Court Opinion

ID: 8268882
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:18:49.507478+00
Date Added: 2024-06-11T16:43:27.209438
License: Public Domain

Swatze, J.
(dissenting).
The opinion of the court rests upon the view that the act of 1881 superseded section 85 of the General Corporation act of 1875 (Rev. p. 192) so far as it was applicable. I think differently. The act of 1881 was modeled after section 1 of an act concerning the sale of railroads, canals, turnpikes, bridges and plank roads, approved March 25th, 1875. P. L. 1875 p. 1¡.1. It follows that act so closely in its essential features that it was evidently copied therefrom. Prior to the sale of the gas works of the old Vineland company, the act of 1875 had been before this court in Boylan v. Kelly, 36 N. J. Eq. (9 Stew.) 331. In that case (at p. 885), we referred to the opinion of Chancellor Runyon that the act of purchase constituted the purchaser a corporation, but did not approve of that opinion which would have been decisive of the case. On the contrary, we distinctly said that the act conferred upon the purchaser the right, at his election, to take and hold and exercise the property and franchises in a corporate capacity, and we pointed out that the conduct of the purchaser in that case sufficiently evinced his purpose to receive and hold the property and rights in a corporate relation, and not as a natural person. The reasoning of this court was quite unnecessary if the view of the majority in the present case is correct. Thq fact that we decided the Boylan Case upon the ground that the purchaser had evinced.an election to hold as a corporation, and not as a natural person, amounted to a disapproval of the view expressed by Chancellor Runyon and now adopted by us. With that decision upon a similar statute, Earnum evinced his election to take as a natural person under section 85 of the Corporation act. All the orders of court and the conveyance to him are couched in language taken from that section. He had a right to rely on what we said in the Boylan Case, and it is too late for us, after property rights have been acquired in reliance upon that ruling, to change our position. When the legislature in 1896 revised the Corporation act it had before it not only the act of 1881, but the act of 1875, and it then reenacted section 85 as section 82 (P. L. 1896 p. 808), and repealed all inconsistent acts. Section 82 of the act of 1896 mentions by name railroads, canals and turnpikes, so that it cannot *716be said that the legislature did not have in mind the very classes of corporations mentioned in the acts of 1875 and 1881. I do not think these acts were repealed by the act of 1896, for the reason that I think there is no necessary inconsistency. The reenactment of section 85 by the legislature is an indication that the revisers, experts as they were in our corporation law, were of opinion that it had not been superseded either by the Railroad and Canal act of 1875 or the so-called Turnpike act of 1881; and the legislature adopted that view, which was the same view expressed by us in the Boylan Qase.
The object of section 85 was not the advantage of the corporation or its creditors. It was to preserve for the benefit of the public the right to continue the operations of corporations having charge of a work of a public nature in which the value of the work was dependent upon the franchise, and in the continuance of which the public, as well as the corporators and creditors of the company, had an interest. The legislature recognized the fact that there was a public interest to be served by the continuance of the operations of the company, and that this end could not be accomplished if the physical property was to be severed from the right to use and operate the same. The present case illustrates the difficulty. It follows logically from the view of the court that the present defendant is without power to conduct the business of supplying Yineland with gas, and, since Farnum has died without organizing a corporation under the act of 1881, no one has the legal right to supply this important municipality with one of the necessities of modern life.
My view, I think, harmonizes with other well-established legal principles. Before a corporation can actually exist there must not only be a charter, but an acceptance of that charter. Far-mum, instead of accepting the corporate powers conferred by the act of 1881, did all in Ms power to show that he did not accept them. By our present decision the purchaser becomes a corporation nolens volens, and is at once, by the act of purchase, constituted a corporation sole — a corporation quite anomalous in our law. Upon this anomaly is ingrafted another, for the corporation sole is empowered by the act to organize “said new corporation” by the election of officers and directors, the issuing of certificates *717of stock, and the creation of preferred stock. A corporation sole with attributes of this character is a legal novelty; yet what other view can be taken? The words “said new corporation” point necessarily to the former language of the section, which, the opinion holds, create a corporation sole. The only other view possible is that the corporation sole created by the mere act of purchase can at once proceed to convert itself into a corporation aggregate, a legal novelty hardly less striking than the former. These difficulties are enough to lead me to conclude that we took the correct view in Boylan v. Kelly, that the purchaser does not become a corporation by the mere act of purchase, but has his election to hold as an individual or to organize a corporation aggregate under the act of 1881.
There is no insuperable difficulty in an individual exercising such franchises as those now in question. He must have express legislative authority, but that is given by section 85 of the old Corporation act. The charter of the old Yineland company gave it express authority to borrow money upon a mortgage of its lands, works, property and franchises. At the date of the charter, and for many years thereafter, such mortgages were usually given to individuals, and the mortgage upon the franchises or even upon the property could be of little value to the mortgagee, unless in case of foreclosure he might purchase the mortgaged property and exercise the franchises. New Orleans, &c., Railroad Co. v. Delamore, 114 U. S. 501; 5 Sup. Ct. 1009; 29 L. Ed. 244. The franchise to maintain and operate the works may be exercised by natural persons. Memphis, &c., Railroad Co. v. Berry, 112 U. S. 609; 5 Sup. Ct. 299; 28 L. Ed. 831. Our statute is careful' to define the right acquired by the purchaser. It is the right to exercise the franchise “during the whole of the residue of the term limited in the charter of said company.” In this respect the case differs from Snell v. Chicago, 133 Ill. 413; 24 N. E. Rep. 532; 8 L. R. A. 858, and on appeal, 152 U. S. 191; 14 Sup. Ct. 489; 38 L. Ed. 408. The term limited in the charter of the Yineland company was perpetual, and a right to exercise the franchises for the whole of the residue of the term necessarily includes a right which shall *718outlast the life of a natural person, and, to be available at all, must therefore involve the right to convey. In the absence of legislation forbidding the exercise of such a franchise by a natural person as grantee, I see no reason why one natural person who is by statute authorized to exercise the franchises may not convey them with the works to another natural person. This was done in the case of Boylan v. Kelly.
I do not question the power of the legislature to control within the constitutional limits the business of supplying gas to a municipality. Section 85 of the Corporation act of 1875 itself enacts that the purchaser shall hold, use, and enjoy the franchises subject to all the restrictions, limitations, and conditions contained in the charter of the insolvent company, and no doubt this would authorize any regulations of the exercise of the rights by Farnum or his grantees which might have been made with reference to their exercise by the Vineland Gaslight Company.
I do not understand whether the court holds that the franchises conveyed to Farnum ceased with his death, or whether they are still in existence. The reference to Snell v. Chicago seems to indicate that the court favors the former alternative. If that view is correct, the effort of the legislature, both by section 85 of the Corporation act of 1875 and by the act of 1881, to preserve these franchises for the public benefit was singularly inefficacious, since it was made to depend upon the uncertain tenure of the purchaser's life.
If these franchises are still subsisting, they must have passed as property of a corporation sole, since the opinion clearly indicates that they could not pass by will or intestacy. If that view is correct it is of considerable importance to know in whom they are now vested. Whoever it may be, it would seem that he holds the franchises separate from the physical property, the works, gas holder, pipes, &c., and no one is at present authorized by law to supply this municipality with gas.
I prefer the more simple but less novel view which I have already indicated.
Bogert and Green, J.J., concur in the views herein expressed.