THE DECISIONS

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OF THE

Supreme Court of the United States,

AT

OCTOBER TERM, 1888.

[Authenticated copy of opinion record strictly followed, except as to such reference words and figures as are inclosed in brackets.]

THE OREGON RAILWAY AND NAV-a judgment, sustaining a demurrer to the IGATION COMPANY, Piff. in Err., answer and in favor of plaintiff for rent, on a contract for the lease of a railroad, owned by plaintiff, which had been leased to and used by defendant. Reversed.

Thomas v. West Jersey R. Co. 101 U. S. 71 (25: 950); Ogdensburgh & L. C. R. Co. v. Vermont & Argued April 27, 30, and May 1, 1888. De- C. R. Co. 4 Hun, 712; Middlesex R. Co. v. Bos

IN ERROR to the Circuit Court of the United Wood's Field Corp. 88.
Messrs. Edmund Robertson, George F.

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Edmunds and A. H. Garland, for defend- | it out. This motion was denied, but the deant in error:

more of said States and Territories to a connec-| the defendant a certain railway or railroad
tion with, or without making any connection owned by the plaintiff, in the State of Oregon,
with, any other railway or railways in either with its stations, depots, and other property
of said States of Oregon, California, or Nevada, connected therewith, for a term of ninety-six
or Territories of Washington or Idaho, and years from the date of the lease; and that the de-
with or without one or more branch lines (a) fendant, by the terms of said indenture, coven-
running north, south, east, or west from said anted and agreed to pay the plaintiff therefor
main line on the east side of said Cascade range the yearly rental of twenty-eight thousand
of mountains, or (b) running from said main pounds sterling, in equal half-yearly payments,
line on the west side of said Cascade range, in on the 15th of May and the 11th of November
said State of Oregon, forming a junction, or in each year in advance. It then proceeds to
one or more junctions, with said main line, at allege "that upon the execution of said indenture
one or more points, to a terminus in said portion of lease, the said defendant entered into posses-
of the State of Oregon west of said Cascade range sion of said demised property, and has continued
of mountains, or to a junction with said main in the enjoyment of the same to the present time,
line, or to a terminus or termini at one or more sea- but that on the 15th of May, 1884, the defendant,
ports on the shores of the Pacific Ocean, all as pretending that neither it nor the plaintiff was
may from time to time be determined by actual authorized or empowered by law to enter into
surveys; as also to purchase, build, construct, said indenture of lease, tendered and offered to
own, equip and operate, or to enter into agree-restore possession of said demised property to
ments to run over or to lease (1) any line or lines, plaintiff in its then condition," and, disavowing
branch or branches, of railway or railways, rail- the obligation of the lease, refused to pay any
road or railroads, that may connect with or be- further rent; wherefore the plaintiff prays
come attached to, or meet or become a part of judgment for the sum of $68,131.
the said main line or its main branch or any of
its branches herein before designated; or (2) such
other main or branch line or lines, or extensions
of any railway or railways, railroad or railroads,
made in connection with this company's main
line, or of any of its branches, or separate and
distinct therefrom, all in such manner of way or
form and on such terms as said company shall
from time to time deem advisable and for its in-
terests, and the doing and performing of all other
operations connected with said designated rail-
way or railways, railroad or railroads, or
branches thereof, or in connection with other
railways of a similar or different nature, the
doing and performing of which this said com-
pany shall at any time deem advisable and
for its interests in the carrying out of its busi-

ness.

The substance of the numerous answers and amended answers is, that the defendant denies that the plaintiff has any corporate existence; avers that it had no power or authority to make the contract or lease as stated in the petition, and that the contract, although signed by the president of the defendant company, with the seal of that company attached, and the signature of the secretary, by order of its board of directors, is also without legal authority, and is not binding upon the defendant. In fact, the essence of the defense and of the whole controversy is, whether these companies had power under their organization as corporations to make the contract of lease which is the foundation of this action.

The defendant avers that it has fully paid [7] the rent due under the lease for the term end

"Third. The building, constructing, purchasing May 15,1881, from which time it disavowed ing, or otherwise acquiring, holding, equipping, the obligatory force of the contract, and offered owning and operating, or the leasing and oper- to return and deliver up to the plaintiff all the ating, or the leasing, equipping, and operating, property it held under the lease. or the selling, transferring, or otherwise disposing of, and the working and using of any other railway or railroad, or of any wharves, jetties, steamboat, or steamship, stage, or of any canals, locks, bridge, clay road, plank road, turnpike, hack, truck, or express lines, or any other line, lines, or means for the transportation of freight or passengers, or either or both, now constructed or operated in whole or in part, or which may hereafter be constructed or operated in whole or in part, in either of the said States of Oregon, California, or Nevada, or said Territories of Washington or Idaho, and that whether in connection with or separate and distinct from, and as line or means independent of said railway or railways, railroad or railroads, so to be built, constructed, purchased, owned, equipped, or operated as aforesaid by this company."

The petition also avers that the company has complied with the Statute of Oregon, which authorizes corporations of foreign countries to do business in that State upon complying with certain requirements. On this averment no issue is raised.

It also alleges that on August 1, 1881, the plaintiff, by an indenture of lease, demised to

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It appears also by the pleadings, both on the [9] part of the plaintiff and defendant, that they entered into an agreement, by which the de- [10] fendant company was to continue to use the road for the time being, in order to prevent serious loss arising from the disruption of the relations of the two railroads, but that such use was not to be construed as being under the lease, nor as binding either party beyond what the law [12] would imply if this arrangement had not been made. There is also an averment in the petition [13] that the property was not in the same condition when the offer to return it was made as it was when it was received; but this is denied in the [14] answer, and as no proof was taken in regard to that fact it can make no figure in the case as presented to this court.

