Washburn v. Cass County

KREKEL, District Judge. The main question is, could the Pleasant Hill Division of the Lexington, Chillieothe & Gulf Railroad Company consolidate with the Lexington, Chilli-eothe & Gulf Railroad Company without having a part of its road constructed, or having work done thereon. The agreed statement of facts admits that on the 4th day of October, 1S70, the date of filing the articles of consolidation between the two roads, and assuming the name of the Lexington, Lake & Gulf Railroad, The Pleasant Hill Division of the Lexington, Chillieothe vt- Gulf Railroad Company had constructed no part of its said railroad, in whole or in part, and had done no work thereon. In order to arrive at the intention and meaning of the consolidation act, it is necessary to look into the various provisions of law conferring authority upon the companies concerned. The Pleasant Hill Division of the Lexington, Chillicothe & Gulf Railroad Company was duly organized. The act of March 23d, 1868, provides for a submission on the petition of twenty-five tax-payers of any municipal township, setting forth their desire to subscribe to the capital stock of any railroad company in this state, building or proposing to build a railroad. When the twenty-five tax-payers presented their petition to the county court of Cass county, there was but one company organized to build a road “passing through or near said township of Polk” (quoting from the petition), and that company’s articles of association in its second section provided that it was intended “eventually to consolidate with and form a link and be a part of the main line of the said Lexington, Chillieothe & Gulf Railroad.” Without this connection it would have been a railroad beginning and ending in the open country. The subscription (voted by the necessary two-thirds vote) was, on the 16th day of September. 1S70, made by the county court to the Pleasant Hill Division of the Lexington, Chillieothe & Gulf Railroad; but it is said the bonds and coupons issued under it to the Lexington, Lake & Gulf Company (which is the corporate name of the consolidated company) are void, because the consolidation was illegal and null. It is contended that to make a legal consolidation under the statute authorizing it, the company must own railroads constructed wholly or in part. Act March 24, 1870 (1 Wag. St. 314). The language of the first section of the act is: “Any two or more railroad companies in this state, existing under either general or special laws, and owning railroads constructed wholly or in part, which, when completed and connected, will form in the whole, or in the main, one continuous line of railroad, are hereby authorized to consolidate, in the whole or in the main, and form one company owning and controlling such continuous line.” In the same section all consolidations, contrary to the act, are declared void, “and any person or party aggrieved, whether stockholder or not, may bring an action against them in the circuit court of any county through which such road may pass, which court shall have jurisdiction in the case and power to restrain by injunction or otherwise.” The question is, what is meant by the language, “owning railroads constructed wholly or in part” — must both roads be wholly or in part constructed? Looking to the object had in view in authorizing consolidation of roads wholly or in part constructed, the inference is, that the building and construction of roads were thereby to be advanced, and such construction should be given to the act as to accomplish this so far as the language used will reasonably permit. A railroad company duly organized, and having private and corporate stock • subscribed to it, may, under the language quoted, be said to be owning a railroad, and indeed would seem to own it, unless the words are construed to mean work done on the road, in grading, bridging, etc. But it is not necessary to give the construction here indicated, for as one of the consolidated roads, namely, the Lexington, Chilli-eothe & Gulf Road, was under actual construction at the time of consolidation, the law is fully complied with, unless both companies must own roads constructed wholly or in part. The views as to the proper construction of the consolidation act here indicated, gain strength from the provisions of the act of March 23d, 1SGS, which authorizes subscriptions to capital stock to companies “building or proposing to build a railroad.” Under this act, the vote and subscription were authorized, and that to a company whose declared purpose was to eventually make the very consolidation under consideration. Unless the consolidation was void, there can be no question but that the new company succeeded to all the rights of each of the companies consolidated, and that the issuing of the bonds to such consolidated company to pay a subscription to one of them —the pieasant Hill Division — was lawful. The question whether each of the consolidated companies “owned railroads constructed [312] wholly or in part,” so far as this is a question of fact, was a fact peculiarly within the knowledge of the county court, and to the existence of which it certified by the recital in the bond, that the consolidation was in due form of the law. Even if such recital did not estop the defendant from denying it, an innocent purchaser of the bonds, for value, is not affected by its falsity, if false it was. The question, whether the legal existence of a corporation, in the exercise of corporate functions as this consolidated company was, when building a part of the Pleasant Hill Division, after consolidation, as admitted in the agreed statement of facts, can be taken ad-, vantage of collaterally, is one which seems, on authority, to be against the defendant. It must have been so viewed by the legislature, for they provided a remedy without invoking the aid or awaiting the action of the state by declaring all consolidation contrary to the act void, and that “any person or party aggrieved, either stockholder or not, may bring an action against them in the circuit court of any county through which such road may pass, which court shall have jurisdiction in the case, and power to restrain by injunction or otherwise.” There is some force in the position taken by the plaintiff, that if the consolidation was void in this case, the original subscription to the Pleasant Hill Division of the Lexington, Chilli-eothe & Gulf Railroad being unquestionably valid, these bonds may be held good under that subscription and in payment thereof.’ Be this however, as it may, the plaintiff has declared on the bonds of the consolidated company and by that it must stand. With no decisions of the supreme court expounding the above mentioned consolidation act, such a construction has been given to it as in my view best harmonizes with the law, and the design of the legislature in enacting it. The objections as to conditions pf consolidation in other respects can have no application here, for it is obvious that a road, such as the Pleasant Hill Division, with no means to connect, would without consolidation be utterly useless and worthless. So well was this understood that “eventual consolidation” was provided for in the articles of association. The case is with the plaintiff.