A contract made by the president of a railroad corporation, in
its behalf and within the scope of its chartered powers, to pay
certain sums to the
Page 131 U. S. 372
proprietors of a railway bridge for the use thereof and made
known to the directors and stockholders and not disapproved by them
within a reasonable time, binds the corporation.
A contract to pay certain sums for the use of a railway bridge
across the Mississippi River, between Illinois and Iowa is not
ultra vires of a railroad corporation of Illinois or of
Pennsylvania whose road connects, by means of intervening
railroads, with the bridge as part of a continuous line of
transportation.
A being a railroad corporation of Ohio, Indiana and Illinois, B
a railroad corporation of Pennsylvania and Ohio, and C a railroad
corporation of Pennsylvania, these three corporations, for the
purpose of establishing a continuous line of transportation,
entered into an indenture by which A leased its railroad to B for
ninety-nine years, B covenanted to pay to A a proportion of the
earnings of that road, and to assume and carry out certain
transportation contracts existing between A and other companies,
receiving and enjoying the benefits thereof, and C guaranteed the
performance of B's covenants. Before the execution of the lease, a
contract was drawn up by which a corporation of Iowa and Illinois,
authorized by its charter to build a railway bridge across the
Mississippi River from Keokuk in Iowa to Hamilton in Illinois,
agreed to build such a bridge and granted to A and three other
railroad corporations in perpetuity the right to use it for the
passage of their trains, and they agreed to pay monthly to the
bridge company stipulated tolls, and if those should fall below a
certain sum, to make up the deficiency, each contributing in
proportion to the tonnage passed by it over the bridge. After the
execution of the lease and upon a formal request of the presidents
of B and C in their behalf, undertaking that they should assume all
the liabilities and be entitled to all the benefits of that bridge
contract as if it had been specifically named in and made part of
the lease, A's president, in its behalf, executed the bridge
contract and reported to his directors that he had done so, and
they never took any action upon the subject. C's president and
directors, in two printed annual reports to their stockholders,
declared the settled policy of the company to secure a continuous
line of traffic from Philadelphia to Keokuk and westward, and
stated that through B, this object had been accomplished. A
subsequent modification of the bridge contract, by which a
deficiency in the tolls was to be borne equally by the four
railroad corporations parties thereto, was executed by A's
president pursuant to a similar request and undertaking of the
presidents of B and of C. The bridge was then opened for use, and
was afterwards used by B and C, and the sums payable by A under the
modified bridge contract for tolls and deficiencies were
semiannually demanded by the bridge company from B, and, after
examination of the accounts, paid by B's comptroller for three
years.
Held that B and C were liable to the bridge company
for the amount of subsequent deficiencies payable by A under that
contract, whether the lease was valid or invalid.
Page 131 U. S. 373
This was a bill in equity, filed July 25, 1881, by the Keokuk
and Hamilton Bridge Company against the Pittsburgh, Cincinnati and
St. Louis Railway Company and the Pennsylvania Railroad Company to
recover deficiencies in tolls for the use of the plaintiff's bridge
under a contract executed at the request of the presidents of those
two railroad companies by the Columbus, Chicago, and Indiana
Central Railroad Company, which was made by amendment a party to
the bill. The Keokuk and Hamilton Bridge Company was a corporation
organized under the laws of Iowa and of Illinois. The Pennsylvania
Railroad Company was a corporation organized under the laws of
Pennsylvania. The Pittsburgh, Cincinnati and St. Louis Railway
Company was formed in 1868 by the consolidation of the Pan-Handle
Company, a corporation organized under the laws of Pennsylvania,
the Holiday's Cove Railroad Company, a corporation organized under
the laws of West Virginia, and the Steubenville and Indiana
Railroad Company, a corporation organized under the laws of Ohio.
The Columbus, Chicago, and Indiana Central Railroad Company was a
corporation formed in 1867 by the consolidation of the Columbus and
Indiana Central Railroad Company, a corporation existing under the
laws of Ohio and Indiana, and the Chicago and Great Eastern Railway
Company, a corporation existing under the laws of Indiana and
Illinois.
