[689]

Wall. 19 (22: 312): Harwood v. Cincinnati &
C. A. R. Co. 84 U. S. 17 Wall. 81 (21: 558);
Lansiale v. Smith, 106 U. S. 391 (27: 219);
Bliss v. Pritchard, 67 Mo. 181; New Albany v.
Burke, 78 U. S. 11 Wall. 96 (20: 155); Wood v.
Carpenter, 101 U. S. 143 (25: 809); Case of
Broderick's Will, 88 U. S. 21 Wall. 503 (22:
599).

souri, at the state line between Iowa and
Missouri. The capital stock of this Iowa
corporation was fixed in the articles of in-
corporation at $3,000,000, and it was pro-
vided in said articles "that in the event of
the consolidation of this corporation with the
Chicago and Southwestern Railway in Mis-
souri, the company in which the two com.
panies may be consolidated shall have the
amount of indebtedness or liability as the
The bill in this case was filed in the Cir- board of directors may deem necessary, not
cuit Court of the United States for the West- exceeding, however, six million of dollars."
ern District of Missouri, on the 25th of On the 25th of September, 1869, these two
September, 1882, by The Board of County companies adopted articles of consolidation
Commissioners of the County of Leaven- and became one company under the name
worth, a municipal corporation of the State The Chicago and Southwestern Railway
of Kansas, on behalf of itself and of all other Company, for the purpose of building a rail-
stockholders of The Chicago and Southwest-road from some point on the Washington
ern Railway Company, chartered in Missouri, branch of the Chicago, Rock Island and
against The Chicago, Rock Island and Pacific Pacific Railroad, in the State of Iowa, to the
Railway Company, an Illinois corporation, Missouri River, in the State of Missouri, at
The Chicago and Southwestern Railway a point on the Missouri River opposite or
Company in Iowa, The Chicago and South- nearly opposite the City of Leavenworth, in
western Railway Company (consolidated), the State of Kansas. In the proceedings
The Iowa Southern and Missouri Northern which resulted in this act of consolidation the
Railroad Company, the last-named three
companies being Iowa corporations, The
Chicago and Southwestern Railway Company,
a Missouri corporation, David Dows and
Frederick S. Winston, citizens of New York,
and Calvin F. Burnes, a citizen of Missouri.
The plaintiff sues as the owner of $300,000
out of $3,000,000 of the capital stock of The
Platte City and Fort Des Moines Railroad
Company, a Missouri corporation, which
stock it originally subscribed for and paid
for at par. The circuit court, held by Mr.
Justice Miller, on a final hearing on pleadings
and proofs, dismissed the bill (25 Fed. Rep.
219), and the plaintiff has appealed.

Mr. Justice Blatchford delivered the opin-power to subject the said corporation to such
ion of the court:

County of Leavenworth, as one of the stock-
holders in the Chicago and Southwestern
Railway Company of Missouri, was repre-
sented by its duly appointed agent, who gave
his assent to the consolidation.

On the 1st of October, 1869, six days after
this consolidation, the new company entered
into a contract with the Chicago, Rock Island
and Pacific Railroad Company, whereby it
agreed to issue its bonds to the amount of
$5,000,000, payable thirty years after date,
bearing interest at the rate of seven per cent
per annum, for which coupons were to be
attached to the bonds, the whole to be secured
by a mortgage on its entire line of road to
the Missouri River.

The following are the material facts of the case, in the view we take of it, substantially In consideration that the proceeds of those as they are set forth in the opinion of Mr, bonds should be placed in the hands of the Justice Miller, delivered in the circuit court: Rock Island Company, and certain advantages The Platte City and Fort Des Moines Rail- be secured to that Company by the contract, road Company was created for the purpose of in the way of connection and running arconstructing and operating a railroad to rangements between the two companies and commence at a point on the Missouri River their roads, the Rock Island Company agreed opposite or nearly opposite the City of to indorse those bonds, and out of the proLeavenworth, Kansas, and run thence north-ceeds of their sale to pay the interest on all easterly to a point on the state line between of them, until the new road was constructed Missouri and Iowa in the direction of Fort and turned over to the Southwestern ComDes Moines. The name of the company was pany. afterwards lawfully changed to the Leaven- In pursuance of this agreement the Southworth and Des Moines Railway Company and western Company issued its bonds to the later to the Chicago and Southwestern Rail-amount of $5,000,000, and placed them in the road Company. Such changes, however, were possession of the Rock Island Company; and merely of name and without prejudice to the on the 6th of October, 1889, made and derights of stockholders in such original com-livered to the defendants Dows, Winston and pany. This company was also authorized Burnes a deed of trust upon their entire line [690] by law to build a branch road from some of road from the Missouri River, in Missouri, point on the main line to a point on the north line of Missouri in the direction of Ottumwa, Iowa.

