Opinion · Supreme Court of the United States
Peterson v. Chicago, Rock Island & Pacific Railway Co.
205 U.S. 364
- Type
- Opinion
- Court
- Supreme Court of the United States
- Jurisdiction
- Federal
- Date
- 1907-04-08
- Topic
- general
How later courts describe this case
- court lacked personal jurisdiction over parent company because the wholly-owned subsidiary controlled its day-to-day operations and personnel decisions
Citator
UpLaw has not yet analyzed Peterson v. Chicago, Rock Island & Pacific Railway Co.. The absence of a flag is not a finding that it is good law.
- Cited by
- 212 opinions
Headnotes
- Civil Procedure — Service of Process A foreign corporation may be served with process within a state only when it is doing business therein, and such service must be made upon an agent who represents the corporation in that business. 205 U.S. at 382
- Business & Corporate Law — Parent and Subsidiary — Doing Business Within a State A railroad company is not doing business in a state merely because another railroad company whose capital stock it practically owns does business there; the ownership of a controlling interest in a subsidiary confers the power to control the subsidiary through the election of its directors, but does not give the parent present control of the subsidiary's corporate property and business, and does not make the parent the company transacting the local business. 205 U.S. at 373
- Business & Corporate Law — Agency The officers and employees of a subsidiary railroad company are not agents of the parent company for purposes of service of process merely because they at times also perform services for the parent as to business transacted outside the state, where such employees are paid by each company in proportion to the business done for it and are under the exclusive management and control of the company in whose separate service they are engaged. 205 U.S. at 373-374
- Business & Corporate Law — Partnerships There is no partnership liability arising from the ownership or control by one railroad company of the capital stock of another, so as to permit the controlling company to be brought into court to respond for a tort by serving process upon the subsidiary company. 205 U.S. at 372
- Civil Procedure — Service of Process Even where a state statute designates certain persons, such as train conductors handling trains for two or more railway corporations across state lines or ticket agents selling tickets or making transportation contracts, as agents of a foreign corporation upon whom citation may be served, the validity of such service still requires that the corporation be doing business within the state and that the service be upon an agent representing the corporation with respect to that business. 205 U.S. at 381
PETERSONv. CHICAGO, ROCK ISLAND PAC. RY.,205 U.S. 364(1907)
27 S.Ct. 513
PETERSONv. CHICAGO, ROCK ISLAND AND PACIFIC RAILWAY COMPANY.
ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF
TEXAS.
No. 225.
Argued March 6, 7, 1907.
Decided April 8, 1907.
THIS case comes here upon a certificate from the Circuit Court
of the United States for the Northern District of Texas, raising
the question of the jurisdiction of that court over an action
brought by plaintiffs in error, Augusta A. Peterson and Ida
Peterson, the latter a minor, suing by her mother and next
friend, and both being citizens of Texas, against the Chicago,
Rock Island and Pacific Railway Company, and Illinois
corporation, hereinafter at times referred to as the Pacific
Company.
The plaintiffs in error, wife and daughter of one John
Peterson, an employe of the Pacific Company, sought recovery for
the alleged negligent killing of said John Peterson while engaged
as an engineer in its employ at Chickasha in the Indian
Territory, on October 19, 1903. It is charged in the petition
that the Pacific Company was then engaged in carrying on its
business in the State of Texas in the name and through the
Chicago, Rock Island and Gulf Railroad, a corporation of the
State of Texas, hereafter at times referred to as the Gulf
Company, which latter corporation, it was alleged, was
Page 365
an auxiliary corporation and agent of the defendant, and was then
and there dominated and controlled by it, its lines of railroad
being operated by the Pacific Company as a part of the Rock
Island system.
It was charged that S.B. Hovey, Vice President and General
Manager of the Gulf Company, residing in Tarrant County, Texas,
was also the general manager and local agent of the Pacific
Company in that State. It was also alleged that F.E. Merrell was
the local agent in Tarrant County, Texas, of the Pacific Company,
and that M.E. Sebree was the local agent for it in said county
and State.
Service of citation was made on the defendants by serving the
parties above named as its agents in Tarrant County, Texas, in
pursuance of the statute of the State. The defendant moved to
quash the service on the ground that neither of the parties were
such agents, and filed in support of its motion the affidavits of
each, Hovey, Merrell and Sebree, denying such agency. Thereafter
plaintiffs made application for additional process in pursuance
of a later statute of the State of Texas, to be hereinafter
noticed, and charged that A.L. Thomas, who resides in Tarrant
County, Texas, was a train conductor engaged in handling trains
over the tracks of the Gulf Railroad in the State of Texas and
over those of the Pacific Railroad beyond the limits of the
State, and that he was engaged in running and handling passenger
trains on the tracks of both said companies on both sides of the
state line, and was an agent and representative of the defendant
company, residing in Tarrant County, Texas. It was further
charged that V.N. Turpin, who resides in Fort Worth, Tarrant
County, Texas, was a ticket agent engaged in the selling of
tickets and the making of contracts for transportation and for
and in the behalf of the Pacific Company from the city of Fort
Worth, Texas, over the lines of the Gulf Company in the State of
Texas and over the line of the defendant company beyond the line
of said State, and was an agent and representative of the
defendant company in said State and county.
Page 366
These persons, Thomas and Turpin, were accordingly served
under the application for new process as the agents and
representatives of the defendant company in the said county and
State.
The defendant company filed a supplemental motion to quash
this service upon the grounds that these persons were not the
agents or representatives of the defendant company, filing their
affidavits in support of said motion. In the return of the writ
served on Hovey it was also set forth that he was general manager
of the Pacific Company, residing in Tarrant County, Texas. The
motion and supplemental motion to quash the service was heard by
the court, the motion sustained and the cause dismissed for want
of jurisdiction, the court holding that the defendant had not
been properly served with process.
From the stipulated facts, documentary evidence and testimony
embodied in the bill of exceptions the following facts, pertinent
to the determination of the issues, may be gathered:
The Pacific Company and the Gulf Company are both of the "Rock
Island System" of railroads. The second annual report of the
"Rock Island Company" June 30, 1904, shows that it is the owner
of the entire capital stock, except directors' shares, of the
Chicago, Rock Island and Pacific Railroad Company, a corporation
of Iowa; that company owns 695,574.75 shares of the capital stock
of the Chicago, Rock Island and Pacific Railway Company, a
corporation of the States of Illinois and Iowa, and 286,349
shares of the common capital stock of the St. Louis and San
Francisco Railroad Company, a corporation of the State of
Missouri, and the report adds:
"Each of the two latter companies operates independently its
lines of railway and each is interested through the ownership,
directly or indirectly, of at least the majority of the capital
stock, in certain subsidiary companies, each of which operates
its property independently. The lines of the Chicago, Rock Island
and Pacific Railway Company, including lines
Page 367
formerly of the Choctaw, Oklahoma and Gulf Railroad Company, the
Burlington, Cedar Rapids and Northern Railway Company, and the
Rock Island and Peoria Railway Company, together with the lines
of its subsidiary companies, namely, the Chicago, Rock Island and
Gulf Railway Company, and the Chicago, Rock Island and El Paso
Railway Company, comprise what is known as the `Rock Island
System.'
