Case Name: THE CAPITAL TRACTION COMPANY v. OFFUTT
Court: Court of Appeals of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1900-11-07
Citations: 17 D.C. App. 292
Docket Number: No. 948
Parties: THE CAPITAL TRACTION COMPANY v. OFFUTT.
Judges: 
Reporter: Reports of Cases Adjudged in the Court of Appeals of the District of Columbia
Volume: 17
Pages: 292–314

Head Matter:
THE CAPITAL TRACTION COMPANY v. OFFUTT.
Corporations; Consolidation; Diability op Vendee por Torts op Vendor.
1. Statutory authority to one corporation to purchase the property, or the property and franchises of another corporation, with appropriate action thereunder by the corporations to be affecte’d, can not of itself and without further provision of some kind, operate to effect a consolidation of the two companies, so as to charge the purchaser company in law with the liabilities of the vendor; construing the act of Congress of March i, 1895, authorizing the Rock Creek Railway Company of the District of Columbia to purchase the line or lines of any street railway company owning or operating an intersecting or connecting line.
2. Where as part consideration for the transfer under statutory authority, by one street railway corporation to another of all of its property, the vendee agrees to “ assume, discharge and perform all the obligations ” of the vendor “and all its liabilities of what kind soever” and to that end to use the property conveyed, so far as might be necessary, such agreement, although consummated, will not render the vendee liable at law to a third party for the obligations of the vendor, whatever may be its resulting liability in equity under such contract.
3. Where under a statute authorizing the purchase by one street railway corporation of the property of another, and the increase of the capital stock of the purchasing corporation to an amount sufficient to provide the purchase price, the purchasing corporation agrees to pay to the selling corporation fio, 750,000 in new stock so authorized, as the approximate value of all the assets of the latter, and that of this sum $8,000,000 shall be used for the retirement of the bonds of the selling corporation and the remainder for the purchase or extinguishment of its stock, such transaction will not be deemed a consolidation, the effect of which will be to render the purchasing corporation liable at law for the liabilities of its transferrer, but to be a mere purchase and sale.
No. 948.
Submitted November 9, 1900.
Decided November 7, 1900.
Hearing on an appeal by the defendant from a judgment of the Supreme Court of the District of Columbia, entered upon the verdict of a jury in an action to recover damages for the alleged unlawful occupation and use by the defendant of a public street in front of the plaintiffs’ premises.
Reversed.
The Court in its opinion stated the case as follows:
This suit was instituted by the appellee, George W. Offutt, in the Supreme Court of the District for damages to his business alleged to have resulted from the unlawful occupation and use of the public street in front of his premises by the appellant, the Capital Traction Company, and by its predecessor in the same franchise, the Washington and Georgetown Railroad Compauy.
The appellee is a grocer and conducts' his- business in a store or warehouse on the north side of M street, formerly Bridge street, in that part of the city of Washington formerly known as Georgetown, a little to the west of Thirty-second street, formerly High street, to which place he moved in 1883, having previously been engaged in the same business at the southeastern corner of the intersection of the same two streets. He seems to have built up quite a large business, a considerable part of which was with persons from the country who came there with their wagons and vehicles, and whose vehicles very often occupied a large part of the street, especially on market days. From 1883 to 1892, his business continued to increase in value and to Realize larger profits from year to year; but it decreased again from 1892 to 1896, when the declaration in this suit was filed, in consequence, as the appellee alleged, of the illegal acts of the appellant and its predecessor which are set out in the declaration. And for this damage these proceedings were instituted by the filing of a declaration at common law on November 10, 1896.
The appellant, the Capital Traction Company, is a corporation organized for the purpose of conducting a street railroad system in the District of Columbia. It was first incorporated as the Rock Creek Railway Company of the District of Columbia under an act of Congress of June 12, 1888, for the purpose of constructing and operating a street railroad from a point in the northwestern boundary of the city of Washington outward northwestwardly into the county of Washington; and it was authorized by subsequent enactments to alter its line to some extent, to build outwards in the county of Washington to the northwestern line of the District of Columbia, and to extend its line eastward within the city on U street, so as to intersect the already existing railroad of the Washington and Georgetown Railroad Company at Fourteenth street and at Seventh street, which it proceeded in due time to do.
