Ames v. Kansas
111 U.S. 449 (1884)

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U.S. Supreme Court

Ames v. Kansas, 111 U.S. 449 (1884)

Ames v. Kansas

Argued March 77, 10-11, 1884

Decided April 21, 1884

111 U.S. 449

Syllabus

The remedy by information in the nature of quo warranto, though criminal in form, is in effect a civil proceeding.

A statute abolishing the common law proceeding by information in the nature of quo warranto, and authorizing an action to be brought in cases in which that remedy was applicable, makes the proceeding a civil action for the enforcement of a civil right, subject to removal from state courts to the courts of the United States when other circumstances permit.

Proceedings by a state against a corporation created under its own laws, in the nature of quo warranto for the abandonment, relinquishment, and surrender of its powers to another corporation with which it has been consolidated under a law of the United States, and proceedings against the directors of said consolidated company for usurping the powers of such state corporation are, when in the form of civil actions, suits arising under the laws of the United States within the meaning of the acts regulating the removal of causes.

When a suit brought by a state in one of its own courts against a corporation amenable to its own process, to try the right of the corporation to exercise corporate powers within the territorial limits of the state, presents a case arising under the laws of the United States, it may be removed to the circuit court of the United States if the other jurisdictional conditions exist.

In view of the practical construction put upon the Constitution by Congress and the courts in the statutes and decisions cited in the opinion, the Court is unwilling to say that it is not within the power of Congress to grant to inferior courts of the United States jurisdiction in cases where the Supreme Court has been vested by the Constitution with original jurisdiction.

The Judiciary Act of March 3, 1875, 18 Stat. 470, does not confer upon circuit courts jurisdiction over causes in which the jurisdiction of the Supreme Court is made exclusive by § 687 Rev.Stat.

Suits cognizable in the courts of the United States on account of the nature of the controversy, and which are not required to be brought originally in the Supreme Court, may be brought in or removed to the circuit courts from state courts without regard to the character of the parties. The reasoning and language in Cohens v. Virginia, 6 Wheat. 397, concerning appellate jurisdiction of the Supreme Court, adopted and applied to the jurisdiction of circuit courts over causes in which a state is a party, commenced in a state court and removed to a circuit court.

Page 111 U. S. 450

Each of these writs of error brings up for review an order of the circuit court remanding a case to the state court from which it had been removed, and the two cases may properly be considered together. The material facts are these:

The Leavenworth, Pawnee and Western Railroad Company was incorporated by the Legislature of the Territory of Kansas in 1855, to build a railroad from the west bank of the Mississippi River, in the Town of Leavenworth, to or near Fort Riley, and from thence to the western boundary of the territory, which was the east boundary of Utah, on the summit of the Rocky Mountains. 10 Stat. 283, c. 59, sec. 19. In 1857, this act was amended so as to authorize the construction of a branch from some favorable point on the main line to some point on the southern boundary of the territory. Where an easy connection could be made with a line of road extending to the Gulf of Mexico, and also of a branch to the northern boundary of the territory. The company was organized under these acts in 1857, and before January 1, 1862, had located its line from Leavenworth to Fort Riley, and had, to a large extent, secured its right of way and depot grounds.

On the 1st of July, 1862, the first Pacific Railroad act was passed by Congress, incorporating the Union Pacific Railroad Company, and providing for government aid in the construction of the several roads brought into the system, the Atlantic and Pacific coasts. 12 Stat. 489, c. 120. By § 9 of this act, the Leavenworth, Pawnee and Western Railroad Company of Kansas was authorized to construct a railroad and telegraph line from the Missouri River at the mouth of the Kansas River, on the south side thereof, so as to connect with the Pacific Railroad of Missouri, to the point in the Territory of Nebraska then established as the eastern terminus of the Union Pacific road. Provision was made for government aid to this company in all respects like that to the Union Pacific. Sec. 16 is as follows:

"That at any time after the passage of this act all of the railroad companies named herein, and assenting hereto, or any two

Page 111 U. S. 451

or more of them, are authorized to form themselves into one consolidated company; notice of such consolidation, in writing, shall be filed in the Department of the Interior, and such consolidated company shall thereafter proceed to construct said railroad and branches, and telegraph line, upon the terms and conditions provided in this act."