The railroads of the Pennsylvania Railroad Company from
Philadelphia to Pittsburgh in Pennsylvania, of the Pittsburgh,
Cincinnati and St. Louis Railway Company from Pittsburgh to
Columbus in Ohio, of the Columbus, Chicago, and Indiana Central
Railroad Company from Columbus to the state line between Indiana
and Illinois, and of the Toledo, Peoria, and Warsaw Railway Company
from that state line to Hamilton in Illinois, with the bridge of
the Keokuk and Hamilton Bridge Company across the Mississippi River
between Hamilton and Keokuk, and the road of the Des Moines Valley
Railroad Company from Keokuk to Des Moines in the State of Iowa,
from a continuous line of railroad transportation from
Philadelphia, on the east, to Des Moines, on the west. For the sake
of brevity, we shall speak of those companies
Page 131 U. S. 374
respectively as the Pennsylvania Company, the Pittsburgh
Company, the Indiana Central Company, the Peoria Company, the
Bridge Company, and the Des Moines Company.
The bridge was built under a contract, dated January 19, 1869,
made by the Bridge Company with the Indiana Central Company, the
Peoria Company, the Des Moines Company, and a fourth railroad
company (the Toledo, Wabash and Western Railway Company) whose
railroad connected with the bridge at Hamilton. By that contract,
the Bridge Company agreed to begin to construct forthwith across
the Mississippi River at Keokuk and to complete by January 1, 1870,
"a substantial wrought-iron bridge, suitable for the running of
railway trains,"
"to lay a track upon said bridge, and connect the same with
railways belonging to the parties hereto, in such manner, and at
such points, as may hereafter be agreed upon,"
and
"to maintain and keep in repair in perpetuity the said bridge
and tracks so that trains may safely cross at all times, except
when repairs make it necessary that crossing should be temporarily
suspended or when it shall be necessary to have the draw open for
the passage of boats,"
and granted to those four railroad companies in perpetuity the
right to use the bridge for the purpose of passing their trains
across the Mississippi River, and they agreed to pay monthly
stipulated rates for the transportation of passengers and freight,
and, if the gross amount of the rates for freight for any year
should fall below the sum of $80,000, making up the deficiency,
each of the four railroad companies contributing in proportion to
the tonnage passed by it over the bridge, for which, by a
subsequent modification of the contract in June, 1871, was
substituted one-fourth of such deficiency. This suit was brought to
recover from the Pittsburgh Company and the Pennsylvania Company
such deficiencies in the sums payable by the Indiana Central
Company under the modified bridge contract since September 1, 1874,
amounting to $118,076.89, and interest. The circuit court entered a
decree for the plaintiff in accordance with the prayer of the bill,
and the Pittsburgh and Pennsylvania Companies each appealed to this
Court.
Page 131 U. S. 375
The facts on which the Bridge Company sought to charge the
Pittsburgh and Pennsylvania Companies for these sums were as
follows:
After the original bridge contract had been drawn up and before
it had been executed, the Indiana Central Company entered into an
indenture with the Pittsburgh and Pennsylvania Companies by which
it leased its franchises and road and all lands and properly
connected with the use thereof to the Pittsburgh Company for 99
years, and the Pennsylvania Company guaranteed the performance of
all the covenants of the Pittsburgh Company as lessee.
The thirteenth and the sixteenth articles of that lease clearly
manifest that one of its chief objects was to establish a
continuous line for quick transportation from Pennsylvania to the
West, and to procure freight and passengers at each end of the
line, and they contain special provisions calling for action of the
Pennsylvania Company, as well as of the Pittsburgh Company, so as
to promote that object.
The sixteenth article of the lease declares that it is in
consideration of the benefits so accruing to the Pennsylvania
Company, by reason of the covenants of the lessor and of the
lessee, "in the forming, maintaining, and operating of a continuous
line of railway in connection with the road or roads of" the
Pennsylvania Company, that this company guarantees to the Indiana
Central Company that the Pittsburgh Company will keep and perform
all its covenants, and that, upon its failure or default to do so,
the Pennsylvania Company will, upon written notice of the kind and
nature of such failure or default, keep and perform those
covenants, in which event it is agreed that it shall be entitled to
all the benefits that might accrue therefrom to the Pittsburgh
Company. Among those covenants of the Pittsburgh Company as lessee
which the Pennsylvania Company thus guaranteed the performance of
were the covenant in the sixth article to pay to or for the benefit
of the Indiana Central Company three-tenths of the gross earnings
of the property leased, and the covenants in the ninth article, by
which the Indiana Central Company assigns to the Pittsburgh Company
certain existing
Page 131 U. S. 376
contracts for transportation over other railroads not mentioned
above, and the Pittsburgh Company
"assumes, and agrees at its own risk and expense to carry out
each and all of said contracts according to their respective tenors
and legal liabilities, receiving and enjoying all benefits to be
derived therefrom."