Subseqüently, by an act of Congress of March 1, 1895, the Rock Creek Railway Company of the District of Columbia was authorized to “ contract with any street railway company owning or operating a connecting or intersecting line for the joint management, lease, or purchase of such connecting or intersecting line or lines and operate the same in connection with its original line; and in case of such contract to provide the means necessary by an increase of the capital stock, not to exceed the actual consideration paid or the actual cost of the necessary equipment.” And the act further provided that, in the event that the said company should enter into any such contract, it might, if deemed advisable by its directors, change its name from that of “The Rock Creek Railway Company of the District of Columbia” to that of “The Capital Traction Company.”
The Rock Creek Railway Company of the District of Columbia entered into a contract, such as was contemplated by the act, with the Washington and Georgetown Railroad Company, purchased the property and franchises of the latter company, whose lines it thereafter continued to operate, and changed its name, as allowed by the act, to that of “ The Capital Traction Company.”
The Washington and Georgetown Railroad Company had been incorporated and organized under an act of Congress of May 17, 1862, to construct and operate a street railroad in the cities of Washington and Georgetown, along Pennsylvania avenue in the former city and Bridge street in the latter, with two branches, one to run northward on Fourteenth street from Pennsylvania avenue to the boundary of the city of Washington, and the other on Seventh street to run north to the boundary of the city, and south to the Potomac River, besides another smaller branch to the Baltimore and Ohio Railroad station. The western terminus of the road in Georgetown was specified in the act to be “ on Bridge street, at the intersection with High street, or at such point on said Bridge street east thereof in the city of Georgetown as may be designated hereafter by the corporate authorities thereof; ” and the authority was given “to lay down a double-track railway, with the necessary switches and turnouts.” The act also contained the following provision in regard to stations, stables, and other terminal facilities:
“Sec. 10. Be it further enacted, That said company shall procure such passenger rooms, ticket offices, stables and depots at such points as the business of the railroad and the convenience of the public may require. And the said company is hereby authorized to lay such rails through transverse or other streets as may be necessary for the exclusive purpose of connecting the said stables and depots with the main tracks. And the said company is hereby authorized to purchase or lease such lands or buildings as may be necessary for the passenger rooms, ticket offices, stables and depots above mentioned.”
There were several subsequent acts of Congress in reference to the business and the affairs of this company to which it does not seem to be necessary here to refer.
The company’s road and branches were duly constructed under these statutory enactments; and for upwards of twenty-seven or twenty-eight years were operated by horsepower; that is, the cars were drawn by horses. In the meantime at the Georgetown terminus land was acquired and stables were constructed for the storage of the cars and the housing of the horses of the company at a place on the south side of Bridge street, opposite to the appellee’s place of business, but a little to the west of it; and the tracks of the company were extended westward of the intersection of Bridge and High streets, and turnouts or switches were laid to run the cars into these stables. By means of a curvilinear track within these stables the cars were enabled to be transferred from the north to the south track, and the work of switching in the street was avoided. This extension westward of the tracks of the company seems to have been accomplished with the consent of the municipal authorities of the District, at all events without objection from them; and'no complaint is made by the appellee of the use of the street by the railroad company during this period in which its cars were drawn by horses.
But by section 3 of the appropriation act of Congress of August, 6, 1890, the company was required to substitute within two years for horsepower the motive power of cable or electricity. It adopted the cable system; and the cars were begun to be operated by this system on August 6, 1892. It is claimed that the transfer of the cars from the north to the south track was impracticable in the adjacent stables as then constructed, in the manner in which the shifting had been done in the time of the horse cars; and accordingly a switch was constructed in the street adjacent to and in front of the appellee’s premises. The constant arrival and shifting of the cars from one track to the other by means of this switch, it is claimed by the appellee, caused a virtual blockade in front of his premises, made the place dangerous for the wagons and vehicles that had been accustomed to come there, and practically drove them off and deprived the appellee of a large number of his customers, who found it more convenient to resort to other places. Many of them never returned, even after the blockade was removed.
This condition of things was continued from August 6, 1892, to July 3, 1896, at which time the road was extended to Union station, near the Aqueduct bridge, some three or four squares or blocks farther west on Bridge street, where the shifting of the cars was thereafter done. This Union station was required by an act of Congress of August 23, 1894, to be constructed by the Washington and Georgetown Railroad Company. Its site was defined in the act; and it was required to be completed within one year thereafter. It was further provided that upon its completion the cars of the company should be run into it, “ and thereafter the said company should cease entirely to switch cars on M street northwest.” In due time this was all accomplished. The cars were first run into the Union station on July 4, 1896, after which there was no shifting or parking of cars adjacent to the plaintiff’s premises.