The Leavenworth, Pawnee and Western Company accepted the provisions of this act, and was thereafter designated as the Union Pacific Railroad Company, Eastern Division. By the Act of July 2, 1864, c. 216, § 12, 13 Stat. 361, the company was required to build its railroad from the mouth of the Kansas by way of Leavenworth, or, if that was not deemed the best route, to build a branch from Leavenworth to the main stem at or near Lawrence. This act also made provision, by sec. 16, for the consolidation of any two or more corporations embraced in the system, upon such terms and conditions as they might agree upon, not incompatible with the laws of the states in which the roads of the companies might be. On the 3d of July 1866, c. 169, 14 Stat. 80, the company was permitted to make its connection with the Union Pacific at any point not more than fifty miles westerly from the meridian of Denver. By another act passed March 3, 1869, c. 324, 15 Stat. 324, the company was authorized to extend its road to Denver, in the Territory of Colorado, and from there to make its connection with the Union Pacific at Cheyenne, over the road of the Denver Pacific Railway and Telegraph Company, a Colorado corporation; power being given to contract with the last-named company for that purpose. On the same day, a joint resolution was passed by Congress, No. 23, 15 Stat. 348, authorizing the Union Pacific Railroad Company, Eastern Division, by a resolution of its directors, filed in the office of the Secretary of the Interior, to change its name to the Kansas Pacific Railway Company.

Under this authority, the road was built from its junction with the Missouri Pacific Railroad in Kansas City, Missouri, through Fort Riley, in Kansas, to Denver, in Colorado, and government aid was furnished it under the acts of Congress.

Page 111 U. S. 452

From Denver it formed its connection with the Union Pacific road at Cheyenne, over the road of the Denver Pacific Company. It also built a branch from Leavenworth to Lawrence, but the road from Fort Riley to the original eastern terminus of the Union Pacific was never constructed.

On the 24th of January, 1880, the Union Pacific Railroad Company, the Kansas Pacific Railway Company, and the Denver Pacific Railway and Telegraph Company, acting under the authority of § 16 of the Pacific Railroad Act of July 1, 1862, and sec. 16 of the Act of July 2, 1864, entered into an agreement for the consolidation of the three corporations into one, by the name of the Union Pacific Railway Company, and from that time the road of the Kansas Pacific Company, including that portion which lies in Kansas, has been operated and managed as the Kansas Division of the Union Pacific Railway Company.

At the first session of the Legislature of Kansas after this consolidation was effected, a resolution was passed directing the Attorney General to inquire into its legality, and to report whether, in his opinion, the consolidated company was amenable to the laws of the state, whether the Union Pacific Railroad Company had usurped or was exercising rights and franchises within the state not authorized by law, or had in any manner failed to comply with or had violated any of the laws of the state, whether the Kansas Pacific Company was in law an existing corporation of the state, and whether the state had lost jurisdiction over the property of the corporation. At the next session, another resolution was passed, directing the Attorney General to institute proper proceedings in the Supreme Court of the state,

"in the nature of quo warranto, against the Kansas Pacific Railway relinquishment, and surrender of its relinquishment, and surrender of its powers as a corporation to such consolidated company, and also to institute like proceedings against the consolidated company, the Union Pacific Railway Company, for usurping, seizing, holding, possessing, and using the franchise and privileges, powers and immunities, of the Kansas Pacific Railway Company in the State of Kansas."

