Court Opinion

ID: 5555338
Source: CourtListenerOpinion
Date Created: 2022-01-11 00:40:07.366366+00
Date Added: 2024-06-11T08:35:18.687379
License: Public Domain

Brown, C. J.,
concurring.
For the purpose of laying, building, and malting a Railroad communication from the city of Savannah to the interior of the State, a company was incorporated by the name and style of the Central Railroad and Banking Company of Georgia, with power to have, purchase, receive, possess, enjoy and retain, to them and their successors, lauds, rents, tenements, hereditaments, goods, chattels and effects, of whatsoever kind, nature oi; quality, the same may be; and the same to sell, grant, demise, alien or dispose of. The exclusive right to construct, keep up and use a railroad between the city of Savannah and the city of Macon, together with banking privileges was granted to said company. But this exclusive right and the banking privileges, are only given for *635twenty-five years, “ to be computed from the time fixed by this Act for the completion of the works authorized by this Act — the Act of 14th December, 1835. “Provided, nevertheless, that the Central Railroad and Banking Company of Georgia, shall after the lapse of said twenty-five years, be and remain incorporate and vested as to their own ivorks, with all the estates, rights, powers and privileges by this Act granted and secured.” Eight years is allowed by this Act for the building and completion of the Road. It follows therefore, that the exclusive right to keep up a railroad between the two cities, and the banking privileges, expired on the 14th of December, 1868; after which time the company remains incorporate with the privileges and rights granted by the charter, “as , to their worlcs” only; and have no power to purchase or hold real or personal estate beyond what is necessary to keep up and maintain and successfully work a railroad between said cities; and, as is provided in another part of the charter, to purchase and hold such real estate as shall have been bona fide mortgaged to it as security, or conveyed to it in satisfaction of debts previously contracted in the course of its dealings, or purchased at sales upon judgements which shall have been obtained for such debts.
The Southwestern Railroad Company is chartered “for the purpose of constructing a railroad connection between the city of Macon and the navigable waters of the Gulf of Mexico,” and it is declared that “ they shall confine their efforts and enterprise to the building ” of this road.
I hold that, under these charters, neither the Central Rail-: road and Banking Company nor the Southwestern Railroad Company has power to purchase stock in any other railroad company, and as such purchase is beyond the power of either company and endangers its charter, any stockholder of either company has the right to file his bill in Chancery to restrain and enjoin any such purchase at any time before it has been fully consummated by the transfer of the stock' to the company and the payment of the consideration therefor, as against any vendor having actual notice of the provisions of the charter of the company. And in this case I hold that • *636the city of Savannah, which was a corporator in the original charter of this company, had actual notice of the provisions of the charters of these companies and of the limits imposed by their charters upon their right to purchase.
The amended charter of the Central Railroad and Banking Company, section 3, provided that books of subscription to the stock of said company shall again be opened at such time and places as shall be appointed by the corporation of Savannah, and shall remain open at each place for the space of two days, giving at least thirty days’ notice in the gazettes of Savannah, Macon and Milledgeville. It appears, therefore, that the corporation of Savannah was the agent appoint-by the State to organize this company by-opening the books of subscription for its capital stock; and it also appears by the reports before us,- as part of the papers in this case, that his Honor, the Mayor of the city, was a stockholder in the company to a large amount at the time of the sale in question. I think it fair, therefore, to say that the city is chargeable with adudl notice of the provisions of this charter, and of the limitations which existed upon its powers to make this purchase.
The city is also chargeable with like notice in the ease of the Southwestern Railroad Company, as she was a stockholder in that company, and one share of its stock is included in the sale. Indeed I understand it to be a general principle of law, that a railroad company, without express authority given by the Legislature to make the purchase, can not purchase stock in another railroad company: Angel & Ames on Corp., 392; Redfield, vol. 1, page 143, note; 12 Beavan, 339. A corporation is not permitted to apply the funds of the company to objects other than those distinctly defined by its charter, or by Act of the Legislature, no matter how beneficial the misapplication might be to the company or to invidual stockholders: 3 Eng. L. & E. Reps.,. 150; 16 do., 182; 73 Eng. Com. L., 73. The same principle is fully recognized and confirmed in the American cases: See Woodbury & Minot, 106; 24 Conn., 162; and 21 How. Reps., 442.
*637In the latter case the Supreme Court of the United States unanimously held that: When two separate corporations were created to make railroads, they had no right to unite and conduct their business under one management; nor had they a right to establish a steamboat line to run in connection with the railroads, and that notes given for the purchase of the steamboat can not be recovered upon. This authority of the highest judicial tribunal in this country is in point. If a railroad company has the power, without express authority conferred in its charter, or by statute, to purchase a single share of the capital stock of another railroad company, it has the like power to purchase all the shares of the capital stock of the other company, and take complete control of and manage the affairs of the company whose stock it has purchased, in connection with its own, which power is expressly denied by this decision of the Supreme Court.
