The statute of Illinois of February 12, 1855, empowering all
railroad corporations incorporated under the laws of the state to
make "contracts and arrangements with each other and with railroad
corporations of other states for leasing or running their roads"
authorizes a railroad corporation of Illinois to make a lease of
its road to a railroad corporation of another state, but confers no
power on a railroad corporation of the other state to take such a
lease if not authorized to do so by the laws of its own state.
A railroad corporation of Indiana is not empowered to take a
lease of a railroad in another state by the statute of Indiana of
February 23, 1853, c. 85, authorizing any railroad corporation of
that state to unite its railroad with a railroad constructed in an
adjoining state and to consolidate the stock of the two companies,
or to extend its road into another state, or
"to make such contracts and agreements with any such road
constructed in an adjoining state for the transportation of freight
and passengers or for the use of its said road, as to the board of
directors may seem proper."
A lease for nine hundred and ninety-nine years by one
railroad
Page 145 U. S. 394
of its railroad and franchise to another railroad corporation
which is
ultra vires of one or of both will not be set
aside by a court of equity at the suit of the lessor when the
lessee has been in possession, paying the stipulated rent, for
seventeen years, and has taken no steps to repudiate or rescind the
contract.
This was a bill in equity, filed July 6, 1887, by the St. Louis,
Vandalia & Terre Haute Railroad Company, a corporation of
Illinois, against the Terre Haute & Indianapolis Railroad
Company, a corporation of Indiana, to set aside and cancel a
conveyance of the plaintiff's railroad and franchises to the
defendant for a term of nine hundred and ninety-nine years. The
bill contained the following allegations:
That the plaintiff was incorporated by a statute of Illinois of
February 10, 1865, amended by a statute of February 8, 1867, to
construct and maintain a railroad from the left bank of the
Mississippi River opposite St. Louis eastward through the State of
Illinois to a point on the Wabash River, convenient for extending
its road to Terre Haute in the State of Indiana, and was not
authorized by its charter or by any law of Illinois to lease its
railroad, or by any other contract or conveyance to part with the
entire possession, control, and use of its property and franchises,
or to deprive itself of and vest in others the power of control in
the management of its said road and other property, and in the
exercise of its franchises, including the right to impose and
collect tolls for the transportation of passengers and freight,
indefinitely, or for any fixed period of time.
That the defendant was incorporated by a statute of Indiana of
January 26, 1847, amended by a statute of March 6, 1865, to
construct and maintain a railroad from some point on the western
line of the State of Indiana eastward through Terre Haute to
Indianapolis, and was not authorized by its charter or by any law
of Indiana to make or accept any lease, contract, or other
conveyance by which it should acquire or obtain, either
indefinitely or for a fixed time, the ownership, management, or
control of any railroad located beyond the limits of Indiana.
That the plaintiff proceeded to construct, and on or about
Page 145 U. S. 395
July 1, 1870, completed the construction and equipment of, its
road; that in order to obtain money for this purpose, on April 6,
1867, it executed a mortgage or deed of trust of all its railroad,
property, and franchises, to secure the payment of bonds amounting
to $1,900,000, and agreeing to set apart annually from its earnings
the sum of $20,000 as a sinking fund for payment of the bonds; that
on March 13, 1868, it executed a second mortgage to secure the
payment of additional bonds to the amount of $2,600,000; that all
the bonds aforesaid were sold and outstanding and unpaid, and that
no sinking fund had been created as provided for in the first
mortgage.
That on February 10, 1868, the plaintiff and the defendant
executed a pretended lease (set forth in the bill, and copied in
the margin
*) of the
plaintiff's railroad, property, and franchises
Page 145 U. S. 396
to the defendant for nine hundred and ninety-nine years, the
defendant retaining sixty-five percent, of the gross receipts, and
the rest to be applied to the payment of interest on the mortgage
bonds, and any surplus paid to the plaintiff.
