Court Opinion

ID: 5220660
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:33:10.860967+00
Date Added: 2024-06-11T08:27:30.637921
License: Public Domain

Ingraham, P. J.
(concurring):
I fully concur in the opinion of Mr. Justice Clarke.
Sections 9 and 10 of the Stock Corporation Law, to which attention has been called, provide a system by which the readjustment of the. respective interests in the property and franchises of a corporation which have been sold by virtue of a mort-.. gage or deed of trust or a . judgment or decree of a court of competent jurisdiction may be carried out. They expressly allow the creditors, mortgagees and stockholders of a corporation owning property and ‘ franchises to purchase at the foreclosure sale and to organize a corporation to carry out the objects for which the corporation was originally organized. The statute expressly gives to .such creditors, mortgagees and stockholders or any of them the right to become a corporation; *337to make an. agreement among themselves for such reorganization and readjustment; to acquire the property and franchises which have thus been sold, and to issue its bonds and stock in conformity with the provisions of the plan or agreement under which the property was purchased at the foreclosure sale; It was recognized that upon such a reorganization or readjustment new capital might he required, and so the amount of bonds or stock was not limited to the amount which had been issued by the predecessor corporation. The Legislature left it to the creditors, mortgagees and stockholders who united in the purchase and in the plan of reorganization and readjustment to fix the amount of bonds and stock to be issued to meet the requirements of the situation. There was thus in existence a comprehensive statute to provide for one condition — the case of a corporation whose property had been sold under a decree of foreclosure or under a mortgage or deed of trust. It required entirely different treatment from the organization of a new corporation to acquire a new franchise and to acquire or construct property with which to exercise it. It was not the general condition relating to either new corporations organized to acquire a franchise or to existing corporations exercising and operating the franchises and which would require from time to time additional money or property for the uses of such corporation, and this statute was re-enacted in 1909 after the passage of the Public Service Commissions Law. (See Stock Corp. Law [Gen. Laws, chap. 36; Laws of 1892, chap. 688], §§ 3, 4, as amd. by Laws of 1901, chap. 354; Laws of 1902, chap. 80, and Laws of 1904, chap. 706, for former provisions.)
This particular subject having thus been regulated by a statute carefully framed to meet such a situation, the Public Service. Commissions Law was passed in 1907. The title of that act is an act to establish the Public Service Commissions and prescribing their powers and duties and to provide for the regulation and control of certain public service corporations. It provided for the appointment of the Public Service Commissioners for each of the two districts into which the State was divided and provided , that each Commission should possess the powers and duties thereinafter specified, and also all *338other powers necessary or proper to enable it to carry out the purposes of the act (§ 4). Article 3 of the- act contains the provisions “relating to the powers of the commissions in respect to common carriers, railroads and street railroads,” and subdivision 2 of section 45 provides that each Commission shall have the general supervision of all common carriers, railroads, street railroads, railroad corporations and street railroad corporations within its jurisdiction; and shall have power to- and shall examine the same and keep informed as to.their general condition, their capitalization, their franchises and the manner in which their lines, owned, leased, controlled or operated, are managed, conducted and operated with respect to the adequacy, security and accommodation afforded by their service, and their compliance with all provisions of law, orders of the Commission and charter requirements. After giving to the Public Service Commission extensive powers in relation to the operation of common carriers, the method adopted by them in rendering the services, and the rates which they were to charge, section 53’provides that without first having obtained the permission and approval of the proper Commission no railroad corporation, street railroad corporation or common carrier should begin the construction of a railroad or street railroad or any extension thereof for which prior to the passage of the act a certificate of public convenience and necessity had not been granted by the Board of Eailroad Commissioners,, or where said corporation or common carrier- should not have become entitled by virtue of its compliance with the provisions of the Eailroad Law to begin such construction; nor, except as above provided, should any such corporation or common carrier exercise any franchise or right under any provision of the Eailroad Law or of any other law not theretofore lawfully exercised without having first obtained the permission and approval of the proper Commission. This section clearly relates to the .organization of a new corporation which had not acquired a franchise or had not béfqre that time lawfully exercised a franchise. Section 54 then provides that no franchise nor any right to or under any franchise to own or operate a' railroad, or street railroad should be assigned, transferred or leased; nor should any contract or agreement with reference to or *339affecting any such franchise or right be -valid or of any force or effect whatsoever unless the assignment, transfer, lease, contract or agreement should have been approved by the proper Commission. Section 55 provides that a common carrier, railroad corporation or street railroad corporation organized or existing or thereafter incorporated under or by virtue of the laws of the State of New York may issue stock, bonds, notes or other evidence of indebtedness payable at periods of more than twelve months after the date thereof when necessary for certain specified objects, provided, and not otherwise, that there shall have been secured from the proper Commission an order authorizing such issue and the amount thereof and stating that in the opinion of the Commission the use of the capital to be secured by the issue of such stock, bonds, notes or other evidence of indebtedness is reasonably required for the said purposes of the corporation. These provisions of the Public Service Commissions Law were in part amended in 1910. In considering the effect of this enactment upon the existing provisions of the Stock Corporation Law it is important to notice that this is in form the grant of a power to' corporations rather than a restriction of power theretofore granted to them by other provisions of law. It expressly ¿rants to any one of the named corporations power to issue bonds for specific purposes provided and not otherwise that the Public Service Commission approve. As. we have seen, the preceding sections regulate the organization of a corporation to acquire a new franchise or the exercise by an existing corporation of a franchise theretofore acquired by it. Section 55 gives to such corporations power to issue bonds, stock or other obligations for certain specified purposes, provided, however, that the proper Commission approve such issue and not otherwise. There is nothing in this statute which in terms or by necessary implication prohibits corporations from issuing stock and bonds for other purposes than those specified, or repeals or affects any express provision of law authorizing the reorganization of a corporation whose property has. been sold under a judgment or decree of foreclosure.