"As the Rock Island Company is the owner of the entire capital
stock, except directors' shares, of the Chicago, Rock Island and
Pacific Railroad Company, the income of both the companies is
included in the following statement."
This report purports to be made by order of the board of
directors, was dated October 17, 1904, and was signed by Robert
Mather, President. Appended to this report as a part of it, under
the head of "Statements and Exhibits, Rock Island System Lines,"
was the following statement, to wit:
"On page 23 of said report, under the heading of `Rock Island
System — State of Mileage Operated:'
"The Chicago, Rock Island and Gulf Railway Company:
Terral, I.T. (Red River), to Dallas, Texas ........... 126.67
Bridgeport, Texas, to Graham, Texas .................. 53.29
Texhoma, O.T., to Bravo, Texas-New Mexico state
line ............................................... 91.75
Texola, O.T. (Texas state line), to Amarillo, Texas .. 112.97
Total Chicago, Rock Island and Gulf Railway -------
Company .......................................... 386.68"
Plaintiff also introduced in evidence a railroad folder, dated
July 10, 1904, on which was printed in large letters "Rock Island
System Time Table," in which appears the names of the Chicago,
Rock Island and Pacific Railway Company; Chicago, Rock Island and
El Paso Railway Company, and the Chicago, Rock Island and Gulf
Railway Company; with a list of the names and residences of the
passenger and freight agents, and a schedule of the passenger
trains on said lines.
Page 368
On the inside of the cover of the folder is a map showing the
lines of the said railroad company, so connected as to belong to
one system. Below the map is printed:
"The Rock Island System of America.
"The Rock Island System covers a territory which is 1,000
miles long by 1,000 miles wide, supports a population of more
than 21,000,000 people and is capable of supporting at least four
times that many. The area of this territory is as great as the
combined area of France, Germany, Italy, Spain, Austria-Hungary,
Denmark, the Netherlands, Turkey, Switzerland and Greece, and its
productive capacity is greater.
"Here are produced more than half the wheat, more than half
the corn, and nearly half the cotton, silver, and gold produced
in the United States."
The origin of the Gulf Company is thus stated in the annual
report of the Rock Island road, June 30, 1904:
"Consolidation of Texas Lines.
"The legislature of the State of Texas, by an act passed March
27th, 1903, authorized the sale of the railroads and properties
of the Chicago, Rock Island and Texas Railway Company, extending
from the Red River to Fort Worth, Texas, with a branch from
Bridgeport, Texas, to Graham, Texas. The Chicago, Rock Island and
Mexico Railway Company extending from the Texas-Oklahoma line
near Texhoma to the Texas-New Mexico line at Bravo; and the
Choctaw-Oklahoma and Texas Railroad Company, extending the
Texas-Oklahoma line near Texola, Texas, to Amarillo, Texas, to
the Chicago, Rock Island and Gulf Railway Company, which had
constructed a line of railroad from Dallas, Texas, to Fort Worth,
Texas, where it connected with the line first named above.
"In accordance with the authority granted, the properties
referred to were, by appropriate corporate action, deeded to the
Chicago, Rock Island and Gulf Railway Company on December 1, 1903.
Page 369
"This consolidation permits the properties in question to be
operated by one management instead of four separate sets of
officials, as heretofore, resulting in economy of operation and
greater efficiency in service.
"In stating the assets and liabilities of the companies
forming the system, the holdings of the Chicago, Rock Island and
Pacific Railway Company in the bonds and capital stock of
auxiliary lines, together with loans between system companies,
have been eliminated from the liabilities and a like reduction
made in the value of the assets; the figures as stated,
therefore, represent the value of the assets and the real
liability without duplication."
Plaintiffs also introduced in evidence the twenty-fourth
annual report of the Pacific Company for the year ending June 30,
1904, in which it is set forth:
"They have included therein operations and affairs of the
operated lines and auxiliary companies forming the `Rock Island
System.'
"In order to make exhibits comparative the figures for the
last preceding year have been restated to meet changed conditions
due to the including in this report the operation of the
auxiliary companies.
"These lines, thus forming the Rock Island System, are the
following:
"Mileage Operated.
The Chicago, Rock Island and Pacific Railway .................. 6,760.74
The Chicago, Rock Island and El Paso Railway .................. 111.50
The Chicago, Rock Island and Gulf Railway ..................... 386.92
"On page 9 of said report, under the head of `Property' and
`Franchises,' occur the following:
"During the year expenditures were made for construction of
extensions and completion of system lines as follows:
Fort Worth, Texas, to Dallas, Texas ........................ $111,371 55
Yarnall, Texas, to Amarillo, Texas ......................... 108,615 64
Jacksboro, Texas, to Graham, Texas ......................... 32,138 96
Page 370
Red River to Fort Worth, Texas ............................. 28,013 04
Texhoma (Texas state line) to Bravo, Texas ................. 9,646 03
Texola (Texas state line) to Yarnall, Texas ................ 2,328 30
"In addition to the expenditures during the year as above,
there has been transferred to property account sundry amounts
expended prior to July 1st, 1903, for construction of new lines
and shops, and purchase of equipment, which have been heretofore
stated in the system assets as `Advances for Construction and
Equipment,' the property represented by such amounts having been
deeded to the Chicago, Rock Island and Pacific Railway Company or
the Chicago, Rock Island and Gulf Railway Company, $23,169.83.
"There has also been transferred to this account the
expenditures made prior to July 1st, 1903, for the purchase of
shares of capital stock of the Burlington, Cedar Rapids and
Northern Railway Company and the Rock Island and Peoria Railway
Company, also cost of stock of the Choctaw, Oklahoma and Gulf
Railroad Company in excess of its par value and the value of
bonds of the Chicago, Rock Island and Texas Railway Company,
owned by the Chicago, Rock Island and Pacific Railway Company,
the value of said property appearing upon balance sheets shown in
prior year's report as `Stocks and Bonds of Constituent
Companies,' $16,446,009.73.
"On page 11 of said report, under the heading `New Lines Open
for Operation,' the following statements are made, viz:
"Additions have been made to the operated system — mileage
since the last report as follows:
"By the Chicago, Rock Island and Gulf Railway Company, Fort
Worth, Texas, to Dallas, Texas, 33.26 miles, opened for operation
in December, 1903.
