Court Opinion

ID: 6965491
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:53:09.531224+00
Date Added: 2024-06-11T16:08:35.699095
License: Public Domain

Mr. Justice Bailey delivered the opinion of the Court: To determine the propriety of the finding and judgment of the court in this ease, it is important, in the first place, to notice the precise nature of the issues which were submitted for trial. The information was filed by the state’s attorney against the “North and South Bolling Stock Company,” by that name, requiring it to answer by what warrant it claims to have, use and exercise the liberties, franchises and privileges of owning, buying, leasing, selling and operating railroad stock. The defendant answered by setting up its incorporation under the general law of this State in relation to corpora.tions, the purposes for which it was incorporated, as declared in its certificate of incorporation, being to use and. exercise the precise franchises and privileges mentioned in the information. The relator, by proceeding against the defendant by its corporate name, must be deemed to have admitted the fact of its-incorporation. The weight of authority may now be regarded: as sustaining the proposition, that the effect of filing an information against a corporation by its corporate name, to-procure the forfeiture of its charter, or to compel it to disclose by what authority it exercises its corporate franchises, is to admit the existence of the corporation. When, therefore, the information is filed against the defendant in its corporate name, and process is issued and served accordingly, and the defendant appears and pleads in the same corporate character, its corporate existence can not afterwards be controverted* High on Extraordinary Legal Remedies, sec. 661. It will thus be seen that the legality of the defendant's-incorporation is not assailed, but the relator seeks to bring the case within that clause of the statute in relation to quo warranto which authorizes the filing of an information where “any corporation does or omits any act which amounts to a surrender or forfeiture of its rights and privileges as a corporation.” For the purpose of showing such acts of omission or commission, the relator has filed two replications. The first alleges that the defendant has not kept or caused to be kept at its principal office or place of business in this State correct books of account of all its business, as required by statute.. The second replication alleges that all the stockholders, directors and officers of the defendant are now and always have-been non-residents of this State; that the defendant does not now and never has kept an office or place of business in this-, State, but has hitherto and does now keep its office and place of business at St. Louis, Missouri, at which its business is-transacted ; that the franchise of the defendant was procured for the purpose of being exercised outside of this State in the-manner aforesaid, and without any intention of making the defendant a domestic corporation in fact and in substance, and that the defendant has, since its organization, acted for all practical purposes as a foreign institution, and has maintained in this State a mere nominal existence. The rejoinder constitutes a substantial traverse of these allegations, and upon the issues thus formed, the case was tried. No question being made by the respondents as to the propriety of the replications, or as to whether they do not constitute clear departures from the case made by the information we are disposed to treat the issues as properly joined. But it may be observed that as to all the matters thus submitted for trial, the burden of proof was on the relator, and unless he has proved by a preponderance of the evidence that the defendant has committed or omitted acts which amount to a ■ surrender or forfeiture of its rights and privileges as a corporation, the judgment of ouster can not be sustained. No evidence was introduced and no witness was called on behalf of the relator, the cause being submitted upon the documentary evidence introduced by the defendant, and upon the testimony of Berthold, one of the defendant’s stockholders and' directors and its president, and who was called as a witness by the defendant. From the evidence thus introduced it appears that, on the first day of December, 1887, the firm of Berthold & Jennings, who were then and still are residents of and doing business in St. Louis, Missouri, were the owners of a large number of railroad freight cars, which were then leased to the St. Louis, Alton and Terre Haute Railroad Company, a corporation organized under the laws of this State, and were then in use by that company on its Belleville and Southern Illinois Division, commonly known as the St. Louis and Cairo Short Line, a line of railroad situated in this State; that Henry O’Hara, who also was then and still is a resident of and doing business in St. Louis, was in like manner the owner of a large number of other railroad freight cars, which were leased to the same Illinois corporation, and in use on the same line of railroad in this State; that for the purpose of placing these cars under one management and avoiding conflicting interests, and for the better management of the property, these parties agreed to incorporate themselves into a joint stock company, under the laws of this State, by the name and style of the North and South Rolling Stock Company; that the three parties should subscribe equally to the capital stock of the proposed corporation and should constitute its first board of directors and officers; that they should turn over the cars owned by them respectively to the corporation on certain prescribed terms, and should not be interested in any manner, except through the proposed corporation, in any other rolling stock running on the St. Louis, Alton and Terre Haute Railroad or its connections. In pursuance of this agreement the corporation was organized, its entire property and assets consisting of these cars, and other cars subsequently purchased, and all leased to and in the possession of an Illinois railroad corporation, and in use on a line of railroad in this State, and its entire business, so far as the evidence shows, consisting of periodical settlements with the lessee railroad company for the mileage or other rents earned by the leased cars. „ It will thus be seen that the property and assets of the corporation, at the time of its organization were and ever since that time have been wholly within this State. To what extent its business has been actually transacted in this State is not clearly shown, but, as the burden of proof on this point is upon the relator, failure of proof militates against the ease of the prosecution rather than that of the defense. It may be said, however, that there Is nothing in the evidence tending to show that the corpr Aion had any business which required