GREENWOOD V. FREIGHT COMPANY

• Decision Date: 01 January 1881
• Citation: 105 U. S. 13
• Court: U.S. Supreme Court

Greenwood v. Freight Company

105 U.S. 13

APPEAL FROM THE CIRCUIT COURT OF THE UNITED

STATES FOR THE DISTRICT OF MASSACHUSETTS

Syllabus

1. Where, by a state statute, the charter of a street railroad company was repealed, and its franchises and track were transferred to another, and the company refuses to seek a remedy, a stockholder who asks an injunction on the ground that the statute impairs the obligation of a contract will have a standing in a court of equity.

2. Such a statute impairs the obligation of a contract unless the legislature reserved the right to repeal the statute conferring the charter.

3. In Massachusetts such, a reservation becomes part of every act of incorporation by virtue of sec. 41, c. 68, of the General Statutes, which declares

"Every act of incorporation passed after the eleventh day of March, in the year one thousand eight hundred and thirty-one, shall be subject to amendment, alteration, or repeal at the pleasure of the legislature."

4. The origin of this and similar clauses of reservation in the statutes of the states stated.

5. By the exercise of the repealing power reserved by such a clause, the charter no longer exists, and whatever validity transactions entered into and authorized by it while it was in force may possess, there can be no new transactions dependent on the special power conferred by the charter. Such power is abrogated when the law granting it is repealed.

6. Neither the rights of the shareholders to the real and personal property of the corporation nor rights of contract or chosen in action are destroyed by such repeal, and if the legislature has provided no specific mode of enforcing and protecting such rights, the courts will do so by the means within their power.

7. If the legislature has the power to repeal the statute under which a company was organized, it can charter a new one and confer the same powers on it as the former possessed, and so far as the property or franchises of the old company are necessary to the public use, it can authorize the new one to take them on making due compensation therefor.

8. A statute which under this power repeals an act of incorporation and at the same time creates a new one with similar powers, the use of which requires the exercise of the right of eminent domain, is not in conflict with the Constitution of the United States if it provides for compensation for the property of the extinct corporation so taken by the new one.

The facts are stated in the opinion of the Court.

Page 105 U. S. 14

MR. JUSTICE MILLER delivered the opinion of the Court.

The appellant, Greenwood, a citizen of the New York, brought his bill of complaint against the Union Freight Railroad Company, a corporation established by the laws of Massachusetts; against the Marginal Freight Railroad Company, likewise a Massachusetts corporation; against the City of Boston, its mayor and aldermen by name; and against the directors of the Marginal Freight Railroad Company -- all citizens of Massachusetts.

The Union Freight Railroad Company demurred to the bill, and the demurrer was sustained and the bill dismissed. It is this decree which we are called on to review on appeal taken by complainant.

The case made by the bill is that the Marginal Freight Railroad Company, which we shall hereafter call the Marginal Company, was organized under an Act of the Legislature of Massachusetts of the date of April 26, 1867, to build and operate a railroad through various streets in the City of Boston,

"with all the privileges and subject to all the duties, restrictions, and liabilities set forth in the general laws, which now are or may hereafter be in force, relating to street railway corporations, so far as they are applicable."

The right of way of this company for part of its route lay over the line of a railway previously granted to the Commercial Freight Railroad Company, and the Marginal Company, by virtue of a provision in its charter, purchased and paid the Commercial Company for the joint use of its track, so far as it ran through the same streets. Afterwards, on May 6, 1872, the Legislature of Massachusetts incorporated, by an act of that date, the Union Freight Railroad Company, which, by virtue of its charter and the authority of the Board of Aldermen of Boston, was authorized to run its track through the same streets and over the same ground covered by the track of the Marginal Company, and to take possession of the track of that and any other street railroad company, on payment of compensation. This latter act also repealed the charter of the Marginal Company.

