1. The Act of March 3, 1873, 17 Stat. 509, is a valid and
constitutional exercise of legislative power. Congress, by
requiring the Attorney General to bring a suit in equity in the
name of the United States in any circuit court against the Union
Pacific Railroad Company and others, intended, not to change the
substantial rights of the parties to the suit, but to provide a
specific mode of procedure, which, by removing certain restrictions
on the jurisdiction, process, and pleading which are in other cases
imposed, would give a larger scope to the action of the court, and
a more economical and efficient remedy than before existed.
2. The provisions authorizing process to be served without the
limits of the district where the suit might be brought, and parties
and subjects of controversy to be united which, in an ordinary
chancery suit, would render a bill multifarious, are regulations of
practice and procedure which are subject to legislative control
3. Statutes have been frequently passed directing suits for
specific objects to be brought by an attorney general, and
regulating the proceedings in them, such as a
quo
warranto, or a bill in equity against a corporation to test
its right to the exercise of its franchises, or to declare them
forfeited, or, if insolvent, to wind up its business and distribute
its assets; and the validity of such statutes has uniformly been
recognized.
4. This bill having, on demurrer, been dismissed below, its
sufficiency must be determined here by the provisions of said act,
for it cannot be supposed that Congress, in laying down in specific
terms the subject matter of the suit and granting enlarged and
peculiar powers to the court, intended that any other matters
should be tried in the case.
5. This is confirmed by the fact that the same act provided
other remedies for other subjects of controversy with the Union
Pacific Railroad Company, and an effectual means of investigating
all its affairs.
6. That act authorized a decree in favor of that company for
money due for capital stock, for money or property received from it
on fraudulent contracts, or which ought in equity to belong to it,
and also a decree in favor of it or of the United States for money,
bonds, or lands wrongfully received from the latter, which ought in
equity to be paid or accounted for.
7. Except in favor of the company or of the United States, there
can under that act therefore be no recovery, and none but such as
was sanctioned by the principles of equity before it was
passed.
8. The company might, by a cross-bill, have availed itself of
the act, but it refuses to do so, and demurs to the bill, thereby
foregoing any relief in its favor in this suit. As it is
conformable neither to the principles of equity nor to those of the
common law to render a decree or a judgment in favor of a competent
party who asserts no claim and declines to proceed in the case,
there can be no recovery in this suit in favor of the company.
9. Though the bill sets up many fraudulent transactions on the
part of the directors
Page 98 U. S. 570
of the company and some of its stockholders for which the other
stockholders would be entitled to relief, the latter are not
parties, and neither the frame of the bill nor the provisions of
the act authorize any relief or recovery in their favor.
10. The United States sustains two distinct relations to the
company -- namely that of the government creating it and exercising
legislative and visitatorial powers and that growing out of the
contract contained in the charter and its amendment.
11. This bill exhibits no right on the part of the United States
to relief founded on that contract. The company has completed its
road, keeps it in running order, and carries all that is required
by the government. To the latter nothing is due, and it has the
security which by law it provided.
12. Nor does the bill show anything which authorizes the United
States as the depositary of a trust, public or private, to sustain
this suit.
13. This interference by the Attorney General with corporations
on the ground of such a trust in the government is limited to two
classes, to neither of which the present case belongs: 1. where
religious, charitable, municipal, or other corporations whose
functions are solely public, and whose managers have destroyed or
misappropriated the fund, or otherwise abused their functions; 2.
where other corporations exercise powers beyond those to which they
are limited by the law of their organization.
14. While the Court does not say that there is no trust in
regard to the duties of the company which the United States can
enforce in equity, it is of opinion that none such is shown in this
bill, and that no case is made for any relief authorized by the act
under which it was brought.
The Act of Congress making appropriations for the legislative,
executive, and judicial expenses of the government, approved March
3, 1873, 17 Stat. 509, has the following language in its fourth and
last section:
"The Attorney General shall cause a suit in equity to be
instituted in the name of the United States against the Union
Pacific Railroad Company and against all persons who may, in their
own names or through any agents, have subscribed for or received
capital stock in said road, which stock has not been paid for in
full in money or who may have received, as dividends or otherwise,
portions of the capital stock of said road, or the proceeds or
avails thereof, or other property of said road, unlawfully and
contrary to equity, or who may have received as profits or proceeds
of contracts for construction or equipment of said road, or other
contracts therewith, moneys or other property which ought, in
equity, to belong to said railroad corporation, or who may, under
pretense of having complied with the acts to which this is an
addition, have wrongfully
Page 98 U. S. 571
and unlawfully received from the United States bonds, moneys, or
lands which ought, in equity, to be accounted for and paid to said
railroad company or to the United States, and to compel payment for
said stock, and the collection and payment of such moneys, and the
restoration of such property, or its value, either to said railroad
corporation or to the United States, whichever shall in equity be
held entitled thereto. Said suit may be brought in the circuit
court in any circuit, and all said parties may be made defendants
in one suit. Decrees may be entered and enforced against any one or
more parties defendant without awaiting the final determination of
the cause against other parties. The court where said cause is
pending may make such orders and decrees, and issue such process as
it shall deem necessary to bring in new parties, or the
representatives of parties deceased, or to carry into effect the
purposes of this act. On filing the bill, writs of subpoena may be
issued by said court against any parties defendant, which writ
shall run into any district, and shall be served, as other like
process, by the marshal of such district."
Following this, and constituting a part of the same section, are
certain provisions for the future government of the railroad
company and its officers, to-wit that its books and correspondence
shall at all times be open to inspection by the Secretary of the
Treasury; that no dividend shall be made but from actual net
earnings, and no new stock issued or mortgages created without
consent of Congress, and punishing directors who shall violate
these provisions. Also enacting that the corporation shall not be
subject to the bankrupt law, and shall be subject to a mandamus to
compel it to operate its road, as required by law.
A previous section directs the Secretary of the Treasury to
withhold from every railroad company which has failed to pay the
interest on bonds advanced to it by the government, all payments on
account of freights or transportation over such roads, to the
amount of such interest paid by the United States, and also the
five percent of the net earning of the roads due and unapplied as
provided by law, and it authorized the companies who might wish to
contest the right to withhold these payments to bring suit against
the United States in the Court of Claims for the money so
withheld.
The Attorney General, pursuant to said fourth section, filed
Page 98 U. S. 572
a bill in equity in the Circuit Court of the United States for
the District of Connecticut against the Union Pacific Railroad
Company, the Wyoming Coal Company, the Credit Mobilier Company, and
some one hundred and fifty individual defendants.
The bill, after reciting certain provisions of the Acts of July
1, 1862, 12 Stat. 480, and July 2, 1864, 13
id. 356, and
other acts amendatory thereof, in relation to the Union Pacific
Railroad Company, and alleging that the company was organized in
October, 1863, and its road opened in 1869; that a board appointed
under the joint resolution of April 10, 1869, reported deficiencies
of construction, requiring an expenditure of $1,586,100; that the
United States issued to the company bonds to the amount of
$27,236,512, which, with the interest, after deducting one-half the
compensation for services, made its aggregate liability, Jan. 1,
1873, $33,435,221.77, and that under the mortgage it executed Nov.
