UNITED STATES V. UNION PACIFIC RAILROAD COMPANY, 98 U. S. 569 (1878)Subscribe to Cases that cite 98 U. S. 569
U.S. Supreme Court
United States v. Union Pacific Railroad Company, 98 U.S. 569 (1878)
United States v. Union Pacific Railroad Company
98 U.S. 569
APPEAL FROM THE CIRCUIT COURT OF THE UNITED
STATES FOR THE DISTRICT OF CONNECTICUT
1. The Act of March 3, 1873, 17 Stat. 509, is a valid and constitutional exercise of legislative power. Congress, by requiring the Attorney General to bring a suit in equity in the name of the United States in any circuit court against the Union Pacific Railroad Company and others, intended, not to change the substantial rights of the parties to the suit, but to provide a specific mode of procedure, which, by removing certain restrictions on the jurisdiction, process, and pleading which are in other cases imposed, would give a larger scope to the action of the court, and a more economical and efficient remedy than before existed.
2. The provisions authorizing process to be served without the limits of the district where the suit might be brought, and parties and subjects of controversy to be united which, in an ordinary chancery suit, would render a bill multifarious, are regulations of practice and procedure which are subject to legislative control
3. Statutes have been frequently passed directing suits for specific objects to be brought by an attorney general, and regulating the proceedings in them, such as a quo warranto, or a bill in equity against a corporation to test its right to the exercise of its franchises, or to declare them forfeited, or, if insolvent, to wind up its business and distribute its assets; and the validity of such statutes has uniformly been recognized.
4. This bill having, on demurrer, been dismissed below, its sufficiency must be determined here by the provisions of said act, for it cannot be supposed that Congress, in laying down in specific terms the subject matter of the suit and granting enlarged and peculiar powers to the court, intended that any other matters should be tried in the case.
5. This is confirmed by the fact that the same act provided other remedies for other subjects of controversy with the Union Pacific Railroad Company, and an effectual means of investigating all its affairs.
6. That act authorized a decree in favor of that company for money due for capital stock, for money or property received from it on fraudulent contracts, or which ought in equity to belong to it, and also a decree in favor of it or of the United States for money, bonds, or lands wrongfully received from the latter, which ought in equity to be paid or accounted for.
7. Except in favor of the company or of the United States, there can under that act therefore be no recovery, and none but such as was sanctioned by the principles of equity before it was passed.
8. The company might, by a cross-bill, have availed itself of the act, but it refuses to do so, and demurs to the bill, thereby foregoing any relief in its favor in this suit. As it is conformable neither to the principles of equity nor to those of the common law to render a decree or a judgment in favor of a competent party who asserts no claim and declines to proceed in the case, there can be no recovery in this suit in favor of the company.
9. Though the bill sets up many fraudulent transactions on the part of the directors chanroblesvirtualawlibrary
of the company and some of its stockholders for which the other stockholders would be entitled to relief, the latter are not parties, and neither the frame of the bill nor the provisions of the act authorize any relief or recovery in their favor.
10. The United States sustains two distinct relations to the company -- namely that of the government creating it and exercising legislative and visitatorial powers and that growing out of the contract contained in the charter and its amendment.
11. This bill exhibits no right on the part of the United States to relief founded on that contract. The company has completed its road, keeps it in running order, and carries all that is required by the government. To the latter nothing is due, and it has the security which by law it provided.
12. Nor does the bill show anything which authorizes the United States as the depositary of a trust, public or private, to sustain this suit.
13. This interference by the Attorney General with corporations on the ground of such a trust in the government is limited to two classes, to neither of which the present case belongs: 1. where religious, charitable, municipal, or other corporations whose functions are solely public, and whose managers have destroyed or misappropriated the fund, or otherwise abused their functions; 2. where other corporations exercise powers beyond those to which they are limited by the law of their organization.
14. While the Court does not say that there is no trust in regard to the duties of the company which the United States can enforce in equity, it is of opinion that none such is shown in this bill, and that no case is made for any relief authorized by the act under which it was brought.
The Act of Congress making appropriations for the legislative, executive, and judicial expenses of the government, approved March 3, 1873, 17 Stat. 509, has the following language in its fourth and last section:
"The Attorney General shall cause a suit in equity to be instituted in the name of the United States against the Union Pacific Railroad Company and against all persons who may, in their own names or through any agents, have subscribed for or received capital stock in said road, which stock has not been paid for in full in money or who may have received, as dividends or otherwise, portions of the capital stock of said road, or the proceeds or avails thereof, or other property of said road, unlawfully and contrary to equity, or who may have received as profits or proceeds of contracts for construction or equipment of said road, or other contracts therewith, moneys or other property which ought, in equity, to belong to said railroad corporation, or who may, under pretense of having complied with the acts to which this is an addition, have wrongfully
and unlawfully received from the United States bonds, moneys, or lands which ought, in equity, to be accounted for and paid to said railroad company or to the United States, and to compel payment for said stock, and the collection and payment of such moneys, and the restoration of such property, or its value, either to said railroad corporation or to the United States, whichever shall in equity be held entitled thereto. Said suit may be brought in the circuit court in any circuit, and all said parties may be made defendants in one suit. Decrees may be entered and enforced against any one or more parties defendant without awaiting the final determination of the cause against other parties. The court where said cause is pending may make such orders and decrees, and issue such process as it shall deem necessary to bring in new parties, or the representatives of parties deceased, or to carry into effect the purposes of this act. On filing the bill, writs of subpoena may be issued by said court against any parties defendant, which writ shall run into any district, and shall be served, as other like process, by the marshal of such district."
Following this, and constituting a part of the same section, are certain provisions for the future government of the railroad company and its officers, to-wit that its books and correspondence shall at all times be open to inspection by the Secretary of the Treasury; that no dividend shall be made but from actual net earnings, and no new stock issued or mortgages created without consent of Congress, and punishing directors who shall violate these provisions. Also enacting that the corporation shall not be subject to the bankrupt law, and shall be subject to a mandamus to compel it to operate its road, as required by law.
A previous section directs the Secretary of the Treasury to withhold from every railroad company which has failed to pay the interest on bonds advanced to it by the government, all payments on account of freights or transportation over such roads, to the amount of such interest paid by the United States, and also the five percent of the net earning of the roads due and unapplied as provided by law, and it authorized the companies who might wish to contest the right to withhold these payments to bring suit against the United States in the Court of Claims for the money so withheld.
The Attorney General, pursuant to said fourth section, filed chanroblesvirtualawlibrary
a bill in equity in the Circuit Court of the United States for the District of Connecticut against the Union Pacific Railroad Company, the Wyoming Coal Company, the Credit Mobilier Company, and some one hundred and fifty individual defendants.
