Case Name: Jonathan P. Bishop vs. Erastus Brainerd
Court: Connecticut Supreme Court
Jurisdiction: Connecticut
Decision Date: 1859-03
Citations: 28 Conn. 289
Docket Number: 
Parties: Jonathan P. Bishop vs. Erastus Brainerd.
Judges: 
Reporter: Connecticut Reports
Volume: 28
Pages: 236–247

Head Matter:
Jonathan P. Bishop vs. Erastus Brainerd.
■ The New York and Boston Railroad Company, a corporation chartered by the legislature of this state, became consolidated, under the same name, with a railroad corporation of the State of Rhode Island, the charter of the latter corporation specially authorizing such union, and that of the former authorizing the company “ to connect and make joint stock or common interest with any other railroad company.” The charter of the Connecticut corporation was subject to amendment by the legislature, which afterwards passed a resolution ratifying and confirming the consolidation. By the articles of union the property of the original corporations was transferred to and vested in the new corporation, which was to pay the . debts of the old corporations. • B was an original subscriber to the stock of the Connecticut corporation. A creditor of that corporation, whose claim accrued after the consolidation, factorized B as the debtor of tbe Connecticut corporation. Upon a scire facias afterwards brought by him against B, it was held:
1, That while it was very questionable whether the charter of the Connecticut corporation would have authorized such a consolidation, yet that the transaction was validated by the ratifying act of the legislature, which was to be considered as an amendment of the charter as much as if it had been expressly so declared.
2. That the consolidation being thus effected by direct legislation, under the reserved power of amending the charter, it was not necessary that the assent of all the stockholders should be obtained, nor that there should be any action of the stockholders or directors on the subject.
S. That the consolidated company thus established was a legal and valid corporation.
4. 'That it was of no importance to the case whether the original corporations were to be considered as absolutely merged in the new corporation and therefore extinguished, or as retaining their individual corporate existence.
5. «That the new corporation being legally established and having [ *290 ] capacity to receive an assignment of the pi’operty of the original corporations, and such assignment having been made on valuable consideration, the indebtedness of B had been legally transferred to and become vested in the new corporation, and he was therefore no longer indebted to -the original coi-poration.
6. That this transfer was not iixvalid against the claim of the plaintiff as a creditor of the original corporation, since his claim accrued after the transfer, and, even if it had accrued previously, yet the original corporation, in the absence of any fraudulent intent, had a right, for a valid consideration, to dispose of its property.
There is no legal difficulty in the way of the creation of a single corporation by the concurrent action of two or more states, nor of the creation of a new corporation out of two or more corporations already existing, nor of the creation by one state of such a corporation where one of the constituent corporations is a foreign one.
Scitus Facias, brought against the defendant as debtor of the New York and Boston Railroad Company. The original claim of the plaintiff against the railroad company consisted of two notes and an account, and accrued after the 1st day of January, 1855, and the plaintiff had obtained a judgment upon the claim, in the superior court of this state, at its term in Middlesex county in February, 1857, and had brought an action of debt on this judgment, and factorized the present defendant. The defendant was an original subscriber to the capital stock of the corporation, and had never paid his subscription, and it was conceded that he was indebted to the corporation unless that indebtedness had been legally transferred to a later corporation of the same name, consisting of the original New York and Boston Railroad •Company and the Woonsocket Union Railroad Company, a corporation originally chartered by the legislature of the state of Rhode Island, which corporations had become consolidated as a new corporation under the authority of the legislatures of the two states. The new corporation thus formed had afterwards become consolidated with the Charles River Railroad Company, a corporation created by the legislature of the state-of Massachusetts, the new corporation taking the name of the New York and Boston Railroad Company, and such consolidation being effected by the action of the respective companies and the resolutions of the legislatures of the several states. The details of the proceedings of the several- corporations, and of [ *291 ] *the legislatures of the several states, in effecting these changes, may be found sufficiently stated in the report of the case of Platt v. The New York and Boston Railroad Company, 26 Conn. R., 549.