1, 1865, to secure the payment of its first mortgage bonds, it has
issued and disposed of them to the amount of $27,237,000; charges
that, April 16, 1867, it executed a mortgage to secure the payment
of its so-called land grant bonds, providing for the application of
the proceeds of all sales of its land from time to time in the
redemption of such bonds; that it has issued $10,400,000 of them,
at seven percent interest, $8,811,000 of which remain outstanding
and unpaid; that it intends to sell land and apply the proceeds to
redeem them, to that extent impairing the security of the United
States for the repayment of its bonds issued to the company; that
the company, on Sept. 1, 1869, issued $10,000,000 of so-called
income bonds, at ten percent interest, secured by an indenture
pledging the net income for the interest, after paying that on the
first mortgage bonds and land grant bonds; that it has also issued
$2,500,000 of eight percent bonds, secured by mortgage on its
bridge across the Missouri River; that for the redemption of the
income bonds it intends to issue and put in the market eight
percent sinking fund bonds for $16,000,000, secured by mortgage on
the property of the company; that it has a floating debt of
$2,000,000, and has issued certificates of stock amounting to
$36,762,300; that, July 16, 1868, it entered into an agreement with
Godfrey & Wardell, which was assigned,
Page 98 U. S. 573
April 1, 1869, to the Wyoming Coal and Mining Company,
purporting, among other things, to lease the coal lands of the
Union Pacific Railroad Company for fifteen years; that the stock in
said coal company, with the exception of one-tenth thereof, is
owned by stockholders and managers of the railroad company; that
said contract is a fraudulent method of obtaining for them a
monopoly of coal supplies and of the coal trade on the line of the
road, and was made in contravention of sec. 3 of the act of 1862;
that on Sept. 1, 1869, the railroad company made a contract with
the Atlantic and Pacific Telegraph Company to transfer to the
latter the entire line of telegraph and appurtenances constructed
for the railroad company under the acts of Congress; that the
managers of the two companies are in part or in whole the same; and
that the arrangement is a fraudulent device to make for said
managers illegal profits, and to deprive the United States of its
lawful security and advantage from the telegraph line.
The bill sets forth an agreement with the Omaha Bridge Transfer
Company, and charges that it is a fraudulent arrangement on the
part of the managers and stockholders to transfer to themselves
personally profits which equitably belong to the railroad
company.
The bill then charges, among other things, that the cost of the
road was less than one-half of the sum represented by the stock and
other pretended outstanding liabilities; that the larger part of
the stock and bonds was issued by certain defendants in the name of
the company, to enrich themselves; that the greater portion of the
stock was never paid for in cash, or in any other thing of
equivalent value; that the company is insolvent; that the
government bonds and a portion of the first mortgage bonds would
have been sufficient to construct the road, without any expenditure
from stock subscribed, or from land grant bonds, or from income
bonds; and that the stock, if paid in cash or its equivalent, would
have been sufficient with less than one-half of the government
bonds to complete the road, without the issue of bonds by the
company; that at its organization in 1863, $2,177,000 stock was
subscribed, on which ten percent was paid; but no considerable
Page 98 U. S. 574
sum was afterward paid thereon, and no considerable amount of
other subscriptions was ever made, except as part of the fraudulent
transactions set forth; that at the organization of the company the
practical management of its business was committed to the executive
committee, whereof one of the defendants, Durant, then
vice-president, was elected a member; that in August and September,
1864, he and his associates used the name of one H. M. Hoxie to
disguise a contract made by them in the name of the company on one
side, with themselves in the name of Hoxie on the other, to
construct about two hundred and forty-six miles of the road between
Omaha and the one hundredth meridian, at the price of $50,000 per
mile, which was known to be in excess of a fair price therefor;
that on Oct. 7, 1864, certain defendants, directors, and another, a
stockholder, agreed with him to take large interests in this
contract, with the design of becoming possessed of all the
franchises and property of the company, and to use, manage, and
dispose of the same for their private benefit; that in execution of
said design they obtained, in November, 1864, control of the
charter of the Credit Mobilier of America, a corporation of
Pennsylvania, and on March 15, 1865, entered into a contract in
writing to conduct its operations in connection with the railroad
company, outside of its charter, at an agency in New York; that
their intention was to substitute the Credit Mobilier as a
contractor in the "Hoxie contract," and that on the same day they
assigned to it the entire beneficial interest from the beginning in
this contract, when the Credit Mobilier was organized to cooperate
with the railroad company, defendant Durant being chosen its
president; that they, in 1865 and 1866, purchased in the name of
the Credit Mobilier, and had conveyed to it, large numbers of
shares of stock of the railroad company, originally subscribed for
in good faith at its organization; that they caused to be allotted
among themselves, as stockholders in the Credit Mobilier, the
shares of railroad stock purchased from the original subscribers,
and also large numbers of other shares subscribed by, or in the
name of, the Credit Mobilier, on which it was pretended that thirty
percent had been paid, and also to be distributed among themselves
a large amount of scrip procured by the Credit Mobilier from the
railroad company in
Page 98 U. S. 575
pretended payment for construction under the "Hoxie contract,"
which scrip, instead of cash, they used in making pretended
payments for the stock, certificates of which they procured to be
issued to them severally by the officers of the railroad
company.
It then states the division among certain defendants, in
February, 1867, of one thousand two hundred and fifty first
mortgage bonds ($1,250,000), which they had caused the railroad
company, to issue and deliver to the Credit Mobilier, on pretense
of payment for roadbuilding under the "Hoxie contract;" that in
1867, they procured transfers to the Credit Mobilier, with few
exceptions, of all the outstanding original shares of stock of the
railroad company; and that thenceforth they, the holders of all the
stock of the Credit Mobilier, became also holders of substantially
all the stock of the railroad company, and managed the same without
regard to the rights or interests of the United States; that in
December, 1867, they fraudulently distributed among themselves, as
stockholders of the Credit Mobilier, in the way of dividends,
sixteen thousand shares of Union Pacific railroad stock, issued to
the credit Mobilier, as assignee of the "Hoxie contract," on
account of fifty-eight miles of railroad west of the one hundredth
meridian, already constructed and paid for by the railroad company,
and charges that they were from the beginning, and throughout,
interested in the whole of the profits of the "Hoxie contract," and
that all the work thereunder was done, and all measurements thereof
and settlements therefor were made, by them in the double capacity
of representatives of the two companies.
