Estes v. Gunter, 121 U.S. 183 (1887)

This is a motion to dismiss, on the ground that the value in dispute does not exceed five thousand dollars. The record shows this: On the 25th of March, 1882, S. H. Gunter, a merchant doing business at Sardis, Mississippi, being unable to pay his debts in full, made an assignment of his stock of goods on hand, and the debts due him by note and book account, to 8. G. Spain, for the benefit of his creditors, but with a preference in favor of Estes & Doan to the amount of $10,000 on a debt due them of $12,000 or over. Other creditors to a much smaller amount in the aggregate were also preferred. The p. 184stock of goods was valued at over $12,000, and the notes and accounts were nominally more than $25,000.

In the progress of the cause Estes & Doan voluntarily dismissed the bill as to all the attaching creditors except Bickham & Moore, and from that time on they and Spain, the assignee, were the only defendants in court. On the 3d of March, 1884, the court, after a hearing of the cause, “ being satisfied that complainants are not entitled to the relief sought,” dissolved p. 185the injunction and dismissed the bill. From the opinion of the court, which has been sent up with the transcript, it appears that this was done because the evidence showed that the assignment was made to hinder and delay creditors, and was, therefore, void. This was, of course, equivalent to a decision that Estes & Doan could not be paid their preferred debt out of the fund in court in accordance with the terms of the assignment. From that decree this appeal was taken.

“ Sect ion 1. That hereafter any corporation for pecuniary profit other than for carrying on mercantile or manufacturing business organized under the laws of any other state or of any territory of the United States or of any foreign country desiring to transact its business, or to continue the transaction of its business in this state, shall be and hereby is required, on p. 187and after September [first], a .d . 1886 to file with the secretary of state a certified copy of its articles of incorporation duly attested, accompanied by a resolution of its board of directors or stockholders, authorizing the filing thereof and also authorizing service of process to be made upon any of its officers or agents in this state engaged in transacting its business, and requesting the issuance to such corporation of a permit to transact business in this state. Said application to contain a stipulation that said permit shall be subject to each of the provisions of this act. And thereupon the secretary of state shall issue to such corporation a permit in such form as he may prescribe for the general transaction of the business of such corporation. And upon the receipt of such permit such corporation shall be permitted and authorized to conduct and carry on its business in this state. Provided that nothing in this act contained, shall be construed, to prevent any foreign corporations, from buying, selling, and otherwise dealing, in notes, bonds, mortgages, and other securities, or from enforcing the collection of the same, in the federal courts, in the same manner, and to the same extent, as is now authorized by law.

“ Sec . 3. Any foreign corporation sued or impleaded in any of the courts of this state upon any contract made or executed in this state or to be performed in this state or for any act or omissioji, public or private, arising, originating, or happening m the state, who shall remove any such cause from such state court into any of the federal courts held or sitting in this state, for the cause that such corporation is a non-resident of this state or a resident of another state than that of the adverse party, or of local prejudice against such corporation, shall thereupon forfeit and render null and void any permit issued or authority granted to such corporation to transact p. 188business in this, state; such forfeiture to be determined from the record of removal, and to date from the date of filing of the application on which such removal is affected, and whenever any corporation shall thus forfeit its said permit no new permit shall be issued to it for the space of three months, unless the executive council shall for satisfactory reasons cause it to be issued sooner.

“ Henry Barron. J “ The defendant is accused of the crime of knowingly transacting a portion of the business of the Chicago and North- p. 189Western Railway Company within the state of Iowa, when such railway company has no valid permit to do business in the state of Iowa, as provided in chapter 76 of the laws of the 21st General Assembly of said State of Iowa, and taking effect September 1, 1886.

