« PreviousContinue »
IV. The United States is the plaintiff in this suit, and the question arises, Is there a right of action in the United States for the causes thus specified, or can a right to recover for such cause of action be given to the United States by an act of Congress? Congress may well authorize its Attorney General to institute suits to recover damages due to the United States, to redress wrongs which are legally wrongs to the United States; but its action can scarcely create such damages, or cause acts to be wrongs to the United States which are, in their nature, wrongs to another. The United States cannot convert to itself the property of another by its own declaration, or its own authority; nor can it maintain an action in its own name against A., to recover a debt which he may owe to B. Moneys recovered by the United States in such an action, like its other funds, will go into its general treasury, and form a part of its resources, to be disposed of according to law. So if any individual' has committed a breach of trust, or been guilty of fraud in discharging his duties as an agent of the Union Pacific Railroad Company, the cause of action to redress such wrong, and to recover damages therefor, and the damages themselves, when recovered, belong to the corporation. The suit for such redress must be in the name of the corporation as plaintiff. As a general rule, and under ordinary circumstances, no other party can be such plaintiff; and an authority by Congress to the Attorney General to commence such action in the name of the United States is valueless. Congress cannot thus appropriate to itself what belongs to another. To give effect to such an act would be to deprive one of his property without due process of law. I do not doubt the power of Congress over the remedy to redress alleged injuries, in other words, its power to regulate the conduct of suits, or to prescribe the form of actions. But it cannot, under the form of regulating the remedy, impair contracts, or dispose of rights of property. It cannot, itself, adjudge that moneys are due to the United States, and by such judgment give authority for their collection.
This principle applies to all the causes of action specified in the act of 1873, except to a portion of the fourth. Thus if any person has subscribed for capital stock, or received capital stock, or shares in the Union Pacific Railroad Company, which have not been paid for, the action to recover the money payable by the terms of the subscription must be in the name of the corporation. The contract was made with the corporation as an existing person; the money, if due at all, is in terms payable to the corporation as such. In law, it must be recovered by the corporation, to be applied by it to the legal necessities of the railroad company. In substance, and in form, the money must go through, and to the corporation, and no creditor, legal or equitable, can maintain an action for its recovery. In certain cases, if the corporation refuses to do its duty, such action may be maintained by the shareholders of the corporation, the corporation being made a party defendant. There may, also, be a case in which a judgment creditor can maintain an action against his judgment debtor, and his creditor to collect his debt after his legal remedies are exhausted. Such was the case of Cumm v. Arkansas, 15 How. 304. That, however, is not the present case. The debt of the United States has not yet matured. Its bonds issued to the railroad company have not become payable, and their payment, when they mature, is secured by a specific lien upon the road and its franchises. It is not a case for a creditor's bill. Whether the interest paid by the United States upon its bonds is a presently payable claim against the company, is a question which has not been argued here, and which I do not decide.
The doctrines I have laid down are sustained by numerous authorities, of which I cite the following: Robinson v. Smith, 3 Paige, 222; The Attorney General v. Utica Ins. Co., 2 Johns. Ch. 871; Carlisle v. South Eastern Ry. Co., 1 McN. & G. 689; Attorney General v. Gr. N. Ry. Co., 1 Dr. & Sm. 154. See the cases cited in Heath v. Erie Ry. Co., 1 Blatchf. 394, &c.
In Robinson v. Smith the rule is laid down by Chancellor Walworth in these words: "Generally, where there has been a waste or misapplication of the corporate funds by the officers or agents of the company, a suit to compel them to account for such waste or misapplication should be in the name of the corporation. But as this court never permits a wrong to go unredressed merely for the sake of form, if it appeared that the directors of the corporation refused to prosecute, by collusion with those who had made themselves answerable by their negligence or fraud, or if the corporation was still under the control of those who must be made the defendants in the suit, the stockholders, who are the real parties in interest, would be permitted to file a bill in their own names, making the corporation a party defendant. And if the stockholders were so numerous as to render it impossible or very inconvenient to bring them all before the court, part might file a bill in behalf of themselves and all others standing in the same situation."
