George v. Central Railroad & Banking Co. of Georgia

• Decision Date: 31 January 1894
• Citation: 101 Ala. 607,14 So. 752
• Court: Alabama Supreme Court
• Parties: GEORGE ET AL. v. CENTRAL RAILROAD & BANKING CO. OF GEORGIA ET AL.

14 So. 752

101 Ala. 607

GEORGE ET AL. v. CENTRAL RAILROAD & BANKING CO. OF GEORGIA ET AL.

Supreme Court of Alabama

January 31, 1894

Appeal from chancery court, Bullock county; Jere N. Williams Chancellor.

Bill by Fannie M. George and others against the Central Railroad &amp Banking Company of Georgia and others. From a decree sustaining a demurrer to the bill, complainants appeal. Reversed.

Geo. F Moore and P. B. McKenzie, for appellants.

Peabody Brannon, Hatch & Martin and Lawton & Cunningham, for appellees.

HEAD J.

This bill is exhibited by C. S. Lee and Fannie M. George, citizens of Alabama, and stockholders in the Mobile & Girard Railroad Company, against that company, an Alabama corporation, and the Central Railroad & Banking Company of Georgia, a Georgia corporation. It is filed in behalf of the complainants and all other stockholders of the Mobile & Girard Company (except the said Central Company of Georgia) who may come in and make themselves parties, and contribute to the expenses of the suit. The purpose of the bill is to enjoin the Central Company from voting certain stock held and claimed by it in the Mobile & Girard Company, to vacate, as void, a certain lease of its road and other property and franchises by the Mobile & Girard Company to the Central Company, and for an accounting from the latter company for its use and abuse of the property and rights of the former, while in possession of the same. A receiver of the property of the Mobile & Girard Company is also applied for. The allegations show that prior to the 13th day of September, 1882, the Central Company had acquired 4,538 shares of the capital stock of the Mobile & Girard Company, of the face value of $438,00, and on that date controlled about 2,799 shares of preferred stock in said Girard Company, on which it (the Central) held a mortgage, and which it voted in meetings and at elections of officers of the Girard Company; at that date, the whole amount of the capital stock of the Girard Company outstanding was of the face value of $1,268,372.74, or about 12,683 shares; that on June 1, 1891, the Central owned 8,161 1/2 shares of said stock, and that the whole number of shares then outstanding was $12,679 70-100; and that the Central Company, by reason of its ownership and control of the majority of the stock, has directed and controlled the election of the directors and officers of the Girard Company ever since the year 1882, and up to and including the last election. It is then alleged that the Central Company is a corporation under the laws of Georgia, deriving all its rights, powers, and franchises from the authority of that state, and subject to the limitations imposed upon it by her constitution and laws; and it is alleged that the constitution of Georgia provides that "the general assembly of this state shall have no power to authorize any corporation to buy shares, or stock, in any other corporation in this state, or elsewhere, or to make any contract or agreement whatever, with any such corporation, which may have the effect, or be intended to have the effect, to defeat or lessen competition in their respective businesses, or to encourage monopoly; and all such contracts or agreements shall be illegal and void," (Const. art. 4, par. 4;) that the Central Company acquired all its said stock, except about 77 shares, after the year 1873, and the larger portion of it after the adoption of the constitution of Georgia containing the provision above copied, which was December 5, 1877; and the pleader insists that the said company was without power, under the laws of Georgia, to buy said stock; and it is further insisted in the bill that it is contrary to the public policy of the state of Alabama to permit a foreign corporation thus to acquire control over a corporation created under her laws, and owing her duties under its charter contract. It is further alleged that the purpose of the Central Company in acquiring the stock was to get control of the affairs and management of the Girard Company, and thereby to defeat and lessen competition in the businesses of said two roads, respectively, and also to encourage the monopoly which the Central Company was, and has been continuously, seeking to enlarge and foster as to the transportation of all freights and other business going eastward out of the state of Alabama, and over the lines of the Girard road and the Columbus Branch of the Western Railroad of Alabama. It is also shown that the Central had acquired sundry other specified railroads, or control of the same, in Alabama, with the purpose to defeat or lessen competition in its business as a common carrier of freights and passengers, such being especially its purpose in its acquisition of control of the Girard Company. On September 10, 1886, the bill alleges, the Girard Company attempted to make, execute, and deliver to the Central Company a lease of its road, and other property and franchises, a copy of which is exhibited with the bill. This lease was for a term of 99 years, and embraced the railroad, and all extensions thereof which might thereafter be constructed, and all property, assets, and franchises of every description of the Girard Company, with the right to the possession and enjoyment of the same. In consideration of the lease, the instrument contains many covenants on the part of the lessee company, not necessary to be mentioned here. The bill charges that the Girard Company had no power to make this lease, and the Central Company no power to accept it, and that the same is void as against public policy. Its validity is assailed also on the ground that, when it was authorized and executed, the Central Company controlled a majority of the Girard stock, by reason whereof it became and was, in effect, both lessor and lessee. It is also assailed as void under the influence of the statute of Alabama which prohibits the making of a lease for a longer term than 20 years. Code, § 1836. The Central Company went into possession of the leased property under the lease, and used and operated it until June , 1891. It appears that the Central Company became insolvent, and its property and rights passed into other hands. On June 15, 1891, it (the Central Company) executed a lease of all its property, for a term of 99 years, to the Georgia Pacific Railroad Company, but it seems that that company never went into possession, having on June 19, 1888, executed a lease of its own road to the Richmond & Danville Railroad Company; and the bill avers that the Central Company delivered possession of the Girard road, its property and assets, to the Richmond & Danville Company, who operated it until it abandoned possession thereof, at a time, to wit, some time after March 3, 1892,

when it repudiated the lease of June 15, 1891, of the Central Company to the Georgia Pacific Company. The bill, nevertheless, states in another place, in the eighteenth paragraph thereof, that the "Central Company has operated said road, from Columbus to its terminus, ever since it went into possession under the lease of 1886 by the Girard Company to it." There were sundry suits in equity instituted in the federal court of Georgia and state court of Alabama, involving the Central Company and its property, viz.: A suit filed by Rowena Clarke on March 4, 1892, in the federal court at Savannah, against the Central Company, the Richmond & Danville Company, and others, ancillary to which was a bill filed in the state court at Montgomery, Ala., on April 11, 1892; a suit filed by the Central Company itself against other companies on the 4th of July, 1892, in the federal court, and on April 11, 1892, it also filed a bill in the state court in Montgomery, Ala. We deem it unnecessary to set out the nature and purpose of these several suits, except to say that in them sundry persons were appointed receivers of the property and assets of the Central Company, who went into, and are now in, possession thereof, as such receivers; some of the receivers being appointed at the instance of the Central Company itself. The present bill, however, expressly avers that the Girard Company was not made a party to any of said suits, and that none of its property ever went into the hands of any of said receivers.

In the lease of 1886, by the Girard to the Central Company, assailed as void in this suit, it is stipulated that said railroad might be extended at any time by the Central Company, the consent of the Girard Company being first obtained; and in the event of an extension beyond its then terminus, at Troy Ala., or any further extension thereof, the Girard Company would at any time, upon the request of the Central Company, its successors or assigns, issue such bonds as might be necessary to build such extension or extensions, not exceeding the ratio that the then bonded debt of the company bore to the number of miles of said railroad, and would secure the payment of such new bonds by a mortgage on the whole of its railroad; and the bill alleges that in March, 1890, the Girard Company entered into a written contract with the Central Company, by which the latter agreed to build an extension from Troy southwestward to Andalusia, Ala., a distance of, to wit, 50 miles; and the Girard agreed to issue and deliver to the Central its first mortgage bonds, at the rate of not exceeding $12,781 per mile, when and as soon as the extension was completed and in operation; that the Girard also paid to the Central Company $142,500, which was the purchase money of the lands granted by congress, to aid in building said railroad, on account of the building and equipment of said road; that, under said contract, the Central Company constructed and equipped 37 miles of said extension, and graded, and procured the necessary...