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LIBRARY
BUREAU OF RAILWAY Ff .?N--"C3
VvAäMlNÜ :
Ijuiitcci'ü of j|ciu. Jírñeü.
JOHN BLACK, ET AL,
G- —
-THE DELAWARE k RARITAN CANAL CO. ET AL.
On Bill for Injunction.
y'iRGUMENT OF JAr, poI^TLANDT ^AI^KER,
Of Countcl for Defendant?.
H£"2-nJ
. N5"2- a? 4-
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(knarji of í|ñii
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JOHN BLACK, ET AL.
vs.
THE DELAWARE & RARITAN CANAL CO. ET AL
On Bill for Injunction.
y^RGUMENT OF J^R. poi\TLANDT j^AI\KER,
Of Counsel for Dcfcndanls.
NEWARK, N. J. :
A. STEPHEN HOLBROOK'S STEAM PRINTERY, 11 MECHANIC ST.
1871.
ARGUMENT OF MR. PARKER.
May it please the Court : I can assure your Honor it is not
without some degree of reluctance that I proceed to inflict upon
you an additional argument upon this already threadbare but im¬
portant subject ; — important, not only because of the very large
wealth the proposed lease transfers, but also from considerations
introduced of a peculiar and quasi-political character. The doc¬
trines of the law involved are few, and not unfamiliar. The di-ffl-
culties of the case, to my mind, are not . grave, but in the manner
in which it has been discussed here, it has, I think, been presented
unfairly—many topics having been pressed before your Honor with
which neither Court nor Counsel have any concern.
The controversy plainly stated is this : Here are parties on one
side who claim that they represent some $345,000 of interest in
these joint railroads. Oh the other side there stand parties repre¬
senting at least §12,660,000. There is a difference between these
parties, it seems, in relation to policy—a very large majority think
that the proposed lease to the Pennsylvania R. R. Company, will
be promotive of their interests ; a few think otherwise. Certainly
it is not for this Court to settle the question as to which of these
parties has made a mistake.
To listen to gentlemen upon the other side one would imagine
that this was the first tinie in the history of this State, or of man¬
kind, that a lease in perpetuity had been granted, and that such a
lease was necessarily an enormity. Only such an hypothesis on
their part can account for, or at any rate justify, their extraordinary
earnestness.
If it please the Court, the answer filed shows the reasons which
prompted the making of the lease, which is in question. And I beg
leave to refer to it because it is legitimate that we should show the
absence of any fraud or heedlessness on the part of the Corporations
«
4
defendant. The rate of interest on the debt of these companies
was increasing annually. The amount of expenses was likewise
increasing, only netearnings uponthe amount of stock and debt
having been attained since 1867. In 1869, as I make out the fig¬
ures, no less than $695,495 appear to have been borrowed or other¬
wise obtained (otherwise, I mean, than from the regular earnings)
in order to pay the ten per cent, dividend which the stockholders
then received ; and, if my calculations from the statements append¬
ed to the answer are correct, in 1870 no less than $1,334,506 was
obtained in some such outside way, in order to pay the dividends of
that year.
The Ohancelloe (to Mr. Parker) : Does that appear in the an¬
swer ?
Mr. Parker : It appears, Sir, by the statement of Mr. Stevens
annexed to his affidavit, and is seen by observing the difference be¬
tween the amount of earnings and the amount of dividends specified
in that statement.
New and large expenditures were called for and even necessary.
Harsimus Cove—a purchase of half a million of dollars—lay idle
for want of money to improve it. The "surplus earnings" were
long since used for dividends or in some other way, and, at any
rate, were gone, and there was pressing upon the company perpet¬
ually a call for an enlargement of their business j the connections
that they had made, by means of agreement, being such as that a
large business of freight gathered on the long line stretching from
the Pacific to the Atlantic, was massing upon them and they were
unable to afford it transportation, or, at any rate, proper ware¬
housing facilities at the terminus of their road. The great business
for which the connection with the Pennsylvania Kailroad was some
years ago agreed upon and made, was lost to the companies, or
rather not attained, because of their want of means to accomplish
it. Surely, under these circumstances, no one can be surprised
that directors and stockholders, desirous to discharge their duties
to the commercial public and equally so to derive their accustomed
revenues from their investment, should gladly adopt that means of
attaining both objects, the legality of which is now impugned.
One thing is very certain : this large majority of stockholders
are not blind to their interests. They propose to do this thing
which is now before the court, not fraudulently nor heedlessly, but
because they are convinced that in this way alone can they be as-
*
5
sured in the future of the profit to which they have been accustomed,
and which they naturally desire.
As I have said, certain subjects have been dragged into this con¬
troversy which have no place in it. One of these I will allude to
before proceeding further. Whether or not this Act of 1870, and
the lease under it, releases the right of the State, reserved in the
charters of these companies, to take the works of the companies
in 1888 at cost, is of no moment in the cause. What has it to do
with this controversy '? If the State did grant to these companies
this right of lease, there is an eud of all that can he said ; that
point will be met when it arises. But I apprehend your Honor
need be under no anxiety on that subject, for it does not seem to
me there is any possible reason for such an idea. What did this
Act do ? It authorized a lease of what the company had, just as it
was, subject to all its incumbrances. In the proviso, it distinctly
says that " no such consolidation, lease, or other arrangement shall
have the eifect, or be construed to release or discharge the said
United Companies, or any or either of them, or any company or
companies with which any such consolidation, agreement, contract
or lease may be made, from any taxes, licéilitij, obligation or duties
which they or either of them may be subject or liable to, either to
this State or to any other person." What is this right of " taking
the works of the company in the year 1888 " I Is it not comprised
within and defined by the word " liability " "? Is not that the word
that exactly expresses such an incumbrance 1 It is not a present
incumbrance for so much money, hut it is literally and exactly a
lidbility.
Now, this, it seems to me, disposes of this point entirely, and
yet it is not all that can be said concerning it. What does a man
lease f Only what he has. Suppose a case in which there was
no question that the power to lease existed. Take the case of any
artificial person, originally or by supplementary action invested with
this additional approach to the full power of a natural person and
suppose that in the exercise of this power thus treated it leases all
the property that it has ; can the right that is Conferred upon the
lessee be any greater or larger than that which the lessor possesses ?
Does the agreement that the party may lease for a perpetuity, make
any difference? Was not the existence of this artificial person
originally a perpetuity ? In the present instance, did not the United
Companies hold their property subject forever to this right and res-
6
ervation of taking the works on the part of the. State ? and if the
State says, " you can admit other men to exercise your dominion
over the subject matter," and does not limit or bound by any period
of time the exercise of the privilege thus conferred, is there yet any
assent which takes away anything from the State ! The answer to
the suggestion is that the State merely agrees, that the
lessee may have just what the lessor had ; and as what the lessor
had is the subject of reservation by the State, so is that which the
lessee receives. Suppose the power bad originally existed and that
the lease had been made in virtue of that power, would there be
any difference ? Would the State then hafe been held to have con¬
sented to an appropriation away of her reservation ' AVhat difference
can it make if thé power is afterwards given ? It becomes a part
of the charter exactly as if it had originally been given.
Hon. J. S. Black (of counsel for complainants) : But is this
State not a party to this contract "?
Mr. Parker : I think not.
Mr. Black : Under this contract, is not the State estopped from
claiming anything *?
Mr. Parker : I think not ; the State stands in two positions ; she
stands first in the superintendent or life-giving position from which
must be derived the power to lease ; she stands likewise in the po¬
sition of a stockholder owning a large amount of the stock. What
would be the effect of the State's consent as a stockholder, it is not
for us here to discuss, for it is not in the case ; but I do submit
that the State's assent that the power to lease shall be exercised,
especially when there is no greater extent as to time in the absolute
exercise of that power than there was in the original constitution of
the company, makes no sort of difference as to the question whether
the State can afterwards say, when 1S8S comes around, "these
works are mine at cost." It does seem to me that such a question
is entirely out of the controversy. It is distinctly a political ques¬
tion—one which has been disposed of by the Legislature; and
whether the act ofc the Legislature had the effect of surrendering
the State's right or not, what difference does it make in the contro¬
versy here 1 It seems to me, if your Honor please, that this sug¬
gestion and various others worked into the discussion, involving
policy only, are simply bugbears, appeals to passion and prejudice,,
fit things for the newspapers or for the hustings, but totally un¬
worthy of the attention or consideration of this honorable court.
7
I make the same remark as to what has been said respecting
the character of the property leased and the security obtained. By
the lease, if the property is perishable and wears out, the lessee is
to replace it immediately, and to keep up the same in equally good
order and in quantity throughout the continuance of the lease.
When sale is made of stock or other property, it must always be
with the consent of the lessor, and the proceeds of this sale must
be devoted either to the reduction of the debt or to the increase of
the security. Failure to keep any covenant for ninety days in¬
volves forfeiture and avoids all rights that are derived thi-ough the
lease. All new acquisitions of canals or railroads or other such
property in New Jersey, made by the lessees, shall be ipso facia
the property of the lessors, and pass under the lease as if originally
owned by them, and be security for the performance of this bar¬
gain. The lessees agree to improve Harsimus Cove, and all the
outlay they make there is to pass as if leased and be security like¬
wise for these covenants. The lessors retain their corporate exist¬
ence, and to protect themselves they have, by express reservation,
all the remedies either at common law or otherwise, which belong
to this relation of lessor and lessee.
Now, if the Pennsylvania Railroad Company is able to keep its
covenants, all must go well. If it is not, the rights given perish
and the franchises that are leased return to the lessors again for¬
ever. What greater security could be had or given ? The amount
is too large to be the subject of additional security. No agreement
for consolidation could be made and a better security be demanded
or had. That idea, it seems to me, is worthy of your Honor's at¬
tention and reflection.
Undoubtedly this Act of 1870 desires and plans consolidation.
What is consolidation 1 It is absorption of one company into
another ; it is such a union as that from the period of union the
two actually become one ; the stock of each is the stock of the
other, or, as the plan is usually carried out, new stock is issued by
one to the stockholders of the other in the newly created organi¬
zation, the existence of which is perpetual. Suppose then that
consolidation by that means — consolidation of stock — which, is
evidently an intention of the Act, had occurred in this case, then
the stockholders of the United Companies would be forever stock¬
holders in the Pennsylvania Company ; its liabilities would be
8
theirs; its revenue would be theirs; its solvency or insolvency
would be theirs.
Is it necessary then to spend time upon what the effect of this
lease is in relation to the security to these stockholders, when the
Act undoubtedly contemplated a state of things which gave them
less security, which absolutely made tbem responsible for all the
debts of the Pennsylvania Railroad Company 1
And again, if your Honor will look at it in the view taken by
counsel—if the Legislature meant consolidation with any Jersey Com¬
pany, (and undoubtedly they meant to give ¡permission for such a
consolidation), much more, if it be true as counsel urge, that the
legislature meant only with a New Jersey company — where is
there such a company by which security could be given to the
stockholders of the United Companies I Is there one in the State
of New Jersey whose name would add solvency and strength to
theirs '? — is there one whose possessions will afford security for
stockholders in the United Companies? — is there one whose cov¬
enant could stand in the respect of pecuniary responsibility, com¬
parison with the covenant of this Pennsylvania Company 1
What if there was a sale, as my learned friend contended
might be made, of all the property of these lessees, — a sale on
five days'notice,—the covenants that are made remain, the title
that is given, if any, would only make the purchaser liable to the
rent. If ho could pay, very well ; if not, the franchises would be
resumed.