The bill, after reciting certain provisions of the Acts of July 1, 1862, 12 Stat. 480, and July 2, 1864, 13 id. 356, and other acts amendatory thereof, in relation to the Union Pacific Railroad Company, and alleging that the company was organized in October, 1863, and its road opened in 1869; that a board appointed under the joint resolution of April 10, 1869, reported deficiencies of construction, requiring an expenditure of $1,586,100; that the United States issued to the company bonds to the amount of $27,236,512, which, with the interest, after deducting one-half the compensation for services, made its aggregate liability, Jan. 1, 1873, $33,435,221.77, and that under the mortgage it executed Nov. 1, 1865, to secure the payment of its first mortgage bonds, it has issued and disposed of them to the amount of $27,237,000; charges that, April 16, 1867, it executed a mortgage to secure the payment of its so-called land grant bonds, providing for the application of the proceeds of all sales of its land from time to time in the redemption of such bonds; that it has issued $10,400,000 of them, at seven percent interest, $8,811,000 of which remain outstanding and unpaid; that it intends to sell land and apply the proceeds to redeem them, to that extent impairing the security of the United States for the repayment of its bonds issued to the company; that the company, on Sept. 1, 1869, issued $10,000,000 of so-called income bonds, at ten percent interest, secured by an indenture pledging the net income for the interest, after paying that on the first mortgage bonds and land grant bonds; that it has also issued $2,500,000 of eight percent bonds, secured by mortgage on its bridge across the Missouri River; that for the redemption of the income bonds it intends to issue and put in the market eight percent sinking fund bonds for $16,000,000, secured by mortgage on the property of the company; that it has a floating debt of $2,000,000, and has issued certificates of stock amounting to $36,762,300; that, July 16, 1868, it entered into an agreement with Godfrey & Wardell, which was assigned, chanroblesvirtualawlibrary
April 1, 1869, to the Wyoming Coal and Mining Company, purporting, among other things, to lease the coal lands of the Union Pacific Railroad Company for fifteen years; that the stock in said coal company, with the exception of one-tenth thereof, is owned by stockholders and managers of the railroad company; that said contract is a fraudulent method of obtaining for them a monopoly of coal supplies and of the coal trade on the line of the road, and was made in contravention of sec. 3 of the act of 1862; that on Sept. 1, 1869, the railroad company made a contract with the Atlantic and Pacific Telegraph Company to transfer to the latter the entire line of telegraph and appurtenances constructed for the railroad company under the acts of Congress; that the managers of the two companies are in part or in whole the same; and that the arrangement is a fraudulent device to make for said managers illegal profits, and to deprive the United States of its lawful security and advantage from the telegraph line.
The bill sets forth an agreement with the Omaha Bridge Transfer Company, and charges that it is a fraudulent arrangement on the part of the managers and stockholders to transfer to themselves personally profits which equitably belong to the railroad company.
The bill then charges, among other things, that the cost of the road was less than one-half of the sum represented by the stock and other pretended outstanding liabilities; that the larger part of the stock and bonds was issued by certain defendants in the name of the company, to enrich themselves; that the greater portion of the stock was never paid for in cash, or in any other thing of equivalent value; that the company is insolvent; that the government bonds and a portion of the first mortgage bonds would have been sufficient to construct the road, without any expenditure from stock subscribed, or from land grant bonds, or from income bonds; and that the stock, if paid in cash or its equivalent, would have been sufficient with less than one-half of the government bonds to complete the road, without the issue of bonds by the company; that at its organization in 1863, $2,177,000 stock was subscribed, on which ten percent was paid; but no considerable chanroblesvirtualawlibrary
sum was afterward paid thereon, and no considerable amount of other subscriptions was ever made, except as part of the fraudulent transactions set forth; that at the organization of the company the practical management of its business was committed to the executive committee, whereof one of the defendants, Durant, then vice-president, was elected a member; that in August and September, 1864, he and his associates used the name of one H. M. Hoxie to disguise a contract made by them in the name of the company on one side, with themselves in the name of Hoxie on the other, to construct about two hundred and forty-six miles of the road between Omaha and the one hundredth meridian, at the price of $50,000 per mile, which was known to be in excess of a fair price therefor; that on Oct. 7, 1864, certain defendants, directors, and another, a stockholder, agreed with him to take large interests in this contract, with the design of becoming possessed of all the franchises and property of the company, and to use, manage, and dispose of the same for their private benefit; that in execution of said design they obtained, in November, 1864, control of the charter of the Credit Mobilier of America, a corporation of Pennsylvania, and on March 15, 1865, entered into a contract in writing to conduct its operations in connection with the railroad company, outside of its charter, at an agency in New York; that their intention was to substitute the Credit Mobilier as a contractor in the "Hoxie contract," and that on the same day they assigned to it the entire beneficial interest from the beginning in this contract, when the Credit Mobilier was organized to cooperate with the railroad company, defendant Durant being chosen its president; that they, in 1865 and 1866, purchased in the name of the Credit Mobilier, and had conveyed to it, large numbers of shares of stock of the railroad company, originally subscribed for in good faith at its organization; that they caused to be allotted among themselves, as stockholders in the Credit Mobilier, the shares of railroad stock purchased from the original subscribers, and also large numbers of other shares subscribed by, or in the name of, the Credit Mobilier, on which it was pretended that thirty percent had been paid, and also to be distributed among themselves a large amount of scrip procured by the Credit Mobilier from the railroad company in chanroblesvirtualawlibrary
pretended payment for construction under the "Hoxie contract," which scrip, instead of cash, they used in making pretended payments for the stock, certificates of which they procured to be issued to them severally by the officers of the railroad company.
It then states the division among certain defendants, in February, 1867, of one thousand two hundred and fifty first mortgage bonds ($1,250,000), which they had caused the railroad company, to issue and deliver to the Credit Mobilier, on pretense of payment for roadbuilding under the "Hoxie contract;" that in 1867, they procured transfers to the Credit Mobilier, with few exceptions, of all the outstanding original shares of stock of the railroad company; and that thenceforth they, the holders of all the stock of the Credit Mobilier, became also holders of substantially all the stock of the railroad company, and managed the same without regard to the rights or interests of the United States; that in December, 1867, they fraudulently distributed among themselves, as stockholders of the Credit Mobilier, in the way of dividends, sixteen thousand shares of Union Pacific railroad stock, issued to the credit Mobilier, as assignee of the "Hoxie contract," on account of fifty-eight miles of railroad west of the one hundredth meridian, already constructed and paid for by the railroad company, and charges that they were from the beginning, and throughout, interested in the whole of the profits of the "Hoxie contract," and that all the work thereunder was done, and all measurements thereof and settlements therefor were made, by them in the double capacity of representatives of the two companies.
