An examination of the statutes of the United States relating to
the construction of a railroad from the Missouri River to the
Pacific Ocean, especially the Acts of July 1, 1862, c. 120, 12
Stat. 489, and July 2, 1864, c. 216, 13 Stat. 356, shows that every
subscriber to the Union Pacific Railroad Company must be deemed to
have become such upon the condition, implied by law, that he should
not be personally liable for the debts of the corporation.
It is equally clear that Congress intended to grant national aid
to all the corporations constructing that connecting line of
railroad upon terms and conditions applicable alike to all, with no
purpose to make discriminations against any one part of the line,
and that the imposition of a liability upon the stockholders of the
Central Pacific Railroad Company for the debt of that corporation,
arising out of the bonds which it received from the United States,
when no such liability was imposed upon
Page 161 U. S. 413
the Union Pacific Railroad Company on account of like bonds
received by it, is entirely inconsistent with that equality.
The United States has no claim against the stockholders of the
Central Pacific Railroad Company on account of the bonds issued to
that company by the United States to aid in the construction of its
road.
This adjudication is not to be taken as deciding that the
stockholders of the Central Pacific Railroad Company either can or
cannot be made liable for its debts to the United States in some
other way than under the Pacific Railroad Acts and by the
acceptance of the United States bonds to aid in the construction of
the road, nor whether the adoption of the California corporation as
an instrument of the national government in accomplishing a
national object, exempted its stockholders from liability, under
the Constitution and laws of California, to ordinary creditors.
The case is stated in the opinion.
MR. JUSTICE HARLAN delivered the opinion of the Court.
The United States seeks by this suit to establish a claim
against the estate of Leland Stanford for $15,237,000.
The deceased held and owned a large number of the shares of the
capital stock of the Central Pacific Railroad Company of California
and the Western Pacific Railroad Company, corporations that were
organized under the laws of California, and which subsequently were
consolidated and became the Central Pacific Railroad Company.
Those companies received bonds of the United States that were
issued, under the acts of Congress known as the "Pacific Railroad
Acts," in aid of the construction of a railroad and telegraph line
extending from the Missouri River to the Pacific Ocean. The present
demand of the government arises out of the obligation which, it is
alleged, rested upon the companies receiving such bonds to pay the
principal at maturity, and to reimburse the United States for all
interest paid thereon.
Page 161 U. S. 414
The bill proceeds upon the ground that, by the Constitution and
laws of California at the time the above corporations were
organized, as well as when they received the bonds of the United
States, each stockholder of a railroad corporation was liable, in
proportion to the stock owned and held by him, for all of its debts
and liabilities, and consequently that the estate of Stanford is
liable to the United States in proportion to the stock owned and
held by him in the corporations named.
The principal contention of the defendant is that the question
of the liability of stockholders for the debts and obligations of
companies receiving bonds of the United States under the Pacific
Railroad acts does not depend upon the laws of California, but is
governed by the acts of Congress under which such bonds were
issued; that, by its legislation in aid of the construction of the
Union and Central Pacific Railroads, Congress intended to define,
control, and regulate the entire relations of the government to all
of the companies receiving subsidy bonds, without reference to the
laws of any state; that those companies were respectively created
or adopted as agencies for a great national purpose, in the
accomplishment of which they were to be subject to the exclusive
control of the general government; that the functions, obligations,
and liabilities of all the companies participating in the bounty of
the United States were to be equal and identical, and that, as to
each company, the government looked to it alone for the performance
of all that the acts imposed upon it, and did not contemplate nor
intend that there should be any individual liability of
stockholders in respect of the subsidy bonds issued by the United
States.
If these acts of Congress have the scope and effect attributed
to them by the defendant, the decree may be affirmed, without any
expression of opinion by this Court upon other questions discussed
at the bar, and which, if considered, would require a construction
of the laws of California relating to the personal liability of
stockholders for the debts of railroad corporations.
Was it part of the contract between the United States and the
corporations receiving its subsidy bonds that the stockholders
Page 161 U. S. 415
of such corporations, respectively, should be personally liable
for the principal and interest of those bonds? Or did the United
States make provision in the acts of Congress for all the security
intended to be taken for their payment? These questions cannot be
answered by referring to any one section of either act, but only by
examining the provisions of all of those acts in the light of the
circumstances under which the United States made grants of public
lands and provided for the issuing of bonds in aid of the
construction of a railroad and telegraph line from the Missouri
River to the Pacific Ocean.
By the Act of July 1, 1862, c. 120, 12 Stat. 489, entitled
"An act to aid in the construction of a railroad and telegraph
line from the Missouri River to the Pacific Ocean, and to secure to
the government the use of the same for postal, military and other
purposes,"
the Union Pacific Railroad Company was incorporated, with power
to lay out, locate, maintain, and enjoy a continuous railroad and
telegraph from a named point in what was then the Territory of
Nebraska to the western boundary of what at that time was the
Territory of Nevada.