It is held in two of these cases that if an incorporated company acts illegally in such manner as to endanger the public interest, it may be restrained from such action on a bill filed by the Attorney General. In many of the cases quoted in these authorities this position is doubted. But I find no case justifying an action in the name of the sovereign to recover money or property belonging to a corporation illegally received by another, although obtained from the corporation by fraud or conspiracy. The power is confined to enjoining the commission of acts endangering the public interests, and does not extend to the recovery of money or property which belongs to the corporation. A suit for such recovery can only be maintained by the corporation, or, in certain exceptional cases, by one or more of its shareholders.
The cases of the contract with the Wyoming Coal and Mining Company, and the others set forth in the bill, come within the principles laid down in the cases cited. It is alleged that the Wyoming contract was made to give an unfair and unreasonable profit to the contractors, to give them a monopoly of the supply of coal for fifteen years, and that the contract was a fraudulent means of obtaining for the parties interested the advantages of the coal trade for the benefit of the individuals named, and against the interest of the railroad corporation.
Again, it is alleged of the Pullman Palace Car Company that an agreement has been made by which it obtains from the railroad company privileges and advantages which it is not for the interest of that company to give, and that the managers and stockholders of the railroad company fraudulently obtain for themselves profits which in equity belong to the railroad company. A similar statement is made in regard to the Omaha Bridge Transfer Company. Again, it is alleged that the cost of the railroad was less than one-half the sum represented by the stock and other outstanding liabilities of the company, and that much of the stock and bonds of the company had been issued not in the interests of the company, but by the managers unlawfully to enrich themselves, and that high interest and commissions are habitually paid to the managers.
The Hoxie contract is of the same general character, and is connected with the following transaction: —
It is alleged that the Credit Mobilier of America was an incorporation organized under the laws of Pennsylvania, with power, among other things, to contract for building railroads; that the defendants named, in pursuance of a design to control the Union Pacific Road for their private benefit, and not for the purposes declared in the act of Congress, obtained the control of the Credit Mobilier; that the intention of the defendants named was to substitute the Credit Mobilier as a contractor in the place of those who had undertaken to perform the Hoxie contract. The means of accomplishing their purpose are set forth in detail; and it is alleged that large amounts of money, dividends, certificates of shares, mortgage bonds, land grants, and income bonds were issued to and received by the defendants named on pretence of payment for building the road, and telegraph lines; and that the transaction was a fraudulent device of such defendants to put money in their own pockets.
The allegations of the bill represent the transactions respecting the Oakes Ames contract, and the Davis contract, to have been of a like design, and perfected in a like manner. It is alleged that the accounts respecting these pretended contracts yet remain unsettled, and that large balances are claimed against the railroad company.
It is alleged that the stocks and bonds issued under this contract should in equity be returned to the company for cancellation, or the amount thereof paid to the company in cash.
In respect to Cornelius Bushnell, it is alleged that the managers permitted him to dispose of a large number of its bonds and of other property, for which he has not accounted, and for which it refuses to compel him to account, and that the corporation sold to him certain other bonds at prices below their real value, and that he obtained large sums of money as compensation for pretended services. All these transactions are alleged to be unlawful and illegal; and it is charged that Bushnell, and Scott, Carnigie and Morgan, who confederated with him, are liable to the company for the amount thereof, with interest thereon.
This is the substance of the bill on this branch of the case. Upon the principles and authorities already expressed, the right of recovery for wrongs of this character is in the railroad corporation. Large amounts of money are involved, which belong to the corporation, and not to the United States; neither the damages nor the right of action belong to the United States. It is true in law, as alleged in the bill, that Bushnell, Scott, Carnigie, and Morgan are " liable to the company for the amount" claimed. The United States possesses no power to sue for and recover this debt due to the Pacific Corporation, and can give none to its Attorney General.