Barron, having been arrested, applied to the Supreme Court of the state for a writ of habeas corpus, by a petition setting p. 190forth various facts as showing that his imprisonment was illegal, and praying that his petition might be tried before the Supreme Court. The writ was issued, a return was made to it by the sheriff, and the case was heard upon an agreed statement of facts, the only material ones, in the view taken of the case, being, that the Chicago and North-Western Railway Company was and is an Illinois corporation, operating railroads in Iowa, and claiming to do so under the authority of statutes of that State, and that Barron, “ at the time he was arrested, was in the employment of the Chicago and North-Western Railway Company, and engaged as an engineer on a locomotive in running a passenger train, which was made up at Chicago, in the State of Illinois, and was destined to Council Bluffs, in Iowa, and that said train was carrying passengers and the United States mails received at different points in the State of Illinois, and destined to points in the State of Iowa and beyond, and also from points in the State of Iowa to other points in the same state,” and that he was arrested while he was engaged in controlling the engine on the train while it was running. It was admitted that the company had not complied with the Iowa statute by taking out the required permit.

(1) The statutes of Iowa do not authorize a domestic corporation to sell or lease its railroad and property and franchises to a foreign corporation. It may consolidate, as provided by § 1275, Code of Iowa. It may make joint running p. 191arrangements with such foreign corporation, as provided by § 1276. A corporation of a foreign state may extend its road into Iowa. Chapter 128, Laws 1880. A corporation of Iowa may extend its road into an adjoining state. Section 1277, Code. These are all the methods provided by law in Iowa, whereby a railroad corporation of that state, may contract for through transportation with corporations of adjoining states. Section 1300 of Code applies only to corporations of Iowa.

II. Even if the sale is authorized, we insist there is no impairment of the obligation of contract by the state. (1) No property right of the railroad is affected, except as a penalty for non-compliance with lease. The penalty is simply a means of enforcement of the law, and if the subject matter of the law is within the powers of the state, then the penalty is a proper means of enforcement. Attorney General v. Ba/y State Mining Co., 99 Mass. 148. (2) There is nothing in the law repugnant to the Constitution of the United States in so far as the subject of control of corporations is concerned. The state has the undoubted right to decide upon what terms and conditions foreign corporations may obtain a domicile of business within the state. Attorney General v. Bay State Mining Co., supra', Ba/nk of Augusta n . Earle, 13 Pet. 519; Runyan v. Costar, 14 Pet. 122; Paul v. Virginia, 8 Wall. 168; Doyle v. Insurance Co., 94 U. S. 535 ; Ducat v. Chicago, 10 Wall. 410; Phila. Fire Association v. New York, 119 U. S. 110. (3) The p. 192right of control is specially reserved in the laws of Iowa; both in the statutes under which the Iowa corporations were formed, and in the laws in force when the railroad company claims to have purchased. This reserved right of control gives the state the right to “ alter, repeal or abrogate ” any rights granted by the State. It cannot deprive the company of its property but may resume or alter what the state granted. (4) This law does not deprive the railroad of any of its property, except as a means of enforcement, and this is justifiable. Attorney General v. Bay State Mining Co., supra. There is no property right in a tribunal, or a particular remedy. So long as there is a competent tribunal and adequate remedy left, there is no impairment of contract. This is elemental. (5) The Chicago and North-Western Railway Co. is subjected to all these reserved powers of control, a. It is subject to the provisions of the laws of 1856, 1860, 1870 and 1872, for the reason that the grantor corporation was so subjected, b. It is subjected to the reserved powers contained in § 1090, because said section was in force as a law when the Chicago and North-Western Railway Co. claims to have purchased, and the settled rule of law is that the corporation purchasing, whether the purchase is at judicial sale or by contract inter partes, takes subject to the law then in force. Trask v. Maguire, 18 Wall. 391; Chesapeake & Ohio Railway Company v. Miller, 114 U. S. 188,189; Memphis Railroad Compa/ny v. Commissioners, 112 U. S. 609; St. Louis <& Iron Mountain Railway Company n . Berry, 113 IT. S. 474; Chicago, Burlington c& Quincy Railroad Compa/ny v. Iowa, 94 IT. S. 155 ; Holyoke v. Lyman, 15 Wall. 500; Sherman v. Smith, 1 Black, 587 ; Beer Company v. Massachusetts, 97 IT. S. 25; Railroad Company v. Fuller, 17 Wall. 560.

