Court Opinion

ID: 5557528
Source: CourtListenerOpinion
Date Created: 2022-01-11 00:44:00.576089+00
Date Added: 2024-06-11T08:35:22.538385
License: Public Domain

McCay, Judge,
concurring.
1st. Assuming that under the original charters of these companies, the Central Railroad and the Southwestern Railroad, they were exempt from taxation at a higher rate than one-half of one per cent, on the net income of each, and that it was not competent for the legislature to take away that privilege, it is my judgment that under the several acts providing for the consolidation of the Central Railroad Company and the Macon and Western and the Southwestern and Muscogee Railroads, two new corporations were created, and that these new companies, whilst they had the same exemption, yet they each held it subject to be withdrawn, as declared in section 1682 of the Code. That section is in these words: “In all cases of private charters hereafter granted, the state reserves the right to withdraw the franchise, unless such right is expressly negatived in the charter.” It is not denied that these companies had, after the consolidation, every right granted in their original charters. The point' made against them and upon which the state of Georgia rests her right is, that after the consolidation, they held these rights, not by virtue of the *414old charter, but by virtue of and under the consolidating acts, and so holding them, that they only hold them at the will of the state. That holding them under a grant of a date subsequent to first Of January, 1863, (when the Code went into effect,) the legislature may repeal that law and take away that grant.
It is claimed on the part of the state that the necessary legal and inevitable effect of the consolidating act, and the acceptance of it by the two corporations, was, in each case, a surrender by the companies to the state of their old charters and the acceptance of a new charter, and that this new charter, though it re-granted all the rights, privileges and immunities of each of the old charters to the consolidated company, is, as it is of a date subsequent to the Code, subject to the provisions of section 1682 of that Code. Whether this be so is the great question we have to determine.
Do these companies hold their franchises under their original charters, or do they hold them under the consolidating acts? If their tenure be under the consolidating acis, the state has a right of repeal; if under their charters, the state has not. It occurs to me that the decision of this question turns very materially on the meaning of the word consolidation, as applied to two or more corporations. Such an application of the word is not only new but seems to be confined to the United States. In England they use the word amalgamation to express something of the -same idea, though even that word, as used in England, does not seem to have any certain and defined meaning. It may mean a mere sale of the assets and business of one company to another, or it may mean the abandonment by two companies of their respective articles and the formation of a new one, composed of the members of the two old ones. Dr. Brice, in his book on Ultra Vires, commences his chapter on amalgamation of railroads by a discussion of the civil law doctrine of novation, as when A owes B, and B. owes G, and there is a novation of the contract, so as that A becomes the debtor of C, and the debt from A to B, as well as the debt from B to C, becomes *415extinct: See Brice’s Ultra Vires, 509, and note. The act of A833 and 1834, Vic., c. 61, seems to treat “amalgamation” and “transfer of business” as distinct. The latter case is treated as a purchase, the former as a combination. In this country I have not' been able to find a case where the word amalgamation is used. Here the word consolidation is common; but so far as I have been able to find, it is only used in cases where there is a complete merger of two companies. In McMahon vs. Morrison, 16 Indiana, 172; Laurence vs. Lebanon Railroad Company, 30 Penn. St., 42; and in Pausel vs. Northern Mississippi Railroad Company, 42 Miss., 63, this term consolidation is defined “a dissolution of the old-corporations,” and at the same instant the creation, of a new, with property, liabilities and stockholders derived from those thus passing out of existence. The language of the act of August 24, 1872, is that the companies shall be consolidated, united, “ that the Macon and Western Railroad Company and the Central Railroad and Banking Company of Georgia be, and they are hereby authorized and empowered to unite and consolidate- the stock of the said two companies, and all the rights, privileges, immunities, property and franchises belonging or attaching to said companies under the name and charter of the said the Central Railroad and Banking Company of Georgia, in such a manner as that each and every owner and holder of shares of capital stock of the Macon and Western Railroad Company shall be entitled to and receive an equal number of shares of the consolidated company.”
