Hyer and Shield were engaged separately, each on behalf of
himself and his associates, in seeking from the city government of
Richmond a concession for a street railway with collateral lines.
Hyer's organization was to be called the Richmond Conduit Company,
and Shield's the Richmond Traction Company. Hyer made a deposit of
money in a bank in Richmond to aid in his projects. Hyer and Shield
then contracted in writing as follows, each being fully authorized
thereto by his associates:
"We
Page 168 U. S. 472
hereby bind ourselves, in our own behalf and for our associates,
mutually to cooperate one with the other in securing a franchise
for said railway and to divide equally between us and our
associates whatever may be realized from the enterprise, first
deducting from said amount whatever actual expenses may have been
incurred by either side, such expenses to be paid out of the first
money realized from said enterprise. The deposit already made with
the State Bank of Richmond by Hyer or his associates is to stand
and remain intact as it now is for the purpose of securing the
franchise aforesaid, subject to any conditions for the withdrawal
thereof made by Hyer with the depositor after the seventeenth day
of August, 1895, and further it is agreed that the application and
franchise to be presented to the Common Council of the City of
Richmond shall be that of the Richmond Traction Company, for the
building of an overhead trolley railway or cable system."
A full statement of the action of the two companies was made to
the Richmond authorities. Hyer fully performed his agreements. He
was unable to go to Richmond when the matter was settled, and
Shield secured the concession for himself and his associates, and
refused to permit Hyer and his associates to participate in it. By
bill in equity, amended bill, and supplemental bill, Hyer sought to
be declared owner of one-half interest in the Traction Company's
franchise, property and stock, and for a decree securing the
possession and enjoyment thereof.
Held that, without
deciding whether the contract sued on was, under the facts and
circumstances disclosed, void as against public policy, the case
presented was not one which called for the interposition of a court
of equity, but that the plaintiff's remedy was by an action at
law.
On October 30, 1895, appellant, as plaintiff, filed his bill
against the defendants in the Circuit Court of the United States
for the Eastern District of Virginia. After some changes, he, on
April 18, 1896, filed an amended and supplemental bill. The
sufficiency of this was challenged by demurrer. The demurrer was
sustained, and on August 22, a decree was entered dismissing the
bill. From that decree the plaintiff appealed to the court of
appeals, which court, on May 14, 1897, ordered that the decree of
the circuit court be affirmed without prejudice, whereupon the case
was removed to this Court by certiorari.
It appears from the allegations in the amended and supplemental
bill that the plaintiff, whose attention had been for some time
devoted to the matter of street railways in the City of Richmond,
Virginia, succeeded in obtaining from the city council a franchise
for the construction and operation of a
Page 168 U. S. 473
street railway on Broad Street, in that city. An ordinance
passed on June 17 granted the franchise to the plaintiff and his
associates under the name and style of the Richmond Conduit
Company. The terms of this ordinance differed in some respects from
those of the one prepared by the plaintiff, who declined to accept
it or to proceed under it in the form in which it had passed the
council. But upon an open conference with the committee on streets
of the city council, plaintiff was assured that changes would be
made rendering the franchise acceptable to him, provided he would
deposit in one of the banks of the City of Richmond the sum of
$10,000, upon certain conditions embodied in a paper, prepared by
the city attorney. On July 17, he caused the deposit to be made,
and gave satisfactory guaranties of the good faith of himself and
associates and of their purpose to construct the railway, which
guaranties, as he was assured, would secure the modification of the
grant in accordance with his suggestions. While in Richmond, and
conferring with the various committees of the city council with
regard to this franchise, he became aware that certain other
parties were seeking to secure a grant of a like franchise to them
under the name and style of the Richmond Traction Company, and that
the defendant P. B. Shield was apparently the head of this
movement, but he had not been successful in obtaining the passage
of any ordinance by the city council. In the early part of August,
1895, the plaintiff went to the City of New York, to make
arrangements for constructing the railway as soon as the amendments
had been made to the ordinance. While there, he was in the banking
house of Stewart & Co., who had been advising with him with a
view of aiding him financially in the prosecution of his
enterprise, and there ascertained that the defendant Shield was
also in conference with the said firm of Stewart & Co., seeking
aid in the prosecution of his Richmond Traction Company scheme.