Sections 4, 6, and 7 of this act constitute the foundation of complainant's grievance, because they are said to impair the obligation of the contract found in the charter of the

Page 105 U. S. 15

Marginal Company, and, as they are short, they are here given verbatim:

"SEC. 4. Said corporation may, within its authorized limits and for the purposes of this act, enter upon and use any part of the tracks of any other street railroad, and may suitably strengthen and improve such tracks, and if the corporations cannot agree upon the manner and conditions of such entry and use, or the compensation to be paid therefor, the same shall be determined in accordance with the provisions of the thirty-eighth section of chapter three hundred and eighty-one of the acts of the year eighteen hundred and seventy-one."

"SEC. 6. Said corporation shall, within four months from the passage of this act, take the tracks, or any part thereof, of the Marginal Freight Railway Company, subject to the laws relating to the taking of land by railroad companies and the compensation to be made therefor."

"SEC. 7. Chapter one hundred and seventy of the acts of the year eighteen hundred and sixty-seven, entitled an 'Act to incorporate the Marginal Freight Railway Company,' and so mach of chapter four hundred and sixty-one of the acts of the year eighteen hundred and sixty-nine as relates to said Marginal Freight Railway Company, are hereby repealed."

The bill avers that the Union Freight Railroad Company has been organized, and is about to proceed in such a manner under this act that the Marginal Company will be utterly destroyed, and its several contracts, franchises, rights, easements, and properties will be impaired and destroyed, and the stock of complainant in said company will be destroyed and made valueless, and he will sustain irreparable damage and mischief.

Complainant then alleges that he had requested and urged the directors of the Marginal Company to take steps to assert the rights and franchises of the company against what he believes to be unconstitutional legislation, and that they had declined and refused to do so. He also sets out a vote or resolution of said directors, in which they respond to his demand by saying that the assertion of the rights of the corporation in the state courts is accompanied with so many embarrassments that they decline to attempt it. The prayer of the bill is for an injunction

Page 105 U. S. 16

against all the defendants, to prevent these acts so injurious to the rights of the Marginal Freight Railroad Company.

The first ground of demurrer to this bill is that the complainant, whose interest is merely that of a stockholder in the Marginal Company, shows no right to sustain this bill, the object of which is to assert rights that are those of the corporation, which is itself under no disability to sue.

This whole subject was fully considered in the recent opinion of the Court in Hawes v. Oakland, 104 U. S. 450, in the decision of which we had the benefit of the able argument of counsel in this case, which was argued before that was decided. We refer to that opinion for the principles which must govern this branch of the present case. It is sufficient to say that this bill presents so strong a case of the total destruction of the corporate existence, and of the annihilation of all corporate powers under the act of 1872, that we think complainant as a stockholder comes within the rule laid down in that opinion, and which authorizes a shareholder to maintain a suit to prevent such a disaster where the corporation peremptorily refuses to move in the matter.

As none of the defendants is charged with a purpose to exercise any power or to perform any acts not authorized by the terms of the Act of May 6, 1872, the remaining question to be decided is whether the features of that act to which complainant objects in his bill are beyond the power of the Legislature of Massachusetts or are forbidden by anything in the Constitution of the United States.

These exercises of power in the statute complained of are divisible into two:

1. The repeal of the charter of the Marginal Company.

2. The authority vested in the Union Company to take its track for the use of the latter company.

It is the argument of counsel, pressed upon us with much vigor, that the two, taken together, constitute a transfer of the property of the one corporation to the other, and with it all the corporate franchises, rights, and powers belonging to the elder corporation.

We are not insensible to the force of the argument as thus stated, and we think it must be conceded that, according to the

Page 105 U. S. 17

unvarying decisions of this Court, the unconditional repeal of the charter of the Marginal Company is void under the Constitution of the United States as impairing the obligation of the contract made by the acceptance of the charter between the corporators of that company and the state unless it is made valid by that provision of the General Statutes of Massachusetts, called the reservation clause, concerning acts of incorporation, or unless it falls within some enactment covered by that part of its own charter which makes it

"subject to all the duties; restrictions, and liabilities set forth in the general laws, which now are or may hereafter be in force, relating to street railway corporations, so far as they may be applicable."

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