Court Opinion

ID: 5197878
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:46:21.702096+00
Date Added: 2024-06-11T08:27:08.560918
License: Public Domain

Clarke, J.
(dissenting):
I dissent. The statute imposes a duty to the public on corporations which derive all their powers and privileges from the peojple of the State, and should be liberally construed in the public interest. When either of two constructions' of a statute is possible, ,“ the interpretation must be adopted which is most favorable to the ’ State.” (Mr. Justice Harlan, in Coosaw Mining Co. v. South Carolina, 144 U. S. 550, 561; cited with approval in Minor v. Erie R. R. Co., 171 N. Y. 573; O'Reilly v. Brooklyn Heights R. R. Co., 95 App. Div. 261; affd., 179 N. Y. 450.) “ This is a statute extending the rights of the individual and ‘to the end that public convenience may be promoted ’ and is to be liberally construed and strictly enforced to accomplish these objects,” said Mr. Justice Woodward in Jenkins v. Brooklyn Heights R. R. Co. (29 App. Div. 8), construing section 105 of chapter 565 of the Laws of 1890, as renumbered section 104 and amended by chapter 676 of the Laws, of 1892, in regard to transfers. In Griffin v. Interurban St. Ry. Co. (179 N. Y. 447) Judge Bartlett said : “In some of the cases in the lower courts, . in construing section 104 in regard’to the *47liability of companies under lease to grant transfers to passengers, the meaning of the words in that connection, ‘ to the end that the public convenience may be promoted by the operation of railroads embraced in such contract substantially as a single railroad with a sipgle rate of fare,’ have been construed as a legislative intimation that certain transfers might be ■ demanded that would not be required in seeking to promote the public convenience. In the cases before us this language establishes the propriety of the transfers demanded.”
It appears that if one road operates or controls another by- contract or by lease, the transfers are demandable. Is it not the intention that if these intramural transportation companies, enjoying the enormous advantages of public franchises in the public streets, combine — in any way— as a consideration therefor they shall grant to the public continuous trips at a single fare ? We cannot close our eyes in these days of great combinations of capital to the facts in regard to street railway matters in New York city. We cannot be blind-to the ¡iractical result of open facts. It is in evidence' here that the defendant, the New York City Railway Company, owns 21,698 shares of the 25,000 shares of the capital stock of the Forty-second Street Company. While it is true that each company has a separate board of directors, yet they have^a common treasure!’. It seems to me a technical, narrow and unreasonable construction to hold that, within the meaning of this statute, the defendant does hot control the .Forty-second Street Company. Speaking after the manner of men, how long would the nominal board of directors of that company remain in office if they ran counter to the wishes or directions of the owner of ninety-nine per cent of the stock ? The very title papers of the defendant express this relationship of control where one company owns á sufficient amount of the stock of another. The indenture between the Third Avenue Railroad Company and the Metropolitan Street Railway Company of April 13, 1900, uses this language : “ And whereas, the party of the first part is the lawful owner of the following amounts of the capital stock of the following named railroad companies (hereinafter referred to as ‘Controlled Companies ’), all of which are operating or were organized to operate street railroads in said City of New York,” etc., and among these is the stock of the Forty-second Street. Railroad Company, *48and throughout the lease it is referred to as-' a ,“ controlled comjaany.” In the mortgage from the Third-Avenue Railroad Company to the Morton Trust Company the saíne language is -used. There seemed to have been no doubt, in the minds of the draftsmen. Of those instruments; or, of the officers who executed them, as to whether the ownership of the stock did not carry with it the Control of the • company. , . .
In Farmers' Loan & Trust Co. v. New York & Northern R. Co. (150 N. Y. 410, 425) it was said : “ The clear and legitimate inference to be-drawn from the, circumstances proved in this, ease is that after the Few York Central and Hudson River Railroad Company • purchased a majority of the stock and -bonds of the Few York and Forthern Railway Company, it controlled its officers and directors as fully and completely as though they had been elected by its-, votes.- * * * Indeed, it is a matter of common knowledge that where the ownership- of a majority of the stock of such a corpora- . .tion changes, the board usually changes, unless its members are already in harmony with the - policy Of the , purchasers.” In Pearsall v. Great Northern Railway (161 U. S. 646), in considering acts of the Legislature-of Minnesota prohibiting railroad corporations from consolidating with, leasing or purchasing, or in any other way becoming.the owner of or controlling any other railroad.-corporation, or the stock, francliises Or rights of property thereof having a parallel dr competing line; Mr. Justice Brown said: “As the Forthern Pacific road also controls,.by its own construction and by the purchase of stock other roads extending from the Mississippi River to the Pacific Ocean, * * * that one-half of the capital stock of the reorganized -company -is to be turned over to the,sharehdlders of'the Great Forthern, which is, ’ in turn, to guarantee the payment of the reorganized bonds, is evidence of the most cogent, character to show that nothing less .than a purchase of a controlling interest, and practically the absolute Control, of the • Forthern Pacific is contemplated by the'arrangement. With half of its capital stock already in its hands,- the purchase of enough to make a' majority would follow almost as a . matter of course, and the mastership of the Forthern Pacific would be assured.” . .
In United States v. Northern Securities Co. (120 Fed. Rep. *49721) the court was construing a public statute. There, as in the case at bar, the subsidiary companies had complete organizations and kept up completely their separate entities. The Circuit Court said: “It will not do to say that so long as each railroad company has its own board of directors, they operate independently and are not controlled by the owner of the majority of their stock. It is the common-experience of mankind that the acts of corporations are dictated and that their policy is controlled by those who own the majority of their stock. Indeed, one of the favorite methods in these days, and about the only method, of obtaining control of a corporation, is to purchase the greater part of its stock. * * * So long as directors are chosen by stockholders, the latter will necessarily dominate the former, and in a real sense, determine all important corporate acts.” On appeal to the Supreme Court (193 II. S. 328) the court said: “The Circuit Court was undoubtedly light when it said — all the judges of that court concurring — that the combination referred to ‘led inevitably to -the following results: First, it placed the control of the two roads in the hands of a single person, to wit, the Securities Company, by virtue of its ownership of a large majority of the stock of the companies.’” Hr. Justice Brewer, concurring, in speaking of the Northern Securities Company, said: “ It is an artificial person, created and existing only for the convenient transaction of business. In this case it was a- mere instrumentality by which separate railroad properties were combined under one control.”
My conclusion is that the defendant controls the Forty-second street road as much as if the boards of directors were identical, as if it had a lease ora traffic contract or owned every share of the stock. The determination of the Appellate Term should be reversed.
O’Brien, P-. J., concurred.