Court Opinion

ID: 3883999
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:14:31.765333+00
Date Added: 2024-06-11T07:42:01.103721
License: Public Domain

Petitioners make application in the original jurisdiction of the Court for writ of mandamus requiring respondent as Secretary of State to accept and file the copy of the charter of the Carolina, Clinchfield  Ohio Railway, tendered to him with a petition for charter and to issue to petitioners a certificate to be known as a charter as prescribed by section 1 of act of 1909, 26 Stat., 54, entitled "An Act to amend sections 1, 3 and 6 *Page 330 
of an Act entitled, `An Act to provide the manner in which owners or projectors of any railroad companies incorporated under the laws of other States or countries may become incorporated in this State,' approved February 25, 1902, so as to provide a more practical method for the incorporation of such companies and their stockholders, owners or projectors."
The petitioners, both in the petition to the Secretary of State and in the petition to this Court, set forth all the facts showing full compliance with all the requirements of said statute.
Respondents demur to the petition on the ground that it fails to state facts sufficient to constitute a cause of action on two grounds:
(a) "It appears that the petitioner, the Carolina, Clinchfield Ohio Railway, is a foreign corporation organized under the laws of the State of Virginia, and is endeavoring to procure a license to build, own and operate a railroad in this State.
(b) "That the statute above mentioned is unconstitutional in that it violates article IX, section 8 of the Constitution, which expressly forbids the General Assembly to license any foreign corporation or association to build, operate or lease any railroad in this State."
The petition shows that the petitioner, Carolina, Clinchfield Ohio Railway is a railroad corporation duly created and organized under the laws of the State of Virginia, and having the authority under its charter and the said law to extend its lines into this State and to do the acts and things herein sought to be done, and that petitioners, Geo. L. Carter, Archer A. Phlegar and William H. Lyles, are stockholders of the said corporation, the said G.L. Carter residing at Johnson City, in the State of Tennessee, the said A. A. Phlegar residing at Bristol, in the State of Virginia, and the said W.H. Lyles residing at Columbia, in the State of South Carolina, and being a citizen of the State of South Carolina. *Page 331 
The petition further shows that petitioners, desiring to own property and carry on business and exercise corporate franchises in the State of South Carolina, especially to construct, own and operate a railroad, which would be an extension of the line of railroad of the petitioner, Carolina, Clinchfield  Ohio Railway, now owned and operated in the State of Virginia, Tennessee and North Carolina, with the authority, consent and approval of the board of directors, and all of the stockholders of the Carolina, Clinchfield  Ohio Railway, filed in the office of the Secretary of State of South Carolina, a petition of which a true copy, including the signatures is hereto annexed, setting forth all of the facts stated in said petition being true to the knowledge of petitioners, and the petition, so filed, was in all respects in full compliance with the provisions of said act. The petition further shows that all the fees required by law in the premises were tendered to the secretary and demand made for the issuance of a charter as required of said act, and that the Secretary of State refused to comply on the ground that said act violated section 8, article IX of the State Constitution.
Other facts appearing are that the Carolina, Clinchfield Ohio Railway has an authorized capital stock of the par value of $30,000,000, and have constructed and under construction a line of railway from a point at or near Dante, in Russell county, Virginia, to a point in Rutherford county, North Carolina, on the boundary line between North Carolina and South Carolina, at or near a point south of Island Ford Ferry of Broad River, and that said railroad company and the stockholders and owners thereof desire to extend the line of said company into the State of South Carolina, from the said boundary line between North Carolina and South Carolina, to the city of Spartanburg, in South Carolina, and that it is the purpose to maintain a principal office as place of business in said city of Spartanburg. The petition to the Secretary of State is signed by the Carolina, Clinchfield *Page 332  Ohio Railway by George L. Carter as president, corporate seal attached, and attested by the signature of Jerry C. Stone as secretary, and it is also signed individually by George L. Carter, Archer A. Phlegar and William H. Lyles.
