Pullman Palace 8212 Car Co v. Central Transp Co

CourtUnited States Supreme Court
Citation18 S.Ct. 808,171 U.S. 138,43 L.Ed. 108
Docket NumberNos. 141 and 496,s. 141 and 496
Decision Date31 May 1898

171 U.S. 138
18 S.Ct. 808
43 L.Ed. 108



Nos. 141 and 496.
May 31, 1898.

On Certiorari to the United States Circuit Court of Appeals for the Third Circuit.

Page 139

The record in this case shows that in 1870 the Central Transportation Company (hereafter called the 'Central Company') was a corporation which had been in 1862 incorporated under the general manufacturing laws of the state of Pennsylvania. It was engaged in the business of operating railway sleeping cars, and of hiring them to railroad companies, under written contracts, by whcih the cars were to be used by the railroad companies for the purpose of furnishing sleeping conveniences to travelers. The corporation at this time had contracts with a number of different railroad companies in the East, principally, but not exclusively, with what is known as the 'Pennsylvania Railroad System,' and it had been engaged in its business with those companies for some time prior to 1870. In the year last named, the Pullman's Palace-Car Company (hereafter called the 'Pullmen Company') was a corporation which had been incorporated under the laws of the state of Illinois. It was doing the same general kind of business in the West that the Central Company was doing in the East. For reasons not material to detail, the two companies entered into an agreement of lease, which was executed February 17, 1870.

By its terms the Central Company leased to the Pullman Company its entire plant and personal property, together with its contracts which it had with railroad companies for the use of its sleeping cars on their roads, and also the patents belonging to it. The lease was to run for 99 years, which was the duration of the charter of the Central Company.

It was also agreed that the Central Company would not engage in the business of manufacturing, using, or hiring sleeping cars while the contract remained in force.

In consideration of these various obligations, the Pullman Company agreed to pay annually the sum of $264,000 during the entire term of 99 years, in quarterly payments, the first quarter's payment to be made on the 1st of April, 1870.

Page 140

From the time of the execution of the contract, its terms were carried out, and no particular trouble occurred between the companies for about 15 years. During this time, and up to the 27th day of January, 1885, the Pullman Company paid to the Central Company, as rent under the contract, the sum of $3,960,000, without any computation of interest. About or just prior to January, 1885, differences arose between the companies. The Pullman Company claimed the right to terminate the contract under the eighth clause thereof, or else to pay a much smaller rent. The merits of the controversy are not material.

The two companies not agreeing, and the Pullman Company refusing to pay the rent stipulated for in the lease, the Central Company brought successive actions to recover the instalments of rent accruing. In one of them the Pullman Company pleaded the illegality of the lease, as being ultra vires the charter of the Central Company. The plea prevailed in the trial court, and upon writ of error the judgment upholding this defense was, in March, 1891, sustained in this court. Central Transp. Co. v. Pullman's Palace Car Co., 139 U. S. 24, 11 Sup. Ct. 478.

After the bringing of several actions for installments of rent by the Central Company, and before the question of ultra vires had been argued in this court, the Pullman Company, on the 25th day of January, 1887, commenced this suit by the filing of its bill against the Central Company in the circuit court of the United States for the Eastern district of Pennsylvania. The bill asked for an injunction to restrain the bringing of more suits for rent. It gave a general history of the transactions between the companies from the execution of the contract betweent hem, in February, 1870, down to the time of the filing of the bill; and it alleged the election of the Pullman Company to terminate the lease under the provisions of the eighth clause thereof, and the willingness of the company to pay what should be found by the court to be equitable and right to the Central Company on account of the property which had been transferred by that company to it, and to this end it prayed the aid of the court. The bill also contained the following allegation:

Page 141

'And your orator shows that in said lease it is recited that the said contract of lease is made on the part of the defendant, the said Central Transportation Company, under an act of the general assembly of the commonwealth of Pennsylvania therein named, approved the 9th day of February, A. D. 1870, a copy whereof is hereto attached, marked 'Exhibit G,' and referred to as part of this bill; but your orator is advised, and therefore submits it to the court, that the said lease, being a grant, assignment, and transfer of all the property, contracts, and rights of the said defendant, the Central Transportation Company, and including a covenant on the part of said defendant corporation not to transact during the existence of said lease any of the business for the transaction of which it was incorporated, was never legally valid between the parties thereto, but was void for they want of authority and corporate power on the part of the defendant to make the said contract of lease, and because the same was in violation of the charter conferring the corporate powers of said defendant, and of the purpose of its incorporation, as by the said charter, to which, for greater certainty, reference is made, your orator is advised it will appear; that the said contract of lease was never susceptible of being enforced in law by your orator against said defendant, and cannot therefore be construed and held to continue in force and obligatory upon your orator; and that your orator can be under no other legal obligation or equitable duty to the defendant than to return such of the property assumed to be demised as is capable of being returned, and to make just compensation for such other of said property as under the said contract of lease it ought to make compensation for, which it is willing and now offers to do.'

In the prayer for relief it was also asked:

'That the court may consider and decree whether said contract of lease was not made without authority of law on the part of the defendant, and in excess of its corporate powers, and in violation of its corporate duties, so as not to be enforceable against your orator beyond the obligation of your orator to make return of or just compensation for the property

Page 142

demised; and that an account may be taken between your orator and defendant; and that the amount may be ascertained that should be paid by your orator to the defendant on any account whatever; * * * and that an accounting may be had between your orator and defendant as to all the matters and things set out in this bill.'

The Central Company answered the bill, denying many of the material allegations therein contained. It denied that the Pullman Company had ever elected to terminate the lease under the provisions of the eighth clause thereof, and it alleged that the lease was still in existence, and that it had the right to recover from the Pullman Company the amount of the rent named in the lease, and that no valid agreement had ever been made between the companies in any way altering the lease or reducing the amount of the rent payable thereunder. It denied that the lease was illegal, and it alleged that, even if it were, the illegality did not justify the complainant in applying for any equitable relief whatever.

Upon application on the part of the Pullman Company, the court granted an injunction restraining the bringing of suits for the collection of rent accruing after July, 1886, but it declined to enjoin those already pending for rent accruing before that dae .

After considerable proof had been taken upon the issues involved in this suit, and after the decision of the other case in this court, in March, 1891, holding the lease illegal and void, the complainant herein, on the 25th of April, 1891, applied to the court for leave to dismiss its bill at its own cost. This application was opposed by the defendant, who, on the same day, moved for leave to file a cross bill, in which it said it would avail itself of the tenders of relief made by the complainant in its bill, and that it would pray such relief in its cross bill as might be pertinent to the case made by the bill. In December, 1891, complainant's motion for leave to dismiss its bill was denied, and the defendant's motion for leave to file a cross bill was granted. Thereupon the cross bill was filed, in which the Central Company, acknowledging, under the decision of this court, that the lease in question was void,

Page 143

claimed to avail itself of the tenders made in complainant's bill upon the subject of the return of its property and compensation for that which it was impossible to return, and claimed, among other things, that the Pullman Company should account for all the profits which it had derived since the making of the lease by the use of the property transferred to it under the agreement, and that the amount found due should be paid to the Central Company, and that the Pullman Company should be adjudged to be a trustee for the Central Company of all the contracts for transportation, whether original, new, or renewals, held by the Pullman Company with railroad companies with which there were contracts of transportation with the Central Company at the time of the making of the lease in February, 1870, and that the Pullman Company should be adjudged to pay the Central Company all such sums as should be due to it by the Pullman Company as such trustee, and that defendant should in the future from time to time account for the sums which should be due by reason of future...

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