It seems to me that none of these matters have any place before
this honorable court. It was in the discretion of these directors
what bargain they should make. It certainly was in the discretion
of two-thirds of the stockholders whether they would endorse that
bargain. After that discretion is exercised and its exertion endorsed
by the stockholders in requisite number, it seems to me that then
all question of the character of the bargain or of the security given,
everything about it, passes away ; because there is no pretence in
this case that there was any fraud intended or any heedlessness
enacted. Everything which the bill alleges, and everything which
appears on the answer in response to it, shows that this lease was
the "subject of long, careful consideration by discreet men, interested
in the subject matter, anxious for profit, and men of such character
for good sense in pecuniary matters as that this court may well
hold itself excused from looking into their proceedings.
9
Mr. Black (again interposed) : The acts charged in the bill and
admitted in the answer, we allege to be fraudulent ; we allege that
they amount to fraud. We have not used that word in the bill
and would rather not use it now.
Mr. Paeeer : I am quite aware, Sir, that you have been
very polite all through ; but I do not see that the case in the bill
amounts to what is generally called or is entitled to be considered
a case of fraud.
So much, if your Honor please, for the preliminary portion of
this discussion, and now to pay some attention to the facts involved
in the case at issue here. That case is this :—The companies by
their directors, with the consent of two-thirds of their stockholders,
wish to make a lease for 999 years to the Pennsylvania Eailroad
Company. There is no fraud, whether it be averred or not ; and
in whatever terms the charge be made, it is equally plain that there
is no possible intention of fraud. The only " fraud " that can be
spoken of is fraud in law or illegality—a subject which is fairly be¬
fore the court.
Mr. Blace : A perversion of a trust.
Me. Paekee : Exactly. There is no heedlessness. There has
been consideration and adoption of the lease by a large majority.
If it be legal, this court will never interfere ; if it be illegal and
injurious to the complainants, then the court ivill interfere. The
argument, therefore, it seems to me, should be confined-to tlielegality
of the lease.
There are three questions in the cause, and but three.
1. Had- the United Companies authority to make this lease ?
2. Had the Pennsylvania Eailroad Company a right to accept it?
3. Was the Act of the Legislature constitutional ?
I shall proceed to consider these points in their order. On the
first, the authority of the United Companies to make this lease, it
is necessary, first of all, to observe the relative situation, geograph¬
ically and physically, of these two companies.
There subsisted between them the agreement of February, 1863,
which is appended to the answer. It is between the same parties
as those named in this agreement of lease ; providing for a connec¬
tion between them, and for the carrying on of through trafiBc. By
it the Pennsylvania Eailroad agree to build The Connecting Eail-
way and to lease it to the Trenton Eailroad for 999 years. The
10
Philadelphia and Trenton Eaiiroad agree to pay six per cent, for
its nse and maintenance ; the Pennsylvania Eaiiroad agree to allow
tracks to be run so as to reach the Wilmington Eoad and the Penn¬
sylvania Eoad, "so as to form a continuous line (says the agree¬
ment) over the said Eoad and they also agree to give a 999 year
lease for that. The Pennsylvania Eaiiroad Company also agrees
to give the United Companies, for 999 years, two tracks, &c., to
the new passenger depot in West Philadelphia so as to accommo-
dite passengers to New York. The freight and passengers were
to be carried over the United Companies' works. The rest of the
agreement regulates this tratSc carefully and settles the division of
receipts. The agreement itself was to subsist for 999 years.
Now, this agreement was not perhaps, in all respects, public, but
the connection was, and it lay open to the eye of the legislature.
That connection was three-fold. There was the Delaware and
Earitan Canal which brought goods to the Pennsylvania Eaiiroad
at Philadelphia, and so was a "connecting and continuous line.''
There was the Camden and Amboy Eaiiroad, which by decisions of
the courts of our State ends at Philadelphia, and which there con¬
nects ilith the Pennsylvania Eaiiroad Company's line. And there
was the Camden and Amboy and New Jersey E. E. Co., connected
by rails with the Pennsylvania E. E. Co. so as to run cars from
New York to New Brunswick by the Trenton branch, and the
" spur ■" to the Delaware bridge, thence on the railroad across it,
thence on the Philadelphia & Trenton Eaiiroad to the " Connecting
Eailway," and by that road to the "Pennsylvania Eailway."
This spur is authorized by an Act of our Legislature of Mar.
15th, 1837. The Joint Companies own the Philadelphia Trenton
Bridge, by contract of the Bridge Managers in 1835, and paid the
expense of laying the rails on the bridge. On the 7th of Decem¬
ber, 1850, an agreement was made about that which is set forth in
the answer. In 1870 all the stock of the Bridge Company, except
one share, belonged to or was the property of the United Compa¬
nies. All this is set forth in the answer (I refer particularly to the
answer, p 31), and shows an amalgamation, practically, of the Phil¬
adelphia & Trenton Eaiiroad Company with the New Jersey United
Companies.
With this state of things existing and this structural business
connection apparent, the Legislature of New Jersey passed the Act
of 1870, which is set forth as part of the bill. In considering that
11
Act, the first point to be noticed is, what sort of a lease it was
which was projected by the Act. It is an Act " to enable the
United Eailroad and Canal Companies to consolidate their stock
and to consolidate or connect with other companies," The power
given by the first section of the Act is to consolidate with " any
other railroad or canal company or companies in this State or other¬
wise with which they are or may be identified in interest, or whose
works shall form with their own continuous or connected lines."
Another phrase is used that touches this question of the lease.
They are authorized expressly to " consolidate their respective cap¬
ital stocks or to consolidate with any other railroad or canal com¬
pany." Then what they were authorized to do was to make an
arrangement in perpetuity. That is exactly the idea of consolida¬
tion. " Consolidate " is a railroad word. Companies only consoli¬
date when they become one in the sense of absorbing the one in
the other. The Elizabeth and Somerville Railroad consolidated
with the Somerville and Easton, and thenceforward became the
Central Railroad of New Jersey and departed from sight. It means
a permanent transfer of the company ; a transfer which shall be
irrevocable; which shall absolutely destroy the existence of the
stockholders in any of the corporations consolidated. It is in that
sense that the Legislature of New Jersey themselves have used
that word, and that too, it will be seen, at a very early day.
In the Laws of New Jersey of 18,C7, p 114, it is recited:
" Whereas, it is desirable that the railroad lines between New
York and Philadelphia, forming by their connection essentially
one line, should be more closely united in interest and management,
whereby great advantages would accrue to the public, as well as
to the stockholders." » » « »
Your Honor will observe here that the very Act itself recites
that these are railroad lines ietween New York and Philadelphia.
"And whereas, the Delaware & Raritan Canal Company and
Camden & Amboy R. R. Co., known as the Joint Companies,
owners of one portion of said lines, and the New Jersey R. R. &
Transportation Co., owners of another portion thereof, have made
or are about making an agreement for a consolidation of interests,
and an equality of dividends, be it enacted, &c. that said com¬
panies be and they are hereby authorized to make such agreement
for consolidation of interests as they may deem proper and expe¬
dient, Ac."
12
And then in the Second Section it goes on : " When such
agreement for consolidation is or shall be made, the said companies
entering or having entered into the same shall be consolidated and
united in interest, according to the terms of such agreement, and
shall be authorized to transact their business as a joint concern."
And a little further below : " The said consolidated interest shall
thenceforward be called and known by such corporate name as they
shall adopt for the said consolidated or united interest."
But the word appears still earlier in legislative use. " The
Marriage Act," as it is generally called (Laws of 1831, p 124)
entitled "An Act relative to the Delaware and Earitan Canal Com¬
pany and the Camden and Amboy Eailroad and Transportation
Company," uses it. It says : " It shall and may be lawful for the
Delaware & Earitan Canal Company and the Camden & Amboy
Eailroad and Transportation Company, by and with the consent of
seven-eighth s of the stockholders of said companies respectively, to
consolidate the capital stock of the said companies, for the purpose
of erecting and completing the canal and feeder of the said railroad,"
and so on.
So here we have an early legislative use of these words. We
know what was produced by the consolidation of these two compa¬
nies : that they became from that moment one, and were known as
" The Joint Companies of New Jersey," and that their stockholders
always shared dividends equally. Now, that was exactly
what is designed to be accomplished by this Act. It is no
matter whether it was to be effected by a contract, agreement, lease
or other arrangement ; it is all the while some sort of consolidation
that is intended.
A consolidation means perpetuity when the two consolidated
companies are in their nature perpetual. Therefore, if your Honor
please, it seems to me to be very clear that any lease for however
great a term of years is not beyond the purview of this Act. Sup¬
pose consolidation had been carried out by some other means, what
would have been the effect ? why, as I have already casually shown,
the debts of the consolidated concern would all have been charges
upon the stockholders of each. There would have been this differ¬
ence between a consolidation carried out by the lease and a consol¬
idation carried out otherwise, that whereas now all the works that
belong to these stockholders of the United Companies remain se¬
curity to them for the performance of the covenants that are made,
13
for tbe payment of their ten per cent, and for all other covenants
in the contract of lease, in the other case of consolidation that
property would have passed away from them into the hands of
some other company—passed away forever—and been subject not
only to their own debts, but to the debts of that company ; so that
what this lease has effected is less than what the Act contemplated
as possible to be effected, and the arrangement is far more secure
for the stockholders.
A perpetual- lease then is within the purview of the Act ; and so
I proceed to a second point in relation to the construction of the
Act, viz. : to whom, according to the Act, could this lease be made ?
Could it be lawfully made to the Pennsylvania Railroad Company ?
Now, with what class of corporations did the Act of the Legis¬
lature empower connection to be made ?
1st. Any with which they (the United Companies) are or may
be " identified in interest."
2d. Any " whose works shall form with their own continuous or
connected lines."
What does the Legislature mean by tbe phrase " identified in
interest " f It illustrates its meaning in the preamble of the Act,
for it there recites not only that the three United Companies are
" identified in interest," but that they have also an " identity of in¬
terest" with the Phila. & Trenton Railroad Company, and with
other companies. When it is objected then that the Legislature
could not have meant companies of other States as among those
with whom connection can be made, it is evident the suggestion is
futile; for here is a corporation existing only by the laws of Penn¬
sylvania, which is described by the Legislature itself as having
"an identity of interest." Could not the United Companies have
consolidated under this Act by an agreement or lease made with or
to the Philadelphia and Trenton Railroad Company '? One answer
then, to the question, " with what companies might the* United
Companies connect," is readily perceived. They may connect with
companies though created by the laws of other States. And thus
it seems to me that that mention of the Philadelphia & Trenton
Railroad Company as a company having " an identity of interest "
with these, at once destroys the whole argument so laboriously con¬
structed by the eminent counsel on the other side to prove that
the Intent of the Legislature was that there could be no " connec¬
tion " with any company not in this State.
14
But let us study the situation of this Philadelphia & Trenton
Railroad and the character of its relation to the United Companies ;
for the Act expressly states that it has " an identity of interest "
with them. It is one of their feeders. It brings travel to them,
and takes it from them. In what other way is it " identified in
interest" with the United Companies ? Possibly, so far as the
legislature knew, not otherwise ; but, in truth, by a contract for
dividing the profits of business. This contract effected a bond of
interest similar in character to that which the legislature authorized
between the Delaware & Raritan Canal, the New Jersey Railroad
and Transportation and the Camden and Amboy Railroad Compa¬
nies. These companies are pronounced to be "identified in interest"
doubtless because they are actually, as well as legally, joined
together. The Act, it seems to me, contemplates two modes by
which companies may be "identified in interest." One is an actually
subsisting, legalized contract between them, by which the interests
of the stockholders of all are made the same ; the other is by local
relation, by which one becomes feeder to the other. And the con¬
text shows this latter meaning to have been intended. The phrase
is used again, and is there followed by the important phrase " or
whose works shall form, with their own, continuous or connected
lines." This is mentioned as one mode of being " identified in
interest." The language is in the disjunctive, and specifies another
class of companies identified in interest than some who are yet so
identified ; for the routes of no company can possibly form a con¬
tinuous line or a connected line with those of another, without the
two being " identified in interest," because, in such case, the travel
of the one must flow into the other. And again : The preamble
states that the United Companies have an identity of interest not
only with the Philadelphia & Trenton Railroad Company, but with
" other companies." How, except by means of local relation ?