That on January 12, 1869, the plaintiff's board of directors
passed a resolution undertaking to authorize its president to
change the terms of said lease, so that the defendants should be
allowed seventy, instead of sixty-five, percent of the gross
receipts,
"but if the working and maintenance expenses of said road shall
be less than seventy percent of the gross receipts aforesaid, then
all of such excess shall be paid over to"
the plaintiff.
That by a statute of Illinois of February 16, 1865, in force at
the time of the execution and delivery of the pretended lease, it
was not lawful for any railroad company of Illinois
Page 145 U. S. 397
or its directors to consolidate its railroad with any railroad
out of the state, or to lease its railroad to any railroad company
out of the state, or to lease any railroad out of the state,
without the written consent of all its stockholders residing within
the state, and that fifty-nine of the plaintiff's stockholders,
residing in Illinois, never consented to or ratified the lease.
That on the completion of the plaintiff's road, the defendant
took possession of and had ever since operated it, and had
received, in tolls and otherwise, more than $21,600,000; that the
pretended lease was void for want of lawful power in either party
to enter into it; that the defendant, by taking possession of the
plaintiff's railroad and property without right, became in equity a
trustee of the plaintiff, and liable to account to it for the
property and for all tolls and emoluments which the defendant had,
or ought to have, collected and received therefrom, and to restore
the property to the plaintiff; that the defendant had refused,
though requested, to turn over to the plaintiff the road and
property or the income thereof, and had thus rendered the plaintiff
unable to establish a sinking fund, as required by the first
mortgage, and that great and irreparable injury would be done to
the plaintiff and its stockholders unless it was restored to the
possession and control of the railroad, property, and
franchises.
That at the time when the lease was executed by the plaintiff,
its officers supposed that it had lawful power to do so, but that
it had recently been advised by counsel that it had no such power,
that it was its duty at once to repudiate this pretended lease, and
to resume the possession, control, and use of its property and
franchises, and that it had rendered itself liable to have its
charter forfeited by the state; that the present income was more
than sufficient to pay the interest on the bonds and to establish a
sinking fund, and that, by reason of the failure to establish a
sinking fund, proceedings might at any time be instituted to
foreclose the first mortgage.
That the taking of long and complicated accounts, covering a
period of nearly seventeen years and involving a great many items,
was necessary for the protection and enforcement of
Page 145 U. S. 398
the plaintiff's rights; that the pretended lease was a cloud on
the plaintiff's title; that a court of law had no jurisdiction
adequate to take the account or to cancel the lease, and that the
defendant was daily withdrawing large sums of money from the
jurisdiction of the court, to the irreparable injury of the
plaintiff. The bill, as originally framed, prayed for a
cancellation and surrender of the lease, for a return of the
railroad and other property held under it, for an injunction
against disturbing the plaintiff in the possession and control
thereof, and for an account of the sums which the defendant had
received from the use and operation of the railroad and property,
or if the lease should be held valid, for an account of the sums
due under the lease, and for further relief.
The defendant demurred to the bill for want of equity, for
laches, for multifariousness, and because the plaintiff had an
adequate remedy at law. The circuit court sustained the demurrer on
all these grounds, as stated in its opinion, reported in 33 F. 440.
The plaintiff thereupon, by leave of court, amended the bill by
striking out the prayer for alternative relief in case the lease
should be held valid. The defendant demurred to the amended bill,
on the same grounds as before, except multifariousness. The court,
delivering no further opinion, sustained the demurrer, and
dismissed the bill, and the plaintiff appealed to this Court.
Page 145 U. S. 400
MR. JUSTICE GRAY, after stating the case as above, delivered the
opinion of the Court.
The object of this suit between two railroad corporations, as
stated in the amended bill, is to have a contract, by which the
plaintiff transferred its railroad and equipment, as well as
Page 145 U. S. 401
its franchise to maintain and operate the road, to the defendant
for a term of nine hundred and ninety-nine years, set aside and
cancelled, as beyond the corporate powers of one or both of the
parties.