"Yarnall, Texas, to end of track west of Amarillo, Texas,
18.40 miles, opened for operation in November, 1903.
"Corrections in measurements, Red River to Fort Worth, Texas,
83 miles.
"Operated system mileage was decreased 18.22 miles between
Yarnall, Texas, and Amarillo, Texas.
Page 371
"Fort Worth, Texas, to Dallas, Texas. — This line was
completed and the line opened for operation by the Chicago, Rock
Island and Gulf Railway Company, December 1st, 1903. It is 33.26
miles in length, connecting with the line of the former the
Chicago, Rock Island and Texas Railway Company at Fort Worth, and
extending to Dallas, where, by an agreement with the Gulf,
Colorado and Santa Fe Railway Company, it has the joint use of
the latter company's terminal facilities.
"The opening of this line gives the Gulf Company direct
entrance into Dallas, enabling it to compete for the traffic of
that important commercial center.
"On page 12 of said report is the following statement, viz:
"System Mileage Under Construction.
"By the Chicago, Rock Island and Gulf Railway Company:
Amarillo, Texas, to Texas-New Mexico boundary ....... 69.87
"Amarillo, Texas, to Tucumcari, N.M. The grading for a
considerable portion of this line has been done from Amarillo
westward.
"It was deemed advisable, however, to suspend active
construction until such time as the business outlook would
warrant the expenditure necessary to complete."
Upon the hearing, counsel made an agreed statement of facts,
as follows:
"The Chicago, Rock Island and Pacific Railway Company is a
consolidated corporation, chartered under the laws of Illinois
and Iowa. It has been an existing railroad corporation for over
twenty years. In June of the year 1892 and for some years prior
to that time the said railway company owned and operated a line
of railway from the city of Chicago in a southwesterly direction
through the States of Illinois, Iowa, Missouri and Kansas to
Minco, Indian Territory. During the year 1892 this company
extended its line from Minco, Indian Territory, in a southerly
direction to the north boundary line of Texas in Montague County.
Page 372
"The Chicago, Rock Island and Texas Railway Company was a
corporation organized under the laws of Texas on the 15th day of
July, 1892. It had an authorized capital stock of three million
dollars, in shares of one hundred dollars each, of which seven
hundred and fifty-four shares were subscribed for at the time of
its organization. Below is a list of the names of the
stockholders and the number of shares of capital stock of this
company subscribed for by each, at its original organization.
[The list shows that of the 754 shares subscribed, 745 were
held by one of the attorneys of the Pacific Company, and of the
other 9 shares, 3 were held by other employes of that road.]
"Under the charter of the Chicago, Rock Island and Texas
Railway Company, it was authorized to construct a line of road
from the north boundary line of Texas at a point in Montague
County in a southerly direction through Montague, Wise and Parker
Counties; the charter being afterward amended, authorized the
construction into Tarrant County. This charter authorized the
issuance of first mortgage bonds amounting to fifteen thousand
dollars per mile for construction and not exceeding five thousand
per mile for equipment.
"When the Chicago, Rock Island and Pacific Railway Company
constructed its line to a point near the north bank of the Red
River, north of Montague County, construction work stopped for a
period of time. The Chicago, Rock Island and Texas Railway
Company began the construction of its line at the north line of
the State in Montague County some time after the Chicago, Rock
Island and Pacific Railway Company stopped work at a point north
of Red River. After construction work began on the Chicago, Rock
Island and Texas Railway Company south of Red River, the Chicago,
Rock Island and Pacific Railway Company constructed its line from
the point where work had stopped north of Red River, to a
connection with the Chicago, Rock Island and Texas Railway
Company at the state line. The Texas company
Page 373
finished the construction of its line into Fort Worth in the
latter part of 1893. Some of the same contractors who constructed
the Chicago, Rock Island and Pacific Railway from Minco south to
Red River also took contracts for work on the Texas line.
"On the 2d day of January, 1893, after the Chicago, Rock
Island and Texas Railway Company had constructed and was
operating its line as far south as Bowie, Texas, it entered into
an agreement with the Chicago, Rock Island and Pacific Railway
Company, a true copy of which is hereto attached and marked
`Exhibit A' for identification. This agreement went into effect
immediately after it was executed, and was acted upon and
observed by said companies until the 14th day of April, 1903,
when the same was canceled under authority of the board of
directors of each company by a written agreement, a true copy of
which is hereto attached, marked `Exhibit B' for identification.
[Exhibits A and B are not printed, as they are the contract
and cancellation thereof, both made before the present case
arose.]
"After the Chicago, Rock Island and Texas Railway Company had
constructed its line, it issued first mortgage bonds to the
extent of fifteen thousand dollars per mile thereon, and these
bonds were purchased by the Chicago, Rock Island and Pacific
Railway Company, for which it paid the Texas line one hundred
cents on the dollar. The Chicago, Rock Island and Texas line cost
a large sum of money in excess of the amounts for which it issued
bonds, which additional cost was paid by application of money
subscribed by the stockholders and by borrowing from the Chicago,
Rock Island and Pacific Railway Company, which money so borrowed
has long since been returned with interest.
"At the time the Chicago, Rock Island and Pacific Railway
Company constructed its line to Red River there was no town or
city at that particular point, but there were towns and cities
south, east and west of there in the State of Texas,
Page 374
and a railroad line, being a part of the Missouri, Kansas and
Texas Railway of Texas, nine miles south of that point.
"When the Chicago, Rock Island and Texas Railway Company was
first organized its general offices were located at Bowie,
Montague County, Texas, and remained there for some time, until
the charter was amended removing them to Fort Worth. The first
general officers elected by the Chicago, Rock Island and Texas
Railway Company, and their residences, were as follows: M.A. Low,
Topeka, Kansas, President; J.C. McCabe, Bowie, Texas, General
Freight Agent, and H.F. Weber, Bowie, Texas, Vice President,
Superintendent, Secretary and Treasurer. All these men, prior to
the time they were elected officials of the Chicago, Rock Island
and Texas Railway Company had been employed in some capacity by
the Chicago, Rock Island and Pacific Railway Company. In 1893
S.B. Hovey was elected Vice President of the Texas company and
remained the Vice President and Superintendent of the Chicago,
Rock Island and Texas Railway Company from that date until it was
sold out under an act of the legislature in 1903. Mr. M.E.
Sebree, who was served with citation in this case, was, for a
number of years and until the date of its sale, trainmaster of
the Chicago, Rock Island and Texas Railway Company and assistant
trainmaster of the Chicago, Rock Island and Pacific Railway
Company, with jurisdiction on that line up to Chickasha, Indian
Territory. Prior to the time he was employed by the Chicago, Rock
Island and Texas Railway Company he had been employed by the
Chicago, Rock Island and Pacific Railway Company as brakeman,
conductor, etc. M.A. Low, of Topeka, Kansas, remained the
President of the Chicago, Rock Island and Texas Railway Company
from its organization until the 8th day of November, 1900, during
all of which time he was one of the general attorneys of the
Chicago, Rock Island and Pacific Railway Company.
