Nashua & Lowell Railroad v. Boston & Lowell Railroad

delivered, the opinion of the court.

This is a suit in equity to compel the defendant, the Boston and Lowell Railroad Corporation, to account for various sums of money alleged to have been received by it and- used for its benefit, to which the' complainant was entitled, and also to charge the defendant Iiosford personally with the amount diverted by him to that corporation. The controversy relates to certain transactions growing out of a joint traffic contract between the plaintiff and the defendant corporations.

The plaintiff, the Nashua and Lowell Railroad Corporation, is alleged in the bill to have been duly established as a corporation under the laws of New Hampshire, and to be a citizen of - that State. It will be convenient hereafter in this opinion to designate it as the Nashua Corporation. On the 1st of February, 1857, it owned and operated a railroad extending from Nashua,in New Hampshire, to Lowell, in Massachusetts,' a distance of thirteen miles, of which five miles were in New Hampshire, and eight miles in Massachusetts. The suit was brought not only against the Boston and Lowell Railroad Corporation, alleged in the bill to be a corporation duly established' by the laws of .Massachusetts and a citizen of - that State, but against Hocum Hosford, its treasurer, and Charles E. A. Bartlett, of the city of Lowell, álso citizens of that State, .but as to Bartlett it has been dismissed. On the 1st of February, 1857, this corporation, which for convenience we shall call the Lowell Corporation, owned and operated a railroad extending from Boston to Lowell, Massachusetts, a distance of twenty-six miles, with a branch to the town of Woburn a mile and a half in length.

On the 1st of. February, 1857, the two corporations entered into a contract in writing with each other, “ for the promotion of their mutual interest through a more efficient and economical joint operation and management of their roads and for the better security of their respective investments as well as for

The Nashua Corporation had at this time leases of the Stony Brook Railroad, extending from its line at North- Chelmsford to Groton Junction, about fourteen miles in Massachusetts, and of the Wilton Railroad extending from Nashua to Wilton, about thirteen miles in New Hampshire. The contract was originally for three years, but by a supplemental agreement of October 1, 1858, it was extended to twenty years. Among other things, it provided:

That the roads of the parties should be “operated and managed by one agent, to be chosen by the concurrent vote of a majority of the directors of each party, and who might be removed by a like vote or by the unanimous vote of either board; ” and that the respective boards of directors should, “by such concurrent action, exercise the same control over the management as is usual with boards of railroad directors in “ordinary cases.” '

That the corporations should each surrender to the joint management thus constituted “ the entire control of their respective roads, shops, depots, furniture, machinery, tools, or other property necessary for the proper maintenance and working of the joint roads,” reserving only certain specified property, necessary for the operation of the roads, consisting principally of real estate.

That the contracts of the Nashua Corporation with the

That the-Nashua Corporation should within the year 1857,1 at its own cost,, erect a freight depot, with the necessary approaches and furniture, in the city of Lowell, upon its site at Western Avenue, which, during the continuance of the agreement, might be used for the accommodation of the joint business.

.That the Lowell Corporation should complete within the year 1857, at its own separate cost, the new passenger depot at Causeway Street in Boston, then under construction, together with the tracks, bridges, and all necessary fixtures connected with thé extension into that city, and at its separate . expense make such alterations in the existing Boston passenger depot as had been designed by the Lowell Corporation for converting it into a freight depot; and also, without charge to the Nashua Corporation, complete at the earliest practicable time the crossing over the Fitchburg Railroad and the- connection with the Grand Junction Railroad.

That the road-bed, bridges, superstructure, depots, buildings and fixtures of each road should be kept as near as might be in like relative repair from their then state and. condition, and that all casualties and damages to the same, except fire risks on buildings, should be at the common risk, and charged in the current joint account, and in case of the destruction by . fire of any buildings or injury to the same, that the owner should rebuild or replace them at his own cost.

That the income and expense accounts of the joint roads should be made up, as nearly as conveniently might be, by .estimate to the close of each month, and the net balance should be divided and paid over, on account, to the respective treasurers of- the two corporations, -thirty-one per cent to the Nashua Corporation and sixty-nine per cent to the Lowell Corporation, subject to a final, adjustment at thé semi-annual closing of accounts; and that on the first' days of April and

That each corporation might separately and on its own account declare such dividends upon its own stock, and payable from its own separate funds, as it might deem expedient, it being distinctly provided that “ the interest upon the debts of either party must also be paid out of such separate share, and not from the common fund.”

