Lindsley v. Natural Carbonic Gas Co.

• Citation: 162 F. 954
• Parties: LINDSLEY v. NATURAL CARBONIC GAS CO. et al.
• Decision Date: 12 June 1908
• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

162 F. 954

LINDSLEY v. NATURAL CARBONIC GAS CO. et al.

United States Circuit Court, S.D. New York.

June 12, 1908

On Motion for Preliminary Injunction July 1, 1908.

Morris & Plante (Alton B. Parker, of counsel), for complainant.

Rockwood Scott & McKelvey, Charles C. Lester, Thomas & Oppenheimer and William S. Jackson, for defendants.

WARD Circuit Judge.

The plaintiff, a citizen of New Jersey and a stockholder and bondholder of the defendant the Natural Carbonic Gas Company brings this bill, on his own behalf and on behalf of all other stockholders and bondholders of the said company, against the Natural Carbonic Gas Company, a corporation of the state of New York, the Attorney General of the state of New York, certain citizens of the state of New York, who compose the 'Citizens' committee in charge of the movement to restore the Saratoga mineral waters and the prestige of the Saratoga Springs as a national health resort,' and the defendant Frank H. Hathorn, who is co-operating with them, asking that the defendant the Natural Carbonic Gas Company be enjoined from complying with, and the other defendants enjoined from enforcing, as they threaten to do, the act of May 20, 1908, entitled 'An act for the protection of the natural mineral springs of the state and to prevent waste and impairment of its natural mineral waters,' on the ground that the same is unconstitutional, violating especially the fourteenth amendment to the Constitution, because it deprives the defendant the Natural Carbonic Gas Company and the complainant of its and his property without due process of law and takes its and his property for public and private purposes, or both, without compensation, and deprives it and him of the equal protection of the laws.

The act is as follows:

An act for the protection of the natural mineral springs of the state and to prevent waste and impairment of its natural mineral waters.

The people of the state of New York, represented in Senate and Assembly, do enact as follows:

Section 1. Pumping, or by any artificial contrivance whatsoever in any manner accelerating the natural flow or producing an unnatural flow of that class of mineral waters holding in solution natural mineral salts and an excess of carbonic acid gas from any well made by boring or drilling into the rock, or pumping, or by any artificial contrivance whatsoever in any manner accelerating the natural flow or producing an unnatural flow, of natural carbonic acid gas issuing from or contained in any well made by boring or drilling into the rock, is hereby declared to be unlawful. Pumping, or by any artificial contrivance whatsoever in any manner accelerating the natural flow, or producing an unnatural flow, of that class of mineral waters holding in solution natural mineral salts and an excess of carbonic acid gas from any well made by boring or drilling into the rock, or pumping, or by any artificial contrivance whatsoever in any manner accelerating the natural flow, or producing an unnatural flow of, natural carbonic acid gas issuing from or contained in any well made by boring or drilling into the rock, by reason whereof the natural flow from any mineral spring or any mineral well belonging to any other person or corporation, is impeded, retarded, diminished, diverted or endangered, or the quality of its waters is impaired, or the quantity of its carbonic acid gas or mineral ingredients diminished, is hereby declared to be unlawful.

Pumping, or otherwise drawing by artificial appliance from any well made by boring or drilling into the rock, that class of mineral waters holding in solution natural mineral salts and an excess of carbonic acid gas, or pumping, or by any artificial contrivance whatsoever in any manner producing an unnatural flow of, carbonic acid gas issuing from or contained in any well made by boring or drilling into the rock, for the purpose of extracting, collecting, compressing, liquefying or vending such gas as a commodity otherwise than in connection with the mineral water and the other mineral ingredients with which it was associated, is hereby declared to be unlawful. The doing of any act or thing whatsoever whereby the natural flow from any spring or well of that class of mineral waters holding in solution natural mineral salts and an excess of carbonic acid gas, is impeded, retarded, diminished, diverted or endangered, or the quality of its water is impaired, or the quantity of its carbonic acid gas or mineral ingredients diminished, is hereby declared to be unlawful.

