Case Name: The Genesee Valley & Wyoming Railway Co., Plaintiff, v. The Retsof Mining Co., Defendant
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1895-12
Citations: 15 Misc. 187
Docket Number: 
Parties: The Genesee Valley & Wyoming Railway Co., Plaintiff, v. The Retsof Mining Co., Defendant.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 15
Pages: 187–196

Head Matter:
The Genesee Valley & Wyoming Railway Co., Plaintiff, v. The Retsof Mining Co., Defendant.
(Supreme Court—Monroe Special Term,
December, 1895.)
1. Corporation—Cannot repossess itself of property by fraud AND FORCE.
A corporation cannot, for a real or fancied wrong, repossess 'itself of leased property by fraud and trickery, and then work destruction and injury thereto in a disorderly and tumultuous manner.
2. Same — Contracts.
■ A contract for transportation which is complete in itself, and establishes new rates, supplants a prior contract therefor.
3. Same — Revocation by stockholders.
A contract, made, by tlie directors of a corporation pertaining to its ordinary business relations cannot be revoked by any action of its stockholders.
4. Same — Directors in two corporations.
A contract between two corporations is not vitiated by the fact that some of the officers were directors in both corporations, in the absence of fraud or bad ..faith, on their part.
Motion by the plaintiff for an injunction to restrain any interference by the defendant with the plaintiff’s railroad and property during the pendency of the action.
The parties' are corporations duly organized' under .the laws of this state, the plaintiff being engaged in the operation of. a railroad originally constructed by the defendant, which is the owner of large and valuable salt mines and interests in the town of York, Livingston county, as well as of the fee of the land upon which a portion of the railroad was constructed.
In June, 1891, the plaintiff became the assignee of a lease made by the defendant to William Foster, Jr., and Charles ■ Q. Freeman of the railroad ‘above mentioned, and the equipment thereof, for the term of 999 years. This lease contained certain covenants and provisions of mutual benefit and obligation, one of which is the principal source from which flows the controversy between the. parties. This provision reads as follows, viz.-:
“ Third. The rates of freight to be charged by the lessees, of ■ their- assigns; of- said railway company from Eetsof shall ■ at no time be more than one per cent per barrel (or per 300 lbs. of merchandise in not less than carload lots) in excess of the rates from time to time in effect from the existing junction points of said road on the Delaware, Lackawanna. & Western railroad and Western New York, & Pennsylvania railroad, and such additional tariff shall be charged only on such shipments as are not covered by contracts between the Genesee & Wyoming Valley railway and connecting railroads.” And it is followed by another which permits, the defendant, in the event of the failure of the lessee to observe any and all of the covenants of said lease, “ to enter upon and take possession of and use and dispose of and for its, own exclusive right all and singular the premises, property and rights hereby demised, and all contracts, fixtures, improvements and permanent property and appurtenant rolling stock which may be hereafter constructed on or added to the demised premises or any part thereof, and to exclude the lessees and all other persons wholly therefrom.”
Subsequently, and upon the 25th day of October, 1894, the parties hereto entered into a supplemental agreement in writing, by the terms of which the defendant agreed to ship all the “ salt and products of manufacture produced by it at the works at Eetsof” and to receive “ all merchandise and material of every description which shall be coming to it ” upon the plaintiff’s railroad, in consideration of which the plaintiff agreed that it would “ transport the same at not exceeding the rates that are charged and received by other railroad companies for similar transportation and service.”
After this agreement had been entered into the plaintiff undertook to transport the products of the defendant’s mines to the various connecting lines of railroad, and in doing so charged therefor a rate which which was in excess of one cent per barrel, but which was not greater than the rates charged by other railroads, and by this very railroad while it was owned by the same parties who compose the defendant’s corporation, for similar service.
The defendant’s officers, claiming that the plaintiff had violated its contract, undertook to avail themselves of the “ re-entry ” clause of the lease. But instead of resorting to the usual legal remedy, they waited until all the plaintiff’s employees, save a solitary watchman, had- returned to their homes upon the night'of October 30, 1895, and then, sending for the_watchman to come to the defendant’s office upon the pretext that they desired to make him a present, delivered to him a written notification of the alleged violation of the third clause of the lease and of their intention to enforce the penalty therefor, and while this interview was in progress a gang of men, numberine1 more than 100. armed with clubs, and some of them with. guns, took possession of the plaintiff’s railroad and rolling stock and proceeded to tear up.the tracks and destroy or render useless all the property upon the premises. In order to make certain that the work of destruction should be completed cans of dynamite were subsequently placed at convenient points along the bank and the abutments of the railroad bridge, a few rods from the head house, and these were connected with electric wires so that they could be exploded upon a moment’s notice in the event of any attempted interference upon the part of the plaintiff. For-. tunately at this juncture the court intervened ■ with a preliminary injunction, and the parties responsible for the condition of affairs above described were considerate enough to forbear further assertion of their rights in the manner at first attempted until this motion could be heard and decided.
