KFV 301 .9 m B47 BENNETT OPINION IN THE CASES OF BYRON STEVENS, Vs THE RUTLAND AND BURLINGTON RAILROAD. Cornell University Library KFV 301.9.R8B47 Opinion of the Chancellor, in the case o 3 1924 024 709 663 G}nrne 11 ICaui l^rljnol library THE OPINION OF THE CHAICELLOE, * IN THE CASE OP BYRON STEVENS vs. THE RUTLAND AND BURLINGTON RAIL- ROAD COMPANY AND OTHERS. B URLINGTON . CHAUNCBY GOODBICH. 1851. IN GHANCEEY. MILO L. BENNETT, Chancellor. BYRON STEVENS vs. THE RUTLAND AND BURLINGTON RAIL- ROAD COMPANY AND OTHERS. This is a bill preferred before the Chancellor of the third Judicial Circuit, against the Rutland and Burlington Rail Road Company and three of its Di- rectors, by a Stockholder in the Company ; the object of which is to obtain an injunction against the Defendants, restraining them from applying the funds of the Corporation, or pledging its credit, for the purpose of constructing a Railroad from Burlington, in the County of Chittenden, to Swan- ton, in the County of Franklin. It appears that the Legislature of this State, at their session in 1843, granted a Charter of Incorpo- ratio'n to divers individuals, and to their successors, STEVENS VS. THE RUTLAND AND for the purpose of building- a Railroad from some point in Burlington, through the Counties of Addison, Rutland, and Windsor or Windham, to some point on the west bank of the Connecticut River, under the name of the Champlain and Connecticut River Railroad Company. This name was subsequently changed by the Legislature, to the Rutland and Burlington Railroad Company. The Charter, among 1 other things, provides that the Capital Stock of the Company shall be one Million of Dollars, with the right in the Corporation to increase it to an amount sufficient to complete said road, and fur- nish all necessary apparatus for conveyance. The Company, after having procured some minor amend- ments to the Charter, which it is not neces- sary to notice, caused the books to be open- ed, the stock to be taken, and organized in due time, under the law, and have caused the road to be constructed, and it has for some time been in suc- cessful operation. The plaintiff, upon opening the books, subscribed for five shares of the capital stock, has regularly paid his subscription, each share being one hundred dollars, and he has ever since been -the owner of said shares. After this road was constructed, and while in operation, the Legislature of this State passed an additional act to authorize this Corporation to extend their Railroad, at any time within three years, from Burlington to BURLINGTON RAILROAD COMPANY. Swanton, in the County of Franklin, it being a distance of about thirty miles. This additional act also provides, that the Corporation, in the con- struction of this extension, shall have all the rights and privileges, and be subject to all the liabilities contained in the original Charter, and the previous supplementary acts. The orator then proceeds to allege, that the Directors, who are made parties to this Bill, and without authority from the Board of Directors or from the Corporation, and without any previous notice, and in bad faith, and for the purpose of prejudicing the interests of the share- holders, procured the Legislature to pass this ad- ditional act of 1850, and have caused it to be ac- cepted by the Board of Directors ; and that the Di- rectors have caused a meeting of the stockholders to be called, to see if they will accept of this act, as an amendment of their Charter ; and that they threaten, if this act shall be accepted by a majority of the Corporation, that they will proceed imme- diately in the construction of this extension, and for that purpose will apply the funds and pecuniary resources of the Corporation, and pledge its credit, to whatever extent they shall find it necessary, to effect the object ; and this too without the consent and against the will of the minority of the. stock- holders, and particularly of the orator, who alleges that he has not and will not consent to accept of 6 STEVENS VS. THE RUTLAND AND said act of 1850, and construct said extension, and that he has ever since the passage of the act re- quested the defendants to desist from the same. These are the material facts stated in the Bill; which has been verified by affidavit. No affidavits have been filed on the other side, and no application for a delay of the hearing, for the purpose of an- swering the Bill ; and since it has been pending be- fore the Chancellor, it appears the Corporation, at a meeting previously called for that purpose, have voted to accept of the act of 1850, as an amend- ment of their Charter. The question is, can the orator, upon such a state of facts, claim, at the hands of the Chancellor, his injunction 1 It is an admitted principle, that in partnerships, and joint stock associations, they can not by a vote of the majority change or alter their fundamental articles of copartnership or association, against the will of the minority, however small, unless there is an express or implied provision in the articles them- selves that they may do it. It is equally well settled, that a court of Chancery will, upon the ap- plication of an individual member of a partnership, or joint stock association, restrain, by injunction, the majority from using the funds or pledging the credit of the partnership or association in a business not warranted, and not within the scope of their BURLINGTON RAILROAD COMPANY. fundamental articles of agreement. Courts of equity treat such proceedings by a majority, as a fraud upon the other members, which they will neither sanction or permit. To prevent the com- mission of fraud, by injunction, has been one of the earliest and most appropriate heads of equity juris- diction, as well as to relieve against it, when com- mitted. It was upon this principle that Lord El- don, when High Chancellor, upon the application of a humble individual member of a Company, which had been organized for the purpose of carrying on a Fire and Life Insurance business, restrained the Company, by injunction, from embarking also in the Marine Insurance business ; though the applicant had paid into the funds of the Company only £150 as a deposite upon fifteen shares : and the Company gotten up by the Rothschilds, of England, and com- posed of six or seven hundred individuals, with a capital of five millions sterling. See Natusch vs. Irving and others. Gow on Part. Appendix, p. 576. The same principle was applied to a corporation by the Vice Chancellor, and by Lord Chancellor Brougham, in the case of Ware vs. The Grand Junction Water Company. 