constant attention o the part of any of its officers or agents, either in this State or elsewhere. As its rolling stock has been operated by the lessee corporation, the defendant had nothing to do with that part of the business, and its settlements for mileage or rents may, so far as appears, have required attention only at fixed intervals. Where those were made whether in Illinois or Missouri, the evidence fails to show with certainty, although perhaps it may be inferred from the fact that the lessee corporation was resident in Illinois and had its principal office in East St. Louis, and the further fact that the defendant’s president made frequent visits to that place on the defendant’s business, that the object of those visits was, in part at least, to make settlements with the lessee. The testimony of Berthold shows, and in this he is not contradicted, that the defendant, ever since its organization, has kept an office in East St. Louis, and that all official meetings of the stockholders and directors have been held there. He admits that no officer or agent of the corporation has been kept in constant attendance at that office, and there is nothing showing that the business of the corporation has ever been such as to require that to be done. He testifies, however, that he, as president of the company, has been in the constant habit of going to East St. Louis as often as two or three times a week to look after its business, and it may fairly be inferred from his testimony, that while there, he made his headquarters at the East St. Louis office. He also testifies that the other officers of the corporation frequently went over to East St. Louis to look after the company’s business. It appears that the defendant has also ah office in the city of St. Louis, that office being at the place of business of Berthold & Jennings, and across the street from the place of business of O’Hara, but the evidence leaves it very much in doubt as to how much and what portion of the corporate business is transacted at that office. It seems to have been more convenient for the three stockholders to have the books kept there, but the witness testifies that they were kept part of the time at the East St. Louis office, and that they had always been there when any stockholder or other person had desired to examine them at that place. In view of all the evidence we are of .the opinion that the averments of the relator’s replication, that the defendant’s franchise was procured for the purpose of being exercised out ef this State, and without any intention of making the defendant a domestic corporation in fact or in substance, and that since its organization it has acted for all practical purposes as a foreign institution, and has maintained in this State a mere nominal existence, are not proved. The property of the corporation is all located in this State, and is managed, used and controlled here. Upon its organization it established an office in this State, which it calls its principal office, and where all meetings of the stockholders and directors have in fact been held, and that office has ever since been and is still maintained. A considerable, if not the most material portion of its business is and has always been transacted, and its substantial interests are and have always been, in this State. Under these circumstances, its existence here must be held to be much more than nominal. If it has forfeited its franchise, it must be by reason of some other act than that of falsely and fraudulently posing as a domestic corporation, while it has in substance and in fact accomplished its migration to another jurisdiction. The facts of this case are different in all their essential features from those appearing in Land Grant Railway and Trust Co. v. Board of Commissioners of Coffey County, 6 Kansas, 245, and Hill v. Beach, 12 N. J. Eq. 31, to which we are referred. In the first of these cases a corporation had been chartered by the Legislature of the State of Pennsylvania, and authorized to engage in certain business enterprises in any of the States or Territories of the United States, except the State of Pennsylvania. The corporation went to the State of Kansas and there engaged in railroad building, and brought mandamus in the courts of that State to compel the county commissioners to subscribe to the capital stock of its railroad. The court, in denying its right to that writ, held that the rules of comity did not require that State to permit the corporation to do business within its borders which it was forbidden to dp in the State of its creation, and that where a corporation attempts to migrate in a body to another State, it dissolves into its original elements, and that the persons who comprise it become only individuals. So, in Hill v. Beach, a corporation was organized under the laws of New York to carry on the business of quarrying stone in a quarry in New Jersey, and it was held that the company would not be recognized in the courts of New Jersey as a legally constituted corporation, and that persons doing business in that State under such assumed corporate capacity would be treated as and held to the responsibility of partners. None of the elements forming the ratio decidendi in those cases are present here. In this ease, however, it is proved, (1) that the stockholders, directors and officers of the corporation are non-residents of this State, and (2) that the corporation has failed to keep its corporate books continuously at its principal office in this State, and it remains to be seen whether either or both these facts constitute a sufficient ground for declaring a forfeiture of its corporate franchise. So far as the ownership of the stock of a domestic corporation by non-residents is concerned, we are aware of no rule of the common law, and certainly none is prescribed by statute, which forbids it. Nor does the law require that any particular proportion of the stock of such corporations should be owned by residents, except, perhaps, in the single case where a certain part of the directors are required to be residents, and there doubtless, by implication, the shares constituting the qualification stock of the resident directors must be held by them. But otherwise, there seems to be no rule forbidding the ownership of all the stock by non-residents. Such ownership, as has been frequently decided, has no effect upon the citizenship of the corporation, as affecting the jurisdiction of the Federal Courts, and we see no reason why, in any point of view, it should have any tendency to take from the organization the position and status of a domestic corporation. So far as we have been able to find, there is no rule of law requiring that the directors of corporations organized under the “Act concerning corporations,” approved April 18, 1872, or any portion of them, be residents of the State. Section 11, of article 11, of the Constitution provides that a