Oregonian Ry. Co. v. Oregon Ry. & Nav. Co.

• Decision Date: 18 March 1885
• Citation: 23 F. 232
• Parties: OREGONIAN RY. CO., Limited, v. OREGON RY. & NAV. CO.
• Court: U.S. District Court — District of Oregon

23 F. 232

OREGONIAN RY. CO., Limited, v. OREGON RY. & NAV. CO.

United States Circuit Court, D. Oregon.

March 18, 1885

John W Whalley and William B. Gilbert, for plaintiff.

Cyrus Dolph and Charles B. Bellinger, for defendant.

James C. Carter also submitted a written brief for defendant.

DEADY J.

This action is brought by the plaintiff, a corporation alleged to have been formed in Great Britain under the Companies Act of 1862,' against the defendant, a corporation formed under the Oregon corporation act of 1862, to recover the sum of $68,131, alleged to be due the plaintiff on a lease of its railway, in Oregon, commonly called the 'Narrow Gauge' road, for the half year commencing May 15, 1884. The case was before this court in December last, on a motion to strike out the second amended answer of the defendant as 'frivolous and immaterial,' and for judgment on the complainant, which was denied, for the reasons then given. 22 F. 245. At the same time the defendant had leave to file a third amended answer, containing two additional defenses.

It appears from the amended complaint, filed on August 15, 1884 that the plaintiff became a corporation on April 30, 1880, by certain persons making and delivering for registry, under the companies act aforesaid, a 'Memorandum of Association' and 'Articles of Association,' as therein alleged and set forth, with a registered office at Dundee, in Scotland, and power, among other things, to own purchase, construct, operate, lease, and sell any railway in Oregon; that the defendant became a corporation under the Oregon act aforesaid on June 13, 1879, by certain persons making and filing articles of incorporation as therein alleged and set forth, with its principal place of business at Portland, in Oregon, and power, among other things 'to purchase or consolidate with, or lease or operate and maintain, on such terms as may be amended upon,' any railway in Oregon; that on August 1, 1881, the plaintiff was the owner of a certain railway in Oregon, and then demised the same to the defendant, by an instrument in writing, for the term of 96 years, for and upon a yearly rent of 28,000 pounds sterling, which rent the defendant thereby expressly agreed to pay the plaintiff in half-yearly installments in advance, and that the defendant, by its proper officers, duly executed said instrument,-- they being first thereunto duly authorized by a vote of the directors; and that the defendant thereupon entered into the possession of said railway and operated the same, but has failed and refused to pay the installment of rent falling due on May 15, 1884.

It is also stated in the complaint that on said last-mentioned date the defendant, pretending that neither party to said lease was authorized to execute the same, offered to restore the demised property to the plaintiff, but not in as good a condition as when received by the defendant, which offer the plaintiff refused to accept; and thereupon, to prevent the loss and injury that might result from suddenly discontinuing the operation of the road, it was agreed between the plaintiff and defendant that the latter should retain the possession thereof, and continue to operate the same, for a period of six months thereafter, during which time this action was commenced, to-wit, on June 28th; but neither such agreement, nor the action of either party thereunder, was to in any way prejudice its claim or contention as to the validity of said lease, or affect its rights in the former one, the defendant admits that it is a corporation, formed under the laws of Oregon, and that its president and assistant secretary signed the writing aforesaid, and affixed thereto the corporate seal, in pursuance of a resolution of its directors, alleged in the complaint; that in pursuance of said writing it entered into the possession of said railway, and operated the same and paid the rent therefor, as therein provided, until May 15, 1884, when it offered to return the same to the plaintiff, which offer was declined, and that it has since retained the possession thereof only under a special agreement with the plaintiff, as above stated; that the said companies act of 1862 is correctly set forth in the amended complaint, and that it comprises all the law of Great Britain touching the power and authority of corporations created or existing under the laws thereof; and denies--