It then recites the facts and objects of the so-called "Oakes Ames contract," and charges that after the completion of the road, under the "Hoxie contract," to the one hundredth meridian, in October, 1866, they, as managers of the railroad company, went on, constructed, and paid for, at the price of about $27,500 per mile, a section of about one hundred and thirty-eight miles of road west of the one hundredth meridian, which was completed October, 1867; that they then entered into a series of writings intended in effect to constitute a contract with themselves as stockholders of the Credit Mobilier, for constructing at excessive prices six hundred and sixty-seven chanroblesvirtualawlibrary
miles of road, beginning at the one hundredth meridian, and including the one hundred and thirty-eight miles already built and paid for at much lower rates; that the objects and effects of this transaction were to despoil the company of $3,000,000 of its stock and bonds, distributed among the defendants, under pretext of a contract to build a portion of its road already built and paid for, and to give them, under the disguise of a contract between parties in different interests, excessive prices for constructing other portions of the road, and to place the control of the company in seven trustees, and withhold its management and direction from the stockholders and directors; that the first three dividends under the "Oakes Ames contract" were received by the defendants named; that on June 3 and 7, 1868, all the trusts in the triplicate agreement (one of the writings connected with the "Oakes Ames contract") in favor of the stockholders of the Credit Mobilier, were directly declared in favor of defendants individually, who received the dividends personally, and not as stockholders of the Credit Mobilier; that thereafter defendants proceeded, as general copartners in form as well as in fact, with the seven trustees as their general managers, and that the last three dividends or allotments under the "Oakes Ames contract" were: July 3, 1868, $2,812,500, in first mortgage bonds; July 8, 1868, $1,125,000, in cash; Dec. 29, 1868, seventy-five thousand shares of stock at par value.
It then states the facts in regard to the pretended "Davis contract" in November, 1868, for the construction of about 125.23 miles of the road not embraced in the "Oakes Ames contract," which was assigned to the same persons for the same trusts as in the case of the "Oakes Ames contract;" and that the road to its western terminus was constructed by certain stockholders of the company, acting through the assignees, under cover of the "Davis contract."
After setting forth at large the dates and amounts of the several subscriptions which the defendants caused to be made to the stock of the railroad company by the Credit Mobilier, or to be assumed by it, as required by the "Hoxie contract," and the distribution of the stock among the defendants; also the dates and amounts of the subscription to the stock of the chanroblesvirtualawlibrary
company made by the trustees under the "Oakes Ames contract" and under the "Davis contract," and its distribution in like manner; that neither the Credit Mobilier nor the trustees ever paid for any portion of their stock, but the excessive contract prices for construction were set off against the subscriptions; that the accounts of the railroad company under the three contracts are unsettled, with large balances claimed against the company; that defendants caused large amounts of money belonging to the company to be expended for unlawful purposes.
Certain alleged fraudulent transactions on the part of one of the defendants, a director, in relation to the sale of bonds, are set forth, in respect of which it is charged he is accountable to the company, which wrongfully refuses to compel him to account.
The bill then charges that the defendants made further divisions and distributions among themselves of the assets of the company, and engaged in other unlawful transactions and dealings with respect to its property, which the complainant is unable to set forth in detail, but which amount to about $17,000,000 in excess of the amounts particularly set forth, and that large amounts of the stock and bonds divided among defendants are still held by them or some of them.
The present condition of the company, with regard to its stock, finances, value of its road, and management, is then set forth, and it is averred to be doubtful whether the road would sell under the first mortgage for more than enough to pay those bonds, and that if the land grant mortgage is allowed to be administered according to its terms, it will exhaust the security of the United States in the lands; that the company had no right to issue first mortgage bonds or land grant bonds or income bonds for distribution among stockholders as profits or for sale to them below their value, and such bonds to the extent so issued and distributed or sold are invalid, unless in the hands of bona fide purchasers without notice; that it has no right to exhaust the security of the United States by paying either principal or interest of land grant bonds or income bonds; that the so-called trustees and assignees, under the "Oakes Ames contract" and "Davis contract," are jointly and severally chanroblesvirtualawlibrary
responsible for all the stock and bonds issued to them; that the grants to the company in the acts of Congress were grants in aid of a public work of the United States, and are held in trust, to be applied to a public use; and that the property mentioned is also a trust for the payment to the United States of the subsidy bonds; that the present management of the company is in adverse interest to the United States; that the latter is entitled, as further security for its debt, and for the public objects provided for by Congress, to have declared that the management of the company should be subject only to the votes of the stockholders holding full-paid stock; to have the franchises, powers, and means so administered that unreasonable and unnecessary liabilities should not be created, and to have an account of reasonable and necessary expenditures and liabilities as a basis for regulating rates of fare under the eighteenth section of the act of 1862, and for determining the basis for estimating the five percent of net profits; to have the franchises, powers, and property so administered as to secure the United States for the repayment of its bonds and promote the public objects of the corporation; to have maintained by the corporation, as a security for those objects, the character and credit which would ensue from a lawful administration of the franchises, powers, and means granted; and to have the lien of the United States remain a first lien, except as to the priority given to the first mortgage bonds within the limits and for the purposes expressed by Congress; that the company neglects and refuses to state or render an account of cost on a lawful or just basis; that the stock of the Credit Mobilier, and the stock, bonds, and cash of the railroad company, held by and allotted, distributed, and divided among several of the defendants, were received in trust for others, whom complainant asks leave to make parties defendant when discovered.
The relief prayed for is, that the grants by the United States be declared to be held by the company for a public use, &c., and the property granted by the United States, &c., to be a trust fund to secure the bonds lent by them, &c.; that the construction contracts, and the land grant and income mortgages be declared void; that an account be taken of the actual cost, &c., of the Union Pacific Railroad and Telegraph; the United chanroblesvirtualawlibrary
states bonds issued, &c.; the stock subscribed, sold, issued, &c.; and of the lands, &c., obtained from the United States; that persons unlawfully holding stock or other property of the company restore it, &c.
A large number of the defendants resided out of the District and state of Connecticut. Subpoenas directed to them were issued to the marshals of the several districts in which they respectively resided, and service thereof was there duly made upon them. There were three classes:
1. Those sued in their own right;
2. Those sued as executors of the estates of deceased persons domiciled at the time of their death out of said state; and
3. Corporations organized under laws of some other state.
The railroad company demurred, alleging
"that the complainant hath not, by its said bill, made such a case as entitles it in a court of equity to any discovery or relief from or against this defendant touching the matters contained in the said bill, or any of such matters."
The defendants who were served with process is the district of Connecticut likewise appeared, and filed demurrers to the bill for want of equity and for multifariousness.
A large number of those defendants who were served with process out of the district of Connecticut appeared de bene esse, and filed motions to dismiss the bill as to them, respectively, stating as the grounds of their motion that by the averments of the bill they were respectively nonresidents of Connecticut, and that the process showed that it was served upon them out of the district.
