Opinion
No. 30590.
May 15, 1933.
1. CORPORATIONS.
Corporation is entity separate and distinct from its stockholders.
2. RAILROADS.
Railroad corporation, notwithstanding its stock was owned by holding corporation, and notwithstanding railroad was operated as part of another railroad system, held not to have lost its corporate entity (Laws 1882, chapter 542).
3. RAILROADS.
Constitutional provision prohibiting foreign corporation from leasing or operating railroad in state, or purchasing interest therein, held inapplicable in suit to recover alleged overcharge of freight carried over local railroad (Constitution 1890, section 197).
4. CARRIERS.
Railroad corporation, under charter, held not limited in right to fix freight charges to commodities transported from one point on its line to another thereon (Laws 1882, chapter 542, section 19).
5. CARRIERS.
Railroad corporation, where commodities are transported from points on its railroad to points on other railroad, held entitled, under charter, to fix freight rates only on portion of through tariff covering transportation of commodities over its own railroad (Laws 1882, chapter 542, section 19).
6. CARRIERS. Question whether freight rate was properly fixed by board of directors of intrastate railroad held not to arise under agreed statement of facts pursuant to which suit to recover alleged overcharge of freight was tried.
Stipulation in agreed statement of facts stated that parties agreed that freight tariffs under consideration were lawful tariffs binding on the intrastate railroad and connecting carrier to extent shown by terms of tariffs, copies of which may be introduced and read in evidence at the trial without formal proof.
APPEAL from Circuit Court of Hinds County.
May, Sanders, McLaurin Byrd, of Jackson, Chas. N. Burch, of Memphis, Tennessee, and R.V. Fletcher, of Chicago, Illinois, for appellant.
The Gulf Ship Island Railroad Company has not lost its rights under its legislative charter. The Legislature made the stock transferable by assignment and did not restrict its ownership to any particular person or corporation.
Chapter 542, Acts of 1882.
The corporate body, Gulf Ship Island Railroad Company, is still in existence. The corporate entity has not been dissolved.
Clearly it was intended by the Legislature that the shares of stock in the corporation should be subject to purchase and sale just as in any other corporation.
10 Cyc., page 575, par. D; 10 Cyc., page 575, par. b; 10 Cyc., page 704, par. c; 33 Cyc., page 63.
Different and distinct corporations may have the same officers and shareholders and this community of officers and of members does not have the effect of merging the two corporations into each other.
10 Cyc., page 373; 7 R.C.L., page 25.
A corporation is for most purposes an entity distinct from its individual members or stockholders who, as natural persons, are merged in the corporate identity.
7 R.C.L. 25; 7 R.C.L., page 707, par. 712.
Distinct corporations may have same officers and shareholders.
10 Cyc., page 373, par. 10; Pullman's Palace Car Co. v. Mo. Pac. Ry. Co. et al., 115 U.S. 597, 29 (L.Ed.) U.S. 499; In re: Watertown Paper Co., 169 Fed. 252; Jessup et al. v. Illinois Central Railroad Co. et al., 36 Fed. Rep. 735; Monongahela Bridge Co. v. Pittsburg Birmingham Traction Co., 196 Pa. St. 25, 46 A. 99, 79 Am. St. Rep. 685; McTighe et al. v. Macon Construction Co. et al. (Ga. case), 33 L.R.A. 800, at pages 802-803; A.T. S.F.R.R. Co. v. Cochran, admr., etc., 7 L.R.A. 414; Moore, etc., Hardware Co. v. Towers Hardware Co., 87 Ala. 206, 6 So. 41; Fietsam v. Hay, 122 Ill. 293, 13 N.E. 501; Louisville Banking Co. v. Eisenman, 94 Ky. 83, 42 Am. St. Rep. 335, 21 S.W. 531, 1049.
The court was without any authority in this proceeding, to undertake to decide whether the franchise rights of the Gulf Ship Island Railroad Company had been lost by any supposed merger or consolidation.
