Court Opinion

ID: 6136178
Source: CourtListenerOpinion
Date Created: 2022-02-04 21:42:38.507354+00
Date Added: 2024-06-11T08:54:31.134144
License: Public Domain

Learned, P. J.
(dissenting):
We are asked in this case to decide that a law dissolving the Broadway Surface Railroad Company is constitutional, and to distribute the property of the company, when the very company which is said to have been dissolved and which has the most direct interest in the question is not a party to the action, and therefore cannot be bound by the decision. But it is said that the receiver represents the company. If that be so, a still greater in justice has been perpetrated. Por the receiver was appointed without any notice to, or hearing of, the company.
The act (chap. 268, Laws of 1886), purporting to annul and dissolve this existing corporation and to repeal its charter, was one which, if valid, affected vested and very valuable rights. It would therefore be only according to due process of law (now guaranteed by the fourteenth amendment to the Constitution of the United States), that this corporation should have a judicial hearing and decision before its vested rights were taken away. But by chapter 310 of the same year it was provided that on the presentation of a certified copy of an act annulling and dissolving the corporation and of a summons and complaint founded thereon by the attorney-general to a Special Term of the Supreme Court, or a judge thereof, the court or judge should immediately appoint a receiver of the assets and property of’such.dissolved corporation. No provision is made for any notice to the corporation, or to any of its stockholders. No opportunity is given for the corporation or the stockholders to show that the act of dissolution is void. No requirement is made *541that the complaint shall state any facts. No obligation is placed on the court or judge to inquire into any facts. So far as his exercise of any judgment is concerned, a newspaper would he as good as the summons and complaint. For it is made his duty on the presentation of this summons* and complaint immediately to appoint a receiver.
As has been well said, “ any ’legislative attempt to divest (vested rights), hy closing the ear of the court, to all evidence excepting such as a party possibly biased and adverse may permit to be heard and by directing in advance, the decision the court shall thereupon render is condemned alike by the Constitution and by every sentiment of justice.” And so, if we examine the order appointing a receiver in this case, we shall find that it was granted on reading the summons and complaint and a verified copy of the act and on the motion of the attorney-general without notice to, or hearing any one for, the company. Indeed, the complaint ivas dated and verified May fourteenth, and the order appointing a receiver was-made that same day, so that notice was practically impossible.
Now, one of the most important questions here is, whether the legislature can pass an act (valid or void is of no consequence), which shall purport to annul a corporation, and then can require the court, at the request of the attorney-general, without notice to any one, to transfer to some person selected by him, all the property of this corporation which, for all that has been decided, is as valid a corporation as it ever was.
It does not help the matter to call this person to whom the property of the corporation is, without notice, transferred by the legislature “ a receiver.” It is no less the taking of property from the owner, the corporation, and giving it to another. Et is to guard against such transactions that Constitutions have so often said that a person shall not be deprived of property without due process of law, or by the law of the land. And, repeatedly, it has been decided that a mere legislative enactment is not due process of law, and is not, in this sense, the law of the land. If it were, then (and this case illustrates the remark), “ judges would sit to execute legislative judgments and decrees, and not to declare the law or administer the justice of the country.” That is what has been done here. The learned justice who granted the order *542appointing a receiver, only executed a legislative judgment and decree, and the person whose property was taken from it was not permitted to be heard, and has never been heard, even through all this heavy litigation. “ A law which, by its own inherent force, extinguishes rights of property or compels their extinction, without any legal process whatever, comes directly in conflict with the Con stitution.” (Wynehamer v. People, 13 N. Y., 434.)
The property of a corporation is no more at the mero of a legislature than that of a natural person, and no legislature could make it the dirty of a court, on the application of the attorney general and without any notice to a natural person, to appoint a receiver, who should take immediate possession of the person’s whole property. If it be said that the company had, by chapter 268 of the Laws of J88G, become defunct, and, therefore, that there was no one to whom notice could be given, that is to assume the very question on which we are to decide. If that act was unconstitutional, then the company was not defunct. To say that the company is defunct and, therefore, entitled to no notice, and then, without giving it notice, to decide that it is defunct, is like hanging a man first and trying him afterwards.