' As thus seen, the contract provided that the two roads and their branches should be operated as a single road by a common agent to be appointed by the directors of both companies, and removable by them or by the unanimous action of either; that the roads and property of each party should be ' kept in a like relative condition and repair as they then were at their joint expense; that the Nashua Corporation should, in 1857, erect at its own expense a freight depot, with necessary .approaches, in the city of-Lowell, and the Lowell Corporation, in the same year, at its expense complete a passenger depot, with necessary approaches, in the city of Boston,, and alter the existing passenger depot there, also, at its own expense into a freight depot; that the interest upon the debts contracted by either party should be paid out of its own share, and not from the common fund; and that the net income should be divided in the proportion of thirty-one per cent to the plaintiff, the Nashua Corporation, and' of sixty-nine per cent to the defendant, the Lowell Corporation — payments on account of such division tó be made upon monthly estimates, and final settlement and adjustment to be had semi-annuálly. The contract did not provide that the property of either corporation Should be improved, or other property-be acquired by either, at the joint expense of both,

Under this contract and during its continuance,. the two corporations united their business and conducted- it with marked success. By leases from othér companies and' the ac

Before passing, however, upon the validity of these claims a question raised as to the jurisdiction of the Circuit Court must be. considered. Its jurisdiction was assumed upon the diverse citizenship of the parties, and, upon the allegations of the bill, rightfully assumed. Although a.corporation is not a

But it also appears that in April, 1836, the legislature of Massachusetts constituted the same persons a corporation of that State, who had been thus incorporated in New Hampshire, giving to them the same name and authorizing- the new corporation to build that portion of the railroad between Nashua in New Hampshire and Lowell in Massachusetts lying within the latter State.

It also appears that in April, 1838, the législature of Massachusetts passed an act to unite the two corporations — the one created by New .Hampshire and the one created by Massachusetts — the first section of which was as follows :

“ The stockholders of the Nashua and Lowell Railroad Corporation, incorporated by the legislature of the State of New Hampshire in the year one thousand eight hundred and thirty-five, are hereby constituted stockholders of the Nashua and Lowell Railroad Corporation, incorporated by the legislature. of this Commonwealth in the year one thousand eight hundred and thirty-six; and the said .two corporations are hereby united into one corporation by the name of the Nashua and Lowell Railroad Corporation; and all the tolls, franchises, rights, powers, privileges and property granted, or to be granted, acquired or to be acquired, under the authority of the said States, shall'-be held and enjoyed by all the Said stockholders in proportion to their number of shares in either or both of said corporations.”

There were other provisions designed to enable the two corporations to conduct their business as one corporation. The act, however, declared that it should not take effect until the

In June of the same year, 1838, the legislature of New Hampshire passed an act' authorizing the two corporations to' unite, and providing in such case that “ all the tolls, franchises, rights, powers, privileges and property” of the two corporations should be held and enjoyed by the stockholders in each and both in proportion to their number of shares therein, and that all property owned, acquired or enjoyed by either of the corporations should be taken and accounted to be the joint property of the stockholders of the two corporations, and that the two corporations should be one — the act to be in force when accepted by the stockholders of the corporations at a meeting called for that purpose.

It does not appear, so far as’ disclosed by the record, except in the allegations of the defendant, that there was any formal acceptance, of this act by the stockholders of the two corporations ; but it would seem that the corporations acted upon its supposed acceptance, for the defendants pleaded to the jurisdiction of the court on the ground that, by the legislation mentioned, the complainant was not a corporation of New Hampshire, and consequently a citizen of that State, but was a corporation of Massachusetts, and thus a citizen of that State.

In the bill as originally filed, the Nashua Corporation was the- only complainant. By a subsequent amendment three persons, citizens of New Hampshire, stockholders of that corporation, were united as complainants. To the bill, as thus amended, the defendants pleaded as follows: “That this court ought not to take further cognizance of or sustain the said bill of complaint, because they say that they, the said defendants, at the time of filing said bill, were, and still are all, each and every one citizens of the State of Massachusetts, and that said plaintiffs, at the time, of filing said bill, were not, and still are not all, each and every one citizens of another State, but that the said Nashua and Lowell Railroad Corporation, one of said.

