Court Opinion

ID: 6617278
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:24:39.943202+00
Date Added: 2024-06-11T15:58:34.802213
License: Public Domain

ON MOTION FOR REHEARING.
Smith, P. J.
The plaintiffs find fault with our construction of section 2664, Revised Statutes, which provides that if any railroad corporation formed under article 2, chapter 42, shall not begin the construction of its road and shall not within one year thereafter expend thereon not less than ten per cent, on the amount of its capital, “its corporate existence a/nd powers shall cease.”
It stands admitted that the defendant railway company had wholly failed to comply with the said statutory requirement. It is further admitted that the corporation has only collected of its stockholders something like one and three-quarters per cent, on its subscribed capital stock, just enough to pay the engineers and attorneys who were in its service about the time of its organization. In the opinion it is held that the effect of this omission to comply with the statute was ipso facto to forfeit absolutely the defendant’s charter without judicial determination.
The general principle is not disputed that a corporation, by omitting to perform a duty imposed by its charter, does not ipso facto cease to be a corporation, but simply exposes itself to the hazard of being-deprived of its corporate character and franchises by the judgment of the court in a proceeding against it by quo warranto on the part of the state. But the legislature possesses the undoubted power to provide that a corporation may lose its corporate existence without the intervention of the courts by an omission of duty or violation of its charter, or default as to imposed *455limitations, and whether the legislature intended so to provide depends upon the language used in the statute. The Matter of B. W. & N. Ry. Co., 72 N. Y. 245, was a case where a statute provided that every railroad corporation, organized under the general laws of the state of New York for the formation of railroad corporations, should begin the construction of its road and expend thereon ten per cent, on the amount of its capital stock within five years after its articles of incorporation should be filed and recorded in the office of the secretary of state, etc.; and for a failure to comply with this requirement “its corporate existence and powers shall cease.'1'1 It will be observed that the above italicised words are identical with those of our statute already quoted. It was held that this statute was self-executive, and that the existence of the corporation was determined by the omission to comply with the condition prescribed by the statute; that the omission was fatal to its corporate existence, and that the statute was not susceptible of any other reading. And in Farnham v. Benedict, 107 N. Y. 159, where a like question arose on the same statute, it was again declared that the corporate existence became extinct by the expiration of the limitations in the statute. So it was held in The Matter of B. W. & N. Ry. Co., 75 N. Y. 335, which was a second appeal in the case from the order of the general term of the supreme court, that the corporation had ceased to be a corporation. Its powers were not simply suspended or in abeyance, but the corporation itself was extinct. It had not, by its failure to commence its road within the time limited simply incurred a liability to forfeiture, but it had ceased to exist as fully and completely as if judgment for forfeiture had been pronounced against it. So in Brooklyn Steam Transit Co. v. City of Brooklyn, 78 N. Y. 524, where the transit company *456was required to have one mile of its road constructed within three years after the passage of the act authorizing its organization, or else its powers and franchises should he “deemed forfeited and terminated.” The transit company failed to comply with the requirement of the act. The court held that there was to he not merely a cause of forfeiture which could he enforced in an action instituted by the attorney general, but the powers, rights and franchises were to be taken as forfeited and terminated. At the end of the time limited, the corporation was to come to an end, as if that were the time limited in its charter for its corporate existence. In The Matter of the Kings Co. Elevated Ry. Co., 105 N. Y. 97, it was said that: “It is certainly well settled that non-performance of the condition of an act of incorporation will forfeit the grant, even at common law, and like effect is given to such omission by statute under which petitioner came into existence,” but I am not aware of any case holding that such default does of itself work a forfeiture, or that it can take effect upon some proceeding where the question is brought directly before the court wnless the statute otherwise provides. It is further held that those eases where the legislature intended, by a self-executing statute, to provide that a corporation shall lose its existence without the intervention of 'the courts, are within the above specified exception. And a similar ruling was made in Commonwealth v. Water Co., 110 Pa. St. 391.
We are aware that some courts have disfavored the views expressed in the cases which we have followed in our ruling in the present case. The question under consideration has not been, as far as we have been able to discover, heretofore presented point blank to any one of the appellate courts of this state. We think, however, that the language of *457section 2664 indicates just exactly what the terms therein employed plainly imply, that is to say, that, when any one of the railroads of this state shall be guilty of non-compliance with its requirements, the existence and powers of such corporation shall cease. Language could not be plainer that the effect of such statutory disregard is not different than that where the corporate existence ceases on account oí the expiration of its charter. But the plaintiff contends that Bank v. Garton, 34 Mo. 123, is an authority against what is held in the opinion. It was there ruled upon the authority of Bank v. Bredow, 31 Mo. 538, that a forfeiture cannot be enforced collaterally, but only by a direct proceeding by scire facias, or quo warrmto. The case was that the bank had violated the provisions of section 5 of chapter 16, Revised Statutes, 1855, which declared that no corporation within the limits of this state should pass or receive any suspended or non-specie paying bank note or post note issued as currency. The decision was undoubtedly correct. There was no language employed in that statute indicating an intention by the legislature that the violation of the prohibitions of the section should ijpso facto operate to extinguish the powers and existence of such bank.
But it will be seen further by reference to sections 8 and 9 of article 1 of the act of 1856-7 relating to “banks and banking” (Acts, 1856-7, 16, 17), that, while it was provided that in case any bank suspended specie payment at any time for a period of ten days, “its charter shall cease and determine,” it is also there further provided that proceedings by scire facias should in such case be commenced against the bank in the proper circuit court, and, if the charge was sustained by the court, that it should annul the bank’s charter. There the statute itself provides a procedure in case *458where a bank had violated the act of its charter, whereby its charter should cease and determine. By the very terms and provisions of this act the intention, such as we think is manifested by section 2664, is clearly negatived. The legislature there provided specially for the annulment of the charter by judicial decree. So that the statute upon which the rulings were made in 31 and 34 1\Io. supra, are dissimilar in their entirety to that in question in this case, and for that reason neither of the cases lends the slightest support to plaintiffs’ contention.
The plaintiffs’ construction of the statute in question renders the words, “its corporate existence and powers shall cease,” meaningless. Or, in other words, that the. statute without these words would be just as effective as it is with them.
According to the plaintiffs’ petition, the life of the defendant corporation was extinct by operation of law .long before the institution of their suit, and we are unable to perceive from whence it derived the power to resuscitate it for the plaintiffs’ present purpose. It results that we must adhere to the conclusion reached in the opinion.