Court Opinion

ID: 5183994
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:45:54.297195+00
Date Added: 2024-06-11T08:26:40.330888
License: Public Domain

Adams, J. (dissenting):
The defendant, the Auburn-City Railway Company,is a domestic, corporation, owning and operating a street surface railroad in the city of Auburn, and the plaintiff is the owner, and holder of two shares of the capital stock of that company.
On the 9th day of January, 1897, a certificate of incorporation of the Auburn and Western Railway Company was duly filed in the office of the Secretary of State at Albany, and in the • clerk’s office of Cayuga county. This certificate states that the object of the incorporators is to construct, maintain and operate a street surface railroad from the Auburn city line on West Genesee street to the intersection of Bayárd and Stevenson streets in the village of Seneca Falls. This line of road would be about eleven miles in length, and it was intended to connect the same at Seneca Falls with another surface railroad, extending west to the city of Geneva, in Ontario county, and thus to parallel the New York Central and Hudson River railroad with a street surface railroad from the city of Auburn to the city of Geneva, a distance of some twenty miles.
After filing this certificate the Auburn and Western-Railway Company applied to the Board of Railroad Commissioners of this State for the certificate required by section 59 of the General Railroad Law, that public convenience and a necessity required the construe-' tion of the road as projected in its articles of association. This application was, upon the 8th day of June, 1897, refused' by the commissioners, upon the ground that public convenience and a necessity did not require the construction of the proposed railroad, *558whereupon an arrangement was entered into between the Auburn and Western Railway Company and the Auburn City Railway. Company, by which the latter agreed to execute a lease of its entire property to the former during the term of its corporate existence, and this action is brought by the plaintiff, as a stockholder of the. Auburn City Railway Company, to restrain the execution of such lease. • .
It is the settled law of this country, as well as of England, that one railroad corporation cannot lease its property and franchises to another company, or to an individual, in the absence of express legislative authority. (R. R. Co. v. Brown, 17 Wall. 445 ; Pa. R. R. Co. v. St. Louis, A. & T. H. R. R. Co., 118 U. S. 290 ; Abbott v. Johnstown, etc., R. R. Co., 80 N. Y. 27; Beman v. Rufford, 6 Eng. L. & Eq. 106; 1 Sim. [N. S.] 550; G. N. R. R. Co. v. The Eastern Counties R. R. Co., 12 Eng. L. & Eq. 224; 9 Hare, 306.)
In recognition of this doctrine the Legislature of this State has enacted that “ any railroad corporation, or any corporation owning or operating any railroad or railroad route within this State, may contract with any other such corporation for the use of their respective roads or routes, or any part thereof, and thereafter use the same in such manner and for such time as may be prescribed in such contract. * * * ” (Gen. R. R. Law, § 78, as amended by chap. 676, Laws 1892.)
It is manifest, "therefore, that the Auburn City Railway Company is not without ample authority to enter into the contract, the execution of which is sought to be restrained by means of this action, provided it is in a position to invoke the aid of the statute just quoted.-
' - It is contended, however, by the learned counsel for the plaintiff that this section of the Railroad Law is not available to the defendant company for the reason that the Auburn and Western Railway Company cannot be said to be the owner of or engaged in operating any railroad or railroad route; and for the further reason that the - company has been refused the certificate of the Board of Railroad Commissioners required by the provisions of section 59.
It is a fact which cannot, of -course, be gainsaid, that the corporation known as the “Auburn and Western Railway Company” is not engaged in operating any railroad or railroad route; for no one *559contends that it could enter upon such an undertaking without the consent of the Board of Railroad Commissioners, and this, as we have seen, it has been unable to obtain. It seems equally clear that that company does not own a railroad ; and while it -is averred in the defendant’s' answer that the necessary consents and franchises have been obtained to enable it to construct its proposed road, it is doubtful whether, upon the facts before us, it can be said to be the owner of a “ railroad route ” within the meaning of that term as used in section 78. But without deciding this question, I am clearly of the opinion that the Auburn add Western Railway Company cannot enter into a contract with the Auburn City Railway Company to lease and operate the latter’s road until it has obtained the certificate of the Railroad Commissioners required by section 59. That section provides that “ no railroad corporation hereafter formed under the laws of this state shall _ exercise the powers conferred by law upon such corporations, or begin the construction of its road, until * * * the Board of Railroad Commissioners shall certify,” etc.