"The Chicago, Rock Island and Texas Railway Company never
issued or sold any equipment bonds, but before it was
Page 375
sold out under special act of the legislature to the Chicago,
Rock Island and Gulf Railway Company, it had purchased and was
the owner of between one thousand and twelve hundred freight cars
of various kinds. During the time it had no equipment of its own,
it rented rolling stock from various railway companies, but
principally from the Chicago, Rock Island and Pacific Railway
Company, and paid therefor prices prevailing between other lines
of railway in the State of Texas.
"After the Chicago, Rock Island and Texas Railway Company
constructed its line into Fort Worth from Bowie and after the
execution of the contract between it and the Chicago, Rock Island
and Pacific Railway Company, of date of January 2d 1893, the
most of the passenger and freight trains running over its line
from Red River to Fort Worth and from Fort Worth to Red River
were operated beyond its lines as the trains of the Chicago, Rock
Island and Pacific Railway Company. The employes operating these
trains were under the control of and paid by the Chicago, Rock
Island and Texas Railway Company while working on its line, and
they were also under the control of and paid by the Chicago, Rock
Island and Pacific Railway Company while on its line. The
equipment in the various trains went as far north as the business
justified, some of the passenger equipment going as far as
Chicago, and some to Kansas City, while the freight equipment
stopped at points beginning at Chickasha, and from there north
wherever the freight was destined. The passenger equipment coming
south stopped at Fort Worth and the freight equipment, where the
freight was handled in carload lots, went to destination,
wherever that might be.
"Whenever necessary the Texas company would operate a local
train to handle freight between Fort Worth and Red River, but as
a general rule the through service maintained took care of this
business. It operated a local freight and passenger train between
Bridgeport and Jacksboro and afterward to Graham from the time
that branch was built until it was sold out, which was several
years. On the through
Page 376
freight trains the run made by the crews was from Fort Worth to
Chickasha and on the through passenger train the run made by the
crews was from Fort Worth to Caldwell, Kansas, these crews being
handled and paid as above set forth. Outside the Pullman cars,
which were in each passenger train, nearly all the passenger
equipment used by the Chicago, Rock Island and Texas Railway
Company belonged to the Chicago, Rock Island and Pacific Railway
Company, for which it paid rental, as provided for under the
terms of the contract herein first referred to.
"Defendant's witness will testify that the Texas company paid
no part of the cost of operating the Chicago, Rock Island and
Pacific Railway, nor did the Pacific Company pay any part of the
cost of the operation of the Chicago, Rock Island and Texas
Railway, nor did either of them participate in the earnings of
the other. The relationship between the companies is fully
disclosed by the terms of the contract dated January 2d 1893,
which was observed up to the time of its cancellation.
"The passenger conductors, brakemen and train guards wear
regular train uniforms and on the lapel of the coat are the words
`Rock Island,' and on the cap is the word `Conductor,' `Brakeman'
or `Porter.' Any member of these train crews, while working on
the line of the Texas company, may be discharged by the proper
officer of that company; and while working on the line of the
Pacific Company may be discharged by the proper officer of that
company. Either company, of course, employs additional men when
needed.
"At the time the contract of January 2d 1893, was canceled
the Chicago, Rock Island and Texas Railway Company was operating
about an hundred and forty miles of road, and the Chicago, Rock
Island and Pacific was operating about three thousand three
hundred miles. For a considerable time after the Chicago, Rock
Island and Texas Railway Company was built into Fort Worth it
employed and maintained at its Fort Worth office a train
dispatcher, who gave orders for the
Page 377
movement of trains over its line, but as a matter of economy this
was abolished, and the Texas company paid a part of the salary of
the train dispatcher located at Chickasha to give orders for the
movement of trains over its rails.
"On the 22d day of September, 1903, the Chicago, Rock Island
and Texas Railway Company, under authority of a special act of
the legislature known as Senate Bill No. 161, was purchased and
absorbed by the Chicago, Rock Island and Gulf Railway Company,
and since that time has ceased to exist as a railroad or do any
business as such.
"At the time the Gulf Company purchased the Texas company it
had constructed and was operating a line of road from Fort Worth
in Tarrant County to Dallas in Dallas County. The Chicago, Rock
Island and Gulf Railway Company now owns and operates three
hundred and eighty-six miles of road, all of which is located
inside of the State of Texas. It does not own any railroad
outside the State of Texas. It owns at the present time about
sixteen hundred cars, including ballast, refrigerator and cattle
cars, twenty locomotives, and eight cabooses, but does not own
any passenger equipment other than the Pullman cars which are
used in each of its passenger trains; it rents its passenger
equipment from the Chicago, Rock Island and Pacific Railway
Company, and pays therefor current rental charged by connecting
lines in Texas. The train crews on both the through passenger and
freight trains are handled in the same way that they were when
the line into Fort Worth was operated by the Chicago, Rock Island
and Texas Railway Company, but the Chicago, Rock Island and Gulf
Railway Company is now operating in many places local trains
between local points in Texas.
"The following is a list of stockholders and the amount of
stock of the Chicago, Rock Island and Gulf Railway Company owned
by each.
[The list is not printed, as the record discloses that, except
directors' shares, the stock is held for the Chicago, Rock Island
and Pacific Railway Company.]
Page 378
"The Chicago, Rock Island and Gulf Railway Company is
operating under a lease that part of the line of the Chicago,
Rock Island and Pacific Railway Company which begins at the north
boundary line of the State of Texas, extending northward to the
town of Terral, Indian Territory, a distance of about 1 1/6 miles.
"Blank passes, properly signed by different railroads,
including the Chicago, Rock Island and Pacific, Texas and
Pacific, Houston and Texas Central and other lines are sometimes
placed with S.B. Hovey, and when so placed he has the permission
of such line to fill in the names of parties and countersign the
pass, and when so countersigned such pass is recognized by the
line over which it is issued. The local ticket agents of the
Chicago, Rock Island and Gulf Railway Company sell coupon tickets
over the Chicago, Rock Island and Pacific Railway Company's line
and nearly all other lines in the United States, which tickets
are duly honored by the respective roads over which they read.
The Chicago, Rock Island and Gulf Railway Company operates only
one passenger train each way daily between Fort Worth and Dallas,
while it operates two trains each way from Fort Worth north. It
operates also only a local freight service between Fort Worth and
Dallas, but no through freight service. Proper officials of the
Chicago, Rock Island and Gulf Railway Company and of the Chicago,
Rock Island and Pacific Railway Company exchange reports with
each other as to the amount of exchange business done.