No private individual can maintain a suit to enforce the forfeiture of a charter, unless specially authorized by the state to do so, nor can a mere ground or cause for forfeiture be successfully used by him as a part of his cause of action in a collateral proceeding, nor can acts amounting to a forfeiture be set up by plea or answer in any collateral action.
1 Elliott on Railroads (3 Ed.), par. 66, page 124; North v. State, 107 Ind. 456, 8 N.E. 159; State v. Rio Grande R.R. Co., 41 Tex. 217; 5 Thompson on Corporations (2 Ed.), sec. 6520; Hinchman v. Philadelphia, etc., R.R. Co., 160 Pa. St. 120, 28 A. 652; Twelfth Street Market Co. v. Phila., etc., R.R. Co., 142 Pa. St. 580, 21 A. 902; Hammett v. Little Rock, etc., Co., 20 Ark. 204; Union Branch R.R. Co. v. East Tenn., etc., Co., 14 Ga. 327; Logan v. Vernon, etc., R.R. Co., 90 Ind. 552; La Grange R.R. Co. v. Rainey (Tenn.), 7 Coldw. 420; 19 L.R.A. 247 (Note); and 58 Am. Dec. 181; Connecticut and Passumpsic Rivers R.R. Co. v. Bailey, 24 Vermont 465, 58 Am. Dec. 181; 10 Cyc. 1086; 10 Cyc. 1087; Bohannon v. Binns, 31 Miss. 355; Middleton v. Georgetown Mercantile Co., 117 Miss. 134; Commonwealth v. Monongahela Bridge Co., 216 Pa. St. 108, 8 Anno. Cas. 68; Parker et al. v. Bethel Hotel Co., 31 L.R.A. 706.
The Gulf Ship Island Railroad Company tariff H-2011 was and is a lawful and legal tariff.
If the tariff H-2011 was lawful and binding on the Gulf Ship Island Railroad Company and the Illinois Central Railroad Company, then of necessity the tariff was lawful and binding on the shipper.
It seems to us that the agreement precludes any inquiry as to how or when Gulf Ship Island tariff No. H-2011 was fixed and approved. The plaintiff and the defendant stipulated that it was a lawful tariff binding on the Gulf Ship Island Railroad and the Illinois Central Railroad. If this be true, then the charges exacted were exacted under a lawful tariff.
4 R.C.L., page 604; Sou. Ry. Co. v. Buckeye Cotton Oil Co., 126 Miss. 562.
The order of the Mississippi Railroad Commission, dated December 3, 1925, is void and of no effect in so far as the Gulf Ship Island Railroad Company is concerned, for three reasons: (1) The Gulf Ship Island Railroad Company was not a party to the proceedings in which said order was entered; (2) The Mississippi Railroad Commission had no right, power or authority to prescribe rates for the Gulf Ship Island Railroad Company; (3) The said order could not apply to the Gulf Ship Island Railroad Company because of the federal injunction enjoining the railroad commission from undertaking to fix the rates for the Gulf Ship Island Railroad Company.
Hinton v. Perry County, 84 Miss. 536; Gulf Ship Island Railroad Co. v. Adams, 85 Miss. 772, 38 So. 348; Stone v. Y. M.V.R.R. Co., 62 Miss. 607; Miss. Railroad Commission v. G. S.I.R.R. Co., 78 Miss. 751; G. S.I.R.R. Co. v. Adams, 90 Miss. 559.
The only power the railroad commission can exercise over the rates of the Gulf Ship Island Railroad Company is to see that they do not exceed the limits fixed by the charter.
Stone v. R.R. Co., 62 Miss. 607; 4 R.C.L., pages 617-618, par. 89; Georgia R. B. Co. v. Smith, 128 U.S. 174, 32 U.S. (L.Ed.) 377; Pengree v. Michigan Central R. Co., 118 Mich. 314, 76 N.W. 635, 53 L.R.A. 274; Stone v. Yazoo, etc., R. Co., 62 Miss. 607; Mississippi Railroad Commission v. Gulf Ship Island Railroad Co., 78 Miss. 751.