2 Rus. and Mylne, 461 S. C. 13 Cond. Ch. Rep. 126. The Vice Chancellor, upon the application of a single share-holder, re- strained the Corporation, not only from embarking their funds and credit in a matter beyond the pro- 8 STEVENS VS. THE RUTLAND AND visions of their Charter, but also from applying to Parliament for a change in the Charter, which would warrant it. The change desired to be made in that case was, that the Company might be en- abled to get their supply of water by means of an aqueduct from the river Colne, instead of the riv- er Thames, as authorized to do under their original Charter. Lord Brougham, on appeal, dissolved that part of the injunction, it is true, which restrained the Company from applying to Parliament for an al- teration of the Charter in the particular desired, but retained the residue of it. So in CunlifF vs. The Manchester and Bolton Canal Company, 13 Cond. Equity Rep. 131. n. the Vice Chancellor re- strained the Corporation, upon the application of a share-holder, from applying to Parliament for a change in their Charter, to enable them to convert a portion of their Canal into a Railway, and from applying any of the corporate funds to the proposed object. It was well conceded, in the argument on the defence, that if the Corporation had been about to proceed to a construction of the contemplated exten- sion without the act of 1850, it would have been a proper case for an injunction. The only question which can be open to debate is, as to what shall be the effect of the act of 1850, and a subsequent adop- tion of the act by the Corporation, upon the individu- BURLINGTON RAILROAD COMPANY. al rights of a share-holder who does not assent to its adoption 1 If bound by it, there is no equity in this Bill. It is, and must be admitted, that the Legisla- ture have no constitutional power, unless it be re- served in the grant, to change or alter an act of in- corporation without consent, and thereby cast upon the Company new and additional obligations, or take from them rights guaranteed under the original Charter. And indeed this the Legislature have not attempted to do. It is also equally true, that it is a part of the law of Corporations, that they act accor- ding to the voice of the majority. But it is to be re- membered, that this is not a suit in which the plain- tiff seeks to protect himself in any corporate right, but in his own individual right, growing out of the fact of his having become a corporator, by his subscrip- tion, and its payment, to the capital stock of the Company. One of an aggregate Corporation may contract with the Company, as well as a third per- son ; and the rights of the individual so contracting are no more distinct and independent, in the one case, than in the other. The plaintiff, by his sub- scription, assumed to pay to the Corporation, and only for the purpose specified in the Charter, its amount, according to the assessments ; and there was at the same time a trust created, and an implied assumption, on the part of the Corporation, to apply it to that object, and none other. The Corporation al- 2 10 STEVENS VS. THE RUTLAND ANH so assumed upon themselves to account to this cor- porator for his share of the dividends, when this road should be completed and put in operation ; and for his share of capital stock, though not innumero. The Charter, in this case, gives to the State the right to purchase out the road, of the corporation, after a given number of years, upon certain terms therein specified. The relation between each original share- holder and the Corporation is the same. The obli- gation of the contract between the Legislature and the Corporation, after an acceptance of the Charter, is no more sacred than that which is created be- tween the Corporation and the individual corporator. Does any one suppose the Legislature could, with- out the consent of parties, absolve a corporator from liability on his subscription to the Corporation, or modify it 1 and can they do the reverse of it 1 It is conceded that there is a class of alterations in a Charter, which the Corporation may obtain and adopt, that would not so essentially change the con- tract as to absolve the corporator from his subscrip- tion, or give him a right to complain in a court of justice, in case he had previously paid it. Where the object of the modification or alteration of the Charter is auxiliary to the original object of it, and designed to enable the Corporation to carry into execution the very purpose of the original grant, with more facility and more beneficially than they BURLINGTON RAILROAD COMPANY. 11 otherwise could, the individual corporator can not complain ; and I should apprehend it would make no difference with the rights of a Corporation, in such a case, though he could show that the Charter, as amended, was less beneficial to the corporators than the original one would have been. The ground upon which such amendments bind the corporator, I deem to be his own consent. When he becomes a corporator by his signing, for a portion of the cap- ital stock, he in effect agrees to the by-laws, rules, and votes of the Company, and there is an implied as- sent, on his part, with the Corporation, that they may apply for, and adopt, such amendments as are with- in the scope, and designed to promote the execu- tion of the original purpose ; and he signs, and the Corporation receive his subscription, subject to such implied contingency : and if we regard it in the na- ture of a license only, it would hot alter the principle. Both parties having acted upon it, it would not be countermandable. But suppose the object of the alteration is a. fun- damental change in the original purpose, and de- signed to superadd to it something which is beyond and aside of it ; does the same principle apply 1 In the case of the Union Lock and Canal Company vs. Towne, 1 N. H. Rep. 44, the Company, under an act of the Legislature of New Hampshire, passed Dec. 1808, were incorporated for the purpose of ren- 12 STEVENS VS. THE RUTLAND AND dering the Merrimack river navigable from Reed's Ferry to Amoskeag Falls ; and in this Charter the Company were