It was conceded that the judgment first obtained by the plaintiff was against the original New York and Boston Railroad Company, chartered by the legislature of Connecticut, and that the action of debt, in which the defendant had been factorized, was against that company. The union of that company with the Woonsocket Union Railroad Company took place in 1853, and before the claim of the plaintiff accrued. By the contract under which that union was formed the property of the original corporations was transferred to the new corporation, the latter, in consideration thereof, agreeing to pay the debts of the old corporation. The union of the new corporation with the Charles River Railroad Company was effected upon like terms, in October, 1855, at which time a part of the claim- of the plaintiff had accrued. ■
On the trial of the case to the jury, upon the general issue, with notice of the special matters of defence above stated, the defendant offered in evidence the charters of the several railroad companies, and the records of their proceedings- in becoming merged in-the consolidated companies, together with the resolutions of the legislatures of the states of Massachusetts, Connec-' ticut and Rhode Island in relation thereto, and requested the court to charge the jury that, if they should find that the original New York and Boston Railroad Compan’y had become merged in the consolidated corporations, the plaintiff could not recover. The plaintiff objected to the evidence offered by the defendant, on the ground that it did not prove or tend to piove that the original corporation -was dissolved, and that-if any merger-was established it was not such a merger- as would preclude an attachment of the indebtedness of the defendant to the -original corporation by a creditor of that corporation, and prayed the court, if' the evidence should be admitted, so to charge the jury. The court admitted the evidence,- but charged -the jury as requested by the defendant.
The jury having returned a verdict-for tho- defendánt, the plaintiff moved for a new trial.
* Dutton, with whom were. Calef and Culver, in support of the motion.
1. We deny that there has been a merger of the original New York and Boston Railroad Company in either of the new companies called by the same name. The original charter of the company gives no other power on the subject than that of making “joint stock” with other companies. Charter, Sec. 1. An amendment of the charter, afterwards passed, merely provides that the company may “ connect and make joint stock or common interest with any other railroad company or companies, in respect to the whole or any portion of the road.” This implies that the original company is still to exist. It might retain a portion of its road. Nothing was intended beyond a union of interests, a joint operation of the two roads for the common benefit. A corporate union was not at all necessary to this end and was not contemplated. Even if the power was sufficient on the part of the Rhode Island Company, yet the consolidation could not be effected and become legal unless the Connecticut company had also sufficient power. But it is claimed that the union has been validated and confirmed by the resolution of the legislature of Connecticut passed in 1854. To this we reply, that a railroad company can not become merged in another railroad company in the absence of a special provision in its charter for such a purpose, without the assent of all the stockholders of both companies. The legislature can not, by its own act, amalgamate two corporations and make them one. It was no part of the object of the incorporation of the original New York and Boston Railroad Company that it should thus be made a part of a new company, and the charter not giving it even the power to become such, the stockholders, in forming the company and subscribing to its stock, have never agreed to any such change. The legislature can not make a contract for them. Redfield on Railways, sec. 252. Fisher v. Evansville Sp Cravrford JR. B.. Co., 7 *'Rort. (Ind.,) 407. Kean v. Johnson, [ *298 ] 1 Stockton Ch., 405. Chapman v. Mad River R. R. Co., 6 Ohio, 119. A perfect union of interests may exist without a union of the corporations. Farnum v. Blackstone Canal Co., 1 Sumner, 46. And see remarks of Judge Story, pp. 61, 62. There the union of interests was complete, and yet it was held that the original companies were not merged. The act passed by the legislature of this state in 1856, ratifying the union of the new company with the Charles River Railroad Company, forming the second consolidated company, expressly provides lor the retention of jurisdiction by this state and for the application of the original subscriptions to the stock of the Con necticut company to the payment of the debts of that company. This shows that the merger of that company in the new companies was not intended. This is shown also by the act of 1854, confirming the union with the Rhode Island company, which speaks of privileges which have been or shall be granted by the legislature to the Connecticut company.
2. But we claim that, if there has been a merger, so that the result is a new consolidated corporation, yet that the original corporations still exist. It is precisely like the case of the states of the union, which still exist as sovereignties, although they have united and formed a consolidated sovereignty. This distinction is sustained by the authorities. Ang. and Ames on Corp., § 103, el seq. Philadelphia, Wilmington and Baltimore R. R. Co. v. Howard, 13 How., 307. A corporation must be located somewhere. Where is such a consolidated corporation located ? It is utterly impossible to allow one entire corporation to exist in three separate states, because the legislatures of the different states may pass different laws with regard to them, that of one state imposing obligations and liabilities which the others do not, or giving power to issue bonds while the others refuse to do it, or repealing the charter while the others permit it to continue. The legislation of the different states with regard to railroads is in fact different. The insolvent laws of the different states are different. Which would determine the rights of such a corporation if it should go into insol- [ *294 ] vency ? *It is necessary that every state should have not onlj' full but sole jurisdiction over every corporation within its limits. How can such jurisdiction be possessed by three states at once ? In every view but that which we take of the case interminable difficulties will be found to arise.