These principles are quite consistent with the power of the United States to institute a suit to procure an adjudication that the charter of the corporation be declared forfeited, and that a receiver of its assets be appointed. The corporation coming into existence by virtue of a statute of the United States, it is quite likely that the federal courts have jurisdiction to adjudge such forfeiture upon the proper allegations and proofs.
In that event a receiver would be appointed, representing the interests of all parties, who would administer upon the assets according to law. This remedy, however, the United States have not thought fit to pursue. They do not ask to have the corporation dissolved. They are content that it should continue in existence. They must recognize its rights as so continuing, and cannot ask that its affairs be administered as if it were dead. (People v. Turnpike Co., 23 Wend. 193; Thomson y. People, 23 Wend. 537; CAes. #• 0. Canal Co. v. B. 0. R. Co., 4 Gill & Johns. 1.)
So I doubt not that, for the purpose of fixing the rates of fares upon the road according to the power reserved in section 18, Congress may direct an examination into the cost of building and running the road, and in an action with appropriate allegations may cite the corporation to a discovery upon that subject and for that purpose. Such, however, is not the theory of the present complaint. So it is quite probable that a bill can be filed for the purpose of securing the application of the five per cent of net earnings in payment of the interest or principal of bonds issued, as provided in section 6. A discovery may be sought, and the suit may be retained to afford relief. But it is sufficient to say that such is not the intent of the present bill, that there are no adequate prayers for such an account, and that the allegations are not framed with reference to a bill to compel the company to pay this annual fund.
These objections apply also to a supposed right of action to protect the mortgage security of the United States. 1. It is not a cause of action against the remaining demurrants. 2. There is no allegation that the security of the road and the ties is now imperilled. They are just as valuable, whether laid by fraud and in extravagance, as if honestly and prudently laid. 3. It is said that some years hence new ties and rails will be needed, and that, if future fraud and misconduct occurs, the security will be imperilled. This is not a present evil; none of the causes of action are fairly within the scope of the present suit.
V. Let us look now at the question of a trust to be enforced, upon the supposition that the act of 1873 was intended to authorize such trust to be set up in the present suit. The claim of the plaintiff upon this branch of the case is contained in the fortysecond paragraph of the complaint, and is as follows : —
"Forty-second. The grants to said Union Pacific Railroad Company, in said acta of Congress, approved July 1, 1862, and July 2, 1884, of the right of way through the public lands for the construction of said railroad and telegraph line, and the right, power, and authority to take from the public lands adjacent to the line of said road, earth, stone, timber, and other materials for the construction thereof, including, with said right of way to the extent of two hundred feet on each side of said railroad where it may pass over the public lands, the right to take all necessary grounds for stations, buildings, workshops, and depots, machine-shops, switches, side-tracks, and water-stations, and of every alternate section of public lands designated by odd numbers to the amount of ten alternate sections per mile, on each side of said railroad, on the line thereof, and within the limits of twenty miles on each side of said road, and of the bonds of the United States, and the proceeds thereof, issued to the said company, as well as of the other corporate property, rights, privileges, and franchises bestowed upon said Union Pacific Railroad Company by said acts of Congress, were grants in aid of a public work of the United States and for a public use; and, haying been accepted by said corporation, the subject of each of such grants is held in trust by said corporation to be applied to such public use, and according to the intention of such grants, and to be accounted for in such application; and the United States are entitled to have the trust so declared and carried into execution, and to have said property so applied and accounted for, and to have the misapplication of the same restrained by the injunction of this court, and the property or proceeds thereof so misapplied, restored to said corporation as such trustee, or to the United States."