Some of the defendants residing out of Connecticut demurred to the bill for want of equity and for multifariousness; others who were nonresidents of Connecticut filed answers with clauses of demurrer.
The case was argued upon the bill and the pleadings, and the motions to dismiss. The demurrers were sustained, and an order entered overruling the motions.
The several nonresident defendants whose motions to dismiss were thus overruled, thereupon, under a protestando, demurred for want of equity and for multifariousness.
Several defendants who had answered withdrew their answers chanroblesvirtualawlibrary
after the decision of the court on the demurrers, and demurred.
At the April Term, 1874, the court below entered a general and final decree upon the bill, demurrers, and answers so filed, dismissing the bill as to all the defendants duly served with process. Whereupon the United States appealed to this Court and here assigns the following errors:
The court below erred:
1. In sustaining the demurrers.
2. In dismissing the bill as to certain defendants who had answered.
3. In dismissing it as to parties who had neither pleaded, answered, nor demurred. chanroblesvirtualawlibrary
MR. JUSTICE MILLER delivered the opinion of the Court.
The Union Pacific Railroad Company brought the suit provided for in the second section of the Act of March 3, 1873, 17 Stat. 508. The case was argued before us on appeal from the judgment of the Court of Claims. All the questions which concern the obligations of the company to pay money to the government, either by way of freight or government transportation, or for the five percent on the net income of the road, were raised in that suit.
The Attorney General, in pursuance of the directions of the fourth section of the act, filed this bill in equity. Many of the defendants demurred to the bill generally, and at the head of this class is the railroad company.
The circuit court sustained this demurrer and dismissed the bill, and the case is before us on appeal from that decree.
No suggestion is made either here or in the court below of any defect in the bill which can be remedied by amendment. The bill is very elaborate, very ably drawn, and no doubt presents in a very intelligible manner every thing which the facts known or suspected justified the pleader in placing in any bill which can be framed under the special statute authorizing the suit.
The question for decision is therefore squarely presented to us, as it was to the circuit court, whether, by the aid of that statute, and within the limits of the power it intended to confer, this bill can be sustained under the general principles of equity jurisprudence.
We say by the aid of that statute, because it is conceded on all sides that without it the bill cannot stand. The service of compulsory process on a party residing without the limits of the district of Connecticut who is not found within them, is expressly forbidden by the general statute defining the jurisdiction of the circuit courts. Parties and subjects of complaint having no proper connection with each other are grouped chanroblesvirtualawlibrary
together in this bill, and they, by the accepted canons of equity, pleading, render it multifarious. This, and other matters of like character, which are proper causes of demurrer, are fatal to it, unless the difficulty be cured by the statute.
When we recur to its provisions, which are said to authorize these and other departures from the general rules of equity procedure, counsel for the appellees insist that it is unconstitutional not only in the particulars just alluded to, but that it is absolutely void as affecting the substantial rights of defendants in regard to matters beyond the power of Congress.
If this be true, we need inquire no further into the frame of the bill, and we therefore proceed, on the threshold, to consider the objections to the validity of the statute.
The Constitution declares, Art. 3, Sec. 2, that the judicial power shall extend to all cases in law and equity arising under the Constitution, the laws of the United States, and the treaties made, or which shall be made, under their authority, and to controversies to which the United States shall be a party.
The matters in regard to which the statute authorizes a suit to be brought are very largely those arising under the act which chartered the Union Pacific Railroad Company, conferred on it certain rights and benefits, and imposed on it certain obligations. It is in reference to these rights and obligations that the suit is to be brought. It is also to be brought by the United States, which is therefore necessarily the party complainant. Whether, therefore, this suit is authorized by the statute or not, it is very clear that the general subject on which Congress legislated is within the judicial power as defined by the Constitution.
The same article declares in Sec. 1 that this "power shall be vested in one supreme court and in such inferior courts as the Congress may from time to time ordain."
The discretion, therefore, of Congress as to the number, the character, the territorial limits of the courts among which it shall distribute this judicial power, is unrestricted except as to the Supreme Court. On that Court the same article of the Constitution confers a very limited original jurisdiction -- namely "in all cases affecting ambassadors, other public ministers, and consuls, and cases in which a state shall be a party" -- and an chanroblesvirtualawlibrary
appellate jurisdiction in all the other cases to which this judicial power extends, with such exceptions and under such regulations as the Congress shall make.
There is in this same section a limitation as to the place of trial of all crimes, which it declares shall (except in cases of impeachment) be held in the state where they shall have been committed, if committed within any state.
Article 6 of the amendments also provides that, in all criminal prosecutions,
"the accused shall enjoy the right to a speedy and public trial by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law."
These provisions, which relate solely to the place of the trial for criminal offences, do not affect the general proposition. We say, therefore, that, with the exception of the Supreme Court, the authority of Congress, in creating courts and conferring on them all or much or little of the judicial power of the United States, is unlimited by the Constitution.
Congress has, under this authority, created the district courts, the circuit courts, and the Court of Claims, and vested each of them with a defined portion of the judicial power found in the Constitution. It has also regulated the appellate jurisdiction of the Supreme Court.
The jurisdiction of the Supreme Court and the Court of Claims is not confined by geographical boundaries. Each of them, having by the law of its organization jurisdiction of the subject matter of a suit and of the parties thereto, can, sitting at Washington, exercise its power by appropriate process, served anywhere within the limits of the territory over which the federal government exercises dominion.
It would have been competent for Congress to organize a judicial system analogous to that of England and of some of the states of the Union, and confer all original jurisdiction on a court or courts which should possess the judicial power with which that body thought proper, within the Constitution, to invest them, with authority to exercise that jurisdiction throughout the limits of the federal government. This has been done in reference to the Court of Claims. It has now jurisdiction only of cases in which the United States is defendant. It is just as chanroblesvirtualawlibrary
clearly within the power of Congress to give it exclusive jurisdiction of all actions in which the United States is plaintiff. Such an extension of its jurisdiction would include all that the statute under consideration has granted to the circuit court.
It is true that Congress has declared that no person shall be sued in a circuit court of the United States who does not reside within the district for which the court was established or who is not found there. But a citizen residing in Oregon may be sued in Maine if found there so that process can be served on him. There is therefore nothing in the Constitution which forbids Congress to enact that, as to a class of cases or a case of special character, a circuit court -- any circuit court -- in which the suit may be brought, shall, by process served anywhere in the United States, have the power to bring before it all the parties necessary to its decision.
Whether parties shall be compelled to answer in a court of the United States wherever they may be served, or shall only be bound to appear when found within the district where the suit has been brought, is merely a matter of legislative discretion, which ought to be governed by considerations of conveyience, expense, &c., but which, when exercised by Congress, is controlling on the courts.