That company was given the right of way through the public lands
for the construction of its railroad and telegraph line, as well as
the power and authority to take, from those lands adjacent to the
line of the road, earth, stone, and timber, and other materials
required in the work of construction, and, so far as it was
necessary to do so, to occupy the public lands for stations,
buildings, workshops, depots, machine shops, switches, sidetracks,
turntables, and water stations; the United States to extinguish the
Indian titles to all lands falling under the operation of the act
and required for the right of way and grants made.
"For the purpose of aiding in the construction of said railroad
and telegraph line, and to secure the safe and speedy
transportation of the mails, troops, munitions of war, and public
stores,"
a large grant of lands was made, for which patents were directed
to be issued as each forty consecutive miles of railroad and
telegraph were completed and equipped in all respects as required.
§§ 2-4.
The fifth section provided that, for the purposes mentioned,
Page 161 U. S. 416
the Secretary of the Treasury, upon the completion and equipment
of forty consecutive miles of railroad and telegraph, should issue
to the company bonds of the United States, of one thousand dollars
each, payable in thirty years after date, bearing six percentum per
annum interest, to the amount of sixteen of said bonds per mile for
such section of forty miles, and
"
to secure the repayment to the United States, as
hereinafter provided, of the amount of said bonds so issued and
delivered to said company, together with all interest thereon which
shall have been paid by the United States, the issue of said bonds
and delivery to the company shall
ipso facto constitute a
mortgage on the whole line of the railroad and telegraph, together
with the rolling stock, fixtures and property of every kind and
description, and in consideration of which said bonds may be
issued, and on the refusal or failure of said company to
redeem said bonds, or any part of them, when required so to do by
the Secretary of the Treasury, in accordance with the provisions of
this act,
the said road, with all the rights, junctions,
immunities and appurtenances thereunto belonging, and also all
lands granted to the said company, by the United States, which at
the time of said default shall remain in the ownership of said
company, may be taken possession of by the Secretary of the
Treasury for the use and benefit of the United States."
The grants referred to were made
"upon condition that said company shall pay said bonds at
maturity, and shall keep said railroad and telegraph line in repair
and use, and shall at all times transmit dispatches over said
telegraph line, and transport mails, troops and munitions of war,
supplies and public stores upon said railroad for the government
whenever required to do so by any department thereof, and that the
government shall at all times have the preference in the use of the
same for all the purposes aforesaid (at fair and reasonable rates
of compensation, not to exceed the amounts paid by private parties
for the same kind of service), and
all compensation for
services rendered for the government shall be applied to the
payment of said bonds and interest until the whole amount is fully
paid."
The company was entitled to pay
Page 161 U. S. 417
the United States, wholly or in part, in the same or other
bonds, Treasury notes, or other evidences of debt against the
United States, to be allowed at par, and after the road was
completed, until the bonds and interest were paid at least five
percentum of the net earnings of said road were required to be
annually applied to the payment thereof. § 6.
The company was required to file its assent to the act in the
Department of the Interior within one year after its passage, and
it was allowed until the 1st day of July, 1874, to complete its
railroad and telegraph through the territories of the United
States, to the western boundary of the Territory of Nevada,
"
there to meet and connect with the line of the Central
Pacific Railroad Company of California." §§ 7, 8.
The ninth section authorized the Leavenworth, Pawnee &
Western Railroad Company of Kansas to construct a railroad and
telegraph line from the Missouri River at the mouth of the Kansas
River, "upon the same terms and conditions in all respects" as were
provided in the act for the construction of the railroad and
telegraph line first mentioned, and to meet and connect with the
same at the meridian of longitude named; the route in Kansas, west
of the meridian of Fort Riley, to the aforesaid point, on the one
hundredth meridian of longitude, to be subject to the approval of
the President of the United States, and to be determined by him on
actual survey. By the same section it was declared that
"the Central Pacific Railroad Company of California, a
corporation existing under the laws of the State of California, are
hereby authorized to construct a railroad and telegraph line from
the Pacific Coast at or near San Francisco, or the navigable waters
of the Sacramento River, to the eastern boundary of California,
upon the same terms and conditions in all respects, as are
contained in this act for the construction of said railroad and
telegraph line first mentioned, and to meet and connect with the
first-mentioned railroad and telegraph line on the eastern boundary
of California. Each of said companies shall file their acceptance
of the conditions of this act in the Department of the Interior
within six months after the passage of this act. "
Page 161 U. S. 418
The tenth section provided that the company chartered by the
State of Kansas should complete one hundred miles of its road,
commencing at the mouth of the Kansas River, within two years after
filing its assent to the conditions of the act, and one hundred
miles per year thereafter until the whole was completed, and the
Central Pacific Railroad Company of California should complete
fifty miles of its road within two years after filing its assent to
the provisions of the act, and fifty miles per year thereafter
until the whole was completed, and
"after completing their roads, respectively, said companies, or
either of them, may unite
upon equal terms with the
first-named company in constructing so much of said railroad and
telegraph line and branch railroads and telegraph lines in this act
hereinafter mentioned,
through the territories from the State
of California to the Missouri River, as shall then remain to
be constructed,
on the same terms and conditions as
provided in this act in relation to the said Union Pacific Railroad
Company."