The contract, dated February 10, 1868, recites that the
plaintiff is a corporation of Illinois, and the defendant a
corporation of Indiana; that their railroads connect at the line
between the two states; that it is desirable that the two roads
should be operated by the defendant as one road, and that the
defendant has "proposed to lease and operate" the plaintiff's road
for a period of nine hundred and ninety-nine years. "It is
therefore agreed" that, upon the completion of the plaintiff's road
to the state line, the defendant "shall take charge of and operate
the same with its equipment" for that period, and
"shall be allowed sixty-five percent of the gross receipts from
all traffic moved over the line, or business done thereon, and from
the property of the company as a consideration for working and
maintenance expenses,"
and shall appropriate the rest of such receipts to the payment
of interest on the plaintiff's mortgage bonds, and pay any surplus
to the plaintiff, for the benefit of its stockholders. Within a
year afterwards, the contract was modified by providing that the
defendant should be allowed seventy, instead of sixty-five, percent
of the gross receipts,
"but if the working and maintenance expenses of said road shall
be less than seventy percent of the gross receipts aforesaid, then
all of such excess shall be paid over to the"
plaintiff. It is further agreed in the contract that the
defendant "shall enjoy all the rights, powers, and privileges of
the" plaintiff "so far as the same may be needful to maintain and
operate said railroad," and may "impose and collect tolls and rates
for transportation, and do all other acts and things, as fully and
as effectually as the" plaintiff "could do if operating said
line."
In short, by this contract, one railroad corporation undertook
to transfer its whole railroad and equipment, and its privilege and
franchise to maintain and operate the road to another railroad
corporation for a term of nine hundred and ninety-nine years in
consideration of the payment from time
Page 145 U. S. 402
to time by the latter to the former of a certain portion of the
gross receipts. This was, in substance and effect, a lease of the
railroad and franchise for a term of almost a thousand years, and
was a contract which neither corporation had the lawful power to
enter into unless expressly authorized by the state which created
it, and which, if beyond the scope of the lawful powers of either
corporation, was unlawful and wholly void, could not be ratified or
validated by either or both, and would support no action or suit by
either against the other.
Thomas v. Railroad Co.,
101 U. S. 71;
Pennsylvania Railroad v. St. Louis, Alton & Terre Haute
Railroad, 118 U. S. 290,
118 U. S. 630;
Oregon Railway v. Oregonian Railway, 130 U. S.
1;
Central Transportation Co. v. Pullman's Car
Co., 139 U. S. 24.
Upon the question whether this contract was
ultra vires
of either corporation, this case cannot be distinguished in
principle from
Pennsylvania Railroad v. St. Louis, Alton &
Terre Haute Railroad, above cited.
By the statute of Illinois of February 12, 1855, all railroad
companies incorporated under the laws of the state were empowered
to make "contracts and arrangements with each other, and with
railroad corporations of other states, for leasing or running their
roads, or any part thereof." Private Laws of 1855, p. 304;
Rev.Stat. of 1874, c. 114, § 34. By the grammatical and the natural
construction, the words "their roads" include roads of Illinois
corporations as well as roads of corporations of other states, and
the power conferred on corporations of Illinois to make contracts
"for leasing" such roads includes making, as well as taking, leases
thereof. Such was the opinion expressed in the case just cited, at
page
118 U. S. 309,
and we see no reason for departing from it.
The plaintiff relies on the statute of Illinois of February 16,
1865 (in force at the date of this contract, but since repealed by
the Revised Statutes of 1874), by which it was enacted that
"it shall not be lawful for any railroad company of Illinois or
for the directors of any railroad company of Illinois to
consolidate their road with any railroad out of the State of
Illinois, or to lease their road to any railroad company
Page 145 U. S. 403
out of the State of Illinois, or to lease any railroad out of
the State of Illinois without having first obtained the written
consent of all of the stockholders of said roads residing in the
State of Illinois, and any contract for such consolidation or lease
which may be made without having first obtained said written
consent, signed by the resident stockholders in Illinois, shall be
null and void,"
and it was provided "that nothing in this act shall be so
construed as to authorize the consolidation of any of said
railroads with railroads out of the State of Illinois." Illinois
Public Laws of 1865, p. 102.
