US SUPREME COURT DECISIONS

The United States granted lands to the Wisconsin, to aid in the construction of railroads. The state granted a portion of these lands to a company, called in the opinion of the Court The Omaha Company, for the purpose of constructing a defined railroad. It also granted another portion of them to another company, called in the opinion of the court the Portage Company, for the purpose of constructing another and different, and to some extent competing, railroad. The latter grant was conditioned upon the completion of the road by the grantee within a specified period. Work was begun upon the Portage road, but in 1873 the company became embarrassed, and then broke down. In 1878, the Legislature of Wisconsin extended the time for the construction of the Portage Company's road three years. In 1881, a contract was made with A. for its completion, under which work was resumed with vigor and was diligently prosecuted, with every prospect that the road would be completed within the extended time. In 1882, before the expiration of that extension, the legislature of that state passed an act revoking the grant to the Portage Company and bestowing it upon the Omaha Company. As a result of this, the work which A. was diligently performing under his contract was arrested; he was prevented through the direct and active efforts of the Omaha Company from completing his performance of it; chanrobles.com-red

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the profits which he would have received from it were lost to him, and the land grant was wrested from the Portage Company. A. then commenced an action at law against the Portage Company, in which a judgment was recovered by his administratrix. Execution thereon being returned nulla bona, a bill in equity was filed in the Circuit Court of the United States by the administratrix against the Omaha Company to reach the land grant in its hands. The bill charged that the Omaha Company had conspired with and bribed certain officials of the Portage Company, who, through circumstances named in the bill, had become sole stockholders in that company, to wrest the land grant from the Portage Company, and to prevent A. from completing his contract. It set forth sundry steps in the alleged conspiracy, and charged that the Legislature of Wisconsin had been induced by the conspirators to pass, the act forfeiting the land grant and bestowing it upon the Omaha Company. The defendant demurred and the demurrer was sustained by the circuit court.

Held:

(1) That the demurrer admitted that A. had suffered the wrongs complained of in consequence of the interference of the Omaha Company.

(2) That it must be assumed, as conceded by the demurrer, that the officials of the Portage Company had been bribed by the Omaha Company to betray their trust, and that the legislature had been induced by false allegations to revoke the grant to the Portage Company and to bestow it upon the Omaha Company.

(3) That as the breaking down of the Portage Company and the ruin of its contractor was the natural and direct result of all this, the contractor could resort to equity to enforce against the land grant in the hands of the Omaha Company the judgment which he had obtained at law against the Portage Company.

(4) That it must be presumed that the legislature, in transferring the grant to the Omaha Company, did not intend to affect thereby the rights of the Portage Company against the Omaha Company in the courts.

(5) That as there was nothing in the words of the grant to the Omaha Company which expressly tied up the granted land, it passed to that company subject to seizure and sale in satisfaction of any of its obligations.

(6) That the Omaha Company, by reason of its conduct in this matter, became, as to the creditors of the Portage Company, a trustee ex maleficio in respect of this property.

If one maliciously interferes in a contract between two parties, and induces one of them to break that contract to the injury of the other, the party injured can maintain an action against the wrongdoer.

When a man does an act which in law and fact is a wrongful act, and injury to another results from it as a natural and probable consequence, an action on the case will lie.

A sole stockholder in a corporation cannot secure the transfer to himself of chanrobles.com-red

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all the property of the corporation so as to deprive a creditor of the corporation of the payment of his debt.

When an act of the legislature is challenged in a court, the inquiry by the court is limited to the question of power, and does not extend to the matter of expediency, to the motives of the legislators or to the reasons which were spread before them to induce the passage of the act, and, on the other hand, as the courts will not interfere with the action of the legislature, so it may be presumed that the legislature never intends to interfere with the action of the courts, or to assume judicial functions to itself.

This is an appeal from a decree of the Circuit Court of the United States for the Western District of Wisconsin dismissing plaintiff's bill.

The bill was filed on the 23d of May, 1888, against the Chicago, Portage and Superior Railway Company, the Chicago, St. Paul, Minneapolis and Omaha Railway Company, and the Farmers' Loan and Trust Company. The Chicago, St. Paul, Minneapolis and Omaha Railway Company was the only defendant served with process. It appeared, and on the 28th of July filed a demurrer to the bill, which, after argument, was sustained, and on September 2, 1889, the decree of dismissal was entered. 39 F.1d 3; 39 F.9d 2.

The facts as stated in the bill are as follows: by two acts, of date June 3, 1856, and May 5, 1864, respectively, 11 Stat. 20, c. 43, and 13 Stat. 66, c. 80, Congress granted lands to the State of Wisconsin to aid in the construction of certain railroads, among others, one

"from a point on the St. Croix River or Lake, between Townships 25 and 31, to the west end of Lake Superior, and from some point on the line of said railroad, to be selected by said state, to Bayfield."

These land grants were accepted by an act of the legislature approved October 8, 1856, Laws of Wisconsin 1856, p. 137, and by a joint resolution of the legislature of the state of date March 20, 1865, Gen.Laws Wisconsin 1865, p. 689, and a map of definite location was duly filed, and accepted by the Secretary of the Interior.

