McCabe's Admx. v. Maysville & B. S. R.

66 S.W. 1054, 112 Ky. 861, 1902 Ky. LEXIS 242

• Court: Court of Appeals of Kentucky
• Decided: March 5, 1902
• Status: Published

Opinion

Opinion op the court by

JUDGE HOBSON

Reversing.

Appellant, Emma R. McCabe, as administratrix of Peter McCabe, deceased, filed this suit in the Mason circuit court against appellees, the Maysville & Big Sandy Railroad Company and the Chesapeake & Ohio Railway Company, to recover damages for the death of her intestate, who, she alleged, was killed in September, 1901, while walking along Third street in the city of Maysville, by ah engine and train of the Chesapeake & Ohio Railway Company, by reason of the negligence of its agents in charge thereof', as well as the negligence of the Maysville & Big Sandy Railroad Company in permitting it to use the track, which was the property, of the latter company. She alleged that after the building and completion of its road, and more than twelve months before the injuries to her intestate, the Maysville & Big Sandy Railroad Company leased and transferred its entire line of road to the Chesapeake & Ohio Railway Company, and that the latter has since that time been in the exclusive! possession and control it; that by the laws of Kentucky the lease and transfer were ultra vires and void; that in December, 1893, pursuant to section 211 of the Constitution of Kentucky, and section 841, Kentucky Statutes, the Chesapeake & Ohio Railway Company became a corporation, citizen, and resident of this State by filing in the office of the secretary of State, and in the office of the railroad commission, copies of its articles of incorporation, and that thereupon a certificate of said incorporation was issued to it by the secretary of State.- She further alleged that the railroad track was laid in Third street under an ordinance from the city authorities; that the railroad track took up the whole street, so as to render it unfit for travel by wagons or vehicles; that the city authorities were without power to authorize such a use of the street; and that' the ordinance was void, and- the operations of the trains on it was illegal. She prayed judgment for $25,000. The Chesapeake & Ohio Railway Company filed its petition to remove the case to the circuit court of the United States, alleging that it is a corporation created under the laws of the State of Virginia, and a citizen of that State, and of no other; that the Maysville & Big Sandy Railroad Company is not a proper party to the action, and was made a party to it for the sole purpose of preventing a removal of the-case to the United States court; that no cause of action is shown in the petition against the Maysville & Big Sandy Railroad Company; that it had authority of law to make the lease referred to, and is insolvent. It is specially pleaded in the petition that, by virtue of the charter and amendments thereto of the Maysville & Big Sandy Railroad Company, and. particularly of the act of February 17, 3866, entitled “An act authorizing the sale of the Maysville & Big Sandy Railroad, and providing for the organization of a new company under its charter to construct said road” (Acts 1865-66, p. 664), and of the general laws of the State of Kentucky, that company had full power and authority to make the lease referred to. On this _ petition the court, over, the plaintiff’s objection, ordered the case to be removed to the federal court, and the plaintiff prosecutes this appeal.

