Case Name: Robert H. McCarter, attorney-general, complainant and respondent, v. Vineland Light and Power Company, defendant and appellant
Court: New Jersey Court of Errors and Appeals
Jurisdiction: New Jersey
Decision Date: 1908-06-22
Citations: 73 N.J. Eq. 703
Docket Number: 
Parties: Robert H. McCarter, attorney-general, complainant and respondent, v. Vineland Light and Power Company, defendant and appellant.
Judges: Bogert and Green, J.J., concur in the views herein expressed.
Reporter: New Jersey Equity Reports
Volume: 73
Pages: 703–721

Head Matter:
Robert H. McCarter, attorney-general, complainant and respondent, v. Vineland Light and Power Company, defendant and appellant.
[Argued December 9th, 1907.
Decided June 22d, 1908.]
Á purchaser at a receiver’s sale, held pursuant to what is now section '•82 of the General Corporation act (P. L. 1896 p. 80S), of all the fran•chises of a gas company (including a franchise to lay gas pipes in the streets), holds such franchises, in view of the act of February 17th, 1881 (P. L. 1881 p. S3), as a body politic and corporate and has no power as an individual to convey such franchises to another person; and, when a corporation, the lessee of the person to whom such franchises were attempted to be conveyed, and with no other .right, proceeds to exercise such franchises by opening and occupying the streets, it will be restrained on the information of the attorney-general.
On appeal from an order of the court of chancery advised by Vice-Chancellor Learning, whose conclusions are reported in 72 N. J. Eq. (2 Buch.) 767.
Messrs. French & Richards, for the appellant.
Mr. Edwin F. Flitter, Mr. Louis H. Miller and Messrs. Gashill & Gashill, for the respondent.

Opinion:
The opinion,of the court was delivered by
Trbnohard, J.
This is an appeal from an order of the court of chancery granting a preliminary injunction.
The information seeks to restrain the Vineland Light and Power Company from extending its gas mains through the highways of the borough of Vineland and township of Landis.
The defendant company was incorporated in the year 1900 under the General Corporation act of this state (P. L. 1896 p. 277), having for its object, among others, as stated, in its certificate of incorporation, the making, sale and distribution of gas in the borough of Vineland and the township of Landis.
No permission has been granted the defendant company by either of the municipalities named to open and occupy the highways. It claims the right to do so as lessee of the franchises granted by the legislature to the Vineland Gaslight Company, by act approved March 15th, 1870. P. L. 1870 p. 577. That act granted to the company last named the right to lay gas pipes in the highways now in dispute. The defendant company claims title to the franchise of the earlier company in the following manner: In the year 1884- the Vineland Gaslight Company became insolvent and a receiver was appointed by the court of chan eery. Pursuant to an order of the court the receiver made public sale of all the property and all the franchises belonging to the company and-appertaining to the principal work for the construction whereof the company was incorporated, and John R. Farnum became the purchaser at that sale, which was duly confirmed by the court. Earnum operated the works until March 37th, 1900, when he and his wife conveyed the same to Arthur A. Holbrook. The conveyance included all the real and personal property purchased by Earnum at the receiver's sale and specifically included the franchises sold by the receiver to Earnum. On March 31st, 1900, Holbrook and his wife conveyed the same property, except .the franchises, to the defendant company, and, by a separate instrument, leased the franchises to the defendant company for the term of ninety-nine years. Since that date the defendant has operated the works and has made some extensions. At the time the information was filed the defendant was engaged in making further extensions and the information was filed to enjoin this new work.
The learned vice-chancellor held that while the purchaser at the judicial sale acquired, under what is now section 83 of the General Corporation act (P. L. 1896 p. 808), all the property, rights, powers, privileges and franchises of the insolvent corporation, yet his title, possession and enjoyment were impaired or wholly destroyed by his failure to comply with the provisions of the act of February 17th, 1881 (P. L. 1881 p. 88j Gen. Slat. p. 869^ § 8^, 85), by completing the organization of the company as authorized by that act.
While we have not found it necessary to decide that precise question, yet we are of the opinion that the preliminary injunction was properly granted for the reasons we will now state.
