#### The Pittsburgh and Connellsville Railroad Company *versus*the Bedford and Bridgeport Railroad Company, *et al.*

1. A corporation, unless restricted by its charter, or statute, has general power to dispose of the whole or part of its property, but cannot sell or assign the whole or part of its franchise unless specially authorized.

2. One railroad company cannot lease to another its franchise of operating a road built or authorized to be built, unless by a grant in express terms, or by necessary implication.

3. In such grants the intention should be very manifest, if not unequivocally expressed; it must not depend on ambiguous phrases, rendering the implication doubtful.

4. The acts of April 23d, 1861, and February 17th, 1870 (leasing railroads) do not authorize one railroad company to lease, etc., the unfinished railroad of another.

5. The act of 1870 was intended merely to extend the privileges of the act of 1861, so as to include the lease of a road beyond the limits of the State.

January 6th, 1871,

at Philadelphia. Before Thompson, C. J., Rear, Agnew, Sharswood, and Williams, JJ.

In the Supreme Court of Pénnsylvania. In equity.

The Pittsburgh and Connellsville Railroad Company, complainants, against the Bedford and Bridgeport Railroad Com*105pany, Charles Wood and others, partners, as Wood, Morrell & Co., John Cessna and John S. Bowers, defendants.

The act of March 31st, 1868 (Pamph. L., 1870, p. -1360), authorized the incorporation of the Bedford and Bridgeport Railroad Company under the general railroad.law of February 19th, 1849, to construct, etc., a railroad from a point at the Pittsburgh and Connellsville Railroad at or near Bridgeport in Bedford County to Bedford in the same county; the capital stock to be $300,000, which might be increased by a vote of the stockholders to any amount sufficient to complete the road ; also to borrow money to complete their improvements and secure it by mortgage on the railroad, franchises, etc. By act of April 15th, 1869 (Id., 1423), subscriptions to stock were declared to be binding, although $5 per share should not have been paid at the time of subscribing. Under these acts subscriptions to about $40,000 had been made to the capital stock. By act of March 16th, 1870 (Id., 453), the company were authorized to extend their road or build a new road from a point at or near Bedford to connect with the Huntingdon and Broad Top Railroad at Mount Dallas in Bedford County, to connect with any other railroad that might be constructed in that county, and to make branch roads to any coal or iron mines in Bed-ford, Somerset, and Cambria counties. They were also authorized to borrow a further sum not exceeding $500,000.

The company was organized early in August, 1870; the management consisted of a president and twelve directors, John Cessna being the president.

On the 1st of October, 1870, according to the affidavits filed: at a meeting of the directors, a quorum being present, the president announced that he had been authorized by responsible men to subscribe for $150,000 of stock, the subscription to be absolute and unconditional for the purpose of making the road from Mount Dallas to Bridgeport; he then, with the assent and knowledge of the members of the board, subscribed that sum in the name and for the firm of Wood, Morrell & Co., defendants. Mr. Cessna drew on them for $15,000, the first instalment, which was immediately paid to the treasurer.

It was also alleged that on the 12th of October, 1870, W. O. Hugh art, president of the plaintiffs, attended a meeting of directors of the Bedford and Bridgeport Company and subscribed for $50,000 of their stock, and paid the first and second instalments, amounting to $10,000.

On the 13th of October the following minute was submitted to the directors:

*106' “Whereas, A large majority of the capital stock of the Bedford and Bridgeport Railroad was subscribed for the distinct and declared purpose of building a railroad from Bedford to Bridgeport, to connect with and’ be operated with the Pittsburgh and Connellsville Railroad, and the releases of the right of way were executed with the same intent and understanding to the Pittsburgh and Conuellsville Railroad Company, and in trust for the Bedford and Bridgeport Railroad Company ; *and*whereas, it will be greatly to the advantage of the town of Bedford and the whole community around it if Bedford is ■ made a dividing point, etc.