So also, the doctrine of multifariousness, whether relating to improperly combining persons or grievances in the bill, it is simply a rule of pleading adopted by courts of equity. It has been found convenient in the administration of justice, and promotive of that end, that parties who have no proper connection with each other shall not be compelled to litigate together in the same suit, and that matters wholly distinct from and having no relation to each other, and requiring defenses equally unconnected, shall not be alleged and determined in one suit. The rule itself, however, is a very accommodating one, and by no means inflexible. Such as it is, however, it may be modified, limited, and controlled by the same power which creates the court and confers its jurisdiction. The Constitution imposes no restraint in this respect upon the power of Congress. Set. 921 of the Revised Statutes, which has been the law for fifty years, declares that when causes of like nature or relating to the same question are pending, the court may consolidate chanroblesvirtualawlibrary
them, or make such other orders as are necessary to avoid costs and delay. It is everyday practice, under this rule, to do what the statute authorizes to be done in the case before us.
But it is argued that the statute confers a special jurisdiction to try a single case, and is intended to grant the complainant new and substantial rights, at the expense and by a corresponding invasion of those of the defendants.
It does not create a new or special tribunal. Any circuit court of the United States where the bill might be filed was, by the act, invested with the jurisdiction to try the case. Nor was new power conferred on the court beyond those which we have regarded as affecting the mode of procedure. It seems to us that any circuit court, sitting as a court of equity, which could by its process have lawfully obtained jurisdiction of the parties, and considered in one suit all the matters mentioned in the statute, could have done this before the act as well as afterwards.
But if this be otherwise, we are aware of no constitutional objection to the power of the legislative body to confer on an existing court a special jurisdiction to try a specific matter which in its nature is of judicial cognizance.
The principal defendant in this suit, the one around which all the contest is ranged, is a corporation created by an act which reserved the right of Congress to repeal or modify the charter. To this corporation Congress made a loan of $27,000,000, and a donation of lands of a value probably equal to the loan.
The statute books of the states are full of acts directing the law officers to proceed against corporations, such as banks, insurance companies, and others, in order to have a decree declaring their charters forfeited. Special statutes are also common ordering suits against such corporations, when they have become insolvent, to wind up their business affairs and to distribute their assets and prescribing with minuteness the course of procedure which shall be followed and the court in which the suit shall be brought.
This Court said in the case of Bank of Columbia v. Okely, 4 Wheat. 235, in speaking of a summary proceeding given by the charter of that bank for the collection of its debts:
"It is the remedy, and not the right, and as such we have no doubt
of its being subject to the will of Congress. The forms of administering justice and the duties and powers of courts as incident to the exercise of a branch of sovereign power must ever be subject to legislative will, and the power over them is unalienable, so as to bind subsequent legislatures."
And in Young v. Bank of Alexandria, 4 Cranch 397, Mr. Chief Justice Marshall says:
"There is a difference between those rights on which the validity of the transactions of the corporation depends, which must adhere to those transactions everywhere, and those peculiar remedies which may be bestowed on it. The first are of general obligation; the last, from their nature, can only be exercised in those courts which the power making the grant can regulate."
See also Commonwealth v. The Delaware & Hudson Canal Co., 43 Pa.St. 227; State of Maryland v. Northern Central Railroad Co., 18 Md. 193; Colby v. Dennis, 36 Me. 1; Gowan v. Penobscot Railroad Co., 44 id. 140.
Statutes of this character, if not so common as to be called ordinary legislation, are yet frequent enough to justify us in saying that they are well recognized acts of legislative power uniformly sustained by the courts.
It may be said, and probably with truth, that such statutes, when they have been held to be valid by the courts, do not infringe the substantial rights of property or of contract of the parties affected, but are intended to supply defects of power in the courts, or to give them improved methods of procedure in dealing with existing rights.
This leads to an inquiry indispensable to a sound decision of the case before us -- namely does this statute, by its true construction, do any thing more than this?
We might rest this branch of the case upon the concession of counsel for appellants, made both in their brief and in the oral argument, but we proceed to examine the proposition for ourselves.
The first suggestion of the legal mind on this inquiry is, that it will not be presumed, unless the language of the statute imperatively requires it, that Congress, by a retrospective law, intended to create new rights in one party to the suit at the expense, or by an invasion of the rights, of other parties, or, chanroblesvirtualawlibrary
where no right of action founded on past transactions existed, that Congress intended to create it.
The United States was to be sole complainant in a suit in equity, and though there may be other defendants, the Union Pacific Railroad Company is the only one named in the act. The relief to be granted is the collection and payment of moneys and the restoration of property, or its value, "either to said railroad corporation or to the United States, whichever shall in equity be entitled thereto." The decree, therefore, can only be made on the ground of some relief to which the United States or the company is entitled by the general principles of equity jurisprudence. It is no objection to granting such relief that the company is a defendant, for by the flexibility of chancery practice a person whose interests in the subject of litigation are on the same side with the complainant may be made a defendant. The corporation could also in such a suit file a cross-bill against the complainant, and, by virtue of this statute, against any co-defendant of whom it could rightfully claim the relief which the statute authorizes.
But whatever be the relief asked, it could only, by the express terms of the act, be granted to that party who was in equity thereunto entitled. It is very plain that there was here no new right established. No new cause of equitable relief. No new rule for determining what were the rights of the parties. That was to be decided by the principles of equity, not new principles of equity, but the existing principles of equitable jurisprudence.
But the statute very specifically defines the matters which may be embraced in this suit as foundations for relief, and classifies them under a very few heads, by declaring who besides the corporation may be sued. They are persons who have received:
1. Capital stock of the company without paying for it in money;
2. Other property of the company unlawfully and contrary to equity;
3. As profits or proceeds of contracts for construction, money or other property which ought in equity to belong to the corporation; or, chanroblesvirtualawlibrary
4. Persons who have wrongfully received from the United States bonds, moneys, or lands which ought in equity to be accounted for, or paid to it or to the company.
There is in this description of the class of persons who may be sued an implied condition that they are already subject to be sued for causes which render them equitably liable. The relief to be granted is also such as to equity belongs.
We are of opinion, therefore, that the act in question was intended not to change the substantial rights of the parties to the suit which it authorized, but to provide a specific method of procedure, which, by removing restrictions on the jurisdiction, process, and pleading in ordinary cases, would give a larger scope for the action of the court and a more economical and efficient remedy than before existed, and that it is a valid and constitutional exercise of legislative power.
If in passing on its constitutional validity we have given the subject much consideration, it will be seen that we have at the same time been compelled to give a construction to its language which will go far to enable us to decide whether it authorized the bill that was filed, for we are of opinion that nothing other than what is found in the act, be express language or by fair implication, can be introduced into this suit as a foundation for the action of the court.