Although this statute in terms declares that any such lease made
without the written consent of the Illinois stockholders "shall be
null and void," it would seem to have been enacted for the
protection of such stockholders alone, and intended to be availed
of by them only. It did not limit the scope of the powers conferred
upon the corporation by law, an excess of which could not be
ratified or be made good by estoppel, but only prescribed
regulations as to the manner of exercising corporate powers,
compliance with which the stockholders might waive or the
corporation might be estopped, by lapse of time, or otherwise, to
deny.
Zabriskie v. Cleveland &c.
Railroad, 23 How. 381,
64 U. S. 398;
Central Transportation Co. v. Pullman's Car Co.,
139 U. S. 24,
139 U. S. 42,
139 U. S. 60;
Davis v. Old Colony Railroad, 131 Mass. 258, 260;
Beecher v. Marquette & Pacific Co., 45 Mich. 103;
Thomas v. Citizens' Railway, 104 Ill. 462.
The decision of the Supreme Court of Illinois in
Archer v.
Terre Haute & Indianapolis Railroad, 102 Ill. 493, cited
by each party at the argument, does not appear to have any
important bearing upon this case. The point there decided was that
the contract now in question, not being satisfactorily proved in
that case to have been either assented to or ratified by the
stockholders residing in Illinois, had no effect as a lease to
convey title to the defendant, and could be sustained, if at all,
only as a contract for the connection of the two railroads, and in
either aspect did not confer on the defendant any right to maintain
a bill in equity against collectors of taxes to restrain the
collection of taxes assessed to the present plaintiff. Upon
questions discussed in the opinion and not necessary
Page 145 U. S. 404
to the judgment or not considered at all, the case cannot be
regarded as a decision, because, as observed by Mr. Justice Curtis,
speaking for this Court,
"to make it so, there must have been an application of the
judicial mind to the precise question necessary to be determined to
fix the rights of the parties."
Carroll v.
Carroll, 16 How. 275,
57 U. S.
287.
It is unnecessary, however, to express a definitive opinion upon
the question whether the contract between these parties was beyond
the corporate powers of the plaintiff, because, as is established
by the decisions of this Court already cited, a contract beyond the
corporate powers of either party is as invalid as if beyond the
corporate powers of both, and the contract now in question was
clearly beyond the corporate powers of the defendant.
The case in this respect is governed by the direct adjudication
of this Court in the case of
Pennsylvania Railroad v. St.
Louis, Alton & Terre Haute Railroad, above cited, which
was much considered both upon argument at the bar and upon petition
for a rehearing. The only differences between that case and this
are that the contract in that case was for ninety-nine years,
whereas in this it is for nine hundred years more, that the rent is
computed in a different way, which does not alter the nature and
effect of the transaction, and that in that case the two roads did
not connect at the state line, but a few miles east of it, which
was held to be immaterial. 118 U.S.
119 U. S.
295-297.
The plaintiff in that case, like the defendant in this, sought
to support the validity of the contract under the statute of
Indiana of February 23, 1853, c. 85, of which section 1 authorized
any railroad company of Indiana "to intersect, join, and unite its
railroad with any other railroad" constructed in an adjoining state
at any point on the state line or elsewhere to which the charters
of the two companies authorized their roads to go, and to
consolidate the stock of the two companies; section 2 authorized
any railroad company of Indiana whose road went to the state line
"to extend its said railroad into or through any other state" under
such regulations as might be prescribed by the laws thereof, and
section 3 authorized any
Page 145 U. S. 405
railroad company of Indiana whose road met and connected at the
state line with a railroad in an adjoining state
"to make such contracts and agreements with any such road
constructed in an adjoining state for the transportation of freight
and passengers, or for the use of its said road, as to the board of
directors may seem proper."
Indiana Rev.Stats. of 1881, §§ 3971-3973.
At the argument of that case, indeed, the third section, being
the one affording the most plausible ground, was principally relied
on, and was the only section of this statute discussed in the
original opinion. 118 U.S.