The rule must be considered settled that ho person or corporation can acquire a right to make a special or exceptional use of a public highway, not common to all the citizens of the state, except by grant from the sovereign power. Jersey City Gas Co. v. Dwight, 29 N. J. Eq. (2 Stew.) 242.
We think the defendant company had acquired no right to make the extensions enjoined, because it had no grant from the state.
We have pointed ont that it was organized under the 'General Corporation act and claims its right to use the streets as lessee of the franchises of the Vineland Gaslight Company, acquired by the latter company by P. L. 1870 p. 577.
Although, technically speaking, franchises are property, they are property of a peculiar character, arising only from legislative grant, and are not subject to sale and transfer without the authority of. the legislature. Stockton v. Central Railroad Co., 50 N. J. Eq. (5 Dick.) 52; Randolph v. Larned, 27 N. J. Eq. (12 C. E. Gr.) 557; Black v. Delaware and Raritan Canal Co., 22 N. J. Eq. (7 C. E. Gr.) 130.
We find no legislative authority for the conveyance of the franchises by Earnum to Holbrook, from the latter of whom the defendant claims title.
Section 82 of the General Corporation act (P. L. W96 p. SOS) provides:
"Whenever a receiver of a corporation shall have charge of a canal, railroad, turnpike or other work of a public nature, in which the value of the work is dependent upon the franchise, and in the continuance of which the public as well as the stockholders and creditors have an interest, the receiver may sell or lease the principal work for the construction whereof the said corporation was organized, together with all the chartered rights, privileges and franchises belonging to it and appertaining to such principal work; and the purchaser or purchasers, lessee or lessees of such principal work, chartered rights, privileges and franchises, shall thereafter hold, use and enjoy the same during the whole of the residue of the term limited in the charter iof said corporation, or during the term in such lease specified, in as full and ample a manner as such corporations could or might have used and enjoyed the same; subject, however, to all the restrictions, limitations and conditions contained in such charter; provided, that nothing in this section contained shall.be so construed as to apply to or in anywise affect any corporation authorized by law to exercise banking privileges."
This legislation, in substance, was originally enacted March 11th, 1842 (P. L. 18Jp2 p. 16L) and with minor changes has been preserved (Rev. Stat. 181^6 p. 136 tit. 5 ch. 3 § 20; Rev. p. 192 § 85; P. L. 1896 p. 303 § 82), and is relied upon by the defendant to protect it in the enjoyment of the franchises originally granted to the Vineland Gaslight Company and sold by the receiver to Earnum.
The rights, if any, acquired by the defendant, are derived from the deed of Farnum to Holbrook, as affected by the provisions of the Corporation act and the independent statute of 1881, hereinafter particularly referred to, which establishes a mode of procedure when the property and franchises of a gas company are sold pursuant to a process or decree of the courts.
That act of February 17th, 1881 (P. L. 1\831 p. S3; Gen. Stat. p. 369k § 3k, 3-5), in relation to the sale and reorganization of turnpike, gas and other companies, provides that upon the sale of the property, rights, powers, privileges and franchises of any turnpike or gas company under any process of decree of any court of this state, or of the circuit court of the United States—
"The person or persons for or on whose account such property, rights, powers, immunities, privileges and franchises may be purchased shall be and they are hereby constituted a body politic and corporate, and shall be and they are vested with all the rights, title, interest, property, possession, claim and demand in law and equity of, in and to such company, with its appurtenances and with all the rights, powers, immunities, privileges and franchises of the corporation as whose the same may have been sold."
The act further provides that such persons, for or on whose account any such property, rights, powers, immunities, privileges and franchises of such corporation may or shall have been purchased, "may organize said new corporation, elect directors and officers, issue stock, create and issue preferred stock and issue and secure bonds."