In the meantime by the act of Congress of March 1,1895, already referred to, the Rock Creek Railway Company had been authorized to enter into contract with any street railroad company owning an intersecting line or lines for the joint operation, lease or purchase of such intersecting line or lines of railroad. It is matter of history that those who controlled the Washington and Georgetown Railroad Company had also acquired the control of the Rock Creek Railway Company, and seeking in some way to combine their interests, but deeming the charter of the latter company as the more advantageous under which to operate, procured from Congress the act of March 1,1895, the important features of which in the present connection have already been stated. In pursuance of its provisions the two companies entered into a contract, which was finally ratified by all the stockholders of both, whereby, after a lengthy preamble reciting the reasons for the contract, it was agreed between the parties that the Rock Creek Railway Company should purchase from the Washington and Georgetown Railroad Company the entire lines of railway of the latter, and all its power houses, car houses, depots, stations, rolling stock, money, choses in action, and all other property, real and personal, belonging to it, with all its rights, privileges, and franchises, for the sum of $10,750,000, payable in the capital stock of the Rock Creek Railway, which had been authorized by the act of Congress to be increased by that amount, it having previously been $1,250,000, and being now $12,000,000. Of this sum of $10,750,000, it was agreed that the sum of $2,750,000 should be paid to the then existing holders of the capital stock of the Washington and Georgetown Railroad Company upon the surrender of their stock in this latter company at the market value of $275 a share; and the remainder, that is, the sum of $8,000,000 of stock, was to be used in the redemption and cancellation of the bonds of the Washington and Georgetown Railroad Company. Among the recitals in the contract were some to the effect that it was one of the conditions of the contract that the obligations of the Washington and Georgetown Railroad Company should be discharged; that the Capital Traction Company should defend all suits against it, and should satisfy all judgments that might be rendered in such suits; and accordingly the second article of the contract provided as follows:
“In consideration of the sale aforesaid by the said party of the second part (the Washington and Georgetown Railroad Company) and the transfer, conveyance, and delivery to the said party of the first part (the Rock Creek Railway Company) of the railway, property, and franchises aforesaid of the said party of the second part, the said party of the first part will assume, discharge and perform all the obligations aforesaid of every kind of the said party of the second part, including all debts owing by it, and all its liabilities of what kind soever, and to that end will use and apply, so far as may be necessary, the said property, real and personal, now of the said party of the second part, hereby contemplated and provided to be transferred, conveyed, and delivered to the said party of the first part.”
The contract purported in terms to be made by each party for itself, its successors, and assigns. It bore date on July 5, 1895, and was carried into final effect on September 21, 1895, by a deed of conveyance of all its property and franchises by the Washington and Georgetown Railroad Company to the Capital Traction Company, which thereupon went into possession thereof 'and has since continued to own and operate all the lines of railroad that previously belonged to the Washington and Georgetown Railroad Company. The officers of the Capital Traction Company then successively resigned their places, with one exception; and the officers of the Washington and Georgetown Railroad Company, with a similar exception, were elected in their places. The president of the latter company became the president of the Capital Traction Company. But the Washington and Georgetown Railroad Company was not dissolved; nor were there any formal steps then or afterwards taken to terminate its corporate existence. There was no resignation of its president or other officers, although no business seems thereafter to have been performed by them, and no corporate meeting held. Suits, however, continued to be defended and prosecuted in its name; and service of process was had in such suits upon the continuing president of the company, and appeal bonds were given by the company through its president.
In this condition of things, about sixteen months after the transfer of all its property and rights by the Washington and Georgetown Railroad Company to the Rock Creek Railway Company, thereafter known as the Capital Traction Company, the present suit was instituted on November 10, 1896, by the plaintiff against the Capital Traction Company, by the filing of a declaration at common law in three counts. Of these counts the.first and second, which are not materially different from each other, charged the unlawful occupation of M or Bridge street, west of Thirty-second or High street, by the Washington and Georgetown Railroad Company with its tracks and switches, and the illegal use of those tracks and switches for the shifting of cars and the keeping of cars standing thereon in front of the plaintiff’s premises and adjacent thereto, from July 1, 1892, to September 21, 1895, and after the latter date and until the filing of the declaration the same unlawful use and occupation by the Capital Traction Company, whereby the customers of the plaintiff were excluded from having the same free access to the plaintiff’s premises which they formerly had, greatly to the detriment of his business. The third count charged the Capital Traction Company with the alleged illegal action of the Washington and Georgetown Railroad Company from July 1, 1892, to September 21, 1895, without any allegation of the continuance of the nuisance by the Traction Company itself after the latter date. It would seem that at the trial the counsel for the plaintiff sought to abandon any claim for damages for the alleged unlawful occupation of the street by either company with tracks and switches, and to confine the recovery to the alleged unlawful use of the tracks and switches so constructed; but in the subsequent charge of the court to the jury the two things seems to have been to some extent blended, as they were in the plaintiff’s declaration; and a considerable part of the controversy at the trial was over the question whether the Washington and Georgetown Railroad Company had any right under its charter or other acts of Congress to extend its tracks for any purpose or in any form beyond the west line of the intersection of the two streets.