By an Act of March 4, 1874, Laws Wisconsin 1874, p. 186, c. 126, the state granted to the North Wisconsin Railway Company, whose name was subsequently changed to Chicago, chanrobles.com-red

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St. Paul, Minneapolis and Omaha Railway Company, and who is the defendant herein, to be hereafter called the Omaha Company, that portion of the land grant applicable to the construction of the road from a point on St. Croix River to Bayfield, and to the Chicago and Northern Pacific Air-Line Railway Company, whose name was subsequently, and before 1878, changed to that of the Chicago, Portage and Superior Railway Company, hereafter called the Portage Company, so much of said grant as was applicable to the construction of the road from the west end of Lake Superior to a junction with the line running from St. Croix River to Bayfield.

The eighth section of this act, which is the granting section to the latter company, is as follows:

"There is hereby granted to the Chicago and Northern Pacific Air-Line Railway Company all the right, title, and interest which the State of Wisconsin now has, or may hereafter acquire, in or to that portion of the lands granted to said state by said two acts of Congress as is or can be made applicable to the construction of that part of the railway of said company lying between the point of intersection of the branches of said grants, as fixed by the surveys and maps on file in the Land Office at Washington, and the west end of Lake Superior. This grant is made upon the express condition that said company shall construct, complete, and put in operation that part of its said railway above mentioned as soon as a railway shall be constructed and put in operation from the City of Hudson to said point of intersection, and within five years from its acceptance of said lands as herein provided, and shall also construct and put in operation the railway of said company from Genoa northerly at the rate of twenty miles per year."

The value of the lands thus granted was at the time of the wrongs hereinafter described, $4,000,000.

By section 12, the company was required within sixty days to file with the Secretary of State an acceptance of the grant upon the terms and conditions named therein, and also such security for the construction of the road as should be required by the governor. Both of these conditions were complied with. chanrobles.com-red

Page 151 U. S. 5

Genoa, named in section 8, was the town on the southern boundary of the State of Wisconsin at which the line of the Chicago and Northern Pacific Air-Line Railway entered the state, and Hudson was the place on the St. Croix River, described in the acts of Congress as the initial point of the road to be aided.

On March 16, 1878, an act was passed by the Legislature of Wisconsin, Laws Wisconsin 1878, p. 442, c. 229, extending the time for the construction of the Portage Company's road three years.

In the panic of 1873-74, the Portage Company had broken down under a load of debts and embarrassments, and remained inactive until 1880. At that time, it secured the services of Willis Gaylord to assist in extricating it from its embarrassments and in continuing the construction of its road. William H. Schofield, an experienced railway projector and financier, was induced to accept the office of President, and the cooperation and assistance of the New York, New England and Western Investment Company (hereafter called the Investment Company) was secured.

A new mortgage for $25,000 a mile and a new issue of stock were provided for. Seven hundred thousand dollars of the new bonds and one million of the new stock were to be issued in full satisfaction of all outstanding stock, bonds, and other demands. In pursuance of these arrangements, it issued certificates of stock for one million dollars in the name of A. A. Jackson, general solicitor of the Portage Company, which, endorsed by him in blank, were deposited with the Trust Company, and it also executed its orders to the number of ninety, calling for the delivery to John C. Barnes or bearer or a designated amount of said one million dollars of stock in ten percent installments. These orders were in the following form:

"To the Farmers' Loan and Trust Company:"

"This is to certify that, for value received, Mr. John C. Barnes or bearer is entitled to have and receive _____ shares of the capital stock of the Chicago, Portage and Superior Railway

Page 151 U. S. 6

Company, which stock has been fully paid for and placed in your keeping as a special trust for delivery upon this order, and you are hereby authorized and directed to accept or certify in the usual manner this order for the delivery of said stock, and to deliver to the bearer hereof _____ shares of the said stock whenever and as often as any two hundred and fifty thousand dollars of the first mortgage bonds of the said railway company are sold or disposed of by said railway company or by its fiscal agent, or whenever and as often as any ten miles of the railroad of said railway company shall be built, as will be certified to by the president of said railway company, and in any event you are hereby directed to deliver to the bearer, on the first day of January, A.D. 1883, any of the said _____ shares of capital stock then remaining undelivered upon a surrender of this order therefor."

"Chicago, Portage and Superior"

"Railway Company"

"By ________, President"

"[On the margin:] This order for the delivery of the bonds and stock of this company held in special trust is hereby approved and accepted. The Farmers' Loan and Trust Company. [Seal]"

These orders were all delivered to John C. Barnes in exchange for and redemption of all the theretofore outstanding stock of the Portage Company, which stock was at once cancelled, with the exception of two certificates for $25,000, which, by oversight or design on the part of Charles J. Barnes, vice-president of the Portage Company, remained in his custody uncancelled.

The situation after these arrangements were made was such that the entire outstanding stock was in the possession and control of C.J. Barnes, J. C. Barnes, and A. A. Jackson, yet held by them in trust for the company. The further stock provided for was to be issued from time to time to assist in the sale of the bonds until enough of the latter had been disposed of to construct the road. These arrangements having chanrobles.com-red

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been perfected, the Portage Company, through its president, sought the alliance and support of the Grand Trunk Railway Company of Canada, which had recently completed an extension of its road to Chicago.