I take it to be a well established principle in this Court, that statutes made in favor of corporations or particular persons in derogation of common right, are to be construed strictly, and that care should be taken not to extend them beyond their express words, or their dear import: 7 Ga., 221. In this case Warner, J., delivering the opinion of the Court, says: “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only, those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence.” In 5 Georgia, 561, my learned associate lays down the same rule ably and forcibly. In 8 Georgia, 30, Judge Lumpkin lays down the rule that care should be taken not to extend such statutes beyond their express words or their clear import. In 9 Georgia, 221, Nesbit, Judge, says: “Grants of exclusive privileges to a corporation or an individual are to be strictly construed. The grantee takes nothing by implication, and the rule has been settled to extend thus far, to-wit: that any ambiguity in the terms of a contract between an individual or corporation and the public, in which exclusive privileges are granted, must operate in favor of the public, and against the individual or *638the corporation.” I might extend quotations from the rulings of this Court of like import, but I deem it unnecessary. It will not be denied that the charter • of the Central Railroad and Banking Company is a contract between the corporation and the public. And the authorities above quoted settle the question that it can take nothing by implication, that care should be taken not to extend its powers beyond their express words, or their clear import, and that it has only such powers as the charter of its creation confers upon it, either expressly or as incidental to its very existence. I refer only to the charter of the Central Railroad and Banking Company, because it is admitted on all sides that its charter is more favorable to the plaintiffs in error than the charter of the Southwestern Railroad Company. If the power to purchase does not exist in the first named company, their case must fail.
Now, it does seem to me that this case, viewed in the light of these well considered authorities, is not even doubtful. The powers given to this company are expressly declared, by its charter, to be for the purpose of laying, building, and making a railroad connection from the city of Savannah to the interior of the State, and of maintaining the same. And since the banking powers, and the exclusive right to have a railroad between Savannah and Macon, have expired by their own limitation, -this is the only purpose of the charter. Its whole scope and extent, as it now exists, is to maintain and successfully work the railroad between said cities, and all the powers conferred by the charter are to be construed strictly in reference to this object. The company remains “ incorporate” and vested, “as to their own works,” with the powers specified in the charter, except as above stated, and vested with those powers as to their own works only.
By the Act of 1852, the Central Railroad is authorized to lease all railroads running in connection with it, or that may hereafter so run. And it was contended by the able counsel for the plaintiffs in error that this confers upon the Central Railroad Company the power to lease the Atlantic and Gulf Road, as a connection between them is authorized by the Act *639of 1861. And it is insisted that by this Act the public policy of the State is declared in favor of the control of the Atlantic and Gulf Road by the Central, or that, at any rate, since the passage of the Act of 1861, such control is not in violation of the public policy of the State.
There are two replies to this. The first is that this record does not show thatany such connection has in fact been made, and it is not a matter, it would seem, of which the Court can take judicial notice. The second is that the Act of 1861 is not of force. That Act is entitled “An Act 'to authorize the connection of the railroad of the Savannah, Albany and Gulf Railroad Company, with the railroad of the Central Railroad and Banking Company of Georgia, by a track running through or around the city of Savannah.” The preamble is in these words: “Whereas, there exists an absolute military necessity, at this time, to connect the aforesaid roads.” The body of the Act then authorizes this connection. Here nothing is left to inference. The State was conducting war against the Government of the United States, and it is declared on the face of the Act what is the object and only object of the connection. It was to meet an absolute military necessity which existed at that time. The 11th Article of the Constitution of this State, ratified in 3 868, adopts all Acts passed by any legislative body sitting in this State as such, since the 19th of January, 1861, including Irwin’s Code, etc., “except so much of said several statutes, Code and laws as may be inconsistent with the supreme law herein recognized, or may have been passed in aid of the late rebellion against the United States, or may be obsolete, or may refer to persons held in slavery, which excepted laws are inoperative and void.” Argument is unnecessary. This Act is not adopted. On the contrary the Constitution declares it to be inoperative and void. There is therefore no Act in force authorizing a connection betweén said roads or between the Central Road and the Atlantic and Gulf Road, with which, I believe, the Savannah, Albany.and Gulf, has been consolidated.
Again I insist if the connection were legally authorized, that it does not come within the true intent or meaning of *640the Act of 1852, authorizing the Central Road to lease all roads running in connection with that road. The Atlantic and Gulf Road does not run in connection with the Central in the sense of this Act. On the contrary, it runs in opposition to it, as a competitor for the freights and travel of a large section of country, and runs in a different direction, and through an entirely different part of the State. If the Act of 1852 can be fairly construed to embrace the Atlantic and Gulf Road, whenever a track is authorized to be laid between the two roads, it embraces every other railroad in Georgia, as they all connect in that sense, and the Central Road has power to lease every road in the State, so soon as it has the means; and it can, by a sufficient increase of fare and freights, in sections where it has destroyed competition, soon possess itself of the necessary amount of funds. Such could not have been the intention of the Legislature in the passage of the Act. It follows that there is no public policy of the State, recognizing the right or power of the Central Road to lease or otherwise control the Atlantic and Gulf Road.
