The City of Menasha et al. vs. The Milwaukee & Northern R. R. Co., imp.

THE STATE VS. WERNER.

April 26-May 10, 1881.

REPORTED from the Circuit Court for Jackson County. This cause was argued with The State v. Haas.

PER CURIAM. The questions submitted for our decision in this case have been answered in the case of State v. Haas, and require no further comment.

The cause will be remitted to the circuit court for further proceedings, with our decision upon the questions in that case.

THE CITY OF MENASHA and another vs. THE MILWAUKEE & NORTHERN RAILROAD COMPANY, imp.

March 30-June 4, 1881.

RAILROADS: CORPORATIONS. (1-3) How far contracts of railroad company binding on another company which has purchased its franchises, etc. INJUNCTION. (4) When to be denied on the pleadings.

1. A railroad company, organized under the provisions of section 1820, R. S., with power to purchase the franchises and property of an older company, previously sold under a mortgage, as well as to construct and operate other lines of road, is not, by virtue of such purchase, an assignee of the older company, so as to be bound by any of its contracts, except such as are a lien upon or otherwise bind the property and franchises thus purchased.

2. A railroad company, having power to extend its track from its depot in the plaintiff city through the city of Neenah, so as to connect with the Wisconsin Central Railroad, entered into an agreement with the city, for a valuable consideration, not to make such connection. Held, that this (if valid) was a mere personal contract, binding only said company and such persons as may be, in a strict sense, its successors or assignees. 3. The Milwaukee & Northern Railroad Company, being authorized by legislative act to build a railroad from the city of Neenah, across Doty's island, to the line of the Milwaukee & Northern Railway Company, in

The City of Menasha et al. vs. The Milwaukee & Northern R. R. Co., imp.

the plaintiff city, it takes authority by subdivision 6, sec. 1828, R. S., to operate such road in connection with the last-named company's road, notwithstanding any covenant of such last-named company with the plaintiff prohibiting such connection.

4. No legal obligation of the Milwaukee & Northern Railroad Company to refrain from building and operating said road being shown, the complaint alleges that the organization of said company was fraudulently and collusively made for the purpose of enabling its co-defendant, the Milwaukee & Northern Railway Company, to avoid its covenant, etc., and asks for an injunction against both roads. The answer fully meets and denies all the averments of fraud and collusion. Held, that on the complaint and answer the injunction should have been refused, and plaintiff's left to their legal remedy.

APPEAL from the Circuit Court for Winnebago County. The case is thus stated by Mr. Justice TAYLOR:

"This is an appeal from an injunctional order restraining the appellant, The Milwaukee & Northern Railroad Company,' from constructing a railroad from the city of Menasha, through the city of Neenah, so as to connect the appellant's railroad terminating in Menasha with the Wisconsin Central Railroad. The grounds alleged for restraining the appellant are, that the Milwaukee & Northern Railway Company entered into an agreement with the village, now city, of Menasha that, in consideration of the said village issuing and delivering to said railway company $60,000 of its corporate bonds in exchange for the same amount of the capital stock of said company, said company, amongst other things, agreed upon its part that it would not extend its track and connect the same within three miles of its depot in the village of Menasha with any other railway, so as to permit the passage of cars from one road to the other, otherwise than north of the north branch of the Fox river, or west of Lake Butte des Morts, without the consent of said village of Menasha. It is alleged that such agreement on the part of said company was and is a great advantage to said city of Menasha, and was so considered by the company and said city at the time the same

The City of Menasha et al. vs. The Milwaukee & Northern R. R. Co., imp.

was made; that it constituted one of the principal inducements to vote the said aid of $60,000 to said railway company, and that, without such agreement on the part of the company, the people of said village would not have voted said aid.

"The complaint further charges that the Milwaukee & Northern Railroad Company is, in fact, the mere successor of the Milwaukee & Northern Railway Company; that it is bound by the agreements of said last-named company; that the organization of the appellant company is collusive, and only made for the fraudulent purpose of avoiding the contract made with the city of Menasha and for the purpose of building said railroad in violation of such contract.

"The answer of the appellant company, in substance, alleges that it was duly incorporated under the general laws of this state, with the powers, among other things, of purchasing the railway property and franchises of the first division of the Milwaukee & Northern Railway, and the Menasha & Appleton Railway, and to operate the same, and to construct and maintain a railroad with one or more tracks from a convenient point in the city of Neenah to the city of Menasha, to connect with the Menasha & Appleton Railway, and to construct, operate and maintain a railway with one or more tracks, connecting with the Milwaukee & Northern Railway, to a convenient point on the Menomonee river, and there to connect with a railroad to be built across the state of Michigan to Lake Superior, with such branches as shall be convenient to obtain business for said railroad, by charter of the state of Wisconsin, bearing date June 5, 1880.'