Section 1 of the statute in question provides: Section 1. "Be it enacted by the General Assembly of the State of South Carolina, that each and every railroad company or railroad corporation created or organized under or by virtue of the laws of any government or State other than this State and the stockholders, owners or projectors thereof, desiring to own property or carry on business or exercise any corporate franchises in this State whatsoever, shall first apply for and obtain a charter and become incorporated as a corporation of this State in the following manner, that is to say: Said corporation and the stockholders, owners or projectors thereof shall file or cause to be filed in the office of the Secretary of State a copy of the charter of said corporation, duly authenticated in the manner directed by law for the authentication of the statutes of the State or country under whose laws such corporation is chartered or organized, accompanied by a petition signed on behalf of said company by its president and secretary and one or more of the stockholders of said company, setting forth: (1) the name of the company or corporation and the State or government under the laws of which it was created or organized; (2) the residence of the stockholder or stockholders joining in the petition; (3) the place at which the company has its principal business and the place at which it is proposed to maintain a principal office of business in this State; (4) the total authorized capital stock of such company; (5) that the company or corporation by its said officers and the stockholder or stockholders signing the petition thereby apply on behalf of the corporation and on behalf of all its stockholders, owners and projectors to be incorporated under the laws of this State of South Carolina, *Page 333 
with power to own property and carry on business and exercise the corporate franchises of said company in this State as a railroad corporation organized under the laws of South Carolina; (6) any other matter which it may be desirable to set forth in said petition. At least one of the stockholders signing said petition shall be a resident of this State. Upon the filing of said petition and of the copy of the charter of said company and the payment of the filing fees fixed by law and the charter fees provided in section 4 of this act, the Secretary of State shall issue a certificate to said corporation or company, and the stockholders, owners or projectors thereof to be known as a charter, that the said corporation or company and the stockholders, owners and projectors thereof, have been fully organized and incorporated under the laws of South Carolina under the name and for the purposes indicated in said petition, with the powers given by or under such charter on file with the Secretary of State, not inconsistent with the laws of this State, including power to acquire or purchase on such terms as shall be agreed upon, from any other corporation or owner or owners or at judicial or foreclosure or other sale, and to build, lease, own and operate lines of railway and other property in this State, with all rights, powers, immunities, privileges and franchises thereto belonging, and to carry on its business and exercise its corporate franchises in this State, and to hold its meetings of stockholders and directors, and to make contracts and conduct its business within or without this State, but in all cases such certificates shall contain the further provision that such company is a body politic or corporate and as such may sue and be sued in any of the Courts of this State, and shall be entitled to all the rights and privileges and subject to all the liabilities of railroad corporations embraced in what is called the General Railroad Law, being chapter L of volume 1 of the Code of Laws of South Carolina, 1902, and the acts amendatory thereof, as well as any acts now existing or hereafter to be passed regulating the *Page 334 
duties, privileges and liabilities of railroad companies. The petition and said certificate shall be recorded by the Secretary of State in books kept by him for that purpose, and a copy of said certificate, and a copy of said charter, filed in the office of the Secretary of State, as aforesaid, shall be recorded in the office of the register of mesne conveyances or Clerk of the Court of Common Pleas in each county in this State in which the proposed line of such corporation or company is or will be situate.
"No irregularity in complying with the provisions of this act shall be held to vitiate the incorporation under the laws of this State until a direct proceeding to set aside and annul the certificate issued by the Secretary of State shall be instituted by the proper authority of this State, and all acts done and contracts entered into shall have the same force and effect as if no irregularity had existed.
"When the Secretary of State issues such a certificate such foreign railroad corporation and its stockholders, owners and projectors shall ipso facto become a domestic corporation, and shall ipso facto be incorporated under the laws of this State, and shall enjoy the rights and be subject to the liabilities of a domestic corporation and may sue and be sued in the Courts of this State, and shall be subject to the jurisdiction of this State as a corporation created under the laws of the State of South Carolina.
"If any such charter or any part thereof filed, as aforesaid, in the office of the Secretary of State shall be in contravention or violation of the laws of this State, such charter, or such parts thereof, so in conflict with the laws of this State, shall be without effect in this State."