We have pointed out that Farnum, in 1884, properly acquired title at the receiver's sale to the property of the Vineland Gaslight Company, including all the chartered franchises belonging to the Vineland Gaslight Company. Instead of availing himself of the provisions of the act of 1881, above referred to, Farnum continued to maintain and operate the gas works as an individual in his own name and as sole owner, until on or about March 27th, 1900, when he conveyed all the property and franchises which he had acquired at the receiver's sale to Holbrook, who, on the 31st of March, 1900, conveyed the property, real and personal, to the defendant company, a new corporation, just organ ized under the General Corporation act, and leased to the same company all the chartered franchises granted to the original Vineland Gaslight Company by the legislature.
It will be seen, therefore,, that a construction of what is now section 82 of the General Corporation act, as modified by the act of 1881, is necessary to a determination of this case.
It is a rule of construction, well established, that all acts in pari materia are to be taken together as if they were one law. Perth Amboy v. Piscataway, 19 N. J. Law (4 Harr.) 173; Jersey v. Demurest, 27 N. J. Eq. (12 C. E. Gr.) 301; Mickle v. Matlack, 17 N. J. Law (2 Parr.) 93; Newark City Bank v. Assessors, 30 N. J. Law (1 Vr.) 22.
Construing the acts in question together, viz.: Eighty-two of the Corporation act and the act of 1881, we find a definite disposition of the title to the chartered rights, privileges and franchises of the insolvent corporation.
Under section 82 of the act concerning corporations, Farnum's rights as a purchaser would seem to be absolute. The title tó the chartered rights, privileges and franchises of the corporation passed to the purchaser, who became entitled to hold, use and enjoy the same during the whole of the residue of the term limited in the charter of said corporation in as full and ample a manner as such corporation could or might have used and enjoyed the same, subject, however, to all the restrictions, limitations and conditions contained in such charter.
If this statute stood alone, Farnum might well claim that he acquired these franchises, although of a public nature, as an individual with the right of perpetual succession, analogous to an indefeasible estate in fee-simple of lands, including not only jus in re but jus disponendi. But in 1881 (P. L. 1SS1 p. 33), before Farnum's purchase at the receiver's sale, the legislature, in exercising control of gas companies and others, modified the character and conditions of the title of purchasers of public franchises at a judicial sale.
The state did not take away or abridge the rights and franchises acquired under the receiver's sale, but prescribed a mode of procedure whereby such rights and franchises, together with die right of perpetual succession, should be thereafter held and enjoyed.
The legislative intent seems to be clear to create a new corporation and not to permit public franchises to pass to an individual to be used and enjoyed, sold and transferred, bequeathed and devised in the same manner as ordinary real or personal property.
Accordingly, the act of 1881 created a corporation in which the title to the franchises in question was ipso facto vested. The effect of this enactment is the same, whether or not the purchaser exercised his right to organize "the new corporation" already created by the election of directors and officers and the issue of stock and the securing of bonds. The act effectually transferred the title and the right of perpetual succession to a corporation sole, and the purchaser, as an individual, ceased to have any title which he could convey or lease in his lifetime or transmit by testamentary disposition.
It is quite probable that the legislature, in formulating the provisions of the act of 1881 concerning the sale and reorganization of turnpike, gas and other companies, used as a guide the act of March 25th, 1875, concerning the sale of railroads, canal«, turnpikes, bridges and plank roads. Rev. of 1877 p. 946.
It is true that this court had before it for construction this latter act, in the case of Boylan v. Kelly, 36 N. J. Eq. (9 Stew.) 331. But it is a misapprehension of the language of that opinion to consider that it decided that the purchaser at a sale had under that act — or a person for whose account the purchase was made— was not by the express provision of the act made a body corporate. In the cited case, one Kelly was the purchaser. He conveyed to Boylan, who, "in due time, proceeded to effect a corporate organization," under the statute.
Chancellor Eunyon, in the court below, 82 N. J. Eq. (6 Stew.) 581, held that Boylan (the person on whose account the purchase was made), was by force of the statute, a body corporate. Whether the statute had this effect, or whether it permitted Boylan to hold as an individual, or as a corporation, as he might elect, was a question, the decision of which the case did not require. Certainly if it did not expréssly make the purcháser a body corporate, it authorized him to hold as á corporation, if he wished to do so, and that he did so wish was conclusively shown by his proceeding to effect a corporate organization under the act.