And the Central Pacific Railroad Company of California, after
completing its road across that state, was authorized
"to continue the construction of said railroad and telegraph
through the territories of the United States to the Missouri
River, including the branch roads specified in this act, upon
the routes hereinbefore and hereinafter indicated, on the terms and
conditions provided in this act in relation to the said Union
Pacific Railroad Company, until said roads shall meet and connect
and
the whole of said railroad and branches and telegraph is
completed."
By the twelfth section, it was declared that the
"track upon the entire line of railroad and branches shall be of
uniform width, to be determined by the President of the United
States, so that, when completed, cars can be run from the Missouri
River to the Pacific Coast; the grades and curves shall not exceed
the maximum grades and curves of the Baltimore & Ohio Railroad;
the whole line of said railroad and branches and telegraph shall be
operated and used for all purposes of communication, travel and
transportation so far as the public and government are concerned,
as one connected, continuous line. . . . "
Page 161 U. S. 419
The fifteenth section gave to any other railroad company then or
thereafter incorporated the right to connect with the road and
branches provided for by the act at such places and upon such just
and equitable terms as the President of the United States should
prescribe.
All of the railroad companies named in the act and assenting
thereto, or any two or more of them, were authorized to form
themselves into one consolidated company, notice of such
consolidation to be in writing, to be filed in the Department of
the Interior, and the consolidated company to proceed to construct
the railroad. branches, and telegraph line,
upon the terms and
conditions provided in the act. § 16.
The seventeenth section provided:
"That in case said company or companies shall fail to comply
with the terms and conditions of this act by not completing said
railroad and telegraph and branches within a reasonable time or by
not keeping the same in repair and use, but shall permit the same
for an unreasonable time to remain unfinished or out of repair and
unfit for use, Congress may pass any act to insure the speedy
completion of said road and branches, or put the same in repair and
use, and may direct the income of said railroad and telegraph line
to be thereafter devoted
to the use of the United States
to repay all such expenditures caused by the default and neglect of
said company or companies,
provided that if said roads are
not completed, so as to form
a continuous line of railroad,
ready for use, from the Missouri River to the navigable waters of
the Sacramento River, in California, by the first day of July,
1876,
the whole of all of said railroads before mentioned
and to be constructed under the provisions of this act, together
with all their furnishings, fixtures, rolling stock, machine shops,
lands, tenements and hereditaments, and property of every kind and
character,
shall be forfeited to and be taken possession of by
the United States, provided that of the bonds of the United
States in this act provided to be delivered for any and all parts
of the roads to be constructed east of the one hundredth meridian
of west longitude from Greenwich, and for any part of the road west
of the west foot of the Sierra Nevada Mountains, there
Page 161 U. S. 420
shall be reserved of each part and installment twenty-five
percentum, to be and
remain in the United States Treasury
undelivered until said roads
and all parts thereof
provided for in this act are entirely completed, and of all
the bonds provided to be delivered for the said road between the
two points aforesaid, there shall be reserved out of each
installment fifteen percentum,
to be and to remain in the
Treasury until the whole of the road provided for in this act
is fully completed, and if the said road or any part thereof shall
fail of completion at the time limited therefor in this act, then
and in that case the said part of said bonds so reserved shall be
forfeited to the United States."
By the eighteenth section, it was declared:
"Whenever it appears that the net earnings of the
entire
road and telegraph, including the amount allowed for services
rendered for the United States, after deducting all expenditures,
including repairs and the furnishing, running and managing of said
road, shall exceed ten percentum upon its costs, exclusive of the
five percentum, to be paid to the United States,
Congress
may reduce the rates of fare thereon if unreasonable in amount, and
may fix and establish the same by law. And the better to accomplish
the object of this act, namely, to promote the public interest and
welfare by the construction of said railroad and telegraph line,
and keeping the same in working order, and to secure to the
government at all times (but particularly in time of war) the use
and benefits of the same for postal, military and other purposes,
Congress may at any time, having due regard for the rights of said
companies named herein, add to, alter, amend or repeal this
act."