to a point on the Washington Branch of the
Chicago, Rock Island and Pacific Railroad
in Iowa, to secure the payment of the bonds
and interest, as agreed. The Rock Island
Company indorsed the bonds and sold them
in open market, or paid them, with its
guaranty on them, to the contractors who
built the road.

On the 12th of May, 1869, a corporation
was duly formed under the general laws of
Iowa and called the Chicago and Southwest-
ern Railway Company in Iowa, for the pur-
pose of building and operating a railroad
from Washington, in Iowa, southwesterly, On the 16th of August, 1871, articles of
to meet the road of said Chicago and South-consolidation were signed between the Chi-
western Railway Company, chartered in Mis-cago and Southwestern Railway Company of

[691]

charged of all liens; and that that company
and the plaintiff be re-established in all the
rights, properties and franchises of that line
of railroad; and for general relief.

the States of Missouri and Iowa and another the balance be found against the plaintiff or company organized under the laws of the that company, the plaintiff or it be decreed State of Missouri, by the name of the Atch to pay the same, which the plaintiff offers to ison Branch of the Chicago and South-do; that the line of railroad running from the western Railway Company, which was au- Missouri River, opposite or nearly opposite thorized to construct a road from a point on the City of Leavenworth, in Kansas, by way the east bank of the Missouri River opposite of Cameron, to the state line between Iowa the City of Atchison, in the State of Kan- and Missouri, be decreed to belong to the sas, by the most practicable route, to a junc-Chicago and Southwestern Railway Company, tion with the Chicago and Southwestern chartered in Missouri; that the same be deRailway. These articles of consolidation livered up to that company, free and diswere duly filed in the office of the secretary of state of the State of Missouri according to the law of that State. The validity of that consolidation is assailed by the plaintiff on the ground that it is void by reason of a The Chicago, Rock Island and Pacific Railfailure to conform to the laws of Missouri. way Company answered the bill, and Dows The original bill prays for the appointment | and Winston, trustees, also answered it, those of a receiver to take possession of the rail-answers being filed on the 5th of March, road operated by the Chicago, Rock Island 1883. On the 30th of March, 1883, the plainand Pacific Railway Company extending from tiff filed exceptions to the first answer, and Washington in Iowa to the Missouri River, on the 2d of April, 1883, exceptions to the [692] and for a decree declaring the articles of second answer. These exceptions were heard consolidation between the Chicago and South- by the court, held by Judges McCrary and western Railway Company, chartered in Mis- Krekel, and were overruled. The opinion of souri, and the Chicago and Southwestern the court, delivered by Judge McCrary, is reRailway Company in Iowa, to be void; that ported in 18 Fed. Rep. 209. The conclusion those companies and the stockholders of each of the court was, that the articles of consoli be remitted to their rights as existing before dation between the Chicago and Southwestern such attempted consolidation; that the Railway Company in Missouri and the Iowa $5,000,000 of bonds and their coupons, and corporation of the same name, having been the trust deed securing them, be decreed to entered into on the 25th of September, 1869, be void as a lien upon the road; that the and the bill not having been filed until the trust deed be canceled by the trustees, as a 25th of September, 1882, and a case of concloud upon the title; that all payments of in- cealed fraud not being shown, the defenses terest made on those bonds by the Rock Is- of laches and of a bar under the Statute of land Company or for such consolidated Limitations of Missouri, set up in the ancompany, on any account whatever, be ad-swers, must be sustained. judged to have been voluntary and unauthor- On the 16th of February, 1884, the plaintiff ized; that it be declared that no right of action ever existed for the reimbursement thereof; that the proceedings for the foreclosure, hereinafter mentioned, of the trust deed, be decreed to have been and to be collusive, fictitious and fraudulent; that the decree therein, the sale thereunder, the personal judgment against the consolidated company and all other proceedings had under such decree be held to be fraudulent and void that the organization of the Iowa Southern and Missouri Northern Railroad Company, hereinafter mentioned, the consolidation of the last-named company with the Chicago, Rock Island and Pacific Railway Company and all acts done by either in execution or confirmation thereof, be adjudged to be void; that an accounting be had between the plaintiff and the Southwestern Railway Company, chartered in Missouri, on the one part, and the other defendants charged as trustees, on the other part, as to all proceedings had by either, involving the receipt or lawful disbursement of money, in which the plaintiff or the Chicago and Southwestern Railway Company, chartered in Missouri, had or have any interest, as well as for the use and occupation of the road and franchises of the latter company; that the true balance be ascertained, and the parties from whom and to whom payable; that, if the balance should be found due to the plaintiff or to the latter company, a decree be given for its recovery against the party indebted, and, if