“ Resolved, In consideration of the above-recited facts and of fifty thousand dollars concurrently herewith subscribed by W. 0. Hughart to the capital stock of the Bedford and Bridgeport Railroad Company, and of one dollar paid by the Pittsburgh and Connellsville Railroad Company, etc., We, the president and directors of the Bedford and Bridgeport Railroad Company, do hereby vote a lease of that part of the Bedford and Bridgeport Railroad from a point near the town of Bedford, etc., to the intersection with the Pittsburgh and Connellsville Railroad, near to the place called Bridgeport, together with all the powers, etc., to the Pittsburgh and Connellsville Railroad Company and their successors, on the following terms,to wit: That the said Pittsburgh and Connellsville Railroad are to operate said road as .soon as the same is completed and in running order, to furnish all necessary repairs and manage and work the said road to the best advantage of the stockholders thereof, yielding'and paying annually as a rent therefor one-third of the entire gross receipts from all sources, for passengers, freights, and mails carried over said part of the Bedford and Bridgeport Railroad, and this lease is to be perpetual as long as the terms thereof are complied with, and we order and direct a formal lease to be drawn and duly executed in duplicate by the president and secretary, under the seal of our cor-* poration, and the same having been received and accepted and agreed to by a vote of the board of directors of the Pittsburgh, and Connellsville Railroad Company and duly and lawfully executed on their part, this contract is to be regarded as complete and fully executed.

“ *And further,*It is understood and voted as a conditionof the subscription of stock this day made by W. 0. Hughart, •on the basis of which this resolution is passed, that the said $50,000 of stock and all other stock now on the books of the Bedford and Bridgeport Railroad Company, except the $150,000 of stock subscribed by Wood, Morrell & Co., shall *107be applied to the grading and construction of that part of the Bedford and Bridgeport road hereby leased and the said condition is to be incorporated in the lease.

“ *And*further, Whereas Mr. Hughart will concurrently herewith pay up $10,000, being the two instalments on his subscription of capital stock, if for any reason there should be a failure of the complete consummation of this contract, the said $10,000 is to be refunded to Mr. Hughart.”

The president announced that in his opinion the board of directors had no such power as is contemplated by said resolutions without a vote of the stockholders, and, therefore, he declared the preamble and resolutions out of order.

On appeal from the ruliug of the president, the board decided that the preamble and resolutions were in order, and they were finally adopted by the board by a vote of five to one, two of the directors declining to vote.

The president ruled that a quorum not having voted the question was lost. This decision on an appeal was overruled, a quorum not voting on the appeal.

The president ruled that no quorum having voted the *appeal*was not disposed of.

On motion, the president and secretary were ordered to execute a contract with Messrs. B,. H. Campbell, Son & Go., for the graduation, masonry, and bridging of the road from Bedford to Bridgeport, and the board adjourned to meet on the 28th instant.

Wood, Morrell & Co. afterwards petitioned the Supreme Court for an injunction to restrain the officers of the Bed-ford and Bridgeport Bail road Company from executing the lease to the plaintiffs, denying the validity of the lease, and asking that their rights be protected.

At the adjourned meeting of the directors of the Bedford and Bridgeport Company, October 28th, 1870, a committee was appointed to put in an answer to the petition.

A preliminary injunction was awarded on the petition of Wood, Morrell & Co.

The bill in this ease was then filed ; it set out:

1. The organization of the Bedford and Bridgeport Company under the act of March 31st, 1868.

2. The termini of the road were Bedford and Bridgeport on the plaintiffs’ road. The principal object of thus procuring the incorporating act was to connect Bedford and the county through which the road would pass, with plaintiffs’ road, to create a cheaper mode of access to the iron ores, etc., of that region to Pittsburgh and Baltimore; that stock was subscribed by citizens of Bedford, the adjoining counties, and Pittsburgh ; with these views the plaintiffs were applied *108to by the officers of the Bedford and Bridgeport Company to procure subscriptions to stock, and to take alease of their road on condition of equipping and operating it.