118 U. S. 312. But in that opinion, reference was made
to
Tippecance Commissioners v. Lafayette &c. Railroad,
in which the Supreme Court of Indiana held that this statute did
not authorize one railroad corporation to lease its railroad to
another with a right of perpetual renewal, and said "[t]o connect
one road with another does not fairly mean to lease or sell it to
another." 50 Ind. 85, 110; 118 U.S.
118 U. S. 312.
And upon the petition for rehearing, all three sections of the
statute in question, as well as other statutes of Indiana, were
cited by counsel and examined by the court, although its
conclusions were briefly stated, according to its usage in an
opinion delivered on a petition for rehearing. 118 U.S.
119 U. S.
633.
It is argued for the defendant that this suit is distinguished
from the former one in being brought not, as that was, in Indiana,
but in Illinois, and must therefore be controlled by the law and
policy of Illinois, and it is contended that the statute of
Illinois of 1855, above cited, empowered the defendant, though an
Indiana corporation, to take a lease of a railroad in Illinois. But
such a suit as this is governed, so far as regards the validity of
the contract, not by the law of the forum, but by the law of the
contract, and the statute of Illinois was manifestly intended to
confer power on domestic corporations only, leaving the powers of
corporations incorporated elsewhere to be determined by the laws by
and under which they were incorporated, even if a state could
confer on a foreign corporation powers which it did not have by the
laws of its own state.
Canada Southern Railway v.
Gebhard, 109
Page 145 U. S. 406
U.S. 527,
109 U. S. 537;
Christian Union v. Yount, 101 U.
S. 352;
Starkweather v. American Bible Society,
72 Ill. 50;
Santa Clara Academy v. Sullivan, 116 Ill. 375,
385.
It may therefore be assumed, as contended by the plaintiff, that
the contract in question was
ultra vires of the defendant,
and therefore did not bind either party, and neither party could
have maintained a suit upon it at law or in equity, against the
other.
It does not, however, follow that this suit to set aside and
cancel the contract can be maintained. If it can, it is somewhat
remarkable that, in the repeated and full discussions which the
doctrine of
ultra vires has undergone in the English
courts within the last fifty years, no attempt has been made to
bring a suit like this. The only cases cited in the elaborate
briefs for the plaintiff or which have come to our notice
approaching this in their circumstances are in American courts not
of last resort, and present no sufficient reasons for maintaining
this suit.
Auburn Academy v. Strong, Hopkins Ch. 278;
Atlantic & Pacific Telegraph Co. v. Union Pacific
Railway, 1 F. 745;
Western union Telegraph Co. v. St.
Joseph & Western Railway, 3 F. 430;
Union Bridge Co.
v. Troy & Lansingburgh Railroad, 7 Lansing 240;
New
Castle Railway v. Simpson, 21 F. 533.
The English cases relied on by the plaintiff were either suits
to set aside marriage brokage bonds, as in
Drury v. Hooke,
1 Vernon 412, and
Smith v. Bruning, 2 Vernon 392,
s.c., nom. Goldsmith v. Bruning, 1 Eq.Cas.Abr. 89, or to
recover back money paid for the purchase, without leave of the
crown, of a commission in the military or naval service, as in
Morris v. McCullock, Ambier 433,
s.c., 2 Eden,
190. Those cases have sometimes been justified upon the ground
that, the agreement being against the policy of the law, the relief
was given to the public through the party.
Debenham v. Ox,
1 Ves. Sr. 276;
St. John v. St. John, 11 Ves. 526, 536;
Cone v. Russell, 48 N.J.Eq. 208. But Sir William Grant
explained them as proceeding upon the ground that the plaintiff was
less guilty than the defendant.
Osborne v. Williams, 18
Ves. 379, 382. And
Morris v. McCullock can hardly be
Page 145 U. S. 407
reconciled with his decision in
Thomson v. Thomson, 7
Ves. 470, or with the current of later authorities.
The general rule, in equity, as at law, is
in pari delicto
potior est conditio defendentis, and therefore neither party
to an illegal contract will be aided by the court, whether to
enforce it or to set it aside. If the contract is illegal,
affirmative relief against it will not be granted at law or in
equity unless the contract remains executory or unless the parties
are considered not in equal fault, as where the law violated is
intended for the coercion of the one party and the protection of
the other, or where there has been fraud or oppression on the part
of the defendant.
