State v. A. & N. R. R. Co.

Section 89 of chapter 16 of the Compiled Statutes provides: "Whenever the lines of railroad of any railroad companies in this state, or any portion of such lines, have been or may be constructed so as to admit the passage of burden or passenger cars over any two or more such roads continuously, without break of gauge or interruption, such companies are hereby authorized to consolidate themselves into a single corporation, in the manner following: The directors of the said two or more corporations may enter into an agreement, under the corporate seal of each, for the consolidation of the said two or more corporations, prescribing the terms and conditions thereof; the mode of carrying the same into effect; the name of the new corporation; the number of the directors thereof, which shall not be less than seven; the time and place of holding the first election of directors; the number of shares of capital stock in the new corporation; the amount of each share; the manner of converting the shares of capital stock in each of said two or more corporations into shares in such new corporation; the manner of compensating stockholders in each of said two or more corporations, who refused to convert their stock into stock of such new corporation, with such other details as they shall deem necessary to perfect such consolidation of said corporations; and such new corporations shall possess all the powers, rights, and franchises conferred upon such said two or more corporations, and shall be subject to all the restrictions, and perform all the duties imposed by the provisions of this subdivision. Provided, That all stockholders in either of such corporations shall be paid the market value of said stock at the date of such consolidation."

This is section 18 of an act passed by the territorial legislature, entitled "An act to create and regulate railroad companies," approved February 8, 1864, and is section 89 of chapter 25 of the Revised Statutes of 1866.

The act including this provision was copied substantially

State v. A. & N. R. R. Co.

from the statute of Ohio of 1851, "relating to railroad companies." (2 Curwen, 1075.) The construction of this section was before the supreme court of Ohio in State v. Vanderbilt, 37 O. S., 590, where it was held that the word "continuously," in the section above quoted, was a restriction upon the power to consolidate, and that this right existed only where the lines when consolidated would form one continuous line over which freight and passengers might be carried without transfer, and that it did not apply to roads which when united would not form a continuous line. The court say: "The attorney general says, and the record supports the statement, that these roads are 'for sixty miles lying parallel and near to each other.' That they are, indeed, in the largest sense, parallel and competing roads, seems to be beyond dispute, and it may be fairly inferred from the record that a leading object in making the consolidation was to destroy that competition. That being true, the lines of these roads are not, in my judgment, 'so constructed as to admit the passage of burden or passenger cars over two or more of such roads continuously,' within the proper meaning of section 3379. That the mere physical ability to pass cars from one road to the other satisfies the statute, is a construction of it which is wholly inadmissible, for the provision requiring such connection would be without meaning. In imposing that restriction upon consolidation, the legislature intended, not merely that the physical fact should exist, but that such consolidation should only be made for the very purpose of passing freight and passengers over both lines, or some material parts thereof not necessarily in a direct or straight line but continuously. Consolidation for the transportation of freight and passengers continuously, is a thing which the legislature might well desire to encourage, as it may be advantageous alike to the public and the companies; but corporations have power only as granted by the general assembly; and where com

*

*

State v. A. & N. R. R. Co.

panies situated as these are, being parallel and competing, claim that authority to consolidate has been granted to them, they must be able to point to words in the statute which admit of no other reasonable construction, for it will not be assumed that the law-making power has authorized the creation of a monopoly so detrimental to the public interest. But the statute contains no such words."

This decision, in our view, states the law correctly, and the statute only authorizes the consolidation of two lines of railway, where the lines thus consolidated will form one continuous railroad. As the Atchison & Nebraska City railroad and the Atchison, Lincoln & Columbus railroad, when consolidated, would form one continuous line, the statute authorized such consolidation; that part of the line, however, in Nebraska, is held by said company as a Nebraska corporation, while that in Kansas is held as a Kansas corporation, under the laws of that state.

Section 94, chapter 16 of the Compiled Statutes, provides that, "Any railroad company heretofore or hereafter incorporated may, at any time, by means of subscription to the capital stock of any other company, or otherwise, aid such company in the construction of its railroad, for the purpose of forming a connection of said last mentioned road with the road owned by the company furnishing such aid; or any railroad company existing in pursuance of law, may lease or purchase any part or all of any railroad constructed by any other company, if said company's lines of said road are continuous or connected as aforesaid, upon such terms and conditions as may be agreed on between said companies respectively; or any two or more railroad companies whose lines are so connected may enter into an arrangement for their common benefit consistent with and calculated to promote the objects for which they are created. Provided, That no such aid shall be furnished nor any purchase, lease, or arrangement perfected, until a meeting

State v. A. & N. R. R. Co.

of the stockholders of each of said companies shall have been called by the directors thereof, at such time and place and in manner as they shall designate, and the holders of at least two-thirds of the stock of such company, represented at such meeting either in person or by proxy, and voting thereat, shall have assented thereto."

It will be observed that the authority of one company to aid another in the construction of its railroad is for the purpose of making connection between the two roads. That is, the two roads when connected must form a continuous line. It will also be observed that the right of any company to lease or purchase any part or all of any railroad constructed by any other company is limited to cases where the purchasing company's line and the road purchased are continuous or connected. If the line purchased or leased does not form a connected or continuous line with the road owned by the company purchasing or leasing the same, there is no power given by statute to either make a lease of said railway or hold under the same. This was the state of the law in 1871, when these companies were organized and consolidated, and the statute has remained in that form until the present time.

Section 2, article 2, chapter 72 of the Compiled Statutes, provides: "That it shall be competent and lawful for any railroad company heretofore incorporated or organized, or which may be hereafter incorporated or organized under the laws of an adjoining state, and which shall have extended its railroad into this state, or have become a corporation of this state under the laws thereof, to mortgage, lease, or sell that part of its railroad, and the property, rights, privileges, and franchises connected therewith situated in this state, to any railroad in this state, and the railroad company making such purchase shall thereupon become vested with all the property, rights, privileges, and franchises of the company making such sale, and pertaining to the said railroad so sold, and shall be authorized to

State v. A. & N. R. R. Co.

locate, construct, and complete, maintain, and operate the railroad thus purchased, and may receive, hold, and convey all the municipal aid, endowments, and property of any kind whatsoever, upon complying with the terms and conditions upon which the same were to be had, as fully and to the same extent as the railroad company making such sale could have done had no such sale been made."

This act was passed in 1881, and the section only applies to corporations of an adjoining state which shall have extended their railroad into this state and become corporations under the laws thereof, to mortgage, lease, or sell that part of their railroad situated within this state to a railroad company within the state. This section does not repeal sections 89 and 94 of chapter 16 of the Compiled Statutes. Nor does it authorize a railway to lease its entire line, that out of the state as well as that within. That statute, therefore, does not apply to nor aid this case. So far as the power to lease is concerned, requiring the lines to be continuous, chapter 58 of the session laws of 1887 contains certain provisions as to the power to purchase or lease railways, which need not be noticed, as it has no application to the case at bar. The second section of the act contains a provision for the ratification of prior leases and consolidations, which at the most can only legalize acts done in good faith where there was a want of full power to perform the same, but does not apply to cases where leases were made or consolidations effected against the inhibitions of the statute. The lease of the defendant, therefore, is not validated or aided by that statute.

To justify the defendant in leasing its line to the B. & M. R. R. Company, it must be able to point to the exact statute granting such authority, which it has failed to do. Penn. Co. v. St. Louis, Alton & T. H. Railroad, 118 U. S., 294. In the opinion of the majority of the court in that case, it is said: "We think it may be stated, as the just result of these cases, and on sound principle, that unless