The several railroad companies named were authorized to enter
into an arrangement with the Pacific Telegraph Company, the
Overland Telegraph Company, and the California state Telegraph
Company,
"so that the present line of telegraph between
the Missouri
River and San Francisco may be moved upon or along the line of
said railroad and branches as fast as said roads and branches are
built, and if said arrangement be entered into and the transfer of
said telegraph line be made in accordance therewith to the line of
said
Page 161 U. S. 421
railroad and branches, such transfer shall, for all purposes of
this act, be held and considered a fulfillment on the part of said
railroad companies of the provisions of this act in regard to the
construction of said line of telegraph. And in case of
disagreement, said telegraph companies are authorized to remove
their line of telegraph along and upon the line of railroad herein
contemplated without prejudice to the rights of the railroad
companies named herein."
§ 19.
The act of 1862 was amended in many particulars by the Act of
July 2, 1864, 13 Stat. 356, c. 216. The time for designating the
general route of the Union Pacific Railroad, and of filing the map
of the same, and the time for the completion of that part of the
railroads required by the terms of said act of each company, was
extended one year from the time designated in the act of 1862, and
the Central Pacific Railroad Company of California was required to
complete twenty-five miles of its road
"in each year thereafter, and the whole to the state line within
four years, and that only one-half of the compensation for services
rendered for the government by said companies shall be required to
be applied to the payment of the bonds issued by the government in
aid of the construction of said roads."
§ 5.
The proviso to section four of the original act was modified so
that the President of the United States was authorized to appoint
for each of the roads three commissioners, as provided for
in the original act, and
"the verified statement of the president of the California
company, required by said section four, shall be filed in the
office of the United States Surveyor General for the State of
California instead of being presented to the President of the
United States, and the said surveyor general shall thereupon notify
the said commissioners of the filing of such statement, and the
said commissioners shall thereupon proceed to examine the portion
of said railroad and telegraph line so completed, and make their
report thereon to the President to the United States, as provided
by the act of which this is amendatory. And such statement may be
filed, and such railroad and telegraph line be examined and
reported on, by the said commissioners,
and the requisite
amount of bonds
Page 161 U. S. 422
may be issued and the lands appertaining thereto may be
set apart, located, entered and patented, as provided in this act
and the act to which this is amendatory, upon the construction by
said railroad company of California of any portion of not less than
twenty consecutive miles of their said railroad and telegraph line,
upon the certificate of said commissioners that such portion is
completed as required by the act to which this is amendatory."
§ 6.
So much of section 17 of the act of 1862 as provided for a
reservation by the government of a portion of the bonds to be
issued to aid in the construction of the said railroads was
repealed, and it was provided that the failure of any one company
to comply fully with the conditions and requirements of that act,
and the act of which it was amendatory, should not work a
forfeiture of the rights, privileges, or franchise of any other
company or companies that should have complied with the same.
§ 7.
To enable any one of the corporations to make convenient and
necessary connections with other roads, it was authorized to
establish and maintain all necessary ferries upon and across all
rivers which its road might pass in its course, and authority was
given each corporation to construct over all rivers, for the
convenience of such road, bridges having suitable and proper draws
for the passage of steamboats.
The tenth section provided:
"That section five of said act be so modified and amended that
the Union Pacific Railroad Company, the Central Pacific Railroad
Company, and any other company authorized to
participate in the
construction of said road may, on the completion of each
section of said road as provided in this act and the act to which
this is an amendment, issue their first mortgage bonds on their
respective railroad and telegraph lines to an amount not exceeding
the amount of the bonds of the United States, and of even tenor and
date, time of maturity, rate and character of interest with the
bonds authorized to be issued to said railroad companies
respectively. And the lien of the United States bonds shall be
subordinate to that of the bonds of any or either of said companies
hereby authorized to be issued on their respective
Page 161 U. S. 423
roads, property, and equipments except as to the provisions of
the sixth section of the act to which this act is an amendment,
relating to the transmission of dispatches and the transportation
of mails, troops, munitions of war, supplies, and public stores for
the government of the United States. And said section is further
amended by striking out the word 'forty,' and inserting in lieu
thereof the words 'on each and every section of not less than
twenty.'"
By the eleventh section, it was declared that
"If any of the railroad companies entitled to bonds of the
United States, or to issue their first mortgage bonds herein
provided for, has at the time of the approval of this act issued or
shall thereafter issue any of its own bonds or securities in such
form or manner as in law or equity to entitle the same to priority
of preference of payment to the said guaranteed bonds or said first
mortgage bonds, the amount of such corporate bonds outstanding and
unsatisfied or uncancelled shall be deducted from the amount of
such government and first mortgage bonds which the company may be
entitled to receive and issue, and such an amount only of such
government bonds and such first mortgage bonds shall be granted or
permitted as, added to such outstanding, unsatisfied, or
uncancelled bonds of the company, shall make up the whole amount
per mile to which the company would otherwise have been entitled. .