Stewart & Co. advised the consolidation of the two interests,
to-wit, the interest of plaintiff and his associates in the conduit
company with that of Shield and his associates in the traction
company. After some conferences, a contract was entered into
between plaintiff and Shield which took the
Page 168 U. S. 474
form of a joint letter to the banker, of which the following is
a copy:
"New York,
August 9th, 1895"
"S. H. G. Stewart, Esq., 40 Wall Street, City"
"Dear Sir: We, the undersigned, L. H. Hyer, of Washington, D.C.
and Phil. B. Shield, of Richmond, Virginia, have this day entered
into the following agreement: that both of us being interested in
the procuring of a franchise for and the construction of a street
railway on Broad Street, in the City of Richmond, Virginia, with
collateral lines, have made the following agreement: that we hereby
bind ourselves, in our own behalf and for our associates, mutually
to cooperate one with the other in securing a franchise for said
railway, and to divide equally between us and our associates
whatever may be realized from the enterprise, first deducting from
said amount whatever actual expenses may have been incurred by
either side, such expenses to be paid out of the first money
realized from said enterprise."
"It is further agreed between us that the deposit already made
with the State Bank of Richmond at Richmond, Virginia, by Mr. L. H.
Hyer or his associates, is to stand and remain intact as it now is,
for the purpose of securing the franchise aforesaid, subject to any
conditions for the withdrawal thereof made by Mr. Hyer with the
depositor after the seventeenth day of August, 1895, and, further,
it is agreed that the application and franchise to be presented to
the Common Council of the City of Richmond shall be that of the
Richmond Traction Company, for the building of an overhead trolley
railway or cable system."
"Among ourselves we will decide what names are proper to be used
in the franchise and the policy we will use in procuring the
same."
"Yours, very respectfully,"
"[Signed] L. H. Hyer"
"[Signed] Phil. B. Shield"
Plaintiff was authorized to act for himself and associates, and
the defendant Shield represented that he had a power of
Page 168 U. S. 475
attorney from all parties interested in the traction company
scheme, and he did actually represent them.
It was agreed between the parties to this contract that a full
statement and explanation of the action of the two companies should
be made to the city authorities of Richmond, and in fact it was so
made. Plaintiff fully performed all the promises and covenants
entered into in said contract in behalf of himself and his
associates, but, being detained by a serious illness, was unable to
proceed immediately to Richmond, and trusted to the defendant
Shield and his associates to carry out other terms of the contract
and secure the franchise for the mutual benefit of both interests.
Disregarding this contract, Shield and his associates secured the
passage of an ordinance granting the franchise to them, and wholly
ignoring plaintiff and his associates. The first section of this
ordinance provides:
"That the Richmond Traction Company, composed of John W.
Middendorf. John L. Williams, Everett Waddey, Reuben Sherreffs,
Philip B. Shield, Charles T. Child and W. F. Jenkins, be, and the
same is hereby, permitted to construct and operate a street railway
within the limits of the city, along the following routes, under
and subject to the conditions and provisions hereinafter set forth:
a double track in Broad Street,"
etc. Subsequent sections cast various obligations upon the
company in respect to the construction and operation of the
railway, the use by other companies of the tracks, and the payment
of a certain percent of the gross receipts into the Treasury of the
city. The last section is as follows:
"Fourteenth. Said Richmond Traction Company, and all such
persons as now compose said company or who may hereafter unite with
them are, in virtue of the authority vested in the Common Council
of Richmond pursuant to the act of the General Assembly of
Virginia, passed March 20, 1860, entitled 'An act to authorize the
Common Council of Richmond to authorize persons to construct
railroads in the streets of said city,' declared to be a
corporation, and are vested with all the rights and privileges
conferred, or intended to be conferred, by said act on persons or
companies authorized by said council of the City of Richmond to
construct railroads in the streets of said
Page 168 U. S. 476
city, and are likewise bound by all the restrictions of said
act."
All the parties named in the first section of this ordinance
were duly notified of the claims of plaintiff and his associates,
under the contract of August 9, notwithstanding which they ignored
plaintiff and his associates and proceeded to organize a
corporation, taking all the stock to themselves, paying nothing
therefor, but receiving certificates purporting to be of fully paid
stock. Plaintiff, after alleging that he is the holder of all the
interests represented by himself and his associates, prayed that he
be decreed the owner of one-half interest in the traction company's
franchise, property, and stock, and specifically for certain orders
to secure to him the possession and enjoyment of such interest.