It is to be noticed that this description of this means of " identi¬
ty in interest," to wit, by having the " works " of companies form
" continuous or connected lines," is in the future tense ; the language
is, "whose works shall form " with their own " continuous or con¬
nected lines." Whenever any company shall so arrange its works,
it becomes a company with which the consolidation authorized by
the Act can be made. If, then, any railroad acquires or possesses
a line which connects with the Jersey lines, no matter how, whether
by erection under their charter or legal purchase, its " works " form.
15
with those of the Jersey coropanies, a "•continuous" or "connected"
line and that company may lawfully be a party to this consolidation.
And even if it be thought that the having a continuous or connec¬
ted line does not make the "identity of interest" contempkted by
that phrase in the statute, still any company who at any time may
acquire " works," forming, with those of the defendants, a continu¬
ous or connected line, may then, by virtue of that description of
the class of companies who may form the consolidation, take this
lease.
But I proceed to say that not only is it true that the Act con¬
templates a foreign company as one with which a lease is or may
be lawful, but it is further true that there is no company of this
State so situate as that this phrase '■^continuous " applies to it- This
word is not used as synonymous with " connected." It is a class
of connections—one by which the " line " continues on—and the
phrase of the statute is that they may connect with those " whose
works shall form with their own continuous or connected lines."
Spurs connect, but the " line " is not thereby continued. I give
force, in this'connection, not only to the words "continuous" and
"connected," but to the word "line." It is important; and if you
find a railroad whose works form " a continuous line" with those of
the United Companies (I do not mean simply a line laid out upon
paper, but also a li>te of business that continues on), I do not care
where you find it, you have found a company with which this consoli¬
dation may take place.
Mr. Black (with Mr. Parker's consent) : As I understand it,
this Pennsylvania R. R. does not form a continuous line ; it does
not form a line at all. The Pennsylvania Railroad goes off, at
right angles, to the northwest. "A continuous line" means one
that continues in the same direction. There is no " continuous
line " then in existence except the one which goes from Philadelphia
to Baltimore. That is a " continuous line " because it goes straight
on. The other is not "a coniinuous line," because it is what you
call a "spur" — a big "spur" to bo sure, i)ut still a "spur."
Mr. Parker : I tried to answer the gentleman's suggestion,
when I made the remark I did in relation to the meaning of the
word " line." If it be a mathematical line only that is spoken of,
then the Act of the legislature was absurd.
Mr. Black : Well, I do not say it is a mathematical line that is
spoken of, but a line running in the same general direction.
16
Mr. Parker: Well, it does seem to me, that even on that ex¬
planation of it, the line of the Camden & Amboy Railroad coming
to the Delaware, crossing it, then going down the Delaware by
means of the Philadelphia & Trenton Railroad, then continuing on
with the Connecting Railway, and so striking the Pennsylvania
Railroad — it does seem to me that the geographical laying down
of that railroad plainly shows exactly such a " connected line" and
such a "continuous line" as my learned friend (hfr. Black) says is
necessary, although it does diverge at some point in some other
direction and goes oif into other quarters. But the real meaning,
I submit, is shown by using these words in the sense of adjectives
qualifying the word " works." Find me a railroad whoso " works "
form with these "a continuous line" of transportation — actually,
in point of fact — and you have the railroad with which connection
may be made. " Spurs," we say, connect, but there is no contin-
uousness of the line there. The " spur " brings in business from
some other quarter. It comes from a short distance only, and is
nothing but a feeder to the great railroad. While the river flows
on, though it may follow a thousand tedious windings, it yet remains
the river. The connection may come in at right angles, or a larger
circuit may be made, but tbere is no continuousness in such a case.
Now, where is the company, organized under New Jersey laws,
which forms "a continuous line" with the United Companies'
works! The map presents none ; and all companies owning their
"connected" lines are subordinate companies — not likely to be
expected to be lessees of these great works ; while, on the other
hand, the Pennsylvania R. R. Co. is, in the flrst place, " identifled
in interest," for it feeds and is fed by, the travel of the United
Companies. And again : it is connected with these companies by
an agreement in perpetuity, by which travel is to be forever contin¬
uously carried over their respective roads. There is therefore clear¬
ly the "identity of interest" that is required.
The P. R. R. is geographically connected with the works of the
United Companies. The " Connecting Railroad" was made for the
express purpose of connecting the two, and it forms already an im¬
portant link in a continuous line of transportation and business.
This Connecting Railroad is a geographical fact. It was patent
to the eye of the Legislature as a part of the works of the Penna.
R. R. Company. That and the Trenton Bridge, with the Phila.
& Trenton Railroad, make an actually structural connected and con-
17
tinmus line. The Phila. and Trenton Eailroad is really the prop¬
erty of the United Companies—part of their established line—long
known to be such and so recognized by the Legislature.
But, as I said before, there is meaning in the phrase '' connected
line. " It signifies business connection as well as structural.
The peculiarity of such a connection is illustrated by the case of
the Phila. & Erie R. R. Co. v. the Catawissa R. R. Co., reported
in 15 Am. Law Reg., 231. The exact point of that case was to
define exactly what were connecting railroads. There it was held
that connecting railroads are either those which have such a union
of .tracks as will admit the passage of cars from one to the other,
or those which have such an intersection as will admit the conve¬
nient interchange of freight and passengers at the point of intersec¬
tion. Therefore, if we show in this cause a line of travel having
an intersection such as will admit of a convenient interchange of
freight and passengers at the point of intersection, plainly there
exists this "connected line" called for by the statute. Your Hon¬
or may also refer on that point to the Albany Law Journal of Sept.
16th, 1874, p .119, plac. 5. I have somewhere among my notes a
memorandum of that case. It is in confirmation of the Catawissa
R. R. case.
The Chancelloe : Upon the point that a Connecting R. R. is
one that may not connect with tracks, but simply for business ?
Mr. Paekee : Yes, sir ; that is the point of it.
Now, sir, to pause and recapitulate. Several considerations jus¬
tify and corroborate the idea that the Legislature intended a con¬
solidation of business with a foreign company :
1. The act mentions a foreign company when using the phrase
" identity of interest."
2. It could not have contemplated any of the «»'«or Jersey com¬
panies as likely to lease these great works.
3. It had evidently in view, when speaking of' " identity of in¬
terest," a feeding line.
4. No compan^ whose works form with theirs a " continuous "
line exists in New Jersey.
6. The Penna. R. R. Co. has both "identity of interest" with
thé United Companies by contracts already existing, and also car¬
ries on a " continued line," which is operated continuously.
I respectfully call the attention of the court to the next
point.
18
6. In every railroad in New Jersey connected with them the
United Companies hold stock—generally a majority of the stock—by
express authority of the Legislature.
What need was there for an act which should empower consoli¬
dation with these ? I press that query upon the attention of your
Honor.
Through the kindness of one of the gentlemen on the other side,
I have been furnished with a list of all the Acts since 1849 supple¬
mentary to the Joint Companies. Among them I find Acts author¬
izing stock subscriptions to the Freehold and Jamesburg, the
Belvidere and Delaware, the Flemington Railroad, the Rocky Hill,
the Mount Holly and Pemberton, the New Egypt and Hightstown—
The Chancelloe : Acts or Resolutions ?
Mr. Pakker : Some of them are Acts and some Resolutions.
To the Flemington R. R., the West Jersey R. Jl. Some of Ihem
authorize the endorsing of bonds of the Princeton Branch and other
railroad companies which are now connected with the United Com¬
panies. The Legislature gave the United Companies express
authority to purchase the stock of these companies. ïf then they
had authority to purchase the stock of these companies, what need
was there for any authority to consolidate with them 1 And these
are the companies—and, I believe, all of them—with whom connec¬
tion in this State is made. Could they then have been meant as
companies having " an identity of interest,'' or " whose works form
connected or continuous lines,"' with whom alone this consolidation
might be effected '?
And so, if your Honor please, unless the Pennsylvania R. R.
Co. could consolidate with the United Companies, who could ? I
assert here—and I ask your Honor to take the map and see for
yourself—that there is not a single company of all those with which
they connect in whose stock the United Companies have not at this
moment a controlling interest. It is manifest, therefore, that such
companies could not have been those which were referred to by the
Legislat ure. That they were not meant is also Apparent for othei
reasons which I have already presented to the court. Then where
is the company, except it be the Pennsylvania Rail Road Company
whose works form with the works of the United Companies a " con
tinuous " or " connected line " '?
Now, the view I have taken thus far leaves out of sight the wordf
" or otherwise" upon which .so much comment has been made ; bu!
19
these words evidently look to the same result. " To consolidate " is
the power given ; "to consolidate with any other railroad or canal
company or companies in this state or otherwise " are the words of
the act. Just before it spoke of consolidation of stocks. In some
other part of the Act it speaks of consolidation of business. Here
it is " or to make such other arrangements for connection or con¬
solidation of business "—" connection of business " or " consolida¬
tion of business." Two modes of consolidation then are mentioned
in the act ; and the third mode of consolidation (if you so call it,
though it is not consolidation) is by the lease of lines. It has the
element of perpetuity that belongs to consolidation. It has all the
benefit of consolidation. It has more of benefit to the stockholders
of these companies than flows or can flow from any consolidation,
because it involves_less risk and retains security.
The Chancellor : Does the counsel contend that under this
act the road could not have been taken on a lease for ten years ?
Me. Parker : I think the companies had the power, sir, to make
a lease for any time ; but I say, as already stated, that power was
given with an intent looking to perpetuity, and, as it is done, it is not
so niuch an exercise of the power given for a " consolidation of
stocks," or a " consolidation of business," as of that for a " con¬
nection of business." It attains all the benefit of consolidation
without its risks and liabilities.
But most evidently by the act ■ three modes of actual consolida¬
tion are spoken of and intended as possible or permissible. One is
" consolidation of stock " ; another is " consolidation of business " ;
the third, the "connection" by lease of lines or, if you please to
use that term, " consolidation " of other lines.
Now, what does the act mean f Does it mean all of these modes
—or if not all, which of them 1 We insist it means all or any of
them.
Now, if it means " consolidate in this state or otherwise," having
structural consolidation in view, then it must mean by a union of
lines out of the state ; for there can be no " continuous " line from
New York to Philadelphia made by union with any companies in
this state. If it means that the companies must be " in this state
or otherwise," (which we think it must mean,) then what can " other¬
wise" signify, except companies not in this state? The rule of
construction is to give effect, if you can, to every word, and it is not
permissible to take a word out of one sentence and put it in another ;
20
you must read the language of the statute as it stands. Looking at
it in the connection in which it is used, I ask again what can that
word " otherwise " signify, except that it permits the consolidation
with companies that are not in this state 1 A reasonable paraphrase
would be, " existing in this state " or " otherwise üian in this state " ;
i. e., existing somewhere else. But "companies in this state" is
synonymous with companies " of this state. Does not the prepo¬
sition "in" there have just the meaning of the preposition "of"
and nothing more? My learned friend .spent much time to prove
that there could be no such thing as "a foreign company" in this
state; that they may think themselves there, that a legislative act
may authorize their being there, but that they cannot possibly get
there. I do not think it necessary to follow my friend's argument
carefully, but it does seem to me very plain that the phrase " com¬
panies in this state " has reference to the locality of creation ; the
place from which the company hails. Substitute the word " of"
for " in," and does not all possible difficulty vanish 1 Then
it would read, " to consolidate with any companies of this state or
otherwise ; " that is, " otherwise than of this state.-' You cannot
understand the word "otherwise" in any sentence without filMng
out the sentence by repeating the words preceding, with the con¬
junction "than." Thus: "sick or otherwise"; otherwise than
sick. ""Well or otherwise"; otherwise than well. To give the
word "otherwise" any meaning at all, it is necessary that it be
immediately succeeded by the word "than." Just follow, then,
this rule in reading the statute—substitute "of" for "in"—and
when you speak of companies of this state or otherwise than of
this state, why they are companies that are of another state ; that
is all.