"No dividends were ever paid on the stock of the Chicago, Rock
Island and Texas Railway Company, and none have been paid on that
of the Chicago, Rock Island and Gulf Railway Company. The net
earnings of the Chicago, Rock Island and Texas Railway Company
were put into betterments and improvements, and the same is the
case with the Chicago, Rock Island and Gulf.
"In 1897, L.G. Hastings, then secretary of the Chicago, Rock
Island and Texas Railway Company, reported to the
Page 379
Interstate Commerce Commission that the Chicago, Rock Island and
Texas Railway Company was controlled by the Chicago, Rock Island
and Pacific Railway Company, through the ownership of a majority
of its bonds. In 1899 he reported it as controlled by the Pacific
Company, through its ownership of a majority of its capital
stock.
"On the 2d day of August, 1904, M.E. Sebree, who resides in
Fort Worth, Texas, was trainmaster of the Chicago, Rock Island
and Gulf Railway Company, and was also assistant trainmaster of
the Chicago, Rock Island and Pacific Railway Company between the
north line of Texas and Chickasha, Indian Territory. He is paid
by the Gulf Company for the work he does for it and by the
Pacific Company for the work he does for it. S.B. Hovey is Vice
President and Superintendent of the Chicago, Rock Island and Gulf
Railway Company, and will testify that he is not connected with,
nor does he perform any service for, any other railroad.
"After making certain changes and additions, the Chicago, Rock
Island and Gulf Railway Company adopted the book of rules issued
by the Chicago, Rock Island and Pacific Railway Company for the
control of the operation of its line, and such rules are now in
force. The cars and engines belonging to the Chicago, Rock Island
and Gulf Railway Company, when in need of repairs, have the work
done at its shops at Fort Worth and Dallas, if the cars and
engines are convenient to these two points; otherwise, the work
is done at some other convenient place, either on or off the line
of the Chicago, Rock Island and Pacific Railway Company, wherever
the cars or engines may be at the time the repairs are needed.
"On the 2d day of August, 1904, the Chicago, Rock Island and
Gulf Railway Company had a different president and altogether
different executive officers from any of the lines above listed
as included in the Rock Island system. The Chicago, Rock Island
and Gulf Railway Company does not now and never has paid any part
of the salary of any officer of the Chicago, Rock Island and
Pacific Railway Company,
Page 380
or of any of the lines named as constituting the Rock Island
System.
"Before the Chicago, Rock Island and Gulf Railway Company
purchased the Chicago, Rock Island and Texas Railway Company, the
Chicago, Rock Island and Mexico Railway Company and the Choctaw,
Oklahoma and Texas Railroad Company, M.E. Sebree was trainmaster
of the Chicago, Rock Island and Texas Railway Company and
division trainmaster of the Chicago, Rock Island and Pacific
Railway Company, with jurisdiction to Chickasha, Indian
Territory. Since the purchase by the Gulf Company of the
above-named Texas lines Mr. Sebree's jurisdiction extends over
what were the Chicago, Rock Island and Mexico Railway Company and
the Choctaw, Oklahoma and Texas Railroad Company, otherwise there
has been no change in his employment or jurisdiction for the past
five to ten years.
"The Chicago, Rock Island and Gulf Railway Company pays a
portion of the salary of a joint train dispatcher located at
Chickasha, Indian Territory, under the same character of
arrangement which existed between the Chicago, Rock Island and
Texas Railway Company and the Chicago, Rock Island and Pacific
Railway Company. This train dispatcher in giving orders for the
handling of trains on the Chicago, Rock Island and Gulf Railway
Company is subject to the control, direction and supervision of
the executive officers of the Chicago, Rock Island and Gulf
Railway Company as if exclusively employed by it.
"The rails of the Chicago, Rock Island and Gulf Railway
Company on the line running from Fort Worth north connect at the
state line with the rails of the Chicago, Rock Island and Pacific
Railway Company. The point of connection is somewhere near the
middle of Red River on a bridge. At this particular point there
is no town, station or turnout, and the trains going in either
direction do not stop at said point. It was not possible to build
a town or station at the exact point of connection."
Page 381
It was further stipulated as to Thomas, the conductor, and
Turpin, the ticket agent, after they were served with process, as
follows:
A.L. Thomas "was at the date of said service and is now and
has for many years been a conductor running on and handling
passenger trains for the defendant, the Chicago, Rock Island and
Pacific Railway Company, the Chicago, Rock Island and Texas
Railway Company, and later on the Chicago, Rock Island and Gulf
Railway Company, after its purchase of the Texas company, running
and handling such trains between Fort Worth, Texas, and Caldwell,
Kansas. That the run of said Thomas is now and has been from Fort
Worth, Texas, to Caldwell, Kansas, as aforesaid, on both sides of
the state line, and that Caldwell, Kansas, is the end of the
first passenger division on said lines north of Fort Worth. And
it is further agreed that V.N. Turpin, upon whom process was
served herein as the ticket agent of the defendant company was,
at the date of the service of said process and has been for a
long time ticket agent of the Chicago, Rock Island and Gulf
Railway Company at Fort Worth, engaged in selling tickets for the
said Chicago, Rock Island and Gulf Railway Company, over its
lines and also over the lines of the Chicago, Rock Island and
Pacific Railway Company and all of its connections. It is further
agreed that the facts are that `Thomas is carried on the Pacific
Company's pay roll and paid for services rendered while on that
company's line north of the Texas state line; and is carried on
the Gulf Company's pay roll and paid by the Gulf Company for
services rendered on its line south of the Texas state line; and
that Turpin is carried on the Gulf Company's pay roll alone, and
is not carried on the Pacific Company's pay roll, and is not an
agent of the Pacific Company, unless the above stated facts make
him one.'"
The annual report of the Pacific Company shows that the board
of directors of said company consists of thirteen members, with
an executive committee of eight members.
Page 382
The report of the Rock Island Company shows that the board of
directors of said company consists of sixteen members and its
financial committee of six members.
Eleven members of the board of directors of the Pacific
Company are also members of the board of directors of the Rock
Island Company. Five members of the executive committee of the
Pacific Company are also members of the finance committee of the
Rock Island Company. The officers of the Rock Island Company,
with two exceptions, are also officers of the Pacific Company and
a majority of the officers of either said companies are common to
both of them.