The question which the court of errors and appeals was called upon to determine was whether parties having judgments against Boylan personally could reach the property and franchises acquired by him through the sale made under the act of 1875. If he held them as an individual they were subject to levy under the judgments against him; if he held them in a corporate capacity, they were not.
Dealing with this question, the court uses this language: "The chancellor, following the case of Commonwealth v. Central Passenger Railroad Co., 52 Pa. St. 506, considered the act of purchase by Boylan as creating him a corporation under the statute. The act certainly does confer upon such purchaser the right, at his election, to take and hold and exercise such property and franchises in a corporate capacity, to the full measure in which they were enjoyed by the corporation sold out, with power to organize for its management in the usual mode of controlling such interests. The purchaser, Boylan, left it in no doubt as to the character in which his purchase was designed to be held, for he proceeded in due time to effect a corporate organization."
Nothing more than this is said by the court as to the meaning of the act. No declaration that the chancellor's construction is erroneous; no pointing out where the error lies; no citation of the language of the statute; nothing to suggest that the court differs with the chancellor, except' the use of the word "certainly."
As we read the opinion of Mr. Justice Knapp, he says in effect that the act at least gives Boylan the right to become a corporation, and that right he has exercised; it is therefore not necessary for us to go as far as the chancellor, and say that under the statute his purchase made him a corporation nolens volens.
To hold that he meant anything more than this, is to say that he deliberately overrode what seems to us to be the plain declaration of the statute without a word of explanation by way of showing why that declaration was not to be accepted as it reads. The language of the statute is that
"The person or persons for or on whose account such railroad, canal, turnpike or plank road may be purchased, shall (be) and are hereby constituted a body politic and corporate."
It seems to us that the words could not be plainer. We should require something more than the words used by the learned justice in the cited case to convince us that he, and the other judges who sat with him, intended to declare that the word "shall" was not mandatory, but permissive only, and that the expression "are hereby constituted a body politic and corporate" did not create a corporation in prcesenti, but merely conferred the privilege of becoming a corporation in futuro, should the purchaser or purchasers so desire.
It should be noted, also, that the act of 1881 differs from somewhat similar acts in New York and North Carolina, which have been discussed in leading cases and which confer the privilege of applying for a charter for a new corporation, but do not require the purchasers to form a corporation.
Accordingly, it was held in People v. Brooklyn, Flatbush and Coney Island Railroad Co., 89 N. Y. 75, that, although a purchaser at a foreclosure sale of a railroad was authorized to create a new corporation for the purposes of the transfer, it was not essential to do so, for he might transfer the property and franchises to a corporation already existing and capable under the law of its creation of holding the property and exercising the franchises which passed to the purchaser by the mortgage sale.
So, in the case of Julian v. Central Trust Co., 198 U. S. 93, the Railroad act of North Carolina was discussed, in a suit to enjoin a sale of property under execution against the Western North Carolina Eailroad Company, the property and franchises of which had been sold under foreclosure and purchased by the Southern Eailroad Company, a foreign corporation.
In support of the right to enforce the executions upon the judgments against the old company, it was claimed that unless the purchaser should, under the Eailroad law of North Carolina, organize a new domestic corporation to take the place of the old one, the property continues liable, though in the hands of the purchaser, to claims and judgments against the old corporation.
The United States supreme court said: "It is true the sec tions of the North Carolina code herewith given clothe the purchaser with the right and privilege of organizing a corporation to operate the purchased property, but we find no requirement that he shall do so."
After quoting the provisions of the act, which provides that the purchasers may file articles of association and such purchasers and associates shall thereupon become a new corporation, the court continues: "This confers a privilege, but does not prevent the purchaser from transferring the property to a company already formed and authorized to purchase and operate a railroad."
The court therefore held that the judgments could not be enforced against the Southern Bailroad Company, and that the purchaser at the foreclosure sale without re-incorporation had the capacity to acquire the title to the property and franchises free from the judgments against the former company.
The act of 1881 created a new corporation when the purchase is consummated. There is, we think, no room for argument or difference of opinion as to the meaning of the act.
The purchaser is constituted a body politic and corporate by the express language of the act, and vested with all the property of the company and all its rights, powers, immunities, privileges and franchises.