filed an amended bill, with substantially the
same prayers as those of the original bill.

To resume the history of the road, it was
completed after several years, and the money
with which this was done was mainly raised
by the sale of the bonds of the Southwestern
Company, indorsed by the Rock Island Com-
pany, and the Rock Island Company paid the
interest on the bonds, as it had assumed to
do. The possession of the road, as it be-
came fit for use, was taken by the Rock Island
Company, so that, when it was completed
from one end to the other, it was in the pos-
session and use of that Company and so
remained for two or three years afterwards.
The Rock Island Company says, in its answer,
that it paid the interest on the bonds out of
the sale of the bonds themselves, according
to the contract, until the road was finished,
and after that paid it out of its own money,
by reason of its obligation as guarantor or
indorser of the bonds. After interest had
thus accrued and been paid in this latter
mode to the amount of $1,000,000, according
to its statement, it made application to the
trustees in the deed of trust for a foreclosure
under the provisions of that deed, on account
of the default of the Southwestern Company
in paying such interest. The trustees accord-
ingly brought such a suit in the Circuit
Court of the United States for the District of
Iowa, where a decree was rendered. A sale
of the Southwestern Road was made to a cor-
poration organized under the laws of Iowa

[693]

[694]

[695]

for its purchase. Under that sale a deed was
made to that company by the Chicago and
Southwestern Railway Company, by order of
the court, and the deed and sale were con-
firmed. To that suit of foreclosure the Chi-
cago and Southwestern Railway Company
and the Chicago, Rock Island and Pacific
Railway Company and others were made de-
fendants, and the two companies appeared by

counsel.

for the bonds and mortgage, then no com-
pany was before the court which foreclosed
that mortgage, which had any interest in the
road, or was under any obligation to defend
the suit. As we have already stated that the
first consolidated company was not before
that court at all, nor represented in the pro-
ceedings, except as it was a part of the sec-
ond consolidated company, it would there-
fore follow that the foreclosure proceedings
are void as to the real Chicago and South-
void, and the consolidation with the Chicago
and Rock Island, as transferring the owner-
ship of that road, is ineffectual; and the real [696]
Southwestern Company, under the first con-
solidation, is still in existence, is the legal
owner of the road and has a right to pay the
overdue interest on its bonds, and to take
possession of it."

After the second consolidation, in which
the Atchison branch came into the South-western Company; the sale of its road is
western Company, that company issued bonds
to raise money for the construction of this
Atchison branch, and a mortgage or deed of
trust was made to secure the payment of
those bonds, which was a first mortgage on
the Atchison branch and a second mortgage
on the remainder of the consolidated com-
pany's road. The trustees in that mortgage
were made defendants in the foreclosure suit,
and the holders of the bonds so secured were
afterwards, on motion, admitted to defend
for their interest in the suit.

After the sale of the road under the decree, and its purchase by the new organization, which was called the Iowa Southern and Missouri Northern Railroad Company, that company entered into a consolidation with the Chicago, Rock Island and Pacific Company, which consolidation included other roads, or pieces of roads, built under the auspices of the Rock Island Company, all of which were now consolidated under the name of the Chicago, Rock Island and Pacific Railway Company, which is the principal defendant in this suit.

