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PULLMAN'S PALACE CAR CO. V. MISSOURI PAC. RY. CO., 115 U. S. 587 (1885)
U.S. Supreme Court
Pullman's Palace Car Co. v. Missouri Pac. Ry. Co., 115 U.S. 587 (1885)
Pullman's Palace Car Company v.
Missouri Pacific Railway Company
Argued November 6, 9, 1885
Decided December 7, 1885
115 U.S. 587
The consolidation of two or more railroad companies in Missouri, under authority derived from Rev.Stat. Missouri 1879 § 789, works a dissolution of the old corporations and the creation of a new corporation to take their place, subject to the then existing obligations of the old companies.
An agreement made by one of such companies before the consolidation, to be carried out over its entire line of railway and on all roads which it then controlled or might thereafter control by ownership, lease, or otherwise, does not affect roads not so owned, leased, or acquired at the time of the consolidation but acquired by the new company subsequently to it.
An agreement by a railway company to haul cars over all roads which it controls or may control by ownership, lease, or otherwise does not oblige it to haul cars over the connecting road of another company in whose stock it acquires, subsequently to the agreement, a controlling interest if the other company maintains its corporate organization and its directors retain the control of its road.
This was a suit in equity brought by Pullman's Palace Car Company to enjoin the Missouri Pacific Railway Company and the St. Louis, Iron Mountain, and Southern Railway Company from discontinuing the use of the drawing room cars and sleeping cars of the Pullman Company on the line of the St. Louis, Iron Mountain, and Southern Company, from refusing to haul such cars on passenger trains running on such line, and from contracting with any other person for supplying like cars for that use. The court below dismissed the bill on demurrer, and from a decree to that effect this appeal was taken.
The case made by the bill is in substance this:
On the 8th of March, 1877, the Missouri Pacific Railway Company was a Missouri corporation owning and operating a railroad between St. Louis and Kansas City, and Pullman's man's Palace Car Company, an Illinois corporation, engaged in the business of manufacturing drawing room cars and sleeping cars and hiring them to or otherwise arranging with railway
companies for their use upon railroads under written contracts for a term of years. By a written contract entered into on that day, the Pullman Company agreed to furnish the Missouri Pacific Company, for fifteen years, upon certain specified terms, with drawing room and sleeping cars sufficient to meet all the requirements of travel, and the Missouri Pacific Company agreed
"to haul the same on the passenger trains on its own line of road, and on all roads which it now controls or may hereafter control by ownership, lease, or otherwise."
The railway company also agreed that the Pullman Company
"shall have the exclusive right, for a term of fifteen years from the date, . . . to furnish for the use of the railway company drawing room or parlor and sleeping cars on all the passenger trains of the railway company, and over its entire line of railway, and on all roads which it controls or may hereafter control by ownership, lease, or otherwise, . . . and that it will not contract with any other party to run said class of cars on and over said lines of road during said period of fifteen years."
Sometime during the summer or autumn of 1880, and as early as October 7, the Missouri Pacific Company
"consolidated with itself certain other companies, under the laws of Missouri, retaining its former name, and . . . said consolidated company assumed all the obligations of the separate consolidating companies, and continued to use and operate the former road, together with other consolidated lines."
The St. Louis, Iron Mountain, and Southern Railway Company is and for many years has been a corporation owning and operating a railroad from St. Louis in a southwesterly direction to Texarkana. On the 20th of November, 1871, that company entered into a contract with the Pullman Company, similar to the one with the Missouri Pacific Company, for the hauling of the Pullman cars on its line until November 20, 1881.
In or about the month of December, 1880, the Missouri Pacific Company "acquired and became the owner of more than a majority of the stock of said St. Louis, Iron Mountain, and Southern Railway Company," and this, as the bill alleges,
"with the intent and purpose of controlling the management and administration of the said St. Louis, Iron Mountain, and Southern Railway Company and for the purpose of subordinating, in effect, the said St. Louis, Iron Mountain, and Southern Railway Company and the Missouri Pacific Railway Company to the same management and control, and of running and operating said roads as one line and in the interest of the Missouri Pacific Rail way Company."
