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PENNSYLVANIA R. CO. V. ST. LOUIS A. & T.H. R. CO., 118 U. S. 290 (1886)

U.S. Supreme Court

Pennsylvania R. Co. v. St. Louis A. & T.H. R. Co., 118 U.S. 290 (1886)

Pennsylvania Railroad Company v. St. Louis,

Alton & Terre Haute Railroad Company

Argued January 14-15, 1886

Decided April 26, 1886

118 U.S. 290


When an existing railroad corporation, organized under the laws of one state, is authorized by the laws of another state to extend its road into the latter, it does not become a citizen of the latter state by exercising this authority unless the statute giving this permission must necessarily be construed as creating a new corporation of the state which grants this permission.

Where a lease of a railroad for ninety-nine years contained covenants for the payment of monthly installments of rent, to keep the road in repair, and to keep accounts of all matters connected with its business, as affecting the amount of rent to be paid, which covenants were guaranteed by other parties than the lessee, a bill which shows failure to pay rent, depreciation of the road, and combination of the guarantors and lessee to divert the earnings of the road to the benefit of the guarantors presents a case of equitable jurisdiction when it prays for specific performance of the obligations of the lease. In such a case, a suit at law on each installment of rent as it falls due is not an adequate remedy.

Unless specially authorized by its charter, or aided by some other legislative action, a railroad company cannot by lease or other contract turn over to another company for a long period of time its road and all its appurtenances, the use of its franchises, and the exercise of its powers, nor can any other railroad company, without similar authority, make a contract to run and operate such road, property, and franchises of the first corporation.

Such a contract is not among the ordinary powers of a railroad company, and is not to be inferred from the usual grant of powers in a railroad charter. Thomas v. Railroad Co., 101 U. S. 70, reaffirmed.

The Act of the Illinois Legislature of February 12, 1855, is a sufficient authority on the part of the St. Louis, Alton & Terre Haute Company to make the lease sued on in this case.

But if the other party to the contract, the Indianapolis and St. Louis Company, had no such authority, the contract is void as to it, and if the other

Page 118 U. S. 291

companies had no power to guarantee its performance, it is void as to them, and cannot give a right of action against them.

An examination of the statutes of Indiana and of the decisions of its courts fails to show, in the one or the other, any authority for an Indiana railroad company to make such a contract as that between the principal contracting companies in this case.

Nor is any authority found in the charters of any of these guaranteeing companies, or of the laws of the states under which they are organized, to guarantee the performance of such a contract as this; the parties to it and the road which it relates to being outside the limits of these states, and having no direct connection with their roads.

The doctrine is sound that when acts have been done and property has changed hands under void contracts which have been fully executed, courts will not interfere; but relief in such cases must be based on the invalidity of the contract, and not in aid of its enforcement. While the plaintiff in this case might recover in an appropriate action the rental value of the use of its road against the lessee company, the other defendants who had received nothing, but had been paying out money under a void contract, cannot be compelled to pay more money under the same contract.

This was a bill in equity to enforce specific performance of a contract of lease of a railway, and contracts of guarantee. Cross-appeals from the decree below. The case is stated in the opinion of the Court.

Page 118 U. S. 294

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