The lease was executed in behalf of each of the three companies,
parties thereto, by its president and secretary, under its seal,
and was approved by votes of the directors and of the stockholders
of the Indiana Central Company and of the Pittsburgh Company, on or
before February 1, 1869, so as to make it valid under the laws of
Ohio, and the Pittsburgh Company forthwith took possession of and
had since operated the railroad so leased.
The lease does not appear to have been approved by formal vote
of the directors or stockholders of the Pennsylvania Company. But
immediately after its execution, the president and directors of
this company, in their printed annual report to their stockholders
of February 10, 1869, stated that the Pennsylvania Company
controlled the railway of the Pittsburgh Company, "as an
indispensable connection for the Pennsylvania Railway with the West
and Southwest," by means of the ownership by the Pennsylvania
Company of more than five millions of the stock and bonds of the
Pittsburgh Company, and of the lease from the Indiana Central
Company to the Pittsburgh Company, "guaranteed by this company,"
and expressed the settled policy of the Pennsylvania Company
thereby to secure a continuous line of traffic to Keokuk and
westward.
The bridge contract was not one of the transportation contracts
specified in the ninth article of the lease. But on February 16,
1869, the presidents of the Pittsburgh and Pennsylvania Companies,
in their behalf, jointly addressed a formal letter to the president
of the Indiana Central Company referring to the bridge contract as
having been under negotiation, but unexecuted by the Indiana
Central Company at the date of the final execution of the lease,
and requesting him, in his official capacity, to execute the bridge
contract,
"it being
Page 131 U. S. 377
understood that the said lessee and Pennsylvania Railroad
Company shall assume all the liabilities and obligations, and be
entitled to all the benefits, of said bridge contract, the same as
if it had been specifically named and made a part of the ninth
article of the said lease."
The president of the Indiana Central Company thereupon, in its
name and under its seal, executed the bridge contract and reported
to its board of directors at the next meeting, in March, 1869, that
he had done so, and the board never in any way repudiated or
disapproved his act, or took any action upon the subject.
On February 1, 1870, an amendment of the lease, defining the
gross earnings to be accounted for as the annual gross earnings of
the road, after deducting, among other things, "the
pro
rata bridge tolls" and "terminal expenses allowed to other
railroad corporations on through business between the East and the
West," was executed by the presidents of the three companies and
approved by votes of the directors and stockholders of the Indiana
Central Company and of the Pittsburgh Company.
This amendment, like the original lease, does not appear to have
been approved by formal vote of the directors or stockholders of
the Pennsylvania Company. But the annual report made in print by
its president and directors to the stockholders a year after, on
February 18, 1871, spoke of this company's control of the western
traffic through the Pittsburgh Company, and by means of the lease
of the Indiana Central Railroad, as an established fact.
On June 6, 1871, and bridge contract was modified so as to have
the deficiency in tolls paid to the Bridge Company by the Indiana
Central Company and the three other railroad corporations, parties
to that contract, one-fourth each, instead of in proportion to
tonnage, and the modification was executed by the president of the
Indiana Central Company, pursuant to a request of the presidents of
the Pittsburgh and Pennsylvania Companies, similar in terms to
their request upon which the original bridge contract had been
executed.
It was on June 13, 1871, after all these transactions had
Page 131 U. S. 378
taken place, that the bridge was accepted by the Bridge Company
and was opened for use, and thenceforward it was used by the
Pittsburgh and Pennsylvania Companies in the exercise of the
control asserted by them under the various contracts above
mentioned. From that time, the Bridge Company, acting in accordance
with the understanding expressed in the letters from the presidents
of the Pittsburgh and Pennsylvania Companies to the president of
the Indiana Central Company, upon which the latter, in behalf of
his company, had executed the bridge contract and the modification
thereof, as well as the original lease and the amendment thereof,
demanded payment directly from the Pittsburgh Company,
semiannually, of the sums payable by the Indiana Central Company
for tolls and deficiencies under the modified bridge contract, and
for more than three years -- from June, 1871, to September, 1874 --
the comptroller of the Pittsburgh Company, after examining the
books of account of the Bridge Company, paid to the Bridge Company
the amount both of such tolls and of such deficiencies. Since that
time, like payments were demanded by the Bridge Company of the
Pittsburgh Company, and the tolls only were paid.
