163 U.S. 564 (1896), Union Pacific Railway Company v. Chicago,

Citation:163 U.S. 564, 16 S.Ct. 1173, 41 L.Ed. 265
Party Name:Union Pacific Railway Company v. Chicago,
Case Date:May 25, 1896
Court:United States Supreme Court

Page 564

163 U.S. 564 (1896)

16 S.Ct. 1173, 41 L.Ed. 265

Union Pacific Railway Company



United States Supreme Court

May 25, 1896




Railroad corporations possess the powers which are expressly conferred by their charters, together with such powers as are fairly incidental thereto, and they cannot, except with the consent of the state, disable themselves from the discharge of the functions, duties, and obligations which they have assumed.

The general rule is that a contract by which a railroad company renders itself incapable of performing its duties to the public or attempts to absolve itself from those obligations without the consent of the state,

Page 565

or a contract made by a corporation beyond the scope of its powers, express or implied, on a proper construction of its charter cannot be enforced, or rendered enforceable by the application of the doctrine of estoppel, but where the subject matter of the contract is not foreign to the purposes for which the corporation is created, a contract embracing whatever may fairly be regarded as incidental to, or consequential upon, those things which the legislature has authorized ought not, unless expressly prohibited, to be held by judicial construction to be ultra vires.

The contract with the Rock Island Company on the part of the Union Pacific Company which forms one subject of this controversy was one entirely within the corporate powers of the latter company, and throughout the whole of it there is nothing which looks to any actual possession by the Rock Island Company of any of the Union Pacific property beyond that which was involved in its trains' being run over the tracks under the direction of the other company, and this was an arrangement entirely within the corporate powers of the Union Pacific Company to make, and which was in no respect ultra vires.

The common object of the Act of February 24, 1871, c. 67, regarding the construction of a bridge across the Missouri at Omaha, and the Act of July 25, 1866, c. 246, touching the construction of several bridges across the Mississippi, was the more perfect connection of the roads running to the respective bridges on either side, and being construed liberally, as they should be, the scheme of Congress in the act of 1871 was to accomplish a more perfect connection at or near Council Bluffs, Iowa, and Omaha, Nebraska.

It being within the power of the Union Pacific Company to enter into contracts for running arrangements, including the use of its track and the connections and accommodations provided for by the contract in controversy, and that contract not being open to the objection that it disables the Union Pacific Company from discharging its duties to the public, it will not do to hold it void and to allow the Union Pacific Company to escape from the obligations which it has assumed on the mere suggestion that, at some time in the remote future, a contingency may arise which will prevent it from performing its undertakings in the contract.

Other objections made on behalf of the Union Pacific Company disposed of as follows: (1) the provision in the contract respecting reference does not take from the company the full control of its road; (2) its acts in constructing its road in Nebraska, not having been objected to by the state, must, in the absence of proof to the contrary, be deemed valid; (3) the contract is not to be deemed invalid because, during its term, the charter of the Rock Island Company will expire; (4) the Republican Valley Company, being a creation of the Pacific Company, is bound by the contract; (5) the Pacific Company has power, under its charter, to operate the lines contemplated by these contracts, it being a general principle that where a corporate contract is forbidden by a statute or is obviously hostile to the public advantage or convenience, the courts disapprove

Page 566

of it, but when there is no express prohibition and it is obvious that the contract is one of advantage to the public, the rule is otherwise.

The contracts in question were in proper form, signed and executed by the proper executive officers, attested by the corporate seal of the Union Pacific Company, approved and authorized by the executive committee, which had all the powers of the board, and ratified, approved and confirmed by the stockholders at their next annual meeting, and this was sufficient to bind the Union Pacific Company although no action by the board was had.

These contracts were such contracts as a court of equity can specifically enforce, and thereby prevent the intolerable travesty of justice involved in permitting parties to refuse performance of their contracts at pleasure by electing to pay damages for the breach.

The public interests involved in these contracts demand that they should be upheld and enforced. It is to the higher interest of all, corporations and public alike, that it be understood that there is a binding force in all contract obligations, that no change of interest or change of management can disturb their sanctity or break their force, but that the law which gives to corporations their rights, their capacities for large accumulations, and all their faculties is potent to hold them to all their obligations and so make right and justice the measure of all corporate as well as individual action.