But on the contrary, the public policy of this State, as clearly shown by its legislation, is to encourage fair and just competition, between the different railroad companies of the State, and to discourage monopolies. The fact that the State granted a charter to the Atlantic and Gulf Road, and subscribed to its capital stock, thereby aiding in its construction, shows that it was the policy of the State, to open a thoroughfare across the southern part of her territory, for the benefit of the people of that and the southwestern section, and for the encouragement of fair and just competition with the roads already in existence, thereby securing to her people the transportation of their freights on just and reasonable terms.
This public policy of the State is violated by the purchase by the Central and Southwestern Railroad Companies, of such quantities of the stock of the Atlantic and Gulf Road as will enable them, by the aid of other stockholders in their interest, to control that road, and destroy that just competition which the legislation of the State, and her subscription *641to the stock of the Atlantic and Gulf Road, was intended to secure and perpetuate for the benefit of her people occupying a large extent of her territory, who would otherwise be left at the mercy of an over-shadowing corporation possessing the power to load them with unjust burdens,' to accumulate a large reserved1-fund, beyond just and liberal dividends to its stockholders, to be used in extending its control, by other like purchases, and making more complete its dominion over the government and people of the State. '
The State of Georgia having been made a party to this bill, and having appeared as such, has the right, as was insisted by her able and eloquent counsel, Judge Lochrane, to object to the consummation of this purchase by the two railroad companies, plaintiffs in error, which has been attempted in violation of both her public policy and their charters.
It was urged with great zeal by counsel for plaintiffs in error, that a ruling against the right of these companies to make this purchase, would be productive of great mischief, as they have indorsed the bonds of other railroad companies to a large amount to aid in the construction of lines to run in connection with them, and that such a ruling as we now make, would render the indorsement void. Were that even so, it is no sufficient reason why we should not faithfully administer the law, as we find it. But such is not my understanding.
Those railroad bonds are usually payable to bearer, transferable on delivery, like a promissory note, and áre due at some distant day- in the future. They are therefore presumed to be given" for a valuable consideration. And as it is presumed till the contrary is shown that every corporation, as well as natural person, discharges its legal duties, and confines itself within the scope of its legitimate powers, I am of opinion that a bona fide purchase of a bond, issued and indorsed' as aforesaid, would have a legal right to compel the corporation by which it is indorsed, to pay the coupons as they became due, and the face of the bond at maturity. The corporation would not -be allowed in this way to take *642advantage of its own wrong, to the injury of a bona fide purchaser, who took the bond without actual notice of the fact that the corporation transcended its authority. In the case in 21st Howard, where the consolidated companies were held not to be liable' for 'the notes given for the steamboat purchased by them, in violation of their charters, it appears in the statement of the case; that the assignee of the notes who brought the suit, took them with notice.
I am equally well satisfied that any stockholder of the company would have a right to file his bill to enjoin the indorsement of the bonds of another company when not authorised by the charter, or that the State, after the unauthorised indorsement is made, _ might proceed to forfeit the charter on account of its violation by the company. But if the stockholder acquiesces in the'action of the company, till the bon¿s have been Indorsed by'the officers of the company, by authority of the board of directors, and have gone into circulation, and are in the hands of bona fide holders without actual notice, he will not then be heard, and the company will be estopped from denying the legality of its own act and will be held liable.
In conclusion, I will remark that the powers and liabilities of a corporation are fixed by its charter: Code, section 1670. A corporation can only purchase and hold such propperty, real and personal, as is “necessary to the purpose of its organization,” and it can only do such acts as are necessary for the legitimate execution of this purpose : Code, section 1678. And a corporation forfeits its'charter, by a wilful violation of any of the essential conditions on which it is granted : Code, section 1684.
In my opinion, the purchase, which is the subject-matter of this investigation, is not within the legitimate scope of the powers conferred upon these Corporations, and is not necessary to the purpose, of their organization. And as the city of Savannah had actual notice of the extent of their powers, under their respective charters, the purchase being illegal and in violation of their charters, she has no right to insist upon its consummation. ,
*643When the stock of a corporation is taken, there is an implied contract between the corporation and each stockholder that the corporation will not violate the charter, and for any act done by. the corporation in violation of the charter, the stockholder may call it to account in a Court of Equity: 2 Russel and Mylne, 461; 13 Eng. Con. Ch. Reports, 131; 2 R. & M., 470; 4 John Ch., 573; 1 Eng. Railway cases, 153, 154. And equity will interfere by injunction to restrain the violation of a charter, whether the violation is by misapplication. of the. funds of the corporation, or the exercise of ungranted powers: Redfield’s Railway Cases, 92, and notes; Ibid, 474, 475, and notes; 1 L. Reg., 154 ; Eden on Injunctions, 338-9.
I am therefore of the opinion that the judgment of the Court below, refusing to dissolve the injunction, is right and ought to be affirmed.