This plea was overruled, the court stating in its opinion that it seemed “that the defendant corporation might go into New Hampshire and there sue the plaintiff, as a New Hampshire cor- ' poration, in the Federal court, although it could not bring such suit in the district of Massachusetts against the New Hampshire corporation, because no service .upon the New Hampshire corporation as such could be. got in this district, if for no other reason,” and adding that “if the defendant could sue the plaintiff in the Federal court for .New Hampshire, notwithstanding the fact of the plaintiff being chartered under the laws of both States, there would seem to be no good reason why the plaintiff, claiming under its New Hampshire charter, should not be allowed to sue the defendant in the Federal court for Massachusetts, as it would be impossible for the defendant in such case to deny the title of the plaintiff as predicated upon the New Hampshire charter, or to deprive the plaintiff Of the benefit of its New Hampshire citizenship thus acquired.” 8 Fed. Rep. 458 .

,A inore satisfactory answer would, perhaps, have been, that whatever effect may be attributed to the legislation of Massachusetts in creating a new corporation by the same name with that of the complainant, or in. allowing a union of its business and property with that of the complainant, it did . hot' change the existence of the complainant as a- Corpora- ■ tion of New Hampshire, nor. its character as-a citizen of that

But on this point we will hereafter speak more at large. At present it is sufficient to say that the decision of the court overruling the plea in abatement upon the facts agreed upon disposed of the question of jurisdiction in the court below. It is"true the defendants, in their answers, subsequently filed,, also made the same objection. Formerly the objection to the, jurisdiction, from a denial of the complainant’s averment ol citizenship, could only be raised by a plea in abatement or by demurrer, and not by answer. De Sobry v. Nicholson, 3 Wall. 420 , 423; Sheppard v. Graves, 14 How. 504 , 509; Wickliffe v. Owings, 17 How. 47 . This rule is modified by the act of March 3, 1875, determining the jurisdiction of the Circuit Courts of the United States. 18 Stat. 472 . That statute provides that, if in any suit .commenced in one of such courts “ it shall appear to the satisfaction of said Circuit Court, at any time after such suit has been brought or removed thereto, that such suit, does not really and substantially involve a dispute or' controversy properly within the jurisdiction 'of said Circuit Court, or that the parties to said suit have been improperly or collusively made 'or joined, either as plaintiffs or defendants, for the purpose of creating a case cognizable ■ or removable under this act, the said Circuit Court shall proceed no further therein, but shall dismiss the suit or remánd it. to the court from which it. was removed, -as justice may

By this statute the time at which such objection may be raised is not thus restricted, but it may be taken at any time after suit brought in the cases mentioned. The principal object of the statute was to relieve the national courts from the necessity of passing upon cases where it was plain that no question was involved within their jurisdiction, and thus free them from a consideration of controversies of a frivolous and questionable character, and to prevent fraudulent and collusive attempts to invoke the jurisdiction of those courts, as had frequently been the practice, by colorable transfers of property or choses in action from a citizen of one State to a citizen of another, to enable the latter to go into those courts, the original owner still retaining an interest in the property or choses inaction transferred, or taking a contract for a retransfer of the same to himself after the termination of the litigation. In such cases it is undoubtedly the duty of the court below, of its own motion,' to deny its jurisdiction, and of this court, on appeal or writ of error, to see that that jurisdiction lias in no respect been thus imposed upon. Morris v. Gilman, 129 U. S. 315 , 326; Farmington v. Pillsbury, 114 U. S. 138 , 143.

If the question of jurisdiction could be raised in the answers of the defendants after the decision upon the issue on the plea in abatement, notwithstanding the decisions cited and the 39th Equity Rule .of this court, the result in this case, though not perhaps in all cases, would be the same. Replications were duly filed to the answers, the effect of which was to deny the allegations respecting the acceptance of the acts having for their object the union of the two corporations, and those allegations were entirely unsupported by the evidence or by anything in the record ; and neither in the final decree of the court, nor in its opinion, was any allusion made to the subject. The only evidence bearing upon the question is found in the legislation of the two States, N ew Hampshire and Massachusetts, and it is plain, as already stated, that no legislation of Massachusetts could possibly affect the existence of the complainant as a corporation of New Hampshire, or .its character as a citi

There are many decisions both of the Federal and state courts which establish the rule that however closely two corr porations of different States may.unite their interests, and though even the stockholders of the one may become the stockholders of the other and their business be conducted by the same directors, the separate identity' of each, as a corporation of the State by which it was created, and as a citizen of that State, is not thereby lost.