To this declaration the defendant pleaded the general issue and the statute of limitations. By virtue of the latter plea, the effect of which was conceded on the part of the plaintiff so far as it was applicable, the period of alleged unlawful use and occupation was restricted to a duration of three years before the institution of the suit; that is, from November 10, 1893, to November 10, 1896. And as the unlawful occupation and use, if it ever existed, is conceded to have ceased on and after the completion of the Union station and the running of the cars thereto on and after July 4, 1896, the period of liability can be no longer than from November 10,1893, to July 3, 1896. But these dates do not seem to have been very greatly regarded in the development of the case before the jury.
The trial seems to have been quite protracted; and in the course of it numerous exceptions were reserved to the admission or exclusion of testimony by the court. There were also exceptions to the instructions as given or refused by the court. The verdict of the jury was for the plaintiff in the sum of $25,000; and upon that verdict judgment was entered, from which the defendant has appealed to this court.
Mr. R. Ross Perry for the appellant:
1. The Washington and Georgetown Railroad Company could not legally consolidate with The Rock Creek Railway Company of the District of Columbia. The defendant acquired its present corporate name by virtue of certain proceedings had in pursuance of the act of March 11, 1895. This act did not provide for any consolidation but did provide for a sale. This sale was made and nothing was done to effect and consummate it save what the statute explicitly provided for. This result of this process must be a sale, for that is what the act authorized, and not a consolidation. The latter result can not be accomplished unless the said act authorized it and this it did not do. 7 Thomp. on Corp., Secs. 8216, 8217; Compress Co. v. Compress Co., 70 Miss. 669; Lanman v. Railroad Co., 30 Pa. St. 42; S. C. 72 Am. Dec. 685, and note; McMahon v. Morrison, 79 Am. Dec. 420; Loan Co. v. Railroad Co., 157 Ill. 641, 651; Kavanaugh v. Life Asso., 84 Fed. Rep. 295; Railroad Co. v. Kentucky, 161 U. S. 677. A sale can never operate as a consolidation save in a jurisdiction where consolidation is allowed. Langhorne v. Railroad Co., 91 Va. 369; Railroad Co. v. Railroad Co., 120 Mass. 397. Authority to consolidate does not exist in this jurisdiction unless given under the act of Congress referred to. The instances in which corporations have been held to be still in existence, although for years they have done no business and have elected no officers or directors, are numerous. 4 Thomp. on Corp., Sec. 4505; 5 Id., Ch. 153; Thomson v. Stanley, 20 N. Y. Supp. 317; Beardsley v. Johnson, 121 N. Y. 224. Whatever may be the law elsewhere upon this subject of consolidation, there does not seem to be room for discussion with respect to it in this jurisdiction. Pearsoll v. Railroad Co., 161 U. S. 646; Railroad Co. v. Kentucky, 161 U. S. 677; Gray v. Steamship Company, 115 U. S. 116 ; see, also, 3 Cook on Corp. 2135 et seq. and note.
2. Unless there has been a consolidation this action can not be maintained against the defendant for any acts or omissions of the Washington and Georgetown Company prior to September 21, 1895, the date of the said sale. The right to bring an action can not be transferred or assigned. Dicey, Parties to Actions, Rules 6, 7, 81, 96, 99. See, also, United States v. Driscoll, 96 U. S. 421; Bank v. Grand Lodge, 98 U. S. 123; Griffith v. Buck, 13 Md. 102.