Page 131 U. S. 381
MR. JUSTICE GRAY, after stating the case as above reported,
delivered the opinion of the Court.
The principal positions taken in the argument for the appellants
were that the Indiana Central Company, the Pittsburgh Company, and
the Pennsylvania Company never authorized their officers to execute
the bridge contract or to bind them by it, and that the contract
was beyond the scope of their corporate powers. But the Court is of
opinion that upon the facts of this case neither of these positions
can be maintained. When the president of a corporation executes in
its behalf, and within the scope of its charter, a contract which
requires the concurrence of the board of directors, and the board,
knowing that he has done so, does not dissent within a reasonable
time, it will be presumed to have ratified his act.
Indianapolis Rolling Mill v. St. Louis &c. Railroad,
120 U. S. 256. And
when a contract is made by any agent of a corporation in its
behalf, and for a purpose authorized by its charter, and the
corporation receives the benefit of the contract without objection,
it may be presumed to have authorized or ratified the contract of
its agent.
Bank of Columbia v.
Patterson, 7 Cranch 299;
Bank of
United States v. Dandridge, 12 Wheat. 64;
Zabriskie v. Cleveland &c.
Railroad, 23 How. 381;
Gold Mining Co. v.
National Bank, 96 U. S. 640;
Pneumatic Gas. Co. v. Berry, 113 U.
S. 322,
113 U. S. 327.
This doctrine was clearly and strongly stated by Mr. Justice Story,
delivering the judgment of this Court in each of the first two of
the cases just cited.
In
Bank of Columbia v. Patterson, which was an action
brought against a corporation by an administrator to recover for
work done by his intestate under contracts with the committee of
the corporation, he said:
"Wherever a corporation
Page 131 U. S. 382
is acting within the scope of the legitimate purposes of its
institution, all parol contracts made by its authorized agents are
express promises of the corporation, and all duties imposed on them
by law, and all benefits conferred at their request, raise implied
promises, for the enforcement of which an action may well lie."
7 Cranch
11 U. S.
306.
"Let us now consider what is the evidence in this case from
which the jury might legally infer an express or an implied promise
of the corporation. The contracts were for the exclusive use and
benefit of the corporation, and made by their agents for purposes
authorized by their charter. The corporation proceed, on the faith
of those contracts, to pay money from time to time to the
plaintiff's intestate. Although then an action might have laid
against the committee personally upon their express contract, yet
as the whole benefit resulted to the corporation, it seems to the
Court that from this evidence the jury might legally infer that the
corporation had adopted the contracts of the committee, and had
voted to pay the whole sum which should become due under the
contracts, and that the plaintiff's intestate had accepted their
engagement."
7 Cranch
11 U. S.
307.
In
Bank of United States v. Dandridge, the point
decided was that the approval of a cashier's bond by the board of
directors of a bank, as required by statute, need not appear upon
the records of the board, but might be proved by presumptive
evidence in the same manner as similar facts might be proved in the
case of private persons, not acting as a corporation or as the
agents of a corporation. The general doctrine was affirmed that the
presumptions, which, by the general rules of evidence,
"are continually made, in cases of private persons, of acts even
of the most solemn nature, when those are the natural result or
necessary accompaniment of other circumstances,"
are equally applicable to corporations, and it was said:
"Persons acting publicly as officers of the corporation are to
be presumed rightfully in office. Acts done by the corporation
which presuppose the existence of other acts to make them legally
operative are presumptive proofs of the latter. Grants and
proceedings beneficial to the corporation are presumed to be
accepted, and slight acts on their
Page 131 U. S. 383
part which can be reasonably accounted for only upon the
supposition of such acceptance are admitted as presumptions of the
fact. If officers of the corporation openly exercise a power which
presupposes a delegated authority for the purpose, and other
corporate acts show that the corporation must have contemplated the
legal existence of such authority, the acts of such officers will
be deemed rightful, and the delegated authority will be
presumed."
12 Wheat.
25 U. S. 70.
The original bridge contract was executed by the president of
the Indiana Central Company in its behalf, upon the formal request
of the presidents of the Pittsburgh and Pennsylvania Companies,
undertaking that these two corporations should assume all the
liabilities and obligations of that contract, and be entitled to
all its benefits. The board of directors of the Indiana Central
Company, having been informed by its president that he had executed
the contract, never dissented, and must therefore be presumed to
have concurred. The modification of the bridge contract was
executed by the president of that company, in its behalf, upon a
similar request and undertaking of the presidents of the Pittsburgh
and Pennsylvania Companies in their behalf.
