Delaware & Hudson Co. v. Boston R. R. Holding Co.
| Decision Date | 04 October 1948 |
| Citation | 81 N.E.2d 553,323 Mass. 282 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | THE DELAWARE AND HUDSON COMPANY & others v. BOSTON RAILROAD HOLDING COMPANY & others. |
April 5, 1948.
Present: QUA, C.
J., DOLAN SPALDING, & WILLIAMS, JJ.
Boston Railroad Holding Company. Corporation, Dissolution, Charter. Constitutional Law, Obligation of contracts, Due process of law, Police power, Equal protection of laws. Statute 1909, c 519, incorporating Boston Railroad Holding Company, and
St. 1910, c.
639, authorizing it to issue preferred stock, by reason of
Section 2 of St 1903, c. 437, did not, separately or together, create a contract between the Commonwealth and the holding company or the New
York, New Haven and Hartford Railroad Company, or both of them, which would be unconstitutionally impaired by St. 1946, c. 518, dissolving the holding company.
In the circumstances, the provision of St. 1946, c. 518, Section 4 that in the dissolution of Boston Railroad Holding Company and distribution of its assets, no distribution in kind or sale of stock of the Boston and
Maine Railroad shall be made unless the department of public utilities shall have furnished to the court satisfactory evidence showing that no distributee or purchaser (other than the Boston and Maine Railroad itself) shall hold stock carrying more than five per cent of the total voting power to which shareholders of Boston and Maine Railroad shall then be entitled, was permissible regulation under the general powers of the Legislature, the so called police power, and was not a taking of property without compensation or without due process of law.
The mere facts, that Pennroad Corporation, not shown to have been incorporated in this Commonwealth, held approximately nineteen per cent of the voting power in the Boston and Maine Railroad as against approximately twenty-six per cent controlled by the New York, New Haven and Hartford Railroad Company through its ownership of all the common stock in Boston Railroad Holding Company and the holding company's ownership of stock in the Boston and Maine Railroad, and that Pennroad
Corporation was not, as was the New York, New Haven and Hartford Railroad Company, affected by the provision of St. 1946, c. 518, Section
4, restricting the quantity of Boston and Maine Railroad voting stock which might be held by a distributee or purchaser of that stock in liquidation of the holding company, did not render the statute unconstitutional as denying equal protection of the laws to the New
York, New Haven and Hartford Railroad Company.
PETITION, filed in the Supreme Judicial Court for the county of Suffolk on July 3, 1947.
The case was heard by Ronan, J., and by him was reported and reserved for consideration of the full court.
H. D. McLellan & R.
Ely, (H. V. Atherton with them,) for the petitioners.
J. L. Hall & R.
Wait, (C. W. Oberdorfer with them,) for Boston Railroad Holding Company and New York, New Haven and Hartford Railroad Company.
G. B. Rowell, Assistant Attorney General, (C.
A. Barnes, Attorney General, & R.
H. Parker, Assistant Attorney General, with him,) for the Commonwealth.
This petition was brought in this court by holders of so called "publicly held" preferred stock of the respondent Boston Railroad Holding Company, hereinafter called the holding company, against that company and the Commonwealth for the purpose of securing the appointment of a receiver to liquidate the affairs of the holding company, as provided in circumstances that have occurred, by St. 1946, c. 518 Section 3. [1] The New York, New Haven and Hartford Railroad Company, hereinafter called the New Haven, has been allowed to intervene as a party respondent. The single justice, after hearing evidence and making findings of fact and rulings of law, reserved and reported the entire case for the consideration of the full court.