3. Even if the Connecticut corporation is to be regarded as merged in the consolidated corporation for all other purposes, and as against all other persons, yet it ought to be regarded as still in existence for the purpose of enabling its creditors to proceed against it. Platt v. New York and Boston R. B. Co., 26 Conn., 544. Otherwise its creditors are remediless. And even if the new corporation be regarded as a legal one, and therefore capable of taking an assignment of the property of the old corporation, yet the law will not allow such an assignment to the injury of the creditors of the old corporation. The assets of the companj1- are thus withdrawn from the reach of its creditors. This consideration should have especial weight in determining the intent of the legislature and the construction to be given to its acts.
T. C. Perkins and Tyler, contra.
The charter of the original New York and Boston Railroad Company, in authorizing it to make joint stocks with any other companies, gave the corporation ample power to enter into a union with the Rhode Island company, as to whose power in the matter no question is made. This power was more explicitly given by the amendment of the charter in 1849. If however this power be regarded as insufficient, yet the validating and confirming act of the legislature of Connecticut, passed in 1854, clearly made the union valid. That act was passed under the power originally reserved in the charter of the company, to alter or amend the .charter at the pleasure of the legislature. The further consolidation of the new company with the Charles River Railroad Company was in like manner validated and confirmed by the act of 1856. These acts, operating as amendments of the original charter, have the same effect as if they had originally constituted a part of the charter. This being so, *the assent of the stockholders to the union [ *295 ] was not necessary, as they are to be regarded as having assented, not only to the original charter itself, but to any amendments that might be made to it by the legislature. The merger of the old New York and Boston Railroad Company in the new one is therefore a lawful one, and the new company has taken the place of the old one, if such a merger could be legally effected—that is, if it was competent for the legislature to establish such a consolidated corporation. ' We claim that the legislature had full power for such a purpose. Philadelphia and Wilmington R. R. Co. v. Maryland, 10 How., 376. Cork and Youghal Railway Co. v. Paterson, 37 Eng. L. & E., 398. In the case of Farnum v. Blackstone Canal Co., (1 Sumner, 46,) cited on the other side, it clearly appears that no corporate union of the companies was contemplated, and that the separate companies were intended to continue in existence, and Judge Story founds his opinion solely upon a construction of the acts of the legislature and not at all upon general principles. But it is claimed that even if the merger, has been effected and is legal, yet the original corporations still exist. But how can they survive the merger ? They cease to do business separately. The consolidated corporation becomes the owner of all the capital. The stockholders become stockholders of the new company, and that by a direct relation and not merely as stockholders of the old companies. Their existence, if it continues, would be merely technical, and it is not to be presumed that the legislatures of the several states, in merging them in the new corporation, intended them to continua in existence where no useful object would be accomplished by it. But even if the Connecticut corporation has a technical existence, how does that fact affect the rights of the plaintiff against this defendant ? The indebtedness of the defendant has been legal]}- transferred from that company to the new company in which it was merged, and again from that.company to the later company finally established by the consolidation of the three companies. This transfer was made upon a valid conr sideration,' the agreement of the new company to pay jj *296 J the debts of‘*the old ones, and the new company was in each instance a legally established corporation, capable of taking an assignment of the propertyand-.assuming such an obligation. It is no reply to -say that the property of the'corporation was thus removed from 'the reach of-the plaintiff, a creditor, and was therefore invalid against him. .He was not a creditor at the time of the first merger. And, if he had been, he had no lien on the property, and there was nothing to prevent a fair disposition of it by the. company. Besides, the plaintiff has his remedy against the new company, which has agreed to pay the debts of the old. The defendant has therefore, in any view of the case which admits that the- new. corporations were legal ones, ceased to be the debtor, of the original Connecticut corporation, and is now the debtor only of the later. corporation of the same name.

Opinion:
Storks, C. J.