In Farnum v. Blackstone Canal Co., 1 Sumner, 46, we have an instance of this kind. It .there appeared that in January, 1823, the legislature of Massachusetts created a corporation by the name of the Blackstone Canal Company, for the purpose of constructing -a certain canal in that State. It also appeared that in June of that year the legislature of Ehode Island incorporated a company by the same -name, the Blackstone Canal Company, and authorized it to construct -a certain canal within tire limits of that State. In May, 1827, the legislature of Ehode Island declared that the stockholders of the Massachusetts Company should bestock•holders in ,the Ehode Island Company as if they had .originally subscribed thereto, if both corporations, should agree thereto, and that the books and proceedings, of the original and associated stockholders should be deemed the books of both. And the court held that, though the two corporations were created in adjacent States by the' same name, to construct a canal in each of the' States, respectively/and after-wards by subsequent acts were permitted to unite their inter

' In Muller v. Dows, 94 U. S. 444 , 447, the bill averred that of the three complainants two were citizens and residents of the State of New York and one a citizen and resident of the State of Missouri. The two original defendants were corporations, namely, the Chicago and Southwestern Railway Company and the Chicago, Rock Island and Pacific Railroad Company, and they were alleged to be citizens of the State of Iowa. It was contended that the Chicago and Southwestern Railway Company could not claim to be a corporation created, by the laws of Iowa, because it was formed by a consolidation of the Iowa company with another of the same name chartered by the laws of Missouri, the consolidation having been allowed by the statutes of each State. Hence it was arguéd that the corporation was created by the laws of Iowa and of Missouri, and, as one of the plaintiffs was a citizen of Missouri, it was urged that _ the Circuit Court had no jurisdiction. But the court replied; speaking by Mr. Justice Strong : .“We cannot assent to this inference. It is true the provisions of the stat

The case of The St. Louis, Alton & Terre Haute Railroad Company v. The Indianapolis & St. Louis Railroad Company, which was before the' Circuit Court - of the United States for the District of Indiana, and is reported.in 9 Bissell, 144 , and which came before this court under the title of The Pennsylvania Railroad Company v. The St. Louis, Alton & Terre Haute Railroad Company, and is reported in 118 U. S. 290 , bears a strong resemblance to the one now before the court. In the bill the plaintiff was alleged to be a corporation created under the laws of Illinois and the defendants were alleged to be corporations created under the laws of- Indiana and of Pennsylvania. To the bill a plea was interposed iii which it was alleged that under various acts of the legislatures of Illinois and Indiana two corporations were creatéd, one the plaintiff, The St. Louis, Alton & Terre Haute Railroad Company, and the other the same company in name in Indiana; that they had been consolidated by those States, and were so inseparably connected together that the plaintiff was really a corporation as well of Indiana as of Illinois ; and that, as some of the defendants were corporations of the State of Indiana the court could not take jurisdiction of the case. But the court held that the fact that the two corporations created by

The case turned upon the point whether the plaintiff corporation of Illinois had become also an Indiana corporation so as to lose its existence or identity and citizenship as an Illinois corporation. The court held in the negative, that it still remained an Illinois corporation, with all its rights of action as such in the United States courts.

When the case came to this court the decision of the court below was affirmed, but it would seem that when it was considered here the plea to the jurisdiction filed in the court below had been withdrawn. The question of jurisdiction was, however, examined by the court of its own motion. “ It does not seem,” said the court, “ to admit of question that a corporation of one State owning property and doing business in another State by the permission of the latter, does not thereby become a citizen of this State also. And so a corporation of

Many cases might be cited from the state courts illustrative and confirmatory of the doctrine of this case. In Racine & Mississippi Railroad Co. v. Farmers’ Loan & Trust Co., 49 Illinois, 331, it appeared that in April,' -1852, the legislature of Wisconsin incorporated. the Racine, Janesville and Mississippi Railroad Company, and that the legislature of Illinois, in February, 1853, incorporated the Rockton and Freeport Railroad Company, both companies authorized to construct rhihvays;. that in February, 185-i, these tAvo companiés entered into an agreement to fully merge and consolidate their capital stock,’ powers, privileges, immunities and franchises. In February,. 1855, both the legislature of Illinois and the legislature of Wisconsin changed the name of these tAvo companies to that of the Racine and Mississippi Railroad Company. It also appeared that in 1S51 the Savannah Branch Railroad Company was organized under the general railroad Iuav of Illinois, and that in January, 1856, this company entered into articles of agreement Avitli the Racine and Mississippi Railroad Company, by