MR. JUSTICE BREWER, after stating the facts in the foregoing
language, delivered the opinion of the Court.
Two questions arise in this case: first, whether the contract
sued on is, under the facts and circumstances disclosed in the
bill, void as against public policy; and, if not, whether the case
presented is one which calls for the interposition of a court of
equity, or should be determined in a court of law.
In respect to the first question, it will be borne in mind that,
upon a demurrer, whatever the facts in the case may really be, we
must take them to be as stated in the bill. So, in determining the
question of the validity of this contract, it must be assumed that
there was no concealment; that everything was open and public, and
nothing withheld from the knowledge of the city council, or any
parties interested in the matter. The case thus presented is: two
parties apply separately to a city council for a franchise to
construct a street railway. The banker from whom each of the
parties is seeking
Page 168 U. S. 477
financial assistance advises them to unite and make a single
application. They do so, and thereafter the city council, aware of
both interests, of the two applications, of the advice to
consolidate and the party by whom it is given, and of all the terms
of the consolidation, grants the franchise to only one of the
parties. Was the agreement to unite in one application against
public policy, and void?
In the view we have taken of the second of these questions, it
is unnecessary to definitely determine the answer which should be
given to the first, though it may not be inappropriate to observe
that the vice which is so frequently detected in contracts and
agreements of a similar nature lies in the fact of secrecy,
concealment, and deception. The one applicant, though apparently
antagonizing the other, is really supporting the latter's
application, and the public authorities are misled by statements
and representations coming from a supposed adverse, but in fact
friendly, source. It would scarcely be doubted that two or more
parties may properly unite in a partnership or corporation, and
thus unitedly make, in the name of the partnership or corporation,
a single application for a grant or franchise, and, if they may so
unite before any application, it is not easy to see why they may
not so unite after having once made separate applications,
providing all the facts and circumstances are fully disclosed and
the public and the public authorities act upon full knowledge, and,
if they may sometimes so unite, an agreement for uniting is not
necessarily void. As said by the New York Court of Appeals in
Atcheson v. Mallon, 43 N.Y. 147, 151:
"A joint proposal, the result of honest cooperation, though it
might prevent the rivalry of the parties, and thus lessen
competition, is not an act forbidden by public policy. Joint
adventures are allowed. They are public and avowed, and not secret.
The risk as well as the profit is joint and openly assumed. The
public may obtain at least, the benefit of the joint responsibility
and of the joint ability to do the service. The public agents know,
then, all that there is in the transaction, and can more justly
estimate the motives of the bidders, and weigh the merits of the
bid.
Page 168 U. S. 478
See also Smith v. Greenlee, 13 N.C. 126;
Phippen v.
Stickney, 3 Metc. 384; Greenwood on Public Policy, p. 190,
Rule 177."
It may be noticed that there is nothing in the agreement,
reduced to writing or as interpreted by the facts stated, which
tends to show any thought or purpose of using corrupt or improper
influences to secure the action of the city council. So that, upon
the record as it stands, the question is, narrowly, whether any
agreement to unite between parties who have applied, or contemplate
application, for a franchise is, under all circumstances,
necessarily void as against public policy.
The case is also easily distinguishable from those of contracts
merely to abstain from bidding. An agreement not to bid tends to
diminish the number of bidders, and thus
prima facie to
lessen the probable profitableness of the sale or contract. Yet
even in cases of public sales, the rule laid down by this Court is
that agreements to unite in a bidding are not
per se void.
Some other element than the mere fact of union must exist before
the agreement is to be condemned.
Kearney v.
Taylor, 15 How. 490. In that case, at a public
sale, a portion of a farm was purchased by a company, organized
pending the sale, and making the purchase with the view of laying
out and establishing a town thereon. After discussing the question
of competition and the reasons which had led courts to frequently
denounce such combinations for the purpose of bidding, the opinion
adds (p.
56 U. S.
520):
"These observations are sufficient to show that the doctrine
which would prohibit associations of individuals to bid at the
legal public sales of property, as preventing competition, however
specious in theory, is too narrow and limited for the practical
business of life, and would oftentimes lead inevitably to the evil
consequences it was intended to avoid. Instead of encouraging
competition, it would destroy it. And sales in many instances could
be effected only after a sacrifice of the value, until reduced
within the reach of the means of the individual bidders."