The two questions presented on this demurrer, and the only ones necessary to be considered, are:

First. Whether the plaintiff, the Oregonian Railway Company (Limited), organized under the Laws of Great Britain, with such aid as the [20] Statute of Oregon gives to it in reference to business done in that State, had the power to lease its railroad to the defendant company; and,

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Second. Whether the Oregon Railway and Navigation Company, the defendant in the action, organized under the Laws of the State of Oregon, had the legal capacity and lawful power to make said lease on its part.

law; and it is the established doctrine of this
court, and, with some exceptions, of the States
in which that common law prevails, as well as
of Great Britain, from which it is derived, that
such a corporation can exercise no power or
Although the lease itself, which is the foun- authority which is not granted to it by the char-
dation of this action, is not found in the plead-ter under which it exists, or by some other Act
ings, nor in the record, the statements in regard
to it made by the petition, amended petition,
and answers leave no question as to its nature or
character so far as it affects the two questions
here suggested.

of the Legislature which granted that charter.
This proposition has been before this court
more than once in recent years.
It was very
fully considered in Thomas v. West Jersey Rail-
road Company, 101 U. S. 71 [25:950], which
resembled the case before us in several im-
portant features.

It may be considered as the established doc-
trine of this court in regard to the powers of
corporations, that they are such and such The Millville and Glassboro Railroad Com-
only as are conferred upon them by the Acts pany, incorporated under the Laws of New
of the Legislatures of the several States under Jersey, entered into an agreement with Thomas
which they are organized. A corporation in and others for the lease of its railroad for twenty
this country, whatever it may have been in years. It was agreed that the company might
England at a time when the Crown exercised at any time terminate the lease and retake pos-
the right of creating such bodies, can only session of the railroad; in which case any loss
have an existence under the express law of the or damage incurred by the lessees should be
State or Sovereignty by which it is created. equitably adjusted by arbitration, and the
And these powers, where they do not relate to amount be paid by the company. This con-
municipal corporations exercising authority tract was made in 1859, and the lessees took
conferred solely for the benefit of the public, control of the property and used it until 1867,
and in some sense parts of the body politic of when they were served with a notice by the
the State, have in this country until within re- lessor terminating the lease. A suit was
cent years always been conferred by special brought to recover the damages mentioned in
Acts of the legislative body under which they the contract, which came from the Circuit
claim to exist. But the rapid growth of cor- Court of the United States for the Eastern
porations, which have come to take a part in District of Pennsylvania to this court, where
all or nearly all of the business operations of it was very elaborately argued, and received
the country, and especially in enterprises re- the earnest consideration of the court, as may
quiring large aggregations of capital and in- be perceived from the report of the case. The
dividual energy, as well as their success in opinion, which was concurred in by all the
meeting the needs of a vast number of most judges who sat in the case, contains a full re-
important commercial relations, have demand-view of the decisions of the English courts on
ed the serious attention and consideration of
law makers. And while valuable services have
been rendered to the public by this class of or-
ganizations, which have stimulated their for
mation by numerous special Acts, it came at
last to be perceived that they were attended by
many evils in their operation as well as much
good, and that the hasty manner in which they
were created by the Legislatures, sometimes
with exclusive privileges, often without due
consideration and under the influence of im-
proper motives, frequently led to bad results.
Whether it was this consideration, or mainly
the desire to fix some more uniform rule by
which the rights and powers of private cor-
porations, or those for pecuniary profit, should
come into existence, it is certain that not many
years ago State Constitutions which were
formed or remodeled came to have in them a
provision like that which is now to be found
in the Constitution of the State of Oregon, art.
XI, § 2:

Corporations may be formed under general laws, but shall not be created by special laws, except for municipal purposes. All laws passed pursuant to this section may be altered, amended, or repealed, but not so as to impair or destroy any vested corporate rights."

Outside of the powers conferred and the privileges granted to these organizations by the statutes under which they exist, they are in all the States of the Union which, like Oregon, have the common law as the foundation of their jurisprudence, governed by that common

the subject discussed, and also of previous de-
cisions of this court.

The question turned altogether upon the
power of the railroad company, under its char-
ter and the Laws of New Jersey, to make the
lease by which its road was turned over for
twenty years to the absolute control of other
parties. The right to do this was asserted un-
der the following language in the charter of
the company:

"That it shall be lawful for the said company,
at any time during the continuance of its
charter, to make contracts and engagements
with any other corporation, or with individuals,
for the transporting or conveying any kinds of
goods, produce, merchandise, freight, or pas-
sengers, and to enforce the fulfillment of such
contracts."

der any sound rule of construction to find in
But the court said that it was impossible un-
this language a permission to sell, lease, or

transfer to others the entire railroad and the
rights and franchises of the corporation.

The cases of Ashbury Railway Carriage &
Iron Company v. Riche, L. R. 7 H. L. 653, de-
cided in the House of Lords in 1875, and East
Anglian Railway Co. v. Eastern Counties Rail-
way Company, 11 C. B. 775, were also reviewed,
with several others of a similar character from

the reports of the highest courts of England, in
which, as this court said-

"The broad doctrine was established that s
contract not within the scope of the powers
conferred on the corporation cannot be made

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