S.B. Hovey, upon whom service was made as aforesaid, was also
produced as a witness, and testified that at the time of the
service of citation upon him he was the Vice President and
Superintendent of the Gulf Railroad Company, and resided at Fort
Worth, Texas; that he held the same position in the Chicago, Rock
Island and Texas Company before it acquired the Gulf Company, and
before that time he had been for many years an employe of the
Pacific Company; that the train dispatcher of the Pacific
Company, located on its lines at Chickasha, in the Indian
Territory, is also train dispatcher of the Gulf Company. He was a
"joint man," as the trains were operated by the same crews across
the Texas state line without stopping; that the movements of
trains on the Gulf route are directed from Chickasha as are those
on the line of the Pacific Company after they cross the state
line going northward. The daily reports of the cars on the Gulf
line are made to the chief dispatcher at Chickasha; that the
business could not be handled in any other way.
Settlements between the two companies are made on a mileage
basis. Reports are made by the officers of the Gulf Company and
Mr. Winchel, who is President of the Gulf Company and of the
Pacific Company. The Gulf Company keeps a fund on deposit with
the Pacific Company at Chicago and receives interest thereon;
that when the defendant company
Page 383
constructed its line of road across the Red River in 1892, the
Texas Company was organized, and the Pacific Company furnished
the money with which the road was constructed south from Red
River to Fort Worth. Most of the directors of the Texas Company
were employes of the Pacific Company. No dividends were paid on
the stock of the Texas Company, and when the Gulf Company took
over its property the directors surrendered their stock in the
old company and got back their $5.00 each; that the transfer to
the Gulf Company of the Texas road, the El Paso road and the
Mexico road was for the purpose of consolidating these roads and
getting under one management, the management of the system. The
employes who run over both the Pacific and Gulf lines while in
Texas are employed and discharged by the latter company; north of
the Texas line they are employed and discharged by the Pacific
Company; the operation of trains was then as it had been before
the Rock Island and Texas road ceased to exist; that the Pacific
Company did not pay any part of the salaries of the heads of the
departments of the Gulf Company — none for the general office.
It, the Pacific Company, pays the train men according to the
number of miles run on its rails. The Gulf Company pays the
expenses of the men while on the rails of that company according
to the number of miles run; that the Rock Island and Gulf Company
had separate cars, servants and agents of its own; that the Gulf
Company lines booked trains daily between Fort Worth and its
northern terminus and back, which trains do not run on the lines
of the Pacific road. He also testified that the lines mentioned
on the Rock Island folder as constituents of the Rock Island
System, namely, the Chicago, Rock Island and Mexico; the Chicago,
Rock Island and El Paso; the Choctaw, Oklahoma and Gulf; the
Chicago, Rock Island and Texas; and the Chicago, Rock Island and
Pacific, were not operated as one road, but were operated
separately; that the revenues were divided just as revenues
earned by the Chicago, Rock Island and Gulf and T. P. would be
divided; that they were
Page 384
divided on a mileage basis; that no reports were made by the Gulf
Company to the head of the traffic department of the Pacific
Company; that reports were made by the Gulf Company to the
President of the Gulf Company, who was also President of the
Pacific Company; that no representative of the Pacific Company
was sent to examine the books of the Gulf Company further than
just as a representative of any other connecting line would
occasionally check up business with the Gulf Company; that the
books of the latter company had never been audited from the
Chicago office; that there was no contract between the Gulf
Company and the Pacific Company, except a traffic agreement as to
the division of rates, made by the general freight agent of each
line, of the same character of contracts which exist between the
Gulf Company and other lines with which it interchanges business;
that the Gulf Company owned about 1,500 or 1,600 freight and
cattle cars and about twenty engines, which were marked C.R.I.
and G.; the train dispatcher has no power to furnish cars on the
Gulf road "if I instruct him not to do so"; that since he had
been Vice President of the Gulf Company, he had had no connection
whatever with the Pacific Company and no duties to perform with
any other railroad than the Gulf Company; that for traffic hauled
over the two lines the Gulf Company received the amount agreed
upon by the general freight agents in the same manner that the
Gulf Company and the T. and P. divided the revenues; that neither
road pays any part for moving freight over the other line, nor
pays any part of the loss sustained while in the hands of the
other company by damage to freight; that the Gulf Company has on
deposit with the Pacific Company several hundred thousand
dollars, for which it receives six per cent interest per annum.
When needed it is checked out.
A copy of the folder of the "Rock Island System's" lines was
sent up with the record. A copy of the map shown on the folder is
printed on the freight window of the office of the agent of the
Gulf Company and calendars with that map
Page 385
printed on them are distributed for the purpose of advertising
the system lines.
By organizing the Chicago, Rock Island and Texas Railway Company, and through it operating the railroad in Texas, the Chicago, Rock Island and Pacific Railway Company was doing its business in Texas by and through those persons who purported to represent the sub-corporation, and the principal corporation was legally in Texas through its said agents, and was liable to suits in the courts of this State by service of process upon the agents which represented it in that business.St. Clairev.Cox,106 U.S. 350;Hatcherv.Leasing Co., 75 F. 368;Manufacturing Co. v.Kelly,160 U.S. 327;S.C.,16 Sup.Ct. 307;Pennsylvania R. Co. v.Anoka Nat'l Bank, 47 C. C.A. 454;S.C., 108 F. 482;Nortonv.Railroad Co., 61 F. 618;Interstate Tel. Co. v.Baltimore O. Tel. Co., 51 F. 49;Montgomeryv.Frobes,148 Mass. 252;Dayv.Telegraph Co.,66 Md. 365.
Since the defendant company so completely owns, dominates and controls the auxiliary corporation through its ownership of the stocks and bonds of the latter company, the contract mentioned became useless and its cancellation did not lessen or affect the control of the defendant over the subordinate corporation. It follows that the service had on the officers and agents of the latter company was valid service on the defendant.Buiev.C.,R.I. P. Ry. Co., supra, also other casessupraand the authorities there cited and reviewed. See also the following authorities:Northern Securities Co. v.United States,193 U.S. 197;Van Dresserv.Oregon Ry. Nav. Co., 48 F. 202;Lehigh Valley Ry. Co. v.Dupont, 128 F. 841;Newcombv.N.Y. Cent. Ry. Co., 81 S.W. 1072;OrientalInvest. Co. v.Barclay, 64 S.W. 87;C. O. Ry. Co. v.Howard,178 U.S. 153-167;Tuchbandv.C.Page 386A. Ry. Co.115 N.Y. 437; 6 Thomp. Corp., §§ 7505, 8034, 8037;Barrow Steamship Co. v.Kane,170 U.S. 100.
The facts established by the agreement of counsel for the defendant and by evidence that was undisputed, show conclusively that the Chicago, Rock Island and Gulf Railway Company was and is controlled and dominated by defendant in such a way and to such an extent as to make it such a local agent of defendant in Texas as is contemplated by Art. 1223 of the Texas statutes, and such facts show conclusively that S.B. Hovey, F.E. Merrell and M.E. Sebree who were severally served with process in this case were each and all such agents of defendant as is contemplated by said statute.