8. In pursuance of these applications W. 0. Hughart, president of the plaintiffs, attended a meeting of the directors of the Bedford and Bridgeport Company, and subscribed for 1000 shares of stock and paid two instalments, being $10,-000, solely on the expressed intention of that company to lease their road to the complainants. Hughart would not have made the subscription unless he had supposed the arrangement had been fully determined.

4. Set out the proceedings by the directors of the Bedford and Bridgeport Company, as to granting the lease.

5. On the 9th of November, 1870, the directors of the plaintiffs accepted the lease, and directed it to be executed and delivered.

6. John Cessna, on October 1st, 1870, as agent of Wood, Morrell & Co., subscribed in their name $150,000 of capital stock; the subscription was not authorized by the board, Cessna made it with the express stipulation that if Hughart, at the next meeting, October 12th, would subscribe $50,000, he would withdraw Wood, Morrell & Co.’s subscription.

7. Wood, Morrell & Co. claim that they have paid to the company $30,000 on account of their subscription ; the plaintiffs deny that such sum had been received by the company, but these moneys were paid into a bank with which Bowers, the treasurer, was connected, without the approval of the directors.

8. 9,10. Wood, Morrell & Co. claim to be *bona fide*stockholders in the Bedford and Bridgeport Company; that they, holding a majority of the stock, have the right to disregard the lease, and have filed a bill to restrain the carrying the lease into effect; at a recent irregular meeting of stockholders, held November 11th,.1870, at which only they and a few other stockholders, owning but 100 shares, were present, resolutions were adopted declaring the lease inexpedient, and forbidding the directors to enter into it, and they intend at the next annual meeting of stockholders, to be held on the second Monday in January, 1871, by voting on their stock, to elect directors hostile to the original design of the *bona fide*stockholders, and to treat the lease as of no effect.

11,12. The subscription by Wood, Morrell & Co. was not made in good faith, for the purpose of promoting the construction of the road from Bedford to Bridgeport in pursuance of the original act of incorporation, but to embarrass and defeat such construction, and to thwart the purpose of *109the original *bona fide*stockholders to have the road leased to and operated by the plaintiffs.

13. The plaintiffs would be greatly embarrassed in carrying out the lease with the Bedford and Bridgeport Company, unless Wood, M'orrell & Co., John Cessna, and others confederating with them, be “ restrained by decree of this court from maintaining and asserting their aforesaid unjust and inequitable designs.”

They prayed for relief, as follows:

1. That the lease-be declared valid and binding.

2. That the subscription of Wood, Morrell • & Co. be declared null and void, as not having been made in good faith ; and that now by a special, and hereafter by a final injunction, the Bedford and Bridgeport Company, and John Bowers, treasurer, be restrained from receiving any money from them on account of their subscription, that what they have paid be returned to them, and that Bowers be restrained from paying said money for any purposes of the company until final decree in this case.

3. That Wood, Morrell & Co. he restrained from acting as stockholders in the company, and particularly from voting on their subscription at the meeting of January 2d, 1871.

4. That the meeting of November 11th, 1870, and the proceedings there, be declared void.

5. For further relief.

An answer was filed by all the defendants ; it set out:

1. They admitted the first paragraph of the bill, and averred that, by the passage of the act of March 16th, 1870, the company was authorized to extend their road to Mount Dallas.

2-3. Citizens of Pittsburgh suhseribed to stock, but the plaintiffs were not'requested to subscribe. Subscription for 11 shares were obtained in Pittsburgh, beside that of Hughart, who subscribed for 1000 shares. When these subscriptions were made the plaintiffs had no road with which defendants could connect. The other allegations in these paragraphs were denied.

4. This paragraph was denied ; the president decided that the preamble and resolution -were not adopted, as no quorum voted ; an appeal was taken, which had not since been considered, and the decision therefore stood.

5. The Bedford and Bridgeport Company had not been informed of the acceptance by the plaintiffs of the proposition in the preamble and resolutions. The defendants did not authorize the notifying of the plaintiffs of the preamble and resolutions; defendants had never seen the lease.