Satterlee, Yeoman & Taylor, for plaintiff.
Charles J. Bissell and William B. Putney, for defendant.

Opinion:
Adams, J.
This motion involves the question whetheror not one corporation which, for some real or fancied wrong received at the hands- of another rival or obnoxious corpora- tion, may take the law 'into its own hands, declare war, and proceed to destroy property and imperil human life. Incidentally, to be sure, some questions of construction are to be considered, the decision of which, in ordinary circumstances, would be controlling upon the rights of the parties. These will, of course, receive proper attention, but, after all, the important and overshadowing subject of inquiry is the one "first adverted to.
. It is difficult to contemplate the condition of affairs which the undisputed facts of this case present with judicial calmness, or to characterize conduct such as some of the officers of the defendant have been confessedly guilty of without indulging in language inore or less fervid. Not only have they resorted to force and violence and thereby occasioned a disturbance of the public peace in the attempted assertion of what they have determined to be their legal rights, but they have wantonly destroyed property of great value, and have not hesitated to proclaim their entire willingness to incur even more serious consequences if their work of destruction was interfered with.
Now I am not unmindful of the rule of law which enables a landlord- who has obtained peaceable possession of premises under the re-entry clause of a lease, where there has been a breach of covenant, to maintain the possession therein obtained as against the lessee and the whole world (Cain v. Flood, 14 N. Y. Supp. 776; Alexander v. Griswold, 17 id. 522; Wood v. King, 43 N. Y. 152; Bliss v. Johnson, 73 id. 529), nor do I overlook the language of the lease in question, which provides that the defendant, in the event of a breach thereof, may not only enter upon and possess itself of the demised property, but may also " use and dispose of it for its own exclusive right; " .and had the lessor in this case contented itself with resorting to nothing worse than trickery to obtain' possession, and having thus obtained it, maintained its possessory privileges in a quiet and orderly .manner, no other question could have arisen than the rights secured to the respective parties by the original lease and the supplemental contract. Wood v. King, supra. But that is not this case. Not only was fraud employed to compass possession, but as soon as it was obtained force was resorted to in' order that it might be maintained; and, instead of resting satisfied with . securing possession of the demised property, its utter destruction was attempted, which, had it been accomplished, would have worked great and irreparable -injury to the plaintiff and would likewise have rendered wholly worthless the security upon which $500,000 worth of bonds had been issued with the knowledge and consent of the defendant.
For the reasons stated, and because, fortunately, there has never, so far as' I am aware, been any necessity for applying the law to this precise state of facts, none of the authorities which have been or can be cited exactly fit the case, but it is not conceivable that in this enlightened period of the world's history a party can obtain possession of .property in the manner in which this defendant's officers and agents admit they have; that is, by fraud and trickery, and then- work all manner of destruction and injury in a disorderly and tumultuous manner, without • rendering themselves amenable to the injunctive process of a court of equity.
At all events, this court is willing to become responsible for a precedent which must be respected, at least, until it is reversed by some higher authority. A criminal proceeding might, it is true, punish the wrongdoers, but I fail to see wherein it could afford any adequate protection to the plaintiff for the destruction to its property, in the event that it shall be ultimately determined by the courts that it has any. property to protect. Before leaving this branch of the case, however, it is but simple justice to the counsel for the defendant to say that they have disclaimed all responsibility for the. indefensible conduct of their client, although-in view of their well-earned reputation as gentlemen of practical common sense, as well as lawyers of conceded ability, such a disclaimer is quite superfluous.
If correct in -the views already expressed, it would seem that the plaintiff's motion might be dispensed with without considering the questions to which counsel addressed their principal argument upon the hearing. Nevertheless it is , desirable, perhaps, that the court should indicate as briefly as possible the conclusion it has reached respecting the main 'issue and its reasons therefor, and especially is this so, in'view of the fact that the learned counsel for the plaintiff' did hot appear to attach to the question already considered the import-' anee in its relations to this particular proceeding which the court accords to it.
It will, of course, be necessary, in order -to determine the relative rights of the parties, to give proper effect and construction to the agreement of October 25, 1894. For upon the ¡Dart of the plaintiff it is claimed that this instrument by its terms very materially modifies the third clause of the original lease, while upon the other hand the defendant insists that no such effect can be given it; and that it would not aid the plaintiff if such a construction were possible. In approaching the consideration of .this, vital question it is important, I think, to'bear in mind that the- construction for which the defendant -is contending involves the forfeiture on the part of the plaintiff of property and interests of very great .value, and this being the case, it is bound to establish its claim in the most, satisfactory manner by reason of the well-established rule that the law does not regard forfeitures with much favor. Baley v. Homestead Fire Ins. Co., 80 N. Y. 21.