3. The very terms of the act of March 1, 1895, exclude a consolidation. They authorize a contract between the Rock Creek Railway Company and “ any street railway company running or operating a connecting or intersecting line for the joint management, lease or purchase of such connecting or intersecting line or lines,” etc. Congress, by this act, had its attention directed to this subject of the transfer by one railway to another of its management or property or both. It chose to confine its legislation to three subjects — joint management, lease and purchase. It omitted any mention of or reference to consolidation. Hence counsel for appellee, to sustain their objection, must establish that sale and consolidation are the same. But this can not be maintained. The term consolidation has acquired a fixed, definite, accepted and judicial meaning, which is, that it is a dissolution of all the original corporations, and, at the same instant, the creation of a new corporation, with property, rights, liabilities and stockholders, derived from those passing out of existence; and it is held inapplicable to a union of two or more companies in such a way that one of the original corporations is continued in existence, while the others are merged in or absorbed by it. Meyer v. Johnston, 64 Ala. 603; Brice’s Ultra Vires (Green), 538-9, note 550; McMahon v. Morrison, 16 Ind. 172 ; Lanman v. Railroad Co., 30 Pa. St. 42; Powell v. Railroad Co., 42 Mo. 63 ; Bishop v. Brainard, 28 Conn. 285-99 ; Clearwater v. Meredith, 1 Wall. 25; Railroad v. Missouri, 152 U. S. 301.
4. The trial court was without jurisdiction. The principlés which determine the right of a third person to sue, upon a contract to which he is not a party and whether he must sue at law or in equity, are settled for this jurisdiction in Keller v. Ashford, 133 U. S. 610; Willard v. Wood, 135 U. S. 309, and Willard v. Wood, 164 U. S. 502. The right of the plaintiff in the present case to enforce at law defendant’s assumption of the liabilities of the Washington and Georgetown Railroad Company depends upon the application of these principles to the case as made by the pleadings. The agreement was made with the Washington and Georgetown Railroad Company, only, and for its benefit, upon a consideration moving from it alone; there is no privity of contract between the plaintiff and defendant. There is no averment in the declaration that the plaintiff knew of or assented to the agreement at the time it was made; or that he has since done or omitted any act on the faith of it. In the absence of such averments the trial court was without jurisdiction. This want of jurisdiction in the trial court the appellate court is bound to take notice of even in the absence of a plea to the jurisdiction, as was done in Willard v. Wood, supra. See, also, Slacum v. Pomeroy, 6 Cr. 224. Nor can a case cognizable at common law be united with one cognizable in equity so as to enable one court to maintain jurisdiction of both. Giesy v. Gregory, 15 App. D.C. 49.
Mr. A. 8. Worthington and Mr. Henry E. Davis for the appellee:
The coming together of two or more corporations, whether the act be characterized as a union, a merger, an amalgamation, or a consolidation, depends upon neither the mere authority nor the “ means, steps, or procedure ” by which it has been accomplished. It is the result to which the law looks to determine what the act in effect is. There is no hard and fast definition of the words consolidate and consolidation, and when a statute authorizes two companies to unite upon terms to be agreed on by and between them, the character and extent of the consolidation is determined by the stipulations of the agreement in the premises. Tested by these principles the act of March 1, 1895, authorized and the transaction in question in this case effected a consolidation of the two companies. Insurance Co. v. St. Louis Co., 13 Fed. Rep. 516 ; Brum v. Insurance Co., 16 Fed. Rep. 140; Blair v. St. Louis Co., 24 Fed. Rep. 148; Thompson v. Railway Co., 93 Fed. Rep. 384; Railroad Co. v. Maryland, 10 How. 376: S. C. 13 How. 307; Tomlinson v. Branch, 15 Wall. 460; Bailey v. Railroad Co., 22 Wall. 604; East Lincoln v. Davenport, 94 U. S. 801; Barr v. Railway Co., 125 N. Y. 363; Stokes v. Detrick, 75 Md. 276; Railroad Co. v. Railroad Co., 44 La. Ann. 1069; Trustees v. Moody, 62 Ala. 386; Meyer v. Johnston, 64 Ala. 603; Reynolds V. Meyers, 51 Vt. 444; Welsh v. Railroad Co., 25 Minn. 314; Dodson v. Railroad Co., 78 Md. 489; Railroad Co. v. Jones, 29 Ind. 465; Railway Co. v. Prewitt, 134 Ind. 557; Society v. Church, 1 Pick. 372; Railway Co. v. Ashling, 56 Ill. App. 327; Railway Co.v. Railway Co., 120 Mass. 397 ; Langhorne v. Railroad Co., 19 S. E. Rep. 122; Anthony v. Glucose Co., 146 N. Y. 407.

