Attorney Gen. v. New York, N.H.&H.R. Co.

• Decision Date: 08 May 1908
• Citation: 198 Mass. 413,84 N.E. 737
• Parties: ATTORNEY GENERAL v. NEW YORK, N. H. & H. R. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

198 Mass. 413

84 N.E. 737

ATTORNEY GENERAL

v.NEW YORK, N. H. & H. R. CO.

Supreme Judicial Court of Massachusetts, Suffolk.

May 8, 1908.

Case Reserved from Supreme Judicial Court, Suffolk County; Arthur Prentice Rugg, Judge.

Suit by the Attorney General, on the relation of William D. T. Trefry, against the New York, New Haven & Hartford Railroad Company. Case reserved on the pleadings, master's report, including the evidence therewith reported, the interlocutory decree confirming the master's report, and the appeal of the informant for the determination of the full court. Decree for informant.Dana Malone, Atty. Gen., and Frederic B. Greenhalge, Asst. Atty. Gen., for informant.

J. H. Benton and C. F. Choate, Jr., for defendant.

KNOWLTON, C. J.

In St. 1906, p. 527, c. 463, part 2, § 57, is the following provision: ‘A railroad corporation, unless authorized by the general court or by the provisions of the following five sections, shall not directly or indirectly subscribe for, take or hold the stock or bonds of or guarantee the bonds or dividends of any other corporation.’ This is a re-enactment of a statute that has been in force since 1874. Then follows a limitation upon the amount of bonds that may be subscribed for and held or guaranteed under the authority above referred to. The following five sections authorize the holding of stock in a telegraph company whose lines connect two or more places on the railroad, the guaranteeing of bonds of a corporation incorporated in Massachusetts for the purpose of carrying freight, passengers and mails between any port of this commonwealth and Europe, the taking of stock in any elevator corporation organized for the purpose of erecting and operating a grain elevator within this commonwealth, the guaranteeing of bonds of connecting railroads and aiding in the construction of any branch or connecting railroad within the limits of the commonwealth, and, for that purpose, the taking of stock in such a corporation.

The provision above quoted is an affirmative statement of the doctrine of ultra vires, in reference to the stock or bonds of other corporations. It carries this prohibition into a field which otherwise, in individual cases and under peculiar conditions, possibly might seem to be open for occupation by a railroad corporation for the promotion, incidentally, of its corporate interests. It is intended to relieve corporations and others from any doubt as to proposed investments in the stock or bonds of other corporations, and as to the financial support of other corporations by guaranteeing their bonds or dividends.

By excepting action under the five following sections it recognizes a policy of the commonwealth to promote, under general laws, the investing in stock or the guaranteeing of bonds in certain corporations whose business is closely connected with that of the railroad corporation, or incidental to it, and also the like investing or guaranteeing for the purpose of aiding a connecting railroad, either already constructed or about to be constructed. Besides the general law permitting investing in aid of connecting railroads under these limitations, the exception recognizes the power of the general court, by further legislation, to authorize the holding of stock or bonds of other corporations, as such holding has often been authorized by special legislation in Massachusetts and in other states.

The Attorney General alleges that the defendant has violated this provision. It therefore becomes necessary to consider the statute more particularly, as well as the defendant's relations to it, and the conduct of the defendant referred to in the information. The statute refers to railroad corporations established under the authority of this commonwealth and amenable to its laws. It does not include foreign corporations. The defendant corporation was established under an act of the Legislature of Massachusetts, and it succeeds to rights and liabilities, or has directly obtained rights and assumed liabilities, under numerous legislative acts of Massachusetts. It was also organized under a law of Connecticut, where most of its property is. Many laws affecting it have been enacted in Connecticut, and it contends that, under the authority of these laws, it could legally do all that the Attorney General complains of.