"We must therefore look beyond the mere fact of an
association
Page 168 U. S. 479
of persons formed for the purpose of bidding at this sale, as it
may be not only unobjectionable, but oftentimes meritorious, if not
necessary, and examine into the object and purposes of it, and if,
upon such examination, it is found that the object and purpose are
not to prevent competition, but to enable or as an inducement to
the persons composing it to participate in the biddings, the sale
should be upheld; otherwise if for the purpose of shutting out
competition and depressing the sale, so as to obtain the property
at a sacrifice."
"Each case must depend upon its own circumstances. The courts
are quite competent to inquire into them and to ascertain and
determine the true character of each."
The observations thus made show that every case must be
determined upon its peculiar facts and circumstances, and the
courts, before condemning an agreement to unite in a bid, must see
that the agreement is such as really destroys the value of
competitive bidding, and these observations, it must be noticed,
were made in respect to a case in which a public sale had been
ordered. The sale was therefore something which must take place,
and the question of making a sale was not discretionary with the
sheriff or other officer charged with the duty of making the sale.
But here, the City of Richmond was not bound to grant any
franchise. It was free to determine whether it would grant or not,
and, if it did, what form of street transportation should be
adopted, and might also well consider the character, the financial
ability, and the situation of the various applicants in determining
to whom it would be best for the public interests to grant such a
franchise.
Where the grantor or vendor has not determined the question of
grant or sale, and it is still a matter of discretion whether the
grant or sale shall be made, it would seem that there were less
cogent reasons for denouncing a combination or agreement of parties
with a view of making a proposal.
Morrison v. Darling, 47
Vt. 67, 72. In that case, it appeared that two parties each
contemplated purchasing property belonging to a third. One of the
two promised the other a certain sum if he would not interfere with
him in
Page 168 U. S. 480
obtaining the property and would assist him in making the
purchase. It was held that the agreement was valid. The court,
after referring to the rule pertaining to the cases of public
sales, said:
"But in this case, the owner of the estate was under no
obligation to sell to anyone, and there was no stipulation to
resort to any illegal or improper means to mislead the owner, or to
induce a sale by any fraud or artifice. We do not think such a
contract can be held void as against public policy."
But, as observed, every case must depend upon its own
circumstances, and it may be that when the facts in this case are
disclosed by the testimony, they will be found to differ materially
from those stated in the bill. Inasmuch as we are of the opinion
that even if the contract be valid, the plaintiff's remedy is in a
court of law, rather than in a court of equity, it is not wise to
attempt to definitely determine whether, under the circumstances
stated, this contract was or was not void as against public policy,
for such determination might prove to be, in the final result, the
mere answer to a moot question. It will be more satisfactory to
pass upon the question when the surrounding facts are fully
developed by testimony.
We pass, therefore, to the second question, which is: assuming
this contract to be valid, was the plaintiff's remedy in equity or
at law? According to the allegations, the city council was aware of
the two parties, of their agreement to unite in one application, of
all the facts surrounding the agreement and proposed union, and,
with such knowledge, it granted this public franchise to one party
alone. In the exercise of its judgment in respect to the public
interests, the city council determined that it was better that the
defendants should have this franchise than that the united parties
should have it. In the face of this determination by the
authorities having special charge of the public interests, and
ignorant, as we must be, of the reasons which controlled the city
council in making this award to the one singly, rather than to the
two jointly, it would be improper for a court of equity to compel a
consolidation of those interests. For reasons which must be held to
be
Page 168 U. S. 481
sufficient and controlling, the city council deemed it not wise
to grant this franchise to the two, but gave it to the one. Shall
the courts overrule this determination and entrust the franchise to
the two, rather than to the one? They have no general supervision
over the judgment and action of public authorities. The city holds
its grantee responsible for the proper discharge of the duties
imposed by its grant of the franchise. It may well have determined
that it did not desire the plaintiff to have any interest in it, or
anything to do with the management of the street railway, and that
the best interests of the city would be subserved by committing it,
primarily at least, to the defendants alone. Shall the courts say
that such determination was erroneous, or may be overruled, simply
because of a private contract between two parties? It must be
remembered that, according to the allegations, the city council
knew of the union of interests, and yet declined to recognize such
union. It may be said that by authorizing these defendants to
incorporate, it put it in their power to let the plaintiff and his
associates or any one else into the enterprise. Of course, the city
council knew that the franchise, when granted, could be alienated
by the grantees, and yet, notwithstanding this possible alienation,
the fact remains that the city council determined that the primary
parties to receive the franchise -- the ones upon whom the burden
of the contract should be laid -- were the defendants alone, and
not in conjunction with the plaintiff or his associates.