It then recites the facts and objects of the so-called "Oakes
Ames contract," and charges that after the completion of the road,
under the "Hoxie contract," to the one hundredth meridian, in
October, 1866, they, as managers of the railroad company, went on,
constructed, and paid for, at the price of about $27,500 per mile,
a section of about one hundred and thirty-eight miles of road west
of the one hundredth meridian, which was completed October, 1867;
that they then entered into a series of writings intended in effect
to constitute a contract with themselves as stockholders of the
Credit Mobilier, for constructing at excessive prices six hundred
and sixty-seven
Page 98 U. S. 576
miles of road, beginning at the one hundredth meridian, and
including the one hundred and thirty-eight miles already built and
paid for at much lower rates; that the objects and effects of this
transaction were to despoil the company of $3,000,000 of its stock
and bonds, distributed among the defendants, under pretext of a
contract to build a portion of its road already built and paid for,
and to give them, under the disguise of a contract between parties
in different interests, excessive prices for constructing other
portions of the road, and to place the control of the company in
seven trustees, and withhold its management and direction from the
stockholders and directors; that the first three dividends under
the "Oakes Ames contract" were received by the defendants named;
that on June 3 and 7, 1868, all the trusts in the triplicate
agreement (one of the writings connected with the "Oakes Ames
contract") in favor of the stockholders of the Credit Mobilier,
were directly declared in favor of defendants individually, who
received the dividends personally, and not as stockholders of the
Credit Mobilier; that thereafter defendants proceeded, as general
copartners in form as well as in fact, with the seven trustees as
their general managers, and that the last three dividends or
allotments under the "Oakes Ames contract" were: July 3, 1868,
$2,812,500, in first mortgage bonds; July 8, 1868, $1,125,000, in
cash; Dec. 29, 1868, seventy-five thousand shares of stock at par
value.
It then states the facts in regard to the pretended "Davis
contract" in November, 1868, for the construction of about 125.23
miles of the road not embraced in the "Oakes Ames contract," which
was assigned to the same persons for the same trusts as in the case
of the "Oakes Ames contract;" and that the road to its western
terminus was constructed by certain stockholders of the company,
acting through the assignees, under cover of the "Davis
contract."
After setting forth at large the dates and amounts of the
several subscriptions which the defendants caused to be made to the
stock of the railroad company by the Credit Mobilier, or to be
assumed by it, as required by the "Hoxie contract," and the
distribution of the stock among the defendants; also the dates and
amounts of the subscription to the stock of the
Page 98 U. S. 577
company made by the trustees under the "Oakes Ames contract" and
under the "Davis contract," and its distribution in like manner;
that neither the Credit Mobilier nor the trustees ever paid for any
portion of their stock, but the excessive contract prices for
construction were set off against the subscriptions; that the
accounts of the railroad company under the three contracts are
unsettled, with large balances claimed against the company; that
defendants caused large amounts of money belonging to the company
to be expended for unlawful purposes.
Certain alleged fraudulent transactions on the part of one of
the defendants, a director, in relation to the sale of bonds, are
set forth, in respect of which it is charged he is accountable to
the company, which wrongfully refuses to compel him to account.
The bill then charges that the defendants made further divisions
and distributions among themselves of the assets of the company,
and engaged in other unlawful transactions and dealings with
respect to its property, which the complainant is unable to set
forth in detail, but which amount to about $17,000,000 in excess of
the amounts particularly set forth, and that large amounts of the
stock and bonds divided among defendants are still held by them or
some of them.
The present condition of the company, with regard to its stock,
finances, value of its road, and management, is then set forth, and
it is averred to be doubtful whether the road would sell under the
first mortgage for more than enough to pay those bonds, and that if
the land grant mortgage is allowed to be administered according to
its terms, it will exhaust the security of the United States in the
lands; that the company had no right to issue first mortgage bonds
or land grant bonds or income bonds for distribution among
stockholders as profits or for sale to them below their value, and
such bonds to the extent so issued and distributed or sold are
invalid, unless in the hands of
bona fide purchasers
without notice; that it has no right to exhaust the security of the
United States by paying either principal or interest of land grant
bonds or income bonds; that the so-called trustees and assignees,
under the "Oakes Ames contract" and "Davis contract," are jointly
and severally
Page 98 U. S. 578
responsible for all the stock and bonds issued to them; that the
grants to the company in the acts of Congress were grants in aid of
a public work of the United States, and are held in trust, to be
applied to a public use; and that the property mentioned is also a
trust for the payment to the United States of the subsidy bonds;
that the present management of the company is in adverse interest
to the United States; that the latter is entitled, as further
security for its debt, and for the public objects provided for by
Congress, to have declared that the management of the company
should be subject only to the votes of the stockholders holding
full-paid stock; to have the franchises, powers, and means so
administered that unreasonable and unnecessary liabilities should
not be created, and to have an account of reasonable and necessary
expenditures and liabilities as a basis for regulating rates of
fare under the eighteenth section of the act of 1862, and for
determining the basis for estimating the five percent of net
profits; to have the franchises, powers, and property so
administered as to secure the United States for the repayment of
its bonds and promote the public objects of the corporation; to
have maintained by the corporation, as a security for those
objects, the character and credit which would ensue from a lawful
administration of the franchises, powers, and means granted; and to
have the lien of the United States remain a first lien, except as
to the priority given to the first mortgage bonds within the limits
and for the purposes expressed by Congress; that the company
neglects and refuses to state or render an account of cost on a
lawful or just basis; that the stock of the Credit Mobilier, and
the stock, bonds, and cash of the railroad company, held by and
allotted, distributed, and divided among several of the defendants,
were received in trust for others, whom complainant asks leave to
make parties defendant when discovered.
The relief prayed for is, that the grants by the United States
be declared to be held by the company for a public use, &c.,
and the property granted by the United States, &c., to be a
trust fund to secure the bonds lent by them, &c.; that the
construction contracts, and the land grant and income mortgages be
declared void; that an account be taken of the actual cost,
&c., of the Union Pacific Railroad and Telegraph; the
United
Page 98 U. S. 579
states bonds issued, &c.; the stock subscribed, sold,
issued, &c.; and of the lands, &c., obtained from the
United States; that persons unlawfully holding stock or other
property of the company restore it, &c.
A large number of the defendants resided out of the District and
state of Connecticut. Subpoenas directed to them were issued to the
marshals of the several districts in which they respectively
resided, and service thereof was there duly made upon them. There
were three classes:
1. Those sued in their own right;
2. Those sued as executors of the estates of deceased persons
domiciled at the time of their death out of said state; and
3. Corporations organized under laws of some other state.
The railroad company demurred, alleging
"that the complainant hath not, by its said bill, made such a
case as entitles it in a court of equity to any discovery or relief
from or against this defendant touching the matters contained in
the said bill, or any of such matters."
The defendants who were served with process is the district of
Connecticut likewise appeared, and filed demurrers to the bill for
want of equity and for multifariousness.
A large number of those defendants who were served with process
out of the district of Connecticut appeared
de bene esse,
and filed motions to dismiss the bill as to them, respectively,
stating as the grounds of their motion that by the averments of the
bill they were respectively nonresidents of Connecticut, and that
the process showed that it was served upon them out of the
district.
Some of the defendants residing out of Connecticut demurred to
the bill for want of equity and for multifariousness; others who
were nonresidents of Connecticut filed answers with clauses of
demurrer.
The case was argued upon the bill and the pleadings, and the
motions to dismiss. The demurrers were sustained, and an order
entered overruling the motions.