authorized to purchase and hold real estate not exceeding six acres, and to exact and collect toll for a period of forty years only, at a rate not averaging more than twelve per cent, per annum on the capital stock invested. In June, 1809, (the 23d) the Legislature passed an additional act, which took off all limitation as to the rate of toll, and time of its duration, and authorized the Company to purchase and hold real estate not exceeding one hun- dred acres. In 1812, the Legislature passed an- other act, conferring the right upon J. L. Sullivan and others, to lock Cromwell Falls, on the same river, which was a point not embraced within the termini of the act of 1808 ; but in other respects the acts were similar ; and in this act, Sullivan and his associates were authorized to transfer the Charter to the Union Locks and Canal Company, so as to be considered a mere addition to that Charter. It was transferred and accepted in August, 1813. The act of June, 1809, was passed upon the petition of the Corporation, and the defendant became a member of the Corporation in that sumner ; but whether before or after the 23d day of June, (the day of its passage) does not distinctly appear ; though the court say, from the declaration it appears all the assessments were made after that date, and a part after the pas- BURLINGTON RAILROAD COMPANY. 13 sage of the act of 1812 and the acceptance of it. It became material to pass upon the effect of both acts. The court, in a well considered opinion given by Judge Woodbury, held that each of the subse- quent statutes created such a fundamental change in the original Charter as to absolve the defendant from all liability for assessments made after the pas- sage of the additional acts ; there being no evidence to show that he had ever personally assented to them. In the Middlesex Turnpike Corporation vs. Lock, 8 Mass. Rep. 268, the court held that a variation and change in the course of the turnpike road, from that which was prescribed in the original Charter, was such a fundamental alteration as to absolve the subscribers from the payment of assessments made after the amendment to the Charter, upon a sub- scription for stock, made before. The supplementary act in that case was passed upon the application of the Directors of the Company, with the assent of the Corporation, at a meeting duly called for that purpose ; and the alteration proposed in the act, was in the course of the turnpike road from Bisket Bridge, in Tyngsboro', to the Fork, in Bedford. The court say, that the defendant was not bound by the application of the Directors to the Legislature for the alteration, nor by the consent of the Corporation thereto ; and that much fraud might be put in prac- 14 STEVENS VS. THE RUTLAND AND tice under a contrary decision. The court did not decide but what the Corporation had still remaining in them the legal right to sell the shares in such a case ; but it would be indeed an idle remedy, in a case where nothing had been paid, as in that. Be- sides, the purchaser would come in under the Char- ter, as amended. The case of the same Company vs. Swan, 10 Mass. Rep. 384, arose under the same Charter, as amend- ed, and was brought to recover assessments on Swan's subscription,, made after the amendment. The case differed from the one in the 8th vol. in this : Swan was a Director in the Company, and joined in the application to the Legislature for a change in the Charter, and when it was claimed by the counsel, that that fact, in connection with the fact that he was officially concerned in making the road under the amended Charter, was equivalent to an indi- vidual assent to the amendment, and bound him personally; the court say they can not admit the soundness of the position. They say that in the promise upon which the action is brought, the de- fendant stands as an individual, and in the promise, referred himself to what the Legislature had done, not to any probable subsequent grant ; and that there is no express consent to the change, and none can be implied ; for the defendant might have been con- trolled by the will of the majority, or if he concurred BURLINGTON RAILROAD COMPANY. 15 in-the votes and proceedings of the Corporation, it was as a corporator, not carrying- with it his individ- ual concurrence ; and judgment was entered up for the defendant. It might perhaps be thought that this . was spinning rather fine ; but we have no occasion to pass upon the soundness of the view taken in this particular. See also the same plaintiff vs. Walker, 10 Mass. Rep. 390. I can not see that the case of Re- vere vs. the Boston Copper Company, 15 Pick. Rep. 351. 363., cited by the defendant's counsel, makes for them, but rather the reverse. The object of the suit was to recover an indemnity, which the plaintiff claimed he had sustained in consequence of the de- fendant's refusal to employ him, and pay him a sala- ry agreeably to a special promise which he had made with them, which by its terms was limited to the time for which the Corporation was established, pro- vided the plaintiff should so long live, and continue to perform his part of the agreement. The plaintiff was a stockholder, and took charge of the business as the agent of the Company. The business of the Company proved unprofitable, after a trial of more than four years, and a majority of the Corporation, voted to dissolve the Company, and wind up its con- cerns ; and for that purpose appointed trustees, and assigned their effects. They also discharged the plaintiff from their service, and gave notice to the executive department of the Government, that they 16 STEVENS VS. THE RUTLAND AND claimed no further interest in the Charter: By the by-laws, the officers held their offices for one year, and until others were appointed. The court said, the Corporation was not dissolved; and that the plaintiff, though one of the Corporation, was not bound by the vote of the majority. So far as an ag- gregate corporator, he might be bound, they say ; but treating him as an individual, with individual rights, he was not bound by the majority vote. This is a strong case to show the distinction, and the plaintiff had his damages allowed him after he was discharged by the majority vote,, by reason of the defendants' refusing to employ him. , The case of the Hartford and New Haven Rail- road Company vs. Croswell, 5 Hill, 385, has an im- portant bearing upon the one before us. The amend- ment in that case to the original Charter, authorized the defendant to purchase, hold, and run upon the Sound, Steamboats, in connection with their Rail- way, and gave the Company, for that purpose, an increase of capital not exceeding $200,000. This seems to be nothing more or less, so far as principle is concerned, than an extension of the terminus of the road at New Haven, by steam power, on the Railroad which the God of nature has made, instead of a Railroad by land, constructed by the art of man. This amendment was accepted both by the Direc- tors of the Company and by the Corporation, con- BURLINGTON RAILROAD COMPANY. 