That the power given to the Public Service Commission was not an arbitrary power to be exercised by it without regard to *340the jprovisions of law or the powers expressly granted to corporations has been established by the cases in the Court of Appeals referred to by Mr. Justice Clarke. Thus in Village of Fort Edward v. Hudson Valley R. Co. (192 N. Y. 139) the defendants were- engaged in building an' extension of their railroads by intersecting and connecting, the tracks of the two companies without the. consent of the village and without the consent of the Public Service Commission. Such a connection was required by section 12 of the Railroad Law, hut the claim was made that this section was either repealed or superseded by the Public Service Commissions Law, section 53, to which attention has been called,, which expressly provided that without first having, obtained the permission and approval of the proper Commission no railroad corporation, street railroad corporation or common carrier should begin the construction of any railroad or street railroad or any extension thereof. But the Court of Appeals held that there having been an express enactment of the Legislature making it the duty of railroad companies to intersect their tracks for the benefit of the public, that the Legislature had itself determined the question of convenience and necessity in such cases, and there was nothing in the Public Service Commissions Law indicating a legislative intent to repeal this provision of the Railroad Law or to invest the Commissioners with power to supersede it. Certainly the provisions of section 53 of the Public Service Commissions Law are more specific than section 55 now under consideration, and yet as'the Railroad Law had required these railroads to make this connection, the power granted to the Public Service Commission was in subordination to that express provision of the statute, although but for that statute it is clear that the permission. of the Public Service Commission would have been necessary. In the case now before .us we have a special law providing for the reorganization of a railroad whose property has been sold under foreclosure. It expressly, provides what stocks and bonds can be issued by the reorganized corporation and authorizes the issue of stock and bonds in compliance with its provisions. Section 55 of the Public Service Commissions Law, which authorizes a railroad corporation to issue stocks and bonds for specified purposes provided and not otherwise that *341there shall have been secured from the proper Commission an order authorizing such issue, contains no provision prohibiting a corporation from issuing bonds or stock except as therein provided if duly authorized so to do by another existing statute. I am inclined to think that under subdivision 2 of section 45 the Commission had power to supervise the carrying out of the agreement made between the bondholders and stockholders of the old Third Avenue Eailroad Company so that it could see that its reorganization committees and the new corporation complied with all provisions of law in the organization and transfer of the property to the new corporation; but in the exercise of that authority the Public Service Commission had. no power to override sections 9 and 10 of the Stock Corporation Law and refuse to allow securities to be issued in exact conformity with the authority conferred on the new corporation by these sections. This is in entire accordance with the other decisions of the Court of Appeals referred to by Mr. Justice Clarke where the same principle seems to pervade the construction given to this act. Thus, in People ex rel. Delaware & Hudson Co. v. Stevens (197 N. Y. 1), in speaking of the power given to the Public Service Commission by section 55, Judge Haight said: “If upon an investigation of the facts it is found that they [stocks and bonds] were not for the purposes of the corporation enumerated by the statute and reasonably required therefor ” the Commission could prevent their issue; that the Public Service Commission, however, was not empowered to substitute its judgment for that of the board of directors or stockholders of the corporation as to the wisdom of a transaction, but that it was designed to make the Commissioners guardians of the public by enabling them to prevent the issue of stocks and bonds for other than the statutory purposes. “It was, therefore, evidently the legislative intent in the enactment of this provision that the commissioners should have supervision over the issuing of long-time bonds to the extent of determining whether they were issued under and in conformity with the provisions of the statute for the purposes mentioned therein, or whether they were issued for the discharge of the actual and not the fictitious debts of the company, or whether 'they were issued for the refunding of its *342actual obligations and not for the inflation of its stocks or bonds. Beyond this it appears to us that the power of the commissioners does not extend.” And in People ex rel. New York, N. H. & H. R. R. Co. v. Willcox (200 N. Y. 423) the court held that the provisions of the charter conferring jurisdiction upon the board of health were not repealed by the Public Service Commissions Law.
Upon the facts as they appeared before the Commission it would seem that it was bound to approve the issue of the stocks and bonds by the new corporation in accordance with the plan of reorganization, and the power of the Commission was confined to a determination of the question as to whether the proposed issue was. as authorized by sections 9 and 10. of the Stock Corporation Law and the agreement for the purchase at the sale under the judgment'of foreclosure.
Miller and Dowling, JJ., concurred..
Order of Commission reversed and matter remitted to it to proceed as indicated in opinion.