Middlesex Railroad v. Boston & Chelsea Railroad

Wells, J. The contracts, by which the road and franchises of the defendant corporation were transferred in the first instance to the Malden & Melrose Railroad Company, and afterwards to the plaintiff corporation, were ultra vires, and invalid. Richardson v. Sibley, 11 Allen, 65. They are not merely contracts by which another party is employed to operate the road in behalf and under the direction and control of the corporation owning the franchise, receiving a share of the profits as compensation. The entire control of the road with all its franchises is transferred, the corporation owning it receiving in return only a fixed rent, payable in the form of a dividend to its stockholders. It is urged however, that this suit is not brought upon the contract itself; but upon a liability for certain expenditures made by the plaintiff for the use and benefit of the defendant, upon its road, and by its procurement. We do not see how the plaintiff could recover for those expenditures in implied assumpsit, upon aH the facts of the case, independently of the written contracts. Being in the actual and exclusive occupation of the road, and running it with and as its own, "the cost of repairs and renovation of the track must be regarded as expenses incidental to such use and to be paid from [352] the gross receipts. In order to recover anything from the defendant, especially in order to recover in the form in which this claim is prosecuted, resort must necessarily be had to the written agreements. We incline to the opinion that no suit can be maintained, either at law or in equity, on account of the claim which is made in this case, or any part of it, unless such suit is founded upon the written contracts ; and that those being ultra vires, the plaintiff has no remedy, in either form. Upon the contracts themselves we come to the same result. By the original agreement with the Malden & Melrose Railroad Company the rent to be paid to the defendant was $5600 per annum, which was equal to eight per cent, on one half of its shares of stock; the other shares receiving no dividend therefrom, and being therefore called “ deferred stock.” Whenever the profits or net earnings should be such as to cover that sum and an equal sum to be retained by the lessee, to wit, in all $11,200, the surplus was to be equally divided between the two corporations. The cost of renewals, which were to be made by the lessee, if they should exceed $1000 in any one year, was to be defrayed from a sinking fund, to be set apart, one half by each of the parties, from such surplus income “ after eight per cent, shall have been divided upon all the stock of said party of the first part; which fund shall be equal to one per cent, a year upon the capital of said party of the first part,” to wit, the Boston & Chelsea Railroad Company, “ or if said fund shall not be sufficient, then the same shall be provided in such a way as may be found equitable.” The agreement between the plaintiff and the defendant, by which the latter assented to the assignment of the lease to the plaintiff, provided that the Boston & Chelsea Railroad Company should abandon, waive and relinquish “ all claim under said contract to any and all participation in the profits or earnings of the railroad or property in said contract demised, or growing out of the operation thereof.” It was further provided that one half of the “ deferred stock” of the Boston & Chelsea Railroad Company should be cancelled, and that the absolute rent to be paid should be increased to $8800, thus securing dividends of eight per cent per annum upon the whole remaining shares of its capital stock [353] To secure the adoption of this arrangement the shareholders of the “ deferred stock ” paid to the Middlesex Railroad Company the sum of §20,000, and that corporation was required to indorse upon all the certificates of stock of the Boston and Chelsea Railroad Company a stipulation entitling them to annual dividends to the amount of eight per cent, to be paid by the Middlesex Railroad Company. This arrangement necessarily defeated that for a sinking fund, from which, primarily, the expenditures were to be repaid; because the sources from which that fund was to be derived no longer remained. There is no -stipulation for repayment in any other mode, except in case the fund so provided shall not be sufficient. In that event alone “ the same shall be provided in such a way as may be found equitable.” The express agreement of the parties has not only made the accumulation of such a fund impossible, but has provided that the whole rent to be paid shall be absorbed in dividends payable by the Middlesex Railroad Company directly to the shareholders of the Boston & Chelsea Railroad Company, and that the latter corporation should relinquish all right and claim to any further share of the earnings of its road; thus relieving the former corporation from accounting for the separate earnings of the leased road and leaving the latter corporation no means of making or providing for such repayment. The plaintiff does not show us, and we are unable to see in what way it would be equitable to require the defendant to provide for any part of the expenditures in question. Consequently there must-be Judgment for the defendant.