Since that time, the Missouri Pacific Company has acquired all but about 1,795 of the 220,682 shares of the capital stock of the St. Louis, Iron Mountain, and Southern Company. Five of the directors of the Missouri Pacific are also directors in the St. Louis, Iron Mountain, and Southern Company, and the two roads are operated under the same general management. The general offices of the two companies are kept together, and both roads are managed substantially by the same persons. All this was brought about and done, as is alleged, in pursuance of an arrangement between the Missouri Pacific Company and persons who were at the time the holders of nearly all the stock of the St. Louis, Iron Mountain, and Southern Company
"for the transfer of the ownership and control of the franchises, property, and business of said last-named corporation to the said Missouri Pacific Railway Company,"
it being part of the arrangement that the
"stockholders of the said St. Louis, Iron Mountain, and Southern Railway Company should not divest themselves altogether of their interest in the franchises, property, and business thereof, but that they should place the same under the control and management of the said Missouri Pacific Railway Company by the method of the transfer of their stock in said St. Louis, Iron Mountain, and Southern Railway Company to the said Missouri Pacific Railway Company, and retain their interest therein by receiving in exchange therefor the stock of the said Missouri Pacific Railway Company, in the proportion of three shares of the stock of the Missouri Pacific to four shares of said St. Louis, Iron Mountain, and Southern, and it was understood that as a part of said arrangement, the stock of said Missouri Pacific Railway Company received in exchange for said stock of said St. Louis, Iron
Mountain and Southern would represent in the hands of its holders a combined interest in the properties of both of said corporations, and that the stock of said St. Louis, Iron Mountain, and Southern which was by the arrangement aforesaid held and used by said Missouri Pacific Railway Company should be retained, held, and used by it to control the franchises, property, and business of the said St. Louis, Iron Mountain, and Southern Railway Company in pursuance and execution of the purpose aforesaid through the authority of the board of directors of said Missouri Pacific Railway Company, and in the interest of all persons so holding as aforesaid stock of the Missouri Pacific Railway Company."
And this, it is further alleged, was done in pursuance
"of a general purpose to place the affairs aforesaid of said St. Louis, Iron Mountain, and Southern Railway Company under the control of the said Missouri Pacific Railway Company that they might be operated together as one institution as nearly as possible, and was a mode adopted to that end in lieu of various other methods and modes proposed and considered -- namely by consolidation, by lease, and otherwise -- as being least subject to objection based upon considerations of policy or legality."
At the expiration of the contract between the Pullman Company and the St. Louis, Iron Mountain, and Southern Company, the president of the last-named company notified the Pullman Company that the further right of that company to have its cars hauled over the line of the St. Louis, Iron Mountain, and Southern road was denied, and that the railroad company would cases to operate its road with the cars of the Pullman Company.
As a ground of equitable relief, the bill contains the following allegations:
"Your orator further shows that the refusal to operate your orator's cars upon the St. Louis, Iron Mountain, and Southern Railway and the denial of your orator's right as aforesaid is a plain and palpable violation of the provisions of the contract between your orator and said Missouri Pacific Railway Company; that such contract cannot be violated without the greatest
and most irreparable damage to your orator; that the cars constructed for the operation of your orator's business are of a very costly sort; that your orator has invested a very large capital in the construction and operation of said cars; that the business of your orator, under its charter and for which it is incorporated, is of such a nature that it can be transacted only through the instrumentality of contracts of the character herein set forth with railroad companies engaged in the business of running railway passenger trains; that by means of such contracts, it can run through cars between remote points and over distances far greater than the length of the separate lines of road, to the great convenience of the public, and that the upholding and enforcement of such contracts is of vital importance and relation to the exercise of the corporate franchises of your orator and to the public convenience; that if said contracts can be violated as is threatened in the matters hereinbefore stated, the facilities of through travel aforesaid will be broken up and the property and estate of your orator, to the extent of very many thousands of dollars, which largely exists and inheres in such contracts, will be destroyed in value and the corporate franchises of your orator practically destroyed; that by reason of the magnitude of the investment as aforesaid and the cost of operating such cars, your orator cannot receive a fair return unless it can have the exclusive operation of said business as provided in said contracts with the several companies over whose roads it operates, and that the exclusive right bargained for and obtained by your orator in said contracts, as in the contract hereinbefore mentioned, is not only reasonable but absolutely necessary for the success of your orator's business, without which your orator could not make desirable contracts, and would not have made the agreement with the said Missouri Pacific Railway Company hereinbefore mentioned."
"Your orator further shows that in making the contract hereinbefore set forth with said railroad companies and in making the provisions therein contained for the extension of the operation of your orator's cars upon such roads as should come within their control, it has had in contemplation the
growth and development of the business which, in the performance of said contract for many years past, it has been building up and developing in the region of country through which the said lines of railway hereinbefore mentioned run; that said business has been largely built up and developed by the efforts and instrumentality of your orator; that in the hope and prospect of its future development, your orator has borne the burden of sustaining and upholding it when the business was comparatively small and unremunerative, and that it will be a gross injustice and inequity to permit said railroad companies, by violation of contract as aforesaid, to remove at the present time the cars of your orator from the line of the said St. Louis, Iron Mountain, and Southern Railway Company or to discontinue operating them thereon or to substitute the cars of any other party thereon. "
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