The several nonresident defendants whose motions to dismiss were
thus overruled, thereupon, under a
protestando, demurred
for want of equity and for multifariousness.
Several defendants who had answered withdrew their answers
Page 98 U. S. 580
after the decision of the court on the demurrers, and
demurred.
At the April Term, 1874, the court below entered a general and
final decree upon the bill, demurrers, and answers so filed,
dismissing the bill as to all the defendants duly served with
process. Whereupon the United States appealed to this Court and
here assigns the following errors:
The court below erred:
1. In sustaining the demurrers.
2. In dismissing the bill as to certain defendants who had
answered.
3. In dismissing it as to parties who had neither pleaded,
answered, nor demurred.
Page 98 U. S. 601
MR. JUSTICE MILLER delivered the opinion of the Court.
The Union Pacific Railroad Company brought the suit provided for
in the second section of the Act of March 3, 1873, 17 Stat. 508.
The case was argued before us on appeal from the judgment of the
Court of Claims. All the questions which concern the obligations of
the company to pay money to the government, either by way of
freight or government transportation, or for the five percent on
the net income of the road, were raised in that suit.
The Attorney General, in pursuance of the directions of the
fourth section of the act, filed this bill in equity. Many of the
defendants demurred to the bill generally, and at the head of this
class is the railroad company.
The circuit court sustained this demurrer and dismissed the
bill, and the case is before us on appeal from that decree.
No suggestion is made either here or in the court below of any
defect in the bill which can be remedied by amendment. The bill is
very elaborate, very ably drawn, and no doubt presents in a very
intelligible manner every thing which the facts known or suspected
justified the pleader in placing in any bill which can be framed
under the special statute authorizing the suit.
The question for decision is therefore squarely presented to us,
as it was to the circuit court, whether, by the aid of that
statute, and within the limits of the power it intended to confer,
this bill can be sustained under the general principles of equity
jurisprudence.
We say by the aid of that statute, because it is conceded on all
sides that without it the bill cannot stand. The service of
compulsory process on a party residing without the limits of the
district of Connecticut who is not found within them, is expressly
forbidden by the general statute defining the jurisdiction of the
circuit courts. Parties and subjects of complaint having no proper
connection with each other are grouped
Page 98 U. S. 602
together in this bill, and they, by the accepted canons of
equity, pleading, render it multifarious. This, and other matters
of like character, which are proper causes of demurrer, are fatal
to it, unless the difficulty be cured by the statute.
When we recur to its provisions, which are said to authorize
these and other departures from the general rules of equity
procedure, counsel for the appellees insist that it is
unconstitutional not only in the particulars just alluded to, but
that it is absolutely void as affecting the substantial rights of
defendants in regard to matters beyond the power of Congress.
If this be true, we need inquire no further into the frame of
the bill, and we therefore proceed, on the threshold, to consider
the objections to the validity of the statute.
The Constitution declares, Art. 3, Sec. 2, that the judicial
power shall extend to all cases in law and equity arising under the
Constitution, the laws of the United States, and the treaties made,
or which shall be made, under their authority, and to controversies
to which the United States shall be a party.
The matters in regard to which the statute authorizes a suit to
be brought are very largely those arising under the act which
chartered the Union Pacific Railroad Company, conferred on it
certain rights and benefits, and imposed on it certain obligations.
It is in reference to these rights and obligations that the suit is
to be brought. It is also to be brought by the United States, which
is therefore necessarily the party complainant. Whether, therefore,
this suit is authorized by the statute or not, it is very clear
that the general subject on which Congress legislated is within the
judicial power as defined by the Constitution.
The same article declares in Sec. 1 that this "power shall be
vested in one supreme court and in such inferior courts as the
Congress may from time to time ordain."
The discretion, therefore, of Congress as to the number, the
character, the territorial limits of the courts among which it
shall distribute this judicial power, is unrestricted except as to
the Supreme Court. On that Court the same article of the
Constitution confers a very limited original jurisdiction -- namely
"in all cases affecting ambassadors, other public ministers, and
consuls, and cases in which a state shall be a party" -- and an
Page 98 U. S. 603
appellate jurisdiction in all the other cases to which this
judicial power extends, with such exceptions and under such
regulations as the Congress shall make.
There is in this same section a limitation as to the place of
trial of all crimes, which it declares shall (except in cases of
impeachment) be held in the state where they shall have been
committed, if committed within any state.
Article 6 of the amendments also provides that, in all criminal
prosecutions,
"the accused shall enjoy the right to a speedy and public trial
by an impartial jury of the state and district wherein the crime
shall have been committed, which district shall have been
previously ascertained by law."
These provisions, which relate solely to the place of the trial
for criminal offences, do not affect the general proposition. We
say, therefore, that, with the exception of the Supreme Court, the
authority of Congress, in creating courts and conferring on them
all or much or little of the judicial power of the United States,
is unlimited by the Constitution.
Congress has, under this authority, created the district courts,
the circuit courts, and the Court of Claims, and vested each of
them with a defined portion of the judicial power found in the
Constitution. It has also regulated the appellate jurisdiction of
the Supreme Court.
The jurisdiction of the Supreme Court and the Court of Claims is
not confined by geographical boundaries. Each of them, having by
the law of its organization jurisdiction of the subject matter of a
suit and of the parties thereto, can, sitting at Washington,
exercise its power by appropriate process, served anywhere within
the limits of the territory over which the federal government
exercises dominion.
It would have been competent for Congress to organize a judicial
system analogous to that of England and of some of the states of
the Union, and confer all original jurisdiction on a court or
courts which should possess the judicial power with which that body
thought proper, within the Constitution, to invest them, with
authority to exercise that jurisdiction throughout the limits of
the federal government. This has been done in reference to the
Court of Claims. It has now jurisdiction only of cases in which the
United States is defendant. It is just as
Page 98 U. S. 604
clearly within the power of Congress to give it exclusive
jurisdiction of all actions in which the United States is
plaintiff. Such an extension of its jurisdiction would include all
that the statute under consideration has granted to the circuit
court.
It is true that Congress has declared that no person shall be
sued in a circuit court of the United States who does not reside
within the district for which the court was established or who is
not found there. But a citizen residing in Oregon may be sued in
Maine if found there so that process can be served on him. There is
therefore nothing in the Constitution which forbids Congress to
enact that, as to a class of cases or a case of special character,
a circuit court -- any circuit court -- in which the suit may be
brought, shall, by process served anywhere in the United States,
have the power to bring before it all the parties necessary to its
decision.
Whether parties shall be compelled to answer in a court of the
United States wherever they may be served, or shall only be bound
to appear when found within the district where the suit has been
brought, is merely a matter of legislative discretion, which ought
to be governed by considerations of conveyience, expense, &c.,
but which, when exercised by Congress, is controlling on the
courts.