. .
Provided also that no land granted by this act shall
be conveyed to any party or parties, and no bonds shall be issued
to any company or companies, party or parties, on account of any
road, or part thereof, made prior to the passage of the act to
which this act is an amendment, or made subsequent thereto under
the provisions of any act or acts other than this act and the act
amended by this act."
The twelfth section provided that the Leavenworth, Pawnee &
Western Railroad Company, now known as the "Union Pacific Railroad
Company, Eastern Division," should build the railroad from the
mouth of Kansas River, by the way of Leavenworth, or, if that be
not deemed the best route, then it should, within two years, build
a railroad from the City of Leavenworth to unite with the main stem
at or near the City
Page 161 U. S. 424
of Lawrence, but to aid in the construction of said branch, the
company was to receive no bonds. And if the Union Pacific Railroad
Company should not be proceeding in good faith to build its
railroad through the territories, when the Leavenworth, Pawnee
& Western Railroad Company, or the Union Pacific Railroad
Company, Eastern Division, shall have completed its road to the
hundredth degree of longitude, then the last-named company may
proceed to make said road westward "until it meets and connects
with the Central Pacific Railroad Company on the same line."
The fifteenth section required that the several companies
authorized to construct the aforesaid roads operate and use said
roads and telegraph for all purposes of communication, travel, and
transportation, so far as the public and government were
concerned,
"
as one continuous line, and in such operation and use
to afford and secure to each equal advantages and facilities as to
rates, time and transportation, without any discrimination of any
kind in favor of the road or business of either or any of said
companies, or adverse to the road or business of any or either of
the others."
Any two or more of the companies authorized to participate in
the benefits of the act were authorized at any time to unite and
consolidate their organizations
"upon such terms and conditions and in such manner as they may
agree upon, and as shall not be incompatible with this act or the
laws of the states in which the roads of such companies may
be,"
and thereupon such organization, so formed and consolidated,
"shall succeed to, possess and be entitled to receive from the
government of the United States
all and singular the grants,
benefits, immunities, guarantees, acts and things to be done and
performed, and be subject to the same terms, conditions,
restrictions, and requirements which said companies,
respectively at the time of such consolidation, are or may be
entitled or subject to under this act, in place and substitution of
said companies so consolidated respectively."
§ 16.
All the provisions of this act, so far as applicable, relating
or in any manner appertaining to the companies so consolidated, or
either thereof, were to apply to the consolidated
Page 161 U. S. 425
organization. And if, upon the completion by the consolidated
organization of the roads, or either of them, of the companies
consolidated, any other of the road or roads of either of the other
companies authorized and forming, or intended or necessary to form,
a portion of "a continuous line" from each of the several
designated points on the Missouri River to the Pacific Coast, shall
not have constructed the number of miles of its road within the
time required, the consolidated organization was authorized
"to continue the construction of its road and telegraph in the
general direction and route upon which such incomplete or
unconstructed road is hereinbefore authorized to be built until
such continuation of the road of such consolidated organization
shall reach the constructed road and telegraph of said other
company, and at such point to connect and unite therewith, and for
and in aid thereof, the said consolidated organization may do and
perform, in reference to such portion of road and telegraph as
shall so be in continuation of its constructed road and telegraph,
and to the construction and equipment thereof, all and singular the
several acts and things provided, authorized or granted to be done
by the company authorized to construct and equip the same,"
and shall be entitled to
"
similar and like grants, benefits, immunities, guaranties,
acts and things to be done and performed by the government of
the United States, by the President of the United States, or the
Secretaries of the Treasury and Interior, and by commissioners in
reference to such company, and to such portion of the road
hereinbefore authorized to be constructed by it,
and upon the
like and similar terms and conditions, as far as the same are
applicable thereto. . . . And in case any company authorized
thereto shall not enter into any consolidated organization, such
company, upon the completion of the road as hereinbefore provided,
shall be entitled to, and is hereby authorized to, continue and
extend the same under the circumstances, and in accordance with the
provisions in this section,
and to have all the benefits
thereof, as fully and completely as are herein provided
touching such consolidated organization. And in case more than one
such consolidated organization shall be
Page 161 U. S. 426
made, pursuant to this act, the terms and conditions of this
act, hereinbefore recited as to one, shall apply in like manner,
force and effect to the other,
provided however that
rights and interests at any time acquired by one such consolidated
organization shall not be impaired by another thereof."