17 vened for that purpose ; and yet it was held that the alteration was fundamental, and absolved the de- fendant from all liability for the assessments on his stock; there being no evidence that the defendant had personally assented to an acceptance of the amendment. In that case the assessments were made, and had become payable, and had been de- manded of the defendant, before the amendment of the Charter. Ch. J. Nelson, in his opinion, lays down this general proposition, " that Corporations can ex- ercise no power over the corporators, beyond those conferred by the Charter to which they have sub- scribed, except on the condition of their agreement or consent." This is a sound proposition. The consent or as- sent may, however, be implied in a class of cases, as has already been stated, where the amendment is not regarded as fundamental, and can be brought within the scope of the original purpose of the asso- ciation ; and this is going to the very verge of the powers of the Corporation. It is difficult, and would be unwise, to attempt to lay down any general rules to determine in what precise cases the assent of the corporator should be implied, and in what not. It is sufficient for the present purpose to say, that his assent can not be implied, in a case like the present, from a majority vote. Courts may differ, and doubt- less will, in regard to what alterations shall be suf- 3 18 STEVENS VS. THE RUTLAND AND ficient to constitute a fundamental change. But in the present case, I think, on this point there can be but one opinion. The termini of the road, as fixed by the Charter, are, Burlington, and some point on the west bank of Connecticut River, in the County of Windsor or Windham. The capital stock is one million of dollars, with a right in the Corporation to increase it to an amount sufficient to complete said road, and furnish the necessary apparatus for con- veyance. The supplementary act of 1850 purports to authorize the Corporation, within three years, to construct and extend their Eailroad from the ter- minus in Burlington, to some point in Sw'anton, in the County of Franklin, a distance of about thirty miles ; and the act provides that in the construction of the road, they shall have all the rights and privi- leges, and be subject to all the liabilities, contained in their original Charter, and the acts in addition to it. The franchise granted to this Company was ter- ritorial ; and an extension of the termini necessarily is an extension of the franchise. It cannot remain the same thing in substance, until it can be establish- ed, that a part is equal to the whole. Besides, the Company may increase the capital stock, to such ad- ditional sum as shall be necessary to construct the extension. The statute of 1850 is little less in effect, if any BURLINGTON RAILROAD COMPANY. 19 thing 1 , than an attempt to create in a summary man- ner, and by way of reference, a new Corporation; and to transfer all the old corporators to it. If all the corporators had assented to this transfer, it was well enough. The change in the purpose, was not more fundamental in the case from the 5th of Hill, than in this. It is not necessary that the business should be changed in kind, to change the original purpose. If this is not a change in purpose, it would not be, to extend the road in one direction to Can- ada line, and in the other to Massachusetts line ; and there would be no limits to the control, which the Corporation might acquire over the individual cor- porators, and this, too, without their consent, except what arises from the confines of Legislative au- thority. The change then in the Charter, being fundamen- tal, and the Corporation not being able to bind the plaintiff" by a majority vote, what must be the re- sult 1 If he had been sued for an assessment upon his stock, he might have claimed, that he was absolv- ed from all liability upon the acceptance of the amendment. And is not this reasonable 1 Shall it be said, that the Legislature and the Corporation have power to embark this corporator in a specula- tion to which he has never consented 1 If it can be done in one case, it can in another. But having paid his funds into the Corporation, he has a right in 20 STEVENS VS. THE RUTLAND AND Chancery to compel a faithful performance of the (rust by the Corporation, in conformity to the origi- nal Charter, and to keep them within its purview. No one can suppose, that upon the payment of his subscription, the personal identity of the plaintiff was merged in the Corporation, or that he ceased to have distinct and independent rights. In Rex vs. Eastern Counties Railway Company, 1 Railway Cases, 509, the King's Bench issued a mandamus, upon the application of a minority, against the Com- pany, directing them to proceed in the construction of a railroad, which had been chartered, between two points, the Corporation having stopped short of one of the termini, and voted to go no further. In the case before us, it must follow, if the plain- tiff is not bound by the conjoined effect of the act of 1850, and a majority vote of the Corporation, the defendants can stand on no better ground, than a voluntary association, who are about to go beyond and aside of their original articles, against the will of a minority. This, in effect, was conceded in the argument. There was nothing improper in the pas- sage of the act of 1850, though upon the application of a portion of the Directors of the Company, as stated in the bill. No attempt is made by the Leg- islature to impair the obligation of any contract between themselves and the Corporation, or to cast upon the Company any new and additional burthens BURLINGTON RAILROAD COMPANY. 