In Quincy Railroad Bridge Co. v. Adams Co., 88 Illinois, 615, 619, the plaintiff was ■ a consolidated . corporation, so called, created by the laws of Illinois and Missouri for bridging the Mississippi River between those States. The plaintiff, a bridge company, to avoid taxation in Illinois, claimed to be a corporation of both States, and not of either alone. The court in its opinion said: “ It is said by appellants, that this corporation, although it derived some of its powers, and’ in part its corporate existence, from this State, (Illinois,) derived an equal part from the sovereign State of Missouri, and, therefore, they are not a corporation created under the laws of either State. To this it is answered, and we think satisfactorily, that the legislatures of this State and of Missouri cannot act jointly, nor

In Chicago & Northwestern Railroad v. The Auditor Gen eral, 53 Michigan, 91, it appeared that the general railroad law of Michigan made roads that lie partly within and partly without' the State,.taxable on so much of their gross receipts as corresponded to the ratio of their local to their entire length. A local company was consolidated with a foreign one that controlled a number of other consolidated roads and several leased lines besides, and in considering the effect of the consolidation the court said, speaking by Chief Justice Cooley: “It is familiar law that each corporation has its existence and domicil, so far as the term can be applicable to the artificial person, within the territory of the sovereign creating 'it; it comes into existence there by an exercise of sovereign will, and though it may be allowed to exercise corporate functions within another sovereignty, it is impossible to conceive of one joint act, performed simultaneously by two sovereign States which shall bring a single corporation into being, except it be by compact or treaty. ■ There may be separate consent given for the consolidation of corporations separately created; but wrhen the two unite they severally bring, to the new entity the powers and privileges already possessed, and the consolidated. company simply exercises in each jurisdiction the powers the corporation there chartered had possessed, and succeeds there to its privileges.”

It would seem clear, from the decisions we have cited, as well as on general principles, that the plaintiff in this case must be considered simply in its character as a corporation

If the position taken by the defendants could be maintained then they could sue in the Federal court in New Hampshire the New Hampshire corporation, whilst that corporation ‘could not enforce its claims in the Federal court in Massachusetts against the Massachusetts corporation. From the cases we have cited, it is evident that by the general law railroad corporations created by two or more States, though joined in their interests, in the operation of their roads, in the issue of their stock, and in the division of their profits, so as practically to be a single corporation, do not lose their identity; and that each one has its existence and its standing in the courts of the country, only by virtue of the legislation of the State by which it is created. The union of name, of officers, of business and of property does not change their distinctive character as separate corporations.

We turn now to a consideration of the claims put forth by the plaintiff for a restoration to it of moneys appropriated to the use and for the benefit of the defendaht corporation. As seen bjr the provisions of the joint traffic contract given above, the Lowell Corporation was to complete the construction of a passenger station, with all necessary approaches, in the city of Boston in 1857, at. its own expense, and to alter the passenger depot then existing there into a freight depot also at its own expense; and the Nashua Corporation was, at its own expense, to erect a freight depot at the city of Lowell for the accommodation of the joint business ; and in case of destruction of buildings belonging to either party, or damage to them by fire, they were to be rebuilt or replaced by the owner. As observed by counsel, it would appear that when

Under the authority of this vote there was deducted from the net earnings of the joint management the interest on the expenditures incurred in the construction of the passenger station in the city of Boston, at the rate of seven per' cent,

But the purchase of the controlling interest in the stock of the Lowell and Lawrence and of the Salem and Lowell Railroad Companies stands upon a different footing. That was a matter solely for the Lowell Corporation, The purchase was never authorized by any vote of the directors of the Nashua Company. At the time those roads were under lease to the Lowell Corporation, and had been taken into the joint account and the net earnings divided between the two corporations in the same ratio as were the earnings of their own roads.

The decree of the court below will be reversed and the ' cause remanded for further proceedings in accordance with this opinion; and

It is so ordered.

Mr. Chief Justice Fuller, Mr. Justice Gray and Mr.. Justice Lamar dissented on the question of jurisdiction.

Mr. Justice Blatchford did not sit in this case, or take any part in its decision.