Three contracts were entered into of dates June 16, 1881, July 10, 1881, and September 30, 1881, by which the bonds of the company were to be disposed of, and money enough advanced for the construction of the road. The bill sets out fully the nature and scope of these contracts, and copies of them are attached as exhibits. It is unnecessary here to say more than that by them, taken in connection with the prior arrangements of the Portage Company, the latter obtained satisfactory assurances of abundant funds, and was placed in a position to fully perform its agreement with the state and construct the railroad by at least May 5, 1882 -- all this, of course, upon the condition of no outside and wrongful interference.

Relying upon the sufficiency of its arrangements for money, it on August 18, 1881, entered into a contract with Horatio G. Angle for the construction of about sixty-five miles of its railway, being that portion covered by the land grant heretofore referred to. By the terms of that contract, Angle was to receive $8,500 per mile in cash and $5,000 per mile in the full-paid stock of the company on condition that he completed the road on or before May 5, 1882. It also contracted for steel rails and fastenings to be delivered as the work of construction proceeded.

Angle commenced work, and had made such progress that on the 20th of January, 1882, he had sixteen hundred men employed along the line, and it was an assured fact that, unless interfered with, he would complete the railway according to the terms of the contract on or before May 5, 1882.

The bill further charges that about this time the Omaha Company conspired with other parties to wrest from the Portage Company its land grant, and to that end to prevent the completion of the contract by Angle and the construction of the road.

In the carrying out of this conspiracy the conspirators chanrobles.com-red

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bribed Charles J. Barnes and A. A. Jackson, officers of the Portage Company, and who, either personally or as attorneys in fact for John C. Barnes, had the control of all the outstanding stock of the Portage Company, though holding it in trust for the benefit of the company, to betray their trust and transfer the stock to one L. J. Gage for the benefit of the Omaha Company.

Having thus secured the control of the stock, they caused notice thereof to be given to the officers of the Grand Trunk Railway Company. These gentlemen, finding that the control of the Portage Company was passing into the hands of hostile interests, surrendered the collateral which had been already transferred to them and declined to proceed further in the contracts which had been entered into.

Continuing the execution of this conspiracy, the Omaha Company notified the general manager of the Portage Company of the purchase of the outstanding stock and advised and induced him to telegraph officially to the engineer in chief in charge of the work of construction, who had engaged in that work seven engineering corps, to forthwith call in these engineers, suspend their work, and pay them off. They also caused the general manager to notify the contractor, Angle, that the control of the company had been changed, and the English capitalists forced out, and also to telegraph to the merchants at Duluth and Superior City (who were furnishing supplies to the sixteen hundred men at work) that the company had been sold out, advising them to protect themselves, because the company could not pay or protect them.

In consequence of these notices, the several engineering corps were broken up, the engineers left the work, all the tools, materials, and other personal property belonging to the contractor and the company were attached at the suit of these merchant creditors, and the sixteen hundred laborers dispersed, and went elsewhere for work.

In further execution of this conspiracy, it endeavored to bribe the president and directors of the Portage Company and the Investment Company to turn over the organization of the Portage Company at once to them. Failing in this, it caused chanrobles.com-red

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a bill to be filed in the Circuit Court for Cook county, Illinois, falsely charging the president and board of directors with incurring imprudent obligations, and otherwise thus impairing the value of the million and twenty-five thousand of stock, purchased as heretofore set forth, and praying for a temporary injunction, which, on February 11, 1882, was granted without hearing or notice, and restrained the president and other officers of the Portage Company from doing any act or thing whatsoever in the name or behalf of the company during the continuance of the injunction.

In still further execution of the conspiracy, the Omaha Company caused the fact of the abandonment of the work and the dispersion of the laborers engaged thereon to be promptly and widely published throughout Wisconsin, and especially among the members of the legislature, then in session at Madison, concealing at the same time the means by which this had been accomplished.

Further, through its own agents, and especially through Jackson and Barnes, the corrupted officers of the Portage Company, it falsely represented to the legislature that no special progress had been made in the matter of constructing this road; that no considerable number of men had ever been at work, and that the Portage Company had finally abandoned it, and was wholly without means or credit to prosecute it.

On the strength of these representations, the legislature, without inquiry or hearing, on February 16, 1882, Laws Wisconsin 1882, p. 11, c. 9, hurriedly passed an act forfeiting and revoking the grant to the Portage Company and bestowing it upon the Omaha Company, which forfeiture and regranting were confirmed by an act passed March 5, 1883.

The contract with Angle having been thus broken by the Portage Company, he commenced an action at law against that company. While this action was pending, Angle died, but a revivor was had in the name of the present plaintiff, and on January 31, 1887, she recovered a judgment in the Circuit Court of the United States for the Western District of Wisconsin for $205,803.19. chanrobles.com-red

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Upon that judgment execution was issued and returned nulla bona, and thereupon this bill was filed to reach the land grant in the hands of the Omaha Company.