21 without their consent. There was no attempt to impair any contract arising- under the prior Charter, between the Corporation and the corporator as an individual, or disturb any vested right in either. The act is not mandatory ; and there is, in fact, an implied condition annexed to it, that it is to be ac- cepted by all whose individual and corporate inter- ests are to be affected by it, before it shall become operative. But suppose this act had been manda- tory upon the Corporation and the several stock- holders, to build this extension in the road within three years ; would not all cry out against its palpa- ble injustice 1 Suppose, instead of this, the Legis- lature had left it optional with the Corporation to accept or reject the act of 1850, and had provided, that in case of the acceptance of the amendment by the Corporation, it should bind the corporators who dissented from it, or did not assent to it, and this too in their individual rights ; would there not be the same reason to cry out against it 1 Would it not, by its carrying a stockholder into an enterprise which he had never consented to, and changing the principles of liability between the Corporation and the individual corporator, from what they were under the original compact, impair and disturb vest- ed rights under it 1 I have no hesitation in saying, that, in my opinion, it would be beyond the pale of the constitutional authority of the Legislature. 22 STEVENS VS. THE RUTLAND AND In Ellis vs. Marshall, 2 Mass. Rep. 269, it was held that no man could be made, by act of legisla- tion, a member of an aggregate corporation without his personal consent : and the same principle would seem to apply, when he is asked to remain and become a corporator under a supplementary act, to be attached to and become a part of the Charter, where that ; which it is proposed to superadd is vital, and constitutes a fundamental change in the Char- ter ; which is but the constitution of the Company. The case of Gray vs. Monongahela Navigation Company in Error, 2 Watts and Sergeant, p. 150, has been much relied upon in the defence. The purpose of the incorporation, as specified in the grant, was to construct a Lock navigation on the Monongahela river. In the Charter it was provided that the Company might raise their dams to a height not exceeding 4 1-2 feet ; and that no one stockholder should have, to exceed ten votes. Some three years after the passage of the act, a supple- mental act was passed, taking off the limitation as to the height of the dams, and permitting them to be raised to a height not exceeding eight feet, and pro- viding that a share-holder of a given amount might have twenty votes. The plaintiff became a subscri- ber for stock, soon after the Charter was given ; and the action was for certain instalments. The altera- tion was at the request of the Directors. It was BURLINGTON RAILROAD COMPANY. 23 claimed, that the alteration changed a most essential feature in the original Charter, and would absolve the defendant below from all obligation to pay his as- sessments. But the court held otherwise, and I do not know that I should differ from them. In regard to the provision in respect to a change in the ratio of votes, the answer given by the Judge at the Cir- cuit, in his charge to the jury, would seem to be con- clusive. He says, it was to correct a palpable blun- der in the first act, which made the section obscure and contradictory; and if the alteration disturbed the obligation of the contract, the act was so far void, and the contract left in force. The provision enlarg- ing the license as to the height of the dams erected in the river, was evidently in furtherance of the ob- ject of the original grant, which was to construct a Lock navigation. It might well be said, that the Corporation had an implied authority to obtain such an amendment to the original grant. In this very case, Ch. J. Gibson says, if the amend : ment extended to a change in the structure of the association, it would have been fatal ; and it was so held by that court in the Indiana and Ebensburgh Turnpike Company vs. Phillips, 2 Penn. Eep. 184. The change in the case of Irvin vs. The Turnpike Company, 2 Penn. Rep. 466, was in the location of a part of the road. This was held, by three judges against two, not to be such an alteration of the 24 STEVENS VS. THE RUTLAND AND grant as to be fatal ; and that an acceptance of the amendment by the Corporation would bind the in- dividual corporators. This case is opposed to the Massachusetts cases, and I am not ealled upon to say which I should be disposed to adopt. It is sufficient to say, that in the one case the court did not consider the alteration in the Charter as a fundamental change in the struc- ture of the association ; while in the other, it was so considered. And as this preliminary question is de- termined, so the result must follow. I apprehend neither the case of Lincoln and Kennebec Bank vs. Eichardson, 1 Greenleaf, 79, or of Foster et al vs. The Essex Bank, 16 Mass. Rep. 245, has any mate- rial bearing upon the question, to show that the plaintiff was bound individually by the majority vote of this Corporation. In these cases, there had been a general law, extending the charters of incorporated Banks for a specified time, and only for the purpose of their closing up their business. This law was attacked, as unconstitutional, by the Essex Bank, when sued by a creditor, after the expiration of their original Charter ; and it was well held, that the law only went to the remedy for existing rights, and in no possible way changed or varied the con- tract of any of the parties ; and it was binding upon the Corporation and the corporators, whether as- sented to or not. BURLINGTON RAILROAD COMPANY. 