The agreement of October twenty-fifth does not, it is true, in express terms either supplant, or supplement -the conditions of the original lease. It does. not even refer to the last-mentioned instrument. But it does contain all the essentials of a complete and independent contract and one which is apparently mutual in its character, and which likewise bears upon the face evidence of mutual consideration.. By its terms the plaintiff agrees to transport the defendant's salt at the sanie rates which other transportation companies receive for similar services, and the defendant agrees to- pay such rates for the term of ten years. In order to break the force of this new contract, affidavits áre produced upon the part of the defendant tending to show that it was not designed. by either party- that it should in any way alter or modify the terms of the original agreement, save-in the one particular, that it should relieve the defendant from the paymeht of any freight whatever upon the salt taken from its mines to the connecting lines of railroad. However this may be,, there is nothing vague or. equivocal in its language, which, as has been shown, does, establish new rates, and its effect can -hardly be limited by any verbal understanding dehors the contract itself. At least such an issue as that cannot very well be tried Upon affidavits.
But it is further argued, this contract is of -no force, even if entitled to receive the construction. ¡which. the plaintiff has been pleased to put upon it, for the reason, that it was exe-' cuted by the directors of the defendant, who were ,at the time of its execution also interested in the plaintiff corporation, and for the further reason that it was subsequently revoked by a resolution of the defendant's stockholders..
The answers to these propositions, it seems to me, are quite.' obvious. In the first place the management of the business of a corporation is always confided to the board of directors. It is true that they possess no authority, independent of the stockholders, to make any material and important alteration of the business or construction of the body' they represent (Morawetz on Private Corporations, § 12), but in the ordinary, every-day business affairs of the corporation their action is all that is necessary, and when such action is once taken and the interests of a third party intervene, it would be singular if those interests could be impaired by any action of. the stockholders. If such a rule should once obtain it would seriously derange the business' interests of the country, for, to illustrate, the directors of a railroad company might contract with a manufacturer -for 10,000 tons of steel rails and, just before their delivery the stockholders could get together and revoke .the contract and the manufacturer would be remedí- less. Now the contract of October twenty-fifth pertains to the ordinary business relations of the two corporations, .viz., the transportation of freight and the rates thereof. It would seem, therefore, that if the board of directors was clothed with any independent authority whatever it must have related to just such matters .as these.
The objection that the directors of the defendant were also interested in the railroad company at the time this supplemental contract was entered into is not, in the absence of. fraud or bad faith, I apprehend, entitled to much weight, and it is not intimated that either of the parties to the instrument was guilty of bad faith. On the contrary, it was executed because it was supposed it would prove beneficial to both. ' It was said in the case of Wallace v. Long Island R. R. Co., 12 Hun, 460, that the fact that the same persons were directors .of the leasing and leased railroad might of itself entitle either corporation to avoid its contract, but that it was insufficient to avoid it at the instance of one or more stockholders. This, however, seems to be the mere expression of * an opinion, and does not harmonize with the language which preceded it, wherein it is stated that all acts of the directors of a coloration, within their corporate powers, and " done in good faith, are valid and binding, not only upon the corporation, but upon each stockholder thereof."-
The rule contended for by the learned counsel for the-, defendant has been considerably .relaxed of late years. Indeed, it would be difficult to conduct the affairs of the multifarious corporations of the country, many of which, / although apparently sustaining the relations of rivals in business, are, nevertheless, practically controlled by the same -directors, if the element of good faith, instead of individual • interests, were not established as the basis of intercorporate action. Van Cott v. Van, Brunt, 82 N. Y. 535; Gamble v. Queens Co. Water Co., 123 id. 91; Twin, Lick Oil Co. v. Marbury, 91 U. S. 587.
The court has been reminded that the injury complained of is, at most, a trespass, and that its injunctive power should not be exerted to redress a wrong of that character. If this , were the case of an ordinary trespass, in which the injury could be compensated for in dollars and cents, it would have been unnecessary to have urged any other objection to the granting of this motion than the one mentioned. But it is . not. The injury already done and that which may be accomplished by the continuance of the- trespass are so serious as to be incapable of measurement by any pecuniary standard, and the case seems a proper one for the - interference of the court in the manner asked- for, even though it may perchance enter-* tain some doubt as to the final result of the controversy.
Injunctions do, it is true, to some extent, at least, anticipate the ultimate judgment of the court, and for that reason, if for no other, they should be granted cautiously, and perhaps even reluctantly, but the right to grant them, nevertheless, resides in the discretion of the court, and this power should be exerted whenever the protection of such vast interests -as are at stake in this action, seems to require it. People ex rel. Gaynor v. MeKane, 78 Hun, 155.
The motion should, therefore, be granted, with ten dollars costs.
Motion granted,- with ten dollars costs..