In 1907 the New Haven acquired one hundred nine thousand nine hundred forty-eight shares of the common stock of the Boston and Maine Railroad, hereinafter called the Boston and Maine. This acquisition was contrary to the policy of this Commonwealth as declared by St. 1874, c. 372, Section 53, which at the time of the acquisition was embodied in St. 1906, c. 463, Part II, Section 57. After the decision in Attorney General v. New York, New Haven & Hartford Railroad, 198 Mass. 413 , whereby the New Haven was enjoined from holding certain other stocks acquired by it, the Boston and Maine stock above mentioned was transferred to a resident of Connecticut who "retained" it in that State. Thereafter the Legislature of this Commonwealth enacted St. 1909, c. 519, incorporating the holding company for the sole purpose of holding the securities, including stock, of the Boston and Maine. Section 1 of this act made applicable to the new corporation certain provisions of general laws, the material portions of which are dealt with later in this opinion. Section 3 provided that the stock of the Boston and Maine acquired by the holding company should not be sold by it without express authority from the Legislature. Section 4 provided that any railroad then incorporated under the laws of this Commonwealth, as the New Haven was, might acquire stock of the holding company, which it might sell upon guaranteeing it, but not without express authority of the Legislature; that the Commonwealth might by act of the Legislature take or acquire such stock by purchase or otherwise, provided that such taking or purchase should include all the securities of the holding company; and that the acquisition by any railroad of the stock of the holding company should be deemed an acceptance by the railroad of all the terms and provisions of the act.
By St. 1910, c. 639, the holding company was given authority to issue preferred stock without voting power (Section 1). It was also provided that the preferred stock should constitute a charge and lien upon, and be secured by, all stock of the Boston and Maine held by the holding company (Section 2), and that, subject to the right of the Commonwealth reserved by the act of 1909 to purchase or acquire the preferred stock of the holding company, this court might enforce the lien by sale of the Boston and Maine stock (Section 4).
The New Haven brought in to the holding company the one hundred nine thousand nine hundred forty-eight shares of Boston and Maine stock which it had acquired in 1907, and received in exchange for those shares and additional shares acquired later (representing a total original investment by the New Haven of slightly over $30,000,000, but subsequently greatly depreciated in value) all the common stock of the holding company. This gave to the New Haven complete voting control in the holding company. The New Haven also acquired the preferred stock of the holding company, of which it still holds two hundred forty-seven thousand seven hundred fifty-nine shares out of a total of two hundred seventy-one thousand nine hundred nine shares. The remaining twenty-four thousand one hundred fifty shares of preferred, called the publicly held preferred stock, were guaranteed as to dividends by the New Haven and were sold by it to the public. This is the stock which the petitioners now hold in part. Through its control of the holding company and the latter's ownership of stock in the Boston and Maine, the New Haven has control of twenty-six and two tenths per cent of the voting power in the Boston and Maine. For further history of the relations between the holding company and the New Haven see Codman v. New York, New Haven & Hartford Railroad, 253 Mass. 144.
Statute 1946, c. 518, under which this proceeding is instituted, dissolves the holding company, subject to the provisions of G. L. (Ter. Ed.) c. 155, Section 51, which continues the corporation for three years as a body corporate for the purpose of prosecuting and defending suits and of enabling it gradually to settle and close its affairs, dispose of its property and divide its stock. The 1946 act also provides that the powers of the receiver appointed by this court to wind up the affairs, of the corporation and the existence of the corporation may be continued only so long as the court finds necessary for those purposes; that nothing in the act [1] shall affect the lien or priority of the preferred stock; but that no distribution or sale of the company's Boston and Maine stock shall be made unless the department of public utilities shall have furnished to the court satisfactory evidence showing that no distributee or purchaser (other than the Boston and Maine itself) shall hold stock carrying more than five per cent of the total voting power in the Boston and Maine; and that no sale or distribution shall be made before May 1, 1948, except pursuant to a plan of liquidation approved by a majority of each class of stock in the holding company and by the court as fair and equitable.
The provisions of the pertinent statutes will be discussed with greater particularity, and further findings of the single justice will be referred to in the course of the consideration of the issues presented. These issues are raised by the respondents the holding company and the New Haven, both of which contend that the 1946 act, under which this proceeding is brought, is wholly unconstitutional and gives the court no jurisdiction whatever to entertain the petition. They set up three grounds for this contention.
(1) They assert that the statutes of 1909 and 1910 created a contract or contracts between the Commonwealth on the one hand and the holding company and the New Haven or each of them on the other hand on the principle of Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, and that the 1946 act impaired the...
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