Miller v. the State

• Decision Date: 01 December 1872
• Citation: 82 U.S. 478,21 L.Ed. 98,15 Wall. 478
• Parties: MILLER v. THE STATE
• Court: U.S. Supreme Court

82 U.S. 478

21 L.Ed. 98

15 Wall. 478

MILLER v. THE STATE.

December Term, 1872

ERROR to the Supreme Court of New York; the case being thus:

Section 1 of article 8 of the constitution of the State, just named, adopted by it A.D. 1826, ordains as follows:

'Corporations may be formed under general laws, but shall not be created by special act except in certain cases. All general laws and special acts passed pursuant to this section may be altered from time to time or repealed.'- And title 3 of chapter 18 of the first part of the Revised Statutes of 1828, enacts thus:

'The charter of every corporation that shall hereafter be granted by the legislature shall be subject to alteration, suspension, and repeal, in the discretion of the legislature.'

With this provision of the constitution and this enactment of the Revised Statutes of the State in force, the legislature of New York passed in 1850 a general act for the formation of railroad companies and the regulation of the same. This act authorized any number of persons, not less than twenty-five, to form a company for the purpose of constructing, maintaining, and operating railroads for public use, . . . and for this purpose to make and sign articles of association in which the name of the company should be stated, the places from which and to which the road was to be constructed, the amount of the capital stock, which should not be less than $10,000 for every mile of road constructed, the number of shares of which the capital stock should consist, and the names and places of residence of thirteen directors of the company who should manage its affairs for the first year, and until others were chosen in their place. Each subscriber was to state what number of shares he would take; and the articles were to be filed in the office of the Secretary of State, and after certain formalities gone through with them, the persons who had subscribed the articles of association, and all who should become stockholders in the company, 'shall,' says the act 'be a corporation by the name specified in such articles of association, and shall possess the powers and privileges granted to corporations, and be subject to the provisions contained in title 3 of chapter 18 of the first part of the Revised Statutes.'¹

The formation of a railroad company to be styled the Rochester and Genesee Valley Railroad Company, and to run between the city of Rochester and the town of Portage, fifty miles south of it, being contemplated by a course which should run through the town of Avon, about eighteen miles south of Rochester, an act of the State just named amending the charter of that city was passed July 3d, 1851, by which its common council were authorized to borrow upon its credit $300,000, to be invested in the stock of the new company, and by virtue of the subscription thus authorized, the city was declared to acquire all the rights and privileges and be liable to the same responsibilities as other stockholders of the company, except as otherwise provided in the act. In case the railroad company elected to receive the subscription, the common council were authorized to nominate and appoint one director for every $75,000 of capital stock held by the city at the time of each election of directors, but the city could have no voice in the election of the remaining directors. On the 10th of July, 1851, the articles of association of the new company were filed in the office of the Secretary of State, organizing the corporation under the general railroad act of 1850, already in part quoted. The corporation was declared in the article to be created for the purpose of constructing, owning, and maintaining a railroad from the city of Rochester to the town of Portage, a distance, as already said, of fifty miles, with a capital stock of $800,000, divided into 8000 shares of $100 each. On the 15th of June, 1852, the mayor of Rochester subscribed for 3000 shares of the stock of the company, and, on the same day, at a meeting of the directors of the railroad, such subscription was unanimously accepted. Other parties subscribed for stock to the amount of $677,500, so that the whole amount subscribed, including the stock taken by the city, was $977,500. The whole amount of capital stock fully paid up was:

By the city of Rochester, $300,000

By all other parties, 255,200

Total amount, $555,200

The balance of the stock subscribed was extinguished or forfeited before March 9th, 1867. Before this time also the Rochester and Genesee Valley Railroad Company had abandoned the construction of their road south of Avon, and assigned all their rights and franchises beyond that point to another corporation.

On the 9th of May, 1867, an act was passed, amending the act of 1851 by giving the common council authority to appoint one director for every $42,855.57 of stock owned by the city; in other words, establishing the same ratio that existed among the subscribers for stock at the time the original subscription was made. The effect of this act was to give the city of Rochester power to appoint seven of the thirteen directors, and the other stockholders six. At the next annual election, however, the stockholders, other than the city, alleging that the act of July 3d, 1851, made a contract between the city and the other stockholders, that the city should elect but four directors out of the thirteen, and that the act of 1867, authorizing the election of seven, violated the obligation of that contract, proceeded to elect one Miller and eight others directors as the directors eligible by them; and on the same day the common council, in pursuance of the act of 1867, appointed seven other persons as directors eligible by them. Thereupon, the attorney-general of New York, on the relation of Powers and the six other directors appointed by the city, issued a quo warranto against Miller and his eight co-directors; and the case coming to the Court of Appeals that court held that the appointment by the city was valid, and the election of the nine directors by the other side irregular. Miller and his co-directors now brought the case here.

The only question involved was the constitutionality of the act of 1867. If that act was constitutional the decision of the State court was correct, and was to be affirmed. If the act was a violation of the Constitution of the United States, the decision was erroneous and was to be reversed.

Messrs. Theodore Bacon and H. R. Selden, for the plaintiff in error, argued the case orally, and submitted also the opinions of certain of the judges in the court below who dissented from the judgment there. A part of one follows:

The act of July 3d, 1851, made it lawful for two corporations to enter into an arrangement by which one of them might become a stockholder in the other if both should consent, and declared what the rights of the parties to the arrangement should be as between each other if they availed themselves of this permission. There was no exercise of legislative will further than to confer this power; all beyond that depended upon the mutual consent of the parties.

The making and the acceptance of the subscription to the stock were acts of the parties, and they thereby adopted the conditions contained in the act of the legislature and mutually consented to be governed by them. The consent of each party must be deemed to have been given in consideration of the obligation thus assumed by the other, and a valid contract was thus made between the subscriber to the stock and the other stockholders of the railroad company, or the company representing the rights of such stockholders, unless it can be shown that the subject-matter of the arrangement was one concerning which a contract could not be made or authorized by the legislature to be made.

The city of Rochester, by this arrangement, secured to itself the right of appointing four out of the thirteen directors. This was a valuable right, for in its absence, if the stock of the company should all be paid up, the city holding but a minority of the stock might not have been able to obtain the election of any director of its selection. In consideration of this privilege the city surrendered to the other stockholders the right to elect the remaining nine directors. The railroad company, in consideration of that surrender, bound itself to admit the four city directors. Neither party can be presumed to have acted on the assumption that this arrangement could be changed without its consent. It may well be supposed that those interested in the company and who had embarked, or were about to embark, their capital in it, would not have consented to place so large an amount of stock in the hands of the city, had they not been secured against the possibility of the control of the affairs of the company becoming invested in so changing and uncertain a body as a municipal corporation, whose officers would have no personal interest in the road and no special inducement to manage it in the interest of its stockholders.

It will be argued, however, that the power reserved in the constitution and statutes of the State of New York, to alter, suspend or repeal the charters of all corporations, gives power to the legislature to change the terms upon which the subscription was received, and to enlarge the number of directors to be appointed by the city, and that the act of 1867, which purports to authorize the city to appoint seven directors instead of four, thus giving to the city the majority instead of a minority representation in the board, is valid as an amendment of the charter of the railroad company.

The purpose and object of this reservation of power is generally conceded to have been to prevent the alienation by the State of corporate franchises, in such form that they could be held as against the State free from that legislative control which the public interests might from time to time require. When it was settled by the Supreme Court of the...