Fort Worth weekly gazette. [volume] (Fort Worth, Tex.) 1882-1891, 1890-12-25

4 IT,,
| general, in case OF injury to the public interest
! from such cause, to file an Information for in
! junction. Where it is to the interest OF the
| public to prevent an illegal act such as this
being committed it is competent for the attor-
| ney-general to file information to restrain
it,. lsee Drewry & smales (Eng.l Rep, vol. l,
p. ISL
This principle has never been changed, and
should never be. In that case the corporation
| performed its functions to the public by carry
ing passengers and coal. but it exceeded its cor
porate pows by the use of it's funds for buying
! and selling that article 1t indeed was acom-
| petltor with coal merchants. The attorney
abuse of its corporate franchises in using its
| funds for other tina corporate purposes as a
competitor in trade with business men.
| In the case at bar the railway company. with
| in violation of the constitution and laws Of the
| state. They therefore void in the hands of
anybody. By collision with the stockholders
| and others it seeks to have these bonds estab-
| lished as fixed charge upon its property by
| decree of the court. The attorney general en-
| tiers the state as party. claiming the right to
| that way. contending that to pay the enor nous
| judgment sought to be recovered by reason of
these bonds would involve the exercise of the
corporate functions to the damage of the pubic.
If therefore, the attorney-general in
England could restrain a corporation from
the use Of its funds in the coal trade. why can
not the attorney general in Texas restrain
| poration from using its corporate powers to
| raise funds to pay debt it never owedf The
prevented
| that might have been beneficial to the public to
| the injury of the company's competitors in the
| coal trade. The other was to benefit no one ex
| cept private parties who hold claims in express
violation OF the constitution and to the injury of
the public.
This English case is sound precedent, offered
| for the one at bar And it, in connection with
the Attorney General VS.. Railroad Company [3j
Wis, 1927, which sustains that officer in his
action to restrain railway companies OF that
state from excuses or abuses of their franchises
al lilo tad
confidence in support of the states right of
action herein. By analogy also the case of the
State of Texas VS.. the Gulf. Colorado and Santa
Fe Railroad Company ~ Texas. p. 4o4l. decided
by this court. is good precedent for this one.
In that action the state by injunction restrained
several railway companies from violating her
Constitution and laws-mainly what is attempted
here to do.
In the famous Dartmouth college case the
principle was established which is now yielded
to by all the courts that a charter is contract
between the government and the incorporators
who accept it. No doctrine has ever been re-
ceived with more favor by the corporations than
that one. Now then the state alleges that it en-
tered into a contract with the International and
Great Northern railway company to the effect,
among other things, that the company would
not execute any mortgage. issue any bonds or
incur any indebtedness except for money paid
property or labor received and applied to the
construction, completion, equipment. working
or operation of the lines of railway named in its
charter, and that it would carry the traffic of the
country at low rate. 1t alleges many obliga-
y
which Its art of the contract rested. The allie
cations were full of the particulars in
which the conditions ditto =, OF the contract
the judgment OF the court should
be rendered establishing those bonds fixed
charges upon the road. If, therefore, the char
ter is contract entered into by the STATE rs a
party to it with the International and Great
Northern railroad company, the obligations
pany, had not the state the right to enter its
own courts to prevent it? If it could move to do
so by an independent action for that purpose
then what is in its way to the accomplishment
OF that end an intervenor in suit already
pending! If the contract gave her rights that
could be asserted in court, there is no reason
nor law why she should not enter any pending
case as party to protect them.
Aside from her rights arising under a contract
the state possesses higher privileges SOW
ereign who alone can protect the public against
the abuses that flow from corporate mismanage-
Inent. She created that railway company as q
public highway. 1t was made so by the consti-
good as well as for private rain within the lin
itations which necessarily surround all corpor-
ate enterprises OF public nature, Under the
constitution and the laws and by the charter the
state granted that railway company powers and
privileges beyond which it could not go.
1t is an elementary principle that the powers
OF corporation organized under legislative
statutes are such and such only as those statutes
confer
1t therefore remains that the charter of a cor
poration Is the measure OF its powers. and that
cusion of all others.
Now then expressly set forth and alleged in
the pleadings, infinitely and in detail, in refer
ence to the bonds in question are the powers
conferred upon the international and Great
Northern railroad company by the state, within
none of which did the right to execute such
bonds ever exist. The pl Unfit failed to meet
the issue but took nonsuit, virtually confess
ing thereby the correctness of the state s alle-
cations.
There are but few powers that can be exer-
cised with more damaging effect upon corporate
property or the public than the one by which
debts are created. To pay debts the corpora
tion must have funds. To procure funds it must
levy a tax or rate upon the traffic which it
ries. AS sequence, therefore. its traffic rates
must grow in proportion to its indebtedness so
to raise funds necessary with which to pay
it. If the Indebtedness is light low rate on
necessarily the tax rate must be increased 10
pay it. The levy OF traffic rate is a sovereign
power delegated by the state to the corporation
upon express or implied conditions. Ths issu-
ance of debt obligations involves the exercise of
that power SO vested, and if that power is abused
the corporate property suffers I'M and the charter
suffers the public is to that extent injured, and
should have its remedy.
The constitution expressly requires the attor-
ney general to take such action in the name of
the state as may be proper and necessary to pre-
vent any private corporation from exercising
any power not authorized by law. The conten-
tion of appellant is that the appellees' claim is
an Illegal and unauthorized one; that it requires
the exercise of corporate powers and action to
pay it; that an increase OF the traffic rates the
railroad would become necessary to do so, and
in that particular the public would be affected
and injured ny acts in violation Of the letter and
spirit of the law.
The court will observe that as to said bonds
the state contends. first. that they were pro-
hibited by the express provisions OF the law and
second that they were not authorized by any
law. If there had been express provision
against the issuance OF such securities, they
would have been void if they involved the ex-
ercise of corporate power unless they were au-
thorlzed law. If that can be established why
should not the corporation be restrained from
paying themi
Again. the purpose for which Indebtedness
can be incurred by . railway company is limited
to such sums of money as may be necessary for
constructing, completing, improving, or oper.
ating the railway; and the power to incur it
must be exercised by a corporate board OF direc-
tors legally elected. In the case 1T bar the state
shows that the bonds were not issued by any
board of directors authorized to act, nor for any
of the purposes expressly pointed out in the
statute, but that they were creatures of specu-
lative scheme to fix burdens upon the public ex-
cusively for private gain. With notice Of these
facts to the owners before buying the bonds
why should they not be Cancelled?
If the state is not interested as q party to the
charter contract, or as a defender of the public
interest in holding the corporation to its legal
oblig atoms and within its corporate powers
then what party can be? She alleged that nei-
Their Of the receivers, nor the corporation, nor
the stockholders would make defense, but that
they coils ding for the purpose Of fixing the
bonds as 3 debt upon the road by decree Of the
court