This suit of the County of Leavenworth is founded on the proposition that the attempted consolidation of the Chicago and Southwestern Company with the Atchison Branch Company is utterly void, and that, as the real Southwestern Company, which issued the bonds and made the mortgage on which the foreclosure suit and sale were based, was never served with process or appeared in that suit, that decree and foreclosure sale are also void. As the real Southwestern Company, which gave this mortgage, refuses to take any steps to assert its rights, the County of Leavenworth, as one of its stockholders, comes forward, on behalf of itself and other stockholders, to do so, and prays that the decree and sale under the proceedings in the Iowa circuit court be set aside and held for naught, as well as the pretended second consolidation. Should this second consolidation be held valid, then it asks that the sale of the road under that decree, and the decree itself, be set aside and held for naught, on the ground of fraud and abuse of trust by the Rock Island Company.

The first question considered by the circuit cr art was, whether the consolidation with the Atchison branch was so void that no company formed by such consolidation had an existence making it capable of doing any business, and especially of being a defend ant in the suit to foreclose the mortgage for $5,000,000. The court said: "It is obvious that if this second consolidated company was not the legal owner of the Chicago and Southwestern Railroad, and was not liable 134 U. S. U. S., Book 33.

67

The consolidation took place in Missouri under an Act of that State approved March 24, 1870 (Laws of 25th General Assembly, adjourned session, p. 89), the first section of which is as follows: "Section 1. 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 of road, with all the powers, rights, privileges and immunities, and subject to all the obligations and liabilities to the State, or otherwise, which belonged to or rested upon either of the companies making such consolidation. In order to accomplish such consolidation, the companies interested may enter into contract fixing the terms and conditions thereof, which shall first be ratified and approved by a majority in interest of all the stock held in each company or road proposing to consolidate, at a meeting of the stockholders regularly called for the purpose, or by the approval, in writing, of the persons or parties holding and representing a majority of such stock. A certified copy of such articles of agreement, with the corporate name to be assumed by the new company, shall be filed with the secretary of state, when the consolidation shall be considered duly consummated, and a certified copy from the office of the secretary of state shall be deemed conclusive evidence thereof. The board of directors of the several companies may then proceed to carry out such contract according to its provisions, calling in the certificates of stock then outstanding in the several companics or roads, and issuing certificates of stock in the new consolidated company under such corporate name as may have been adopted; provided, however, That the foregoing provisions of this section shall not be construed to authorize the consolidation of any railroad companies or roads, except when by such consolidation a continuous line of road is secured running in the whole or in the main in the same general direction; and provided, It shall not be lawful for said roads to consolidate in the whole or in part, when by so

1069

[697]