Under these instructions the present suits were brought in

Page 111 U. S. 453

the supreme the Kansas Pacific Company sets the Kansas Pacific Company sets forth the acts of the Territorial Legislature of Kansas incorporating the company and extending its powers, passed in 1855 and 1857; the organization of the company under its charter; the Acts of Congress, passed July 1, 1862, and July 2, 1864, granting aid to the company, and the construction of the road. It then averred

"That on the 24th of January, 1880, the said Kansas Pacific Railway Company wrongfully and unlawfully attempted to consolidate its said corporation with the Union Pacific Railroad Company, a corporation chartered under the said acts of Congress of 1862 and 1864, whose line runs from the Missouri River at or near Omaha, Nebraska, to Ogden, in Utah Territory, and the Denver Pacific Railway and Telegraph Company, whose line begins at the City of Denver, in the State of Colorado, and runs in a westward direction to a junction with the Union Pacific Railroad Company at a place called Cheyenne, in the Territory of Wyoming. And the said Kansas Pacific Railway Company unlawfully and wrongfully attempted to confer upon the said consolidated company all of its franchises, immunities, liberties, and privileges granted by virtue of its charter aforesaid, and to merge the same into a pretended corporation, not created by the laws of the territory or State of Kansas, nor owing any duty to the Territory or State of Kansas, but a pretended corporation created, if at all, by acts of Congress, and amenable only to federal control, and subject only, as to its rights and the causes of action which might thereafter exist against it, to the jurisdiction of the federal tribunals. And the said Attorney General gives the court further to understand and be informed that the said Kansas Pacific Railway Company unlawfully and wrongfully entered into articles of consolidation with said Union Pacific Railroad Company and the said Denver and Pacific Railroad and Telegraph Company, which were expressly in violation of its charter, and in conflict with the duties and obligations owing by it to the State of Kansas under the provisions and terms of its charter aforesaid, and further, that said articles were in conflict with the laws of the State of Kansas respecting railroad corporations and the right of railroad companies to consolidate, and were not compatible with such laws. "

Page 111 U. S. 454

The bill then sets forth a copy of the articles of consolidation, from which it appears that the sole and only authority relied on for the consolidation was that contained in the several acts of Congress, and that the intent of the parties was to organize the company thereby formed

"under the said acts of Congress, and to make the said acts of Congress the charter or constituent acts of this company, as fully as if the same were incorporated herein at large."

The contract then appointed directors of the new company, and the place for holding the annual meeting of stockholders, until otherwise ordered, was fixed at the company's office in the City of New York. The then existing bylaws of the Union Pacific Railroad Company were also provisionally adopted and made applicable to the new company. It is then averred that it was the duty of the Kansas Pacific Company to make certain reports to the Secretary of State of Kansas, which it had wholly failed to do, and that it held

"its general offices and all accounts of its operations at the general offices of said pretended consolidated company at the City of Omaha, in the State of Nebraska, and alleges and pretends that the said corporation, the Kansas Pacific Railway Company, no longer owes any duty under its charter as aforesaid to the State of Kansas, but that it is controlled as to its chartered obligations by the acts of Congress creating the Union Pacific Railroad Company, and by the unlawful articles of consolidation aforesaid."

It is then charged that the company has violated the laws of the state by failing to keep its general offices for the transaction of business within the state, and removing them to Omaha and placing "the same under the absolute order, control, and disposal of the said pretended consolidated company." Then it is alleged that the road of the Kansas Pacific Company is run as the "Union Pacific Railway Company, Kansas Division," and managed by the new corporation; that

"since the pretended consolidation as aforesaid, the said Kansas Pacific Company has wholly failed and neglected to designate some person residing in each county into which its said line of railroad runs, or in which its said business is transacted, on whom all process and notices issued

Page 111 U. S. 455

by any court of record, or justices of the peace of such county, may or might be served,"

and that it has also failed from the same time

"to file a certificate of the appointment or designation of such person in the office of the clerk of the district court of the county in which such person resides."

The consolidation is afterwards attacked because the roads were originally competing roads, and did not connect at the state line so as to form a complete and continuous line of railway. The next allegation is that the Kansas charter was forfeited by the diversion of the road

"to the use of a foreign corporation, outside of the jurisdiction of the State of Kansas, and beyond the reach of her authorities, with the declared intent that it shall be operated and used and worked, not according to the laws of Kansas, made or to be made to protect the rights of her people, but under and according to the provisions of other laws, alleged to have been enacted by the legislature of another government, for the regulation of another railroad, lying in another state."