It was further provided that
"should the Central Pacific Railroad Company of California
complete their line to the eastern line of the State of California
before the line of the Union Pacific Railroad Company shall have
been extended westward so as to meet the line of said first-named
company, said first-named company may extend their line of road
eastward one hundred and fifty miles on the established route, so
as to meet and connect with the line of the Union Pacific Road,
complying in all respects with the provisions and restrictions of
this act as to said Union Pacific Road, and upon doing so shall
enjoy
all the rights, privileges and benefits conferred by this
act on said Union Pacific Railroad Company."
§ 16.
By a subsequent act approved March 3, 1865, the tenth section of
the act of 1864 was so amended as to allow the Central Pacific
Railroad Company, the Western Pacific Railroad Company of
California, the Union Pacific Railroad Company, the Union Pacific
Railroad Company, Eastern Division, and all other companies
provided for in the above act, to issue their six percentum
thirty-year bonds, to the extent of one hundred miles in advance of
a continuous completed line of construction; further, that the
assignment, made by the Central Pacific Railroad Company of
California to the Western Pacific Railroad Company of said state of
the right to construct all that portion of said railroad and
telegraph from the City of San Jose to Sacramento was ratified and
confirmed to the latter company, "with
all the privileges and
benefits of the several acts of Congress relating thereto and
subject to all the conditions thereof." 13 Stat. 504.
From this review of the legislation of Congress, it appears that
the acts of 1862, 1864, and 1865 all relate to the same general
subject, and, when examined for the purpose of ascertaining the
object of Congress in passing them, they
Page 161 U. S. 427
should be regarded as one enactment. What that object was is no
longer a subject of inquiry in this Court. In
United States v.
Union Pacific Railroad Company, 91 U. S.
92, this Court, speaking by Mr. Justice Davis, held that
the construction of a railroad connecting the Missouri River with
the Pacific Ocean was a national work, because such a road would be
a great national highway, under national control; that the scheme
for establishing that highway originated in national necessities,
the country being involved at the time in a civil war which
threatened the disruption of the Union, and endangered the safety
of our possessions on the Pacific, and that the enterprise required
national assistance because private capital was inadequate for an
undertaking of such magnitude. It appears upon the face of the act
of 1862 as amended by the act of 1864 that Congress had in view the
promotion of the public interest and welfare by the construction of
a railroad and telegraph line that could be used by the government
at all times, but particularly in time of war, for postal,
military, and other purposes, and that, so far as the government
and the public were concerned, such road and telegraph were to be
operated as one continuous line. These ends were to be attained
through the agency of a corporation created by Congress, and of
certain corporations, organized under state laws, which Congress
selected as instruments to be employed in accomplishing the public
objects specified in its legislation.
Naturally, the next inquiry is whether Congress made any, and,
if any, what, provision to secure the United States against
liability on account of its bonds issued in aid of the construction
of this national highway? The acts of 1862 and 1864 furnish the
answer to this question. By the act of 1862, as we have seen, it is
provided that the issuing of bonds, and their delivery to the
railroad company entitled to receive them, should
ipso
facto constitute a mortgage on the whole line of the railroad
and telegraph constructed by the company receiving the bonds,
together with its rolling stock, fixtures, and property of every
kind and description, and in consideration of which the bonds were
issued, and upon the refusal or failure of the company to redeem
the bonds, or any part of
Page 161 U. S. 428
them, when required so to do by the Secretary of the Treasury in
accordance with the act, the railroad, with all the rights,
functions, immunities, and appurtenances appertaining thereto, and
all lands granted to the company, could be taken possession of by
that officer for the use and benefit of the United States. The same
act also authorized the government to retain all sums due as
compensation for services rendered in its behalf by the railroad
company.
These provisions were so far altered by the act of 1864 as to
authorize the Union Pacific Railroad Company, or any company
authorized to participate in the construction of the road from the
Missouri River to the Pacific Ocean, to place a first mortgage on
their railroad and telegraph lines, respectively (to an amount not
exceeding the bonds of the United States), to which mortgage the
lien of the United States bonds was made subordinate, saving the
right of the government, reserved in the act of 1862, to be
preferred in the use of the railroad and telegraph for the
transportation of the mails, troops, and munitions of war and the
transmission of telegraphic dispatches. The act of 1864 also
provided that only one-half of the compensation due from the
government for services rendered should be retained and applied to
the payment of the bonds issued by the United States. But the Act
of May 7, 1878, c. 96, § 2, known as the "Thurman Act,"
provided that the whole of such compensation might be retained,
one-half to be applied to the payment of interest on the bonds
issued by the United States and the other half to be turned into
the sinking fund established by that act.