Opinion:
Mr. Justice Morris
delivered the opinion of the Court:
The assignments of error are exceeding^ numerous, amounting to seventy-seven in all. But we do not deem it necessary to consider all these, or indeed more than one of them. For we are of opinion that this suit can not be sustained against the Capital Traction Company for the alleged delinquency of the Washington and Georgetown Railroad Company. We know of no rule or principle of the common law, which would authorize suit to be maintained against one person, who is sui juris, for the default of another person, who is equally sui juris, whether the persons be natural persons or corporations. For one corporation can no more be held for the default of another corporation than can one natural person for the default of another natural person.
This principle of law is not sought to be controverted on behalf of the appellee; but it is supposed that there is something in this case which takes it out of the general rule. And the argument is, that the Washington and Georgetown Railroad Company and the Capital Traction Company have become in fact consolidated or merged into each other, and that therefore the latter, as the surviving or consolidated company, has become liable for the obligations of its predecessor.
It is undoubtedly the law that, when two or more corporations become consolidated with each other by permission or authority of the sovereign power, whether under a new name or under the name previously held by one of the component companies, the new corporation so formed, although in technical strictness an independent organization entirely distinct from the companies which have become merged in it, is chargeable, at all events in equity, and generally, if not always, even at common law, with all the liabilities of its component members and of each one of them. Moreover, as is very justly argued on behalf of the appellee, there may be actual consolidation to all intents and purposes, without its being so designated. There is no magic in the use of the word consolidation to effect that result. If the coming together of two corporations under the authority of law be in fact consolidation, it is of no consequence by what name the act is characterized; nor is it of any consequence by what steps the result has been effected. One of those steps may take the shape of bargain and sale.
But the power of corporations, especially those which exercise a public function such as is exercised by railway companies,.is derived from the law of their creation; and they may not combine with each other, or be amalgamated, or consolidated, or be merged one into another, except by express authority of statute enacted for the purpose, which,. when given, will be the measure of the.extent and character of the combination to be effected. It is very plain that statutory authority to one corporation to purchase the property, or the property and franchises, of another corporation, with appropriate action thereunder by the corporations to be affected, can not, of itself and without further provision of some kind, operate to effect a consolidation of the two companies, so as to charge the purchaser company in law with the liabilities of the vendor. For it might well be that the vendor company might desire to dissolve, or go out of business, or to limit its business; or that, being hopelessly involved in debt beyond the value of its assets, it could not efficiently exercise its franchise for the benefit of the public, which yet should be exercised, and therefore should be transferred to some more capable corporation. And it might well be that the purchaser company would pay in cash a full and adequate consideration for the property and franchises purchased by it. Assuredly in such cases, when no consolidation is intended or sought to be effected, the mere purchase by one corporation of the property and franchises of another corporation under authority of law, and the succession of the purchaser corporation to the exercise of the franchise held by the vendor corporation, could not reasonably be held to operate as a consolidation of the two companies, or to charge the purchaser company with the liabilities of its predecessor in the franchise. The succession of the purchaser company to the franchise in such a case is not a succession in the sense in which that term is used in relation to the kind of corporation which is known as a corporation sole.
A contract of purchase and sale between two corporations is not different in law from a similar contract between two individuals, except that individuals may contract freely with each other, and corporations require legislative authority to enter into such contracts as are involved in the case under consideration. The construction and effect would be the same whether such contracts were made by individuals or by corporations. In neither case would the purchaser become liable either for the torts or the contracts of the vendor, and least of all for the torts, unless such liability entered into the transaction and became part of the consideration for the transfer, and then only in the manner and to the extent stipulated. This is so plain a principle of law and justice that it needs only to be stated in order to insure its prompt acceptance.
