Little Rock & Napoleon Railroad v. Little Rock, Mississippi River & Texas Railroad

Harrison, J. This was a suit in equity by the Little Rock and Napoleon Railroad company against the Little Rock, Mississippi River and Texas railway, and Jared E. Redfield —the president — and Dudley E. Jones, Sol. F. Clark, S. L. Griffith, C. F. Penzel, Elisha Atkins, John H. Reed and E. Winchester — the directors thereof, to enjoin the said Little Rock, Mississippi River and Texas railway from extending and building its railroad between the- city of Little Rock and the city of Pine Bluff. The complaint, which was filed on the ninth day of February, 1880, alleged, in substance: that the plaintiff was incorporated by an act of the general assembly, entitled “an act to incorporate the LittleRock and Napoleon Railroad company,” approved January 12,1853, and granted, the right and franchise to build and operate a railroad from the city of Little Rock to the town of Napoleon; and that, in the exercise of said right and franchise, it at an expenditure of $150,000 surveyed and located the road, and cleared and graded part of the track between Napoleon and Pine Bluff and laid ties along the same. That certain named persons afterwards, on the twenty-fourth day of November, 1868, under the provisions of the act of July 23,1868, entitled “ an act to provide for a general system of railroad incorporations,” which, however, it denied to have been constitutionally passed by the general assembly or to have become a law, associated themselves together as a corporation by the name of the Little Rock, Pine Bluff and New Orleans Railroad company, for the purpose of building a railroad from Little Rock to Pine Bluff', and from Pine Bluff' in a southeasterly direction to a point on the south boundary of the state, with a branch from Pine Bluff to a point on the Mississippi river near Napoleon — and the said company proceeded to build and put in operation the said branch from Pine Bluff to the Mississippi river — but that it never made any location or survey of the line between Pine Bluff' and Little Rock, or any part of its main line. That the said branch road was built by said company on the located and established line of the plaintiff’ between Pine Bluff and Napoleon, which said company took possession of without the- consent of the, plaintiff, and the work already done upon it was used and appropriated in its construction. That said company issued and' negotiated its bonds, and secured the same by a mortgage on its road, property and franchises; and default having been made in the'payment of the interest, Charles Main and other holders of its bonds, instituted suit against it in the circuit court of the United States for the eastern 'district of Arkansas, for foreclosure of the mortgage, and a decree of foreclosure and sale was rendered therein; and afterwards on the tenth day of December, 1875, all its property, including its i*oad-bed, line and franchises were sold under the decree; and that the purchasers thereof, and their associates, under the provL sions of the act of December 9,1874, entitled “ au act supplementary to an act entitled 4 an act to provide for a general system of railroad incorporation,’ approved July 23, 1868” (and which also it denied to have been constitutionally passed by the general assembly, or to have become a law), organized themselves as a corporation, by the name of the Little Rock, Mississippi River and Texas railway, with James E. Redfield as president, and D. E. Jones, S. F. Clark, S. L. Griffith, C. F. Penzel, Elisha Atkins, John H. Reed and E. Winchester as directors, and caused to be filed in the office of the secretary of state, the certificate of such organization required by said act. But that the said purchasers and their associates did not so organize themselves as a corporation within one year after the sale, and they did not file the certificate within six months after their attempted organization; and that they never did in fact become a.corporation. That the said Little Rock, Pine Bluff and New Orleans Railroad company did not, as required by the act of July 23,1868, within two years after the filing of its articles of association in the office of the secretary of state, file therein a preliminary survey of its road, and an affidavit of three of its directors that five per cent, of the stock subscribed had been actually and in good faith paid to the directors, or either — and which five per cent, of the stock subscribed was never paid; and that it did not within five years after its incorporation expend in the construction of .the road ten per cent, of its capital stock; and other failures to comply with the provisions of the act were stated — whereby it was charged that it had forfeited its franchises, and had at the time of the decree and sale no corporate existence ; and no franchise whatever passed to the purchasers or to them and their associates. That the said purchasers and their associates, for the reasons mentioned, were not a corporation, but that claiming to be a corporation by the said name of the Little Rock, Mississippi River and Texas railway, and to have the right and franchise to build and operate a railroad from Little Rock to Pine Bluff, and from Pine Bluff to a point on the Mississippi river near Napoleon, were then locating and building, as a part of their line, a railroad between Little Rock and Pine Bluff, upon or parallel to, and within a distance of ten miles of the line located and adopted by the plaintiff'. . , That the plaintiff was ready and able, and it was its intention tó immediately build and put in operation, its road between Little Rock and Pine Bluff; but if the said persons or the said Little Rock, Mississippi River and Texas railway, if it be a corporation, build