But again, this same preposition "in" just in that place means
" under the laws of," because a company cannot, exist in this state,
except it exists under the laws of this state. Use that phrase
then in substitution ; make the sentence read, " companies existing
under the laws of this state or otherwise," and the meaning is ob¬
vious and clear. What intelligent meaning, therefore, can be given
to these words " or otherwise," excepting that they refer to the
place where the corporation has its local habitation and whence it
derives its name ?
Now, the method of explaining these words by my learned "friends
on the other side is, to my mind, most extraordinary. They say,
21
if I understood thgin, that j'ou should drop the words " or other¬
wise" out of their place, then pick them up and put them back in
the sentence in this connection : " or to consolidate or otherwise
with any other railroad or canal company or companies in this
state with which they may be identified in interest." " Other¬
wise"—whati " Arrange,''my friend, Mr. Browning, has in his
brief; but that is putting in an entirely new idea; that is coining
another word; and yet he must do it, because by his arrangement
he almost turns au adverb into a verb, and makes it have the force
and effect of some other word than itself. And it seems to me that
making the attempt to read the Jaw in this way shows that the view
the gentleman takes is incorrect. If it were not that he has made
up his mind that under no circumstances whatever ought this law
to be construed to give authority to consolidate with any except the
Jersey companies, such an idea could never have entered his brain.
It is maintained then that it is perfectly clear that a lease to the
Pennsylvania Railroad Company is permissible under this act.
1 pass on, then, to the second general point : Has the Penn.
Railroad Company the right to accept this lease "? And I remark
in the first place, that if the act authorized these companies to
make a lease to a foreign company, it would seem to have author¬
ized the reception by that foreign company of that lease ; and that
here in this state and before our tribunals, the question of power
on the part of the company thus authorized to receive cannot be
mooted. Suppose this Pennsylvania company accepts this lease, and
suppose, also, it bad no power so to do, could it come into our court
and deny that it had power to receive it ? Could it come here and
say, " we have, it is true, entered into these obligations, but we had
no power to do it and we therefore insist that this court will relieve
us"? It might do that in Pennsylvania courts, but it seems to
me to be a very different question as to whether it would be per¬
mitted to do that here;—after receiving all the property and making
use of it, then to turn around and say, " we never had any power
to receive this title and therefore we will not abide by the liability
which it imposes." Even supposing the question to arise in the
Pennsylvania courts, it seems to me that if the Pennsylvania cor¬
poration had received the property and taken the benefit of the lease,
a court of equity would not permit them to turn and deny their
authority.
But, if your Honor pleases, the Acts of Pennsylvania are full
22
upon the subject. The answer gives those acts ; and I wish to
call your Honor's particular attention to the language of the act
on page 98 of the answer ; " That it shall be lawful for any Rail¬
road Company existing under the laws of this Commonwealth, from
time to time, to lease or become the lessees, by assignment or other¬
wise, of any railroad or railroads or" (these are the words to which
I ask particular attention) " or enter into any other contract with
any railroad company or companies, individuals or corporations,
whether the road embraced in such contract or lease be within the
limit of this state or created by or existing under the laws of any
other state or states."
Now then this Act empowers them not only to accept a lease
and become a lessee, but it empowers them to enter into any other
contract with any such company as is there referred to.
Now, my learned friend, Mr. Browning, asks, what right has this
Penna. R. R. Company to take a lease of the goods and chattels,
the moneys and eflfects, the ten thousand choses in action, which pass
by virtue of the lease 1 I answer that they had express authority to
enter into any contract other than the lease. And if they had that
power to enter into any contract, though these articles are not the
ordinary subjects of lease, nevertheless they have full authority to
take title to any of them. And as to stock (to which particular
attention was paid by the other side) your Honor will find in the
Acts of Pennsylvania for 1869, p. 11, an act that bears directly on
this subject. It is in these words : " It shall and may be lawful
for any railroad company created by, or existing under, the laws of
this Commonwealth, from time to time, to purchase and hold the
stock and bonds, or either, or to agree to purchase or guarantee the
payment of the principal or interest, or either, of the bonds of any
other railroad company or companies chartered by it or existing
under the laws of any other state."
And I again suggest to your Honor, what if consolidation had
occurred otherwise than by a lease—what if, instead of this '' mode
of connection" in business, the mode had been adopted of absolutely
consolidating with the Pennsylvania R. R. Company, what then
would have become of the property, the choses in action, the stock,
the rolling stock, everything that belongs to the United Companies ?
They would at once pass over. And thus by means of this lease,
comprehending in its terms an agreement for perpetual substitution.
23
the stockholders of the United Companies retain their property in
effect while they simply part with it in form.
And so I pass to the third general head of discussion : Was the
act of the Législature constitutional f
It is alleged that it was unconstitutional because it required the
consent of only two-thirds of the stockholders ; or, to put the ob¬
jection in other words, it is alleged to be unconstitutional as against
the dissentient stockholders. The inquiry is, is it such a change
in the organic law or structure of the Company as that it cannot be
binding upon all stockholders, though a majority of them may
adopt or wish it ? It does not seem to me to be the intention of
the Legislature to authorize a hardship upon the stockholders,
rather the reverse. If they had required no " consent," the act
copld have been accepted by but a majority of the stockholders,
directly or indirectly. But they demand the consent of more than
a majority—of two-thirds. Indeed, it would seem that their object
was to test the wisdom and propriety of the measure. The act is
no better, no more legal, in requiring two-thirds than it would be if,
expressly or impliedly, the consent of a majority of stockholders
had been required.
Now, on this point we have nothing to do with consolidation. I
mean with consolidation of stocks or absorption of the company.
The lease does not do this ; and though it may be true that " a
consolidation" would be an infringement of the rights of dissentient
stockholders, that consolidation being in stock and in the ordinary
form—I do not mean to admit that it would be so, but I say though
it may be true, it is by no means, therefore, true that a lease is an
invasion of the rights of dissentient stockholders ; because " a con¬
solidation" does pass away all property forever and put a man's
interest into another concern, making him embark in a different en¬
terprise. If it were a consolidation with the Penna.R. R. it would
immediately impose upon him all the risks while it gave him all the
profits of the business done by that company in the State of Penna.
and throughout its various connections and branches. That would
he a very diifereut thing, it seems to me, and I submit it to this
court, from merely giving this lease of works in this state to the
Penna. Rail Road Co. or any other company. There is not here,
as 1 said before, consolidation but only connection of busimss ; and
the argument is to proceed upon just what has been done, and not
upon what might have been done under this act. The counsel for
24
the other side cited a case from 17 Barbour, 581 (The Troy and
Rutland Co. vs. Kerr) ; but upon the point that such a lease ope¬
rates to dissolve the company or to work any change in iis strueture,
the case was flat against him. The very head-note of that case is :
" A lease by a railroad corporation of a part of its road or franchises
during a continuance of its charter, and the transfer of the remainder
during the same time does not, ipso facto, dissolve the corporation.
It seems," it says, " one railroad corporation cannot give up its road
or give the management of its road to another, or delegate its pow¬
ers without the authority of the Legislature."
So that the case cited by my learned friend, instead of proving
that this lease made a difference in the structural character of the
company or dissolved it, proves exactly the other way. The opin¬
ion of the Judge in its reasonings looks that way, but -the
court decided, and the decision was pronounced, in the manner I
have indicated. The simple question is this : does the exercise of
the power to lease work such a change la the structure of the com¬
pany as lhat an unwilling stockholder may say, " non hace in federa
ve7ii." Your Honor's recollection of the cases that have been cited,
of Natusch V. Irving and others, must accord with mine that the
controlling point in all these cases is just that: if the stockholder
can say, " I never came into any such contract," then there may be
relief; but if the contract is one into which be may impliedly be
thought to have come originally, it is good. Now, two things ap¬
pear to me to be clear : first, that the lease is no such change, and
second, that if it be such a change the act is still constitutional be¬
cause it provides for compensation to dissentient stockholders.
What then, if your Honor pleases, is the intrinsic nature of a
lease ? It is a delegation of the active powers of the managers of
the company to another corporation in consideration of the guar,
antee of profits. It is strictly and only the provision of a new
mode for the profitable use of the franchises. And what I contend
for is that though such a delegation is not lawful without express
authority of the legislature, yet that when that authority is given,
a majority of stockholders may accept it and may make it binding
upon all. I am not disputing the authority or soundness of the ruling
in Zabriskie v. The Northern Railroad, or of the case which pre¬
ceded it. Both were cases in which the Legislature authorized the
investment of the money of an individual in an enterprise entirely
different from that in which the money had already been invested.
25
In the one case (that of Kean v. Johnston) the Legislature author¬
ized the consolidation of the Elizabethtown and Somerville Koad
with the Elizabethtown and Easton Road and the creation therefrom
of the Central Railroad of New Jersey, and permitted the new com¬
pany to give their shares to every stockholder in the old in lieu of
the stock that he theretofore held. And the money of the Elizabeth-
town and Somerville stockholder was thenceforward to be used, not in
the road for which he subscribed it (between Elizabethtown and Som¬
erville), but in a road for which he never did subscribe it, between
Somerville and Easton. In the other case—of the Northern Rail
Road—a branch was authorized and the question was whether the
stockholder's money that was specially given for a certain road
could be used in another road. Those cases were both very differ¬
ent from this ; because a new mode of using the very franchise
which was the subject of the investment authorized by public au¬
thority is an entirely different matter from a law authorizing the
use of the money, the subscription, the stock which was held, in
an entirely different enterprise. A party may say to the Legisla¬
ture, " we embarked in one special enterprise ; who ever dreamed
that by so doing we should be dragged into another ? " But a new
mode of use, a selection of a different set of men for the discharge
of the duties embraced in the running of a railroad, the giving
power to perform a work which must be done, by a different set of
agents,—this is a thing by no means parallel with the adoption of
a different project. Suppose a supplementary law authorized a
controlling executive committee to be constituted to whom all pow¬
ers were to be committed ; suppose a law authorised a greater
freedom in the mode of use, such as a greater width of track or a
change of route between the same termini, or an adoption of two
routes between the same termini ; or the adoption by a horse rail¬
road of locomotive power; or, in these days of novelty, the adoption
of stationary power like that used on the Elevated Railway in New
York, or of magnetic power, if that be possible ; or again the build¬
ing of the railroad on an elevation ; or, if this were the original
plan, then a change and the authority to build it upon the land ; or
again, in the case of a Trust Company, the reception of goods, on
deposit ; or if the company were a savings bank, the right of dis¬
count or of issue ; or if a railroad company, that of connection
simply ; or even of a lease of a connecting railroad, or a bargain
for the admission of a new railroad project to trade in just partner-
26
ship—'in all these cases and as many more as may be conceived, a
diflferent contract is made and yet the structure of the contract re¬
mains. Cannot the state give this additional power, and does not
every subscriber to stock agree impliedly that if the public author¬
ity demands or empowers any new way of discharging a public
duty, his associates may agree to adopt it. That is the point that
seems to meet us here. .
