company by its charter or by the laws of the United States. The Union Pacific received 17,8001 shares of Atlantic and Pacific stock, which it subsequently disposed of for about $450,000. A sort of joint maintenance and operation of the telegraph was contemplated by the contract, its provisions, however, being such that the commercial business should all be done by or for the telegraph company.

II.

Thus matters stood with the bond-aided railroads and their telegraphs in January, 1880, the point at which the efforts of Mr. Jay Gould effected the consolidation of the Union Pacific Railroad Company, the Kansas Pacific Railway Company, and the Denver Pacific Railway and Telegraph Company into the Union Pacific Railway Company. Mr. Gould was in control of the Union Pacific and was also interested in the American Union Telegraph Company, which he had organized and for the business of which he was seeking western connections. Such connections were rendered impossible by the contracts of the bond-aided roads with the Western Union and the Atlantic and Pacific. These two companies were now working in harmony and were soon to be consolidated. The interests of the American Union could only be secured, therefore, by getting rid of the contracts. It was determined that the Union Pacific should resume the operation of its own telegraph lines, with a view to their employment for the purposes of the American Union. In accordance with this plan, President Eckert, of the American Union, on February 17, 1880, made a formal demand on the Union Pacific for exchange of telegraphic business on terms as favorable as were granted by the latter to any individual or corporation, basing his demand on the Congressional acts creating the railway companies. The counsel for the Union Pacific, Messrs. Sidney Bartlett and John F. Dillon,

1 But 1,800 of them were for a debt owed by the Atlantic & Pacific to the Union Pacific.

advised compliance with this demand. Their opinion declared that under the laws of Congress the contracts by which the telegraph business was turned over to other companies were void. The duties of the bond-aided corporations in respect to telegraph, as in respect to railway business, were by their charters personal, and hence inalienable without express legislative authority. Any contract devolving these duties on others was ultra vires.

The advice of its counsel was quickly followed by the Union Pacific, both on its main line and on the Kansas Pacific. Formal notice was served on the Western Union that the Union Pacific would itself operate and use its telegraph lines, "placing all companies and persons upon equal footing, giving equal rights to all, and exclusive or favored privileges to none." On the 27th of February, by taking possession of telegraph lines, cutting connecting wires and other drastic proceedings, expression was given of a purpose to terminate existing arrangements with the Western Union. The telegraph companies promptly secured temporary injunctions restraining the Union Pacific from carrying out its purposes, and in several cases the injunctions were made permanent. general and definitive settlement of the issues was never reached. For in 1881 the Atlantic and Pacific, the Western Union and the American Union companies were consolidated, their jarring interests were brought into harmony and litigation ceased.

But a

The most important judicial opinion rendered during the continuance of this litigation was that of Judge G. W. McCrary, in the United States circuit court for the district of Nebraska,1 on the motion to make permanent a temporary injunction against the Union Pacific. The principle which should determine as to the validity of the contracts whereby the Union Pacific leased its telegraph property and franchise to the Atlantic and Pacific, was to be found, Judge McCrary said, in the recent case of Thomas et al. vs. West Jersey Railroad

1 Atlantic & Pacific Telegraph Company vs. Union Pacific Railway Company, I McCrary, 541; 1 Fed. Rep., 745.

Company.1 In that decision Justice Miller had declared that the charter of a corporation is the measure of its powers, and that where a corporation like a railroad company has granted to it by charter a franchise intended in a large measure to be exercised for the public good, the due performance of those functions being the consideration of the public grant, any contract which disables the corporation from performing those functions - which undertakes, without the consent of the state, to transfer to others the rights and powers conferred by the charter and to relieve the grantees of the burden which it imposes-is a violation of the contract with the state, and is void as against public policy.