It is obvious that if two interests which it may be believed are
now not in harmony, if not decidedly antagonistic, are let into
equal control of a franchise such as this, the public interests may
suffer. Harmony in management is no inconsiderable factor in
securing the best possible results, and if the parties in interest
are of two minds as to how the railway shall be managed, what
improvements shall be made, and, in general, what shall be done in
connection therewith, it is not difficult to perceive that their
antagonism may prevent that efficiency which will tend to make the
street railway of the greatest advantage to the public.
This conclusion, while not interfering with the right of the
Page 168 U. S. 482
plaintiff to maintain his action at law for the damages
resulting from the defendants' breach of contract, at the same time
preserves the city's control over the franchise and upholds its
determination as to the party or parties to whom it is willing to
entrust such franchise.
But, beyond these relations of the public to the enterprise,
courts are not often wont to compel parties to unite interests and
work together. And here it may be well to notice that the contract
was not one in terms for a partnership in the management of the
railway, but only one for a division of the profits. The parties
stipulated to cooperate in securing the franchise, and to divide
equally the profits, but left the question of control and
management unsettled. The application, it is true, was to be in the
name of the Richmond Traction Company, but who should compose that
company was, according to the last clause of the contract, to be
subsequently determined. It may, however, be conceded that there is
an implication of joint ownership as well as of joint interest in
the management, and in the profits arising therefrom, and thus it
may be said that the contract was really one for a partnership. It
is seldom that a court of equity will decree that a partnership
which has been agreed upon shall be carried into effect. More
frequently is it called upon to release parties from partnership
agreements on the ground that their antagonism prevents the
fulfillment of the purposes of the partnership, and it would seem
like a contradiction to force antagonistic parties to form a
partnership when it is one of the recognized rules of equity that
such antagonism is ground for dissolving a partnership already
existing. It is true that the ordinance contemplates the formation
of a corporation, and courts will sometimes decree the specific
performance of a contract for the transfer of stock. But the
ordinance was passed after the contract, and, as we have seen, the
most that can be said of the contract is that it contemplated the
creation of a partnership. The fact that thereafter the city
council deemed it best to provide by ordinance that the grantees of
the franchise should incorporate does not change the scope of the
contract. It is precisely the same that it would have been
Page 168 U. S. 483
if the council had granted the franchise to Shield personally,
and authorized him, as an individual, to construct and operate the
railway. How, then, can it be said that this contract is to be
deemed one for the transfer of shares of stock in a corporation? No
corporation then existed. The Richmond Traction Company, in whose
name the application was to be made, was not then a corporation,
and became one only on the passage of the ordinance. There was no
certainty that one would ever be formed. There was no agreement
that one should be formed, and the rights of the parties must be
determined by the facts as they were at the time of the contract,
and the terms which entered into it. But even if it be considered
as a contract specifically for the transfer of stock, what is the
rule in respect to actions in case of a breach thereof? If stock
has a recognized market value, courts will ordinarily leave the
parties to their action at law for damages for breach of the
agreement to sell; but in cases where the stock has no recognized
market value, is not purchasable in the market, or has a value
which is section not settled but contingent upon the future
workings of the corporation, equity will sometimes decree specific
performance of a contract of purchase. It is in reliance upon this
that plaintiff claims the right to a decree for specific
performance. The enterprise, he says, is a new one. It is difficult
to put a fair pecuniary value on the stock or on the franchise. It
is one of those things contingent largely on the successful working
of the railway. It must be conceded that there is force in the
contention that only by letting the plaintiff into the possession
of the interest he claims can adequate compensation be secured. At
the same time, the present value of the franchise, and therefore of
the stock of the corporation owning the franchise, is not wholly
beyond estimate. That which it may have three or four years hence
may depend largely upon the matter of management. But it is a
franchise which has definite possibilities. The miles of track
covered by it, the population adjacent to the line, and therefore
the number of people likely to avail themselves of its advantages,
the cost of construction and of operation, are all well known
facts, and upon such known facts it is not
Page 168 U. S. 484
impossible for a jury to form a fair estimate of the value of
the franchise, and therefore of the damage which the plaintiff has
sustained by the repudiation of the contract to give him a half
interest in it.
