Am. Loan & Trust Co. v. Gen. Electric Co.

• Decision Date: 29 December 1901
• Citation: Am. Loan & Trust Co. v. Gen. Electric Co., 51 A. 660, 71 N.H. 192 (N.H. 1901)
• Court: New Hampshire Supreme Court
• Parties: AMERICAN LOAN & TRUST CO. v. GENERAL ELECTRIC CO.

51 A. 660

71 N.H. 192

AMERICAN LOAN & TRUST CO.

v. GENERAL ELECTRIC CO.

Supreme Court of New Hampshire. Merrimack.

Dec. 29, 1901.

Bill in equity by the American Loan & Trust Company against the General Electric Company.Facts agreed, and case transferred on a special question.Case discharged.

Bill in equity to restrain the General Electric Company, a judgment creditor of the Concord Electric Company, from completing a levy on property of the latter company, mortgaged to the American Loan & Trust Company.Facts agreed.The Concord Electric Company is a corporation formed May 29, 1901, under the general law.Its articles of association state the objects of its formation as follows: "The objects for which this corporation is established are: (1) To acquire from the purchasers of all the property, rights, and franchises of Concord Land and Water Power Company under foreclosure sale held at Concord, New Hampshire, on March 6, 1901, all said property, rights, and franchises acquired by said purchasers at said sale; (2) as the successors and assigns of said purchasers, to be constituted under chapter 52 of the Laws of 1895 a corporation as of the date of said sale for all purposes, and to be vested with all the rights, powers, and privileges of said Concord Land and Water Power Company under its charter or the public laws; (3) to acquire, improve, and develop water power on the Merrimack river in the city of Concord for hydraulic, electrical, and other purposes; (4) to generate, distribute, and deal in electric energy in all its forms; (5) to buy, own, sell, and deal in real estate and personal property in connection with the foregoing business; (6) to acquire, own, and dispose of stocks and bonds in other corporations in connection with the various forms of business herein specified; and (7) to carry on such manufactures and enterprises in connection with all the foregoing purposes as may from time to time appear necessary or desirable to the corporation."The Concord Land & Water Power Company, to whose property, etc., the Concord Electric Company succeeded, was also a corporation, formed in 1892, under the genera] law, for the following purposes, as specified in its articles of association: "The object for which the corporation is established is the improvement and development of the water power on the Merrimack river, in the city of Concord, for electrical and other purposes, and buying, owning, and selling such real and personal property, and carrying on such various manufactures and such other business in connection with said water power and power developed therefrom as may seem necessary and desirable to the corporation."The latter corporation owned, among other things, an electric light and power plant in Concord, operated by electricity developed on the company's property at Sewall's Falls on the Merrimack river, and conducted along highways and streets in the city upon lines of wire placed therein under licenses granted by the mayor and aldermen.October 2, 1893, the water power company mortgaged its property, rights, and franchises to the American Loan & Trust Company to secure the payment of an issue of bonds amounting to $400,000.The property of the company was in the possession and under the management of receivers, duly appointed by the court, from June, 1897, to July, 1901, and they made large additions to it under the authority of the court.By virtue of a decree made in October, 1900, in a suit in favor of the trust company for a foreclosure of the mortgage, the property, rights, and franchises of the water power company, including the additions and improvements made by the receivers, were sold and conveyed, July 1, 1901, to three persons, who immediately conveyed the same to the Concord Electric Company.The Concord Electric Company, in addition to its organization under the general law, availed itself of the authority conferred by chapter 52,Laws 1895, to become a corporation, by adopting its present name, fixing its capital stock at $400,000, and filing with the secretary of state the certificate required by that chapter.The Concord Electric Company issued bonds for the purpose of paying a part of the purchase price of the property, etc., and for the purpose of paying certificates issued by the receivers, amounting to $70,000, for the cost of additions and improvements, the payment of which was assumed by the company in the purchase, and for the purpose of providing funds for making further additions, improvements, and extensions; and it secured the payment of the bonds by a mortgage, duly executed and recorded, to the American Loan & Trust Company, of all the property, rights, privileges, and franchises acquired by its purchase and to be subsequently acquired, and all contracts, choses in action, then and subsequently belonging to the company, and all income and revenues accruing from the mortgaged premises.The bonds are now in the hands of holders for value.The property so acquired and mortgaged consisted of several hundred acres of land situated on both sides of the Merrimack river in Concord, upon which are located its dam, canal, and power house used for converting the power of the river into electric energy; a pole line for transmitting the energy from the power house to the compact part of the city; a station on Bridge street in Concord, containing apparatus for distributing electric currents, and an auxiliary electric plant operated by steam power for supplying electric energy when the water power plant is disabled; lines of wire located in streets of the city under licenses granted by the mayor and aldermen for supplying electric energy for lights for the city and its inhabitants and for mechanical uses; tools and other personal property used in the business; and contracts for supplying electric energy to customers, including contracts with the city for lighting streets.The business carried on by the company is identical with that carried on by its predecessor; and the property covered by its mortgage, excepting the additions that were made by the receivers, is substantially the same as that covered by the water power company's mortgage aforesaid.A large portion of the company's real estate is now used for agricultural purposes by tenants.The company has a large quantity of land for sale for mechanical and building purposes, and is prepared to furnish electric energy for manufacturing purposes on this land.The General Electric Company, having recovered a judgment against the Concord Electric Company, has commenced a levy upon the Bridge street station above mentioned.This station, and the apparatus contained in it, are indispensable to the carrying on of the Concord Company's business.The defendants contest the validity of the trust company mortgage on the ground that the Concord Company had no power to make such a conveyance of its property without special authority from the legislature.The question of power was transferred from the October term, 1901, of the superior court by Stone, J.