25 The case of Ware vs. The Grand Junction Water Company, 13 Cond. Chan. Sep. 126, has been re- lied upon to defeat the equity of this bill. The Vice Chancellor allowed a special injunction, in the terms of the prayer of the bill ; the first branch of which restrained the Company from making 1 any application to Parliament, or taking any other proceedings for obtaining such an alteration in the original Charter, as was desired ; and the second branch merely re- strained them from carrying those alterations into ex- ecution, independently of such legislative sanction ; or from using, or permitting to be used, the seal, name, funds, credit, and officers of the Company, with a. view to effect any such purpose, under their existing Constitution. The Lord Chancellor supported the injunction of the Vice Chancellor, so far as related to all such acts as were not authorized by the then present constitution of the Company ; but dissolved it, so far as to permit the Company, as a qua corpo- rate body, to apply to Parliament for an alteration in their Charter, so as to authorize the change desired ; but restrained them from applying their corporate funds to that purpose. The Chancellor proceeded up- on the ground, that it was an incidental right in the Corporators, as a qua corporation, to apply for such a change ; and that the plaintiff subscribed for stock, subject to such a contingency ; and that all the argu- ments touching the proposed change, were proper for 4 26 STEVENS VS. THE RUTLAND AND a Committee of the House of Lords, or Commons. He evidently goes upon the ground, that Parliament is the proper place to meet the question ; and that if Parliament decide to make the alteration proposed, it is binding upon all the Corporators. I apprehend, that the views expressed by the Lord Chancellor in that case, if sound, must rest upon one of two grounds : either that the change asked for in the Charter, was not a fundamental one, or else upon the ground of the transcendent powers of a British Parliament. It is said, by Lord Coke, " that the pow- er and jurisdiction of Parliament is so transcendental and absolute, that it cannot be controlled or con- fined, either for causes or persons, within any bounds ;" and in Steph. Elec. Law, vol. 1. p. 11, the doctrine is maintained, that the Statutes of the Realm are binding upon all the subjects, unless they are repugnant -to the laws of God ; and that they can only be dispensed with by the same authority of Parliament with which they were made. And though other writers have maintained the ground, that there are certain boundaries set to the exercise of even the supreme powers of a British Parliament ; yet it is not necessary particularly to consider this subject. It is evident that Lord Brougham in the case of Ware vs. The Grand Junction Water Works, grounds himself upon the sovereign and vncontrollable powers of the Parliament. The change in the Charter, ask- BURLINGTON RAILROAD COMPANY. 27 ed for in that case, would, under most if not all the de- cisions in this country, be regarded as a. fundamental one. The argument of Lord Brougham, at least in in one particular, does not seem very sound. He says : " The Company ought to have the power of ob- taining an alteration in their Constitution, or that the plaintiff ought to have come in as a member of it, under certain conditions and limitations." But would the conditions and limitations be more sacred than the Constitution itself 1 and if Parliament might change the Constitution, might they not dispense with the conditions and limitations. See Amer. Law Mag. vol. 6, p. 93. But with us, no Legislature can transcend the bounds of the Constitution. It is not a Constitutional tribunal, to hear and settle the rights of the parties, as Lord Brougham seems to consider the British Parliament. I apprehend, that in this State, no Court of Chancery would restrain a Corporation from applying to the Legislature for a fundamental change in their Charter; and a sufficient reason would be, that if the additional power and authority changed the Charter of the original con- tract, and defeated the vested rights of the stock- holders, the act would bind such of the stock- holders only as consented to the alteration. In the case of Coleman vs. Eastern Counties Bail- way Companies,10 Beavans' Rep. page l,the directors of the Railway Company, for the purpose of increas- 28 STEVENS VS. THE RUTLAND AND ing their business, proposed to guarantee certain profits, and to secure the capital stock of an intend- ed Steam Packet Company, who were to act in con- nection with the Railroad Company ; and it was held not to be within their power ; and they were re- strained by injunction, upon the application of a shareholder, even though it appeared that the share- holder was suing at the instigation of a rival Com- pany. The Master of the Rolls, Lord Langdale, says, " that such a circumstance, in itself, was not sufficient to prevent the orator from obtaining a special in- junction, upon the merits of his case." In the recent case of Munt vs. The Shrewsbury and Chester Rail- way Company, 3d vol. of English Rep. in Law and Equity, p. 144, the defendants, by various acts of Par- liament, were empowered to construct several rail- ways, and also to build wharves, and warehouses, for the purpose of the traffic of the Company, upon the banks of the River Dee. The Railway Company brought a bill into Parliament, to empower them to improve the navigation of the River Dee having no power to apply any of the capital of the Company to that purpose, under the original Charter. Upon the application of a single shareholder, it was held that the Directors could not apply any of their funds in improving the navigation of the River Dee, or in payment of the expenses of getting a bill through Parliament for that purpose ; and an injunction was BURLINGTON RAILROAD COMPANY. 29 granted to restrain them from so doing. In that case, it was a conceded fact, that the prosperity of the Railway Company depended materially upon the navigation of the river being kept in good condition, and that it was then in a state of deterioration ; and the Company had actually expended two thousand pounds upon the river, before the bill was brought. The Master of the Rolls says, " So far as the power of a court of Chancery extends, it has unalterably decided, that companies possessed of funds for objects which are distinctly defined by act of Parliament, cannot be allowed to apply them to any other pur- pose whatever, however beneficial or advantage- ous it, may appear to be to the Company, or to indi- vidual members of the Company." The injunction not only stayed them from expending any further sums of money upon the River, but from applying to Par- liament for an alteration of the Charter, at the ex- pense of the Corporation. In the 13th of Eng. Cond. Rep. 132, we have a short note of a case following the note of the case of Cunliff vs. The Manchester and Bolton