The judgment on which the present proceeding by writ of scire-facias is foundéd, was, by the concession of both the parties in this case, rendered against the New York and Boston Railroad Company, which was the corporation chartered by the legislature of the state of Connecticut in 1846, and the question is, whether the defendant, when the. copy of the writ, in the suit in which that judgment was rendered, was left with him in service, was indebted to that corporation,. And it is also conceded that he was then so indebted, by virtue of his subscription to the original stock of that corporation, unless, as is claimed by the defendant, that indebtedness had been previously transferred and assigned to a consolidated corporation of the same name,1'composed of the first mentioned corporation and the Woonsocket Railroad Company, a corporation .which was chartered by the state of Rhode Island. It is further conceded, that in point of form, the indebtedness of the defendant on his subscription was regularly transferred by the Connecticut corporation to the consolidated corporations ; but the legal validity of that transfer is questioned by the- plaintiff, on the grounds which will be hereafter noticed. •
The act incorporating the Rhode Island corporation which was passed after the creation of the Connecticut corporation, authorized the former company to unite with any railroad company which *had been or should be empowered [ *297 ] by the legislature of Connecticut to construct a railroad to the westerly terminus of the railroad of the Rhode Island corporation, and provided that, when the companies should have been so united, the stockholders of one company should become stockholders in the other companies or company ; that the companies thus united should constitute one corporation, by such name as the united companies might.adopt; and that all franchises, property, powers and privileges granted or-acquired under the authority of said states respectively, should be held and enjoyed by the said stockholders in proportion to the number of,shares or amount of property held bv them respectively in either or both of said corporations. The Connecticut and Rhode Island corporations subsequently entered into a contract with each other, by which, in its terms, the two companies became completely merged, consolidated and amalgamated into a new corporation by the name of the New York and Boston Railroad Company, and all the franchises, property, power and privileges of the two respective corporations were transferred to the consolidated company. . In 1849 the legislature of Connecticut passed the following resolution, after reciting that the two corporations had united and made joint stock with each other, thereby forming one company under the name of the New York and Boston Railroad Company ; " Resolved by this assembly, that the proceedings of the said companies, whereby they became so united and merged as one company, shall be and the same are hereby validated and confirmed, and the capital stock of said companies shall together form the capital stock of said united company, and the stockholders of each of said companies shall be stockholders of the said united company, which shall have all the powers, rights, privileges and franchises now enjoyed by, or which may be hereafter granted to, the New York and Boston Railroad Company in this state."
The plaintiff objects that the contract of consolidation '^between the two companies was one which neither the.[ *298 ] Connecticut corporation nor its stockholders, unless they were unanimous,-could, according to its charter, legally make, and that therefore it derived no validity from the Connecticut resolutions. The-original charter of that company authorized it " to make joint stocks with any other railroad corporation;" and it was subsequently, in 1849, also authorized " to connect and make joint stock or common interest with any other railroad company or companies, in respect to the whole or any portion or portions of the road.or roads of the said company or companies."
We think that it is very questionable whether these provisions would authorize the Connecticut corporation to become consolidated with the Rhode Island corporation, so that the stocks of said companies should be completely merged into on.e, or whether its effect was anything more than to enable the Connecticut corporation to unite with the Rhode Island corporation, so that the operations of the two corporations severally should be carried on by them respectively for the common interest and benefit of the two corporations. But, however, that may be, the charter of the Connecticut corporation provided that it might be altered, amended, or repealed at the pleasure of the General Assembly, and under this reserved power we are of the opinion that it was competent for the legislature of that state, either by its own direct enactment, or by ratifying an arrangement between the Connecticut and Rhode Island corporations for their consolidation, (supposing the arrangement in the first instance to be unauthorized), to sanction and validate such amalgamation, and that such ratification constitutes virtually an amendment of the charter'of the Connecticut corporation, as much as if it was enacted specifically and in form as an amendment, and under the said reserved power it was unnecessary that the stockholders, or even the directors, should act upon the said consolidation, although in fact such consolidation was ratified and confirmed subsequently by the board of directors, and also at a legal meeting of the stockholders by a majority of them. [ *299 ] Hence it appears that by the terms *of the charters of the Rhode Island and Connecticut corporations and the amendments made to the latter in connection with the agreement of the two corporations, a new consolidated corporation has been created, provided it was competent for those two states, by such united action, to create, under their joint authority, such a corporation. It is not questioned by the plaintiff, and indeed could not be in view of the authorities, that a state may create a corporation which shall be composed of two or more corporations created by the same state, as well as of two or more natural persons, or that a state may create a corporation composed of natural persons belonging to different states. And there is substantially no more objection to a state creating a corporation to be composed of corporations chartered by different states than of natural persons belonging to those states. Nor do we see any objection, technical or otherwise, to the parting, by two or more states unitedly, in the exercise of their sovereign authority, with such of their respective powers as shall he necessary, in order to confer upon persons natural or artificial the franchise or privilege of being a corporation, and with such powers and privileges as they shall deem it proper to grant to them. And this power has been not unfrequently exercised by states without objection or question.