doing it will deprive the public of the benefit | railroad companies shall consolidate or at-
of competition between said roads. And in tempt to consolidate their roads contrary to
case any such railroad companies shall con- the provisions of this Act, such consolidation
solidate or attempt to consolidate their roads shall be void, and any person or party ag-
contrary to the provisions of this Act, such grieved, whether stockholders or not, may
consolidation shall be void, and any person bring action against them in the circuit court
or party aggrieved, whether stockholders or of any county through which such road may
not, may bring action against them in the pass, which court shall have jurisdiction in
circuit court of any county through which the case and power to restrain by injunction
such road may pass, which court shall have or otherwise." This sentence does not come
jurisdiction in the case and power to restrain after but before the provision concerning the
by injunction or otherwise. And in case any resolution accepting the law under which
railroad in this State shall hereafter intersect consolidation is made. In the orderly suc
any such consolidated road, said road or roads cession of ideas, this concerning the accept-
shall have the right to run their freight cars ing the provisions of the Statute was not in
without breaking bulk upon said consolidated the mind of the draftsman when the provision
road, and such consolidated road shall trans- making the consolidation void was penned.
act the business of said intersecting or con- On the other hand, the limitation that the
necting road or roads on fair and reasonable companies which are authorized to consolidate
terms, and the same may be enforced by ap- are only those whose roads when united 'will
propriate legislation. Before any railroad form in the whole or in the main one contin-
companies shall consolidate their roads, under uous line of railroad,' and that this authority
the provisions of this Act, they shall each shall not be construed to authorize the con-
file with the secretary of state a resolution solidation of any railroad companies or roads,
accepting the provisions thereof, to be signed except when by such consolidation a contin-
by their respective presidents and attested uous line of road is secured, running in the
by their respective secretaries, under the seal whole or in the main in the same general
of their respective companies, which resolu- direction,' and 'it shall not be lawful for
tion shall have been passed by a majority said roads to consolidate in the whole or in
vote of the stock of each at a meeting of the part, when by doing so it will deprive the
stockholders thereof, to be called for the public of the benefit of competition between
purpose of considering the same.
said roads,' immediately precedes the dec-
laration that any attempt to consolidate
contrary to the provisions of the Act shall
be void. It is the consolidation of such roads
as do not form when so consolidated one con-
tinuous line, but may be made up of parallel
and competing lines, which is forbidden and
declared to be void. The language of the
remedy prescribed by the Statute indicates
that it is for the violation of this principle
that it is given. The court of the county in
which the road lies or through which it
passes, not that where the company has its
organization or offices, shall have jurisdic-
tion, and the remedy shall be to restrain the
company by injunction or otherwise. It is
the continuity or parallelism of the roads,
the benefit of competition by roads between
the same points, which is to be secured.
And it is clear that the Legislature was not
so much interested about the companies and
their amalgamation into one company as they
were that rival roads and competing roads
should not be consolidated and brought under
the same control. I doubt very much whether
the Legislature intended to declare that even
for a violation of this principle, much less
of any of the other mere details of the mode
of accomplishing this consolidation, it should
be absolutely void, void ab initio, void any
where and under all circumstances, but only,
as the word 'void' is so often used in leg-
islation and in written agreements, that it
should be voidable; that if on investigation
the roads were of that character which the
Statute forbids to be consolidated, the proper
court could so declare and annul and avoid
the consolidation. This is the more reason-
able, as the parallelism or competing char-
acter of the two roads, if it were disputed,
could only be satisfactorily ascertained by a
judicial investigation, and it could not be

The circuit court, after quoting this section of the Statute, proceeds to say: "A certified copy of the articles of agreement under which the consolidation was effected, with the corporate name of the new company, was duly filed with the secretary of state, as this law requires. But there is no evidence in this record of the filing with the secretary of state, by each of the companies so consolidated, of a resolution accepting the provisions of the Act, passed by a majority of the stockholders, at a meeting of stockholders called for the purpose of considering the same, nor is there any evidence of such [698] meeting of the stockholders of the companies separately, except such as may be implied from the certitied copy of the articles of agreement of consolidation duly filed in the secretary's office. Is the absence of any evidence of these meetings and of the passage of the resolutions to accept the provisions of the Act by the respective companies fatal to the creation of the new consolidated company, when all other requirements of the Statute shall have been complied with? It will be observed that this is the last provision in the Statute, though the thing ordered to be done is one of the first steps required in the process. It is also a provision which may well be held to be directory, and designed to secure evidence that each of the companies intending to consolidate recognize the Statute as the sole authority for such consolidation, and their obligation to be governed by its provisions. If the other essential provisions of the Act were complied with, it does not necessarily follow that the whole proceeding would be void for a failure to comply with this direction of the Act. It is argued, however, that by the express language of the Statute it is declared tliat, in case any such

[699]

permitted that any man who wished to do so | versy it may have growing out of that busi. could assume for himself that the consolida-ness, that all the steps which the law directs tion was void and act accordingly. Without for the consolidation proceedings have been the aid of the Statute, if the Legislature or strictly complied with. The hardship would [700] the governor or the attorney-general of the be as great on those who sue it for violated State believed the roads were not such as the duty of contract, or otherwise, to be required law permitted to be consolidated, they could, to prove in the same manner the existence of by the institution of proper proceedings in a the corporation which they bring into court of justice, have the act of consolidation court. annulled, if they were correct in their views. This Statute confers the right on any person aggrieved by such improper consolidation to have relief by application to the proper court, which would not otherwise exist.