Canal Com- pany, in which it is said, that soon after the Bill was filed by Cunliff, one Maudsley filed his bill against the same Company, and for a similar object ; and that the Vice Chancellor overruled a demurrer to this bill ; and that an answer was put in and upon a hearing upon the merits, the bill was dismissed. What were 30 STEVENS VS. THE RUTLAND AND the precise allegations in Maudsley's bill, cannot be ascertained from the note. All that is said is, that the bill was for a similar object as that of CunlifF. If the bill simply charged that the Company were about to apply, as a qua corporation, to Parliament, for an act to convert a portion of the Canal into a Railway, and that they threatened, when such act was obtain- ed, to apply their funds in changing the Canal into a Railway, the demurrer, upon the authority of the case of Ware vs. Grand Junction Water Company, was rightfully overruled. And if the answer not only denied the intention of the Company, to use any of the funds of the Corporation, or their credit, to ob- tain the alteration in the Charter, and also denied all intent to apply their funds to the making of such change, until the new act was obtained ; the bill should have been dismissed, upon the doctrine of Lord Brougham, that the act when obtained would be binding upon all the shareholders. But if this would be so in England, I have attempted to show, that it must be attributed to the uncontrollable power of their Parliament, and that it could not be so under our Constitution. If the bill alleged, that the Com- pany were about, not only to affix the corporate seal to a petition to Parliament, but also to use the corpo- rate funds to defray the expenses of getting the new act passed, as well as in converting the Canal into a Railway, and all this was not denied in the answer, BURLINGTON RAILROAD COMPANY. 31 the bill, upon the whole current of the English cases, should have been retained. The Rutland and Burlington Rail Road Company is hut a private Corporation, so far as the stockholders are concerned ; though as it regards the powers of the Legislature to authorize the taking of private property for public use, it may be said to be a qua public Corporation. The stock is owned by individ- uals who compose the Corporation, and from which they design to derive a profit ; and they manage the business in view to their own interest ; and it does not become a public Corporation, because the public interests may be incidentally promoted by it. In principle, it is like a turnpike, a canal, or bridge charter. Ten Eyck vs. Delaware and Raritan Canal Company, 3 Harr. (N. J.) Rep. 22. I think it is obvious beyond a reasonable doubt, upon principle and authority, that the plaintiff is not bound in his individual rights as a corporator, by force of the act of 1850 and the majority vote of the Corporation, without his individual assent. In the case of public Corporations, as in towns, counties, &c, a different rule may obtain. The distinction between private and public associations and corporations, has been well settled since the days of Lord Coke. (Coke Little. 181, b.) In case of public associations and corporations, the public good requires that the voice of the major- 32 STEVENS VS. THE RUTLAND AND ity should govern ; and hence, the power is more fa- vorably expounded than when created for private purposes ; and it would seem that public conven- ience required the adoption of such a rule. But in case of private associations and Corporations, it is not the doctrine, that a majority can bind the minor- ity in a matter beyond and aside of their original ar- ticles of association, or Charter of incorporation, un- less it be by special agreement giving such power, which must be a part of the original association. If, in a case like the present, the majority cannot bind the minority, it is plain that there is an equity in this bill, and that the defendants can stand in no better situation than if they had by a vote of the Company proceeded to build the extension, and to apply the funds and credit of the Corporation to that purpose, without any additional act of the Legisla- ture. The case of Livingstone vs. Lynch et al., 4 Johns. Ch. Rep. 573, was the case of a voluntary association, under the name of the North River Steam Boat Company ; and a majority, without the consent of the minority, changed by a vote, the articles of association, and proceeded in their business according to their new articles. The bill was brought by the plaintiff against the majority of the Company, to have the rights of the association reinstated on their for- mer basis ; and the Chancellor decreed the new ar- ticles null and void, and set up the old articles, and BURLINGTON RAILROAD COMPANY. 33 enjoined all further proceedings under the new articles. In the case of Natusch vs. Irving et al., which was also the case of a voluntary association, an injunction was allowed to restrain them from going into a busi- ness not within the scope of the original articles, in pursuance of a vote of the majority. And in that case, before the hearing, the defendant had offered to pay back all that the orator had paid into the Company, with interest from the date of the payment, and also to fully indemnify him against all loss, by the transactions of the Company, already had or thereafter to be had, in the business, which was beyond their original articles. Lord Eldon, to this part of the case, replies, in substance, that it is not competent, for any num- ber of persons, in a partnership (unless so provided for) formed for specified purposes, to effect that forma- tion by calling upon some of their partners to receive back their capital stock, and interest, and quit the concern — which, in effect, would be merely compell- ing them to retire upon such terms as should be dic- tated to them, so as to form a new Company ; and that it is the right of a partner, to hold his associates to the specified purposes, whilst the partnership contin- ues, and not to rest upon indemnities with respect to what he had not contracted to engage in ; and that a partner cannot be compelled to part with his shares, though for double.what he originally gave for them ; and that it may be his principal reason for keeping 5 34 STEVENS VS. THE RUTLAND AN0 them, to have the partnership carried on according to the original contract. This doctrine