(1) That the defendant is or ever was a corporation formed or existing under the companies act of 1862, or otherwise, or at all; (2) that neither said companies act, nor any other law of Great Britain, confers on the plaintiff the power to lease said railway; (3) knowledge or information sufficient to form a belief, (a) as to whether a memorandum or articles of association were made and delivered for registry in pursuance of said companies act of at all, (b) or as to whether the plaintiff has a registered office at Dundee, in Scotland; (4) that the plaintiff is or ever was authorized to own, purchase, construct, operate, lease or sell any railway in Oregon; (5) that either the plaintiff or defendant ever had the power or authority to execute said instrument in writing or any indenture for the leasing of said railway, or that the stockholders of the defendant ever authorized or assented thereto, and that said 'pretended lease was and is unauthorized and void,' and that any sum of money is due the plaintiff from the defendant; and avers 'that is has fully paid the rental provided for in said pretended lease' for the period during which it held possession of said railway thereunder, to-wit, for the term ending May 14, 1884.

The further defenses contained in the answer are briefly these:

(1) The railways which 'the defendant was and is organized to construct and operate, and the termini of which were specified in its articles of association,' are east of Portland, and do not embrace the railway alleged to have been demised to the defendant, nor any one to the south of said city, and that said railway forms no part of and has no 'near connection' with the said roads of the defendant. (2) That prior to the execution of said pretended lease 'the capital of the defendant had been contributed and applied in the construction and equipment' of railways, the termini of which are specified in its articles of association, and which have 'no near connection' with the one mentioned in said lease; and that said lease was never authorized or assented to by the stockholders of the defendant, and was a wholly unauthorized attempt by the officers thereof 'to divert and subject the capital of defendant to a wholly new object and enterprise not contemplated when said capital was contributed and expended.'

The plaintiff demurs to this answer:

(1) To so much thereof as denies the corporate existence or due organization of the plaintiff, or its power to make the contract herein sued on, for that the defendant ought not to be allowed or heard to say or allege the same contrary to its deed of August 1, 1881, as aforesaid; (2) to so much thereof as denies the power and authority of the defendant to make said contract, for that the same does not constitute a defense; and (3) to the first and second special defenses therein, for that 'the new matter therein set up' does not constitute a defense.

The plaintiff also moves to strike out certain portions of the answer, as follows:

(1) The admission that the defendant is and was a corporation under the laws of Oregon, coupled with the denial that it ever had the power to purchase or lease a railway in Oregon, because the admission is redundant, and the denial sham and frivolous; (2) the admission that the defendant entered into possession of the railway under the alleged lease, coupled with the denial that the possession has been held thereunder since May 15, 1884; (3) the denial that at the time the defendant offered to restore the road to the plaintiff, it was not in as good condition as when received by the defendant, because the same are frivolous and irrelevant; and (4) 'the rest and residue' thereof, not hereinbefore asked to be stricken out or included in the demurrer thereto, because the same is irrelevant.

The demurrer and motion were argued by counsel and submitted together.

This is substantially an action on the covenant of the defendant, contained in the lease, to pay the rent therein reserved, and its liability thereon does not depend on its use or occupation of the property. Mills v. Auriol, 1 Smith, Lead.Cas. 910. Therefore the allegations in the pleading concerning the special agreement under which the defendant has operated the road since May 15, 1884, are immaterial and not relevant to the controversy involved in the action. And the same may be said of the allegations concerning the plaintiff's compliance with the laws of this state concerning foreign corporations doing business herein, as there are no laws on the subject applicable to the plaintiff. Oregon & W.T. & I. Co. v. Rathbun, 5 Sawy, 32.

When the case was before the court on the motion to strike out the answer, counsel for the plaintiff made the point that the denial of the plaintiff's corporate existence was a plea in abatement, and therefore waived by being pleaded with matter to the merits. But the court, admitting the rule, held that the matter was pleaded in bar, as it might be, and refused to strike it out. 22 F. 248. In the brief now filed in the case, counsel returns to the argument, and insists that this denial of the corporate existence is a plea in abatement, citing Conrad v. Atlantic Ins. Co. 1 Pet. 450, where it is said that a plea to the merits admits the capacity of the plaintiff to sue, and that a want of corporate capacity should be taken advantage of by a plea in abatement. But...