Samuel Pearce, Plaintiff In Error v. the Madison and Indianapolis Railroad Company and the Peru and Indianapolis Railroad Company

• Decision Date: 01 December 1858
• Citation: 16 L.Ed. 184,21 How. 441,62 U.S. 441
• Parties: SAMUEL PEARCE, PLAINTIFF IN ERROR, v. THE MADISON AND INDIANAPOLIS RAILROAD COMPANY AND THE PERU AND INDIANAPOLIS RAILROAD COMPANY
• Court: U.S. Supreme Court

62 U.S. 441

21 How. 441

16 L.Ed. 184

SAMUEL PEARCE, PLAINTIFF IN ERROR, v. THE MADISON AND INDIANAPOLIS RAILROAD COMPANY AND THE

PERU AND INDIANAPOLIS RAILROAD COMPANY.

December Term, 1858

THIS case was brought up by writ of error from the Circuit Court of the United States for the district of Indiana.

The case is stated in the opinion of the court.

It was submitted, on printed arguments, by Mr. O. H. Smith and Mr. Fox the plaintiff in error, and Mr. Hendricks for the defendants.

Mr. Justice CAMPBELL delivered the opinion of the court.

The defendants are separate corporations, existing under the laws of Indiana, and were created to construct distinct lines of railroad that connect at Indianapolis, in that State. The plaintiff is the assignee of five promissory noties, that were executed under conditions set forth in the declaration, and of which he had notice. The two corporations, (defendants,) some time before the date of the notes, were consolidated by agreement, and assumed the name of the Madison, Indianapolis, and Peru Railroad Company, and under that name, and under a common board of management, conducted the business of both lines of road.

While the business of the two corporations was thus directed and managed, the president of the consolidated company gave these notes in its name in payment for a steamboat, which was to be employed on the Ohio river, to run in connection with the railroads. After the execution of the notes, and the acquisition of the boat, this relation between the corporations was dissolved by due course of law, and, at the commencement of the suit, each corporation was managing its own affairs. The plaintiff claims that the two corporations are jointly bound for the payment of the notes, but the Circuit Court sustained a demurrer to the declaration.

The rights, duties, and obligations of the defendants are defined in the acts of the Legislature of Indiana under which they were organized, and reference must be had to these, to ascertain the validity of their contracts. They employer the defendants respectively to do all that was necessary to construct and put in operation a railroad between the cities which are named in the acts of incorporation. There was no authority of law to consolidate these corporations, and to place both under the same management, or to subject the capital of the one to answer for the liabilities of the other; and so the courts of Indiana have determined. But in addition to that act of illegality, the managers of these corporations established a steamboat line to run in connection with the railroads, and thereby diverted their capital from the objects contempleted by their charters, and exposed it to perils, for which they afforded no sanction. Now, persons dealing with the managers of a corporation must take notice of the limitations imposed upon their authority by the act of incorporation. Their powers are conceded in consideration of the advantage the public is to receive from their discreet and intelligent employment, and the public have an interest that neither the managers nor stockholders of the corporation shall transcend their authority. In McGregor v. The Official Manager of the Deal and Dover...