The section of the State Constitution which it is alleged is violated by the statute is as follows, the writer dividing the section into subdivisions and adding the italics:
Section 8. (1) The General Assembly shall not grantto any foreign corporation or association (a) a license to build, operate or lease any railroad in this State; but in all *Page 335 
cases where a railroad is to be built or operated, or is now being operated in this State, and the same shall be partly in this State and partly in another, or in other States,the owners or projectors thereof shall first become incorporated under the laws of this State (b) nor shall any foreign corporation or association lease or operate any railroad in this State, or purchase the same or any interest therein; (2) Consolidation of any railroad lines and corporations in this State with others shall be allowed only where the consolidated company shall become a domestic corporation of this State; (3) No general or special law shall ever be passed for the benefit of any foreign corporationoperating a railroad under any existing license of this State or under any existing lease, and no grant of any right or privilege, and no exemption from any burden shall be made to any such foreign corporation, except upon the condition that the owners or stockholders thereof shall first organize a corporation in this State under the laws thereof, and shall thereafter operate and manage the same and the business thereof under said domestic charter."
It seems clear that subsection 2 and 3 of the quoted section above are not involved in this controversy, as no consolidation of any railroad lines and corporations in this State with others is proposed now, and as the statute in question is not a general or special law for the benefit of any foreign corporation operating a railroad under anyexisting license or lease of this State and therefore the petitioning foreign corporation is not such a corporation as is within the intent of the provision. It further appears that the terms of the demurrer limit the inquiry to the question whether the statute violates the first portion of the quoted section, or subsection 1 as indicated.
We do not think the statute violates this provision.
First. There is a plain distinction between a license to a foreign corporation to build, operate or lease any railroad in this State, and the grant of a charter creating a domestic *Page 336 
corporation and granting to such domestic corporation power to build, operate or lease any railroad in this State. In the first case the foreign corporation maintains its entity and as such carries on its business here, but in the second case a new entity is created which is not a foreign corporation but a domestic corporation.
All the authorities show that when a foreign corporation complies with a statute such as ours it becomes a domestic corporation: Southern Railway v. Tompkins, 48 S.C. 49,25 S.E., 982; Mathis v. Southern Railway, 53 S.C. 257,31 S.E., 240; Calvert v. Ry., 64 S.C. 139,36 S.E., 750; Wilson v. Ry., 64 S.C. 162, 36 S.E., 701; Geraty v.R.R. Co., 80 S.C. 361, 60 S.E., 936; Debman v. SouthernBell Tel. Co. (N.C.), 26 S.E. Rep., 269; Leyden v. Endowmentetc. (N.C.), 39 S.E. Rep., 47; Allison v. SouthernRy. (N.C.), 40 S.E. Rep., 91; Davis, Adm. v. Chesapeake Ohio Ry. (Ky.), 70 S.W. 857; 75 S.W. 275;Stout v. Sioux City etc. (Neb.), 8 Fed. Rep., 794; Walters
v. Chicago, etc. Ry. (Neb.), 104 Fed. Rep., 377; Russell etal. v. St. Louis S.W.R. (Ark.), 75 S.W. 725; SouthernRy. Co. v. Allison, 23 Sup. Ct. Rep., 717, and other cases of the Supreme Court of the United States recognize that compliance with such a statute would make a domestic corporation for all purposes, except federal jurisdiction. The Wilson and Calvert cases, supra, do not shake the decision in the Tompkins case, supra, and in Geraty
v. R.R. Co., supra, Mr. Justice Gary, speaking for the Court, said: "But whether the foreign corporation is incorporated as a domestic corporation where it accepts a character or files a copy of its charter granted by another State with the Secretary of State, it has not been denied that it becomes a domestic corporation for all purposes except federal jurisdiction," citing Southern Ry. v.Tompkins and Calvert v. Ry. If there is a decision anywhere to the contrary, it has not been called to the attention *Page 337 
of the Court, and we assume the proposition is beyond controversy.
If this be so, no license is proposed to be granted to a foreign corporation, but what is sought is the charter of a domestic corporation.
Whether such a corporation, nevertheless, may have the right to remove causes to the Federal Court under the rule declared in Railroad Co. v. James, 161 U.S. 545; Ry. Co.
v. Louisville Trust Co., 174 U.S. 552; Southern Ry. v.Allison, 190 U.S. 226, is wholly irrelevant to the question at bar. The question is whether the petitioners could become a domestic corporation in harmony with the State Constitution, and not whether such corporation would have right of removal.