Thomas v.
Richmond, 12 Wall. 349,
79 U. S. 355;
Springs Co. v. Knowlton, 103 U. S. 49; Story
Eq.Jur. § 298.
While an unlawful contract the parties to which are
in pari
delicto remains executory, its invalidity is a defense in a
court of law, and a court of equity will order its cancellation
only as an equitable mode of making that defense effectual and when
necessary for that purpose. Adams on Eq. 175. Consequently it is
well settled at the present day that a court of equity will not
entertain jurisdiction to order an instrument to be delivered up
and cancelled upon the ground of illegality appearing on its face,
and when, therefore, there is no danger that the lapse of time may
deprive the party to be charged upon it of his means of defense.
Story Eq. Jur. § 700a, and cases cited;
Simpson v. Howden,
3 Myl. & Cr. 97;
Ayerst v. Jenkins, L.R. 16 Eq. 275,
282.
When the parties are
in pari delicto, and the contract
has been fully executed on the part of the plaintiff by the
conveyance of property or by the payment of money, and has not been
repudiated by the defendant, it is now equally well settled that
neither a court of law nor a court of equity will assist the
plaintiff to recover back the property conveyed or money paid under
the contract.
Thomas v. Richmond, above cited;
Ayerst
v. Jenkins, L.R. 16 Eq. 275, 284. For instance, property
conveyed pursuant to a contract made in consideration of the
compounding of a crime, and the stifling of a criminal prosecution,
and therefore clearly illegal, cannot be
Page 145 U. S. 408
recovered back at law, nor the conveyance set aside in equity,
unless obtained by such fraud or oppression on the part of the
grantee that the conveyance cannot be considered the voluntary act
of the grantor.
Worcester v. Eaton, 11 Mass. 368, and 13
Mass. 371;
Atwood v. Fisk, 101 Mass. 363;
Bryant v.
Peck & Whipple Co., 154 Mass. 460;
Williams v.
Bayley, L.R. 1 H.L. 200;
Jones v. Marionetshire
Society, 1892, 1 Ch. 173, 182, 185, 187.
In the case at bar, the contract by which the plaintiff conveyed
its railroad and franchise to the defendant for a term of nine
hundred and ninety-nine years was beyond the defendant's corporate
powers, and therefore unlawful and void, of which the plaintiff was
bound to take notice. The plaintiff stood in the position of
alienating the powers which it had received from the state, and the
duties which it owed to the public, to another corporation which it
knew had no lawful capacity to exercise those powers or to perform
those duties. If, as the plaintiff contends, the contract was also
beyond its own corporate powers, it is certainly in no better
position. In either aspect of the case, the plaintiff was
in
pari delicto with the defendant. The invalidity of the
contract, in view of the laws of which both parties were bound to
take notice, was apparent on its face. The contract has been fully
executed on the part of the plaintiff by the actual transfer of its
railroad and franchise to the defendant, and the defendant has held
the property, and paid the stipulated consideration, from time to
time, for seventeen years, and has taken no steps to rescind or
repudiate the contract.
Upon this state of facts, for the reasons above stated, the
plaintiff, considered as a party to the unlawful contract, has no
right to invoke the assistance of a court of equity to set it
aside. And so far as the plaintiff corporation can be considered as
representing the stockholders, and seeking to protect their
interests, it and they are barred by laches.
Harwood v.
Railroad Co., 17 Wall. 78;
Graham v. Birkenhead
&c. Railway, 2 Hall & Twells 450,
s.c., 2
Macn. and Gord. 146;
Flooks v. Southwestern Railway, 1 Sm.
& Gif. 142, 164;
Gregory v. Patchett, 11 Law Times
357.
Page 145 U. S. 409
This case is not like those in which the defendant, having
abandoned or refused to perform the unlawful contract, has been
held liable to the plaintiff as upon an implied contract for the
value of what it had received from him, and had no right to retain.