The able decision of Chief Justice Gibson, 2 Watts & Seargent,
161, states the distinction upon this subject.
" A grant of additional privileges to a corporation has certainly
not been thought an invasion of the contract which exists between
it and subscribers to its stock. It is alleged to be so in tbis in¬
stance, because the grant of a privilege to raise the dams higher
than was allowed by the original act, might lead to a greater ex¬
penditure to compensate injuries to the riparian owners by flooding
their lands, than was contemplated when the defendant became a
stockholder. But what was there in the contract of subscription
to forbid the acceptance of such a grant f The contract remains
unchanged by it though its consequences may be varied : it was to
pay so much the share, and so it is yet. But the constitutional
restriction of the power of the states to enact laws which impair
the obligation of a contract, has regard to direct and not conse¬
quential invasions of it."
And then he quotes Mr. Justice Story. He says: " Mr. Justice
Story remarked that in respect to public corporations which exist
only for public purposes, such as counties, towns, cities and the
rest, the Legislature may, under proper limitations, have a right
to change, modify, enlarge and restrain them, securing, however,
the property for the use of those for whom and at whose expense
it was originally purchased. Is not a corporation to improve the
navigation of a river which is a part of the public domain, though
it be authorized to demand tolls in compensation of its outlay, a
public one f If it be not, a bank of the United States, for the
flscal purposes of the Federal Government, which has been author¬
ized to discount notes and deal in exchange on its private account,
would not be a public corporation, and it would consequently be
beyond the constitutional power of Congress to grant such a bank
a charter. In Irvin v. The Turnpike Co. (2 Penn. 4C6,) it was
ruled that the benefit which would incidentally result to the prop¬
erty of stockholders near the proposed route of a turnpike road does
27
«
not enter into their contract of subscription as a part of its consid¬
eration ; and that they engage in the enterprise necessarily subject
to the power of the Legislature to change the route for the public
good, when the contrary has not been stipulated in the act of incor¬
poration. Now, an act to incorporate a company for purposes of
slack-water navigation, is as essentially of a public nature as an
act to incorporate a company for the purpose of making a turnpike
road. In this instance, then, what has the Legislature of Pennsyl¬
vania done ? It has not pretended to take away any corporate
franchise, or .to impinge upon any right before granted. That is
not pretended. On the contrary, it has enlarged a corporate privi¬
lege. But the exercise of it, it is alleged, may plunge the company
into an expense not originally contemplated. What of that ? The
defendant is not bound to contribute to it beyond the amount of
his original subscription, and as to that his contract remains the
same. But it is said that by taking off the limitation of the com¬
pany's expenditure,'the Legislature has altered its power, incurred
responsibility for greater damages than it otherwise could have
done. In that lies the fallacy. The Legislature has not made it
incumbent on the company to use the additional privilege granted
to it, but has left the use of it to its discretion. It may, in fact,
never use it ; and whether it shall do so will depend on the volition
of the defendant's corporate agents, the president and managers, by
whose acts he is necessarily to be bound as his own, even in the
acceptance of a modification of ihe charter for the public good,
provided it don't extend to a change of the structure of the associ¬
ation, " as was attempted in the Indiana and Ebensburg Turnpike
V. Phillips, (2 Pens., 184,) where the original corporation was bro¬
ken up, and the subscribers to its stock were apportioned according
to an arbitrary line of demarcation as regarded their residence, and
transferred to the one or the other of two distinct corporations
erected on its ruins. To do that, was declared to be beyond the
legislative power. On any other principle than that of Irvin v. The
Turnpike already quoted, no improvement in the plan of a public
work once begun could be made without cutting loose the corpora¬
tors from their subscriptions and resolving the corporation into its
primitive elements. Such improvements or alterations are frequent¬
ly made and subscriptions to the stock are consequently in subordi¬
nation to the principal. At all events,itissufficientfortheargument
that the constitutional restriction has been restrained by the ultimate
28
tribunal to interference directly with the terms of the contract, and
not merely with its incidents."
Now, in this case, it was insisted that there were two alterations
in the original contract. One was that the Legislature gave the
larger stockholders more votes than they had at first ; and the other
(this to which the Judge refers) was that the Legislature authorized
them to raise the dam, thereby subjecting the stockholders to a
greater amount of expenditure for damages. The argument was
thus stated : "By the act no stockholder shall be entitled to more
than ten votes, and by the eighth section the dams to be erected
were limited to four feet, six ; whereas by the new act the stock¬
holder is in a measure silenced." The opinion of the Chief Justice,
already read, decides that such new privileges and changes in the
organization and mode of use of the franchises are not invasions of
the structure of the contract, but they are such things as belong to
the Legislature, and which the Legislature has the right to give to
public corporations, and which every stockholder in such a corpo¬
ration, when he makes his original contract, contemplates may yet
be conferred by the Legislature upon him.
This case has been followed in many others. Your Honor will
find an illustration of the same principles strongly set forth in
"White vs. The Syracuse and Utica Railroad, 14 Barbour's Reports^
560, and the decision in the case I have cited, of Troy and The
Rutland Co. vs. Kerr, 17 Barbour, 601. The opinion there runs
somewhat counter to the conclusion at which the court arrived, but
it is valuable because it refers to the whole subject with a good
deal of succinctness, and the court will find a number of cases
cited there which are of use in the investigation of this subject.
It cites two English cases, Stevens vs. The South Devon Railroad
Company, 13 Bevan, 48, and vs. The London and South
Western Railroad, 19 Eng. Law & Equity, 11. I may add in
referring to these decisions, without citing them, that your Honor
will find this class of ruling : that the courts will restrain managers
of a corporation, at the instance of stockholders, not from applying
to Parliament to get new powers but from spending the money
already subscribed for that purpose. The courts seem to
leave the stockholder in this position. They say to him, "if the
company gets new power we won't help you as against their exer¬
tion ; you must help yourself, because evidently the Legislature
have the right to confer these new privileges, and it being a public
29
matter their right is not to be abridged. And then the remedy of
the stockholder is simply this : if he chooses to sell out he gets his
money back ; if he chooses to go on he acquiesces in the privilege
and in the new sort of enterprise, whatever it is, or whatever the
Legislature orders.
This view of the law as established in Great Britain is exactly
in accordance practically with what we contend for here ; namely,
that whenever a corporation having public objects is organized,
there lies reserved in the Legislature by the contract of every
stockholder the authority to confer upon that corporation new
privileges as to the mode of exercising its franchise, and that if
the I.egislature does grant this new privilege, then it may be ac¬
cepted by a majority of the stockholders and is thereby made
binding upon all. A corroborative suggestion on this point is this :
Ordinary, that is to say natural, persons can build a railroad if they
do not need the power of " eminent domain " ; and if they thus build
one across the state they would have the power of lease as incident to
the right of property. Corporations for wise purposes are not in¬
vested with all the powers individuals have. The directors are
made trustees for the exercise of the *' public use," and they are pub¬
lic officers. Is there not an implied contract by those who join such
a corporation that any of the ordinary rights as to disposition of
property, if the Legislature chooses to confer them, may be acceded
to by the corporation '?
Wedïtesdat, Sept. 20, 1871.
May it please the Court : Before proceeding in the line of argu-
ment which I purpose to pursue, I beg leave to make one other
suggestion upon the subject of the construction of the act. The
idea of the other side is that this act should have the words " or
otherwise " taken from their present place in the context and placed
after the word " consolidate" in the sentence that gives authority
to consolidate with any other railroad or canal company, etc. I
wish to call your Honor's attention to this suggestion. All the
words after the words " or otherwise" are descriptive of " compa¬
nies," and may readily be dropped from the context ; and if the
gentleman's ideas are correct, he would then make this act read
thus : " or to consolidate or ofkeririse with any other railroad or
canal company or companies in this state by agreement, contract,
lease or otherwise as to the directors of the United Companies may
seem to be expedient." Thereby, your Honor will observe, using
30
the words " or otherwise," when there is no necessity for them
whatever ; because the words as used after the word " lease " give
exactly the idea which the other side wish to convey by placing
those two words after the word " consolidate."
Dropping then the question of construction and resuming the
case at the point where I left it yesterday, I beg leave for a moment
to recapitulate. I have contended that a different contract exists
between stockholders in the case of a corporation formed for public
purposes from that which exists when the company is simply for
private emolument; that that contract is that the public might
give to such a corporation such new methods for the exercise of the
franchise conferred as might seem right to the Legislature. The
case in Watts & Seargent which I have quoted, is here strictly in
point, and the doctrine is eminently reasonable. Such companies
are for public purposes ; they are simply modes whereby the state
exercises its right and discharges its duty of advancing the public
weal. It commits this discharge to individuals whom for that pur¬
pose it constitutes a corporation. Must not the state expect—and
must not the stockholder join in the expectation—that if the state
wishes to confer more power to advance the original object of the
corporation, it may do so, and that the corporation may, as such,
agree to it Í Is it reasonable to suppose that the state would have
no more right to increase the efficiency of corporations having pub¬
lic objects, than of corporations which are wholly private in their
purposes ! Does it give such corporations the great power of. emi¬
nent domain, without reserving any more right of oversight or
direction for the public good than when that power is not conferred Î
I beg leave to call your Honor's attention to some passages from
one or two of the cases I have quoted in corroboration of this view.
I read first from 14 Barbour's Sup. Court Eeports, p 560 :
"A charter of incorporation," says Edwards J., delivering the
opinion of the court, " like a contract between individuals is to be
construed according to its spirit and meaning as well as its letter.
And in this point of view, when it is asked by the plaintiff's counsel
whether the Legislature can convert the défendant into a banking,
insurance or mining company, I answer most unhesitatingly that it
cannot, and for the obvious reason that such an act would create a
new company of a new and distinct character. But no such thing
is proposed in this case. If the law in question is sustained and
carried into effect, the company will remain the same as it now is,
31
as to its character, structure, objects and business. It will have
the same road, and the same buildings and property, with the same
agents as it would have if the law had not been passed."
Even that remark is applicable here, because the agents are those
who carry on the work—not the individuals (for no individuals are
appointed or designated) but the same class of agency.
" There will be no foreign element introduced into its organiza¬
tion. It is not like the case of a subscription to the stock of a
moneyed or any similar corporation. The eifect of the subscription
will be that the surplus capital of the company will be used to
increase its business and to promote the objects for which it was
chartered. The new road from its location and situation will furnish
additional facilities of travel to a large population spread over an
extensive tract of country, and will probably and almost necessarily
increase the number of persons who will come to this state, and
pass over the road of the defendant. This was the object and will
undoubtedly be the effect of the law."
There are passages particularly worthy of notice, but with which
I will not now trouble the Court, in the Opinion of Hamm, Pre¬
siding Justice, in 17 Barbour, especially at pp. 601 to 606. As I
think I stated yesterday in relation to this case, the Judge who
delivered the opinion of the Court, halted somewhat in adopting the
decision which his brethren of the majority had made ; and in his
opinion, he goes over the cases on both sides, and it is therefore
valuable as presenting to your Honor at one view many of the cases
pro and con, which bear upon this vexed subject.
Now, this implication, if your Honor pleases, for which I contend
_—the implied contract, I mean, on behalf of every stockholder,
that there were certain powers reserved by the legislature, and
which it might yet confer, and which might lawfully be accepted by
the corporation — this implication, I say, seems strengthened very
much to my view by a reference to the original acts chartering
these two great companies. 1 do not refer now to the act chartering
the N. J. E. E. Co., but to acts passed at the same session of the
legislature, by which the Camden and Amboy and the Delaware and
Earitan Companies were both incorporated. Your Honor will find
the very same language used in the incorporating clause of that
act. It is enacted that the corporations constituted, shall have,
enjoy and exercise all the rights, the powers and privileges pertain¬
ing to corporate bodies — a very large power.