In Powers v. Railroad Co., 169 U. S., 92, 18 Sup. Ct., 264, 42 L. Ed., 673, the United States supreme court said: “A petition for removal, when- presented to the State court, becomes part of the record of that court, and must doubtless, show, taken in connection with the other matters on that record, the jurisdictional facts upon which the right of removal depends; because, if those iacts are not made to appear upon the record of that court, it is not bound or authorized to surrender its jurisdiction, and, if it does, the circuit court of the United States can not allow an amendment of the petition, but must remand the case.” It was the duty, therefore, of the court below, when the petition for removal was presented, to determine whether the jurisdictional facts upon which the right of removal depended appeared in the petition, and, if they did not appear, to overrule the motion for the removal of the case. On appeal from that judgment: the same duty devolves upon this court. Under the act of Congress the jurisdictional facts to sustain removal are that “there shall be a controversy which is wholly between citizens of different States and which can be fully determined as between them.” It has been held that in a suit against two defendants jointly liable, where one of them is a citizen of the State and the other a citizen of another State, if they are properly sued jointly, a removal can not be had by the non-resident defendant. Railway Co. v. Dixon, 179 U. S., 131, 21 Sup. Ct. 67, 45 L. Ed., 121. The common-law distinctions between the different forms of action have been abolished by our Code of Practice, and all persons who are liable for a wrong may now be sued jointly in this State in an action to recover for negligence.' A railroad company is given by the State certain franchises, and thereby assumes certain burdens. These it can not transfer to another without legislative authority, so as to exempt itself from responsibility for the torts of its transferee. The Maysville & Big Sandy Railroad Company was therefore liable to appellant jointly with the Chesapeake & Ohio Railway Company, if the transfer was unauthorized, and, in this event, the suit against the two companies jointly might be properly maintained. To hold otherwise would be to require the plaintiff to prosecute two actions, although each of the defendants was alike liable to bim. The question then to be determined is, did the petition for removal show that the controversy was wholly between the plaintiff and the Chesapeake & Ohio Railway Company, and that the Maysville & Big Sandy Railroad Company was not a proper party to the action? Section 203 of the State Constitution is in these words: “No corporation shall lease or alienate any franchise so as to relieve the franchise or property held thereunder from the liability of the lessor or grantor, lessee or grantee, contracted or. incurred in the operation, use or enjoyment of such franchise or any of its privileges.” The franchises of a corporation are its property. The declaration that these in case of a lease or alienation shall not be relieved from the liability of the lessor or grántor, lessee or grantee, contracted or incurred in the use of the franchise, or any of its privileges, is, in substance, a declaration that the corporation shall not be relieved of such liability; for its existence is inseparable from all of its franchises. Under this section, therefore,' no lease made by a corporation can exempt it from liability for the wrongs of its lessee. If the lease in question was made after the adoption of the Constitution, it would not exempt the lessor from liability. The date of the lease is not shown in the record, but if jt was made before the adoption of the Constitution the result is the same. An act of the General Assembly approved January 22, 1858, entitled “An act to authorize railroad companies to make certain contracts with each other,” is relied on. But this act only refers to “railroad companies' in the Commonwealth,” or domestic corporations. The act is in these words (see 2 Stan,t. Rev. St. p. 548) : “That all railroad companies in this Commonwealth shall have power and authority to make, with each other, contracts of the following character: 1. For the consolidation of either the management, profits, or stock of any two or more companies, the roads of which are or shall he so connected as to form a continuous road, either temporarily or permanently. 2. For the leasing of the road of one company to another, provided the roads so leased shall be so connected as to form a continuous line. 3. For the completion in whole or in part, of the unfinished road of any company. 4. For giving a common name and style to any continuous road belonging to two or more compatoies, provided, however, that all such contracts shall be approved by a majority, in interest, of all the stockholders in; each of the contracting companies, at some stated or called meeting of the same.” Section 2: “That the called meetings of stockholders, provided for in the first section, shall be called by the president and directors of the company, and notice of the time and place thereof, and of the purposes' of such meeting, shall be advertised in one or more newspapers of general circulation in the county where the principal office of s.uch company is then kept, for at least two weeks before such meeting.” In the construction of statutes it is a cardinal rule that they are not presumed to be intended to have effect beyond the jurisdiction of the State. The second section of the act can, therefore, have! no reasonable application to foreign companies, for it can not be presumed that the Legislature intended to regulate the proceedings of the president, directors or stockholders of such companies or advertisements to be given in other States. Taking this section in connection with the opening words of the first section, “All railroad companies in this Commonwealth,” we see no room for doubt that the Legislature intended to confer these privileges only on domestic companies.