of Lord Chan- cellor Eldon necessarily grows out of the doctrine, that it is the business of, courts of justice to enforce the contracts of parties, not make them. To give to courts not only the power to enforce, but also the power to make, or even modify in one iota a contract fairly made, would be the rankest despotism. I am not ready to suppose the Directors in pro- curing the act of 1850 to be passed, or the Corpora- tion in accepting that act, acted in bad faith to any of the old stockholders; but doubtless they were governed by the most honorable motives, and meant it for the best good of all concerned, notwithstand- ing the allegations in the bill. The case is not put, at all, upon the allegations in the bill, imputing bad faith to the Directors in obtaining the act of 1850. If it was, it would be very material to the merits of the question, that the bill should be answered. The ground assumed is, that this Corporation had the funds of the original stockholders for an object dis- tinctly defined in the original Charter, and that they cannot be allowed to apply them to any other purpose whatever, without the consent of the stock- holders ; and that, to do it, would be a breach of trust. In regard to the expediency of bringing this bill, the Chancellor cannot, and has no right to judge. BURLINGTON RAILROAD COMPANY. 35 The orator has the constitutional and sole right of determining this matter; and if he thinks it expedient, we must acquiesce in it : and no plea of the public good, or inequality of interests involved, can justify the Chancellor in denying to the orator a right which is clearly accorded to him by well established Chan- cery principles. The public good is best promoted by an impartial administration of justice according to the right of the case ; and courts cannot measure the equality or inequality of interests in the litigant parties, and make that a basis for a decision, notwith- standing what has been urged in the argument. Where it is clearly shown that a Corporation is about to exceed its powers, and to apply their funds or credit to some object beyond their authority, it would, if the purpose of the Corporation was car- ried out, constitute a breach of trust ; and a court of equity can not refuse to give relief by injunction. See Aagar vs. The Regent's Canal Company, Coop- er's Equity Rep. 77. The River Dan Navigation Com- pany vs. North Midland Railway Co., 1 Railway Cases 153-4. The case from the 1st vol. of Rail- way Cases was before the Lord Chancellor, and he uses this language : " If these Companies go beyond the powers which the Legislature has given them, and in a mistaken exercise of those powers, interfere with the property of individuals, this Court is bound to interfere; and that was Lord Eldon's ground 36 STEVENS VS. THE RUTLAND AND in Aagar vs. The Regent's Canal Company. The Lord Chancellor further adds : " I am not at liberty (even if I were in the least disposed, which I am not,) to withhold the jurisdiction of this Court, as ex- ercised in the case of Aagar vs. The Regent's Canal Company." In that case Lord Eldon proceeded simply on the ground that it was necessary to exer- cise this jurisdiction of Chancery for the purpose of keeping these Companies within the powers which the acts give them. And it is added, " And a most wholesome exercise of the jurisdiction it is ;. because, great as the powers necessarily are, to enable the Companies to carry into effect works of this magni- tude, it would be most prejudicial to the interests of all persons with whose property they interfere, if there was not a jurisdiction continually open, and ready to exercise its power to keep them within their legitimate limits." It cannot justify the Chan- cellor in refusing to exercise the jurisdiction of Chan- cery, because the defendants may claim the right to proceed under color of the act of 1850. It is a set- tled principle, that the circumstance of the defend- ant's acting under color of law, simply, can form no justification. The question, after all, will be ; does the law justify the act which is being done, or threatened to be done ? Osborn vs. The Bank of the United States, 9 Wheaton, 738. If a law is uncon- stitutional, it can give no authority. If the power it BURLINGTON RAILROAD COMPANY. 37 confers is abused, or exceeded, the person acting under the color of law, is a wrong doer. In the case at bar the Corporation had no power to build the extension under their original Charter ; and the act of 1850 is not binding upon the orator without his con- sent. The injunction must therefore be allowed ; but only so far as to restrain the defendants, until the further order of the Chancellor, from, applying the present funds of the Corporation, or their income from their present road, either directly or indirectly to the pur- pose of building said extension in said road, or to pay land damages and other expenses which may be contingent upon the building of it ; and also from us- ing or pledging, directly or indirectly, the credit of the Corporation in effecting the object of the exten- sion ; and at the same time, the Company will be left at liberty to build the extension with any new funds which they may see fit to obtain for that specific ob- ject. Though this is but an interlocutory decree, made upon the plaintiff's equitable rights, as disclosed in the bill ; still,it having been twice argued,and it being a case of considerable interest and importance, I have deemed it proper to publish, somewhat at length, the grounds of my opinion. " To err is human ;" and if, upon more mature consideration, the conclu- sions of my own mind shall be found to be unsound, 38 STEVENS VS. THE R. & B. R. COMPANY. and not in accordance with principle and authority, I rejoice that they may be corrected by a superior tribunal. For plaintiff Messrs. Maeck and Aldis. For defendants, Messrs. Smalley & White, and Chas. Linsley. After the above decision was announced, and be- fore the injunction was issued, the defendants pro- posed to file bonds to indemnify the plaintiff against all damages which he might sustain by reason of the extension ; -upon which the Chancellor suggested, that he did not deem it competent for him to make contracts for the parties ; and that upon the authority of the case of Natusch vs. Irving et al., it could make no difference, if filed, in the result.