The parties served with process at the time of such service sustained to the defendant the exact relation prescribed by Texas statute regulating such service. Such statute was enacted to provide for the service of process in just such cases as this one and to meet the conditions here presented. The real question at issue, therefore, is: Had the Texas legislature the power to enact such law? If yea, then the service was valid service on the defendant.Barrow Steamship Co. v.Kane,170 U.S. 107,108;Lafayette Ins. Co. v.French, 18 How. 404;Ex parteSchollenberger,96 U.S. 369;New England Mut. L. Ins. Co. v.Woodworth,111 U.S. 138,146;Shawv.Quincy Mining Co. (Ex parte Shaw),145 U.S. 444,452.Mr. M.A. Lowfor defendant in error:
A foreign corporation can only do business in a State with its consent expressed or implied. The laws of Texas give no such express consent to a foreign railway company and none can be implied, either from its laws or its action with respect to such corporations. It does not authorize a foreign railway company to own, lease or operate a railway within the State. There is nothing in the record to show that the Rock Island Company was doing business in Texas with the consent of the State.TheLafayette Ins. Co. v.French, 18 How. 404;Page 387St. Clairv.Cox,106 U.S. 350;Barrow Steamship Companyv.Kane,170 U.S. 100.
The evidence offered on the hearing of the motions to quash the service of citations was not sufficient to show that the Rock Island Company was doing business in Texas. As a matter of law, it could not own, lease or operate the railway of the Gulf Company; nor could these companies consolidate. On the facts stated in the petition the court will take judicial notice that each company was a separate and independent corporation, created under the laws of different States, and that they could not be one company, substantially or otherwise, because they had no power to so unite.
The fact that the Rock Island Company loaned money to the Texas Company to assist it in constructing or extending its railway, that it owned all or any part of the capital stock of the Gulf Company, and that it exercised such authority in the selection of directors of the company as a stockholder lawfully may, does not tend to show that it was doing business in Texas.United Statesv.American Bell Telephone Co., 29 F. 17;Pullman Car Co. v.Missouri Pacific Co.,115 U.S. 587,596;Potterv.Pittsburg Steel Co.,120 U.S. 649;Pennsylvania R.R. Co. v.Jones,155 U.S. 333,344;Earlev.Chesapeake O. Ry. Co., 127 F. 235;Central GrainStock Exch. v.Board of Trade, 125 F. 463;St. LouisS.W.R. Co. v.Gate City Co-operative Co.,70 Ark. 10;St. Louis Southwestern R. Co. v.Smith,71 Ark. 290;Conleyv.Mathieson Alkali Works,190 U.S. 406.
None of the citations issued in this case was legally served, and on the facts in evidence, the court did not err in sustaining the motion to quash.
To the validity of service of process upon a foreign corporation, it is necessary that the corporation be at the time actually and substantially doing business in the State, and that the service be made upon an agent representing the corporation with respect to the business carried on in the State, in such a capacity that, in the absence of express authority,Page 388acquiescence in the exercise of such authority ought to be clearly implied. The agent upon whom service is made must sustain such a representative relation to the business transacted by the corporation in the State as to charge him with the duty of accepting service. Story on Agency, § 140;St. Clairv.Cox,106 U.S. 350,357;Fitzgerald Const. Co. v.Fitzgerald,137 U.S. 98-106;Mexican Central Ry. v.Pinkney,149 U.S. 194;Goldeyv.Morning News,156 U.S. 518,521,522;UnitedStatesv.American Bell Telephone Co., 29 F. 17;Mutual Life Ins. Co. v.Spratley,172 U.S. 602,617,619;Earlev.Chesapeake O. Ry. Co., 127 F. 235, 240;Conleyv.Mathieson Alkali Works,190 U.S. 406;CentralGrain Stock Exchangev.Board of Trade, 125 F. 463;N.K. Fairbanks Co. v.Cincinnati N.O. T.P. Ry. Co., 54 F. 420, 423;Strainv.Chicago Portrait Co., 126 F. 831, 833, 834;Frawleyv.Pennsylvania Casualty Co., 124 F. 259;Union Pacific R. Co. v.Miller,87 Ill. 45.
Service upon one partner or joint obligor will not confer jurisdiction to render a personal judgment against another partner or joint obligor.D'Arcyv.Ketchum, 11 How. 165;Goldeyv.Morning News,156 U.S. 521;In re Grossmayer,177 U.S. 48;Kingsleyv.Great Northern R. Co.,91 Wis. 380.
The statutes which concern service on corporations in the State of Texas are as follows (Sayles' Texas Civil Statutes):Page 389
"Art. 1194, Sec. 25. Foreign, private or public corporations, etc. — Foreign, private or public corporations, joint stock companies or associations, not incorporated by the laws of this State, and doing business within this State, may be sued in any court within this State having jurisdiction over the subject matter, in any county where the cause of action or a part thereof accrued, or in any county where such company may have an agency or representative, or in the county in which the principal office of such company may be situated; or when the defendant corporation has no agent or representative in the State, then in the county where the plaintiffs or either of them reside."
"Art. 1223. Foreign corporations, how served. — In any suit against a foreign, private or public corporation, joint stock company or association, or acting corporation or association, citation or other process may be served on the president, vice president, secretary or treasurer, or general manager, or upon any local agent within this State, of such corporation, joint stock company or association, or acting corporation or association."
By the act of March 13, 1905, General Laws of Texas, 1905, p. 30, an additional method of serving foreign corporations was provided as follows:
"SEC. 2. That service may be had on foreign corporations having agents in this State in addition to the means now provided by law by serving citation upon any train conductor who is engaged in handling trains for two or more railway corporations, whether said railroad corporations are foreign or domestic corporations, if said conductor handles trains over foreign or domestic corporations' tracks across the state line of Texas, and on the track of a domestic railway corporation within the State of Texas, or upon any agent who has an office in Texas, and who sells tickets or makes contracts for the transportation of passengers or property over any line of railway or part thereof, or steamship or steamboat of any such foreign corporation or company.Page 390
"SEC. 3. For the purpose of obtaining service of citation on foreign railway corporations, conductors who are engaged in handling trains and agents engaged in the sale of tickets or the making of contracts for the transportation of property as described in sec. 2 of this act, are hereby designated as agents of said foreign corporations or companies upon whom citation may be served."
It is settled by the decisions of this court that foreign corporations can be served with process within the State only when doing business therein, and such service must be upon an agent who represents the corporation in its business.St. Clairv.Cox,106 U.S. 350;Goldeyv.Morning News,156 U.S. 518,521,522;Conleyv.Mathieson Alkali Works,190 U.S. 406.