As to the first question, we are controlled by our own decisions, as to the second, we may have opinions, but we have no authority to finally determine, but must follow the conclusions, whatever they be, of the highest Federal Tribunal, the final arbiter in such matters. As it was not in the power of the constitutional convention, nor in the legislature, to control the Federal Courts in the determination of Federal questions, we will not read into the section of the Constitution any such purpose, but will confine ourselves to the ascertainment of the meaning of the Constitution, to be deduced from the language used.
What is the meaning of the word "railroad" and the words "owners or projectors thereof?"
We do not understand "railroad" as used in this section to mean railroad company or corporation, but it refers to the property fairly falling within the term railroad, including track, rolling stock, station houses and generally such property as is usual, incident, or necessary to the operation of a railroad, doubtless including all franchises when conferred.United States v. Denver etc., 14 Sup. Ct. Rep., 11; 7 Words and Phrases, 5900-1. *Page 338 
By section 2024 "railroad" in that chapter must be construed to mean "a railroad or railway operated by steam" and "railroad corporation" or "railroad company" means "all corporations, companies or individuals now owning or operating, or which may hereafter own or operate any railroad in whole or in part in this State." Sometimes by a mere figure of speech we speak of a railroad company or corporation as a railroad, but the connection in which it is used indicates the meaning. Here the connection clearly shows the meaning to be the railroad line or track and its essentials. "Thereof" clearly refers to "railroad."
The Constitution, therefore, provides that where a railroad is to be built or operated in this State, and the same shall be partly in another, the owners or projectors thereof shall first become incorporated under the laws of this State. The term "owners" applies more especially to those who have the right of property in a tangible railroad in existence in such form as to constitute the subject of ownership. Projectors of a railroad not in existence as distinguished from owners are those who project, plan or promote the prospective railroad, or if you please the prospective corporation. Who then are the owners or projectors of the line of railroad in process of construction up to the State line, and who are the projectors of the prospective continuation of such railroad line into South Carolina, and of the plan to acquire the necessary charter from South Carolina? It is manifest that the petitioner is one of such projectors. It is so alleged in the petition and admitted by the demurrer. We see no difficulty in declaring that a foreign corporation acting through its directors or managing officers may "project" the building of a railroad into another State and the plan to become a corporation of that State. Hence it cannot be said that the fact that the Carolina, Clinchfield  Ohio Railway signed the petition and prayed to be created with others into a South Carolina corporation was in violation of *Page 339 
the Constitution, which requires such owners or projectors to become incorporated in this State.
Section 19, art. IX, does not prohibit one corporation from holding stock in a State corporation, the prohibition is against holding a majority of the stock.
The manner of organizing domestic corporations is exclusively within legislative powers. If the legislature, in the matter of domesticating foreign corporations, chooses to adopt an existing organization, we see no constitutional inhibition. If this does not prove satisfactory the charter is subject to amendment.
But it is said the section of the Constitution further provides that no foreign corporation or association shall lease or operate any railroad in this State or purchase the same, or any interest therein. This provision, we think, relates to any existing railroad, but if it should be construed as referring to a prospective railroad it must be construed in harmony with the requirement that the projectors of a prospective line of railroad, to be partly in this State and partly in another, must become incorporated under the laws of this State. The granting of the charter in this case would not confer upon the said Carolina, Clinchfield  Ohio Railway as a foreign corporation any rights in the prospective railroad as lessee or as purchaser of the same or any interest therein. The railroad is to be built, owned and operated by the South Carolina corporation as an entity distinct from the petitioners as the projectors thereof.