Both companies are empowered “ to consolidate ” and form a union. -Care is taken that the debts of both the organizations shall become the debts of the new. The stock to be issued to the Macon and Western stockholders is to be stock in the consolidated company. This language is entirely inconsistent with the idea insisted upon by the plaintiffs in error, to-wit: that the act merely intended to allow a purchase by the Central Railroad Company of the Macon and Western. Why call the company the consolidated company ? Why. provide, as is done in section 2, for official action by *416both companies, either in a shareholders’ meeting or by written authority, to the directors? Why take pains to carry over to the new company the debts of both the old ones ? It is impossible to conceive of consolidation if this be not one. The act itself calls it so. The two companies do, in fact, become one. There is, it is true, no express provision that the old companies cease to exist, but that is the necessary effect of the arrangement. Nobody pretends that the Macon and Western Company is in existence, but there is no express language of the act so declaring. It lias ceased to exist, simply because all its stock, franchises, debts, and rights, are absorbed in the consolidated company. Why is not this just as true of the old Central Railroad Company ? Had a new name been taken, nobody would for a moment have supposed that the old Central Railroad Company did not go out of existence precisely as did the Macon and Western. The stockholders of both are equal stockholders in the new company — the consolidated company — all the debts of both are to be assumed by and be binding on the consolidated company, and all benefits and rights of both are to accrue to and vest in the same. Why this singular language, why should care be taken to carry over to the consolidated company the debts and liabilities of both the Central and Southwestern companies as well as the rights and benefits? There is, too, something in section 3d which to my mind adds force to these ideas. That section provides that when the assent of the stockholders shall be had, the directors of both corporations shall “ complete said union and consolidation, and certify the same to his excellency the governor of this state, to be filed in the- office of the secretary of state.” Why this formal provision for having this “ union and consolidation ” 'part of the public records ? Such a proceeding fits aptly with the idea of a surrender of the old charters and the acceptance of the new. Just such a thing would have been provided had such surrender and acceptance been the intent of the legislature. I doubt if in all the “amendments,” however important, that have been passed to the charters of corporations in this state, the acceptance of *417the amendment has been required to be so formally made. Indeed, to take this act altogether, it would be very difficult to use language more apt to merge, amalgamate, consolidate, both of these original corporations, into a new one, and entirely to abandon the old companies. Take the words of the 4th section, especially the last clause, defining the rights of the Macon and Western shareholders. It says : “which new certificate shall entitle the holder thereof to the same rights, privileges and benefits, as attach to holders of stock now (at the date of the act and before the union,) held by the shareholders in said companies or either of them. By the very terms over and over again repeated, the stockholders of both of these companies, become stockholders in the road from Savannah to Atlanta. Each stockholder of each company keeps all his old rights, powers, and privileges as to the road of his old company, and gets new rights in the consolidated company.
As to the debts of both the old companies, there is a clear novation by the express terms of the act; the consolidated company undertakes to pay all the debts and liabilities of both of the old companies, and upon all contracts where rights accrue to either of the old companies the consolidated company is to have the benefit of them. The Macon and Western Railroad Company has ceased to exist, simply because, its property and franchises, its debts and liabilities, are transferred to the consolidated company ; and precisely the same thing is true of the old Central Railroad and Banking. Company, for by the express terms of the act, its rights, privileges, immunities, property and franchises, its debts and liabilities, and all benefits and rights arising under any of its contracts, are transferred to the consolidated company.
As I have said, it is significant that the act itself, not only transfers the debts, liabilities, rights and benefits, etc., of both companies over but does it to the consolidated company. So that this act not only authorizes the consolidation of the two companies, which ipso facto, according to the authorities, and to the actual meaning of the word, involves the surrender of *418both the old charters and the acceptance of a new one. But the details of the act — the words used — show that this was the clear contemplation of the legislature in passing the bill and granting the authority. The 15th section of the act of parliament of 1870, in reference to life insurance companies, has an expression in it that exactly conveys the idea I intend to express. The expression is this: When an amalgamation takes place between two companies, or when the business of one company is transferred to another, the combined company, or the purchasing company shall, etc. Was the union of the two companies, the Central and the Macon and Western, a combination or a purchase? Were they contractors, by which one became bound to the other, or by which the Central Railroad Company undertook a duty to the stockholders of the Macon and Western? Clearly this latter was not the case.' The assent of the legislature having been given, and the assent of the stockholders obtained, the directors, of each company officially “consolidated,” and under the corporate seals of each company certified that consolidation to the governor. It is not a sale, not a transfer of the Macon and Western to the Central, it is the mutual meeting, blending, union — consolidation of both in a new consolidated company. The Central loses its identity just as completely as the Macon and Western. The act of both is the same. On the filing of the certificate the stockholders of both the old companies, no longer stockholders in a road from Macontto Savannah or from Macon to Atlanta, are stockholders in a road from Savannah to Atlanta, stockholders in the consolidated company. There is not a word in the act authorizing the then Central Railroad and Banking Company to work a railroad from Macon to Atlanta. Its old charter is not amended, and that old company, if it still exists, is to-day exercising a franchise not granted to it by law.
The consolidated company has the right to work a road from Savannah to Atlanta, but it is not the Central Railroad and Banking Company, chartered in 1835; nor is it the Macon and Western Railroad Company, but it is the consolidated *419company formed under the act of August 24th, 1872, and clothed with the full franchise, on the filing of the certificate of its formation or consolidation with the governor, as prescribed by the act. A mere looker on,, who sees the Central Railroad and Banking Company working the road from Macon to Atlanta, might suppose the charter had been amended, and the franchise extended. But we find no such extension in the act of August 24th, 1872. The Macon and Western Railroad is to-day working a road from Atlanta to Savannah, justas much as the old Central Railroad Company is. The truth is, neither is doing it. A new company, formed under the consolidating act and springing into existence on the transmission of the certificate of consolidation to his excellency, the governor, to- be filed, as other acts of incorporation are, with the secretary of state; a consolidated company, taking for its name the Central Railroad and Banking Company, is the entity that is operating the two roads now consolidated into one.
2d. The doctrine is now well established by numerous decisions, that if the state, in granting a charter, reserve the right to repeal, the right exists without qualification. That is the bargain, and though there are decisions that this right has limitations, yet the current of authority is the other way. Perhaps, too, all the cases are reconcilable, by admitting that the repeal cannot affect rights between the corporations and third persons, arising under the charter. And this, it seems to me, is the logic and common sense of the matter. A bargain is a bargain. Those who enter upon the enterprise do so with their eyes open. I do not see how any limitation can exist, even if by the law of the state, as was the common law, the real estate goes to the state on the dissolution. I see no reason why the state has not a right to exercise the privilege reserved in the charter. As I have said, those who make the venture, accept and act upon the charter, do so at their own hazard ; they take the risk like other people who undertake enterprises, the success of which turns upon the permanence of particular laws. . So, too, it is well settled, that *420when there is a general law declaring all charters granted after its passage, repealable, it is not a violation of the obligation of the contract between the state and a corporation to repeal a charter so granted. The contract is entered into under the general law, reserving the right of repeal, and the adventurers take-the charter with such a construction upon the grant. A charter so granted stands on the same footing as though the right to repeal was reserved in the charter. The law declaring the right of repeal is a rule of construction. An analogus case may be found in section 1688 of the Code, which declares that all charters expire at the end of thirty years, unless otherwise specially provided. At common law, charters were perpetual. Under the decision of the supreme court of the United States, in the Dartmouth College case, charters were held here, on this principle, to be perpetual and irrepealable. But our legislature has repealed this common law rule, and declared charters not perpetual.
1st. It limits them to thirty years, when they expire, without more..
2d. It declares, as a rule of law, that the legislature may repeal them, and the contract, like all other contracts, is entered into under the general law. As a matter of course, this being only a layy, the legislature may alter it, and so the Code provides that all charters are repealable, unless it be expressly provided in any charter to the contrary; unless, in other words, the law is repealed so far as that charter is concerned. It results, therefore, that in any .state where this general law exists, any charter in which it is not expressly declared that it is irrepealable, is subject to the legislative will just as though it were specifically provided in the charter: 47 Maine, 34; 32 N. J.L., 134; 21 N. Y., 9; 55 Penn. St., 452; 3 Bush, Ky., 592. See also Tomlinson vs. Jessup, 15th Wallace, 457; where the law is so distinctly held.
3d. But it is said that whilst it may well be that the charter is repealable, it does not at all follow that it is competent to take away a part of it. The right to destroy may exist, and yet the legislature has not a right to'maim. But does not *421the right to repeal include the right to modify ? Does not the greater include the less? Perhaps there might be strength in this position, if charters in this state stood as they do at common law. If it were competent for the state to compel a corporation to exercise its functions, perhaps it might well be said, that the state could not take away a part and insist on the corporation exercising what remains. But our Code, section 1685, authorizes a corporation to surrender its franchises. It was argued that the decision in the case of The Meehanics’ Bank vs. Heard, 37 Georgia, 401, is contrary to this. But that charter was one granted before the Code, and was irrepealable. This court has not held that a corporation created since the Code may not surrender its franchises without the consent of the state. Indeed, such a right would seem to follow from the reservation of the right to repeal. A contract ought to be equal, and it was doubtless just because the right to repeal was reserved that the. section authorizing a surrender was made a part of the system. If, then, Ihe legislature has a right to withdraw the whole franchise, it is within its sphere to withdraw a part. If the stockholders do not desire to keep what is left they can surrender. But at best this objection is only a formal one. If the right to repeal exists the legislature may clearly, at its pleasure, enact that the charter shall be repealed, unless the corporation consent to pay taxes like other people, and practically this would, without doubt be the consequence were this case to turn solely on the point that this is not a repeal but only a modification.
But there is another section of the.Code which is pertinent to this discussion. Section 1651 of the Code is as follows: “Persons are either real or artificial. The latter are the creatures of the law, and except so far as the law forbids it, subject to be changed, modified or destroyed.”
Now, here is a clear declaration of the right to modify, change or destroy, unless the law forbids it. Evidently the codifiers had the very provisions found in sections 1682 and 1683, in mind. As to private charters granted before the Code, the law, to-wit: the constitution of the United States forbid *422the repeal or modification. As to private charters granted since the Code, the legislature might forbid it by so expressly contracting in the charter. Both these provisions ought to be taken together. They were the product of one mind, at the same time, and by taking them together it seems to me that the law maker most surely used the word “withdraw” in section 1682, with the idea that it included the right expressly declared in section 1651, to change and modify as well as destroy.
The Southwestern Railroad Company stands on the same footing as the Central. In both cases the intent was not a purchase but a consolidation. This is the very language used, and this the effect of the thing done in both cases. In my judgment, and according to the authorities, this consolidation can only be done by the dissolution of both companies and the creation of a new, under such name, and charter as the act of consolidation requires. This is the legal, necessary effect of a consolidation. Tlie authority to consolidate is a legislative authority to surrender the old and take up the new; and when the companies do consolidate, the old is surrendered and the new accepted. Nor is there anything in the point that the authority to consolidate was granted before the Code. The consolidation was after the adoption of the rule changing the common law presumption that charters are perpetual unless limited in terms. The act permitting the consolidation was not a charter until accepted. Until then it was subject, even under the old law, to repeal or modification at the will of the state. No right had vested, no contract had been entered into. It was a mere proposition. The sections'of the Code to which I have referred modified this proposition. Under the offer, as the law stood, to-wit: the common law, there was no limit as to time, and under the constitution of the United States the charter, being thus unlimited, would have been irrepealable if accepted. But before tiie acceptance this common law was altered. There was a limit fixed of thirty years, and besides, it-was provided, under the two sections of the Code to which I have alluded, *423that a charter might be modified or withdrawn. That the grant was nothing till accepted is well settled: Dartmouth College vs. Woodward, 4 Wheat., 518; State vs. Dawson, 16 Indiana, 40; Kennebec Bank vs. Richardson, 1 Greenleaf, 81.