Syllabus.

This case is not like those in which the defendant, having abandoned or refused to perform the unlawful contract, has been held liable to the plaintiff, as upon an implied contratt, for the value of what it had received from him and had no right to retain. Spring Co. v. Knowlton, 103 U. S. 49; Logan County Bank v. Townsend, 139 U. S. 67, and cases there cited.

But the case is one in which, in the words of Mr. Justice Miller in a case often cited in this opinion, the court will not disturb the possession of the property that has passed under. the contract, but will refuse to interfere as the matter stands. Pennsylvania Railroad v. St. Louis, Alton & Terre Haute Railroad, 118 U. S. 290, 316, 317. See also Union Trust Co. V. Illinois Midland Co., 117 U. S. 434, 468, 469; Central Transportation Co. v. Pullman's Car Co., 139 U. S. 24, 56, 57, 61.

Decree affirmed.

HANCOCK v. LOUISVILLE & NASHVILLE RAILROAD COMPANY.

SHELBY RAILROAD COMPANY v. LOUISVILLE & NASHVILLE RAILROAD COMPANY.

APPEALS FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF KENTUCKY.

Nos. 325, 326. Argued April 21, 22, 1892. - Decided May 16, 1892.

The act of the legislature of Kentucky of January 22, 1858, authorizing any railroad company to lease its road to another railroad company, provided its road so leased should be so connected as to form a continuous line, permits the lessee company to take leases of branches by means of which it establishes continuous lines from their several termini to each of its own.

Under the legislation of the State of Kentucky, the right to receive and vote upon the shares of stock in the Shelby Railroad Company which were issued upon the subscription of a part of Shelby County became vested in the Shelby Railroad District of Shelby County as a corporation quoad hoc.

Opinion of the Court.

THE case is stated in the opinion.

Mr. B. F. Buckner for appellant. Mr. T. L. Burnett and Mr. John L. Dodd were with him on the brief.

Mr. J. C. Beckham for appellees.

MR. JUSTICE BREWER delivered the opinion of the court.

These two cases were argued together, the object of attack in each being the same, to wit, a lease made by the Shelby Railroad Company, on July 16, 1879, to the Louisville, Cincinnati and Lexington Railway Company, and subsequently transferred by the latter to the Louisville and Nashville Railroad Company. Each seeks the same relief, the cancellation of that lease. Hancock, the appellant in one case, was a stockholder in the Shelby Railroad Company, the appellant in the other, and sues for the benefit of that company, the allegations of his bill being intended to bring the case within the requirements of equity rule number 94. His bill was filed on the 3d day of December, 1886, and in it he alleges in substance that he notified and requested the Shelby Railroad Company to institute an action for the cancellation of said lease, but that the directors of said company at a meeting held to consider the matter resolved not to institute such action. He charges that the lease was made without legislative authority, and was therefore ultra vires and void; and also that it was not ratified by a majority of the stockholders of the Shelby Railroad Company. The Shelby Railroad Company filed its bill on the 4th day of August, 1888, but rested its attack on the validity of the lease on the ground that it had not been ratified by a majority of its stockholders.

In disposing of these cases, therefore, two questions must be considered. First, was there legislative sanction for such a lease; and second, if so, was it ratified by a majority of the stockholders of the Shelby Railroad Company. With reference to the first: On January 22, 1858, the legislature of Kentucky passed a general statute which in terms gave to all

Opinion of the Court.

railroad companies in the Commonwealth "power and authority to make, with each other, contracts of the following character: 2d, for the leasing of one company to another, provided the road so leased shall be so connected as to form a continuous line; provided, however, that all such contracts shall be approved by a majority in interest of all the stockholders of each of the contracting companies, at some stated or called meeting of the same." 1 Sess. Laws, 1857-58, 10.