Under the act of 1881, there is no option to the purchaser to apply for a charter or not, as he pleases. There is no privilege conferred upon the purchaser to accept or reject at his will. The act itself confers the charter and creates the corporation, which comes into existence at the completion of the purchase. Whether the organization of the corporate body by election of directors and officers is required may be in question, but the legislative intent is unmistakable to prevent the anomaly of public franchises passing by assignment or devolution by operation of law or by last will and testament.
It is against the policy of the state to have public franchises operated by individuals, by executors, administrators, guardians of infants, or trustees in bankruptcy.
If the claim of Farnum to exercise the jus disponendi is sound, and his title as an individual is absolute, the transfer of the franchises to an alien or a foreign corporation might be sustained and the anomaly would be presented of public franchises operated .in some parts of the state by individuals, in other parts by foreign corporations or foreign executors or trustees or assignees who claim title by purchase, and in still other parts by companies organized under laws regulating public service corporations.
The policy of uniform legislation must be adhered to and public corporations should be amenable to a fixed code of laws, regulating and controlling their operations and defining the duties and obligations of their officers and agents in the interest of the public.
A strict construction of similar legislation was made in Snell v. City of Chicago, 152 U. S. 191, where the president of a plank road company was authorized by statute to sell to the county of Cook the franchise, property and immunities of the company, or to any other party, and the right was exercised by the execution of a deed, conveying all the property of the company, consisting of the charter and its amendments and franchises, the right of way, grading, planking, ditches, bridges and drainages, toll houses, &c., to one Snell, who went into actual possession and control of the property and franchises and continued to exercise them until his death eighteen years later. The city of Chicago commenced proceedings to remove a toll gate maintained by the heirs of Snell, who thereupon filed a bill for an injunction. The court of Illinois dismissed the bill and the appeal was dismissed by the United States supreme court. While the supreme court did not expressly decide that the strict construction given by the court below was correct, and decided that no federal question was involved, yet the court said: "The mere grant of franchises to a corporation carries with it no power of alienation and many cases have arisen in which an attempted alienation by the corporation has been declared by the courts to be void, as divesting it of the power to discharge the duties imposed by the charter."
The supreme court of Illinois, in the same case below (Snell v. Chicago, 133 Ill. 413), declared that the person who was to enjoy the rights and privileges of the corporation was the pur-' clyiser of the franchise and road, and this did not include his heirs and assigns. It was stated that at most Snell had merely the "right to organize as a corporation." The court used this language: "If Snell in Ms lifetime was the owner of such franchise by express legislative grant, he could not assign it, and it could not descend to his heirs. He failed to use it for the purpose of effecting any corporate organization and it died with him."
We point out that the act of March 24th, 1899, entitled "An act concerning corporations" (P. L. 1899 p. S'S4), has no application to the present case, for the reason that it only provides for a transfer of franchises by lease or assignment, by one corporation to another corporation, and does not refer to a conveyance by an individual to another individual, or to a lease by an individual to a corporation, such as are in the chain of title of the defendant.
It is a well settled rule that a corporation, created by statute, possesses no rights and can exercise no powers which are not expressly given or to be necessarily implied. Stockton v. Central Railroad Co., 50 N. J. Eq. (5 Dick.) 52 Northwestern Fertilizing Co. v. Hyde Park, 97 U. S. 659.
In accordance with these principles, Farnum, the purchaser at the receiver's sale, held the franchise as a body politic and corporate and had no power as an individual to convey them to Holbrook. Since the defendant claims the franchises as the lessee of Holbrook, it follows that the defendant was not possessed of them.
This being so, there can be no doubt of the power of the court to restrain the act complained of at the instance of the attorney-general. Stockton v. Central Railroad Co., 50 N. J. Eq. (5 Dick.) 152.
The order of the court below granting the preliminary injunction is therefore affirmed, with costs.
Pitney, Chancellor.
My vote for affirmance is based substantially upon the grounds expressed by Vice-Chancellor Learning in his opinion delivered in the court below, and reported in 65 All. Rep. lOlpl.