Louisville v. Boney

• Decision Date: 06 March 1889
• Court: Indiana Supreme Court
• Parties: Louisville, N. A. & C. Ry. Co. v. Boney.

117 Ind. 501

20 N.E. 432

Louisville, N. A. & C. Ry. Co.

v.Boney.

Supreme Court of Indiana.

March 6, 1889.

Appeal from circuit court, Porter county; H. A. Gillette, Special Judge.

Action by Matthias Boney against the Louisville, New Albany & Chicago Railway Company, to enforce a judgment. Decree for plaintiff. Defendant appeals.

Geo. W. Friedley, Geo. R. Eldridge, and Geo. W. Easley, for appellant, J. W. Yonche and Wood & Wood, for appellee.

Mitchell, J.

This proceeding was instituted by Matthias Boney against the Louisville, New Albany & Chicago Railway Company, the complaint being essentially in the nature of a creditor's bill. Putting aside much irrelevant matter set up in the pleadings, the material facts upon which the questions for decision depend are the following:

In September, 1874, Boney entered into a written contract with the Indianapolis, Delphi & Chicago Railroad Company, under which he constructed the grade, and otherwise prepared about three miles of the company's road-bed in Lake county, ready for the reception of the ties and rails. In February, 1875, within the time prescribed by statute, he gave notice of his intention to hold a contractor's lien upon that part of the road-bed which he had constructed, stating in his notice that a specified sum remained due him for work performed under his contract. He subsequently instituted suit in the Lake circuit court, and in March, 1876, recovered a personal judgment against the railroad company, and obtained a decree foreclosing his lien, in pursuance of which he afterwards sold that part of the company's road-bed described in his lien and decree. Boney became the purchaser, the amount bid being only a part of the amount of his judgment. Subsequently other portions of the company's right of way were levied upon to satisfy the balance of the Boney judgment, which levy seems never to have been released nor otherwise disposed of. After Boney had acquired his lien the franchises and property of the Indianapolis, Delphi & Chicago Railroad Company were sold in pursuance of a decree foreclosing a trust mortgage which had been executed by the railroad company, but which was a junior lien to that of Boney's. The sale resulted in the organization of a new corporation, called the “Chicago & Indianapolis Air-Line Railroad Company,” which succeeded to all the rights of the original corporation. Boney was not made a party to the foreclosure suit. The Chicago & Indianapolis Air-Line Railroad Company completed and put in operation what was formerly known as the “Air-Line Road from Indianapolis to Chicago,” in 1881, using the old right of way through Lake county, including the three miles theretofore constructed by the plaintiff, and upon and in respect of which he had taken the lien and the other proceedings above mentioned. Subsequently, in the same year, the corporation last above mentioned became consolidated with, and its property and franchises incorporated into, the Louisville, New Albany & Chicago Railroad Company, which then owned and operated a railroad from Louisville to Michigan City. This latter company has since continuously owned and operated as part of its system what was formerly known as the “Air-Line Road from Indianapolis to Chicago.” After the consolidation it was adjudged, in an action to which Boney and the appellant railroad company were both parties, that the former took nothing by his purchase at the foreclosure sale, made in pursuance of the decree foreclosing his contractor's lien above mentioned. Thereupon, in August, 1885, this suit was instituted by Boney in order to establish his claim against the appellant railroad company, and to obtain the decree of the court directing the sale of the road-bed constructed by him, and for general relief. The court found the facts specially, and gave judgment that the Louisville, New Albany & Chicago Railroad Company pay the plaintiff the sum of $4,580 within 40 days from the date of the judgment. It was further ordered that, in default of payment within the time fixed, the sheriff of Lake county should, after giving three weeks' notice, sell the railroad of the Louisville, New Albany & Chicago Railroad Company, “as the same is now located, constructed, owned, operated, and controlled from the city of New Albany, in Floyd county, Ind., to Michigan City, in La Porte county, Ind., and from the city of Indianapolis, in Marion county, Ind., to the state line between Indiana and Illinois, together with all the rights, franchises, privileges, and immunities of said company connected therewith or incident thereto.” From this judgment and order of sale the railroad company prosecutes this appeal.

Two questions are presented for decision: (1) Did the appellant railroad company become liable so that a judgment for the amount of the plaintiff's claim was properly rendered against it? (2) If it did become liable to pay the plaintiff's claim, can the order directing the sheriff to sell all of its property within the state of Indiana, including all the rights, franchises, and privileges connected therewith or incident thereto, be maintained?

In respect to the first question, it may be said an examination of the statute will disclose that ample provision is made for the consolidation of railroad companies; but there is no express statutory declaration that the corporation into which the consolidated companies become merged, shall assume or become liable for the debts and obligations of the original companies. The effect of a statutory consolidation is, however, practically to dissolve the old corporations into the new, which takes the place and succeeds to all property, rights, franchises, and privileges of the several consolidated companies. While it is an open question in some jurisdictions whether or not, in the absence of a statute, the debts of the original companies follow as an incident of the consolidation, and become by implication the obligations of the new corporation, it is settled in this state that the act of consolidation involves an implied assumption by the new company of all the valid debts and liabilities of the consolidated companies. Railroad Co. v. Jones, 29 Ind. 465;Railroad Co. v. Powell, 40 Ind. 37;Railroad Co. v. Hendricks, 41 Ind. 48. The rule which the authorities support seems to be that where one corporation goes entirely out of existence by being incorporated into another, if no arrangements are made respecting the property and liabilities of the corporation that ceases to exist, the corporation into which it is merged will succeed to all its property, and be answerable for all its liabilities. Thompson v. Abbott, 61 Mo. 176;Mount Pleasant v. Beckwith, 100 U. S. 514;Car Co. v. Railway Co., 115 U. S. 587, 6 Sup. Ct. Rep. 194. After the consolidation the liability of the new company is substituted for that of the original companies, which have, to all intents and purposes, ceased to exist. 2 Mor. Priv. Corp. § 955. There was hence no error in rendering a judgment in personam against the Louisville, New Albany & Chicago Railroad Company.

The other feature of the case presents a question of much greater difficulty. According to the established rule of the common law, which controls the current of modern authority, the franchises of a corporation-mere incorporeal hereditaments-were not subject to seizure and sale upon execution, in the absence of express statutory provisions authorizing the sale and prescribing the method of transfer. It follows as a natural sequence that lands, easements, or things essential to the existence of the corporation and the execution of its corporate duty, and without which its franchise would be of no practical use, cannot be levied upon and sold on execution at law, so as to detach them from the franchise, and thus destroy its use. Railroad Co. v. State, 105 Ind. 37, 4 N. E. Rep. 316; Ammant v. President, etc., 13 Serg. & R. 210;Baxter v. Turnpike Co., 10 Lea, 438, 4 Amer. & Eng. Corp. Cas. 134; Herm. Ex'ns, 561. Thus it has been said, in effect, that the franchises and corporate rights of a company, and the means which are necessary to enable it to maintain its existence and subserve the objects and purposes of its creation, are incapable of being granted away or transferred by any act of the company, without express authority, or by any adverse process against it. Canal Co. v. Bonham, 9 Watts & S. 27. Accordingly, where, upon an execution issued on a judgment recovered against a canal company, the marshal had seized and advertised for sale a toll-house and sundry canal-locks and other tangible property, an injunction was sustained; the...