their or its road, it would by its interference with the trade and business of the plaintiff’s road when completed, cause great and irreparable damage and injury to the plaintiff-, and as a continuing wrong give rise to a multiplicity of suits. And that the said Little Rock, Mississippi River and Texas railway was insolvent and unable to pay any damages that might be recovered against it. The answer of the Little Rock, Mississippi River and Texas railway admitted that the plaintiff located that por-, tion of its road between Napoleon and Pine Bluff, and in the years 1856 and’ 1857 cleared and graded, at intervals, a small part of the track and placed ties along the same; but denied that it located or established any part of the line between Pine Bluff and Little Rock, or that it expended in the work anything like the sum of $150,000. It alleged that there had been no election of officers or meeting of the stockholders of the company since 1857, and since that year no calls on subscriptions to stock had been made, and no efforts made to collect previous calls, and it had since then given up all attempts to build the road and abandoned its franchises; and in the - month of July, 1869, M. L. Bell, R. V. McCracken and Samuel Butler, the last elected president, secretary and treasurer of the company, by an instrument of writing, in their respective capacities, so far as they might or could, sold and transferred to the Little Rock, Pine Bluff' and New Orleans Railroad company, whatever interest the company had in the work done and in the line of road, and turned over and delivered to it, all its books, records and papers; and said Little Rock, Pine Bluff and New Orleans Railroad company took possession of such part of the abandoned line and work as answered its purpose, and proceeded to build and put in operation, as a part of its main line from Little Rock to the south boundary of the state, the road from Pine Bluff to Eunice on the Mississippi river, a distance of seventy miles, which ran, a part of the way, on the plaintiff’s abandoned line. That the Little Rock, Pine Bluff and New Orleans Railroad company afterwards became consolidated with the Mississippi, Ouachita and Red River Railroad company, under the name of the Texas, Mississippi River and Northwestern Railroad company, and the last mentioned company thereafter operated-the road until the sale under the decree. That the sale under the ded'ee was confirmed by the court, and the purchasers thereat and their associates after-wards on the eightee2ith day of December, 1875, organized themselves as a corporation under the provisions of the act of December 9; 1874, by the name of the Little Rock, Mississippi River and Texas railway, which became entitled to and vested with all the corporate rights and franchises that had belonged to the Little Rock, Pine Bluff and New Orleans Railroad company, or was derived from it by the Texas, Mississippi River and Northwestern Railroad company, under the consolidation. That after the organization of the defendant corporation, it was found impracticable to maintain and operate part of the road from Pine Bluff' to Eunice, and the defendant, as permitted and authorized by the act of March 3, 1877, entitled “ an act authorizing the change or abandonment of location by railroad-corporations,” abandoned about fifty miles of its line as then constructed, or from Varner’s station, twenty-five miles southeasterly from Pine Bluff, to Eunice, and at great expense built about fifty miles of'new road, on another line — not running near Napoleon — from Varner’s station to Arkansas City on the Mississippi river below Eunice. That by an act of the general assembly, approved March 15, 1879, entitled “an act to donate certain lands of tbe state to the Little Rock, Mississippi River and Texas railway,” the state granted to it certain lands in aid of the construction of its road, and as one of the conditions of the grant requii^d it to begin work on the line between Little Rock and Pine Bluff within twelve months from the passage of the act and to finish the same within two'years; and that it had surveyed and located the line between the two places and bought the necessary rails and fastenings, and contracted for the grading.and ties therefor, and before the expiration of twelve months after the passage’ of the act, began, and was then proceeding with the work of construction as rapidly as circumstances permitted. That the possession taken by the Little Rock, Pine Bluff and New Orleans Railroad company of the part of the plaintiff’s abandoned line, was open and notorious, and the same, except so much as the defendant had voluntarily abandoned, had been ever since, until the commencement of the suit, held peaceably and adversely, successively, by the Little Rock, Pine Bluff and New Orleans Railroad company, the Texas, Mississippi River and Northwestern Railroad company and the said defendant; and that the plaintiff was estopped from asserting against the said defendant a right of franchise to build a railroad between Little Rock and Pine Bluff. And it further alleged that there was still no regular or valid organization of the plaintiff company; but that certain of the former stockholders, and other persons, falsely claiming to be stockholders, in order to annoy and harass the defendent and embarrass it in the construction of the road, and thereby extort money from it, had recently combined together, and pretended to elect a board of directors and to appoint a president and other officers, and to reorganize the company. And that having since 1857 abandoned all efforts to build its road, and since then had no organization as a corporation at the adoption of the present constitution, it was by section 1, of Article XII, thereof, deprived