As to the power of the Maysville & Big Sandy Railroad Company to make the lease, we are also referred to the following provision in its charter (Act Nov. 25, 1851, sec. 8) : “Sec. 8. That whenever any portion of said railroad shall be completed and in readiness for business, such portion thereof may be put in operation under authority of the board of directors on such terms for the use thereof as the board of directors may prescribe, not exceeding the maximum rates authorized by the fifteenth section of the act incorporating the Maysville & Lexington Railroad Company; provided, they may make special contracts for special services- on such terms and conditions as the parties thereto may agree upon.” Acts 1851.-52, p. 390. We do not see that this section goes further than to authorize the operation of the road under authority of the board of directors. The rule is that charters of this sort are strictly construed. We are also referred to the following provis-, ion (Act Feb. 17, 1866, sec. 3; see Acts' 1865-66: p. 6M) . “The purchaser or purchasers at any such sale after the same has been ratified and approved by said court shall in virtue thereof be invested with the title to said road and all its franchises and chartered privileges as fully and completely as if the same had been originally granted to them.. They shall have power to reorganize the company under its charter; and for the purpose of its charter open books and receive and collect subscriptions of stock to said-company, make contracts with individuals, corporations and othc-r railroad companies for the building, completion and operating .of said road or any part thereof.” When this statute was passed the road was not completed; the purpose of the provision was to enable the company to complete and operate the road. To this end it was empowered to “make contracts with individuals, corporations and other railroad companies for the building, completion and operating of said road or any part thereof.” Thus power was granted it to make the contract with the Chesapeake & Ohio Railroad Company above referred to; but no exemption was granted from any liabilities which attached to it,' and such an exemption, as against the public, can not be implied. While there is some conflict of authority, we think the great weight supports this conclusion. In Harmon v. Railroad Co., 28 S. C., 404, 5 S. E., 835, 13 Am. St. Rep., 686, the court said: “The circuit judge seems to rest his conclusion upon the ground that, inasmuch as under the charter of the defendant company it has power to lease its road, it follows necessarily that when the road is leased the company is released from all its obligations to the public and to individuals, and these obligations then rest solely upon the lessee. IVe can not accept this view. It rests upon the idea that, inasmuch as the defendant company incurs these obligations in exchange, as it were, for the chartered rights and privileges conferred by the Legislature, when such rights and privileges are transferred to another by the consent of the Legislature, the corresponding obligations are likewise transferred to such other person or corporation. This, at first view, seems plausible, and is the view adopted in some of the States. But it rests upon the unfounded assumption that the defendant company has transferred all of its chartered rights and privileges to the Richmond & Danville Railroad Company. We understand the testimony as tending to show, and the concession of counsel to be, simply, that the defendant company has leased its road to the Richmond & Danville Railroad Company, and not that it had transferred all its chartered rights and privileges to that company. On the contrary, this very case necessarily implies that the defendant still maintains its corporate organization and existence, and instead of running its road itself directly lias bargained with another company to run it for a compensation, as we must suppose. The defendant company, therefore, in reality still enjoys the benefits of its charter, and can not be permitted to escape its corresponding obligations.” In Driscol v. Railroad Co., 65 Conn., 254, 32 Atl., 354, the court said: “A grant to a corporation of a right to lay out, construct; and operate a railroad is' the grant to the corporation of the capacity to exercise a portion of the powers of sovereignty for the purpose of making pecuniary profit to itself. This is its franchise. Such grants are never made except at the request of the corporation. In return, the corporation is held to have promised to pay just damages to any person injured by any want of care in using the right so granted. As the grant is of a ptiblic right, in which every one of the public is a sharer, so the promise is to each one of the public. A due regard for the public rights obviously requires that a corporation which has asked for and received such a grant shall not be absolved from its promises except by an act of the Legislature to that effect so distinct and unequivocal as not to be open to mistake. Nothing should be left to inference.” In Braslin v. Railroad Co., 145 Mass., 68, 13 N. E., 65, the„ court said: “The sanction of the Legislature was given to the contract as made by the parties, but added nothing by way of exemption from the primary responsibility of the lessor. ... It was under a positive duty and obligation to the public, and the consent of the Legislature to the making of the lease did not imply a discharge from the duty and obligation. . . . Where a corporation seeks to escape from the burden imposed upon it by the Legislature, clear evidence of a legislative assent to such exoneration should be found.” In Logan v. Railroad Co., 116 N. C, 946, 21 S. E., 959, the court said: “After conferring upon a corporation the right of eminent domain, with many other special privileges which the Legislature is empowered to grant only in consideration of its duty and obligation to serve the people by affording them the means of safe as well as speedy transportation for themselves and their property, the State can not be held to have abdicated its right to protect the patrons of the road who are under its care by the strained construction of a naked power to lease. Such a power does not carry with it the authority to the lessor to absolve itself and transfer its duties and obligations to another, whether able or unable to respond in damages for its wrongs or defaults.” These were all suits against the lessor where the lease was authorized by statute. See, to the same effect, Balsley v. Railroad Co., 119 Ill, 68, 8 N. E., 859, 59 Am. Rep., 784; Singleton v. Southwestern R. R., 70 Ga., 464, 48 Am. Rep., 574; Tillett v. Railroad Co., 118 N. C., 1031, 24 S. E., 111; Railroad Co. v. Morris, 68 Tex., 59, 3 S. W., 457; Chollette v. Railroad Co., 26 Neb., 169, 41 N. W., 1106, 4 L. R. A., 135; Parr v. Railroad Co., 43 S. C., 197, 20 S. E., 1009, 49 Am. St. Rep., 826; Pennsylvania Co. v. Ellett, 132 Ill., 654, 24 N. E., 559; Stephens v. Railroad Co., 36 Iowa, 327; Bower v. Railroad Co., 42 Iowa, 546; Railroad Co. v. Lee, 71 Tex., 558, 9 S. W., 604.