These views do not conflict with the case of Farnum v. The Blackstone Canal Co., (1 Sumner's R., 46,) in which the court held only, as a matter of construction, that in that particular case.it was not the intention of the legislatures of Massachusetts and Rhode Island to consolidate or amalgamate the two corporations there in question, or to do more than to empower them to unite for the promotion of their common interests. No question was there made as to the competency of those legislatures to consolidate those corporations into one, or even to extinguish their original individual existence. In regard to the effect of such a consolidation, it does not necessarily follow that it would extinguish, to all intents and purposes, the existence of those corporations. It is possible for them still to subsist for certain purposes, notwithstanding they should be thus amalgamated. Whether, however, *the consolidation of [ *300 ] the Connecticut and Rhode Island corporations now in question, operated as a total or partial extinction of those respective corporations or either of them, it is quite unnecessary to consider in this case, because, as we have already seen, the corporation composed of those two corporations is one which was clearly competent to take an assignment' of the claim founded on the subscription of the defendant to the stock of the Connecticut corporation, and if that claim was legally transferred to the consolidated corporation, the defendant thenceforth ceased to be a debtor to the Connecticut corporation, and therefore the plaintiff can not recover in this suit, brought against him as such debtor, whatever other rights may lie retained-by the Connecticut corporation.
The form of the assignment by the Connecticut to the consolidated corporation, of the debt owed to the former by the defendant, being conceded to be sufficient, and the objections of the plaintiff to the existence of the latter corporation to which it was assigned, and to its capacity to receive such an assignment, being answered, the inquiry remains whether that assignment was invalid by reason of the effect it might have in withdrawing the assets of the Connecticut corporation from its creditors and defeating them in the collection of their .debts, which is the only other ground upon which the assignment is attacked. It is to be observed in this case that, so far as there is any evidence as to the time when the claim of the plaintiff against that corporation, which he is now endeavoring to collect, accrued, it originated after the assignment of the debt of the defendant to the consolidated corporation. That claim consisted of the notes on which the plaintiff obtained the judgment against the Connecticut corporation, upon which the suit was brought on which the judgment was rendered to enforce which the present scire facias is brought, and those notes.were not given until long after the assignment which is now in question. That assignment, therefore, was not invalid on the ground that it defeated the collection of any then existing debt against the Connecticut .corporation. If, however, that debt of the plain- [ *301 ] *tiff had accrued before the assignment, we are unable to perceive how the latter could be invalidated by that circumstance. There was nothing in the charter of the Connecticut corporation which prevented it, although' it might even have been insolvent, from assigning fairly, and for a good consideration, either the claim that it held against, the defendant or any other of its property, and no general principle, of law forbids an- honest transfer for value by any debtor of any of his property, to whatever. extent he may be indebted. In the absence of any specific lien, acquired by a creditor, his debtor may, by the principles of the common law which we are now applying, honestly deal with his property, although insolvent, in the same manner as if he were solvent. In the present case it is not claimed by the .plaintiff that the assignment by the Connecticut corporation- was made with any fraudulent intent, or that there is any objection to the consideration of that assignment, which was the assumption by the consolidated corporation of the debts of the Connecticut corporation. The obligation to assume those debts was one which could be enforced for. the benefit of the latter corporation or its creditors against the corporation which received the assignment, and the validity of the assignment would not depend on the ultimate ability of the latter corporation to fulfill that obligation. These,, considerations, to show that the assignment would have been valid as against a, prior creditor of the Connecticut.-corporation, are at least applicable with equal force to the assignment of a debt due from -.the latter corporation which did not accrue until after the execution of the assignment. In short, the question is whether an assignment of property by a debtor, honestly and for a valuable consideration, is valid against a creditor . whose debt should accrue, subsequently to the assignment. We know of no principle of the common law on which such a tainsfer can be ¡impugned, and.in this case it is affected by no statute, •
The union of the united Connecticut and Rhode Island corporations with the Charles River Railroad Company, which took place in 1855, has been adverted to in the course of the argument, as though it had a bearing on the *case before us. We designedly say nothing of that [ *302 ] union, because we would leave entirely open every question in which the rights of those united companies are involved, and it is plainly unnecessary to look further than the consolidation, or union of the Connecticut and Rhode Island corporations, and-the condition of the claim against the defendant growing out of the assignment of his subscription to that consolidated corporation. What has been done with that claim since it was assigned to that corporation is of no importance in the present case; it is sufficient that, by that assignment, it had ceased to be a debt due from the defendant to the Connecticut corporation, and could not therefore be attached by the plaintiff as its creditor. A new trial is not advised.
In this opinion the other judges concurred.
New trial not advised.