The order of December 3, 1925, does not apply to the shipments in question in this suit because to so hold would be to deprive defendant, Illinois Central Railroad Company, of its property without due process of law and would unlawfully discriminate against the Illinois Central Railroad Company.
Mississippi Railroad Commission v. G. S.I.R.R. Co., 78 Miss. 751; G. S.I.R.R. Co. v. Adams, 90 Miss. 559; Stone v. Y. M.V.R.R. Co., 62 Miss. 607; Bohannon v. Binns, 31 Miss. 355; 1 Elliott on Railroads (3 Ed.), page 124; Public Utilities Com. of Illinois v. Railroad Co., 278 Ill. 58, 115 N.E. 904; I.C.R.R. Co. v. R.R. Com. of Ky., 1 F.2d 805; I.C.C. v. L. N.R.R. Co., 227 U.S. 88, 93; L. N.R.R. Co. v. U.S., 245 U.S. 466; Mississippi Railroad Commission v. M. O.R.R. Co., 154 Miss. 871.
Lotterhos Travis, of Jackson, for appellee.
The Gulf Ship Island Railroad has lost the right to fix its own rates by reason of acquisition of control by the Illinois Central Railroad Company.
The Gulf Ship Island Railroad Company was organized under a special legislative charter approved February 23, 1882, and appearing in the Acts of 1882 as chapter 542, page 849.
It will be noted that the legislative charter of the Gulf Ship Island Railroad granted the road the power to fix rates only to a limited extent; that is to say, its board of directors was authorized to fix the rates to be charged on freight up to certain maxima fixed as to certain classifications of freights as the same existed in 1882. The power which is relied on in this case by the appellant as a contract right free from interference can be exercised only by the board of directors and not by the railroad company generally through other officers or agents.
The charter powers of railroads to fix their rates are strictly construed.
2 Hutchinson on Carriers (3 Ed.), sec. 574; 4 R.C.L. Carriers, sec. 87, page 615; Mississippi Railroad Commission v. Y. M.V. Railroad Co., 62 Miss. 607; Mississippi Railroad Commission v. Natchez, etc., Railroad, 62 Miss. 646; Mississippi Railroad Commission v. G. S.I. Railroad, 78 Miss. 750, 29 So. 789; Chicago, etc., Railroad v. Minnesota, 134 U.S. 418, 33 L.Ed. 970.
In the case of Mississippi Railroad Commission v. G.S.I.R.R., supra, the Mississippi court held generally that the Gulf Ship Island had a contract right under its charter to fix rates within the terms of the charter as to single line movements of freight, but that the court expressly excluded from its holding the question of joint traffic rates or rates applicable to shipments over the line of the Gulf Ship Island and some other railroad, which is the case before the court at this time.
The charter power to fix rates is lost when control by stock ownership is acquired by another carrier, substantially amounting to a consolidation.
4 R.C.L. Carriers, sec. 91, page 619; St. Louis, etc., Railroad Co. v. Gill, 156 U.S. 649, 39 L.Ed. 567; Norfolk Western R. Co. v. Pendleton, 156 U.S. 667, 39 L.Ed. 574; Covington Lexington Turnpike Road Co. v. Sanford, 164 U.S. 578, 41 L.Ed. 560; Benwood v. Public Service Commission, L.R.A. 1915C, page 261.
The foregoing authorities establish a principle which, so far as we know, has never been denied. Under these authorities if the Illinois Central Railroad Company had purchased the properties of the Gulf Ship Island Railroad and thereafter operated the two railroads as a single system, substantially as is done in fact, unquestionably there would be no further right to claim that the Gulf Ship Island has the right to fix its own rates to any extent without legislative control. The same result would follow if the Illinois Central had leased the properties of the Gulf Ship Island and thereafter operated these lines as a part of the Illinois Central system. The same result would also have followed unquestionably if the Illinois Central and the Gulf Ship Island had entered into a consolidation in the technical sense, creating a new corporation which succeeded to the properties, rights, franchises and privileges of both of the former corporations. Apparently no case has ever before arisen involving this question under facts like those in the present case, where one carrier has acquired complete control of the other by purchasing its entire outstanding capital stock and thereafter operating the two railroads as a single system but maintaining the technical separate corporate existence of the railroad acquired.