*1106. This paragraph, except as to Wood, Morrell *& Co.’s*subscription, was uufounded.

7. The charges in this paragraph were not true. Bowers was duly elected treasurer of the company, and had been so recognized by all the board. Checks were drawn on him by the board and paid by him. He had received from Wood,. Morrell & Co. $60,000, and from other subscribers $3415 ; had paid out $29,000 on checks of the directors, which absorbed what had been received from all sources, except Wood, Morrell & Co., and $14,000 of that paid by them. The grading, etc., of the road had been ordered from Mount Dallas to Bridgeport; payments to contractors would shortly be due, and without the money from Wood, Morrell & Co. these payments could not be met. By a unanimous vote, the directors contracted liabilities to about $184,000 for grading; and for land damages, ties, etc., about $45,000 more. The available subscriptions in Bedford County would not exceed $50,000. Of Hughart’s conditional subscription of $50,000, one of the contractors was required to take $15,000 in stock for his labor. Without Wood, Morrell & Co.’s subscription the company could not grade the road, much less procure supei’structure and rolling stock, which would cost from $250,000 to $300,000 more.

8. Wood, Morrell & Co. were *bona fide*stockholders; there was no lease to be overturned; the court having on their petition awarded an injunction against the company as to the lease, defendants averred that to be a bar to the complaint.

9. The stockholders’ meeting of November 11th, 1870, was legally convened by the president under the act of February 19th, 1849, and was regular; a majority of the stockholders were present.

10. 11, 12. Wood, Morrell & Co.’s subscription was made in good faith, it being their desire that the road from Bed-ford to Bridgeport, which is now in process of construction, should be completed; their subscription of $150,000 had been invariably recognized by all the directors until recently.

John Cessna, president; John W. Singenfelter, David M. Black, George W. Gump, directors; and John S. Bowers, treasurer, also answered separately, precisely as in the foregoing answer of all the defendants.

The auswers were accompanied with affidavits of the matters averred in them.

The plaintiffs moved to dissolve the injunction restraining the directors of the Bedford and Bridgeport Railroad Company from executing and delivering the lease of their road, etc., to the plaintiffs.

*111*G. Shiras, Jr.,*and *G. W. Burgvnn,*for plaintiffs.

*John Cessna*and *Theodore Guyler,*for defendants.

Mr. Justice Sharswood

delivered the opinion of the court, February 9th, 1871:

The principal question which has been raised and discussed upon this motion to dissolve the preliminary injunction heretofore granted is, whether the Bedford and Bridgeport Railroad Company have any right to execute a lease to the Pittsburgh and Connellsville Railroad Company, as proposed by the resolution offered in the board of directors at their meeting of October 13th, 1870. If it shall appear that no such right exists, then it will be altogether unnecessary to consider and determine two other questions which have been the subject of much earnest contention before us.

First, whether the directors have such power without the consent of the stockholders to be expressed at a meeting to be called under the charter. And second, whether, supposing them to have such power, the resolution was adopted by the vote of a majority of the board at a meeting at which a lawful quorum was present.