The authorities generally support these views. In Pomeroy's
Specific Performance of Contracts, ยง 290, the author, citing
several cases, says:
"It is well settled, as a general rule, that an agreement to
enter into a partnership which would be literally performed by
executing the partnership articles, or to carry on a partnership
already established, will not be specifically enforced."
In
Hill v. Palmer, 56 Wis. 123, 129, the court
observes:
"It is also well settled that the wrongful refusal by a party to
a contract of co-partnership to permit the firm to commence
business, or, as it is sometimes termed, to launch the partnership
business, is ground for an action at law by the injured partner to
recover damages of the partner whose wrongful act has defeated the
purposes for which the co-partnership was formed. The cases which
so hold, both in England and this country, are very numerous.
Indeed, the authorities seem to be quite uniform in so holding. The
following are a few of the cases referred to:
Venning v.
Leckie, 13 East.Term R. 7;
Gale v. Leckie, 2 Stark.
107;
Manning v. Wadsworth, 4 Md. 59;
Glover v.
Tuck, 24 Wend. 153;
Bagley v. Smith, 10 N.Y. 489;
Terrill v. Richards, 1 Nott & McC. 20;
Ellison v.
Chapman, 7 Blackf. 224;
Williams v. Henshaw, 11 Pick.
79;
Addams v. Totten, 39 Penn.St. 447;
Vance v.
Blair, 18 Ohio 532; 1 Story, Eq.Jur. sec. 665; Collyer on
Part. sec. 245; 2 Lindley on Part. (4th ed.) 1025, and cases cited
in notes."
Powell v. Maguire, 43 Cal. 11, disclosed, like the case
at bar, an agreement in respect to a franchise to be obtained from
the legislature for the mutual benefit of plaintiff and defendant.
The franchise in that case was for maintaining a steam ferry, and
it appeared that the defendant, after obtaining the franchise in
his own name, constructed a ferryboat at his own expense, and
operated in between the points named in the charter. The suit was
one to obtain
Page 168 U. S. 485
specific performance of the agreement, and it was held that it
could not be maintained, the court saying, on page 19:
"Upon these facts, it is obvious that if the plaintiff's rights
rested solely on a verbal agreement to the effect that he and the
defendant would establish and maintain the ferry at their joint
expense and for their joint benefit, without reference to the
franchise, the plaintiff's only remedy would be an action at law
for a breach of contract. He would have no right to participate in
the profits of an enterprise to which he had contributed nothing,
and could claim no interest in a boat constructed by the defendant
at his own expense and for his own use, nor in the earnings
thereof. In such cases, it is well settled that when the
partnership was never launched, and when one of the co-partners has
proceeded to conduct the enterprise in his own name at his own
cost, and for his own exclusive benefit, excluding the other party
therefrom, and repudiating the partnership agreement, the only
remedy of the injured party is an action at law for a breach of
contract. There would be in such a case no existing partnership,
but only an agreement to form one, which was never consummated by
launching the enterprise."
In that case, also, it was held that the contract was against
public policy, the facts in respect to the contract not having been
disclosed to the legislature at the time the franchise was granted.
In respect to this, it was said (page 21):
"When the legislature grants a franchise to a particular person,
his associates, and assigns, it delegates to him the right to
select the person thereafter to be associated with him in the
enterprise. . . . But if several persons desiring to obtain a
franchise from the legislature, in which they are all to be
mutually interested, see fit to ask it in the name of one only,
public policy requires that they should be made to rely solely on
his good faith in carrying out the agreement, and if he repudiates
the contract on obtaining the franchise, a court of equity will
grant no relief. It may be that if the legislature had known
beforehand who the real parties in interest were, they would not
have made the grant, and if the courts could be appealed to to
enforce such secret antecedent
Page 168 U. S. 486
agreements, unsupported by any subsequent acts of the ostensible
beneficiary, it is evident that powerful secret combinations would
be formed to procure vicious legislation under false
pretenses."