It is the contention of the appellee in this case that under this last state of facts the courts will look through the form to the substance and apply the rule laid down in the numerous authorities herein cited, because the reason for the rule applies in this case as much as in the others.
The charter of the Gulf Ship Island it is true recognized the assignability of the shares of stock of that corporation, but there is nothing in the charter providing that such shares of stock shall always be subject to sale and transfer to any person or corporation who desires to buy regardless of the public policy and law of the state. Therefore, section 197 of the Mississippi Constitution which in general forbids the operation of any railroad in this state by any foreign corporation and requires the operating corporation to domesticate by taking out a Mississippi charter, is applicable to the Gulf Ship Island charter; and it is unlawful and contrary to the laws and public policy of Mississippi for the Illinois Central to acquire all of the capital stock of the Gulf Ship Island and maintain and operate it as a part of its system of railroad under its control, except that the Federal statute expressly authorizes this to be done when approved by the commerce commission.
It must be conceded, of course, that technically speaking the Gulf Ship Island Railroad Company still exists as a separate corporation, but we submit that the shadow cannot control the substance.
Although it is generally held that the fact that one person acquires all of the stock of a corporation does not destroy the existence of the corporation, yet in numerous cases it has been held that such single ownership, particularly by another corporation, may for certain purposes amount to the creation of a single corporation.
Gulf Oil Company v. Lewellyn, 248 U.S. 71, 63 L.Ed. 133; Southern Pacific Co. v. Lowe, 247 U.S. 330, 62 L.Ed. 1144; Y. M.V.R.R. Co. v. Adams, 81 Miss. 90, 32 So. 937; Adams v. Y. M.V.R.R. Co., 77 Miss. 194, 24 So. 200.
The power granted the board of directors of the Gulf Ship Island Railroad could not be delegated to others, and rates established by the Gulf Ship Island Railroad are entitled to no special protection except as fixed by its board of directors.
1 Elliott on Railroads (3 Ed.), sec. 262; 14a C.J., page 95; Y. C.R.R. Co. v. Ritchie, 40 Me. 425; Farmers Mutual Fire Ins. Co. v. Chase, 56 N.H. 321; Percy v. Millaudon, 3 La. 568; Silver Hook Road v. Greene, 12 R.I. 164; Weidenfeld v. Sugar Run Road, 48 Fed. 615.
Argued orally by J.L. Byrd, for appellant, and by Fred Lotterhos, for appellee.
The appellee sued and obtained a judgment against the appellant for an alleged overcharge of freight on several shipments of cotton seed from points on the Gulf Ship Island Railroad consigned to the appellee at Hazlehurst, Mississippi. The Gulf Ship Island Railroad Company and the Illinois Central Railroad Company are connecting carriers, and Hazlehurst is on the Illinois Central Railroad. The freight charges were collected by the Illinois Central Railroad, and were in accord with the through joint tariff of the two railroads; the Illinois Central Railroad paying to the Gulf Ship Island Railroad its part thereof. That part of the freight charges collected covering the transportation of the cotton seed over the Gulf Ship Island Railroad was not in accord with the freight tariffs approved by the Mississippi Railroad Commission, but was in accord with a provision of the Gulf Ship Island Railroad's charter of incorporation. This provision is as follows:
"Sec. 19. Be it further enacted, that said company shall have and possess the power of fixing, from time to time, by its board of directors, the rates at which it will do express or telegraph business, and also the rates at which said company will transport persons or property over its railroads and branches; provided said last mentioned rates, shall not exceed four cents per mile for each passenger, nor exceed the following rates on freights: sixty-five cents per hundred pounds for transporting first, or second class freights one hundred miles or less; forty-five cents per hundred pounds for transporting third or fourth class freight one hundred miles or less; thirty-two cents per hundred pounds, for transporting fifth or sixth class freights one hundred miles or less; (reference being had herein to the classification of freights now recognized and observed on the existing line between New Orleans and Jackson, Mississippi), but in no case shall the railroad company be limited to a less charge than twenty-five cents, for the transportation of any passenger, or parcel, or package or article, however short the distance. The rates so established from time to time by the said board of directors, for transporting persons or property as a railroad company, not exceeding the maximum rates for said railroad business as above set out, may be charged and collected by said company." Laws of 1882, chapter 542.
