Minneapolis & St. Louis Ry. Co. v. Gardner, 177 U.S. 332 (1900)

Minneapolis and St. Louis Railway Company v. Gardner

No. 160

Submitted March 5, 1900
Decided April 9, 1900
177 U.S. 332

ERROR TO THE SUPREME COURT

OF THE STATE OF MINNESOTA

Syllabus

There is no substantial difference between the federal question in this case raised in the Supreme Court of Minnesota and that raised in it here.

The act of Minnesota of March 2, 1881, c. 113, authorizing the consolidation of several railroad companies created a new corporation, upon which it conferred the franchises, exemptions, and immunities of the constituent companies, but that did not include an exemption of stockholders in the old companies from the payment of corporate debts, or their liability to pay them.

In a state having a constitutional provision imposing liability on stockholders, if the legislature intended those of a new corporation created by it should be exempt, it would express the intention directly, and not commit it to disputable inference from provisions which apply by name to the corporation.

On the merits, this case presents the question of the liability of the individual plaintiffs in error upon a judgment which was recovered by one Revilo F. Parshall against the Minneapolis & St. Louis Railway Company, and assigned to the defendant in error.

A motion, however, is made to dismiss on the ground that this Court has no jurisdiction.

The Minnesota Western Railway was incorporated by the Territory of Minnesota by an act of its legislature approved March 3, 1853. The usual powers of corporation were conferred, and the company was authorized to construct a railroad from and to certain points in the territory.

Power was reserved to alter or amend the act. There was no provision fixing the liability of stockholders. The act was several times amended, changing the route of the road in some particulars.

In 1858, the State of Minnesota was admitted into the Union, and its Constitution contained the following provision: "Each stockholder in any corporation shall be liable to the amount of the stock held or owned by him." Art. 10, sec. 3.

It was amended in 1872 so as to except the stockholders of corporations organized for carrying on any kind of manufacturing or mechanical business.

On February 4, 1870, the provision of the act of 1853, reserving the right to alter or amend the act, was repealed.

After the passage of the act of 1870, the company changed its name to the Minneapolis & St. Louis Railway Company.

No steps were taken towards construction or acquiring any line of railroad until 1869. The actual construction was commenced during the fall of 1870, since which time the said company or the consolidated company, hereafter mentioned, has operated and maintained a line of railway in the state.

By an act approved March 2, 1881, in addition to other powers conferred, the Minneapolis and St. Louis Railway Company, and any other railway companies in the construction of whose lines it has aided, or whose lines were at the time held under lease by it, were authorized to consolidate. The act provided for the manner of consolidation, the name of the new corporation -- which might be "the name of either corporation party thereto or any other name" -- the transfer of the properties of the old corporations, the retirement of their stock and the issue of new, and defined the purposes and powers of the new corporation. It is inserted in the margin.

The consolidation was made as provided in the act by agreement between the Minneapolis Railway Company, the Minneapolis and Duluth Railroad Company, the Minnesota and Iowa Railroad Company, and the Fort Wayne and Fort Ridgely Railroad Company, and articles of incorporation were duly filed in pursuance of the act.

The consolidated company thereafter entered upon, and until the second of November, 1894, enjoyed, the franchises, rights, property, and earnings of the constituent corporations.

The Minneapolis and Duluth Railroad Company was a Minnesota corporation, and the Fort Dodge and Fort Ridgely Railroad Company and the Minnesota and Iowa Southern Railroad Company were Iowa corporations, and the laws of the State of Iowa authorized the incorporators of railroad companies to exempt themselves from personal liability for the corporate debts by embodying in the articles of incorporation an article or provision declaring the exemption. This was done.

On and prior to June 28, 1888, the Minneapolis and St. Louis Railway Company executed three mortgages, one of which was to the Central Trust Company of New York, dated June 1, 1881, to secure outstanding bonds of the aggregate par value of $1,382,000, together with interest thereon at the rate of six percent per annum.

This mortgage was duly foreclosed, and the railroad properties, rights, and franchises covered by it duly sold, and the title confirmed by final decree to the assignee of the purchaser.

The defendant in error was a judgment creditor of the consolidated company, being assignee of a judgment recovered by R. F. Parshall, in the Circuit Court of the United States for the District of Minnesota for personal injuries received by him from the railway company.

The individual plaintiffs in error were shareholders of that company, and each acquired his stock between November, 1884, and the date of the commencement of this suit, but was not a shareholder of either of the companies which formed the consolidated company.

The answer of the individual defendants denied liability under the Constitution and laws of the State of Minnesota, alleged the incorporation of the Minneapolis and St. Louis Railway Company prior to the adoption of the Constitution and statutes, and that it was incorporated in the year 1853, under and pursuant to the provisions of chapter 66 of the Special Laws enacted by the Legislature of the Territory of Minnesota under and by the name of the Minnesota Western Railroad Company, which name was subsequently changed to the Minneapolis and St. Louis Railway Company, substantially as set forth in the first division of the complaint; that the liability of the stockholders of said Minnesota and St. Louis Railway Company was fixed by said act of incorporation, and not otherwise, and that the constitutional provision and laws referred to in the complaint are not applicable to or binding upon these defendants in that behalf.

The trial court rendered judgment for the defendant in error, which was affirmed by the supreme court of the state, 73 Minn. 517, and this writ of error was sued out.

On the appeal to the supreme court of the state, it was assigned as error, among others, that the trial court erred in holding that the state constitution, if applied to the defendant railway company, did not violate section 10, article 1, of the Constitution of the United States in that the provisions of section 3, article 10, impaired the obligation of the charter contract contained in chapter 66, Laws of 1853, Territory of Minnesota. Also in holding that the constitutional provision of the state, if applied to defendant in error, is not in violation of the Fourteenth Amendment of the Constitution of the United States in that the state, by and through the provisions of section 3, article 10, assumed to impair and destroy rights theretofore vested in the defendants (plaintiffs in error).

Also in holding that the defendant railway company was not created until the passage of the act of 1881, that the legislature intended by the act to create or did in fact create a new corporation, or intended to or did abridge or modify the rights, privileges, or immunities theretofore possessed by the Minneapolis and St. Louis Railway Company, or, if a new corporate entity was created, that it did not possess such rights, privileges, and immunities, including the exemption from double liability upon its stock created by the act of 1853, and also possessed by the other constituent corporations of the consolidation.

The assignments of error in this Court claim that the supreme court of the state held, and erred in holding, the constitutional provision imposing liability on stockholders valid against plaintiffs in error, and not to be in violation of the contract created by the act of 1853, the benefits of which act were vested, continued, and perpetuated in the plaintiffs in error by the act of 1881, and not to be in violation of that provision of the Constitution of the United States, which prohibits any state from impairing the obligations of a contract, and not in violation of the Fourteenth Amendment of the Constitution of the United States, in that it assumes to impair and destroy rights vested by the the act of 1853 and the act of 1881.

It is also claimed that the court held, and erred in holding, that the Constitution of the state, if enforced against plaintiffs in error, was not in violation of Section 10, Article I, of the Constitution of the United States, and did not impair the obligations of the contract between the state and plaintiffs in error, embodied in the act of 1881.

Also that the consolidation of the several railroad corporations pursuant to the act of 1881 created a new corporation.