What construction is to be given to this language 1 It seems to me that its import' is in no sense obscured by words of doubtful meaning, and that it needs only to be read to make clear the intent of the Legislature, which was undoubtedly that the obtaining of the certificate referred to should be not only a prerequisite to the construction of a railroad, but likewise a condition precedent to the exercise of any of the powers conferred by law upon a corporation organized for The purpose of constructing and maintaining such a road. That the right to obtain and operate a railroad, as lessee, is one of the powers thus conferred, seems too plain to require argument.
* It has been well said by a learned jurist that “ the statute does not recognize that, prior to the granting of the certificate, the corporation has any powers; it does not say it shall not exercise its powers, but the powers conferred by law upon such corporations. * * * Practically, a corporation that has no powers that it can exercise has no power at all, and is not in fact a corporation. * * * It is not complete as a corporation until the certificate mentioned has been granted ; until that time it is an inchoate thing ” (People ex rel. Depew & S. W. R. R. Co. v. Board R. R. *560Comrs., 4 App. Div. 259, 268); and-this view of the construction to be given to the language of the statute is materially strengthened by the saving clause thereof, which provides that nothing therein contained “ shall prevent any such railroad cdrporation from causing such examinations and surveys for its proposed railroad to be made as may be necessary to the selection of the most advantageous route.”
The privilege thus reserved is one of the corporate powers conferred by law (R. R. Law, § 18), and one which could not be exercised until the certificate of- the commissioners had been obtained, but for the express permission contained in the section from which the above quotation is taken; and as this is the only power which is thus reserved, it was manifestly the intention of the Legislature to include all others within the inhibitory provision.
If I am correct in the views thus far expressed, it necessarily follows _ that the Auburn and Western Railway Company is to all intents and purposes without corporate life. It certainly cannot construct .and operate a road of its own ; neither should it be permitted ' to evade the statute by operating one which belongs to another corporation, and as any attempt upon its part to acquire such a right as lessee would be clearly ultra vires, I do not see why the plaintiff is not correct in his contention that the defendant company has no right to dispose of its property in the manner contemplated by the proposed lease.
It only remains, therefore, to determine whether the plaintiff is in a position to invoke the aid of a court of equity in his effort to prevent the consummation of this illegal contract. If the plaintiff is a stockholder of the defendant company, as for the purpose of this appeal it must be assumed that he is, he has the undoubted right to insist upon a strict observance of the contract entered into between him and the corporation of which he is a member, and which is in effect that the latter shall confine its operations to such as are within the power conferred upon it by the statute under which it was created. As has been shown, the attempt upon the part of the corporation to lease its property and franchises to another company which had no legal existence was ultra vires j the consummation. of such a scheme would consequently have been a violation of the contract between the corporation and the stock*561holders, to prevent which an injunction is the appropriate, remedy. (Barr v. N. Y., L. E. & W. R. R. Co., 96 N. Y. 444; Kent v. Quicksilver Mining Co., 78 id. 159; High Inj. [3d ed.] § 605 j. Cook Stock & Stockh. §§ 666, 668, 671.)
The right to maintain such an action and to invoke the aid of a court of equity is one which is personal to the stockholder, and the motive which induced him to purchase his stock and to bring his-action in no wise affects that right, and can have no legitimate bearing upon the nature of the relief to be awarded by the court.. (Ramsey v. Gould, 57 Barb. 398 ; Elkins v. C. & A. R. R. Co., 36 N. J. Eq. 5; Hawes v. C. C. W. Co., 21 Am. Law Reg. [N. S.] 252; Du Pont v. N. Pacif. R. R. Co., 18 Fed. Rep. 467.)
. My conclusion of the whole matter, therefore, is that the plaintiff' is in a position to invoke the aid which he seeks through the medium of this action, and that the order granting him a preliminary injunction should be sustained.
Ward, J., concurred.
• Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs.