Court Opinion

ID: 5504729
Source: CourtListenerOpinion
Date Created: 2022-01-10 03:07:42.949321+00
Date Added: 2024-06-11T08:34:01.272814
License: Public Domain

MAYHAM, P. J.
Appeal from an order made at special term, vacating and setting aside an injunction order granted by a judge of this court, restraining the defendant corporations from consolidating under the laws of New York. The defendant the Ogdensburgh & Lake Champlain Bailroad Company is a corporation incorporated under the laws of New York, owning and operating a railroad, with a capital stock of over $3,000,000. The defendant the Central Vermont Bailroad Company is a corporation organized under the laws of the state of Vermont, owning and operating a railroad in the state of Vermont, with a capital of $1,000,000. The railroads of these respective corporations connect with each other at the state lines, and together form a continuous line of railroad into both states. In 1880 the defendant the Ogdensburgh & Lake Champlain Bailroad Company issued its income bonds to the amount of $1,000,000. These bonds, by their terms, bore annual interest at the rate of 6 per cent., payable semiannually, provided that the net earnings of the railroad and other property of the company, after satisfying the expenses of operating and maintaining the same, and the interest on all liens, charges, incumbrances, and other indebtednesses, with all taxes and assessments and floating indebtedness on the property of, or owned by, said company, “shall, respectively, suffice to pay such rate of interest on all of this issue of bonds outstanding at the time any installment of interest shall fall due, or such interest, less than six per cent, per annum, as such net earnings shall be sufficient to pay upon such bonds, each being entitled to the ratable share thereof on presentment and surrender of the coupon representing the same, and that the board of directors of such railroad company shall determine the amount of such net earnings.” These bonds also provided that, on the registration of the bonds by the holder 30 days previous to an election of directors, such holder “may have one vote for each $100 of such bonds held by him for directors of said company.” The plaintiffs are holders, each in his own right, of some of these income bonds, and as such owners and holders are entitled to such privileges and immunities as are provided in such bonds to the holders thereof. The Ogdensburgh & Lake Champlain Company now propose to consolidate their railroad company with the Central Vermont Bailroad Company under the provisions of the statute which authorizes railroad companies, upon conditions therein provided, and preliminary to such consolidation entered into an. agreement for consolidation with the directors of the Central Vermont Bailroad Company. By the terms of this agreement of con*646solidation the capital of the new and consolidated company is $1,-307,700, and the capital stock of each of the old companies is made convertible into the stock of the new company; ten shares of the stock of the Ogdensburgh & Lake'. Champlain stock for one of the consolidated company, and that of the Central Vermont Company into such consolidated company stock share for share. The agreement provides for the naming of the directors of the new company, and their election annually thereafter. The contract also provides for holding a meeting of the stockholders of each of the old companies and the submission to them" of the question of such proposed consolidation. The contract also provides for the vesting in the new corporation of all the property and effects of each of the old " corporations, but expressly provides that “the rights of all creditors of liens upon the property of either of said corporations, parties to this agreement and act, shall be preserved and unimpaired; and the respective corporations shall be deemed to continue in existence to preserve the same; and all debts and liabilities incurred by either of said corporations shall thenceforth attach to such new corporation, and be enforced against it and its property to the same extent as if incurred or contracted by it.”
It is insisted on the part of the plaintiffs and appellants that this proposed consolidation, if carried into effect, would essentially impair the obligations of the contract between them and the Ogdensburgh & Lake Champlain Eailroad Company—First, by depriving them, as bondholders, of the right to vote for those persons whose judgment as to the application of earnings is practically decisive of their rights to interest; second, by depriving them of directors who would have any motive to promote the interests of the plaintiffs, and who, from their position, would be familiar with the facts, and in whose selection they, as bondholders, have a right to participate; thirdly, that the net earnings of the property of. the company belong to the bondholders, and that by the article of consolidation no provision is made for keeping separate accounts, and no accounting is provided for for the same; fourthly, that the bondholders are deprived of their share in the extension of the business of the company. If it be true that, for any other objections suggested by the plaintiffs, the law authorizing the consolidation of these companies impairs the obligation of the contract between the Ogdensburgh & Lake Champlain Eailroad Company and these bondholders, then the contention of the plaintiffs that the law is unconstitutional must prevail. But there is no express provision in chapter 73 of the Laws of 1880, under which these bonds were issued, nor in the condition of the bonds themselves, against consolidation of the company with any other railroad company under the provisions of chapter .917 of the Laws of 1869 and the amendments of the same, and, as has I think been clearly shown in the very able and exhaustive opinion of the special term, these bonds must be deemed to have been issued and taken by the plaintiffs subject to the contingency which might occur,—of a consolidation. If, therefore, the right to consolidate existed at the *647time of the issuance and negotiation of these income bonds, the purchaser must be deemed to have taken them subject to that right, which vested in the company by the act of 1869, and which, like Aaron’s rod, swallows up all the objections of the appellants, and against which they cannot now be heard to contend. I think, therefore, that the order should be affirmed on the opinion of the special term, with costs and printing disbursements.
PUTNAM, J., concurs. HERRICK, J., dissenting.