These authorities might be multiplied, but they are sufficient
to show the general rule controlling actions of this kind. For
these reasons and upon these authorities, we are of the opinion
that the suit for specific performance cannot be maintained. The
decree of the circuit court was one dismissing the bill absolutely.
In view of the doubt which rests as to the validity of the
contract, we think it should have been a dismissal without
prejudice, and the order will be therefore that the case be
remanded to the circuit court, with directions to modify the decree
so as to make it one dismissing the bill without prejudice to an
action at law.
MR. JUSTICE HARLAN, concurring.
I am of opinion that the object as well as the effect of the
contract set out in the bill was to diminish competition in
reference to the obtaining of a public franchise. For that reason,
it was detrimental to the public interests, and one in respect of
which a court of equity ought not to give any aid to either party.
In addition to this view, it appears upon the face of the ordinance
in question that the City Council of Richmond named the persons by
whom that franchise was to be exercised, and a court of equity
ought not to force another party into connection with those whom
the city council thus designated. Aside from these considerations,
I am of opinion that if the plaintiff has any remedy at all, he has
an adequate one at law. Upon this last ground, I acquiesce in the
judgment of the majority of the Court in this case.
MR. JUSTICE BROWN, dissenting.
MR. JUSTICE PECKHAM and myself are unable to concur in that part
of the opinion of the Court which holds that the
Page 168 U. S. 487
complainant is not entitled to relief in equity. Neither the
agreement between Hyer and Shield of August 9, 1895, nor the
negotiations of these parties with the Common Council of the City
of Richmond contemplated or implied a partnership between them. Not
only is it a fact of which we may take notice that street railways
are universally constructed and operated by corporations, but it
was one of the stipulations of the agreement of August 9, 1895,
that "the application and franchise to be presented to the Common
Council of the City of Richmond" should "be that of the Richmond
Traction Company for the building of an overhead trolley or cable
railway system." The franchise of June 17, 1895, was granted by an
ordinance of this council to Hyer and his associates under the
corporate name of the Richmond Conduit Railway Company, while the
rival competing scheme of Shield was applied for under the name and
style of the Richmond Traction Company. Not only must the Common
Council have understood that it was contracting with a corporation,
but there is nothing to show that it placed any special reliance
upon the personal qualities of Shield or his associates. Indeed,
the facts set forth in the bill in this connection show
conclusively there could have been no such reliance.
While the entire stock of the Richmond Traction Company may have
been taken in their names, there was nothing to prevent that stock
from being transferred at any time to other parties, nor could the
city have had any personal claim against Shield or his associates.
The transaction was with the corporation, and with the corporation
alone, and, in a legal point of view, it was a matter of entire
indifference to the city who became the owners of the stock. The
entire stock of the company might have been transferred to other
parties the day after the charter was granted without any violation
of its provisions. In fact, the Common Council is alleged to have
understood that the interests of the two companies had been
consolidated, and granted the charter to the traction company with
knowledge that Hyer and his associates were to participate equally
in the enterprise.
Under such circumstances, we think it clear that the court
Page 168 U. S. 488
should have entertained a bill for the specific performance of
this contract, and not have relegated the parties to the doubtful
and unsatisfactory remedy of an action at law. We understand the
rule to be, as stated by Cook on Stock and Stockholders, section
338, that
"if the stock contracted to be sold is easily obtained in the
market, and there are no particular reasons why the vendee should
have the particular stock contracted for, he is left to his action
for damages. But where the value of the stock is not easily
ascertainable, or the stock is not to be obtained readily
elsewhere, or there is some particular and reasonable cause for the
vendee's requiring the stock contracted to be delivered, a court of
equity will decree a specific performance, and compel the vendor to
deliver the stock."
This principle is particularly applicable to a case of this
kind, where the corporation was but recently formed, the railroad
yet unconstructed, and its shares of uncertain value, if, indeed,
they had any market value at all. To require the complainant under
these circumstances to bring a personal action for a breach of
contract against Shield, who is alleged to be hopelessly insolvent
and wholly unable to respond in damages, is to offer him the shadow
and deny him the substance of relief.