"The question of the existence of this corporation arises incidentally in this effort of the County of Leavenworth to assert the rights of another company, and, though the bill prays that the consolidation be held void, it is not the State which makes this request or institutes or controls this proceeding, nor is the proceeding itself of the character of a direct suit for the purpose of procuring such a decree, which would bind the company in any other case.

"I am of the opinion that the consolidation of August, 1871, was valid, and that this corporation thus formed succeeded to the rights, the property and the obligations of the Chicago and Southwestern Company crcated by the consolidation of September, 1869, and that it was the proper party to be sued and to represent all the interests of all the stockholders in all the corporations of which it was composed, including the County of Leavenworth as one of these stockholders."

We have carefully considered the views urged on the part of the appellant, in regard to the propositions thus laid down by the circuit court, and are of opinion that those propositions are sound; and it is sufficient for us to express our concurrence in them, without adding more.

"In regard to the acceptance of the provisions of the Consolidation Act to be filed with the secretary of state, this is eminently a matter between the State and the corpora tions whose rights are affected, and if, on a failure to file such acceptance, the consolida tion is to become void, it is the privilege of the State to enforce the forfeiture or annulment, and not of every private person who shows an injustice or injury done to himself. But if this was more doubtful than it is, it appears to me that the proposition here insisted on is concluded by this language of the Act: 'A certified copy of such articles of agreement [for consolidation], with the corporate name to be assumed by the new company, shall be filed with the secretary of state, when the consolidation shall be considered duly consummated, and a certified copy from the office of the secretary of state shall be deemed conclusive evidence thereof.' This certified copy from the secretary's office is to be considered evidence of something. Let us consider what and its effect as evidence. 1. Of what is it to be a copy? Of The circuit court, in its opinion, next disthe articles of agreement for consolidation cusses the question of the validity of the made by the companies to be consolidated; not proceedings in the Circuit Court of the of all the requirements of the Statute. prelim- United States for the District of Iowa, under inary or otherwise. 2. What shall it prove? which the road of the Southwestern Company That thereafter the consolidation shall be con- was sold, and afterwards became a part of sidered duly consummated. There is no am- the new system of consolidated roads held by biguity in this. It shall be evidence that the the Rock Island Company, and says: "The consolidation has been perfected, and has re- matter is much simplified by the fact that sulted in the creation of a new corporation, that court had jurisdiction of the case, juriswhose name is to be found in this certified diction of the parties plaintiff and defendant, copy. 3. What is the effect of this evidence? of all the necessary parties to the relief The Statute says it shall be conclusive. It is sought and of the subject matter of the suit. not necessary here to hold that, in a direct For any mere error of that court in its deproceeding on the part of the State to have a cision on matters of law or fact, the proper declaration of the nullity of such a consolida- remedy was by appeal, and one of the partion, no evidence can be received to impeach ties did as to its own interest take such ap the validity of the original act of consolida-peal to the Supreme Court of the United [701] tion. It is my opinion that in such case the certified copy from the secretary's office would not be conclusive, but prima facie, evidence. "But what is meant and what is reasonable is, that when a corporation so organized comes into a court of justice, either as plaintiff or defendant in a contest with individuals or other corporations in regard to any matter affecting its rights, its powers, its authority to make contracts, to sue or to be sued, the production of the paper mentioned shall end all inquiry into its existence as a corporation, with such powers as the law confers on it. It would be burdensome in the extreme, a hardship altogether unnecessary to any proper purpose, to require of a corporation doing an immense business to prove, in every contro

States, which affirmed the decree. Another
remedy was by bill of review asking the
same court to reconsider and reverse or
modify its decree on the same or on newly
discovered evidence. This course has not
been adopted, and it admits of very serious
doubt whether any proceeding can be sus-
tained in any other court the purpose of
which is to set aside the decree of that court
in the matter, of which it had jurisdiction.
I know of no reason why the suit to have a
decree declaring null and void the foreclosure
proceedings of that court, by reason of any
fraud in its procurement, whether it be legal
fraud implied from the relations of the par-
ties, or actual fraud practiced in the prog-
ress of the case, should not have been

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