It is contended upon the part of the plaintiffs in error that the Pacific Company was doing business in the State of Texas, because of a partnership arrangement with the Gulf Company, or because the latter company was the agent of the Pacific Company, or, as it is sometimes said, the representative of the Pacific Company in the State of Texas. As to the question of partnership, we do not think this record presents a question of that sort. The suit is not for a partnership liability. It is an action upon a single cause of action for the tort of the Pacific Company. Service is not had by serving one partner. The real contention is that the service reaches the Pacific Company because of the agency or representative character of the Gulf Company.
Is it true that the Gulf Company was the agent of the Pacific Company or its mere creature in such a sense that to serve it is equivalent to serving the controlling company? It is a fact that both companies had common agents and employes to a certain extent, but the record shows that such employes were paid in proportion to the business done for each company. And that while in the service of the companies respectively they were under the exclusive management and control of the company in whose service they were engaged, with noPage 391power to discharge or employ, the one company for the other; and that, although the service was in a sense common, it was kept distinct and separate in the control and payment of the employes while in the separate service of the respective companies.
It is true that the Pacific Company practically owns the controlling stock in the Gulf Company, and that both companies constitute elements of the Rock Island System. But the holding of the majority interest in the stock does not mean the control of the active officers and agents of the local company doing business in Texas. That fact gave the Pacific Company the power to control the road by the election of the directors of the Gulf Company, who could in turn elect officers or remove them from the places already held; but this power does not make it the company transacting the local business.
This record discloses that the officers and agents of the Gulf Company control its management. The fact that the Pacific Company owns the controlling amounts of the stock of the Gulf Company and has thus the power to change the management does not give it present control of the corporate property and business.PullmanPalace Car Companyv.Missouri Pacific Co.,115 U.S. 587,597.
InConleyv.Mathieson Alkali Works,190 U.S. 406, suit was brought upon a contract with the Mathieson Alkali Works. The defendant had designated no agent upon whom summons could be served, and service was made upon two members of the board of directors resident of the city of New York. Upon motion made to set aside the service of summons a reference was directed to ascertain whether the defendant corporation was doing business in the State of New York. The master reported, among other things, that the defendant had operated a plant at Niagara Falls, but had conveyed all its property to another corporation organized under the laws of Virginia. That the consideration expressed for the conveyance was $1.00 and other valuable consideration, but the substantial consideration was the entire capital stock of thePage 392grantee, the Castner Electrolytic Alkali Company. That the business of the defendant since said transfer was carried on in Providence, where it had its principal place of business. The master found that the company at the time of attempted service was not doing business in New York. Of the effect of the transfer of the entire stock of the new company to the defendant the master found: "The fact that it held the entire capital stock of the Castner Electrolytic Alkali Company, and that the operations of that company were carried on under the same management as before December 31, 1900, is not material. The new corporation was a separate legal entity, and, whatever may have been the motives leading to its creation, it can only be regarded as such for the purpose of legal proceedings. It was that corporation alone which transacted any business in this State, notwithstanding it may have been for all practical purposes merely the instrument of the defendant corporation.Peoplev.American Bell Telephone Co.,117 N.Y. 241;United Statesv.American Bell Telephone Co., 29 F. 17."
Upon exceptions the master's report and conclusions were affirmed and the service set aside. That judgment was affirmed in this court. In the course of the opinion, Mr. Justice McKenna, speaking for the court, coming to deal with the effect of the transfer to the Castner Company, said: "The defendant was competent to convey its property to the Castner Electrolytic Alkali Company and afterwards make the locality of its own business Providence and Saltville. Whether the transfer to the latter company was fraudulent we certainly cannot decide from this record, and the by-law which provided for a monthly meeting in New York could not of itself keep the corporation in New York. The testimony is positive that no business of the corporation was done in New York city after the transfer of the Niagara Falls plant; that all of the business of the corporation was conducted at Providence, except of a purely manufacturing character, which was conducted at Saltville."Page 393
So, in the case at bar, notwithstanding the ownership of the stock in the Gulf Company by the Pacific Company, the former company transacts the business in Texas, and is a separate legal entity, authorized under the laws of Texas and legitimately carrying on business there.
There is no evidence that the Pacific Company may not lawfully hold the stock of the Gulf Company, and under the statute of Illinois it seems to be authorized so to do. Starr Curtis, Ill. Stat. vol 3, p. 3229. It is true that the Pacific Company loaned the money to build the road of the Texas Company, predecessor of the Gulf Company. But as was well observed by Judge (afterwards Justice) Jackson inUnited Statesv.American Bell TelephoneCompany, 29 F. 17: "For one person to supply means for another to do business on is not the doing of that business by the former."
The conduct and control of the business in Texas was entrusted to the Gulf Company. As the largest stockholder the Pacific Company had an interest in that business, but a separate corporation had been legally created in Texas, with authority to make contracts and control its own affairs and carry on its own business. This separate corporation had its own officers, a large amount of its own property, was responsible for its contracts and to persons with whom it dealt.
Nor do we think that the persons served with process are agents of the Pacific Company doing the business of the company in Texas. Section 2 of the act of March 13, 1905, Laws of Texas, 1905, p. 30, is very broad, and would seem to comprehend conductors who handle trains for two or more corporations over foreign or domestic roads across the state lines of Texas and on the track of a domestic railroad within the State of Texas, or upon any agent who has an office in Texas and who sells tickets or makes contracts for the transportation of passengers or property over any line of railroad or part thereof, of any such foreign corporation or company; and such companies and agents by section 3 of the act are made agents of the foreign corporation or company, upon whom the citationPage 394may be served. But it is essential to the validity of such service that the corporation shall be doing business within the State, and that the service be upon an agent representing the corporation with respect to such business.Goldiev.MorningNews, 156 U.S.ubi sup.; Conleyv.Mathieson Alkali Co., 190 U.S.ubi sup.
The conductors, one of whom was served, when he crossed the Texas line, this record shows, became the servant and agent of the Gulf Company. The ticket agent sold tickets for the Gulf Company, in whose employment he was. He would also sell tickets good upon its line, and over the lines of the Pacific Company, but he transacted this business as the agent of the Gulf Company. As to Hovey, the record fails to show that he was agent of the Pacific Company; on the contrary, it shows that he had no connection with the company, and that his duties were confined to the affairs of the Gulf Company. The same is true of Merrell; and as to Sebree, the record shows that for the services rendered as trainmaster he was paid by each company for the service performed for it and had no charge as agent of the business of the Pacific Company in the State of Texas.
We reach the conclusion that the Pacific Company was not doing business in the State of Texas and that the attempted service was not upon agents of that company transacting its business in that State in such a sense as to give jurisdiction by service of citation upon them. The judgment of the Circuit Court isAffirmed.
Dissenting: The CHIEF JUSTICE and MR. JUSTICE MOODY.Page 395