After all this the bridge was opened for use, and was used by
the Pittsburgh and Pennsylvania Companies. For more than three
years, semiannual accounts for the sums payable by the Indiana
Central Company were rendered directly by the Bridge Company to the
Pittsburgh Company, and settled by the latter after examination by
its comptroller. It must be presumed, although not affirmatively
proved, that the comptroller reported his action in this respect to
the board of directors, as well as to the stockholders at their
annual or other meetings. There is no difficulty, therefore, in
holding that the Pittsburgh Company was bound by the bridge
contract and the modification thereof if within its corporate
powers.
The evidence that the directors or stockholders of the
Pennsylvania Company authorized or ratified the action of its
president in this regard is not so full and conclusive, but is
quite sufficient to bind this company. After the execution of
Page 131 U. S. 384
the original bridge contract, the directors of the Pennsylvania
Company twice joined with the president in a printed annual report
to the stockholders, declaring in unequivocal terms the settled
policy of this company to secure a continuous line of traffic from
Philadelphia to Keokuk and westward, and stating that this object
had been accomplished through the Pittsburgh Company.
The reasonable inference from this evidence, which there is
nothing in the record to control or qualify, is that the
Pennsylvania Company had the benefit of the original bridge
contract, and either authorized or ratified its execution, and,
under the circumstances of this case, the president must be
considered as having authority to procure and assent to the
modification of that contracts as to the proportion of the
deficiency in tolls to be borne by the Pittsburgh Company as
principal and the Pennsylvania Company as guarantor.
From all the facts of the case, the conclusion is inevitable
that the Pittsburgh and the Pennsylvania Companies were the real,
though not the formal, parties to the bridge contract executed by
the Indiana Central Company at their request and for their benefit,
and that this contract, as well as the lease, bound the Pittsburgh
and Pennsylvania Companies if within the scope of their corporate
powers.
The outlines of the doctrine of
ultra vires and the
reasons on which it rests have been clearly stated in previous
judgments of this Court.
The reasons why a corporation is not liable upon a contract
ultra vires -- that is to say, beyond the powers conferred
upon it by the legislature, and varying from the objects of its
creation as declared in the law of its organization -- are: 1st.,
the interest of the public that the corporation shall not transcend
the powers granted; 2d., the interest of the stockholders that the
capital shall not be subjected to the risk of enterprises not
contemplated by the charter, and therefore not authorized by the
stockholders in subscribing for the stock; 3d., the obligation of
everyone entering into a contract with a corporation, to take
notice of the legal limits of its powers.
These three reasons are clearly brought out in the unanimous
Page 131 U. S. 385
judgment of this Court, delivered by Mr. Justice Campbell, in
the leading case of
Pearce v. Madison &
Indianapolis Railroad, 21 How. 441, in which it was
held that a railroad corporation was not liable to be sued upon
promissory notes which it had given in payment for a steamboat
received and used by it and running in connection with its
railroad.
So it has been repeatedly adjudged by this Court that a lease
made by one railroad corporation to another, either of which is not
expressly authorized by law to enter into the lease, is
ultra
vires and void.
Thomas v. Railroad Co., 101 U. S.
71;
Pennsylvania Railroad v. St. Louis &c.
Railroad, 118 U. S. 290,
118 U. S. 630;
Oregon Railway v. Oregonian Railway, 130 U. S.
1.
But while the charter of a corporation, read in connection with
the general laws applicable to it, is the measure of its powers,
and a contract manifestly beyond those powers will not sustain an
action against the corporation, yet, whatever, under the charter
and other general laws, reasonably construed, may fairly be
regarded as incidental to the objects for which the corporation is
created is not to be taken as prohibited. Accordingly, where the
charter of a railroad corporation or the general laws applicable to
it manifest the intention of the legislature, for the purpose of
securing a continuous line of transportation of which its road
forms part, to confer upon it the power of making contracts with
other railroad or steamboat corporations to promote that end, such
contracts are not
ultra vires. Green Bay &
Minnesota Railroad v. Union Steamboat Co., 107 U. S.
98;
see also Branch v. Jesup, 106 U.
S. 468,
106 U. S.
478.