But, further, that act was passed May 4, 1886. If it was constitutional and the company thereby ceased to exist, then by 1 Revised Statutes (m. p. 600, § 9) the directors became at once trustees for the stockholders, and had full power to settle up the affairs of the company. So that when chapter 310 of that year was passed, May eleventh, if the company had been lawfully annulled, the directors were by law the trustees, and were entitled as such to the ownership and possession of the property. . How could the legislature, by its mere act, require the court, without notice to these trustees, to take from them property with which they were vested by law ?
Of course there are cases of non-residents having property in this State in which judicial process goes against the property, and notice is given to such non-resident by advertisement and the like. And there are cases of distributions of property and estates where notice is given otherwise than personally, so that there are exceptions to the general rule requiring personal notice of judicial proceedings. But in the case of a citizen of this State, or a corporation in this State, incorporated by its laws and having its property here, *5431 cannot believe that property can be taken from it by the form of a judicial proceeding of which the owner of the property has no notice, and to which such owner has no opportunity to make a defense.
When this order of May fourteenth was made, either the corporation was, or, if that was defunct, its trustees were, in possession and entitled to the ownership of the property which had belonged to the company. On that day an order of the court, without notice to these owners, assumed to take away their property and give it to another person. I do not believe that this is by “ the law of the land” (Const., art. 1, § 1), or by “ due process of law” (art. 1, § 6). “ The words (due process of law’ * * * cannot mean less than a prosecution or suit instituted and conducted according to the prescribed forms and solemnities for ascertaining guilt or determining the title to property.” (Taylor v. Porter, 4 Hill, 147.) It is no process of law at all when a court, without givingithe owner a hearing, takes away his property. Nor do I think that this constitutional principle can be evaded by arguing that the receiver is but a temporary custodian. Every owner of property has a right to be custodian of his property, unless upon a hearing it be decided that such right must temporarily cease. To take from him the possession of his property is pro tanto as much depriving him of his rights as to take away the absolute ownership. And if possession is ordinarily nine-tenths of the law, the possession of a receiver of a railroad company, with his (supposed) power to issue certificates and his rights to fees, is fully ten-tenths. Furthermore, this receivership is no temporary control. As will be seen by section 6 of chapter 310, it is but a step to the sale of the property — an absolute transfer of the company to the highest bidder.
I do not see that any of the parties to this present action were really interested to have the annulling act declared unconstitutional. Certainly not the plaintiff : nor the receiver, who claims under that act; nor the directors who are said to claim to be trustees because the company is annulled. The remaining parties seem only to desire to protect their own interests as mortgagees, lessees and the like, whatever became of the company. It is, therefore, not strange that the repealing act was held constitutional in the judgment now appealed from.
*544In the case of Chicago Life Insurance Company v. Needles (113 U. S., 574) a question arose as to the validity of a judgment dissolving a corporation in an action commenced by the auditor of the State, and the court, in affirming its constitutionality (at p. 583), said : There is no “ deprivation of property without due process of law, for that statute authorizes a public officer to bring the company before a judicial tribunal which, after full opportunity for defense, may determine whether it is insolvent,” etc, “grounds which, if established, constitute sufficient reason why the corporate franchises and privileges granted by the State should be no longer enjoyed.”
Now, these remarks show what, in the opinion of that court, was necessary to constitute due process of law, viz., bringing the company before the tribunal, full opportunity for defense, determination of the facts by the court. Not one of these existed to authorize the order appointing a receiver.
In Stuart v. Palmer (74 N. Y., 184) the court say “that due process of law requires an orderly proceeding adapted to the nature of the case in which the citizen has an opportunity to be heard and to defend, enforce and protect his rights. A hearing, or an opportunity to be heard, is absolutely essential. We cannot conceive of due process of law without this.” These admirable words should never be disregarded.