32
"All the powers pertaining to corporate bodies and necessary to
perfect an expeditious and complete line of communication from
Philadelphia to New York, and to carry the objects of this act into
effect"—that was what the Legislature proposed to give these cor¬
porations, each of them. That was the declaration of what their
intent was ; that is a description of what the stockholders accept¬
ed; that is a definition of what the stockholders understood as
possible to be done in the future. It may in one sense be called a
promise solemnly made on the part of the Legislature, that if they
did not then have all powers that were necessary " to perfect a com¬
plete line of communication from Philadelphia to New York, and
to carry the objects of that act into efl'ect," they might expect that
the Legislature would one day grant them. Now, why these very
strong expressions, perfect a line of communication"—give it
everything that in the future as well as in the present could be
dreamed of—"perfect a complete line of communication" ? Complete,
how ? Everybody knew what the line of communication was and
was to be, a line of rails stretched from one city to another. Why
use the word "complete"*? Was there not some mind even then
existing, some genius almost prophetic, which could peer into the
future which was then unseen and almost unimaginable, and foretell
that to-day there is necessary to fill out the word " complete " a
much larger amount of power and a grander scope than then was
dreamed of. Sir, the object of that act, I doubt not, in the minds
of the wise and skillful men who devised it, had reference to what
was to their minds plainly apparent though others might not then
have recognized the peculiar situation and locality of New Jersey.
They saw, I doubt not, that she lay in the pathway of all the in-,
dustry and productive power of this whole continent to its great
commercial emporium. They saw, I doubt not, that the time would
come when the word " complete" would indeed be a large word and
signify much. And in taking a contract from the state with a view
to its great future, they took it in words which clearly show that
their intent as stockholders was to have every power of use of their
franchise that could possibly be given for its promotion.
And, again, it seems to me that this implication is greatly strength¬
ened by a reference to the course of legislative practice, which is
the practice likewise of these very stockholders in relation to these
acts. In 1831 was the first consolidation between these two com¬
panies ; and a system or practice as to new powers, the mode of
33
conferring and acquiring them, was at once then begun. Consoli •
dation was effected between the Canal and the Railroad Company.
That consolidation could take place only on the consent of seven-
eighths of the stockholders, and it was provided that disagreeing
stockholders should be paid back what they had paid with interest.
In March, 1832, an act was passed by which authority was given
to transfer a thousand shares of the stock to the state — by which
it was provided that a new system of government should be cre¬
ated. A director was to be appointed by the state, and the author¬
ity of that director was particularly defined. A lateral railroad to
New Brunswick was also authorized. Your Honor will perceive that
provision was thus made for changing the mode of government of
this corporation, for giving away a large portion of its capital, and
establishing a new mode of employment of its capital, by a road to
New Brunswick. All this was provided to be done by the assent
of a majority of the stockholders. A few days after, in 1832, a
change of location was allowed. In 1835 a lateral road was au¬
thorized, without any consent being required. In 1837 connection
with the New Jersey Railroad was permitted, without any stock¬
holder's assent being required ; and after that, running down from
1850 to the present time, I find no less than twenty-two acts au¬
thorizing subscriptions from the moneys of this corporation, for the
Freehold and Jamesburgh Railroad, the Belvidere and Delaware
Railroad, the Flemington, again for the Freehpid and Jamesburg,
the Rocky Hill, the Mt. Holly and Pemberton, the New Egypt and
Hightstown, the Flemington again, the West Jersey Railroad (per¬
mitting the endorsing of bonds of other companies), and so on —
twenty-two acts of that nature will be found, entirely altering the
very structure of the original contract, with no provisions for the
assent of stockholders nor for compensation to them. And this
review brings us down to the act creating the United Companies,
which act is the second in the list in which dissentient stockhold¬
ers are provided for ; and in that act the same kind of provision is
made for their compensation as in the act which is now in question
before this court.
Now, if your Honor pleases, it is one of the strong points of the
stockholders who filed this bill that they are either original or old
stockholders. They state to the court as one of the reasons why
their complaint should be listened to, that they invested their money
long ago, that they have kept it there through all the changes and
34
the chances of this mortal life that have intervened ; and therefore
they would urge your Honor to consider their rights with more
gravity than you would if they were persons who bad bought the
opportunity of being injured. But all this while they have seen
this practice of the Legislature in relation to their own companies
going on ; all this while they have themselves acceded to these
changes in the original contract. Can they come here at this late
day and say, " all this is contrary to our contract f Have they not
established that whatever may be the truth as to other corporations
—particularly as to other public corporations—as to these corpora¬
tions, the contract shall he held one whose structure is not invaded
by any such law as that in question before this court? Have
they not incorporated into their original contract this provision, that
the Legislature of New Jersey, whenever in its wisdom it may
choose, may change their fundamental law at least in such a manner
as that new modes of use of their franchises, new methods of profit
for themselves may he devised and exercised ?
But without resorting to any implication in the original con¬
tract that greater power to exert the franchise may he granted
and may he accepted by the corporation, I proceed to remark
that the Legislature Ms given this power, and that being so,
that there is nothing in the original contract which prevents
the exercise of it, and nothing in this case of fraud or of folly
which calls upon this court to interfere. The contract is two¬
fold : with the state and with each other. Only with that " with
each other " are we here concerned. That contract, I suppose to
he, to use, not to abandon—for mutual pecuniary profit out of the
earnings, at the reasonable discretion of a hoard of directors consti¬
tuted as by the charter; not to he interfered-with except in case of
fraud, or wanton mistake amounting thereto. This is all, it seems
to me, that can he reasonably claimed, and this definition accords
almost precisely with that of the Attorney General in his brief
given to the court. Now, suppose, if your Honor pleases, a part¬
nership between individuals in an enterprise which could he carried
on by individual acts where the contract restricted action to some
selected by the rest, and the others were barred by it from any ac¬
tive agency. Suppose the matter related to a hotel, a farm or a ship.
Suppose the managers had carefully experimented, and without
fraud and, in the exercise of a reasonable discretion, determined
th^t it was better to lease than to otherwise manage, and should
35
propose by leasing to secure a certain profit, what would be the
course of a court of equity ? would it enjoin this mode of lease ?
Take a mine, for instance, and suppose the contract to be what I
have described ; a certain board are to manage, and exclusively
manage ; the other partners in the enterprise give it all up to them.
Now, suppose that board, instead of themselves employing miners,
buying steam engines for drainage if needed, and making all the
other arrangements that are necessary for a mine—suppose they
choose to say to some man more expert in mining than themselves,
"here, take this mine; we give it to you on a lease during ajl
the time for which we ourselves are entitled to use it; agree
that you shall work it, fix it so that you shall not abstain from
working it, and pay us a royalty of so much for every ton you
raise." Would there be any objection to this in the original contract
of these parties, the whole end and object of which contract was
the using of that mine, the deriving profit from it—that and noth¬
ing more, to derive profit from the use of it ! • Would there, I ask,
be anything in that case which would call for the interposition of a
court of equity ? What difference is it whether it be a mine or a
railroad—what difference, I mean, to the individual ? There is a
great difference to the state. The state needs the railroad for pub¬
lic purposes, and there may 1)8 a desire on the part of persons who
are actuated by patriotic motives as well as by considerations of
pecuniary gain, that it shall be managed in a particular way ; but
as a matter of right between the parties and of pecuniary right be¬
tween individuals, I ask would a court of equity interfere ? One
way of using either a mine or a railroad is authorized. Actual
hand-work on the part of the men who are designated to manage
the work is not contemplated ; some class of agents must be ap¬
pointed. Another method of using the property is to farm it out
for a share of the profits ; to fix what is called a rent either by
royalty or by calculating the profits of every year, and thus fixing
a yearly sum. Fraud or egregious folly would be restrained and
always is ; but would discretion, exercised by careful men having
their own interest in view, be interfered with by the court 1 I call
attention, on this point, to a case that has been cited here more
than once, of Featherstonhaugh vs. The Lee Moor Porcelain Clay
Co., 1 Eq. Cas., Law Rep. 318. The head note of that case tells
the whole story. A company was incorporated, in the first place,
for "the making, preparation and sale of porcelain clay," with
36
power, if it should be deemed expedient, after the original business
had become developed lo combine "mining operations" with the
original business. By the company's deed it was provided that it
was provided that it should be competent for any extraordinary
general meeting, by a majority of two-thirds in number of the share¬
holders, to empower and require the directors to bind the company
and every shareholder thereof to any act, deed, matter or thing
whatsoever which the company, by virtue of its corporate capacity
or otherwise, or all the shareholders together, would be enabled to
make, do or execute, if the consent of every shareholder was given
thereto. It also provided that the directors should have power to
make contracts ; and in case it should be doubtful whether it was
in the competence of the directors to conclude any contract, the
same might be submitted to an extraordinary general meeting, and,
if sanctioned, should be binding upon every shareholder, whether
under incapacity or not, in like manner as if every shareholder were
sui generis md had consented. The company obtained lease of
land for ninety-nine years, commenced business in 1852 and paid
one dividend and no other, the undertaking not turning out success¬
ful. Held—that after this a majority of two-thirds of the share¬
holders, in general meeting, were empowered under the above clause
to authorize the directors to make a valid mining lease for twenty-
one years of the whole of the works and buildings of the company.
But. it seems the clauses would not authorize the like majority to
engage the company in an undertaking wholly unconnected with
their original purpose.
Now, your Honor will observe the doctrine of that case. It
holds the doctrine of Natusch vs. Irving and of all the cases
which formed the substrata of your Honor's decision in Zabriskie
vs. The Northern Eailroad ; but it says although the contract
provided for the absolute exercise of certain active power by the
directors and provided for nothing more, yet that under such power
they might, where the case did not involve fraud, lease the property
to somebody else and let that somebody else do all the work. And
it does seem to me that the case is, in every respect, precisely
parallel with that which is now before the court.
I call attention also to a case following that and equally illus¬
trative, in 8 H. of L. cases, 712, Simpson vs. The Westminster
Pal. Hotel Co.
I cite these cases more particularly because, while illustrating
37
the point under dispute here, each of them takes the doctrine of
Natusch vs. Irving as established law. The head note of the case
is this :
" The funds of a joint stock company established for the purposes
of one undertaking cannot be applied to another, and the attempt
so to apply them though sanctioned by all the directors and by a
large majority of the shareholders, is illegal. But where a com¬
pany was established ' for the erection, furnishing and maintenance
of an hotel, the carrying on the usual business of an hotel and
tavern therein, and the doing all such things as are incidental or
otherwise conducive to the attainment of the above objects,' " —
this is the language of the joint stock agreement : " and the
directors, while the hotel was in the course of being built, agreed
to let out for a stipulated period of short duration a large portion of
it to the head of a government department for the business of his
ofiBce, and evidence was given that such a letting was calculated to
be productive of advantage to the company in its intended business
and that a majority of shareholders had sanctioned the act : it was
held that the arrangement was valid, within the words of the clause
' all such things as are incidental or otherwise conducive to the
attainment of the objects for which the company was established.'
In that case, there were four hundred and fifteen rooms in the
hotel and one hundred and sixty-nine of them were let for the offices
of the government. I read now from the argument of counsel—
Mr. Gifford and Mr. Jessel for the appellant ;
" The object of this agreement is entirely different from that of
carrying on .the business of a hotel keeper, which was the object for
which the company was instituted. The agreement cannot, there¬
fore be sustained.'' And he quotes Natusch v. Irving, Const, v.
Hays, Coleman v. The Eastern Counties Eailway Co.
