and beyond the powers of the defendant corporation, it was its legal duty-a duty both to the stockholders and the public-to rescind and abandon the contract at the earliest moment; and the performance of that duty, though delayed for several years, was a rightful act when done, and could give the other party no right of action, and that to hold otherwise would be to hold that any act performed in executing a void contract makes all its parts valid, and that, the more that is done under a contract forbidden by law, the stronger is the claim to its enforcement by the courts.'

'A contract ultra vires being unlawful and void, not because it is in itself immoral, but because the corporation, by the law of its creation, is incapable of making it, the courts, while refusing to maintain any action upon the unlawful contract, have always striven to do justice between the parties, as far as could be done consistently with adherence to law, by permitting property or money parted with on the faith of the unlawful contract to be recovered back or compensation to be made for it. In such case, however, the action is not maintained upon the unlawful contract, nor according to its terms, but on an implied contract of he defendant to return, or, failing to do that, to make compensation for, money or property which it has no right to retain. To maintain such an action is not to affirm, but to disaffirm, the unlawful contract.'

I think that the judgment of the circuit court of appeals should be reversed, and the cause remanded to the circuit court, with directions to set aside its decree and dismiss the bill.

Mr. Justice GRAY likewise dissented.