So also, the doctrine of multifariousness, whether relating to
improperly combining persons or grievances in the bill, it is
simply a rule of pleading adopted by courts of equity. It has been
found convenient in the administration of justice, and promotive of
that end, that parties who have no proper connection with each
other shall not be compelled to litigate together in the same suit,
and that matters wholly distinct from and having no relation to
each other, and requiring defenses equally unconnected, shall not
be alleged and determined in one suit. The rule itself, however, is
a very accommodating one, and by no means inflexible. Such as it
is, however, it may be modified, limited, and controlled by the
same power which creates the court and confers its jurisdiction.
The Constitution imposes no restraint in this respect upon the
power of Congress. Set. 921 of the Revised Statutes, which has been
the law for fifty years, declares that when causes of like nature
or relating to the same question are pending, the court may
consolidate
Page 98 U. S. 605
them, or make such other orders as are necessary to avoid costs
and delay. It is everyday practice, under this rule, to do what the
statute authorizes to be done in the case before us.
But it is argued that the statute confers a special jurisdiction
to try a single case, and is intended to grant the complainant new
and substantial rights, at the expense and by a corresponding
invasion of those of the defendants.
It does not create a new or special tribunal. Any circuit court
of the United States where the bill might be filed was, by the act,
invested with the jurisdiction to try the case. Nor was new power
conferred on the court beyond those which we have regarded as
affecting the mode of procedure. It seems to us that any circuit
court, sitting as a court of equity, which could by its process
have lawfully obtained jurisdiction of the parties, and considered
in one suit all the matters mentioned in the statute, could have
done this before the act as well as afterwards.
But if this be otherwise, we are aware of no constitutional
objection to the power of the legislative body to confer on an
existing court a special jurisdiction to try a specific matter
which in its nature is of judicial cognizance.
The principal defendant in this suit, the one around which all
the contest is ranged, is a corporation created by an act which
reserved the right of Congress to repeal or modify the charter. To
this corporation Congress made a loan of $27,000,000, and a
donation of lands of a value probably equal to the loan.
The statute books of the states are full of acts directing the
law officers to proceed against corporations, such as banks,
insurance companies, and others, in order to have a decree
declaring their charters forfeited. Special statutes are also
common ordering suits against such corporations, when they have
become insolvent, to wind up their business affairs and to
distribute their assets and prescribing with minuteness the course
of procedure which shall be followed and the court in which the
suit shall be brought.
This Court said in the case of
Bank of
Columbia v. Okely, 4 Wheat. 235, in speaking of a
summary proceeding given by the charter of that bank for the
collection of its debts:
"It is the remedy, and not the right, and as such we have no
doubt
Page 98 U. S. 606
of its being subject to the will of Congress. The forms of
administering justice and the duties and powers of courts as
incident to the exercise of a branch of sovereign power must ever
be subject to legislative will, and the power over them is
unalienable, so as to bind subsequent legislatures."
And in
Young v. Bank of
Alexandria, 4 Cranch 397, Mr. Chief Justice
Marshall says:
"There is a difference between those rights on which the
validity of the transactions of the corporation depends, which must
adhere to those transactions everywhere, and those peculiar
remedies which may be bestowed on it. The first are of general
obligation; the last, from their nature, can only be exercised in
those courts which the power making the grant can regulate."
See also Commonwealth v. The Delaware & Hudson Canal
Co., 43 Pa.St. 227;
State of Maryland v. Northern Central
Railroad Co., 18 Md. 193;
Colby v. Dennis, 36 Me. 1;
Gowan v. Penobscot Railroad Co., 44
id. 140.
Statutes of this character, if not so common as to be called
ordinary legislation, are yet frequent enough to justify us in
saying that they are well recognized acts of legislative power
uniformly sustained by the courts.
It may be said, and probably with truth, that such statutes,
when they have been held to be valid by the courts, do not infringe
the substantial rights of property or of contract of the parties
affected, but are intended to supply defects of power in the
courts, or to give them improved methods of procedure in dealing
with existing rights.
This leads to an inquiry indispensable to a sound decision of
the case before us -- namely does this statute, by its true
construction, do any thing more than this?
We might rest this branch of the case upon the concession of
counsel for appellants, made both in their brief and in the oral
argument, but we proceed to examine the proposition for
ourselves.
The first suggestion of the legal mind on this inquiry is, that
it will not be presumed, unless the language of the statute
imperatively requires it, that Congress, by a retrospective law,
intended to create new rights in one party to the suit at the
expense, or by an invasion of the rights, of other parties, or,
Page 98 U. S. 607
where no right of action founded on past transactions existed,
that Congress intended to create it.
The United States was to be sole complainant in a suit in
equity, and though there may be other defendants, the Union Pacific
Railroad Company is the only one named in the act. The relief to be
granted is the collection and payment of moneys and the restoration
of property, or its value, "either to said railroad corporation or
to the United States, whichever shall in equity be entitled
thereto." The decree, therefore, can only be made on the ground of
some relief to which the United States or the company is entitled
by the general principles of equity jurisprudence. It is no
objection to granting such relief that the company is a defendant,
for by the flexibility of chancery practice a person whose
interests in the subject of litigation are on the same side with
the complainant may be made a defendant. The corporation could also
in such a suit file a cross-bill against the complainant, and, by
virtue of this statute, against any co-defendant of whom it could
rightfully claim the relief which the statute authorizes.
But whatever be the relief asked, it could only, by the express
terms of the act, be granted to that party who was in equity
thereunto entitled. It is very plain that there was here no new
right established. No new cause of equitable relief. No new rule
for determining what were the rights of the parties. That was to be
decided by the principles of equity, not new principles of equity,
but the existing principles of equitable jurisprudence.
But the statute very specifically defines the matters which may
be embraced in this suit as foundations for relief, and classifies
them under a very few heads, by declaring who besides the
corporation may be sued. They are persons who have received:
1. Capital stock of the company without paying for it in
money;
2. Other property of the company unlawfully and contrary to
equity;
3. As profits or proceeds of contracts for construction, money
or other property which ought in equity to belong to the
corporation; or,
Page 98 U. S. 608
4. Persons who have wrongfully received from the United States
bonds, moneys, or lands which ought in equity to be accounted for,
or paid to it or to the company.
There is in this description of the class of persons who may be
sued an implied condition that they are already subject to be sued
for causes which render them equitably liable. The relief to be
granted is also such as to equity belongs.
We are of opinion, therefore, that the act in question was
intended not to change the substantial rights of the parties to the
suit which it authorized, but to provide a specific method of
procedure, which, by removing restrictions on the jurisdiction,
process, and pleading in ordinary cases, would give a larger scope
for the action of the court and a more economical and efficient
remedy than before existed, and that it is a valid and
constitutional exercise of legislative power.
If in passing on its constitutional validity we have given the
subject much consideration, it will be seen that we have at the
same time been compelled to give a construction to its language
which will go far to enable us to decide whether it authorized the
bill that was filed, for we are of opinion that nothing other than
what is found in the act, be express language or by fair
implication, can be introduced into this suit as a foundation for
the action of the court.