The Attorney General is peremptorily ordered to bring the proceeding. The filing of the bill and its subject matter are both removed from the domain of discretion. For the purposes of this suit, the court wherein it is brought is vested with powers and aided by modes of procedure which it can apply to no other. Parties are subjected to a jurisdiction by process to which the same court cannot subject them in any other suit, and they are required to litigate their rights in a suit common to them and others with whom they could not be joined under the rules governing such matter in any other case.
We are bound, therefore, to presume that Congress did not intend that this special remedy should include anything beyond the matters which we have seen were so carefully and so specifically mentioned as grounds of relief.
Other provisions of the act show that Congress had, or believed that it had, other grievances against this company for chanroblesvirtualawlibrary
which other remedies are furnished. Any director or officer who violates certain provisions is to be punished criminally. By mandamus in the proper court, but not in this suit, the company is to be compelled to operate its road as required by law. The second section directs the Secretary of the Treasury to withhold payment for transportation for the United States until what is due for interest paid shall be satisfied, and the matter, if disputed, is to be settled by suit brought by the company in the Court of Claims.
This consideration makes it clear that any bill brought by the Attorney General under the fourth section of the act of 1873 must be limited by the provisions of that act, both as to the grievances on which it counts and the relief which it seeks.
With these views of the statute under which this bill is brought and by which its sufficiency on demurrer must be tested, we approach the examination of the bill itself.
It consists of forty-seven pages of printed matter divided into forty-eight separate paragraphs, each of which undertakes to set forth a distinct ground of relief or points out the relief which is sought.
It will therefore be impossible to give in this opinion the results of the separate examination of each of these paragraphs; nor is this at all necessary. A consideration of the principal grounds of relief, grouped as they can easily be under a few heads, will indicate the views which we believe to be sufficient to decide the whole.
We will consider together the allegations of the bill against the Wyoming Coal Company, the Credit Mobilier Company, the Pullman Palace Car Company, and the three construction contracts of H. M. Hoxie, Oakes Ames, and James W. Davis. These are by far the most important as regards the sum involved as well as the principles which must decide the case.
The substance of the charge is that the board of directors of the railroad company made contracts for building the road, and for running the Pullman cars on it, and for mining its coal lands and purchasing the coal so mined, which were a fraud upon the company; that these contracts allowed exorbitant prices for work done and material furnished; that otherwise chanroblesvirtualawlibrary
they were very advantageous to the other contracting parties and injurious to the company; that in all of them, the directors or a controlling majority of them were interested adversely to the company; that in fact they were, in the name of the company, making contracts with themselves as the other party. In short, it may be taken for granted that if these allegations are true, as they must be held to be on demurrer, frauds more unmitigated than those set forth in this bill were never perpetrated on a helpless corporation by its managing directors.
That these frauds are such as a court of equity would relieve against in a proper case may be seen in the opinion of the Circuit Court for the Nebraska District in a suit growing out of the Wyoming Coal Company's contract. Wardell v. Union Pacific Railroad Co., 4 Dill. 330.
The first inquiry arising on these facts is what relief can be given, and who is entitled to it?
The obvious reply to the first branch of the question is that the parties who made this contract and received the pecuniary benefit of it can at law be made responsible in damages or held in equity to compensation for the loss suffered. There would be no difficulty in adjudging in a proper suit that such contracts were void and then ordering an accounting on the basis of a fair compensation for what had been done in the way of construction, building, opening mines, furnishing coal, &c., and what had been received for such work and materials. The difficulty is to whom shall this money be paid when recovered, and can it be recovered in this suit? If the railroad company, falling into purer hands, had brought such a suit, the bill might be sustained.
But the company is not the complainant here. It seeks no relief for these wrongs. It may have been the design of the law to give the corporation an opportunity by a cross-bill to obtain relief against the other defendants, who are charged with these frauds. Such a bill, if not strictly within the rule of equity procedure, which only allows a defendant to file a cross-bill against a complainant, might be sustained under the provisions of this statute. But the company files no such bill. It desires no such relief. On the contrary, it resists by demurrer any further proceeding in the matter. Can it be compelled in chanroblesvirtualawlibrary
this mode to prosecute such a suit? So long as it exists in the possession and unrestrained exercise of all its corporate powers, its board of directors, unless under judicial prohibition or compulsion, is vested with the sole authority to decide whether it will assert its right of action for a supposed injury, or will condone it.
The circumstances of the alleged fraud, the probability of success in the suit, the extent of the injury, the amount which may be recovered, the expense of the proceeding, and the danger of injury to the company itself, are all matters which address themselves to them as grounds for the exercise of the discretion of the directors. They have decided to have nothing to do with it. How, then, can a decree be rendered in their favor or relief be given them which is not asked? With what hope of advantage can the court enter upon the inquiry touching the frauds alleged and the amount of the injury sustained when the party aggrieved refuses to proceed?
On the other hand, if the court does proceed, shall the decrees, if rendered against the defendants, be in favor of the company? If so, what good results would follow? Since the company resists any decree in its favor now, it would probably enter satisfaction or releases of the decrees as fast as they are rendered. If it did not do this, how would the moneys, if collected and paid into its treasury, be applied? It is alleged to be insolvent and in debt, but except the claim of the government, which will be presently considered, there is no allegation showing to what use the court can decree the application of these moneys. They must therefore go into the treasury of the company, to become subject to the control of its directors, who are now resisting this action. Not only this, but it is obvious that the amount recovered would come mainly out of the same men who now as directors or as stockholders would control the fund, and would probably order its redistribution to the parties who paid it, or give receipts or releases in advance.
The truth is that the persons who were actually defrauded by these transactions, if any such there be, were the few bona fide stockholders who took no part in them and had no interest in the fraudulent contracts. But it is not alleged that chanroblesvirtualawlibrary
there are such. If there be, they are not made parties to this bill, nor does it provide any relief for them. Yet a moment's consideration will show that they alone -- to say nothing of the complainant for the present -- suffered any legal injury or are entitled to any relief. As to the directors and stockholders who took part in these fraudulent contracts, they are participes criminis and can have no relief. This class probably included nine-tenths in value of the shareholders. It is against all the principles of jurisprudence, whether at law or in equity, to permit them to litigate this fraud among themselves. If the innocent stockholders are not parties here, we have already seen that, with the power of the directors over the money recovered, they would get no relief by the suit.
The statute, however, did not permit them to be made parties. Their interest is not the same as that of the company. The statute provides only for the collection and payments of money, or the restoration of property, or its value, to the railroad company, or to the United States, as either of them may be in equity held entitled thereto. This does not embrace what a defrauded stockholder may be entitled to in his individual right.