Proceeding to apply the principle here enunciated to the present case, Judge McCrary said: "It is certain that the contracts in question amounted to a lease or alienation, by the Union Pacific Railroad Company, of property which was necessary to the performance of its obligations and duties to the government and to the public." The act of 1862 and amendments thereof devolved on the Union Pacific, "individually and personally, the power and duty of constructing, operating and maintaining a line of telegraph as well as a railroad." This is manifest from the fact that the government endowed the corporation with large grants of land and bonds, and required reimbursement from the earnings of the railroad and telegraph. The words "maintain and enjoy," in the authorization "to lay out, locate, construct, furnish, maintain and enjoy a continuous railroad and telegraph," attest the personal and inalienable character of the powers granted and the obligations imposed.

Continuing, Judge McCrary said :

The very same language which authorizes the construction and operation of the telegraph line also authorizes the construction and operation of the railroad, and the property in the one is as necessary to the performance of the public duties of the corporation as that in the other. The charter of the company, with the amendments, considered as a whole, was manifestly intended to create a corporation which should be personally amenable to the government in the exer

1 101 U. S., 71.

cise of the powers conferred, and which should in quasi-public capacity perform the duties imposed, and render an account of its earnings. The purpose was not to authorize the construction of a line either of railroad or telegraph to be thereafter sold, leased or transferred to other parties, leaving the government to the chance of securing from or through the lessee or vendee its proportion of the earnings.

By its contract with the Atlantic and Pacific, the Union Pacific alienated property which was necessary to the performance of its charter duties to the public and the government, and the clause asserting that the property is still subject to the rights of the government, and requiring that the Atlantic and Pacific shall perform fully and faithfully all the duties imposed and to be imposed by the charter and by acts of Congress, does not make the contract good. The Union Pacific "certainly could not divest itself of these powers and duties and devolve them upon the plaintiff, without express authority from Congress." The contract, therefore, is ultra vires and void. This would be the case even if the agreement had not transferred property necessary to the performance of the obligations of the Union Pacific; for the attempt to alienate the telegraph franchise-the right to operate a telegraph line, to fix rates, to charge and collect tolls-would alone render the contract void.

But though an ultra vires contract is null and void, yet the rights already acquired under it must be respected. Accordingly, Judge McCrary held that the summary action of the Union Pacific was unlawful. That corporation must not of itself ruthlessly subvert existing relations. Though the contract is void, it is not permissible for one of the parties to set it aside without resort to law, and without regard to moral considerations. The preliminary injunction against the Union Pacific was accordingly confirmed, but with modifications authorizing the Union Pacific to institute legal proceedings "to cancel and set aside the said contracts upon a return of the consideration, and to settle and adjust upon principles of equity the accounts between the parties."

The Central Branch Union Pacific, on taking possession of the telegraph along its route, at the same time instituted legal proceedings to have its contract with the Western Union declared void, and an account taken between the parties thereto. On an application for an injunction against the Western Union, heard in the United States court for the district of Kansas, May 8, Judge Foster, following the foregoing opinion of Judge McCrary, declared the contract between the Central Branch Union Pacific and the Western Union ultra vires and void. The Western Union, moreover, was enjoined from interfering with the railroad company's possession of the telegraph, on the ground that,

this contract being absolutely void, and the plaintiff having taken peaceable possession of the property, accompanied with legal proceedings to have the contract declared null, and for an account to be taken between the parties, in my judgment the defendant cannot compel a restitution of the property under the contract pending the proceedings.1

On the Kansas Pacific Railway, now become the Kansas Division of the Union Pacific, the railroad company and the telegraph company had not, as on the main division of the Union Pacific, each built a separate telegraph line. Here there was only one line, and to its construction both the railroad and the telegraph company had contributed. Consequently the legal questions involved were somewhat different. The obligations of the Kansas Pacific and the Union Pacific (main line) to construct and operate a telegraph were the same under the acts of 1862 and 1864. But in the case of the Kansas Pacific another act of Congress, the so-called Idaho Act of July 2, 1864, was pertinent, and it was upon the fourth section of this act that the decision of the suits brought against the Kansas Pacific principally turned. Let us now consider these suits in detail.

11 McCrary, 556.

2 The same was true of the Central Branch Union Pacific. Supra, p. 189. 3 See contract, supra, p. 189.