In some States a distinction is made between injuries resulting from the negligence of the lessee alone and those resulting from the failure of the lessor to discharge some duty imposed by law upon him, where the lease is authorized by statute, and the lessor is only held liable for the latter. Thus the lessor is held responsible where cattle stray upon the track and are injured while the road is operated by the lessee by reason of the failure to fence the track as required by statute, or where a person is injured by reason of the improper construction of a station house too near the track, or an injury results from a failure to put in sufficient cattle guards, or there is a failure to transport persons or property as required by the charter of the lessor. Heron v. Railway Co., 68 Minn., 542, 71 N. W., 706; Lee v. Railroad Co., 116 Cal., 97, 47 Pac., 932, 38 L. R. A., 71, 58 Am. St. Rep., 140; Bean v. Railroad Co., 63 Me., 295; Nugent v. Railroad Co., 80 Me., 62, 12 Atl., 797, 6 Am. St. Rep., 151; Lakin v. Railroad Co., 13 Or., 436, 11 Pac. 68, 57 Am. St. Rep., 25. After citing a number of these cases in his note to Lee v. Railroad Co. (Cal.) 47 Pac., 932, 38 L. R. A., 71, 58 Am. St. Rep., 152, Freeman, commenting on them, says: “If it be true, as the decisions with substantial unanimity admit, that a lessor railway remains liable for the discharge of its duties to the public unless expressly exempted therefrom by statute, it seems difficult to conceive its absence of liability in any event, except perhaps where the plaintiff is suing upon an express contract made with him by the lessee corporation. Is it not as much a public duty on the part of a railway corporation to operate its trains without negligence as it is to receive all freight offered for transportation, or to carry all passengers who offer to pay the regular rates, or to keep its track and station houses in safe condition? In truth we do not know of any duties of a railway corporation which are of a private character. . . .” There are cases in which the lessor had been held not responsible for injuries to the servants of the lessee by reason of the lessee’s negligence. Railroad Co. v. Washington, 86 Ya., 629, 10 S. E., 927, 7 L. R. A., 344; Hukill v. Railroad Co. (C. C.l 72 Fed., 745. These cases rest on the idea that the duty owed to the servant by his employer grows out of the contract of service, which is voluntarily entered into by the servant, and that he does not stand to it like the public. In addition to these there is a line of cases holding the lessor not responsible for any acts of the lessee, on the ground that the legislative authority to lease constitutes the lessee quo ad hoc the owner of the property, and. substitutes him for the lessor. Miller v. Railroad Co., 125 N. Y., 118, 26 N. E., 35; Caruthers v. Railroad Co., 59 Kan., 629, 54 Pac., 673, 44 L. R. A., 737, and cases cited.

Upon principle and the weight of authority we are of opinion that the Maysville & Big Sandy Railroad Company is liable to appellant. The obligation to" fence'the track for the protection of stock, or to receive passengers or freight, or carry them safely, is no more a duty of the lessor imposed upon it by its charter than its duty to avoid injury to the traveling public in the discharge of its functions, as in this case. By its acceptance of the franchises conferred by the State the corporation assumed the corresponding burdens thereby imposed. These franchises it could not transfer to another without distinct legislative authority. The grant of power to lease its property is one thing; the grant of absolution from its responsibility is another, and is not to be inferred from a mere power to lease the road, where the corporation still retains its existence and the enjoyment of its franchises in the rents. For such grants are strictly construed, and, as against the public, are never extended by construction. In the case before us there is only a grant to the lessor of power to contract for the operating of the road. The company enjoys all its' franchises in the fruits of the contract. There is nothing in the provision to show that the Legislature had in mind authorizing the company to divest itself of its franchises, or permitting it, while enjoying them or their fruits, to be acquit oí responsibility for their abuse, without regard to the financial ability of the lessee or his amenability to suit. In Harper v. Railroad Co., 90 Ky., 359 (12 R., 333) (14 S. W., 346), the question was not elaborated, and it is apparent from the opinion that only the question of jurisdiction was really considered by the court; for it does not appear from the facts stated that the lease in that case was authorized by statute, or under what provision of law it was made.

It is unnecessary for us to pass upon section 211 of the Constitution and section 841 of the Kentucky Statutes, and determine whether appellee can accept citizenship in this State, and so take all its advantages and at the same time plead that it is a non-resident of the State.

Judgment reversed, and cause remanded for further proceedings consistent with this opinion.

Judges O’Rear and DuRelle, dissent.- Judge Burnam not sitting.