Nashua Corp v. Boston Corp

• Decision Date: 19 May 1890
• Citation: 136 U.S. 356,34 L.Ed. 363,10 S.Ct. 1004
• Parties: NASHUA & L. R. CORP. v. BOSTON & L. R. CORP. et al
• Court: U.S. Supreme Court

136 U.S. 356

10 S.Ct. 1004

34 L.Ed. 363

NASHUA & L. R. CORP. v. BOSTON & L. R. CORP. et al.

May 19, 1890.

[Statement of Case from pages 357-360 intentionally omitted] Francis A. Brooks and E. J. Phelps, for appellant.

J. H. Benton, Jr., for appellees.

[Argument of Counsel from pages 361-365 intentionally omitted]

FIELD, J.

This is a suit in equity to compel the defendant the Boston & Lowell Railroad Corporation to account for various sums of money alleged to have been received by it, and used for its benefit, to which the complainant was entitled, and also to charge the defendant Hosford personally with the amount diverted by him to that corporation. The controversy relates to certain transactions growing out of a joint traffic contract between the plaintiff and the defendant corporations. The plaintiff, the Nashua & Lowell Railroad Corporation, is alleged in the bill to have been duly established as a corporation under the laws of New Hampshire, and to be a citizen of that state. It will be convenient hereafter in this opinion to designate it as the 'Nashua Corporation.' On the 1st of February, 1857, it owned and operated a railroad extending from Nashua, in New Hampshire, to Lowell, in Massachusetts, a distance of 13 miles, of which 5 miles were in New Hampshire, and 8 miles in Massachusetts. The suit was brought not only against the Boston & Lowell Railroad Corporation, alleged in the bill to be a corporation duly established by the laws of Massachusetts and a citizen of that state, but against Hocum Hosford, its treasurer, and Charles E. A. Bartlett, of the city of Lowell, also citizens of that state; but as to Bartlett it has been dismissed. On the 1st of February, 1857, this corporation, which for convenience we shall call the 'Lowell Corporation,' owned and operated a railroad extending from Boston to Lowell, Mass., a distance of 26 miles, with a branch to the town of Woburn a mile and a half in length. On the 1st of February, 1857, the two corporations entered into a contract in writing with each other 'for the promotion of their mutual interest through a more efficient and economical joint operation and management of their roads, and for the better security of their respective investments, as well as for the convenience and interest of the public,' that their roads, with their branches, should be 'worked and managed as one road,' under certain conditions and stipulations which were stated at length. The contract recited that a large portion of the business of the two roads was joint business passing over the roads and through the branches of both parties, making desirable a common policy, and unanimity of management, and that, in the transaction of their business, there was a mutual interest, both as to the mode of transaction, and to the tariff upon the same, as well as in all other mater § relating thereto, and that the two corporations, by operating under a common management, would thereby be enabled to do business with greater facility, greater regularity, and at a greater saving of expense.

