City of Menasha v. Milwaukee & Northern Railroad

Taylor, J. We think the injunction was improvidently issued, and should .be dissolved. All collusion and fraud charged in the complaint being denied by the answer of the appellant, the plaintiffs’ right is uncertain and doubtful; and in such case a court of equity ought not to interfere, but leave the party to his legal remedies. We think it is well settled by the decisions of this court, that if the appellant company was in good faith organized for the purposes set out in its answer, the fact that it purchased at foreclosure -sale the property and franchises of the Milwaukee & Northern Railway Company for the purpose of thereafter operating the same, would not bind such new company to abide by or perform the contracts of the Milwaukee & Northern Railway Company. See Wright v. M. & St. P. Railway Co., 25 Wis., 46-53. The covenant between Menasha and the old company was a personal contract, and binds only that company and its successors and assignees, within the restricted meaning of such words; and a purchaser of the property and franchises is neither a successor nor assignee, and is in no way bound by the contracts of the old company, except when such contracts are a lien upon its property or in some other way bind the property or franchise. The old company, under its charter, bad the undoubted right to extend its road through the city of Neenah and connect with the Wisconsin Central Railroad in that city; but, by its contract with the city of Menasha, it bound itself not to exercise that right. Admitting that this [421] contract is valid, and that a court of equity would interfere as between the parties to prevent a violation of the same (which is, perhaps, a question of grave doubt), it is very clear that such contract cannot bind another corporation purchasing the property and franchises of said company, when the charter of such purchaser authorizes it to build the connecting road. If the appellant corporation were a corporation organized under the provisions of section 1788, R. S. 1878, as the mere assignee or owner of the powers, privileges and franchises of the old company, it may be as such organization it would have no power to exercise any right or franchise which the old corporation would not have had the right to exercise. But the appellant corporation was not organized under that section. According to the allegations of the answer, it was organized under the provisions of section 1820, R. S. 1878, with power to purchase the property, rights and franchises of the old company, sold under the mortgage, and also with power to construct the line of railroad in question, as well as another railroad from the end of the Milwaukee & Northern Railway at Green Bay to the Menomonee river, there to connect with other roads to be built in the state of Michigan. "We do not think that the mere fact that the appellant company was authorized to purchase the property and franchises of the N orthern Railway Company, and to operate the road constructed by such company, could prevent such company from constructing and operating the other roads authorized to be constructed and operated by it, although such construction and operation would indirectly avoid the covenant made by the Northern Railway Company with the respondents. Subd. 6, sec. 1828, R. S., authorizes every railroad to connect with every other railroad which it intersects, and provides for compelling such connections when refused. It is clear, therefore, that a corporation authorized to build a railroad from the city of Neenah across Doty’s'island to the line of the Milwaukee & Northern Railway, in the city of Menasha, would be author [422] ized to build and operate the same in connection with said Milwaukee & Northern Railway Company’s road under said section, notwithstanding any agreement or covenant made by said last-named company prohibiting such connection. In this matter the company cannot bind the state and those acting under its authority, although it may possibly bind itself. We think the learned counsel for the respondents clearly recognize this power on the part of the state, and have, therefore, as the ground for their relief, alleged in various ways that the acts of the appellant were fraudulent and collusive, and that the only object of obtaining its charter v^as to avoid the covenant of the Milwaukee & Northern Railway Company in regard to the matter in controversy, and that there was no real intent to build and operate the other roads mentioned in its charter. These charges of fraud and collusion being positively denied by the appellant, there is no sufficient ground, as' the case stands upon the pleadings, for granting the injunction. In the view we have taken of the case, it is unnecessary to discuss the question whether a court of equity would lend its aid in enforcing a contract made by a railroad company, which prohibits it from exercising the franchise of constructing and operating all the lines of road authorized by its charter; or the other question, whether it will lend its aid to enforce a contract which is in any sense against public policy, and especially in a case where the violation of the contract is a public benefit. If, in this case, the appellant company is, in fact, the mere successor of the Milwaukee & Northern Railway Company, and its organization is, in fact, a fraud, and made for the sole purpose of building the line of railroad in controversy, in violation of the contract made by such, coloration, the right of the respondents can be vindicated in an action at law, and the public interests which are to be promoted by the building of the line of road contemplated, will not be prejudiced. The rights of respondents are not so certain, nor are they so clearly [423] founded on equitable principles, as to justify tbe court in enjoining the appellants in the construction of a work which seems to be for the public interest. By the Court. — The order of the circuit court is reversed, with costs, and the cause remanded for farther proceedings according to law.