We are of opinion, therefore, that no decree can be rendered in favor of the railroad company on account of these transactions or for the value of the stock not paid for by those who received it. Although issuing it without payment may have been in violation of law, and an implied contract may exist on which the company could compel payment, the United States cannot in this suit recover it, and the company refuses to assert its right thereto.
The same principle applies to the arrangements made by the railroad company with the Atlantic and Pacific Telegraph Company and with the Omaha Bridge Company which are here assailed. These are existing contracts under which the business of the principal corporation with the others is conducted and with which it is satisfied. It asks no rescission, and is content to comply with them. It is not within the power of the Court to annul them, or to make new ones for the parties.
No decree can therefore be rendered on this bill in favor of chanroblesvirtualawlibrary
the Union Pacific Railroad Company, because it is not the complainant, but a defendant, and, asking no affirmative relief or any other, it resists being brought into this suit and refuses to plead in it any further than compelled by the court.
If there is any relief to which the United States is entitled against the company, the latter, being a defendant, must remain and answer to the claim. But it is conformable to the principles neither of the common law nor of equity to compel it to prosecute a suit as complainant which it disapproves, or to establish a claim which it denies, or take a decree where it asserts nothing to be due.
We must now inquire whether the bill makes a case in which the United States, the complainant, is entitled under the terms of the statute to relief.
The United States is not, and never has been, a stockholder in this company. It is a creditor.
The government sustains two distinct relations to the railroad company, and, in considering her rights under this statute, it is important to keep them separate. The company is organized under, and owes its corporate existence to, an act of Congress. The government has all the rights which belong to any other government as a sovereign and legislative power over this creation of that power. That this power should not be too much crippled by the doctrine that a charter is a contract, the eighteenth section declares that Congress may at any time, having due regard for the rights of the companies named therein, add to, alter, amend, or repeal the act. The power of Congress therefore in its sovereign and legislative capacity over this corporation is very great.
The government, however, holds another very important relation -- namely that of contract. It has loaned to the company $27,000,000 and granted to it on certain terms many million acres of land. The government is paying all the time the semiannual interest on its own bonds loaned to the company. The company is bound by contract to pay them, principal and interest, at their maturity. The government by the contract has a lien on the road and its appurtenances to secure this payment. The company is also bound by the contract to perform for the government all the transportation and telegraphing chanroblesvirtualawlibrary
that may be required of it, and to keep its road and line always in order and readiness to render these services. It may have other contract obligations to the government not here mentioned, but these are all that are important to our inquiry. The government has delivered its bonds to the company. The company has built the road, owns it, and operates it. Does the bill allege anything which, growing out of this contract, entitles the United States to relief?
One of its allegations is that there is due to the United States and unpaid, on account of interest on the bonds, the sum of $6,198,700, and that the balance of interest for which the company is liable is rapidly accumulating. It was filed in May, 1873, and this Court, at its October Term, 1875, decided, in United States v. Union Pacific Railroad Co., 91 U. S. 72, that the company was not bound to pay this interest until the bonds mature except so far as the act made in that regard two special provisions. One was that half the compensation for transportation performed for the United States should, as provided by the subsequent amended charter of 1864, be withheld by the government for that purpose; the other was that after the completion of the road, five percent of its net earnings were to be applied annually to extinguish the debt to the United States.
The second section of the act of 1873, as we have seen, provides for the first of these cases, and as to the other, the government has brought suits, which are now ripe for decision in this Court.
There is therefore no ground for relief on account of money due by the company to the United States.
It is said that the latter, as a creditor whose lien is endangered by the extravagance of the company, and the misappropriation of its means, has the right to come into equity for preventive relief to secure the collection of the sums of which the company has been defrauded.
The government made its contract and bargained for its security. It had a first lien on the road by the original act of incorporation, which would have made its loan safe in any event. But in its anxiety to secure the rapid prosecution of the work -- an end more important to it than to anyone else, chanroblesvirtualawlibrary
and still more important to the people whom it represented -- it postponed this lien to another mortgage, that the means might be raised to complete the road. It has the second lien, however, and the right to appropriate one-half of he price it annually pays for the use of the road -- a very large sum -- and five percent of the net earnings of the road, which may become much larger, to the extinction of this debt. It is not wholly unreasonable to suggest that the amount which the company may be compelled to pay annually under these two provisions will be sufficient as a sinking fund to pay the entire debt, principal and interest before it falls due.
It is difficult to see any right which as a creditor the government has to interfere between the corporation and those with whom it deals. It has been careful to protect its interests in making the contract, and it has the right which that contract gives. What more can it ask? It is true that there is an allegation of insolvency. But in what that insolvency consists is not clearly shown. It has a floating debt. What railroad company has not? It is said it does not pay the interest on its debt to the United States. We have shown that it owes the United States no money that is due. There is no allegation that it does not pay the interest on all its own funded debt. The allegation as it is would be wholly insufficient to place the corporation in bankruptcy, even if that was not forbidden by the act under which this bill is drawn. The facts stated are utterly insufficient to support a creditor's bill by the United States. That requires a judgment at law, an execution issued, and a return of nulla bona. Here there is no judgment, no money due, and no sufficient allegation of insolvency.
We are unable, therefore, to see any relief to which under this bill the United States, on account of its contract relations with the company, would be entitled in a court of equity.
If we look at the statute, this is still clearer. The moneys due for unpaid stock, or for property of the company unlawfully received, or as profits in fraudulent contracts for construction, are all described in the act as belonging to the corporation, and to be restored to it. Those who may have wrongfully and unlawfully received from the United States bonds, moneys, or lands which ought in equity to be accounted for and paid to it or to chanroblesvirtualawlibrary
the company, may be compelled to pay the moneys or restore the property to the party, which shall in equity be entitled thereto.
But in this connection, no one but the company has received property, lands, or moneys from the United States. There is no allegation that the moneys were not used to build the road. If there was, there is nothing now due, and the company is performing all its obligations to the government under the contract.
The bill establishes no right in the government, under this or any other clause of the act, to recover in its own right any property or money from the company.
In its sovereign or legislative relation to the company, the United States has powers the extent of which it is unnecessary to define in this case. The two sections of the act under one of which this suit was instituted are instances of the exercise of these powers, and they affect the interest of the company in important particulars. Congress might also have directed the Attorney General, either as part of this proceeding or as an independent one, to ask the court to declare the franchises of the company forfeited. It might have ordered a bill to inquire if the company was insolvent, and if so, to wind up its affairs and distribute its assets. In short, there are many modes in which the legislature could have called into operation all the judicial powers known to the law. But it has not done so, and that is the constantly recurring answer to this bill. It provided in the statute for a mode of securing a full inquiry into the affairs of the company by enacting that the Secretary of the Treasury should have free access to all its books and correspondence -- a mode of obtaining information far more effective than a bill of discovery. The statute therefore did not authorize a bill of discovery. Not wanting the company declared bankrupt and closed out by a decree of the court, Congress enacted that it should not be subject to the bankrupt law, as other corporations were, but should continue to exercise its franchises and perform its duties, and that it might be compelled to do this by a writ of mandamus from the proper court. It limited the relief to be granted under this act, therefore, both by the terms in which it was granted and by other provisions, to the recovery of a moneyed decree or a restoration chanroblesvirtualawlibrary
of specific property to which the United States or the company was by law entitled.