The Nashua Corporation had at this time leases of the Stony Brook Railroad, extending from its line at North Chelmsford to Groton Junction, about 14 miles in Massachusetts, and of the Wilton Railroad, extending from Nashua to Wilton, about 13 miles in New Hampshire. The contract was originally for three years, but by a supplemental agreement of October 1, 1858, it was extended to 20 years. Among other things it provided that the roads of the parties should be 'operated and managed by one agent, to be chosen by the concurrent vote of a majority of the directors of each party, and who might be removed by a like vote, or by the unanimous vote of either board,' and that the respective boards of directors should 'by such concurrent action exercise the same control over the management as is usual with boards of railroad directors in ordinary cases;' that the corporations should each surrender to the joint management thus constituted 'the entire control of their respective roads, shops, depots, furniture, machinery, tools, or other property necessary for the proper maintenance and working of the joint roads,' reserving only certain specified property necessary for the operation of the roads, consisting principally of real estate; that the contracts of the Nashua Corporation with the Wilton and Stony Brook roads should be assumed by the joint management, and carried out, and that the contract with the Wilton road, which was to expire on the 1st of April, 1858, might be renewed during the continuance of the joint management; that the Nashua Corporation should within the year 1857, at its own cost, erect a freight depot, with the necessary approaches and furniture, in the city of Lowell, upon its site at Western avenue, which during the continuance of the agreement might be used for the accommodation of the joint business; that the Lowell Corporation should complete within the year 1857, at its own separate cost, the new passenger depot at Causeway street in Boston, then under construction, together with the tracks, bridges, and all necessary fixtures connected with the extension into that city, and at its separate expense make such alterations in the existing Boston passenger depot as had been designed by the Lowell Corporation for converting it into a freight depot, and also without charge to the Nashua Corportion, complete at the earliest practicable time the crossing over the Fitchburg Railroad, and the connection with the Grand Junction Railroad; that the road-bed, bridges, superstructures, depots, buildings, and fixtures of each road should be kept as near as might be in like relative repair from their then state and condition, and that all casualties and damages to the same, except fire risks on buildings, should be at the common risk, and charged in the current joint account, and, in case of the destruction by fire of any buildings, or injury to the same, that the owners should rebuild or replace them at his own cost; that the income and expense accounts of the joint roads should be made up, as nearly as conveniently might be, by estimate to the close of each month, and the net balance should be divided and paid over, on account, to the respective treasurers of the two corporations,—31 per cent. to the Nashua Corporation, and 69 per cent. to the Lowell Corporation,—subject to a final adjustment at the semi-annual closing of accounts, and that on the 1st days of April and October in each year the said accounts should be accurately closed and balanced by settlement with each party, covering and adjusting all previous payments on account,—the Nashua Corporation receiving as its proportion 31 per cent. of the said joint net income, and the Lowell Corporation receiving as its proportion 69 per cent. thereof; that each corporation might separately, and on its own accoun, d eclare such dividends upon its own stock, and payable from its own separate funds, as it might deem expedient; it being distinctly provided that 'the interest upon the debts of either party must also be paid out of such separate share, and not from the common fund.' As thus seen, the contract provided that the two roads and their branches should be operated as a single road by a common agent to be appointed by the directors of both companies, and removable by them, or by the unanimous action of either; that the roads and property of each party should be kept in a like relative condition and repair as they then were at their joint expense; that the Nashua Corporation should in 1857 erect at its own expense a freight depot, with necessary approaches, in the city of Lowell, and the Lowell Corporation, in the same year, at its expense, complete a passenger depot, with necessary approaches, in the city of Boston, and alter the existing passenger depot there, also at its own expense, into a freight depot; that the interest upon the debts contracted by either party should be paid out of its own share, and not from the common fund; and that the net income should be divided in the proportion of 31 per cent. to the plaintiff, the Nashua Corporation, and of 69 per cent. to the defendant the Lowell Corporation, payments on account of such division to be made upon monthly estimates, and final settlement and adjustment to be had semi-annually. The contract did not provide that the property of either corporation should be improved, or other property be acquired by either, at the joint expense of both.

Under this contract, and during its continuance, the two corporations united their business and conducted it with marked success. By leases from other companies and the ac- quisition of branch roads a large mileage was added to their lines, and a correspondingly increased business was transacted by them. In 1874 the Nashua Corporation reported to its stockholders that the two corporations then operated under their joint management 135 miles,—more than double the mileage at the time the contract was entered into. It is stated that 33 miles of this distance were added by the acquisition of the Salem & Lowell and the Lowell & Lawrence roads in 1858, and 16 miles of it by the purchase of the Lexington & Arlington road, in 1869. Contracts were made for business with connecting lines to such an extent that the two roads, during the late years of their joint operation, transported annually in the neighborhood of 300,000 tons of freight and 200,000 passengers. The net income resulting from this extended business was satisfactorily apportioned pursuant to the contract, 31 per cent. going to the Nashua Corporation, and 69 per cent. going to the Lowell Corporation, except as they were affected by two transactions of which the Nashua Corporation complains. One of these transactions was the alleged illegal appropriation by the Lowell Corporation of $181,962 for a passenger depot at Boston erected by that corporation for its own benefit, and which, complainant...