The State ex inf. Hadley v. Missouri Pacific Railway Co.

Decision Date27 November 1911
Citation141 S.W. 643,237 Mo. 338
PartiesTHE STATE ex inf. HERBERT S. HADLEY, Attorney-General, v. MISSOURI PACIFIC RAILWAY COMPANY, WESTERN COAL & MINING COMPANY, RICH HILL COAL MINING COMPANY and KANSAS-MISSOURI ELEVATOR COMPANY
CourtMissouri Supreme Court

Writ of ouster denied.

Herbert S. Hadley, Attorney-General, Elliott W. Major Attorney-General, and John Kennish, Assistant Attorney-General, for informant; F. W. Lehmann of counsel.

(1) The respondent, the Missouri Pacific Railway Company, has violated the provisions of its charter, the Constitution laws and public policy of the State of Missouri, and has been guilty of a usurpation of franchise by becoming the owner of all of the stock in said coal companies and elevator company and by conducting, controlling and operating the business and affairs of each of these companies. Said Missouri Pacific Railway Company was not authorized by its charter, the laws or Constitution of the State to hold the stock or to engage in the operation of the business of coal mining companies or elevator companies, as the ownership of such stock and the conduct and operation of the business of said companies are alleged and admitted not to have been necessary or incident to the construction, maintenance or operation of said railway as a public highway and common carrier. (2) By reason of the ownership of the stock of the coal mining companies and the elevator company, and the conduct of the business of each of these companies by the Missouri Pacific Railway Company, the autonomy, integrity, independence and individuality of each of said companies was thereby destroyed; they thereby ceased to be a corporation in that they were no longer an aggregation of individuals; they were thereby rendered incapable of discharging their duties to the public and the State; all contrary to the Constitution, laws and public policy of the State. A corporation, and particularly a railroad corporation, has no right to own the stock of another corporation, unless that right is specially conferred by statute. 1 Morawetz on Corporations, par. 227; Taylor on Corporations, par. 49; Matthews v. Skinker, 62 Mo 329; State ex inf. v. Trust Co., 144 Mo. 562; Railroad v. Canal Commissioners, 21 Pa. St. 589. (3) The railway company was guilty of a usurpation of a franchise not conferred upon it by the State in owning the stock and carrying on the business of the other three respondents. Noyes on Incorporate Relations, par. 294; Jessup v. Railroad, 76 F. 741; Hirschel on Corporations, p. 86; Stone v. Rottman, 183 Mo. 552; Newland Hotel Co. v. Lowe, 73 Mo.App. 135; City of Goodland v. Bank, 74 Mo.App. 367; Ollesheimer v. Thompson Mfg. Co., 44 Mo.App. 185; State ex rel. v. People's United States Bank, 197 Mo. 600. (4) The right to own stock in another corporation does not confer a right to control its business. Spelling on Corporations, sec. 172; Taylor on Corporations, sec. 267; Brice on Ultra Vires, 133; Pearson v. Convord R. R. Corp. 62 N.H. 537; Railroad v. Iron Co., 46 Ohio St. 44; Railroad v. Railroad, 31 N.J.Eq. 475; Denny Hotel Co. v. Schram, 6 Wash. 134; Hazelhurst v. Savahhan R. R. Co., 43 Ga. 57; People v. Chicago Gas Co., 130 Ill. 268; Franklin Co. v. Lewiston Inst. for Savings, 68 Me. 43; Insurance Co. v. Harbor Protection Co., 37 La. Ann. 233; Lagrone v. Zimmerman, 46 S.C. 372; Pauly v. Coronado Beach Co., 56 F. 428; Lumber Co. v. Rees, 103 Ala. 627. (5) The ownership of the stock and the conduct of the business of the elevator company by the railway company was also a usurpation. Memphis Grain & Elevator Co. v. Railroad, 85 Tenn. 703; In re New York Central R. R. Co., 77 N.Y. 248; Railroad v. Warren, 16 Ill. 502. The coal companies and the elevator company have, by reason of the ownership of their stock and the doing of their business by the railroad company, ceased to have the power to maintain a legal existence as a corporation, and no longer conduct, or are able to conduct, the business that they were authorized by the State to transact. People v. North River Refining Company, 121 N.Y. 696; State ex rel. v. Equitable Loan and Investment Co., 142 Mo. 320.

Alexander G. Cochran, Martin L. Clardy and R. T. Railey for respondents.