It is useless, therefore, to inquire what might have been done by some other legislation, or what, independently of legislation, are the rights of the government, for we can only act on such as are recognized by the act under which the circuit court proceeded.
This brings us to the consideration of the last ground of relief which we propose to notice and which, with the alleged right to a decree in favor of the company against the individuals and corporations who have defrauded it, is most earnestly insisted on here.
The proposition is that the United States, as the grantor of the franchises of the company, the author of its charter, and the donor of lands, rights, and privileges of immense value, and as parens patriae, is a trustee, invested with power to enforce the proper use of the property and franchises granted for the benefit of the public.
The legislative power of Congress over this subject has already been considered, and need not be further alluded to. The trust here relied on is one which is supposed to grow out of the relations of the corporation to the government, which, without any aid from legislation, are cognizable in the ordinary courts of equity.
It must be confessed that, with every desire to find some clear and well defined statement of the foundation for relief under this head of jurisdiction, and after a very careful examination of the authorities cited, the nature of this claim of right remains exceedingly vague. Nearly all the cases -- we may almost venture to say all of them -- fall under two heads:
1. Where municipal, charitable, religious, or eleemosynary corporations, public in their character, had abused their franchises, perverted the purpose of their organization, or misappropriated their funds, and as they, from the nature of their corporate functions, were more or less under government supervision, the Attorney General proceeded against them to obtain correction of the abuse, or,
2. Where private corporations, chartered for definite and limited purposes, had exceeded their powers, and were restrained chanroblesvirtualawlibrary
or enjoined in the same manner from the further violation of the limitation to which their powers were subject.
The doctrine in this respect is well condensed in the opinion in People v. Ingersoll, recently decided by the Court of Appeals of New York. 58 N.Y. 1. "If," said the court,
"the property of a corporation be illegally interfered with by corporation officers and agents or others, the remedy is by action at the suit of the corporation, and not of the Attorney General. Decisions are cited from the reports of this country and of this state, entitled to consideration and respect, affirming to some extent the doctrine of the English courts and applying it to like cases as they have arisen here. But in none has the doctrine been extended beyond the principles of the English cases, and aside from the jurisdiction of courts of equity over trusts of property for public uses and over the trustees, either corporate or official, the courts have only interfered at the instance of the Attorney General to prevent and prohibit some official wrong by municipal corporations or public officers, and the exercise of usurped or the abuse of actual powers."
To bring the present case within the rule governing the exercise of the equity powers of the court, it is strongly urged that the company belongs to the class first described.
The duties imposed upon it by the law of its creation, the loan of money and the donation of lands made to it by the United States, its obligation to carry for the government, and the great purpose of Congress in opening a highway for public use and the postal service between the widely separated states of the Union, are relied on as establishing this proposition.
But in answer to this it must be said that after all, it is but a railroad company, with the ordinary powers of such corporations. Under its contract with the government, the latter has taken good care of itself, and its rights may be judicially enforced without the aid of this trust relation. They may be aided by the general legislative powers of Congress, and by those reserved in the charter, which we have specifically quoted.
The statute which conferred the benefits on this company, the loan of money, the grant of lands, and the right of way, did the same for other corporations already in existence under state or territorial charters. Has the United States the right chanroblesvirtualawlibrary
to assert a trust in the federal government which would authorize a suit like this by the Attorney General against the Kansas Pacific Railway Company, the Central Pacific Railroad Company, and other companies in a similar position?
If the United States is a trustee, there must be cestuis que trust. There cannot be the one without the other, and the trustee cannot be a trustee for himself alone. A trust does not exist when the legal right and the use are in the same party, and there are no ulterior trusts.
Who are the cestuis que trust for whose benefit this suit is brought? If they be the defrauded stockholders, we have already shown that they are capable of asserting their own rights, that no provision is made for securing them in this suit should it be successful, and that the statute indicates no such purpose.
If the trust concerned relates to the rights of the public in the use of the road, no wrong is alleged capable of redress in this suit or which requires such a suit for redress.
Railroad Company v. Peniston, 18 Wall. 5, shows that the company is not a mere creature of the United States, but that while it owes duties to the government the performance of which may, in a proper case, be enforced, it is still a private corporation, the same as other railroad companies, and, like them, subject to the laws of taxation and the other laws of the states in which the road lies so far as they do not destroy its usefulness as an instrument for government purposes.
We are not prepared to say that there are no trusts which the United States may not enforce in a court of equity against this company. When such a trust is shown, it will be time enough to recognize it. But we are of opinion that there is none set forth in this bill which, under the statute authorizing the present suit, can be enforced in the circuit court.
There are many matters alleged in the bill in this case, and many points ably presented in argument, which have received our careful attention, but of which we can take no special notice in this opinion. We have devoted so much space to the more important matters that we can only say that, under the view which we take of the scope of the enabling statute, they furnish no ground for relief in this suit. chanroblesvirtualawlibrary
The liberal manner in which the government has aided this company in money and lands is much urged upon us as a reason why the rights of the United States should be liberally construed. This matter is fully considered in the opinion of the Court already cited in United States v. Union Pacific Railroad Co., supra, in which it is shown that it was a wise liberality for which the government has received all the advantages for which it bargained, and more than it expected. In the feeble infancy of this child of its creation, when its life and usefulness were very uncertain, the government, fully alive to its importance, did all that it could to strengthen, support, and sustain it. Since it has grown to a vigorous manhood, it may not have displayed the gratitude which so much care called for. If this be so, it is but another instance of the absence of human affections which is said to characterize all corporations. It must, however, be admitted that it has fulfilled the purpose of its creation and realized the hopes which were then cherished, and that the government has found it a useful agent, enabling it to save vast sums of money in the transportation of troops, mails, and supplies, and in the use of the telegraph.
A court of justice is called on to inquire not into the balance of benefits and favors on each side of this controversy, but into the rights of the parties as established by law, as found in their contracts, as recognized by the settled principles of equity, and to decide accordingly. Governed by this rule and by the intention of the legislature in passing the act under which this suit is brought, we concur with the circuit court in holding that no case for relief is made by the bill.
MR. JUSTICE SWAYNE, with whom concurred MR. JUSTICE HARLAN, dissenting.
I concur in the opinion, so far as it relates to the constitutional validity of the act of Congress which lies at the foundation of the case. In the residue I cannot concur.