Whether, in view of the previous decisions of this Court, the
lease from the Indiana Central Company could be upheld it is
unnecessary to consider, because the validity of the bridge
contract does not appear to us to depend upon the validity or
invalidity of the lease.
The bridge contract and the lease were separate and distinct
agreements. The bridge contract was in form between the Bridge
Company and the Indiana Central Company. The lease was between the
Indiana Central Company and the Pittsburgh
Page 131 U. S. 386
and Pennsylvania Companies, and the Bridge Company was not a
party to the lease.
The Bridge Company was organized under the laws of Iowa and
Illinois, and was authorized by those laws and by the Act of
Congress of July 25, 1866, c. 246, ยง 7, 14 Stat. 245, to construct
and maintain the bridge, and its power to enter into the bridge
contract is undoubted. The power of the Indiana Central Company, as
an Illinois corporation, to enter into that contract is made
equally clear by the statutes of Illinois, collected in the brief
of the appellee.
By the statute of February 28, 1854, all railroad companies of
Illinois, having their termini fixed by law, and their roads
intersecting by continuous lines, are authorized to consolidate
their property and stock with each other, or with companies out of
the state, whose lines connect with theirs, and when, by reason of
such consolidation or of such extension into or through an
adjoining state, it is necessary for the construction of any
railroad to cross any stream of water, it may be done by bridges or
viaducts.
By the statute of February 12, 1855, all railroad corporations
of Illinois have the power to make all necessary and convenient
"contracts and arrangements with each other, and with railroad
corporations of other states, for leasing or running their roads,
or any part thereof," as well as the "right of connecting with each
other and with the railroads of other states, on such terms as
shall be mutually agreed upon by the companies interested." By the
statute of February 16, 1865,
"it shall be lawful for the directors of any railroad company
created by the laws of this state, to contract for the use and
operation of any railroad connecting with their line beyond the
limits of the state, and in all contracts for the use and operation
of any railroad by another corporation it shall be lawful for the
parties to provide for the use of any of the powers and privileges
of either or both of the corporations, parties thereto."
And by the statute of February 25, 1867,
"railroads terminating or to terminate at any point on any line
of continuous railroad thoroughfare where there now is or shall be
a railroad bridge for crossing of passengers and freight in cars
over the same as part of such thoroughfare,
Page 131 U. S. 387
shall make convenient connections of such railroads, by rail,
with the rail of such bridge, and such bridge shall permit and
cause such connections of the rail of the same with the rail of
such railroads, so that by reason of such railroads and bridge
there shall be uninterrupted communication over such railroads and
bridge as public thoroughfares."
See also Stats. of February 12, 1853, March 5, 1867,
and March 11, 1869. Gross' Stats. (3d ed.) 536-539.
The bridge contract was therefore a lawful and valid contract as
between the Bridge Company and the Indiana Central Company. Upon
the question of its effect to bind the Pittsburgh and Pennsylvania
Companies, some other facts attending its execution are worthy of
consideration. The bridge contract was not in existence as an
executed and binding contract when the lease was made. But it was
signed after the execution of the lease and the delivery of
possession of the road by the Indiana Central Company to the
Pittsburgh Company, and at the formal request of the Pittsburgh and
Pennsylvania Companies, embodying an express agreement on their
part with the Indiana Central Company to "assume all the
liabilities and obligations, and be entitled to all the benefits,
of said bridge contract." The reference in that request and
agreement to the ninth article of the lease was for the purpose of
defining the extent of the liabilities and benefits assumed, and
perhaps of indicating that the Pittsburgh Company alone was bound
as principal, and the Pennsylvania Company as guarantor only; but
it did not make the bridge contract a part of the lease.
The reasonable inference is that, according to the original
intent and by the subsequent action of the parties, the Pittsburgh
and Pennsylvania Companies were understood and treated as directly
liable to the Bridge Company for the proportion of tolls and
deficiencies, which, by the terms of the bridge contract, was
chargeable to the Indiana Central Company.