The Attorney General is peremptorily ordered to bring the
proceeding. The filing of the bill and its subject matter are both
removed from the domain of discretion. For the purposes of this
suit, the court wherein it is brought is vested with powers and
aided by modes of procedure which it can apply to no other. Parties
are subjected to a jurisdiction by process to which the same court
cannot subject them in any other suit, and they are required to
litigate their rights in a suit common to them and others with whom
they could not be joined under the rules governing such matter in
any other case.
We are bound, therefore, to presume that Congress did not intend
that this special remedy should include anything beyond the matters
which we have seen were so carefully and so specifically mentioned
as grounds of relief.
Other provisions of the act show that Congress had, or believed
that it had, other grievances against this company for
Page 98 U. S. 609
which other remedies are furnished. Any director or officer who
violates certain provisions is to be punished criminally. By
mandamus in the proper court, but not in this suit, the company is
to be compelled to operate its road as required by law. The second
section directs the Secretary of the Treasury to withhold payment
for transportation for the United States until what is due for
interest paid shall be satisfied, and the matter, if disputed, is
to be settled by suit brought by the company in the Court of
Claims.
This consideration makes it clear that any bill brought by the
Attorney General under the fourth section of the act of 1873 must
be limited by the provisions of that act, both as to the grievances
on which it counts and the relief which it seeks.
With these views of the statute under which this bill is brought
and by which its sufficiency on demurrer must be tested, we
approach the examination of the bill itself.
It consists of forty-seven pages of printed matter divided into
forty-eight separate paragraphs, each of which undertakes to set
forth a distinct ground of relief or points out the relief which is
sought.
It will therefore be impossible to give in this opinion the
results of the separate examination of each of these paragraphs;
nor is this at all necessary. A consideration of the principal
grounds of relief, grouped as they can easily be under a few heads,
will indicate the views which we believe to be sufficient to decide
the whole.
We will consider together the allegations of the bill against
the Wyoming Coal Company, the Credit Mobilier Company, the Pullman
Palace Car Company, and the three construction contracts of H. M.
Hoxie, Oakes Ames, and James W. Davis. These are by far the most
important as regards the sum involved as well as the principles
which must decide the case.
The substance of the charge is that the board of directors of
the railroad company made contracts for building the road, and for
running the Pullman cars on it, and for mining its coal lands and
purchasing the coal so mined, which were a fraud upon the company;
that these contracts allowed exorbitant prices for work done and
material furnished; that otherwise
Page 98 U. S. 610
they were very advantageous to the other contracting parties and
injurious to the company; that in all of them, the directors or a
controlling majority of them were interested adversely to the
company; that in fact they were, in the name of the company, making
contracts with themselves as the other party. In short, it may be
taken for granted that if these allegations are true, as they must
be held to be on demurrer, frauds more unmitigated than those set
forth in this bill were never perpetrated on a helpless corporation
by its managing directors.
That these frauds are such as a court of equity would relieve
against in a proper case may be seen in the opinion of the Circuit
Court for the Nebraska District in a suit growing out of the
Wyoming Coal Company's contract.
Wardell v. Union Pacific
Railroad Co., 4 Dill. 330.
The first inquiry arising on these facts is what relief can be
given, and who is entitled to it?
The obvious reply to the first branch of the question is that
the parties who made this contract and received the pecuniary
benefit of it can at law be made responsible in damages or held in
equity to compensation for the loss suffered. There would be no
difficulty in adjudging in a proper suit that such contracts were
void and then ordering an accounting on the basis of a fair
compensation for what had been done in the way of construction,
building, opening mines, furnishing coal, &c., and what had
been received for such work and materials. The difficulty is to
whom shall this money be paid when recovered, and can it be
recovered in this suit? If the railroad company, falling into purer
hands, had brought such a suit, the bill might be sustained.
But the company is not the complainant here. It seeks no relief
for these wrongs. It may have been the design of the law to give
the corporation an opportunity by a cross-bill to obtain relief
against the other defendants, who are charged with these frauds.
Such a bill, if not strictly within the rule of equity procedure,
which only allows a defendant to file a cross-bill against a
complainant, might be sustained under the provisions of this
statute. But the company files no such bill. It desires no such
relief. On the contrary, it resists by demurrer any further
proceeding in the matter. Can it be compelled in
Page 98 U. S. 611
this mode to prosecute such a suit? So long as it exists in the
possession and unrestrained exercise of all its corporate powers,
its board of directors, unless under judicial prohibition or
compulsion, is vested with the sole authority to decide whether it
will assert its right of action for a supposed injury, or will
condone it.
The circumstances of the alleged fraud, the probability of
success in the suit, the extent of the injury, the amount which may
be recovered, the expense of the proceeding, and the danger of
injury to the company itself, are all matters which address
themselves to them as grounds for the exercise of the discretion of
the directors. They have decided to have nothing to do with it.
How, then, can a decree be rendered in their favor or relief be
given them which is not asked? With what hope of advantage can the
court enter upon the inquiry touching the frauds alleged and the
amount of the injury sustained when the party aggrieved refuses to
proceed?
On the other hand, if the court does proceed, shall the decrees,
if rendered against the defendants, be in favor of the company? If
so, what good results would follow? Since the company resists any
decree in its favor now, it would probably enter satisfaction or
releases of the decrees as fast as they are rendered. If it did not
do this, how would the moneys, if collected and paid into its
treasury, be applied? It is alleged to be insolvent and in debt,
but except the claim of the government, which will be presently
considered, there is no allegation showing to what use the court
can decree the application of these moneys. They must therefore go
into the treasury of the company, to become subject to the control
of its directors, who are now resisting this action. Not only this,
but it is obvious that the amount recovered would come mainly out
of the same men who now as directors or as stockholders would
control the fund, and would probably order its redistribution to
the parties who paid it, or give receipts or releases in
advance.
The truth is that the persons who were actually defrauded by
these transactions, if any such there be, were the few
bona
fide stockholders who took no part in them and had no interest
in the fraudulent contracts. But it is not alleged that
Page 98 U. S. 612
there are such. If there be, they are not made parties to this
bill, nor does it provide any relief for them. Yet a moment's
consideration will show that they alone -- to say nothing of the
complainant for the present -- suffered any legal injury or are
entitled to any relief. As to the directors and stockholders who
took part in these fraudulent contracts, they are
participes
criminis and can have no relief. This class probably included
nine-tenths in value of the shareholders. It is against all the
principles of jurisprudence, whether at law or in equity, to permit
them to litigate this fraud among themselves. If the innocent
stockholders are not parties here, we have already seen that, with
the power of the directors over the money recovered, they would get
no relief by the suit.
The statute, however, did not permit them to be made parties.
Their interest is not the same as that of the company. The statute
provides only for the collection and payments of money, or the
restoration of property, or its value, to the railroad company, or
to the United States, as either of them may be in equity held
entitled thereto. This does not embrace what a defrauded
stockholder may be entitled to in his individual right.
We are of opinion, therefore, that no decree can be rendered in
favor of the railroad company on account of these transactions or
for the value of the stock not paid for by those who received it.
Although issuing it without payment may have been in violation of
law, and an implied contract may exist on which the company could
compel payment, the United States cannot in this suit recover it,
and the company refuses to assert its right thereto.