majority of the directors of all railroad corporations shall be residents of this State, and that provision is repeated, in substance, in section 11, of the act for the incorporation of railroad companies, approved March 1, 1872. But no such provision is to be found in the Constitution or statutes applicable to those classes of corporations which may be organized, as was the ■one now before us, under the general law concerning corporations. The fair conclusion is, that while the public policy of the State, as declared by its constitutional and statutory law, requires that a majority of the directors of railroad corporations shall be residents, no such requirement exists in case of other corporations, and that it is no violation of law, and therefore no ground upon which a forfeiture of its franchises can be declared, that all the directors and officers of the corporation now before the court are, and since its organization have been, non-residents. Nor are we disposed to hold that the mere fact that the ■corporate books have been kept most of the time at the company’s St. Louis office, is of itself a sufficient ground for dissolving the corporation. Its two offices are on the opposite ■sides of the Mississippi River, and but a short distance from ■each other. Whenever the books have been required at the Bast St. Louis office by any stockholder or other person entitled and desiring to see and examine them, they have been produced at that office, and there is nothing showing the slightest indisposition on the part of the corporation to have its books there when needed for any lawful purpose. It is true that keeping its books for most of the time in St. Louis may not be a strict compliance with the statute in that behalf, but it does not appear that any interest, either public or private, has been or is likely to be imperiled or incommoded thereby. The thirteenth section of the statute under which the defendant was incorporated provides that it shall be the duty of -the directors or trustees of. every stock corporation to cause to be kept at its principal office or place of business in this State, correct books of account of all its business, and every stockholder in such corporation shall have the right at all reasonable times by himself or by his attorney, to examine-the records and books of account of the corporation. It would seem that the primary object of this statutory provision is to-protect the rights of stockholders, and the evidence is positive that whenever a stockholder has desired to examine the books at that place, they have been produced there for his examination. It is probable that the statute may have had other objects in view in requiring the books to be kept at the principal office in this State, as for instance to aid the State in exercising its visitorial power over the corporation, or, perhaps, to enable creditors of the several stockholders to ascertain the number of shares of stock standing in the names of each, so-as to levy their executions or attachments thereon, but there is no reason to suppose that the books would not have been instantly produced whenever required for either of those purposes. ' It is not every failure to comply with the exact letter of the-statute which will expose,a corporation to the loss of its franchises. In determining whether such departure from the provisions of the act of incorporation has occurred as will work a forfeiture, the same general principles of construction are applicable which govern valuable grants to individuals upon conditions subsequent or precedent. In all such cases, a sub-, stantial performance of the conditions, according to the intent of the charter, is all that is required, and slight departures are overlooked. High on Extraordinary Legal Remedies, sec. 651. Some stress is sought to be laid upon the fact that neither at the office in East St. Louis, nor at the office in St. Louis, was any sign displayed, advertising to the public the location of the office. But this circumstance seems to have very little significance, when it is remembered that the business in which the corporation was engaged involved no dealings with the general public, but only with the corporation to which its cars were leased, and that there was therefore very little if any occasion to advertise its place of business to the public. Considerable significance is also sought to be given to the fact that the defendant’s officers have never listed the corporate property in this State for purposes of taxation. Whether it was listed by the lessee who had it in possession is not shown. The property was all tangible property existing in this State, and was within the reach of the officers whose duty it was to levy and assess taxes. But even if its property escaped taxation solely through the negligence of its officers to see to it that the property was properly listed, we are unable to see how such fact would have a tendency to sustain the judgment in this case. Important as is the duty of every ■property holder, whether a natural person or a corporation, to have his property properly listed for purposes of taxation, so that each may bear his proper share of the public burdens, we ■are not aware that a failure by a corporation to list its property for that purpose has ever been held to be an act amounting to a forfeiture of its corporate franchise. The relator in his argument has relied very largely upon the case of State v. M. L. S. & W. Ry. Co. 45 Wis. 579. While we are not prepared to yield our assent in all respects to either the reasoning or conclusion of that decision, it is sufficient for our present purposes to distinguish that case from ■this by pointing out the fact that in that case, there was a demurrer to the information, whereby'the facts alleged were all admitted. Those facts were, that the principal or general-office of the corporation was in the city of New York; that the books and records of the corporation were not and never had been kept within the State of Wisconsin, and were then in the city of New York, and that none of the general officers of the corporation resided in Wisconsin, but that its president, secretary and treasurer all resided in the city of New York. These facts being all admitted it was held that sufficient ground was shown for dissolving the corporation. In some respects the decision is based upon Wisconsin statutes which are essentially different from ours. In the present case, however, issues were taken upon the allegations of the relator, and many of them failed of being proved, thus necessitating, in our opinion, a different result from that reached in the Wisconsin ease. After carefully considering the entire case, we find ourselves unable to concur with the decision of the learned judge who tried the case in the court below. The judgment therefore will be reversed, and the cause will be remanded .to the City Court of East St. Louis. Judgment reversed.