III. The law in question does not amount to a regulation of commerce within the meaning of the Constitution of the United States. (1) It has been repeatedly held by this court, that it is not every law which may remotely or indirectly affect commerce, that can be construed to amount to a regulation thereof. State Tax on Railway Gross Receipts, 15 Wall-284; Peik v. Railway Compa/ny, 94 U. S. 164; Munn v. HF p. 193nois, 94 U. S. 113; The Jane Grap v. The John Frazier, 21 How. 184; Osborne v. Mobile, 16 Wall. 479; Sherlock v. Alling, 93 U. S. 99; Telegraph Co. v. Telegraph Co., 96 U. S. 1Paul v. Virginia, 8 Wall. 168; Gilman v. Philadelphia, 3 Wall. 713. In these cases, and in more that might be cited, the laws did in one way or another, and to a greater or less degree, in some directly, and in others indirectly, operate upon commerce, either with foreign nations or among the states; but this court held, they did not amount to a regulation of such commerce. (2) The counsel in claiming that the law in question is a regulation of commerce confounds two powers that in their nature and essence are distinctively different, viz: the control of commerce, and the control of corporations. The one is a transaction, the other the agency of the transaction. Over the transaction the powers of the Federal Government are supreme and exclusive. It is not so over the agency. Munn v. Illinois, and authorities quoted. “ The two governments have supreme authority within their respective spheres, and within them neither can interfere with the other.” — (Mr. Justice Field.) (3) Over state highways the state has exclusive control. Over national highways the Federal Government has exclusive control. Neither can interfere with the other. The common state and county roads, turnpikes, canals and railroads are state highways. It constructs them and gives them being, and has the right to control them. Baltimore Ohio Railroad v. Maryland, 21 Wall. 456. (4) The navigable waters of the nation are national highways, and over them the powers of the general government are supreme and exclusive. Baltimore & Ohio Rail/road v. Maryland, supra. (5) Railroads constructed in territories under charter from Congress are national highways; “ but this right passes from the nation to the newly formed state whenever the latter is admitted into the union.” The state has the supreme right to say what corporation or persons shall have supervision of these highways within its borders, if anyy and upon what terms. (6) The state cannot so control state highways as to prohibit commerce from other states being earned over them. But it may decide as to the agencies by which

IV. It is not in violation of the 14th Amendment to the Constitution of the United States. (1) Corporations are not citizens of the United States. Balt. <& Ohio Railroad v. p. 195Koontz, 104 IT. S. 5. (2) A corporation of zone state is not a person within the meaning of the XIVth Amendment, except within the state of its creation. Philadelphia Fire Association v. Nero York, 119 IT. S. 110. (3) Any class of corporations may be singled out from another class, and regulations applied to the whole class is not a denial of equal protection of the law to such person within the meaning of the XIVth Amendment. Chicago, &c., Railway v. Iowa, 94 IT. S. 155; Nunn v. Illinois, 94 IT. S. 113; and it matters not that the corporation was doing business in the state before the law was enacted. — See last case cited, page 113, and Doyle v. Ins. Co., supra. The objection that the law deprives the Chicago & North-Western Railway Co. of the right to remove causes to courts of the United States, and that such right is guaranteed to it by the Constitution is fully met in the case of Doyle v. Ins. Co. heretofore cited. There is no difference in principle in this respect between the Iowa law involved in this case and the Wisconsin law involved in the case cited.

The statute manifestly applies to the Chicago and North-Western Railway Company as an Illinois corporation. The first section provides, that a foreign corporation, desiring to continue the transaction of its business in Iowa, is required, on and after September 1, 1886, “to file with the secretary of state a certified copy of its articles of incorporation duly attested, accompanied by a resolution of its board of directors or stockholders, authorizing the filing thereof, and also authorizing service of process to be made upon any of its officers or agents in this state engaged in transacting its business, and requesting the issuance to such corporation of a permit to transact business in this state,; said application to contain a stipulation that said permit shall be subject to each of the provisions of this act; and thereupon the secretary of state shall issue to such corporation a permit in such form as he may prescribe, for the general transaction of the business of such p. 196corporation; and, upon the receipt of such permit, such corporation shall be permitted and authorized to conduct and carry on its business in this state.”

