When the pleadings in the trial court of a state, the assignment
of error in the supreme court of the state, the opinion of the
latter court, and its original decree present no federal question,
and two days later, on
Page 139 U. S. 289
motion of counsel, the decree is modified so as to show that a
federal question was presented by counsel and decided adversely to
their contention, there is color for a motion to dismiss for want
of jurisdiction here.
When a charter power is once fully exercised by a corporation
and exhausted, it is, in respect of further contracts and rights of
the corporation, as if it had never been granted.
The plaintiff in error having exhausted the power to mortgage
its property given by the act of 1847 before its property was
mortgaged in 1881, the latter mortgage was made under the then
existing laws of Tennessee.
Motion to dismiss or affirm. The case is stated in the
opinion.
MR. JUSTICE BREWER delivered the opinion of the Court.
This case is submitted on a motion to dismiss or affirm. The
facts are these: the State of Tennessee in 1847 (Acts 1847-1848,
page 195) granted a charter of incorporation to the East Tennessee
and Virginia Railroad Company. In 1869, this corporation was
consolidated with the East Tennessee and Georgia Railroad Company,
under the name of the East Tennessee, Virginia and Georgia Railway
Company. This consolidated company, in 1881, executed a mortgage
which in 1886 was foreclosed, and the plaintiff in error, the East
Tennessee, Virginia and Georgia Railway Company, as purchaser, took
possession of the franchises and property. After this foreclosure
and sale, petitions in the nature of creditor's bills were filed in
behalf of the defendants in error, judgment creditors of the
railroad company, to subject its property in the hands of the
purchaser, the railway company, to the satisfaction of their
judgments. These judgments were, in point of time, subsequent to
the mortgage of 1881, and the question presented was whether they
were superior liens. Such superiority was claimed under and by
virtue of a proviso to section 3 of chapter 72 of the Laws of
Tennessee of 1877, page 92, which reads:
"And provided
Page 139 U. S. 290
further that no railroad company shall have power under this act
or any of the laws of this state to give or create any mortgage or
other kind of lien on its railway property in this state which
shall be valid and binding against judgments and decrees and
executions therefrom for timber furnished and work and labor done
on or for damages done to persons and property in the operation of
its railroad in this state."
By final decree of the chancery court, approved by the supreme
court of the state, priority of lien was given to the appellees'
judgments, and satisfaction decreed out of the property. Of this
adjudication of priority plaintiff in error complains, and presents
as a federal question the proposition that the act of 1877, giving
priority to certain judgments over mortgage liens, was an
impairment of the contractual rights created by the act of 1847.
The fifteenth section of that act contained this provision:
"The said company may at any time increase its capital to a sum
sufficient to complete the said road, and to stock it with
everything necessary to give it full operation and effect, either
by opening books for new stock, or by selling new stock, or by
borrowing money on the credit of the company, and on the mortgage
of its charter and works."
And the contention is that this section granted the right to
create an absolute first lien by mortgage which could not be taken
away by subsequent statutes giving priority to any judgments or
claims of date later than the mortgage. The claim that the act of
1877 was in impairment of contractual rights given by a prior act
of the legislature applicable to the corporation mortgagor
presents, doubtless, a federal question, and the first matter for
our consideration is whether there was color for the motion to
dismiss. It appears that in the pleadings filed by the railway
corporation responsive to the petitions of the appellees, the
unconstitutionality of the act of 1877 was alleged; but such
unconstitutionality was not predicated on any provision of the
United States Constitution, but solely on those of the constitution
of the state. We quote from the answer to one of the petitions,
which, in this respect, is as full and complete as any:
"Respondent is advised and will insist that the act of 1877,
Page 139 U. S. 291
under which petitioners seek to pursue and appropriate
respondent's property to the payment of their claims, and
especially the provision of the third section of said act, is
unconstitutional and void because said act embraces more than one
subject, and the proviso in section 3 aforesaid and the subject of
said proviso is not expressed in the title of said act, and because
said act is not in compliance with article 2, section 17, of the
constitution of this state, and therefore petitioners have no
warrant of law for asking satisfaction of their claims from the
property mentioned in the original bill."