of its charter and franchises. It denied that the Little Rock, Pine Bluff' and New Orleans Railroad company failed to file in the office of the secretary of state, within two years after the filing of its articles of association, a preliminary survey of its road, or an affidavit of three of its directors that five per cent, of the stock subscribed had actually and in good faith been paid to the directors; and each and all other matters whereby it wrns alleged in the complaint that it forfeited or was deprived of its franchises, and ceased to be a corporation. And also denied .that the organization of the defendant was not within one .year after the sale under the decree, or that the certificate thereof was not filed within six months after the organization took place. It also filed a cross-complaint, which, in addition to the averments in the answer we have already stated, alleged,, that the plaintiff, if still a corporation, not having surveyed and located its road between Little Rock and Pine Bluff', it, the defendant, has now the sole and exclusive right under the provisions of the act of July 23,1868, to build a railroad between said places within the distance of ten miles of its line; that it was building one of the public-highways of the state, to aid in the construction of which, the state had granted to it many thousand acres of land,, upon the condition that the road between Little Rock and Pine Bluff should be completed on or before the fifteenth day of March, 1881; that if it should suspend work upon it, the public would be subjected to great inconvenience- and loss, and it, the defendant, would be liable to a multiplicity of suits for damages, and would otherwise suffer irreparable loss and injury; that the plaintiff was insolvent: and if damages were recovered against it, they could not be collected, and that the filing of the complaint cast a. cloud upon its right and authority to build the road and greatly, impaired the value of its securities. And it prayed that the plaintiff' should be enjoined from prosecuting any suit against it calling in question its right to build and operate the road between Little Rock and Pine Bluff, or for maintaining and operating the road between Pine Bluff and Arkansas City, and from itself building a road between Little Rock and Pine Bluff' within ten miles of the defendant’s road. The plaintiff answered the cross-complaint. It denied as in its-complaint, that the Little Rock, Pine Bluff and New Orleans Railroad company ever became or was a corporation, and also denied that the defendant ever became or was a corporation, alleging that the purchasers atthe sale and their associates were not citizens or residents of the state, but that to simulate a compliance with the act of December 9,1874, which requires a majority of the directors of the corporation formed under it to be citizens and residents of the state, one share of stock was by them transferred without consideration and without their knowledge, respectively to Dudley E. Jones, Sol. E. Clark, S. L. Griffith and C. E. Penzel, citizens and residents of the state, to qualify them to become directors; and so, though not citizens and residents themselves of the state, in fraud of the law, to organize themselves as a corporation. The other defendants made no defense to the action. The court upon the hearing dismissed the complaint for want of equity, and rendered a decree in favor of the defendant company upon the cross-complaint, enjoining the plaintiff from interfering with or obstructing it in the construction or in the operating of its road, and from bringing any suit for the possession thereof; but did not enjoin it from building a road of its own under its charter. The plaintiff appealed. The act of January 12, 1853, to incorporate the Little Rock and Napoleon Railroad company, is a public act of which we will take notice, and by it the plaintiff ipso facto ■et eó instanti was created a corporation, as held in Hammett v. Little Rock and Napoleon Railroad Company, 20 Ark., 204, the act declaring that “regular organization of the company shall be presumed and considered as proved in all •courts of justice.” And it appeal’s by the pleadings and the evidence, that it had, long before the adoption of the present constitution commenced in good faith the construetion of its road. Section 1 of Article XII of the constitution, by which the charters 'of corporations, of which there had been no bona fide organization, and which had not in good faith commenced business, were revoked, has, therefore, no application to it. The appellant does not claim that its charter has conferred on it an exclusive right to build a railroad between Little Rock and Pine Bluff, or that the state might not have granted a like franchise to its own to another company • but that until such grant is made, it has the sole right, and the building of another and competing road, by an unincorporated company to which the state has not granted the privilege, by which its gains and profits will be continually affected and impaired, will so interfere with the appellant’s use and enjoyment of its property as to be a nuisance. As an abstract proposition, this, we think, may not be questioned, but we do not deem it necessary to inquire whether the appellee company be a corporation, or have-such a franchise, or not; nor, therefore, whether the acts of July 28, 1868, and of December 9, 1874, under which the appellee company claims corporate powers and franchises, were constitutionally passed, and are valid and subsisting laws. The appellant appears to have done no work on its road since 1857, and since 1861 (if not since 1857, as to which the proof is not clear,) there had been no election of - officers or meeting of the stockholders,- and from that