Section 4 imposes a penalty of $100 a day on the corporation for carrying on its business in Iowa without having complied with the statute, and having a valid permit, and provides that any agent, officer or employe who shall knowingly act, or transact such business, for the corporation, when it has no valid permit, shall be guilty of a misdemeanor, and for each offence shall be fined not fo exceed $100, or be imprisoned p. 197in the county jail not to exceed thirty days, and pay all costs of prosecution.

In view of these considerations, the case falls directly within the decision of this court in Home Insurance Co. v. Morse, 20 Wall. 445. In that case, which was twice argued here, a statute of Wisconsin provided that it should not be lawful for any foreign fire insurance company to transact any business in Wisconsin unless it should first appoint an attorney in that state, on whom process could be served, by filing a written instrument to that effect, containing an agreement that the company would not remove a suit for trial into the Federal court. The Home Insurance Company, a New York corporation, filed the appointment of an ag£nt containing the following clause: “ And said company agrees that suits commenced in the state courts of Wisconsin shall not be removed by the acts of said company into the United States Circuit or Federal courts.” A loss having occurred on a policy issued by the company, it was sued in a court of the state. It filed its petition in proper form for the removal of the suit into the Federal court. The state court refused to allow the removal, and, after a trial, gave a judgment for the plaintiff, 'which was p. 198affirmed by the Supreme Court of Wisconsin. The company brought the case into this court, which held these propositions: First, The agreement made by the company was not one which would bind it, without reference to the statute; Second, The agreement acquired no validity from the statute. The general proposition was- maintained, that agreements in advance to oust the courts of jurisdiction conferred by law, are illegal and void, and that, while the right to remove a suit might be waived, or its exercise omitted, in each recurring case, a party could not bind himself in advance, by an agreement which might be specifically enforced, thus to forfeit his rights at all times and on all occasions, whenever the case might be presented.

In both of the cases referred to, the foreign corporation had made the agreement not to remove into the Federal court suits to be brought against it in the state court. In the present case, no such agreement has been made, but the locomotive engineer is arrested for acting as such in the employment of the corporation, because it has refused to stipulate that it will not remove into the Federal court suits brought against it in the state court, as a condition of obtaining a permit, and p. 200consequently has not obtained such permit. Its right, equally with any individual citizen, to remove into the Federal court, under the laws of the United States, such suits as are mentioned in the third section of the Iowa statute, is too firmly established by the decisions of this court to be questioned at this day; and the State of Iowa might as well pass a statute to deprive an individual citizen of another state of his right to remove such suits.

That corporations are confined strictly to the powers and rights granted by their charters, and can have nothing not expressly given, is established by the following cases, and meets the claim of the plaintiff to a fee simple absolute in the land in controversy: Dartmouth College v. ^Woodward, 4 Wheat. 518; Ba/nk of Augusta v. Earle, 13 Pet. 519, 587; Beach v. Fulton Ba/nk, 3 Wend. 573; People v. Utica Ins. Co., 15 Johns. 358 j1 Le Couteulx v. City of Buffalo, 33 N. Y. 333 ; Camden <& Amboy Railroad v. Remer, 4 Barb. 127; H°‘ bile (& Ohio Railroad v. Franks, 41 Miss. 494; Trustees v. p. 205Peaslee, 15 N. H. 317; Shaumut Bank v. Plattsburgh, &c., Railroad, 31 Vt. 491; Pennsylvania, &c., Na/v. Co. v. Dandridge, 8 G. & J. 248;1 Vandall n . South San Francisco Dock Co., 40 Cal. 83; Winter v. Muscogee Railroad, 11 Geo. 438; Whitman Mining Co. v. Baker, 3 Nevada, 386; Ruggles v. Collier, 43 Missouri, 353; Rochester Ins. Co. v. Martin, 13 Minn. 59; Occum Co. v. Sprague Mf’g Co., 34 Conn. 529; Maddox v. Graham, 2 Met. (Ky.) 56; East Anglian Railways v. Eastern Counties Railway), 11 C. B. 775; PeopleN. Albany, 11 Wend. 539;2 Beatty v. Knowler, 4 Pet. 152.