The prayer was that the

"Kansas Pacific Railway Company . . . be made to answer to the State of Kansas by what warrant it claims to have, use, and enjoy the liberties, privileges, and franchises aforesaid, and further, by what warrant it claims and has exercised the right to put said railroad and its appurtenances into the possession and under the control of the above-mentioned foreign railroad company, and by what right it claims to maintain such foreign corporation in such possession, or in the enjoyment and exercise of the franchises and privileges bestowed by the State of Kansas exclusively on said Kansas Pacific Railway Company, and that . . . the said respondent company be adjudged to have forfeited all its rights, liberties, and franchises, and to be ousted from the same, and that the corporation be thereupon dissolved, and that it be further adjudged that the said franchises granted to the defendant by the state have become relinquished, abandoned, and forfeited to the State of Kansas, and that the same be resumed to the state, and that the state take possession of the said railroad, with all its appurtenances and fixtures, as public property, and make such disposition thereof as may be thought

Page 111 U. S. 456

necessary to secure the rights of the state, saving the just interests of creditors and other third parties guiltless of the frauds, wrongs, and injuries herein charged against the corporation and the members thereof."

The answer of the defendant, which, for the purposes of the suit, appeared in the name of the Kansas Pacific Railway Company, admits the consolidation and sets up the authority for that purpose under the laws of Congress. All violations of the laws of Kansas are denied, and the position is distinctly assumed that the Kansas Pacific Company became, under the legislation of Congress, a corporation of the United States, and as such had full authority to enter into the agreement of consolidation which is complained of.

The petition against the individuals who, as is alleged, call themselves the board of directors of the Union Pacific Railway Company, charges them with using, without warrant, charter, or grant, the liberties, privileges, and franchises of being a railroad company to use and occupy the railroad of the Kansas Pacific Company, and averring that the road was built under the Kansas charter of the Leavenworth, Pawnee, and Western Company. The prayer is that they may be made

"To answer to the state by what warrant they claim to have, use, and enjoy the liberties, privileges, and franchises aforesaid, and that upon a due hearing hereof the said defendants and said pretended railroad company be adjudged to have unlawfully and wrongfully usurped and appropriated the rights, liberties, privileges, and franchises aforesaid, and to be wrongfully and unlawfully using, enjoying, and exercising the same, and that they be ousted therefrom."

The answer of the defendants sets up the legislation of Congress affecting the original Kansas corporation, and the consolidation of that company with the Union Pacific and Denver Pacific Companies under this authority. They assert their right and that of the Union Pacific Railway Company, whose directors they are, to exercise within the State of Kansas all

Page 111 U. S. 457

the powers, and to enjoy all the franchises and privileges, of the old Kansas Pacific Company, and this by reason of the consolidation of that company, under the authority of Congress, with the other two companies.

The directors are all citizens of states other than Kansas.

As soon as the answers were put in, petitions were filed by the defendant in each case for the removal of the suit against them, respectively, to the Circuit Court of the United States for the District of Kansas. The petition of the railroad company alleged as grounds for removal: 1, that the suit was one arising under the Constitution and laws of the United States, and 2, that the defendant was a corporation, other than a banking association, organized under a law of the United States, and that it had a defense arising under the laws of the United States. That of the directors was also put on the grounds 1, that the suit was one arising under the Constitution and laws of the United States, and 2, that the directors were sued as members of a corporation, organized under an act of Congress, for an alleged liability of the corporation, and that their defense arose under and by virtue of the laws of the United States.

Each suit was duly docketed in the circuit court of the United States, and, on motion of the state, remanded to the Supreme Court of the state.

From these orders to remand, the railway company and the directors, respectively, took a writ of error to this Court.

Page 111 U. S. 459

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