The same principle applies to the arrangements made by the
railroad company with the Atlantic and Pacific Telegraph Company
and with the Omaha Bridge Company which are here assailed. These
are existing contracts under which the business of the principal
corporation with the others is conducted and with which it is
satisfied. It asks no rescission, and is content to comply with
them. It is not within the power of the Court to annul them, or to
make new ones for the parties.
No decree can therefore be rendered on this bill in favor of
Page 98 U. S. 613
the Union Pacific Railroad Company, because it is not the
complainant, but a defendant, and, asking no affirmative relief or
any other, it resists being brought into this suit and refuses to
plead in it any further than compelled by the court.
If there is any relief to which the United States is entitled
against the company, the latter, being a defendant, must remain and
answer to the claim. But it is conformable to the principles
neither of the common law nor of equity to compel it to prosecute a
suit as complainant which it disapproves, or to establish a claim
which it denies, or take a decree where it asserts nothing to be
due.
We must now inquire whether the bill makes a case in which the
United States, the complainant, is entitled under the terms of the
statute to relief.
The United States is not, and never has been, a stockholder in
this company. It is a creditor.
The government sustains two distinct relations to the railroad
company, and, in considering her rights under this statute, it is
important to keep them separate. The company is organized under,
and owes its corporate existence to, an act of Congress. The
government has all the rights which belong to any other government
as a sovereign and legislative power over this creation of that
power. That this power should not be too much crippled by the
doctrine that a charter is a contract, the eighteenth section
declares that Congress may at any time, having due regard for the
rights of the companies named therein, add to, alter, amend, or
repeal the act. The power of Congress therefore in its sovereign
and legislative capacity over this corporation is very great.
The government, however, holds another very important relation
-- namely that of contract. It has loaned to the company
$27,000,000 and granted to it on certain terms many million acres
of land. The government is paying all the time the semiannual
interest on its own bonds loaned to the company. The company is
bound by contract to pay them, principal and interest, at their
maturity. The government by the contract has a lien on the road and
its appurtenances to secure this payment. The company is also bound
by the contract to perform for the government all the
transportation and telegraphing
Page 98 U. S. 614
that may be required of it, and to keep its road and line always
in order and readiness to render these services. It may have other
contract obligations to the government not here mentioned, but
these are all that are important to our inquiry. The government has
delivered its bonds to the company. The company has built the road,
owns it, and operates it. Does the bill allege anything which,
growing out of this contract, entitles the United States to
relief?
One of its allegations is that there is due to the United States
and unpaid, on account of interest on the bonds, the sum of
$6,198,700, and that the balance of interest for which the company
is liable is rapidly accumulating. It was filed in May, 1873, and
this Court, at its October Term, 1875, decided, in
United
States v. Union Pacific Railroad Co., 91 U. S.
72, that the company was not bound to pay this interest
until the bonds mature except so far as the act made in that regard
two special provisions. One was that half the compensation for
transportation performed for the United States should, as provided
by the subsequent amended charter of 1864, be withheld by the
government for that purpose; the other was that after the
completion of the road, five percent of its net earnings were to be
applied annually to extinguish the debt to the United States.
The second section of the act of 1873, as we have seen, provides
for the first of these cases, and as to the other, the government
has brought suits, which are now ripe for decision in this
Court.
There is therefore no ground for relief on account of money due
by the company to the United States.
It is said that the latter, as a creditor whose lien is
endangered by the extravagance of the company, and the
misappropriation of its means, has the right to come into equity
for preventive relief to secure the collection of the sums of which
the company has been defrauded.
The government made its contract and bargained for its security.
It had a first lien on the road by the original act of
incorporation, which would have made its loan safe in any event.
But in its anxiety to secure the rapid prosecution of the work --
an end more important to it than to anyone else,
Page 98 U. S. 615
and still more important to the people whom it represented -- it
postponed this lien to another mortgage, that the means might be
raised to complete the road. It has the second lien, however, and
the right to appropriate one-half of he price it annually pays for
the use of the road -- a very large sum -- and five percent of the
net earnings of the road, which may become much larger, to the
extinction of this debt. It is not wholly unreasonable to suggest
that the amount which the company may be compelled to pay annually
under these two provisions will be sufficient as a sinking fund to
pay the entire debt, principal and interest before it falls
due.
It is difficult to see any right which as a creditor the
government has to interfere between the corporation and those with
whom it deals. It has been careful to protect its interests in
making the contract, and it has the right which that contract
gives. What more can it ask? It is true that there is an allegation
of insolvency. But in what that insolvency consists is not clearly
shown. It has a floating debt. What railroad company has not? It is
said it does not pay the interest on its debt to the United States.
We have shown that it owes the United States no money that is due.
There is no allegation that it does not pay the interest on all its
own funded debt. The allegation as it is would be wholly
insufficient to place the corporation in bankruptcy, even if that
was not forbidden by the act under which this bill is drawn. The
facts stated are utterly insufficient to support a creditor's bill
by the United States. That requires a judgment at law, an execution
issued, and a return of nulla bona. Here there is no judgment, no
money due, and no sufficient allegation of insolvency.
We are unable, therefore, to see any relief to which under this
bill the United States, on account of its contract relations with
the company, would be entitled in a court of equity.
If we look at the statute, this is still clearer. The moneys due
for unpaid stock, or for property of the company unlawfully
received, or as profits in fraudulent contracts for construction,
are all described in the act as belonging to the corporation, and
to be restored to it. Those who may have wrongfully and unlawfully
received from the United States bonds, moneys, or lands which ought
in equity to be accounted for and paid to it or to
Page 98 U. S. 616
the company, may be compelled to pay the moneys or restore the
property to the party, which shall in equity be entitled
thereto.
But in this connection, no one but the company has received
property, lands, or moneys from the United States. There is no
allegation that the moneys were not used to build the road. If
there was, there is nothing now due, and the company is performing
all its obligations to the government under the contract.
The bill establishes no right in the government, under this or
any other clause of the act, to recover in its own right any
property or money from the company.
In its sovereign or legislative relation to the company, the
United States has powers the extent of which it is unnecessary to
define in this case. The two sections of the act under one of which
this suit was instituted are instances of the exercise of these
powers, and they affect the interest of the company in important
particulars. Congress might also have directed the Attorney
General, either as part of this proceeding or as an independent
one, to ask the court to declare the franchises of the company
forfeited. It might have ordered a bill to inquire if the company
was insolvent, and if so, to wind up its affairs and distribute its
assets. In short, there are many modes in which the legislature
could have called into operation all the judicial powers known to
the law. But it has not done so, and that is the constantly
recurring answer to this bill. It provided in the statute for a
mode of securing a full inquiry into the affairs of the company by
enacting that the Secretary of the Treasury should have free access
to all its books and correspondence -- a mode of obtaining
information far more effective than a bill of discovery. The
statute therefore did not authorize a bill of discovery. Not
wanting the company declared bankrupt and closed out by a decree of
the court, Congress enacted that it should not be subject to the
bankrupt law, as other corporations were, but should continue to
exercise its franchises and perform its duties, and that it might
be compelled to do this by a writ of mandamus from the proper
court. It limited the relief to be granted under this act,
therefore, both by the terms in which it was granted and by other
provisions, to the recovery of a moneyed decree or a
restoration
Page 98 U. S. 617
of specific property to which the United States or the company
was by law entitled.