The first error assigned is, that the case is not one of equitable jurisdiction, it being contended that the complainant below had a complete and adequate remedy at law. The bill sufficiently alleges that the complainant is in possession of the premises in controversy, and in this respect is supported by the proofs. The prayer of the bill is, that the defendants may be required to assert and declare the rights and title claimed by them in and to the premises, and that in the meantime they may be enjoined “ from interfering with or hindering or obstructing your orator, his agents, or employes, in any manner in. the use and enjoyment of said way and depot until the further order of said court,” and for general relief. The contention of the appellants, however, is, that by the statute of West Virginia the complainant might have maintained an action of ejectment. Reference is made in support of this 1 S. c. 29 Am. Dec. 543. 2 & C. 27 Am.' Dec. 95. 8 St. C. 67 Am. Dec. 471. p. 206contention to the West Virginia Code of 1868, c. 90, to show that an action of ejectment in that state will lie against one claiming title to or interest in land, although not in possession. Admitting this to be so, it, nevertheless, cannot have the effect to oust the jurisdiction in equity of the courts of the United States as previously established. That jurisdiction, as has often been decided, is vested as a part of the judicial power of the United States in its courts by the Constitution and acts of Congress in execution thereof. Without the assent of Congress that jurisdiction cannot be impaired or diminished by the statutes of the several states regulating the practice of their own courts. Bills quia timet, such as the present, belong to the ancient jurisdiction in equity, and no change in state legislation giving, in like cases, a remedy by action at law, can, of itself, curtail the jurisdiction in equity of the courts of the United States. The adequate remedy at law, which is the test of equitable jurisdiction in these courts, is that which existed when the Judiciary Act of 1789 was adopted, unless subsequently changed by act of Congress.

The next assignment of error is that the proof fails to sustain the title set up by the appellee. That title is based upon two judicial sales. eThe first of these was a sale to Henry A. Cram, in a proceeding commenced in 1860 by the Bank of Virginia and other judgment creditors against the Winifrede Mining and Manufacturing Company, the object of which was to marshal the assets of that corporation and apply them to the payment of its debts. A decree was rendered therein on January 26, 1861, ascertaining the debts of the company and their priority as liens, and ordering a sale of its property for their satisfaction. That decree directed the sale of “that ten thousand-acre tract of land belonging to the Winifrede Mining and Manufacturing Company, fully set out and described in the bill and exhibits and other proceedings in this cause, and lying on Kanawha and Coal rivers and on Field s Creek, in the counties of. Kanawha and Boone, together with all improvements thereon used in the mining, transporting, and shipping of coal, including railroad iron, picks, shovels, cars, engines, and whatever other tools and implements there p. 207may be upon the property belonging to said company.” The sale to Cram was duly confirmed by the court, and a deed conveying the property made to him by the commissioner. Subsequently, in. 1878, Henry A. Cram, the purchaser, filed his bill in equity against Edward A. Bibby and others, in which he alleged that the purchase made by him at the sale under the decree in favor of the Bank of Virginia was made in trust on behalf of himself and others. The object and prayer of his bill were, that the trusts arising out of the agreements set forth therein, in pursuance of which the purchase was made, might be administered and carried out under the direction of the court, and an account taken of the expenditures of the complainant, the property sold, and the proceeds divided among the parties in interest. By an amendment, the Winifrede Mining and Manufacturing Company was made a party to the bill; and in a second amendment it was alleged that at the sale made under the decree in the Bank of Virginia case, the railroad track and road-bed leading from the Kanawha River to the ten thousand-acre tract, some five miles long, more or less, was sold and should have been7 conveyed by the commissioner in his deed to the complainant, but by mistake was left out and not embraced in the conveyance. The complainant, therefore, prayed that the Winifrede Mining and Manufacturing Company, and all parties named as defendants in the original bill, be made defendants to the amended bill, and that the court would treat the roadway as a part of the property embraced in the deed to the complainant; adding that it was a coal property, that the road and road-bed and rails cost some $300,000, and that the property was valueless without this roadway, and the court was asked to sell the property, including the roadway as an entirety. To this amended bill an answer was filed in the name and on behalf of the Winifrede Mining and Manufacturing Company, admitting the allegations of the bill and amendments to be true, and particularly that the property, including the road-bed and the ten thousand-acre tract and rails, was sold as an entirety, and as such purchased by Cram, and should have been included in the deed from the commissioner to him as purchaser. p. 208In this suit a final decree was passed ordering a sale of the property as prayed for and described. It was declared in that decree that “ the legal title to the tract of 10,180 acres of land, more or less, situated on Field’s Creek and Big Coal Biver, West Virginia, and in the bill and amended bills mor$ particularly described, together with the road-bed and right of way from the same to the Kanawha Biver, including the front property,” was vested in the complainant, Henry A. Cram, and the property as thus described was ordered to be sold. At this sale Theodore Wright, the appellee, became the purchaser for the sum of $120,000. This sale was confirmed by the court and a deed ordered to be made, upon payment of the purchase money.