By the laws of Illinois, as we have seen, the bridge contract
was valid, and might lawfully be made between the Bridge Company
and the Indiana Central Company, and it appears
Page 131 U. S. 388
to us equally clear that the laws of Pennsylvania authorized the
Pittsburgh and Pennsylvania Companies to assume the obligation of
that contract with the Bridge Company, either directly or through
the intervention of the Indiana Central Company. By the statute of
Pennsylvania of April 23, 1861, it is enacted that
"It shall and may be lawful for any railroad company created by
and existing under the laws of this commonwealth from time to time
to purchase and hold the stock and bonds, or either, of any other
railroad company or companies chartered by, or of which the road or
roads is or are authorized to extend into this commonwealth, and it
shall be lawful for any railroad companies to enter into contracts
for the use or lease of any other railroads upon such terms as may
be agreed upon with the company or companies owning the same, and
to run, use, and operate such road or roads in accordance with such
contract or lease, provided that the roads of the companies so
contracting or leasing shall be, directly or by means of
intervening railroads, connected with each other."
Purdon's Digest (11th ed.) 1439.
While the first provision of that statute authorizes any railway
company of Pennsylvania to purchase and hold stock and bonds of
such railroad companies as either are chartered by the state or
have roads extending into it, the second clause makes it lawful for
railroad companies of Pennsylvania to contract for the use or lease
not merely of railroads of the two classes defined in the first
clause, but of any railroads whatever, provided only "the roads of
the companies so contracting or leasing shall be, directly or by
means of intervening railroads, connected with each other." The
only reasonable construction of the words "any other railroads" in
the second clause is that it includes all railroads, whether within
or without the state, coming within the description of the
proviso.
But any question of the construction of that statute in this
regard is removed or rendered immaterial by the statute of
Pennsylvania of February 17, 1870 (passed more than a year before
the modified bridge contract was executed, or the bridge completed
or used), which, in the clearest terms, authorizes
Page 131 U. S. 389
any railroad company of Pennsylvania to enter into a lease or
any other contract on such terms and conditions as may be agreed
upon, or to guaranty the payments or covenants thereof, as to any
railroads, whether "within the limits of this state, or created by
or existing under the laws of any other state or states," provided
they are connected, either directly or by means of intervening
lines, with its road, and form a continuous route for the
transportation of persons and property. Purdon's Digest (11th ed.)
1441.
Nor can we have any doubt that the Bridge Company was a railroad
company and the bridge a railroad within the meaning of these
statutes. The principal purpose and use of the bridge was the
passage of railroad trains. It was, in substance and effect, a
railroad built over water instead of upon land, and, strictly
speaking, it was a railway viaduct, rather than a bridge.
Bridge Proprietors v. Hoboken
Co., 1 Wall. 116.
The necessary conclusion from the foregoing considerations is
that it was rightly held by the circuit court that the Bridge
Company was entitled to recover from the Pittsburgh Company, and,
it having declined to pay upon due demand, to recover from the
Pennsylvania Company also the amount of the deficiencies in tolls
which, by the modified bridge contract, was payable by the Indiana
Central Company.
It is proper to add that our judgment does not rest in any
degree upon the ground suggested in argument that, the bridge
contract and the lease having been executed, the Pittsburgh and
Pennsylvania Companies, having received the benefits of them, are
estopped to deny their validity, because, according to many recent
opinions of this Court, a contract made by a corporation, which is
unlawful and void because beyond the scope of its corporate powers
does not, by being carried into execution, become lawful and valid,
but the proper remedy of the party aggrieved is by disaffirming the
contract, and suing to recover, as on a
quantum meruit,
the value of what the defendant has actually received the benefit.
Louisiana v. Wood, 102 U. S. 294;
Parkersburg v. Brown, 106 U. S. 487,
106 U. S. 503;
Chapman v. Douglas County, 107 U.
S. 348,
107 U. S. 360;
Salt
Page 131 U. S. 390
Lake City v. Hollister, 118 U.
S. 256,
118 U. S. 263;
Pennsylvania Railroad v. St. Louis &c. Railroad,
118 U. S. 290,
118 U. S.
317-318.
The sole ground of our decision is that the bridge contract is
independent of the lease, and is valid and binding as between the
parties to this suit, whether the lease is valid or invalid. This
being so, the question argued at the bar, whether the appellants,
by reason of eviction, are no longer liable on the lease, becomes
immaterial, and the judgment of the circuit court in a former suit
affirming the validity of the lease has no effect upon our decision
for the same reason, as well as because the Bridge Company was not
a party to that judgment, and therefore neither bound by it, nor
entitled to the benefit of it.
Decree affirmed.
MR. CHIEF JUSTICE FULLER and the late Mr. Justice Matthews,
having been of counsel, took no part in the consideration or
decision of this case.