" Occupation of rooms for the purposes of the public business of
the Covernment, is not occupation for the business of an hotel, and
more especially when the occupants do not take their meals there
nor sleep there. This letting therefore does not fall within any of
the words defining the powers of the directors and consequently is
not an act which can by law be confirmed and rendered valid even
by the vote of a general meeting."
The Lord Chancellor says ;—
" I think that this case is to be determined on the principles laid
down by Mr. Cifford, in his very able argument for the appellant ;
38
and I bow to the authority of Natusch v. Irving and the other de¬
cisions to which he referred. The funds of a joint stock company
established for one undertaking cannot be applied to another. If
an attempt to do so is made, this act is ultra vires, and although
sanctioned by all the directors and by a large majority of the share¬
holders, any single shareholder has a right to resist it, and a court
of equity will interpose on his behalf by injunction. A railway
company cannot apply its funds to make a line of railway different
from that described in the act by which the company was constitu¬
ted. A company e.stablished for granting fire and life insurances
cannot engage in marine insurances. A company established to
make a railway and exercise the trade of carriers upon the line, from
one town in England to another, cannot add to it the trade of a
steam packet company. And no company can ever abandon the
business for which it was established and undertake another. Nev¬
ertheless, I cannot say that Vice Chancellor Page Wood and Lord
Justice Knight Bruce were wrong in holding that this agreement
between the Westminster Hotel Company and the Secretary of
State for India is not ultra vires. I think that under this agree¬
ment the directors do not abandon the undertaking for which the
company was established, and they cannot he said to engage in any
new undertaking."
And then he remarks upon the meaning of those words, " the
doing of all such things as are incidental or conducive to the attain¬
ment of the above objects," and holds that under a literal and fair
construction of the contract there was power in the directors to let
these rooms in this way, although the lease was one for several
years.
Now, if your Honor pleases, is not that case exactly ours Î
What is this company doing except providing for the use of their
franchise ? And if in this contract there were large words, such
as the use of all powers incidental to the power or conducive to the end
in question, are they, when you come to consider them, stronger
words than those in the contract in question, which are that this
company [the Camden and Amboy Railroad Company] shall have all
powers necessary to perfect a complete communication between Phil¬
adelphia and New York 1 Now, we are not to-day standing where we
stood a half century ago Î What is necessary to-day to perfect a com¬
plete communication between New York and Philadelphia 1 We say
that the answer appears in the declaration of the Legislature in this
3«
act of 1870 : that in order to perfect a complete communication
there must be consolidation—or what is in its effect equivalent to
consolidation—between the United Companies of New Jersey and
the Pennsylvania Railroad Company of Pennsylvania. For I think
I may safely say that that act looks to that connection and to no
other. On the authority I have cited, I respectfully submit to your
Honor that the lease under discussion is within the terms of the
contract.
But, if your Honor pleases, this act is constitutional, because
the right of every dissenting stockholder is respected, and compen¬
sation is made to him. The steps in the procedure are the
fo llowing :—
1. The lease or contract is to be arranged for.
2. It is to be consented to by two-thirds of the stockholders of
each company.
3. This consent duly authenticated, is to be filed.
4. The lease is then to be made.
5. Stockholders may yet dissent, and then
6. Payment is to be made, and the stock either taken or extin¬
guished. ■
This is no novel mode of action. It began with these corpora¬
tions in 1831, in the marriage act. It was again adopted by them
in 1867, in the marriage act with the New Jersey Railroad Com¬
pany, when the Camden and Amboy was permitted to commit
polygamy. It has its counterpart in New York. In the laws of
New York, of 1853, p. 113, your Honor will find the exact plan in
all its details.
The Chaxcelloe : A general or private law '?
Me. Paekee : A general law. It was adopted in Pennsylvania,
as your Honor will see by turning to the case of Mott vs. The
Pennsylvania Railroad in 6 Casey, to which I will soon call your
Honor's attention. It may be called a method of exercising the
ppwer of eminent domain ; and it is so called, if your Honor pleases,
in cases in New Hampshire, which your Honor will find referred to
in a note to p. 664 of Sedgwick on Statutes. If not a method of
exercising oíií«eut ffowa/«, it is a plan for the attaining of justice
when possible injustice is supposable.
Two points are made against this method of compensation.
First, it is said, it does not precede the taking and therefore does
not meet the requirements of the New Jersey constitution; and
40
second, it is said that it is not for "a public use" that this taking
occurs.
As to its not preceding the taking, I heg to say to your Honor
that if there be anything whatever in this point, it is within the
power of this court to obviate the difficulty. Let this court, if they
have any doubt upon it, hold this cause and direct payment
to any of these stockholders who come in before the absolute de¬
livery of this lease, and all objection is obviated.
And I beg your Honor's attention to the. fact that this is a bill
by stockholders generally :—John Black and other stockholders sue
for their own benefit and for that of all other stockholders who may
come in and desire the benefit of this suit. It is therefore in your
Honoris power so to wield your authority that if any man says, " I
am not paid before I am injured," your Honor may reply, "you
shall be. I will direct such an inquiry as is contemplated by the
act as to the value. I will hold this cause until that inquiry is
reported upon, and you shall not have it to say that you have been
denied any privilege that belongs to you by the Constitution of
your native state." And for this course your Honor has direct
precedent in a ease already cited, of Lantoan vs. The Lebanon
Valley Railroad Company 6 Casey 42. In that case, a railroad
corporation proposed to abandon its charter and dissolve itself with
the consent of the state, and to merge itself, with all its corporate
rights and privileges, into the Philadelphia and Reading Railroad
Company, so that the two companies might be consolidated into
one ; and it was provided that the dissentient stockholders, one and
all, should receive the stock of the Philadelphia and Reading Rail¬
road Company in exchange for their own. It was a case exactly
like that of the consolidation of the Elizabeth and Somerville and
Elizabeth and Easton Companies, at the organization of the Central
Railroad Company of New Jersey. The provision for compensation
was only the exchange of stock. Chief Justice Lowrie delivered
the opinion of the court, composed of himself, the subsequent Chief
Justice Woodward, Judges Thompson, Strong, Porter and
Knox ; and this is the concluding passage of the opinion of the
court — " the act of dissolution works a change in the forrn
of the interests of its members by destroying the stock and substi¬
tuting the thing which the stock represented, that is, a legal interest
in the property, and leaves the members to seek a division of this.
But this property is indivisible, and therefore we see no objection to
41
the act of the Legislature so far as it allows the majority to dispose
of it in the way proposed, except that, under the Constitution, they
cannot be allowed to divert or embarrass the plaintiffs interest
therein without first giving security therefor. The act of transfer
and dissolution is one. If carried into effect it destroys his stock.
Before it is done he must be secured, and we must grant the injunc¬
tion asked for, to stand until this is done. Let the injunction he
issued on the plaintiffs giving security to the amount of $1000 to
the defendants ; and let it be dissolved on the defendant's giving
security to the plaintiff, in double the market value of his stock, to
pay for said stock when its value shall be ascertained."'
Now, it seems that the Constitution of Pennsylvania, like that of
New Jersey, requires this compensation to be made : whether the
requirement was stated in exactly the same terms that are employed
in our own Constitution, including the use of the word " first," I
do not know.
Judge Blace here interposed the following remarks : Will my
friend allow me to say a word to the court now and thus save me
the necessity of again referring to that case of Lanman vs. The
Lebanon Valley Eailroad Company ? The Constitution of the state
of Pennsylvania authorizes the Legislature, whenever they think
proper, when they think it will serve the purposes of public justice,
to dissolve a corporation ; and this corporation was dissolved with
the consent of the corporation and the Legislature both ; and the
judge puts the right to do that upon the ground here that the stock¬
holder took the stock in that case subject to the right of fhe state
to dissolve the corporation and give him back his property. But
in this state the Legislature did not provide for giving him back
his property, but required he should take something else for it.
The court in the case referred to said that that could not be done ;
they must give him money or leave the property in the same con¬
dition in which they found it.
Me. Paekek, proceeding :
The counsel argue that we take their property when this lease
is made ; hut they thereby beg the question entirely. The lease
does not take that property away. If I let my house does my
tenant in consequence own my property ? But that is a very insuf¬
ficient illustration, because I oim my house ; but do the stockhold¬
ers in the legal sense own the railroad ? Can the stockholders sue
for one iota of that railroad property ? If a car is taken away by
42
some person, if a locomotive is by design blown up or destroyed,
can the stockholders come into court and say " my property has
been taken," and ask the court to restore it ? Of course we all know
that the contrary is the case. The stockholder in no respect owns
the property ; all he has is an interest in the profits of the use of
that property and a right to defend the property itself in order that
he may obtain those profits. Legally and equitably, the corporation
owns the property. In no respect can the stockholder be held to
own the property itself. He has a right and interest in it ; the
right of protection, the right that it shall be used, the right that
from that use there shall come profit, the right that directors shall
manage the property personally or by agency, and that that profit
shall come to him regularly and honestly. And now do we meddle
with this property when we make this lease '? It is said that the
perpetuity of the lease makes a difference, that here is a lease made
for nine hundred and ninety-nine years ; but as that lease is made,
the argument, it seems to me, is in no wise true. But admitting its
soundness, it does not follow that that there would be. a taking
away of the property of the stockholder. There might be wrong
done. To make a case of wrong actually done him, there
must be shown a fraud upon him in that they disposed of the sub¬
ject matter of the corporation and prevented him "thereafter from
deriving a profit from its use. But I submit to the court that this
lease, though it be for nine hundred and ninety-nine years, so long
as it constantly pays a fair rent and makes large and adequate re-,
muneration, is not a passing away or a sale of the property ; that
length of time in such a case makes no difference. If under this
lease there was a payment in gross, I admit that then there would
be in equity a perfect alienation of the property away from its own¬
er, and the owner would have, instead of the property, the money
which had been realized or produced by it ; but so long as the prop¬
erty is merely leased and there springs from it everlastingly rent,
and that rent is such as the court recognizes as fair remuneration,
(and which experience shows, in the present case, to be an average
remuneration,) there is no alienation and no sale, and no wrong
either.
Now, the real truth here is this : This lease may injure the stock¬
holder by depreciating the value of his stock, or it may profit him
by causing it to appreciate. That is all that the lease can do. It
pannot take his stock ; it may injure it. We know that it will ap-
43
precíate it. It has already done so, though of course that is public
rumor. But that is our conviction—that it will do so—and they
on the other side think it will not. It is then uncertain, if your
Honor pleases, whether injury will be done or not to that which is
the object and the right of the stockholders, to wit, getting profit,
out of the use of this property. It is perhaps impossible for the
stock to be taken, in the sense of the constitution, because it can¬
not be touched ; it is not the subject of handling. The certificate
is merely evidence of interest; it is no more the property than is
the title deed of the estate. Is the stockholder any less a stock¬
holder when this lease is made ? Does he not still own his stock
himself? The property out of which he derived profit is placed in
another condition of usefulness and profit, but it is there—it is just
as much there as before. His interest in it is just as much
there as before. Could he not, after this lease is made,
come into this court and say, " I am a stockholder in the company.
I own so many shares, being such and such a proportion of
interest belonging to me in that company. Some other company
has taken it away from the Pennsylvania Eailroad Company
to whom it was leased for use and profit, and they have not a
suflBcient title to it, and I want the aid of this court to help me as
a party having an equitable interest in that stock." And if all this
could be done, then plainly the constitution does not apply when it
speaks of private property being taken, because it is not taken and
it cannot be taken. Injury can be compensated for, but that is all.
Now, then, comes in the statute. The lease makes not the slight¬
est difference as to theriglitoi the stockholder; the only difference it
makes is in the amount of profit he can receive. It does nothing
more than add to the security of the profits by the covenant of
others. To my mind, the argument that this property of the stock¬
holder is taken when the lease is made, seems really unworthy of
its authors and of the attention given it. After the lease is made,
the stockholder is given by the statute a limit of time during which
to consider whether he is injured or not. If he makes up his mind
that he is, then the law says to him, " have your stock valued."