The objection of the appellants, that these proceedings do not vest in Theodore Wright, the appellee, the title which was in the Winifrede Mining and Manufacturing Company to the premises in dispute, cannot be sustained. It could avail the appellants as a defence only by showing that the legal title was still outstanding in the Winifrede Mining and Manufacturing Company, and that as between that company and Wright the latter was wrongfully in possession; but that question has already been adjudged as between the Winifrede Mining and Manufacturing Company and Cram, to whose title Wright succeeds by the decree of the Kanawha Circuit Court, as against which that company can no longer assert any title, either at law or in equity, to the property in controversy. Wright is now vested by virtue of that decree with whatever title the Winifrede Mining and Manufacturing Company had to the premises as completely as if that title had been conveyed to him by the company by a deed under its corporate seal. It is said, however, by the appellants, that the decree rendered in the suit in which Cram was a complainant was collusive and fraudulent, because it appears upon the face of the record that the Winifrede Mining and Manufacturing Company appeared -without process and answered, but not under its corporate seal, by the same ‘counsel who represented Cram. This, however, is not proof of fraud, but only of a consent to do -what it appears to have been perfectly proper to do; that is, to make good an imperfect conveyance. p. 209Were it otherwise the imputed fraud is not one of which the appellants are the proper party to complain, being strangers to the transaction.

The proceedings between the Winifrede Mining and Manufacturing Company and John McConihay for the appropriation p. 212of the lands in controversy for right of way and depot purposes for its railroad took place in 1853, and whatever title he acquired by virtue of those proceedings vested after the Code of 1849 took effect. It is contended on the part of the appellee, that the nature and character of that title are determined by that act, and not by the act of March 11, 1837; although it is also insisted that if the act of 1837 remained in force for that purpose, nevertheless there has been no failure of title by reason of its conditions.

Were it otherwise, however, we are satisfied that the charter of the Winifrede Mining and Manufacturing Company, in this particular, was altered by the operation of the Code of 1849. Chapter 61 of that act applies to companies incorporated to construct and carry on works of internal improvement, including railroads. The first section declares that “ every company which is governed by the act passed on the 7th day of February, 1817, prescribing certain general regulations for the p. 213incorporation of turnpike companies, or by the act passed on the 11th day of March, 1837, prescribing certain general regulations for the incorporation of railroad companies, and every company tyhich, after the commencement of this act, shall be incorporated to construct any work of internal improvement, shall be governed by the provisions contained in the 57th chapter and in this chapter, so far as they can apply to such company without violating its charter.” By the express terms of this section every company previously incorporated, but in existence when that act went into operation, and which, by the terms of its charter, was governed by the act of March 11, 1837, thenceforward was to be governed by the provisions contained in the Code. This includes the Winifrede Mining and Manufacturing Company, which, on July 1, 1850, when the Code took effect, was such a corporation. The Code of 1849 contained no such provision as that embraced within the terms of § 20 of the act of March 11, 1837. On the contrary, it provides, in § 31, that, “ if the works of any company be not commenced and completed within the time prescribed by its act of incorporation, or if after such works be completed the company shall abandon the same, or for three consecutive years cease to use and keep them in good repair, in each of these cases the State may either proceed by quo warranto or take possession of the works and property of such company; and, in case of so taking possession, shall keep the same in good repair, and have all the rights and privileges previously vested in the company. But the State shall pay the company for such works and property the full value of the same at the time it takes possession thereof.”