These and other provisions indicate the extent to which Congress
deemed it necessary to make provision for the protection of the
United States against liability on its bonds loaned to railroad
companies for the purposes indicated in the act of 1862. The
security taken by the government was, of course, impaired by the
act of 1864, which subordinated the lien of the United States, as
originally declared, to the first mortgages executed by the
respective companies under the authority of that act. But if the
act of 1862, fairly interpreted, excludes the idea that
stockholders of the companies
Page 161 U. S. 429
receiving subsidy bonds were to be personally liable to the
United States for the principal and interest accruing on those
bonds, the legislation of 1864, however unwise, did not have the
effect of imposing such liability.
Now the important fact disclosed by the Pacific Railroad Acts is
that no one of them contains any clause imposing upon the
stockholders of a corporation receiving subsidy bonds personal
responsibility for any debt due to the United States from such
corporation by reason of its failure to pay those bonds at
maturity. It was, of course, competent for Congress, when
incorporating the Union Pacific Railroad Company, to impose such
liability upon the stockholders of that corporation. But as it did
not do so, as the personal liability of stockholders for the debts
of the corporation arises only from statute, it cannot be claimed,
nor is it claimed, that the stockholders of that corporation
incurred by their subscriptions of stock any liability to the
United States or to any other creditor for the debts of that
company. They were bound, of course, to make good the amount of
their subscriptions; but, that being done, their personal
responsibility to creditors of the corporate body ceased.
Pollard v.
Bailey, 20 Wall. 520,
87 U. S. 526;
Terry v. Little, 101 U. S. 217;
Trustees of Free Schools in Andover v. Flint, 13 Met. 539,
541;
Slee v. Bloom, 19 Johns. 456, 474;
Carr v.
Iglehart, 3 Ohio St. 458;
Seymour v. Seymour, 26 N.Y.
134, 139;
Bohn v. Brown, 33 Mich. 257;
Woods v.
Wicks, 7 Lea 40, 45;
Smith v. Huckabee, 53 Ala.191,
193;
Bank v. Hendrickson, 40 N.J.L. 52, 54;
Coffin v.
Rich, 45 Me. 507, 510; 3 Thomps. Corp. § 2925, and
authorities there cited. Congress, by its legislation, encouraged
and invited the investment of private capital in the construction
of a highway which at that time was deemed of vital importance to
the whole country. As the stockholder of a corporation is not
liable beyond the amount of his unpaid subscription for its debts
unless such liability is imposed by statute, and as the acts of
Congress in question are silent upon that subject, every subscriber
to the stock of the Union Pacific Railroad Company must be deemed
to have become such upon the condition,
Page 161 U. S. 430
implied by law, that he should not be personally liable for the
debts of the corporation. It is not too much to say that if the
acts of 1862 and 1864 had made the stockholders of the corporations
therein named personally liable in proportion to their stock for
the repayment of the principal and interest of the bonds issued and
delivered to such corporation, the accomplishing of the objects
Congress had in view would have been seriously retarded, if not
wholly defeated.
It is said, however, that these principles have no application
to stockholders of California corporations that came into existence
under constitutional and statutory provisions making a stockholder
of a railroad corporation liable in proportion to his stock for its
debts and obligations.
This position cannot be sustained except upon the theory that
Congress intended to take a larger security in respect of that part
of the Pacific Road which the California company undertook to
construct and maintain than it took in respect of the Union Pacific
Railroad. But it cannot be inferred from the legislation of
Congress that it intended, for the protection of the interests of
the United States, to impose a heavier liability upon the
stockholders of the California company than was imposed upon the
stockholders of the Union Pacific Railroad Company. Why should it
have so intended? Why should it be supposed that Congress would
purposely make it more difficult to construct one part of the
proposed national highway than another? The supreme end sought to
be attained was, by means of private capital and governmental aid,
to secure the construction of the whole line, for the benefit,
primarily, of the United States and for the use of all the people.
If, instead of making use of the Central Pacific Railroad Company
of California, Congress had itself created a corporation, with
authority to construct a road from San Francisco through the
territories of the United States to meet the Union Pacific Railroad
Company, no one would suggest that the stockholders of such a
corporation would have been liable for its debts unless Congress
expressly imposed liability upon them. In respect of the liability
of stockholders to the United States on account of its subsidy
bonds,
Page 161 U. S. 431
we cannot believe that Congress intended to apply to the
stockholders of the state corporation, selected to participate in
the great work of establishing railroad and telegraphic
communication between the Missouri River and the Pacific Ocean, any
rule that it did not prescribe for stockholders of a national
corporation created for the purpose of accomplishing the same
object.