"The answer then alleges the insolvency of the Milwaukee & Northern Railway Company, the foreclosure of a mortgage given upon its railway, rolling stock, road-bed and franchises, and a sale under such mortgage of the first division of said railway, including the Menasha & Appleton Railway Company's road; that at such sale Guido Pfister and Ephraim Mariner, a committee of the bondholders, bid off the same for

The City of Menasha et al. vs. The Milwaukee & Northern R. R. Co., imp.

the sum of $1,500,000; that the sale was duly confirmed, and that the appellant company purchased from said Pfister and Mariner the property and franchises so purchased by them at said mortgage sale; and that afterwards said appellant resolved to construct a line of railroad from a point in the city of Neenah across Doty's island, to connect with the Menasha & Appleton Railway and the first division of the Milwaukee & Northern Railway, so purchased by the appellant, in the city of Menasha. The construction of this line of road is the one sought to be enjoined by the respondents in this action. The answer then denies all collusion with the said Milwaukee & Northern Railway Company, and all knowledge on the part of the appellant's incorporators of the existence of the contract set out in the complaint, with the Milwaukee & Northern Railway Company, at the time of the organization of the appellant company; alleges that the stockholders of the Milwaukee & Northern Railway Company have long since abandoned their investment in that company, and have ceased to elect officers thereof; denies that the appellant company was organized to be the successor of the Milwaukee & Northern Railway Company; denies that it was organized and created for the sole purpose of violating the covenant of the Milwaukee & Northern Railway Company, set forth in the complaint; and denies that said covenant made by the latter company with said village of Menasha is of any benefit whatever to said city of Menasha.

"The answer also shows that ever since 1873 the Milwaukee & Northern Railway has been operated in connection with the Wisconsin Central Railroad, the two roads connecting in the city of Menasha but not running through the city of Neenah, and that the new line of road is intended to connect the same roads by running through the city of Neenah, and thereby enable the two roads to do business in the city of Neenah as well as in the city of Menasha, and that the new line will not in any way hinder the people of Menasha from doing busi

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The City of Menasha et al. vs. The Milwaukee & Northern R. R. Co., imp.

ness over both of said railroads with the same facilities and convenience now enjoyed by them.

"Upon the complaint and answer the circuit court made an order restraining the appellant from constructing a road from Neenah to the depot of the Milwaukee & Northern Railway Company in the city of Menasha; and from such order this appeal was taken."

E. Mariner, for the appellant:

1. The contract between the town and the railway company, set out and attempted to be enforced, is void, as against public policy. Williamson v. Railway Co., 53 Iowa, 126; St. L., J. & C. R. R. Co. v. Mathers, 71 Ill., 592; St. J. & D. C. R. R. Co. v. Ryan, 11 Kans., 602; P. R. R. Co. v. Seely, 45 Mo., 212; Marsh v. Railway Co., 64 Ill., 414; State v. Railroad Co., 29 Conn., 538; Bestor v. Wathen, 60 Ill., 138; Fuller v. Dame, 18 Pick., 472; Ft. E. & Ft. M. Plank Road Co. v. Payne, 15 N. Y., 583; Butterworth, etc., Turnpike Co. v. North, 1 Hill, 518; Holladay v. Patterson, 5 Oreg., 177. Equity, therefore, will not interfere to enforce it. Fry on Spec. Perf., § 307; Story's Eq. Jur., § 736; Swartzer v. Gillett, 2 Pin., 238; Miller v. Larson, 19 Wis., 463. 2. Conceding the contract to be valid, its object being to prevent the railway company from carrying out the full authority granted to it by its charter, and in limitation of the rights of the public, the town will not be aided in equity, but will be left to its remedy at law. Broom's Leg. Max., 466 (620); Williamson v. Railway Co., supra. There is nothing to show that the legal remedy is not adequate. Prescott v. Everts, 4 Wis., 314; Shephard v. Genung, 5 id., 397; McIndoe v. Hazelton, 19 id., 567; Batchelder v. Batchelder, 20 id., 452. 3. This is not the contract of the Milwaukee & Northern Railroad Company. Contracts of a company whose property and franchises have been sold upon foreclosure to a company which has been reörganized under the statute, are not obligatory on the new organization. Gilman v. R. R. Co., 37 Wis., 319; Vilas v.