Spring Co. v. Knowlton, 103 U. S. 49;
Logan County Bank v. Townsend, 139 U. S.
67, and cases there cited.
But the case is one in which, in the words of Mr. Justice
Miller, in a case often cited in this opinion, the court will not
disturb the possession of the property that has passed under the
contract, but will refuse to interfere as the matter stands.
Pennsylvania Railroad v. St. Louis, Alton & Terre Haute
Railroad, 118 U. S. 290,
118 U. S.
316-317.
See also Union Trust Co. v. Illinois
Midland Co., 117 U. S. 434,
117 U. S.
468-469;
Central Transportation Co. v. Pullman's Car
Co., 139 U. S. 24,
139 U. S. 56-57,
139 U. S.
61.
Decree affirmed.
*
"Whereas a contract for the construction and equipment of the
St. Louis, Vandalia and Terre Haute Railroad, belonging to a
corporation of the State of Illinois, has been entered into this
day by which arrangements have been made to complete and equip said
road between East St. Louis and the state line of Indiana in the
manner set forth in said contract:"
"And whereas the Terre Haute and Indianapolis Railroad Company,
a corporation of the State of Indiana, has proposed to construct,
without delay, a first-class railroad, being an extension of their
present road from Terre Haute to the state line of Indiana, upon
such location as will connect properly and directly with the St.
Louis, Vandalia and Terre Haute Railroad at the state line of
Illinois:"
"And whereas it is desirable that the said lines when connected
should be operated by the Terre Haute and Indianapolis Railroad
Company as one road between Indianapolis and St. Louis, and the
said Terre Haute and Indianapolis Railroad Company having proposed
to lease and operate the said St. Louis, Vandalia and Terre Haute
Railroad for a period of nine hundred and ninety-nine years, it is
therefore agreed, first --"
"That upon the completion of the road between East St. Louis and
the state line of Indiana, the Terre Haute and Indianapolis
Railroad Company shall take charge of and operate the same, with
its equipment, for a period of nine hundred and ninety-nine years,
for which they shall be allowed sixty-five percent of the gross
receipts from all traffic moved over the line or business done
thereon, and from the property of the company, as a consideration
for working and maintenance expenses, the remaining thirty-five
percent to be appropriated as follows: 1st. to the payment of
interest on the first and second mortgage bonds of the St. Louis,
Vandalia and Terre Haute Railroad Company according to their legal
priority; 2d. all the surplus of said thirty-five percent to be
paid over to the St. Louis, Vandalia and Terre Haute Railroad
Company semiannually, to be disposed of by it for the benefit of
its stockholders."
If the thirty-five percent should from any cause not be
sufficient in amount to protect the interest on mortgage bonds and
sinking funds therefor as they mature from time to time, together
with the payment of taxes and proper cost of maintaining
organization, so that the rights of stockholders may be preserved,
then and in that event the lessee shall advance for the company
whatever amounts may be needed, to be accounted for under the
yearly averages of this lease during this contract.
"It is further agreed that the Terre Haute and Indianapolis
Railroad Company, as lessee, shall enjoy all the rights, powers,
and privileges of the St. Louis, Vandalia and Terre Haute Railroad
Company so far as the same may be needful to maintain and operate
said railroad; also, to impose and collect tolls and rates for
transportation, and do all other acts and things as fully and as
effectually as the said St. Louis, Vandalia and Terre Haute
Railroad Company could do if operating said line, it always being
understood and agreed that the gross proceeds from through or joint
traffic or business shall be divided on the
pro rata basis
per mile for distance moved on the road of each party."
"In witness whereof the parties have respectively hereunto
affixed, this, the tenth day of February, 1868, their official
signatures and seals under authority of their boards of
directors."
"THE ST. LOUIS, VANDALIA AND TERRE HAUTE RAILROAD COMPANY"
"[Seal] By J. F. ALEXANDER,
President"
"THE TERRE HAUTE AND INDIANAPOLIS RAILROAD COMPANY"
"[Seal] By W. R. McKEEN,
President"