As Congress contemplated the construction of one connected,
continuous line from the Missouri River to the Pacific Ocean, to be
used for governmental and public purposes; as it recognized "the
necessity of uniting, by iron bands, the destiny of the Pacific and
Atlantic states;" as its enactments disclose an intention to grant
national aid to the corporations named, upon terms and conditions
applicable alike to all of them -- we cannot impute to it the
purpose to make a discrimination against one part of that line that
would necessarily have retarded the accomplishment of the important
public object which it had in view. Throughout the whole of the
acts referred to is manifest the purpose that the California
corporation and other state corporations named should enjoy the
rights, immunities, benefits, and privileges given to them upon the
same terms and conditions as were prescribed for the Union Pacific
Railroad Company. But the imposition of liability upon the
stockholders of the California corporation for the debt of that
corporation arising out of the bonds it received from the United
States, when no such liability was imposed upon the stockholders of
the Union Pacific Railroad corporation on account of like bonds
received by it, would be inconsistent with that equality in terms
and conditions which Congress prescribed for the corporations that
were invited or permitted to participate in the grants, rights,
benefits, privileges, and immunities granted by the general
government to the corporation created by it.
It should be remembered that the question here is not whether
the stockholders of the California company can be made liable for
its debts to the United States arising in some other way than under
the Pacific Railroad Acts, and by the acceptance of United States
bonds in aid of the construction
Page 161 U. S. 432
of its road. Nor are are now to decide whether the adoption of
the California corporation as an instrument of the national
government in accomplishing a national object exempted its
stockholders from liability under the Constitution and laws of
California to ordinary creditors. The question before us relates
only to the liability of the stockholders of the California
corporation on account of a claim of the United States, arising out
of particular acts of Congress which authorized the issuing and
delivery of bonds to that corporation and made such provision for
the security of the United States as Congress deemed necessary and
proper, but which did not reserve any right to look to the
stockholders of that corporation if it failed or refused to meet
the obligation imposed upon it in respect of those bonds.
Touching the obligation of the several railroad companies to pay
at maturity the bonds received from the United States in aid of the
construction of a railroad and telegraph line to the Pacific Ocean,
there are cogent reasons, apart from the words of the act of
Congress, why a rule should not be applied to the stockholders of
the Central Pacific Railroad Company which confessedly cannot be
applied to stockholders of the Union Pacific Railroad Company. Both
corporations participated in the execution of the purposes of
Congress. Each received franchises and powers from the federal
government to be exerted for objects of national concern. Although
the Central Pacific Railroad Company of California became an
artificial being under the laws of that state, its road owes its
existence to the national government, for all that was accomplished
by the corporation that constructed and owns it was accomplished in
the exercise of privileges granted by, and because of the aid
derived from, the United States. "By the act of 1862," this Court
has said
"Congress granted this corporation a right to build a road from
San Francisco or the navigable waters of the Sacramento River to
the eastern boundary of the state, and thence through the
territories of the United States until it met the road of the Union
Pacific company. For this purpose, all the rights, privileges, and
franchises were given this company that were granted the
Page 161 U. S. 433
Union Pacific Company except the franchise of being a
corporation, and such others as were merely incident to the
organization of the company. The land grants and subsidy bonds to
this company were the same in character and quantity as those to
the Union Pacific, and the same right of amendment was reserved.
Each of the companies was required to file in the Department of the
Interior its acceptance of the conditions imposed before it could
become entitled to the benefits conferred by the act. This was
promptly done by the Central Pacific Company, and in this way that
corporation voluntarily submitted itself to such legislative
control by Congress as was reserved under the power of
amendment."
Again, in the same case: "But for the corporate powers and
financial aid granted by Congress, it is not probable that the road
would have been built."
Sinking Fund Cases, 99 U.
S. 710,
99 U. S. 727.
And in
California v. Pacific Railroad Company,
127 U. S. 1,
127 U. S. 38, Mr.
Justice Bradley, delivering the opinion of the Court, referred to
the Pacific Railroad acts relating to the Central Pacific Railroad,
and said:
"Thus, without referring to the other franchises and privileges
conferred upon this company, the fundamental franchise was given by
the acts of 1862, and the subsequent acts to construct a railroad
from the Pacific Ocean, across the State of California and the
federal territories until it should meet the Union Pacific, which
it did meet at Ogden, in the Territory of Utah."
The relations between the California corporation and the state
were of no concern to the national government at the time the
purpose was formed to establish a great highway across the
continent for governmental and public use. Congress chose this
existing artificial being as an instrumentality to accomplish
national ends, and the relations between the United States and that
corporation ought to be determined by the enactments which
established those relations, and if those enactments do not
expressly nor by implication subject the stockholders of such
corporation to liability for its debts, it is to be presumed that
Congress intended to waive its right to impose any such
liability.
The views we have expressed render it unnecessary to
consider
Page 161 U. S. 434
any other question in the case. We are of opinion that the bill
filed by the United States was properly dismissed, and that the
order of the circuit court of appeals affirming such dismissal was
correct.
The judgment is therefore affirmed.