Argument for Appellee. of the act of March 3, 1881, c. 94, of the laws of Minnesota for 1881, Gen. Laws, 109, which enacts that "no railroad corporation shall consolidate with, lease or purchase, or in any way become owner of, or control any other railroad corporation, or any stock, franchise, or rights of property thereof, which owns or controls a parallel or competing line." Defendant answered that it had ample power to make and perform its agreement under its charter; that the true construction of the provisions of the acts of 1874 and 1881, just cited, is that they do not amend or affect its charter, and that if the opposite construction be adopted, they are void in so far as they prohibit or affect its rights to make and perform this agreement, because they are in violation of the contract clause of the Constitution. Upon the other hand, plaintiff insisted that the right to so amend the charter of the defendant, as to prohibit the performance of this contract, was reserved to the State by section 17 of the act of 1856, providing that the act might be amended by any subsequent legislation, in any manner not destroying or impairing the vested rights of said corporation. The case was first submitted to the court upon motion for injunction, which was denied, and again upon a final hearing upon bill and answer; and the court, for the reasons stated in the opinion upon the motion for injunction, entered a decree dismissing the bill. Whereupon the plaintiff appealed to this court. Mr. Henry J. Horn for appellant. Mr. H. W. Childs, Attorney General of the State of Minnesota, for that State. Mr. M. D. Grover, Mr. Cushman K. Davis, Mr. F. B. Kel logg, and Mr. C. A. Severance for appellee. I. The agreement, so far as it relates to an interchange of traffic, to a joint use of tracks and terminals and to through billing and routeing of traffic from points on the line of appellee to points on the line of the Northern Pacific Railroad Com Argument for Appellee. pany, not reached by its line, is valid. It is authorized by express provisions of the acts constituting appellee's charter and is in accord with public policy. Section 3 of the Interstate Commerce Act provides: “Every common carrier, subject to the provisions of this act, shall, according to their respective powers, afford all reasonable, proper and adequate facilities for an interchange of traffic between their respective lines.” Chap. 108, Laws of 1893, State of Minnesota, provides: "All railway companies doing business in this State shall, upon the demand of any person or persons, establish reasonable joint through rates for the transportation of freight between points on their respective lines within the State. Car load lots shall be transferred without unloading in the cars in which such shipments are made, unless such loading shall be done without charge therefor to the shipper or receiver." See Stewart v. Erie & Western Transportation Co., 17 Minnesota, 372; Oregon Short Line v. Northern Pacific Railroad, 61 Fed. Rep. 158; Oregon Short Line v. Northern Pacific Railroad, 51 Fed. Rep. 465. The proposed guaranty is not an accommodation promise, or a loan of credit, but is an agreement to meet a legal obligation upon conditions, or to pay a debt, or to satisfy a liability. The rule is well established that such a guaranty is valid if based upon a valuable consideration, and the guarantor has the right to invest in it. Zabriskie v. Cleveland, Columbus & Cincinnati Railroad, 23 How. 381; Green Bay & Minnesota Railroad v. Union Steamboat Co., 107 U. S. 98; Pittsburg, Cincinnati &c. Railway v. Keokuk & Hamilton Bridge Co., 131 U. S. 371; Fort Worth City Co. v. Smith Bridge Co., 151 U. S. 294; Harrison v. Union Pacific Railroad, 13 Fed. Rep. 522; Tod v. Kentucky Union Land Co., 57 Fed. Rep. 47; Leavenworth v. Chicago &c. Railway, 134 U. S. 688; Kent v. Quicksilver Mining Co., 78 N. Y. 159; Rodgers Works v. Southern Railroad Association, 34 Fed. Rep. 278; Railroad Co. v. Howard, 7 Wall. 392; Low v. Central Pacific Rail road, 52 California, 58. II. The agreement, so far as it relates to a transfer of one Argument for Appellee. half the full paid stock of the new or reorganized company, by the stockholders of such company, to the stockholders of appellee, is not forbidden by any law of the State. Appellee does not acquire the legal title to the stock, and by such transfer of stock it does not acquire the ownership or control, of the new or reorganized company. See Pullman's Palace Car Co. v. Missouri Pacific Railway, 115 U. S. 587, where a construction was given to the word "control" such as we contend for. III. If the legal effect of the agreement, taken as an entirety, is to give to appellee the control of the new or reorganized company, it is authorized by the acts constituting its charter to execute the agreement and acquire such control. (1) It has such authority under the provisions of the act of March 1, 1856, giving it power to become part owner of a railroad, or to adopt a railroad as its own, and to acquire the right to the sole or joint use of a railroad. (2) It has such authority under the provisions of the act of February 28, 1865, giving it the right to consolidate its stock and property with the stock and property of another railroad company, either within or without the State. IV. The appellee having power