Streeter & Hollis, for plaintiff.

Johnson, Clapp & Underwood, for defendant.

CHASE, J.The power of private corporations generally to secure the payment of their debts by a mortgage of their property is not denied; but it is alleged that the Concord Electric Company is a quasi public corporation, and, being such, cannot mortgage or otherwise alienate its franchises and the property required for the performance of its public duties without the assent of the legislature.According to the weight of authority, measured by the number of the cases, quasi public corporations have this disability.4 Thomp. Corp. §§ 5352, 5355, and authorities cited.Whether the reasons upon which the doctrine rests are sufficient to support it has been seriously questioned.3 Cook, Corp. 1782a;Miller v. Railroad Co., 36 Vt 452;Shepley v. Railroad Co., 55 Me. 395, 407;Kennebec & P. R. Co. v. Portland & K. R. Co., 59 Me. 9;Hunt v. Gaslight Co., 95 Tenn. 136, 31 S. W. 1006.The doctrine has been approved in this state in respect to railroad corporations.Pierce v. Emery, 32 N. H. 504;Richards v. Merrimack & C. R. R., 44 N. H. 127;State v. Hayes, 61 N. H. 264, 324.Whether the secondary franchises of a quasi public corporation—the franchises other than that of being a corporation—and the property required for the fulfillment of the public purposes of the corporation may be mortgaged depends upon the terms upon which the franchises are granted, "or, in the absence of anything special in the grant itself, upon the intention of the legislature, to be deduced from the general purposes it had in view, the means it intended to have employed to execute those purposes, and the course of legislation on the same or similar subjects; or, as it is sometimes compendiously expressed, upon the public policy of the state."Hall v. RailroadCo., Fed. Cas. No. 5,948.The Concord Electric Company was formed under the general law of the state.This provides that any five or more persons of lawful age may associate together by articles of agreement to form a corporation for certain specified purposes, and for "the carrying on of any lawful business except banking, life insurance, the making of contracts for the payment of money at a fixed date or upon the happening of some contingency, and the construction and maintenance of railroads."Pub. Stc. 147, § 1.When the articles are recorded as required, and the charter fee, if any, is paid, the signers become a corporation, "and such corporation, its officers and stockholders, shall have all the rights and powers and be subject to all the duties and liabilities of other similar corporations, their officers and stockholders, except so far as the same are limited or enlarged by this chapter."Id.§ 4.Among the powers expressly granted to such corporations is the power to make "contracts necessary and proper for the transaction of their authorized business," and to "purchase,...