[16 S.Ct. 1174] These were petitions in equity filed by the Chicago, Rock Island & Pacific Railway Company against the Union Pacific Railway Company and the Omaha & Republican Valley Railway Company, and by the Chicago, Milwaukee and St. Paul Railway Company against the Union Pacific Railway Company in the District Court of Douglas County, Nebraska, January 2, 1891, to compel the specific performance of two contracts, dated May 1, 1890, and April 30, 1890, respectively, and removed on petition of the Union Pacific Railway Company to the United States Circuit Court for the District of Nebraska, where they were heard by MR. JUSTICE BREWER, and decrees rendered in favor of complainants. 47 F. 15. From these decrees, defendants appealed to the United States Circuit Court of Appeals for the Eighth Circuit, by which they were affirmed. 51 F. 309. Thereupon these appeals were prosecuted.

To the contract of May 1, 1890, the Union Pacific Railway Company, the Omaha and Republican Valley Railway Company, and the Salina and Southwestern Railway Company

Page 567

were parties on one side, and the Chicago, Rock Island and Pacific Railway Company and the Chicago, Kansas and Nebraska Railway Company on the other, and the contract of April 30th was between the Union Pacific Railway Company and the Chicago, Milwaukee and St. Paul Railway Company.

The Union Pacific Railway Company controlled and operated more than five thousand miles of railroad, and, among others, a main line extending from Council Bluffs, Iowa, by way of Omaha and Valley Station, Nebraska, to Ogden in Utah territory, a distance of about eleven hundred miles; a main line from Kansas City, Missouri, by way of Topeka and Salina, Kansas, to Denver, Colorado, the Republican Valley Railroad, extending from Valley Station, Nebraska, by way of Lincoln and Beatrice in that state, to Manhattan, Kansas, the Salina Railroad, extending from Salina to McPherson, in Kansas, a railroad extending from Hutchinson, in Kansas, to the southern border of that state, and other auxiliary roads.

The Rock Island Company owned and operated a line of railway extending from Chicago, by way of Davenport, to Council Bluffs, Iowa, and from Davenport to St. Joseph, Missouri. As the owner of the latter line and lessee of the Chicago, Kansas and Nebraska Railway Company and other corporations, it controlled and operated a through line of railway from Chicago, by way of Davenport, St. Joseph, and Beatrice, Nebraska, to Colorado Springs and Denver, Colorado, a line from St. Joseph, Missouri, by way of Horton, Topeka, and Hutchinson, to Liberal, Kansas, and other lines, amounting in the aggregate to more than three thousand miles of railway.

The Union Pacific Railway owned nearly all of the stock and bonds, elected the directors, and built, controlled, and operated the railroads of the Republican Valley and Salina Companies, and the Rock Island Company owned and operated the roads of the Kansas Company under a lease for 999 years, so that the Pacific Company and the Rock Island Company were practically the real parties in interest to the contract of May 1.

Page 568

The St. Paul Company was operating more than six thousand miles of railroad, and one of its lines extended from Chicago to Council Bluffs, Iowa.

The following sketch roughly indicates the domain of the contracts:

Page 569

Early in 1890, the Rock Island Company determined to connect its lines from Chicago to Council Bluffs with its southerly line to Colorado Springs by constructing a bridge across the Missouri River at Council Bluffs, and a railroad from that terminus, by way of Omaha land South Omaha and Lincoln, to Beatrice, Nebraska, thereby shortening its line from Chicago to Denver and Colorado Springs, and the St. Paul Company joined in the undertaking in order to extend its line from Council Bluffs on to Omaha and South Omaha. Acting in concert, the two companies caused a corporation to be created under the laws of the State of Iowa by the name and style of the Nebraska Central Railway Company, with power to build a bridge across the river at Omaha, and one or more lines from that city west. Congress granted to this corporation the necessary franchise for the bridge. 23 Stat. 43. Preliminary surveys and estimates were made which showed that the entire cost of the bridge and tracks to South Omaha would be about...

To continue reading