It is useless, therefore, to inquire what might have been done
by some other legislation, or what, independently of legislation,
are the rights of the government, for we can only act on such as
are recognized by the act under which the circuit court
proceeded.
This brings us to the consideration of the last ground of relief
which we propose to notice and which, with the alleged right to a
decree in favor of the company against the individuals and
corporations who have defrauded it, is most earnestly insisted on
here.
The proposition is that the United States, as the grantor of the
franchises of the company, the author of its charter, and the donor
of lands, rights, and privileges of immense value, and as
parens patriae, is a trustee, invested with power to
enforce the proper use of the property and franchises granted for
the benefit of the public.
The legislative power of Congress over this subject has already
been considered, and need not be further alluded to. The trust here
relied on is one which is supposed to grow out of the relations of
the corporation to the government, which, without any aid from
legislation, are cognizable in the ordinary courts of equity.
It must be confessed that, with every desire to find some clear
and well defined statement of the foundation for relief under this
head of jurisdiction, and after a very careful examination of the
authorities cited, the nature of this claim of right remains
exceedingly vague. Nearly all the cases -- we may almost venture to
say all of them -- fall under two heads:
1. Where municipal, charitable, religious, or eleemosynary
corporations, public in their character, had abused their
franchises, perverted the purpose of their organization, or
misappropriated their funds, and as they, from the nature of their
corporate functions, were more or less under government
supervision, the Attorney General proceeded against them to obtain
correction of the abuse, or,
2. Where private corporations, chartered for definite and
limited purposes, had exceeded their powers, and were
restrained
Page 98 U. S. 618
or enjoined in the same manner from the further violation of the
limitation to which their powers were subject.
The doctrine in this respect is well condensed in the opinion in
People v. Ingersoll, recently decided by the Court of
Appeals of New York. 58 N.Y. 1. "If," said the court,
"the property of a corporation be illegally interfered with by
corporation officers and agents or others, the remedy is by action
at the suit of the corporation, and not of the Attorney General.
Decisions are cited from the reports of this country and of this
state, entitled to consideration and respect, affirming to some
extent the doctrine of the English courts and applying it to like
cases as they have arisen here. But in none has the doctrine been
extended beyond the principles of the English cases, and aside from
the jurisdiction of courts of equity over trusts of property for
public uses and over the trustees, either corporate or official,
the courts have only interfered at the instance of the Attorney
General to prevent and prohibit some official wrong by municipal
corporations or public officers, and the exercise of usurped or the
abuse of actual powers."
P. 16.
To bring the present case within the rule governing the exercise
of the equity powers of the court, it is strongly urged that the
company belongs to the class first described.
The duties imposed upon it by the law of its creation, the loan
of money and the donation of lands made to it by the United States,
its obligation to carry for the government, and the great purpose
of Congress in opening a highway for public use and the postal
service between the widely separated states of the Union, are
relied on as establishing this proposition.
But in answer to this it must be said that after all, it is but
a railroad company, with the ordinary powers of such corporations.
Under its contract with the government, the latter has taken good
care of itself, and its rights may be judicially enforced without
the aid of this trust relation. They may be aided by the general
legislative powers of Congress, and by those reserved in the
charter, which we have specifically quoted.
The statute which conferred the benefits on this company, the
loan of money, the grant of lands, and the right of way, did the
same for other corporations already in existence under state or
territorial charters. Has the United States the right
Page 98 U. S. 619
to assert a trust in the federal government which would
authorize a suit like this by the Attorney General against the
Kansas Pacific Railway Company, the Central Pacific Railroad
Company, and other companies in a similar position?
If the United States is a trustee, there must be
cestuis que
trust. There cannot be the one without the other, and the
trustee cannot be a trustee for himself alone. A trust does not
exist when the legal right and the use are in the same party, and
there are no ulterior trusts.
Who are the
cestuis que trust for whose benefit this
suit is brought? If they be the defrauded stockholders, we have
already shown that they are capable of asserting their own rights,
that no provision is made for securing them in this suit should it
be successful, and that the statute indicates no such purpose.
If the trust concerned relates to the rights of the public in
the use of the road, no wrong is alleged capable of redress in this
suit or which requires such a suit for redress.
Railroad Company v.
Peniston, 18 Wall. 5, shows that the company is not
a mere creature of the United States, but that while it owes duties
to the government the performance of which may, in a proper case,
be enforced, it is still a private corporation, the same as other
railroad companies, and, like them, subject to the laws of taxation
and the other laws of the states in which the road lies so far as
they do not destroy its usefulness as an instrument for government
purposes.
We are not prepared to say that there are no trusts which the
United States may not enforce in a court of equity against this
company. When such a trust is shown, it will be time enough to
recognize it. But we are of opinion that there is none set forth in
this bill which, under the statute authorizing the present suit,
can be enforced in the circuit court.
There are many matters alleged in the bill in this case, and
many points ably presented in argument, which have received our
careful attention, but of which we can take no special notice in
this opinion. We have devoted so much space to the more important
matters that we can only say that, under the view which we take of
the scope of the enabling statute, they furnish no ground for
relief in this suit.
Page 98 U. S. 620
The liberal manner in which the government has aided this
company in money and lands is much urged upon us as a reason why
the rights of the United States should be liberally construed. This
matter is fully considered in the opinion of the Court already
cited in
United States v. Union Pacific Railroad Co.,
supra, in which it is shown that it was a wise liberality for
which the government has received all the advantages for which it
bargained, and more than it expected. In the feeble infancy of this
child of its creation, when its life and usefulness were very
uncertain, the government, fully alive to its importance, did all
that it could to strengthen, support, and sustain it. Since it has
grown to a vigorous manhood, it may not have displayed the
gratitude which so much care called for. If this be so, it is but
another instance of the absence of human affections which is said
to characterize all corporations. It must, however, be admitted
that it has fulfilled the purpose of its creation and realized the
hopes which were then cherished, and that the government has found
it a useful agent, enabling it to save vast sums of money in the
transportation of troops, mails, and supplies, and in the use of
the telegraph.
A court of justice is called on to inquire not into the balance
of benefits and favors on each side of this controversy, but into
the rights of the parties as established by law, as found in their
contracts, as recognized by the settled principles of equity, and
to decide accordingly. Governed by this rule and by the intention
of the legislature in passing the act under which this suit is
brought, we concur with the circuit court in holding that no case
for relief is made by the bill.
Decree affirmed.
MR. JUSTICE SWAYNE, with whom concurred MR. JUSTICE HARLAN,
dissenting.
I concur in the opinion, so far as it relates to the
constitutional validity of the act of Congress which lies at the
foundation of the case. In the residue I cannot concur.