Sec. 2. Any citizen of the state may maintain an action to restrain any person or corporation from committing any of the unlawful acts specified in section one of this act, in any city or town in which said citizen is assessed for and is liable to pay, or within one year before the commencement of the action has paid, a tax.

Sec. 3. The Attorney General may at any time, in the exercise of his discretion, bring and maintain an action in the name of the people of the state of New York, to restrain any person or corporation from any of the unlawful acts specified in section one of this act. It shall be the duty of the Attorney General to institute and prosecute such an action, upon the written request of ten citizens of this state who are assessed for taxes therein and whose aggregate assessments amount to not less than $10,000, and who shall state, in writing, facts and circumstances showing any such unlawful act or acts and give an undertaking with sureties to be approved by a Justice of the Supreme Court to indemnify the people against the costs of such action.

Sec. 4. The provisions of section 870 of the Code of Civil Procedure shall apply to any action brought under this act and no person shall be excused from answering on the ground that his examination would tend to convict him of crime, but such answers shall not be used against him in any criminal prosecution for violating the provisions of this act.

Sec. 5. Nothing in this act contained shall be construed to affect the Onondaga salt springs reservation, located in Onondaga county, or the springs of any county adjacent thereto.

Sec. 6. This act shall take effect immediately.

The bill alleges that the complainant is a citizen and resident of the state of New Jersey and the owner and holder of 5 first-mortgage gold coupon bonds of the value of $500 each of the Natural Carbonic Gas Company, and of 19 10-year 6 per cent. debenture bonds of the value of $7,500, and of 35 shares of preferred capital stock, and of 27 shares of the common capital stock of the said company of the value of $100 each; said first-mortgage bonds being secured by a mortgage upon the premises of the said company consisting of 21 acres of land in the village of Saratoga Springs upon which it has erected valuable buildings containing costly machinery and in which it is doing a business of the value of more than $50,000 a year. The bill admits that the defendant gas company pumps through wells made by boring or drilling into the rock on its lands mineral waters holding in solution natural mineral salts and an excess of carbonic acid gas, and that, when the said mineral water is raised to the surface, it extracts the gas which it compresses and sells throughout the United States. It is also alleged that the enforcement of the statute will utterly destroy the value of the gas company's property and of the complainant's interest therein.

The act, read in connection with the business of the gas company, provides that:

First. Pumping mineral waters or gas from any such well is unlawful. Second. Pumping mineral water or gas from any such well by means whereof the natural flow from any mineral spring or any mineral well belonging to any other person or corporation is impeded, retarded, diminished, diverted or endangered or the quality of its waters is impaired or the quantity of its carbonic acid gas or mineral ingredients is diminished is unlawful. Third. Pumping from any such well mineral waters for the purpose of extracting, collecting, compressing, liquefying or vending such gas as a commodity otherwise than in connection with the mineral water or other mineral ingredient with which it is associated is unlawful. Fourth. Doing any act or thing whereby the natural flow from any such well is impeded, retarded, diminished, diverted or endangered or the quality of its waters is impaired or the quantity of its carbonic acid gas or mineral ingredients is diminished is unlawful.

An order to show cause why a preliminary injunction as prayed for should not issue with a restraining order in the meantime was granted, returnable June 19th, and the defendants now move to vacate the restraining order.

It is objected, in the first place, that the complainant cannot assert his rights as a stockholder because of his failure to comply with the ninety-fourth rule in equity. Inasmuch as the jurisdiction of the court depends not only upon diversity of citizenship, but upon constitutional grounds, the rule is not applicable. It was enacted to prevent collusive actions in the federal courts by nonresident stockholders on the ground of diversity of citizenship, and also to prevent stockholders from asserting rights of a corporation which should be asserted by its directors. In this case the court has jurisdiction because of the constitutional questions raised and it is quite evident that the gas company and its directors...