under its charter and under the facts disclosed in the record, to execute the agreement, such right was not taken away by the state laws of 1874 and of 1881. V. An accepted act of incorporation of a private corporation is a contract between the State and the corporation. Where the charter consists of a series of acts, each act which confers new and valuable powers and franchises is a contract between the State and the corporation. Any law of the State, which impairs or destroys any valuable franchise granted by such act, violates section ten, article one, of the Constitution of the United States, which provides that no State shall pass any law impairing the obligations of a contract, and is, therefore, inoperative, unless a right to modify, impair, or destroy such franchise is expressly reserved. A right to become owner of the railroad of another company, or to adopt it, or to become the owner of the stock of another company; or to Argument for Appellee. consolidate with, or acquire the control of such company, is a valuable franchise and property right, which becomes vested immediately upon the acceptance of the acts by which the right is granted. See Dartmouth College case, 4 Wheat. 518; Branch v. Jesup, 106 U. S. 468; Piqua Bank v. Knoop, 16 How. 369; Monongahela Navigation Co. v. United States, 148 U. S. 312; Wilmington Railroad v. Reid, 13 Wall. 264; The Binghamton Bridge, 3 Wall. 51; Boston & Lowell Railroad v. Salem & Lowell Railroad, 2 Gray, 1. VI. A charter contract not containing a reservation on the part of the State of a right to alter or amend cannot be impaired by subsequent legislation. A right may be reserved by the State to alter, amend or repeal a charter contract. In such case vested rights may be impaired or annulled. Not vested rights in property, or contract acquired by user of corporate powers and franchises, but rights vested in the corporation by the terms of the charter contract, being part of the contract of incorporation. The distinction between the rights of property, acquired under an exercise of corporate powers and franchises, and which are protected under the Fourteenth Amendment of the Constitution of the United States, and rights given by contract, and which are protected under article one of section ten of the Constitution, is apparent. See Tomlinson v. Jessup, 15 Wall. 454; Hamilton Gas Light Co. v. Hamilton, 146 U. S. 258; Greenwood v. Freight Co., 105 U. S. 13; Bridge Co. v. United States, 105 U. S. 470. A charter contract may contain a limited reservation of a right to alter or impair powers, rights, and franchises granted by it. In such case it is the contract that may be altered or amended, and vested rights growing out of an acceptance of the contract may be impaired. In this case we have a reservation of a right to amend, " in any manner not destroying the vested rights of the corporation." The vested rights of the corporation were the rights, privileges and franchises which it acquired on its acceptance of the acts constituting its charter. By such acceptance the corporation acquired a right to hold and convey property, real or personal, necessary to carry Argument for Appellee. into effect the object and purpose of the corporation; the right to construct railroads, main and branch lines; the right to become part owner of, or to adopt as its own, the railroad of another company; the right to acquire the sole or joint use of the railroad of another company; the right to consolidate its stock, its railroad, property, effects and franchises with the stock, property, effects and franchises of any other railroad company, either within or without the State. If the proposed arrangement had been made prior to the passage of the act of 1874, it is not contended that under the right reserved to amend, the State could have lawfully annulled such contract of consolidation, or have deprived appellee of any right acquired under it. In such case it is conceded the right would have become vested, and thus could not have been impaired. It is claimed that only rights of property and other derivative rights, which have been acquired by user, under the acts constituting the charter, are vested rights within the meaning of the words as used in section 17 of the act of 1856; but this is not so. It is not the user that gives the right or franchise. It is the franchise which authorizes the user. The distinction between rights of property, which are protected as vested rights, because they are property rights, and a contract right, and obligation, in the form of powers, privileges and franchises granted by an act of incorporation, seems very apparent. A reservation of a right to amend without words of limitation, gives a right to amend the charter, in any manner the State may deem expedient. It is the contract that in such case is subject to amendment. Here we have words of limitation, "may amend in any manner not impairing or destroying the vested rights of the corporation." Are not the negative words to stand as the controlling language? In construing these words we should look at the condition of the country when the acts were passed. There was no railroad within 300 miles of the legislature that passed the act of 1856, and there was no hope of settlement until a railroad should reach there. Under such circumstances, the leg VOL. CLXI-42 |