Thus it was also said in another case: “ He is sought to be held bound by a judgment when he was never personally summoned or had notice of the proceeding, which result has been frequently declared to be contrary to the first principles of justice.” (Ferguson v. Crawford, 70 N. Y., at 256.)
But if, without hearing the company, we are to pass upon the question of the validity of the annulling act, I am not ready to hold it valid. The right to be a corporation is simply the right of several natural persons to associate and act as an artificial person. In regard to all that class known as moneyed corporations there is no doubt that the property, to which the corporation has the legal title belongs beneficially to the stockholders, and their beneficial right does not cease when the corporation ceases to exist. They still remain the beneficial owners.
The old idea that the right to be a corporation was a franchise or *545special gift of the legislature is modified by the Constitution, which provides that corporations shall not be created by special acts, except when, in the judgment of the legislature, the objects of the corporation cannot be attained under general laws. (Const., art. 8, § 1.) The legislature has passed general laws under which this railroad company and others like it may be incorporated, and has thus declared that the objects of this corporation can be attained under general laws. And the legislature has passed numerous laws under which corporations of various kinds may be created. So that, in fact, it is easier to form a corporation than to form a limited partnership. There is, then, no longer a special privilege but a general right.
Under these general laws numerous corporations have been formed; and the agreements forming such corporations are contracts which the parties thereto have entered into with each other. They are as much contracts between the parties as a limited partnership is. Would it be thought that the legislature could dissolve and annul a contract of limited partnership ? Further, when the right to be a corporation was a special gift of the legislature, if the legislature took away its gift, there could no longer be a corporation. But now, if five persons incorporate themselves to day under a general law, and if to-morrow the legislature pass an act dissolving the corporation, the same five persons may, the day after, incorporate themselves again under the same name and for the same purpose. What sense, then, in saying that the legislature may annul a contract of incorporation, when the parties to it may, under these general laws, form the same contract again and become the same corporation as before ?
It is in "accordance with these views that the Constitution, in that same section, provided that all general laws and special acts passed pursuant thereto might be altered from time to time or repealed. 11 made no provision for the alteration or repeal of a corporation formed under a general law. The alteration or repeal contemplated was of a law, not of n private contract made under a law, and the alteration or repeal of a general law is not the same as the alteration-or repeal of a contract made under such law. Nor does the law now in question repeal a general law. As the Constitution, therefore, does not authorize the annulling of a contract of incorpo*546ration made under the general law, we may take its language as by implication denying such power. Nor does section 8, chapter 18, title 3, part 1 of the Revised Statutes apply, because, that speaks of charters conferred by the legislature. This corporation has not a charter conferred by the legislature. The legislature conferred nothing; and are forbidden to confer such charters.
It is said that by section 48, chapter 140, Laws of 1850, the legislature has this right to dissolve this corporation. If by enacting a law that-every contract thereafter made by any persons may be thereafter annulled by the legislature, the effect of the provision of the United States Constitution as to the validity of contracts can be destroyed, then that argument is sound; and that constitutional provision is practically annulled. The legislature claims to annul this contract, made under a general law, because it had declared that 'it might do so. Suppose the legislature should enact that every promissory note thereafter made should be subject to be annulled 'by the legislature. Would such notes be affected thereby? As •said above, the existence of general laws for incorporation is inconsistent with the idea that corporations formed under these laws may be annulled by the legislature. Such corporations are really but -private contracts which the legislature may not destroy. When the power to incorporate is thus general, the so-called repeal of the ■charter can have no other effect than to put the property, beneficially belonging to the corporators, into the hands of the directors as trustee for the corporators. These corporators may again incorporate themselves, and as soon as the directors (as trustees), have closed up the business of the former corporation, may put the same property again into the new corporation. That great harm and embarrassment might thus be effected by the legislature is undoubtedly true. But it is difficult to see how any taking away of the right to be a corporation could be effectual.