So upon the pleadings no federal question was presented. Not
only that, but in the assignment of error which was made when the
case was taken to the supreme court of the state, no reference was
made to any federal question, and the unconstitutionality of the
act was rested solely upon its supposed conflict with the state
constitution. Further, in the opinion of the supreme court of the
state, reported in 88 Tenn. 138, which is an elaborate and careful
discussion of the questions in the case, the alleged conflict
between the act and the state constitution is fully noticed, but
nothing is said about any supposed infringement of the federal
Constitution. When, on October 26, 1889, the decree of the supreme
court was entered affirming the ruling of the chancellor as to the
liability of the property, the points decided were specifically
stated in it, and in them no reference is made to any federal
question. Two days thereafter, an entry appears on the records of
that court stating that upon application of counsel for the railway
company, the decree is modified so as to show that, upon the
argument of the case, the question of the invalidity of the act of
1877 by reason of the inhibition of the federal Constitution was
presented by counsel, and that the decision of the court was
adverse to such contention. Upon these facts, we think there was
color for the motion to dismiss. The pleadings in the trial court,
the assignment of error, the opinion of the supreme court, and the
original decree of that court contain no reference to any federal
question. The invalidity of the act of 1877 in all these
proceedings is placed upon a supposed conflict with the state
constitution. Obviously
Page 139 U. S. 292
that was the substantial matter litigated. The fact that two
days after the decision, the presentation of a federal question was
recognized by the supreme court is not to be taken as a declaration
that the federal question was a principal one -- one which it had
theretofore ignored -- but rather implies that it was a subordinate
and incidental matter which, though noticed by counsel, was not
made the stress of the argument or the burden of complaint. As such
a claim had been made, although in a subordinate and incidental
way, and although it was a matter which had not arrested its
attention, that court, with a delicate sense of justice, caused a
statement to be entered of the presentation of this federal
question in order that any rights of review which the railway
company might have by reason thereof should not be lost to it.
Recognizing the fact that thereby a federal question is presented,
it seems so obvious that it was not the bone of contention -- the
principal matter litigated -- but only put into the record for the
purpose of an appeal, that it must be adjudged there was color for
the motion to dismiss. While that motion must be denied, the motion
to affirm is presented for consideration, and upon that we have no
doubt.
Whatever special rights of mortgage were given by the act of
1847 were exhausted. That special right was to increase its capital
by the issue of bonds secured by mortgage to a sum sufficient to
complete its road and stock it with everything to give it full
operation. It appears that the road authorized by this charter was
completed, equipped, and in full operation more than twenty-five
years before the mortgage of 1881, and long before the
consolidation of 1869. Of course, when a charter power is once
exhausted, it is, in respect to further contracts and rights, as
though it had never been granted. So in 1881, when the railroads
company executed its mortgage, it was not by virtue of this special
grant of power, but by virtue of the general power given by
subsequent statutes, and the exercise of such general power must be
held subordinate to the terms accompanying its grant. Neither is it
of any significance that, by legislation prior to 1877, a general
power to mortgage had been given to railroad corporations. Until
a
Page 139 U. S. 293
general power granted to corporations has been exercised, the
terms and conditions under which it may be exercised are subject to
legislative control. It may change or modify them as it sees fit,
and the law in force at the time the mortgage is executed, with all
the conditions and limitations it imposes, is the law which
determines the force and effect of the mortgage. That law, in this
case, was the law of 1877, which subordinated the mortgage to the
lien of subsequent judgments for claims of the nature of those held
by appellees.
We see no error in the ruling of the Supreme Court of Tennessee,
and it is therefore
Affirmed.