It is claimed that the lessor's and lessee's roads do not form a continuous line, within the meaning of this statute, and that, therefore, the condition upon which a valid lease could be made was wanting. The main line of the lessee's road extends in a northeasterly direction from Louisville to Cincinnati. At Anchorage, about twelve miles east of Louisville, the Shelbyville road touches it. At the time of the lease the latter road was completed from the place of junction to Shelbyville, a distance of about eighteen miles, the general course being a trifle south of east. There was a physical connection between the two roads at Anchorage, the latter being the western terminus of the Shelbyville road. From this place the main line of the lessee road extends northeasterly, and the Shelbyville road southeasterly, making two forks of the letter "V." Shelbyville is nearly due east from Louisville, and the Shelbyville road, together with the twelve miles of the lessee's road, make a continuous line between Shelbyville and Louisville, in a route about as straight as the average railroad. But Anchorage is not a terminus of the lessee road, and the contention is, that under the statute the leased line must touch one of the termini of the lessee's road, so as to make an extension of it. As counsel expresses it: "Where two roads are in such connection or juxtaposition with each other as that the leasing of one by the other will extend or lengthen the line and create a new terminus, the act applies, and it applies only in such a case." In reference to this contention, the learned judge of the Circuit Court observed: "This construction would authorize the Shelby Railroad Company to lease the L. C. & L. railroad from its junction near Anchorage to Louisville, but not the L. C. & L. R. R. Com

Opinion of the Court.

pany to lease the Shelby railroad from the junction to Shelbyville."

We think this suggestion pertinent, and that the contention of appellant, Hancock, cannot be sustained. It is enough that by the lease the connected roads form a continuous line, and it is not essential that the leased line be an extension from either terminus of the lessee's road. The evil which was intended to be guarded against by this limitation was the placing of parallel and competing roads under one management, and the control by one company of the general railroad affairs of the State through the leasing of roads remote from its own, and with which it has no physical or direct business connection. It was not intended to prevent a company with a long road, like the lessee company, from leasing branches by means of which it establishes continuous lines from their several termini to each of its own. By this lease a direct and continuous line from Louisville to Shelbyville was created, and neither the letter nor the spirit of the statute was thwarted.

But the chief reliance of counsel is on the other question. The Shelby Railroad Company is a corporation created by an act of the general assembly of Kentucky, of date March 15, 1851. 2 Sess. Laws 1850-51, 364, c. 431. That act was amended March 10, 1854, 2 Sess. Laws 1853-54, 453, c. 913; February 15, 1858, 2 Sess. Laws 1857-58, 158, c. 554; and February 3, 1869, 1 Sess. Laws 1869, 260, c. 1393. By the last amendment a part of Shelby County, the boundaries being specifically prescribed in the act, was authorized to subscribe $300,000 to the stock of the company, if a majority of the votes cast at an election should favor such subscription. The result of the election was to be entered on the records of the county court, and if favorable the county judge was to cause the subscription to be made in the name of said portion of Shelby County, and to issue bonds in its name in payment thereof. In pursuance of this act an election was had, and, being in favor of the subscription, it was made, and bonds to the amount of $300,000 were executed and delivered to the railroad company on June 1, 1869. The original charter

Opinion of the Court.

authorized the county of Shelby to subscribe for stock, the subscription to be made payable at such times and upon such terms as should be agreed upon, with no provision for the issue of the bonds, but with authority to levy and collect taxes for the purpose of paying such subscription. Section 26 of the act reads:

"That each and every person who pays any part of said tax shall be entitled to his pro rata share of said stock in the respective companies authorized and contemplated in this act, and into the treasury of which said tax is paid, and shall be entitled to demand and receive a certificate so soon as he shall have paid for a full, half or quarter share, or shall produce transfers from those who have paid portions, so as to entitle him to a full, half or quarter share."

The amendment of 1869, which authorized the issue of bonds, also directed a tax to pay the interest and principal of such bonds; and in section 9, provided:

"The several counties and portions of counties shall not vote the stock for which certificates may be issued to the taxpayers, but the same shall be voted by the individual stockholders."

After the issue of these bonds, and on March 11, 1870, an act amending the charter was passed, 2 Sess. Laws 1869–70, 248, c. 626, section 3 of which is as follows:

"That when any county or part of a county, city, town, or precinct, shall have delivered its bonds in payment for stock subscribed, it shall be entitled to representation and to vote the amount of such stock in any meeting of the stockholders. of said company. The stock owned by a county shall be represented by the county judge and all of the justices of the peace of the county; stock owned by a part of a county or a precinct, by the-county judge and by the justices of the peace residing in the district or precinct taxed."

And on February 26, 1873, a further amendment provided that the part of Shelby County which subscribed stock and issued bonds should have "the corporate name of 'The Shelby Railroad District of Shelby County,' and by that name may sue and be sued."