It is very plain, therefore, that something more than the mere purchase of the assets and franchises of one company by another under authority of law given for such sale and purchase, is required to effect a consolidation of the two companies, or to charge the purchaser company with the liabilities of the vendor. Now, there is nothing whatever in the act of Congress under which the purchase in question was authorized, beyond the mere authority to make the purchase, which looks to a consolidation of the Washington and Georgetown Railroad Company with the Rock Creek Railway Company. Except an authority for joint management or lease, which may be left out of consideration inasmuch as it was never availed of by the Rock Creek Company, the sole provision in the statute — and there is nothing else in our laws that has any bearing on the subject — is an authorization to the Rock Creek Company to purchase any connecting or intersecting line or lines of railroad and to operate the same in connection with its original lines, and permission to raise the money for the purpose of effecting the purchase by a sufficient increase of its capital stock. Whatever may have been the intention of those who promoted this legislation, there is not a word in the statute which intimates in any manner that it was its purpose to effect a consolidation of the two companies, or that the proposed purchase should be made subject to the assumption of the liabilities of the Washington and Georgetown Railroad Company by the Rock Creek Railway Company. On the contrary, the plain inference from the statute was that the latter company should pay to the former a full and adequate consideration for the property and franchises proposed to be transferred, which should serve as a substitute therefor to meet the liabilities of the vendor company, if any it had, and not that there should be any consolidation of the two or merger of one into the other. In the absence of statutory authority, we can not see how there can be consolidation in this Districl of two or more corporations exercising the franchise of a railroad company; nor can we see how, in the absence of legal provision, a company which purchases the property and franchises of another company, can by virtue of such purchase be charged with the liabilities of the company from which it has purchased.
But in this case, and apparently as part of the consideration for the transfer, and entering into the contract therefor, the Rock Creek Railway Company covenanted to "assume, discharge and perform all the obligations" of the Washington and Georgetown Railroad Company, " and all its liabilities of what kind soever," and to that end would use the property conveyed to it. so far as might be necessary ; and it is contended that this agreement and the contract, in which it is contained, operated to make the appellant liable to the appellee. But we understand it to be conceded, and certainly it must be conceded, that such a contract between two natural persons would not make the purchaser directly responsible at common law to a third party for the obligations of the vendor; and this for the reason, if for no other, that the liability of the vendor is without limitation, and that of the purchaser is to be governed by the terms of his contract, and generally does not extend beyond the value of the property transferred to him. Whatever, therefore, might be the liability of the purchaser under such a contract to a third party in equity, it is certainly not contemplated that he should be subject to a suit at common law at his instance for the liabilities which primarily are those of the vendor. Now, it is not apparent why, in the absence of statutory provisions expressly or by implication imposing such liability as a condition of the transfer, a corporation should be any more liable to a third party for the obligations of another corporation whose property it has purchased, than a natural person would be under similar circumstances. The law is not different in this regard for the corporation and for the natural person. The act of Congress might have required the Rock Creek Railway Company, as the condition for being permitted to purchase the franchise of the Washington and Georgetown Railroad Company, to assume, the liabilities of the latter, and to submit to suit for them as though it had been itself originally liable; but it made no such condition; and the contract between the two companies can not be construed to operate as imposing such liability against their will.
In connection with the question of consolidation some importance apparently is attached to the fact that of the $10,750,000 of the new stock authorized to be issued by the Rock Creek Railway Company, stock of the par value of $2,750,000 was agreed to be issued to the stockholders of the Washington and Georgetown Railroad Company, upon their surrender of their stock in this latter company at the market value of $275 a share; and this is claimed to evidence mere consolidation. But we do not so understand it. The provision was that the whole sum of $10,750,000 should be paid by the Rock Creek Company to the Washington and Georgetown Railroad Company as the approximate value of all the assets of the latter; and that of this sum $8,000,000 should be used for the retirement of the bonds of the latter company, and the remainder for the purchase or extinguishment of the stock, without which the transfer of the property could not well have been effected.
We do not think that the conclusion which we have here reached is. antagonized by any of the adjudicated cases cited on behalf of the appellee. Some of these are cases of consolidation, pure and simple, authorized by express provision of law; others are cases in which the property of one company has been transferred to another in fraud of the rights of creditors or subject to a charge in favor of creditors, and in which courts of equity have reached such property for the benefit of such creditors. One of them, the case of Trustees of the University, etc., v. Moody, 62 Ala. 389, was where there was a change of name and of management, and no actual change of the corporation itself. But .the case principally relied on by the appellee in this connection is that of Chicago, etc., Railway Co. v. Ashling, 56 Ill. App. 327, first in the intermediate appellate court of the State of Illinois, and afterwards in the Supreme Court of the State, in 160 Ill. 373. In that case it appeared that there was a general statute of the State of Illinois which provided that in all cases when any company or corporation chartered under the laws of the State should consolidate its property, stock or franchises with any other company or companies, such consolidated company should be liable for all debts and liabilities of each company included in such consolidation, and suit might be instituted and maintained therefor against such Consolidated company. But there was no law regulating or prescribing the course to be pursued in effecting a consolidation. One railroad company purchased the whole property and franchises of another railroad company, and by way of purchase issued its own stock, dollar for dollar, to the stockholders of the absorbed company, changing their rights merely from the selling to the purchasing company. An action of trespass was pending against the vendor company at the time of the consolidation or absorption. A plea in abatement to the effect that the vendor company was dissolved and that the suit against it could no longer be maintained, was overruled, and the plaintiff recovered judgment. Afterwards suit was entered on this judgment against the consolidatód company, and judgment rendered thereon against the latter company. This came for review before the appellate tribunals; and it was held that the transaction was a consolidation, and not merely a bargain and sale. But it is to be noticed that the statute authorized consolidation, and not the transfer in terms of its property and franchises by one corporation to another. Consolidation plainly was what was intended whether it was so called or not; and the law governing consolidation was the only law applicable. One company may be authorized to consolidate its property and franchises with another company, and yet not .to sell to it and still maintain its separate existence; and, on the other hand, one company may be authorized to sell to another and yet not to be consolidated with it. The difference between these two provisions is the difference between the case cited and that before us for our consideration.