It is not necessary to inquire whether a repeal of the general law would destroy corporations created before the repeal, for no such repeal has been attempted. It is doubtful whether a corporation incorporated under the general laws has anything which can be called a charter, although that word is often used in respect 'to such corporations. But, if applied to the certificate signed by the parties and filed, it is quite inaccurate, for that is simply a pri*547vate agreement, not in any way a thing conferred by the legislature. And it is, therefore, this agreement of the parties which the legislature assumes to destroy and annul.
As before remarked, these general laws are numerous. They authorize the formation of corporations for a great many purposes, literary, scientific, benevolent, as well as for business purposes; insurance, railroad, gas companies and the like; so that there is hardly any kind of enterprise which has not taken this form of association. Great numbers of persons have thus organized, and a large amount of money lias been thus invested, and the aggregate of the pecuniary interests involved is enormous. To say that all this is held at the mercy of the legislature, that in its discretion (or want of discretion) it may dissolve all these corporations and compel the closing up of all the business through an army of receivers, seems to me to be a very dangerous doctrine. It is one to which 1 cannot assent. I prefer to think that the Constitution, by its provision for general laws and its prohibition of special acts, took this dangerous power from the legislature ; and that what the legislature is not - to create it is not to destroy. The framers of the Constitution saw the evils which had arisen from the process of getting special acts of incorporation through the legislature. They could not have intended that these corporations, formed under general laws, should be obliged annually to protect themselves against the passage of special repealing acts. To appreciate the importance of the doctrine in question, one has only to consider what the effect would be of the introduction in the legislature of an act to annul and dissolve the New York Central and Hudson River Railroad Company, or any other- great corporation. And the doctrine, if sound, affects not.only such corporations as exercise a quasi public power, as railroad companies may be said to do, but it affects all manufacturing companies and companies of a similar character, which are, in every sense, private enterprises. So that any of these might be, at any moment, destroyed by the legislature for no cause whatever.
To illustrate these views, let us suppose that several persons unite and form a partnership for some manufacturing business. It would hardly be said that the legislature could annul and dissolve this partnership. But suppose that the members of this partnership avail themselves of the general law and form themselves into a *548corporation. The effect of this would be to authorize the several persons to act as one, to give them succession, and in some degree to limit their individual liability. Is there any reason why the legislature should now have a power to annul and dissolve, which they did not have in regard to the partnership ? These remarks are, perhaps, applicable with more force to a railroad corporation than to any other; because by article 3, section 18, of the Constitu tion the legislature is prohibited from passing any private bill granting to any corporation, association or individual the right to lay down railroad tracks; so that the power of special legislation to make this kind of corporation is altogether taken away.
One other suggestion may be made. If the legislature can, at its will, dissolve any corporation, then it can indirectly accomplish that special legislation which the Constitution forbids. For instance, let us suppose that there are five manufacturing corporations engaged in a certain business. The legislature has only to dissolve four of them and the result is the possession by the remaining one of an exclusive corporate right. Thus the object of the constitutional provision would be destroyed ; and we should have a return to the special creation of corporations by the legislature, with its attendant evils.
The Constitution intended to take from the legislature the power of granting special privileges or franchises, and to leave the whole subject to the enjoyment of all persons alike. This is still more plainly seen by article 3, section 18, which forbids the granting to any individual or corporation any exclusive privilege, immunity or franchise. If the legislature can take away franchises and privileges from all except such individuals or corporations as it favors, this constitutional provision will be of little value.
No one disputes that a violation cf duty may be a ground for forfeiting rights previously enjoyed by persons, natural or artificial. The question here is, can rights be taken away by the mere will of the legislature, without any cause shown? A statute passed to take away private rights is not' legislation, whatever else it may be called. If, however, this corporation has been annulled and the receiver has been legally appointed, I agree fully with the views of my brother Landon as to the rights of the respective parties to the action.
*549Judgment affirmed, without prejudice to any action of attorney-general respecting traffic contracts, with costs to respondents who are not also appellants.