The first question to be considered is whether, by reason of the peculiarities of its organization as a corporation owning and operating a railroad extending into different states, and deriving power and authority from the legislation of different states, it is relieved from the prohibition of the statute. If, without considering other provisions of the charter from Massachusetts or of the charter from Connecticut, we look first at the facts that there was a consolidation of two corporations into a single corporation which was the creature of both states, operating a railroad extending into both, having the same capital stock to cover the property in both states, and electing its officers and managing its business as a single corporation, there is nothing that makes it any more a domestic corporation in one of the states than in the other. It is a foreign corporation in neither of them. It is a domestic corporation in each of them. It is a single corporation in most of its features. In other features it is two corporations acting together as one. It is a single corporation with two parents who live apart and act independently, each having absolute control in his own domain. It owes allegiance and is subject alike to each, and is dependent upon each alike for future favors. We are speaking now of a legislative consolidation, or merger, of two corporations, upon equal terms, which this was; and not of mere permission to a corporation of one state to enter another state and acquire property or franchises there.

The statutes relating to corporations owning lines of railroad running across the boundaries of states differ considerably in their provisions. The acts under which the defendant corporation assumed its present name were St. 1872, p. 124, c. 171, and Connecticut Public Acts 1871, p. 713, c. 129. These provided for a consolidation of the Hartford & New Haven Railroad Company with the New York & New Haven Railroad Company. The New York & New Haven Railroad Company was incorporated in 1844. Private Laws of Connecticut, vol. 4, p. 1020. The Hartford & New Haven Railroad Company was itself incorporated, in its later form, under the authority of St. 1844, p. 162, c. 28, and the Resolve of Connecticut passed in 1845 (Private Laws of Connecticut, vol. 4, p. 967), whereby the Hartford & Springfield Railroad Company of Massachusetts and the Hartford & New Haven Railroad Company were united under the name of the New Haven, Hartford & Springfield Railroad Company. See, also, Private Laws of Connecticut, vol. 4, 900. By St. 1847, p. 464, c. 244, the name of the corporation to be formed by the union was changed to the Hartford & New Haven Railroad Company, which was the name of a previously existing corporation owning a railroad extending from Hartford to New Haven, incorporated in 1833. Private Laws of Connecticut, vol. 2, p. 1002. There were several acts of the General Assembly of Connecticut in regard to the Hartford & Springfield Railroad Company of Connecticut, covering the years from 1835 to 1842, but this corporation was never organized. The extension of the Hartford & New Haven Railroad Company and its union with the Hartford & Springfield Railroad Company were under the Resolve of 1845, already referred to. The acts relative to the Hartford & Springfield Railroad Company of Connecticut may be found in the Private Laws of Connecticut, vol. 2, p. 1006; volume 4, pp. 917-919; and in the Connecticut Private Acts 1838, p. 47. These acts all provide for a union with a Massachusetts corporation, for the construction and operation of a railroad between Hartford and Springfield.

The Hartford & Springfield Railroad Company, which was consolidated with the Hartford & New Haven Railroad Company under St. 1844, p. 162, c. 28, was incorporated under St. 1839, p. 44, c. 101, with the additional and amendatory acts, St. 1844, p. 162, c. 28; 1845, p. 414, c. 42, and 1847, p. 464, c. 244.

Section 7 of St. 1872, p. 125, c. 171, under which the New York, New Haven & Hartford Railroad Company was organized, is as follows: ‘Said consolidated corporation shall, at all times, be subject to the Legislature of this state as to that portion of its road in this state, as heretofore, and shall be subject to the general laws of this state as to its whole road, so far as such laws may be applicable thereto.’ In section 5 is this clause: ‘Provided, however, that when a special duty or liability is imposed, or any special franchise, privilege or immunity is conferred on the corporation so merged by its charter, such duty or liability shall attach to and be discharged by, and such franchise, immunity or privilege be enjoyed by such consolidated corporation, so far as the same is applicable to the road and franchise of said merged corporation.’ St. 1852, p. 45, c. 87, is an act authorizing the Hartford & New Haven Railroad Company to increase its capital stock, and in reference to the authority of the corporation it contains this language: ‘Also to make any lawful contract, and merge or make joint stock with any other railroad company owning a branch of said railroad or connecting line, without the limits of Massachusetts, in the same manner and to the same extent as may be authorized by the General Assembly of the state of Connecticut. And said company shall be subject to all the general laws of this commonwealth to the same extent as if their railroad were wholly therein. Provided, however, that nothing in this act shall be interpreted to confer the power to purchase, merge or make joint stock with the railroad of the New Haven and Northampton Company, known as the Canal...