Not only the lands granted and the bonds issued by Congress to this road are here asserted to be the subject of a trust which the United States are entitled to have executed, but the moneys received upon subscription to its stock by individuals, and from all other sources; all its corporate property, in short, ahd its corporate rights, privileges, and franchises. In the sense that all men are bound to deal honestly and act justly in the discharge of their duties, and that whoever receives benefits or advantages from the public, which are expected or intended to produce an advantage to some portion of the people of the country, assumes a trust to affect that advantage, the plaintiff's claim is true. It is not, however, accurate in a legal sense, to say of a bank incorporated for banking purposes, or of an insurance company, or of any similar institution, that it is a trustee of the government to effect the desired result, or that its property is impressed with a trust for that purpose, which may be enforced in the courts.
Such incorporation is chartered for private benefit as well as for public advantage, and is legally bound to administer its affairs for the public advantage only to the extent that it does not violate the provisions of its charter or the law of the land. With this limitation such corporations are authorized to manage their own affairs for their own benefit, and such is the understanding of the government which grants a charter, and of the individuals who accept it. If, in this respect, a corporation should fail in its duty, the remedy is not by an attempt to enforce its supposed duties to the public as a trust, but to punish its illegal acts by a forfeiture of its charter.
The plaintiff's counsel base their argument of a trust upon the title of the act of July 1, 1862, viz., "An act to aid in the construction of a railroad and telegraph line from the Missouri River to the Pacific Ocean, and to secure to the government the use of the same for postal, military, and other purposes." No trust is declared in this title, or in the sections of the act in which this aid is extended. In section three it is enacted, " that there be hereby granted to the said company, for the purpose of aiding in the construction of said railroad and telegraph line, and to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores thereon," every alternate section of land, &c. In section five it is enacted, "that, for the purpose herein mentioned, the Secretary of the Treasury shall, upon the certificate" specified, issue to said company bonds of the United States; and "the issue of said bonds, and delivery to the company, shall, ipso facto, constitute a first mortgage on the whole line of the railroad and telegraph; and upon failure to redeem the said bonds, the road, and all its rights, functions, immunities, and appurtenances, and all granted lands which may remain unsold, may be taken possession of for the use and benefit of the United States: Provided, that this section shall not apply to that part of any road now constructed." Not only is no trust expressed, but the idea thereof is excluded by taking a mortgage upon the road, the telegraph, its property, franchises, and all its granted lands remaining unsold. The government does not rely upon the security of an uncertain and undefined trust, but takes an express mortgage, where it intends to secure to itself the performance of conditions by the company.
The sixth section enacts " that the grants aforesaid are made upon the condition that said company shall pay said bonds at their maturity, shall keep said railroad and telegraph lines in repair and use, and shall at all times transmit despatches, and transport mails, troops, munitions of war, &c., over said railroad."
A condition precedent is that which is requisite in order that something else should take effect, and without the existence of which that something else does not and cannot exist. Now, that these grants were made absolutely, that is, without condition precedent, is evident from the undisputed fact that the legal title to the lands vested at once in the corporation, and the same are now held by the grantees of the corporation, without interference from the government or claim of title on its part. The same is true of the bonds issued by the government. (Stanley v. Colt, 5 Wallace, 142, Curtis, arguendo, and cases cited.) The condition referred to can only be a condition subsequent, which Congress may enforce or omit at its pleasure, and which does not affect the title to the property, or the existence and powers of the corporation, until it is enforced. Its enforcement would not be as of a trust, but to declare a forfeiture of the charter and resume possession of the lands.
And again, in section 17, Congress specifies the mode in which it intends to secure the completion and keeping in repair of the road and telegraph. If the corporation fails to complete the road and telegraph within a reasonable time, or permits the same to remain out of repair, Congress may pass an act to insure its speedy completion or repair, and may confiscate its subsequent income to repay the expenditures caused by its delay or neglect.
The next section provides that, to enable it to accomplish the same purposes. Congress may alter, amend, or repeal the act. These affirmative guards and securities furnish strong evidence that Congress did not intend to rely upon a condition or an implied trust to secure its rights. Whatever trust, guaranty, or protection it desired, was reserved in express terms. Implications are thereby excluded. (Legyett v. Dubois, 5 Paige, 114; Anstice v. Brown, 6 ib. 4-18.) The expressions which it is