So also the case of the New Bedford Railroad Company v. Old Colony Railroad Company, 120 Mass. 397, is supposed to be almost identical with the present case. But plainly this is an error. There one railroad company was authorized to purchase the franchise and property of another railroad company, but upon the express condition that the purchasing corporation should then " be subject to all the duties, liabilities, obligations and restrictions " of the vendor company; and it was held that the liabilities thus imposed were not mérely liabilities towards the public for the faithful exercise of the franchise, as claimed by the purchaser company, but the liabilities of every kind resting upon the vendor. We fail to see wherein this is an authority for the present case.
Without further elaboration, we may say that, if Congress had intended a consolidation in this instance, it could easily have said so. It seems studiously to have avoided saying so, 'and therefore not to have intended it. Likewise, it would have been competent for Congress, as a condition for the purchase which it authorized, to impose upon the purchaser a liability for the obligations of. the vendor company. It seems studiously to have avoided doing this also. It authorized a purchase, and nothing whatever beyond that; and we think that it would do violence to the statute to add to it by construction provisions which are not contained in it. The rights of the creditors of the Wasüington and Georgetown Railroad Company do not demand any such construction. Those rights seem to be reasonably secure in any event. That company remained, and we may assume yet remains, alive for the purpose of suit against it; and it is not apparent that a judgment against it will not be paid, or that it can not be enforced by proper proceedings for the purpose. It is true that its property and franchises have now passed into the possession of the Capital Traction Company; and presumably it has now no property of its own wherewith to satisfy its liabilities, if any there are. But this fact, while it may justify recourse to a court of equity in proper cases, does not any more than in the case of a natural person similarly situated, authorize the institution of suit at com mon law against the Traction Company for the delinquences of the Washington and Georgetown Railroad Company. It appears from the record that judgments against the latter company rendered subsequently to the transfer of assets to the Traction Company have been duly paid; and, therefore, while it might have been more convenient if suit had been authorized directly against the Capital Traction Company in cases. like the present, yet, as Congress has not so provided, we see no hardship in remitting parties to the ordinary procedure of the common law.
We are of opinion, therefore, that this suit can not be sustained against the Capital Traction Company for any tortious action committed by the Washington and Georgetown Railroad Company before September 21, 1895, which seems to have been the date of the transfer of its assets • by the latter company to the former; and that there was error in the rulings of the trial court to the contrary. Consequently we must reverse the judgment appealed from and remand the cause for a new trial. And it is very clear that upon a new trial, in order to justify any recovery against the defendant in this case, all claim of damage for the tort of the Washington and Georgetown Railroad Company must be eliminated.
We greatly regret that we can not put our judgment in a shape to be reviewed by the Supreme Court of the United States upon the record now made. If the case stood alone on the third count of the declaration, we might do so by entering a final judgment here, or by declining to remand the cause for a new trial; for then it would be plain that, if the view which we take of the case be correct, there could be no recovery whatever by the plaintiff in these proceedings. But the judgment, from which the appeal has been taken, is a general judgment upon all the counts; and in two of these, the first and second, there is a a good cause of action stated against the defendant for its own alleged tort for the period between September 21, 1895, and the time of the institution of the suit on November 10,1896. We have no option, therefore, but to remand the cause for a new trial.
The judgment of the Supreme Court of the District of Columbia in this cause will, therefore, be reversed, with costs; and the cause will be remanded to that court, with directions to set aside the verdict and to award a new trial. And it is so ordered.