All of the corporate stock of the Gulf Ship Island Railroad Company is owned by the Mississippi Valley Company, a holding corporation, and all of the stock of the Mississippi Valley Company is owned by the Illinois Central Railroad Company. The Gulf Ship Island Railroad Company operates its road in conjunction with and as a part of the Illinois Central system, but it maintains its separate corporate organization, its directors being elected by the owner of its corporate stock, the Mississippi Valley Company.
The appellee's contentions are: First, the charter right of the Gulf Ship Island Railroad Company to fix its freight rates has been lost, because, they say, it has been merged with and become, for all practical purposes, a part of the Illinois Central Railroad Company; second, that the Gulf Ship Island Railroad's charter right to fix its freight charges applies only to local shipments on its own railroad, and does not authorize it to exercise that power when joining with another railroad company in fixing a through rate on commodities transported from points on its railroad to points on the railroad of the other company; and, third, that it does not appear from the record that the freight rate complained of was fixed by the board of directors of the Gulf Ship Island Railroad Company.
A corporation is an entity separate and distinct from its stockholders. The Gulf Ship Island Railroad Company, therefore, has not lost its corporate entity either because of the purchase of all of its corporate stock by the Mississippi Valley Company or because its railroad is being operated by it as a part of the Illinois Central Railroad system. The railroad itself is still owned and controlled by the Gulf Ship Island Railroad Company, and the control which the Illinois Central Railroad Company has thereover being such only as results from its control over the election of the Gulf Ship Island Railroad Company's board of directors. 7 R.C.L. 25 and 707; Pullman's Palace-Car Co. v. Missouri Pacific R. Co., 115 U.S. 587, 6 S.Ct. 194, 29 L.Ed. 499; Peterson v. Chicago, R.I. P.R. Co., 205 U.S. 364, 27 S.Ct. 513, 51 L.Ed. 841.
The Illinois Central Railroad Company is a foreign corporation, but section 197 of the Constitution, invoked by the appellee, has no application here. If that section of the Constitution has been here violated, as to which we express no opinion, the state only can take advantage thereof.
The appellee's second contention is without merit. The charter does not expressly limit the Gulf Ship Island Railroad Company's right to fix its freight charges on commodities transported by it only when such commodities are transported from one point on its line to another thereon, and to so limit it by construction is not warranted by any of the charter's implications, and would strip the right of any practical value. Of course, the transportation charges of a railroad to which the Gulf Ship Island Railroad Company delivers commodities for further transportation are not governed and cannot be affected by the right of the Gulf Ship Island Railroad Company to fix the transportation charges over its own road. In other words, in fixing joint freight tariffs with other railroads for the transportation of commodities from points on its railroad to points on other railroads, the Gulf Ship Island Railroad Company can act on its charter right to fix freight rates only as to that portion of the through tariff covering the transportation of commodities over its own railroad.
The appellee's third contention does not arise on this record. The case was tried in part on an agreed statement of facts, one of the stipulations of which is that "they (referring to the parties hereto) do agree that" the freight tariffs here under consideration "were lawful tariffs binding on the Gulf Ship Island Railroad Company and the Illinois Central Railroad Company to the extent shown by the terms of said tariffs, copies of which tariffs may be introduced and read in evidence at the trial without formal proof." As we understand this agreement, and the course of the trial in the court below indicates, it was intended thereby to permit the appellant to introduce the freight tariffs without proving the method of their adoption.
Reversed, and cause dismissed.