Suppose we should accept the construction that the stockholder
of the foreign corporation must apply for a domestic charter, how would that relieve the difficulty, if other foreign corporations or associations were as matter of fact stockholders? It is not unreasonable to suppose that the constitutional convention knew that it was possible to be within the charter power of any foreign corporation to own stock in another. In that view the difficulty remains that if all stockholders must apply, then some foreign corporation *Page 340 
may have to apply as such. It is sought to obviate this difficulty by saying that only those stockholders who are natural persons must petition for a charter in this State, and may become a new corporation. This would be giving, we think, an unwarranted construction to the language of the Constitution requiring the owners or projectors of a prospective railroad in this State to become incorporated. The case of the Southern Ry. v. Tompkins, and the other cases in this State cited above, distinctly hold that the constitutional provision is not violated by the grant of a domestic charter to a foreign corporation upon its own application. The cases cited held the Act of 1896 constitutional, which provided for the domestication of foreign railroad corporations by the filing of an authenticated copy of the charter. This act was supplanted by the act of February 25, 1902. Under said act of 1902, petitioners Lyles and Phlegar sought to be incorporated, and upon refusal of the Secretary of State to issue the charter, mandamus was sought to compel the same in the case of Lyles v. McCown,Secretary of State, 82 S.C. 127.
That statute required that the owners and stockholders of a foreign corporation should apply for a charter and become incorporated in this State in the manner provided in the act of February 28, 1899, which among other things, required books of subscription to the capital stock to be opened in this State, and not less than five hundred dollars per mile shall be subscribed by bona fide subscribers, and the organization of the company by election of officers.
A demurrer to the petition was sustained on the ground that the statute authorizing the incorporation had not been complied with in the particulars above mentioned. The Court declined to give assent to the contention then made that article IX, section 8 of the Constitution, and the statute passed in pursuance thereof, did not contemplate recognition of the organization by subscription of stock, payment of stock, election of officers and other steps in the organization *Page 341 
already taken under a charter obtained from another State. There is, therefore, nothing in this last case antagonistic to the rule announced in the Tompkins case; on the contrary, that case was referred to and distinguished.
The legislature conceiving that a more practical method of incorporating foreign companies and their stockholders, owners and projectors was necessary, adopted the present statute, with which petitioners have fully complied.
Up to this point we have considered the question as if the foreign corporation alone is applying for a domestic charter.
In this case, however, natural persons join in the petition, and one of them is a resident citizen of this State, and the South Carolina corporation will be composed of natural persons. If, therefore, we should permit ourselves to inject irrelevant matter into the case and notice what seems the betenoire of the discussion, the right of removal to the Federal Court, that fact would distinguish the charter, if granted in this case, from the charter of adoption in the Tompkins case, and very probably it would come within the remarks of the Court in R.R. v. James, 161 U.S. 545, that, "In order to bring such an artificial body as a corporation within the spirit and letter of that Constitution, as construed by the decisions of this Court, it would be necessary to create it out of natural persons, whose citizenship of the State creating it, would be imputed to the corporation itself."
But whatever may be the result with respect to the matter of removal, the application in this case cannot be denied without overruling the Tompkins case and the cases which have followed it, as it is clear that the statute in question, if possible, is even more clearly within the Constitution than the statute sustained in that case.
The respondents rely upon the following language inSouthern Ry. v. Tompkins, 48 S.C. 49, 52,25 S.E., 982, as a basis for the overthrow of the statute in question: "What was the intention of the framers of the Constitution *Page 342 
in adopting section 8 of article IX? The main object was to require foreign railroad companies to be placed on the same footing with domestic corporations as to their rights and liabilities under the jurisdiction of the State Courts."
This is attempted to be construed as if the Court was considering the question of removal of causes to the Federal Courts, whereas, no such question was before the Court. It is not usual to approve a quoted extract from an opinion interpreting the Constitution as a basis for overthrowing the opinion and interpretation.
A more reasonable construction of the language quoted, in the light of the conclusion to which it led, is to consider it as referring to the constitutional power to domesticate a foreign corporation, and to confer upon such domesticated corporation, the rights, and subject it to the duties and liabilities, of a domestic corporation. Among the principal rights thus conferred would be the power to condemn rights of way, and among the principal duties and liabilities would be to subject its domestic charter to alteration and repeal.
Other local rights and duties subject to the jurisdiction of State Courts might be mentioned, and give ample scope to the meaning of the quoted remarks, without imputing a meaning foreign to the question under consideration in that case, which was the power of the legislature to grant a domestic charter to a foreign corporation.
Under this view it is the plain, ministerial duty of the Secretary of State to issue the charter applied for, and writ of mandamus should issue.
CIRCUIT JUDGES PRINCE, MEMMINGER, ALDRICH and
SHIPP concur in this opinion.