time-until the reorganization of the company, in December, 1879, just before the commencement of the suit, it had no organization, and it seems from the evidence, long before the attempted transfer of the line and work done on it by its former president, secretary and treasurer, in 1869, to the Little Rock, Pine Bluff and New Orleans Railroad company, the stockholders had abandoned all expectation or purpose of building the road. Many of them had become insolvent and gone into bankruptcy, and many of them were dead, and no probability existed of the company ever building the road, and some of the stockholders expressly •consented to and approved the action of the former officers in transferring, or attempting to transfer, the line and road-bed to said company, and in turning over to it the books, records and papers, and none made any objection •thereto, or to said company building its road from Pine Bluff to Eunice, upon the line. And, as shown by the pleadings and evidence, the appellee company had been, when the suit was commenced, since the eighteenth day of December, 1875, claiming to be and acting as a corporation, and had been recognized as such by. the act of March 15, 1879; and been in the possession-•of and operating the road built on said line by said company from Pine Bluff' to Eunice, except that portion between Varner’s station and Eunice, which it had subsequently abandoned, and had in the meantime built some fifty miles of new road from Varner’s station to Arkansas 'City. And from the time the Little Rock, Pine Bluff and New Orleans Railroad company took possession of the line, in 1869, until the reorganization of the appellant company, in December, 1879, it stood by, and saw, without remonstrance •or objection by it, or any of its stockholders, the Little Rock, Pine Bluff and New Orleans Railroad company build the road from Pine Bluff to Eunice, and the appellee company, after it became the owner of it by the purchase at the foreclosure sale, at great cost and expense, build fifty miles of new road from Varner’s station to Arkansas City; .and not until after the road from Pine Bluff to the Mississippi river had been built and in operation, and the appellee company was about to build from Pine Bluff’ to Little Rock, did the appellant assert a claim to or indicate an intention to build, that part of tbe line. ■ There is no satisfactory proof that the line between Little Rock and Pine Bluff was ever established. It is evident that the building of that part of the road from Pine Bluff to the Mississippi river, has greatly increased the necessity for, and importance of, that between Little Rock and Pine Bluff. .. . Ve are clearly of the opinion, whether the appellee company has a grant from the state of the franchise to build the road or not, the appellant is estopped from questioning its authority. Gross injustice would be done the appellee company if it should now be enjoined from the completion of its road, and if an injury results to the appellant, it has been induced by its own conduct. “A corporation,” says Justice Campbell, in the case of Zabriskie v. Cleveland, Columbus and Cincinnati Railway, 23 How., 381, “ quite as much as an individual, is held to a careful adherence to truth in their dealings with mankind, and can not, by their representations or silence, involve pthers in onerous engagements, and then defeat the calculations and claims their own conduct has superinduced.” And Sir Samuel Romilly remarked, in the case of the Rochdale Canal Company v. King, 16 Beav, 630, that “ if one stand by and encourage another, though but passively, to lay out money, under an erroneous opinion of title, of under the obvious expectation that no obstacle will after-wards be interposed in the way of his enjoyment, the court will not permit any subsequent interference with it by him who formerly promoted and encouraged those acts of which he now either complains or seeks to obtain the advantage.” After for so many years passively encouraging other companies to expend their money and means in the construction of the road, it is too late now for the appellant to claim that it, only, has a franchise to build it. Hitchen v. The St. Louis, Kansas City and Northern Railway Co., 69 Mo., 224; Erie R. Co. v. Del., Lack. & Western, and Morris & Essex R. Cos., 21 N. J. Eq., 283; Morris & Essex Railroad Company v. Prudden, 20 N. J. Eq., 530; Goodin v. Cincinnati & White Water Canal Co., 18 Ohio St., 169; Davenport Central Railway Co. v. Davenport Gas Light Co., 43 Iowa, 301. The case of The Erie R. Co. v. Del., Lack. & Western, and Morris & Essex R. Cos., supra, is very analogous to this. In that case, the chief justice, in delivering the opinion of the court, said: “The case is this: The complainants claim the exclusive right to a railroad betw een the cities of Paterson and Hoboken; they stood by and saw the defendants build, within sight of their own road, a rival parallel road this whole distance, at a cost of many millions of dollars; they expressed no dissent, sind gave no warning; and, finally, they sold, for a large sum of money, a part of their own land to help the construction of this road, which, it is now claimed, has no rightful basis whatever. In my estimation, these facts are amply sufficient to debar the complainants from ever calling in question the lawfulness of this structure which has been erected, not only through the passiveness of the complainants, but by their .active assistance.” Courts of equity ever discountenance laches and neglect, and nothing will put their powers in action but conscience, good faith, and reasonable diligence, neither of which was shown in the appellant’s case. The appellee company was clearly entitled to the injunction granted by the decree. The decree is affirmed.