A corporation, unless specially restricted by its charter, or some statute, has general, power to dispose of its property, the whole or part, but it has no right to sell or assign its franchises, either in whole or in part, unless specially authorized by law. This seems clearly to be the result both of the English and American cases: Angell and Ames on Corp., sect. 191, and notes; 1 Redfield on Railways, 588, chap. xxii. It Í3 taken for granted in Gratz *v.*The Pennsylvania Railroad Company, 5 Wright, 447. One railroad company cannot lease to another its franchise of operating a road built, or authorized to be built, unless it can show a grant of power from the sovereign, in express terms, or by necessary implication. In England, courts of equity have frequently enjoined railway companies from carrying leasing contracts into effect which wanted the expivss authority of Parliament: 1 Red-field, 592. The general canon of construction applicable to legislative grants of this class, derogating as they do from common right and public policy, requires that the intention should be very manifest, if not to be unequivocally expressed; at all events not to depend upon ambiguous phrases rendering the implication doubtful. It is not pretended that the Bedford and Bridgeport Railroad Company have any special authority to make such a lease, either in the act incorporating them or any supplement thereto. It is contended that all railroad companies have such special authority by the provisions of the act of Assembly of April 23d, 18(11, P. L., *112410 ; and of February 17th, 1870, P. L., 31. By the first of these it is made lawful for any railroad company to purchase and hold the stock and bonds, or either, of any other railroad company: “ And it shall be lawful for any railroad com•panies to enter into contracts for the use or lease of any other railroads, upon such terms as may be agreed upon with the company or companies owning the same, and to run, use, and operate such road or roads in accordance with such contract or lease. Provided, That the roads of the companies so contracting or leasing shall be directly, or by means of intervening railroads, connected with each other.” An unusual degree of caution and accuracy seern's to have been employed in the language of this statute. There are no general comprehensive phrases; not only is the use or lease.to be of a “ railroad,” implying a finished road, but this intention is still more clearly evinced by the words which follow explanatory of the grant, namely : “ power to run, use, and operate such road,” not, it will be observed, “ to contract or build ;” which words would have naturally suggested themselves had the intention been that one company could lease to another the franchise of making a road. It would be violating the letter and, it seems to us, the true spirit and policy of this legislation, to extend the construction beyond what has been thus plainly expressed. The proviso is very significant upon this question of intention ; for how can two roads be said to be connected unless they are completed, — unless a connection has been actually made so as to form one continuous line, and especially in the case where there is an intervening road, for if such intervening road should never be made they never can be connected with each other. If the connecting roads need not be completed, it is plain that the intervening roads need not be. Thus, a road at one end of the State might become the lessee of a road at the other end, with nothing but projected railroads, with no existence but in the acts of Assembly, intervening between them. There is a plain distinction in policy between allowing a corporation to purchase the mere charter or franchise of making a road, and then going on to build it or not according as may be most for their interest, and that of allowing them by contract “ to run, use, and operate” a road already built, and of which it is hardly to be supposed that they would become lessees without an intention, to make it as productive as possible. Light is thrown upon the intention of the legislature in this general provision by referring to another special act which may be regarded as *in pari materia*with it. By the act of April 13th, 1860, Pamph. L., 711,it was provided that “the President and Managers of the Sunbury and Erie Railroad Com*113pany be and they are hereby authorized to make and enter into any contract or contracts with the managers, or president and directors of any other railroad company or companies in this Commonwealth, having relation to the completion, the working of, or to the traffic originating on, or passing over or to and from the Sunbury and Erie Railroad, and which may be considered just and reasonable by the contracting parties.” Thus it will be seen that the legislature in granting this power specially in the case of an unfinished road, expressly included that of completion. It is true, as has been strongly urged, that the proviso being restricted to leases and contracts, and not to the power given by the first clause of the act to any railroad .company to purchase and hold the stock and bonds of another, such other road it would seem need not be connected, either directly or by means of intervening roads, with the road of the company purchasing its stock or bonds. In this way, it is said, that one railroad company, by buying and holding a majority of the shares of stock, may effectually acquire the entire control of any other railroad company, whether its road be connecting or not, and whether finished or not. If control can be obtained in this way why should the legislature restrict them in the matter of leasing? This is not a question for us to answer, *lia lex scripia est.*The legislature has seen fit to draw this distinction, though it may be a distinction without any difference, and we are bound to carry out their intention.

The act of February 17th, 1870, was evidently intended merely to extend the privilege granted by the act of 1861, so as to include the lease of a road beyond the limits of the Commonwealth. It has a proviso in nearly the same words as the act of 1861, with this additional clause: “Thus forming a continuous route or routes for the transportation of persons and property;” an addition which certainly does not weaken the force of the reasoning which has been presented in regard to the construction of the act of 1861.

Motion refused.

Mr. Justice Ag-new delivered a dissenting opinion, in which Mr. Justice "Williams concurred.