The language there is very remarkable ; it is to find out the " full
value of his, her or their stock immediately prior to such lease"—
not " the market value," though that may be held by the court to
be a measure of the full value. When reading this bill and observ¬
ing the earnest rhetoric with which the value of this stock is mag-
44
nified, it has occurred to me that this act provides a remedy when
it says, there shall be assessed the full value of that stock immedi¬
ately prior to the lease. But whether the companies take the stock
or whether it is simply extinguished, leaving things as they were be¬
fore, is of no moment to the present controversy. I submit to your
Honor that this law is entirely constitutional, and I wish, on that
point, to draw attention again to the case of Mott vs. The Penn¬
sylvania Railroad Company, where such a provision was directly
decided by the Supreme Court of Pennsylvania to be constitutional.
I refer to the opinion of the court, at its close, 6 Casey p. 34. I
need not enter at large upon a statement of this case. One of the
paints your Honor will find alleged was that the law was unconsti¬
tutional, notwithstanding that it was provided in said act that if
any stockholder should exercise his right to refuse to comply with
said act, after a majority of the stockholders should have accepted
the same, his stock might be appropriated by the company without
his consent, on paying him the full market value thereof. This act
was nevertheless in terms declared to be constitutional in these
words : " All other parts of the act " (there was one portion de¬
clared unconstitutional) " are constitutional, and there is nothing to
prevent a sale under the general provisions of the act." That and
the case I have already cited on p. 42 of the same book, are au¬
thorities upon this subject.
I proceed then to the discussion briefly of the other objection to
this act—that the use is only private, not public. How if your
Honor pleases, the act is for consolidation ; that is the motive of the
act. Though I have argued that it is not subject to the same ob¬
jection as is consolidation in stock, or even in business, yet the lease
is as effective as consolidation, though it is not consolidation ; for
the United Companies remain intact, exercising powers of oversight,
still protecting the rights of stockholders—the managers surrender¬
ing the authority over their subordinate agents, but nevertheless
still existing as a distinct organization and for the very purpose of
promoting the interest of these stockholders by securing the most
complete use of the franchise. But, as I have said, the effect is
nevertheless exactly the same as if consolidation had been effected ;
and all the public good that the Legislature contemplated in consol¬
idation was not only meditated by them as arising from such a
lease, but is actually attained by such a lease. "What then is the
motive of the Legislature in enacting consolidation? Evidently
45
the completion of the grand public purposes for which these com¬
panies were organized, by acquiring the largest through trafiSc.
That is the public end. That would be a good public motive for
granting a charter. If a charter could be granted to authorize
transportation from Philadelphia to New York without taking a
ton of freight from any point along its way, would it not be a "pub-
licuse"? What becomes of it at the other end' It must be landed
from the cars ; it must be warehoused ; it must be re-shipped ; it
is the creation of commerce at that point.
For what was Harsimus Cove secured and preserved '? It was
for through traffic, nothing else, in the expectation that there would
come to Jersey City from Pennsylvania and all the world beyond
immense quantities of merchantable commodities requiring trans¬
shipment and therefore room and therefore commerce.
Let us think for a moment on this matter of the public interest
in through traffic. What made New York the commercial metrop¬
olis of the western world '? Her bay is rivalled by Newport, by
Portland, by Portsmouth, by Hampton Roads; all her natural ca¬
pacities for commerce belong apparently (and in some of these
instances in a larger degree) to other places, but her command of
the great natural highway from Albany down, first gave New York
her prominence as a mercantile emporium. Then the Erie Canal,
devised by the far seeing ken of DeWitt Clinton, enlarging still the
sphere of through traffic ; then the Hudson River Road increasing
the capacity of transportation, with its companion, the Harlem, and
their connecting roads, the New York Central and the Boston Road ;
and then the Erie—Briareus of railroads I may fairly call it—these
great means of through traffic have been the jource of the pros¬
perity and wealth of the city of New York. The experience of
Jersey City and of Hoboken is the same. When the Morris and
Essex got there from Easton and the New Jersey Centralfrom the
same point—these roads connecting with others that went far into
the interior, and when the Erie arrived after them, what activity
and prosperity did they not engender 1 It was through traffic, sir,
that did it all. And not alone have Jersey City and the Bay of
New York been benefited, but who can estimate the benefit to trade
and business all along their routes which has resulted from the con¬
struction of those railroads originally designed to be promotive of
through traffic I In through traffic no trans-shipment is required
nor breaking of bulk ; on the contrary, merchandise may be ship{5ed
46
from all parts of New Jersey direct to every part of the great
West, the South and the whole continent. If these are the
advantages of through trafBc, and if the Legislature thought, as
they doubtless did, that consolidation with the Pennsylvania Rail¬
road would increase its facilities or would hasten a result having
that tendency, surely here is "public use."
No one can have observed the history of this country or ac¬
quainted himself with that of Great Britain, without seeing that
the necessities or conveniences of trade, in other words the public
weal, perpetually call for consolidation as a means of promoting
trafiSc, of giving intensity to the energy of those who need these
great public facilities. In New York we notice the Central and the
Hudson ; the Erie, with a multitude of smaller roads ; in New
Jersey, the Delaware and Lackawanna has now absorbed the Mor¬
ris and Essex; the Lehigh Valley has taken possession of the
Morris Canal ; the Erie has long ago appropriated the Paterson
and Hudson and the Paterson and Eamapo. The United Com¬
panies themselves have appropriated numerous smaller tributaries,
their works having served for years as a great river into which ran
from every direction rills of their own creation. They but follow
the law of being when they themselves to-day become, through this
consolidation, a great trunk road with which shall connect not only
these, but the greater roads that actually cross the continent.
All this is not brought about by ambition or political design, but
by trade. Thoroughness, completeness of execution and expedition
in railroad duties, transportation without breaking bulk and without
delay, these are the motives for railroad consolidation. Hence ex¬
perience seeks for consolidation—hence consolidation here—and as
soon as it is effected, the avenues of commerce will be improved
and the public benefitted, as was the legislative design.
Consolidation too, 1 think it fair to observe, tends to a proper
obliteration of state lines. It binds a nation together and makes
Us one. Suppose the line of the Pennsylvania Central to end at
our state line ; would it not be a public use to build a road which
would connect it with our own ? If consolidation would facilitate
this connection and promote vast trade, is it not a " public use " ?
We have nothing to do here with the matter on political grounds.
It may be unwise to trust these great corporations. That argument
is for another forum. If valid in this instance, then it was equally
valid as against the Marriage Act and against the whole system of
47
consolidation as established in New Jersey. It is no stronger argu¬
ment, to-day, in this period of greater advanceipent in transportation
facilities and traffic development.
It is said the state has left it to the companies to declare the
" public use." Not so ; the state declares any such " consolidation "
as is called for by the act to he a " public use," and leaves the
companies to determine with what particular company they will
consolidate. The property to he taken for public use is designated.
The " public use "—consolidation with any road with which the
United Companies are identified in interest or with which their
roads form a continuous line—is plain. As an act generally leaves
to a company organized for railroad purposes to determine upon its
route, so the act in this instance leaves to these companies to de¬
termine with which road consolidation shall take place.
Another objection to the validity of this act is that it places the
highways of the state under control of a foreign corporation ; and
it is urged that the Legislature have no power so to do ; but I ask
why have they not the right so to do with this class of highways.
Is it anything more than consenting that citizens of another state
may come here, subject themselves to our laws, and then manage
our corporations ? If our highways were placed under foreign law
it would be another matter ; but are they ? When a company comes
here and accepts the privileges which are given by the Legislature
of the State of New Jersey, do they not become bound to exert
those privileges in the rnanner provided for by the State of New
Jersey ?
Your Honor is familiar with a leading illustration of this manner
of naturalization of companies, so to speak. The Erie has for
years been the lessee and sole manager of two of our railroads,
having absorbed a company organized for the purpose of building
a tunnel, and has, I believe, by direct charter, been authorized it¬
self to construct a railroad from that tunnel to its dock. And yet
these lesser roads were all public highways, not only in the limited
but in the enlarged original sense of avenues for locomotion by the
motive power of individuals as well as of corporations. And yet
has there been any difficulty between the state and the Erie Rail¬
way '? Has that corporation brought the laws of New York into
New Jersey and made them supreme, or has it not willingly obeyed
the laws of New Jersey í Why not admit other citizens of the
United States to the privileges of our own state ?
48
It seems to me now too late to take a narrow view of this ques¬
tion. The rights of parties to the use of such highways have
already been endorsed in New Jersey in a case which has been
cited to your Honor.
As to other topics which have been suggested in connection with
this case I have nothing to say. I will not take it for granted that
the Legislature of New Jersey past, present or future, has been, is
or will be corrupt, or that the acquisition of the immense capital
which this consolidation lease will bring into our state will destroy
our morals and bind us, hand and foot, to a moneyed Juggernaut.
I have a better opinion of my state. And if public corruption
greater than has heretofore existed should stalk abroad among us,
I have a firm conviction that there will yet be found some few with
whom purity and truth will remain, and whose moral power will
check and restrain the threatened dangers.
But I fail to perceive that a foreign corporation as owner of our
works would prove a whit more dangerous to our liberties than
foreign owners of a domestic corporation. The policy adopted by
this act is no new thing in New Jersey. It is but a new instance of
that policy which has, in truth, been her necessity, and in which she
has been aided by her singularly advantageous location :—the poli¬
cy of inducing foreign capital hither. It was that policy which led
her first of all the states, it is believed, to abandon jealousy of aliens
and to allow them to hold and convey real estate without restriction.
It was that policy which, in the infancy of railroads, and when
almost all her public men were ignorant of their character and
capacity, led her to give a monopoly for crossing her territory, in
order early to acquire the benefits of through railroad traffic. It
was that policy which, within a few years, triumphed finally over
the shortsighted economy which even yet hampers Pennsylvania,
and established a rate of interest and an amendment of the usury
laws which has brought and is bringing, yearly, millions of foreign
capital to enrich her. It was that policy which some twenty years
ago permitted the consolidation of two of her roads—the Paterson
and Hudson, and Paterson and Eamapo—with the Erie, under the
effects of which incalculable benefit has arisen to Jersey City and
Hoboken, as well as to the country through which these railroads
pass. It was that policy which authorized the lease of the Morris
and Essex to the Delaware and Lackawanna, by which that great
artery of public wealth has been made the rival of the Erie, not
49
only in business, but in benefit to New Jersey. It was that policy
which, later yet, has placed the Morris Canal in hands which will
really develop its beneficial capacity. Nor is it'a policy of which
we should either he ashamed or afraid. It is our location which
induces it. If we cannot ourselves make use of our local advan¬
tages, if we are not rich enough, why should we deny them to the
nation ?
The day is gone for state pride' to intervene and forbid the use
of foreign capital and enterprise upon our soil, exqept under the
management of our own citizens. .Out of the misery of those
wretched five years, when wrongly asserted state rights contended
against nationality, this good has already come, that local divisions
are to a greater extent obliterated, and all American citizens stand
everywhere, as they were meant to stand—alike. If corporations
from other states acquire rights here, they acquire them under our
laws ; they will be compelled to obey them ; they will repose under
their protection. They become, in a sense, naturalized citizens of
New Jersey. "We lose nothing. We everywhere gain. Individ¬
uals may lose consequence, but the state and the public will be
profited, for centralization will intensify energy and enterprise, and
promote tenfold the good which a great railroad, actually beginning
at the Pacific, having its trunk in New Jersey and its terminus upon
her shore, must necessarily dispense within her borders.