(1) Corporations have not only the powers expressly granted to them, but those which are necessarily implied. While it is true they derive all their power from the Legislature which creates them, it is also true that what is fairly implied is as certainly granted as what is expressed. In other words, no corporation can be invested with the right to go into the business for which it has been incorporated without carrying with it an implied right to do things, and perform acts in connection with its carrying out of the purposes for which it is incorporated; that, unless restrained by their charters or the law of the State, they have the power to deal precisely, in carrying out their corporate purposes, as individuals seeking to accomplish the same ends; that they may resort to any means that would be necessary and proper for an individual in executing the same, unless they be prohibited by the terms of their charters or some public law from so doing; that while in regard to their express powers, the grants are construed most liberally in favor of the State, and most strictly against the corporation, yet, in regard to incidental powers, neither strict nor liberal, but only reasonable rules of construction are applied; that corporations may even so far develop and extend their operations as to engage in matters not primarily contemplated by their founders, provided such matters be fairly within their scope, and that, in so developing and extending their undertakings they employ direct, and not indirect means; that "necessary", when used in defining the powers of corporations, does not mean simply what is indispensable, but also what is useful, convenient and proper to carry into effect the franchises granted. Greene's Bryce on Ultra Vires, pp. 66-91; Ellerman v. Stock Yards Co., 49 N.J.Eq. 217; 2 Cook Stock. and Corp. Law, sec. 681; Malone v. Lancaster Gas Light & Fuel Co., 37 A. 932; 23 Am. and Eng. Ency. Law, 680; Jacksonville Ry. & Nav. Co. v. Hooper, 160 U.S. 514; Railroad v. Union Co., 107 U.S. 98; Todd v. Union Land Co., 57 F. 47; 2 Purdy's Beach on Priv. Corp., pp. 12-28-29; Endlich on Interpretation of Statutes, sec. 418; Ft. Worth City Co. v. Smith Bridge Co., 151 U.S. 294; Pennsylvania Co. v. Bridge Co., 131 U.S. 371; Brewing Co. v. Fraatz, 123 Ill.App. 26; 1 Elliott on Railroads, sec. 38; 1 Wood's Railway Law, sec. 169; 1 Spellman on Priv. Corp., secs. 68, 73 and 75; Western Boatman's Benev. Ass'n v. Kribben, 48 Mo. 37. (2) Thus, a railroad company may own elevators, or stock in elevator companies, or acquire coal mines or stock therein, as incidental to the operation of its lines of road, and to enable it to serve the public the better. Railroad v. Nebraska, 164 U.S. 403; Railroad v. Wathem, 17 Ill.App. 582; In re Application New York Central, 77 N.Y. 248; Railroad v. Kipp, 46 N.Y. 546; Railroad v. Mckissock, 140 U.S. 304.

VALLIANT, C. J. Kennish, J., not sitting, having been of counsel.

OPINION

In Banc

Quo Warranto.

VALLIANT C. J. --

The information is in quo warranto. The respondents are Missouri corporations; the business for which each was incorporated is indicated by its corporate name, a railroad company, two coal mining companies, and an elevator company.

The charge in the information is that the railroad company has acquired the capital stock of the three other corporations and is engaged in conducting the business for which they were incorporated. More specifically stated, the charge is that the Western Coal & Mining Company was organized under the laws of this State in 1879, with a capital stock of $ 500,000, for the purpose of carrying on a general coal and mining business in Missouri, Kansas and elsewhere, with power to purchase, lease or otherwise acquire mineral and other lands for the purpose of mining coal and other minerals, buying and selling coal, etc., and owning and operating machinery and appurtenances necessary to carry on that business; and that after its organization the corporation entered upon the business for which it was chartered and continued to conduct the same until the acquisition of its capital stock by the Missouri Pacific Railway Company, whereupon it ceased to perform its functions and the business has since and is still being conducted alone by the railroad company, to the injury of the interests and welfare of the people of the State.

Like specifications are made in relation to the Rich Hill Coal Mining Company, and, varying only in reference to the character of the business, relating also to the Kansas-Missouri Elevator Company. The conclusion from those facts drawn in the information is that the two coal companies and the elevator company have lost their integrity and individuality and are rendered incapable of exercising the franchises granted by their respective charters, that each had become a mere cover for the unlawful exercise of power by the railroad company, and their further existence is of injury to the people of the State.

The prayer is that the two coal companies and the elevator company be ousted of their charters, that the railroad company be ordered to cease operating the business of those three companies, and failing to heed such order, that it be ousted of the corporate rights granted by its charter.

The respondents filed a joint answer to the following effect They admit the origination of each of the corporations as stated in the information and the purpose for which it was organized, and they admit that a majority of the capital stock of the three other companies is owned by a trustee who...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT