Narragansett Electric Lighting Co. v. Sabre

• Decision Date: 28 June 1929
• Docket Number: Nos. 567, 569.,s. 567, 569.
• Citation: 146 A. 777
• Parties: NARRAGANSETT ELECTRIC LIGHTING CO. v. SABRE et al. NARRAGANSETT CO. v. NARRAGANSETT ELECTRIC LIGHTING CO.
• Court: Rhode Island Supreme Court

146 A. 777

NARRAGANSETT ELECTRIC LIGHTING CO.

v. SABRE et al.

NARRAGANSETT CO.

v. NARRAGANSETT ELECTRIC LIGHTING CO.

Nos. 567, 569.

Supreme Court of Rhode Island.

June 28, 1929.

Case Certified from Superior Court, Providence and Bristol Counties.

Petitions in equity by the Narragansett Electric Lighting Company against George W. Sabre and others, and by the Narragansett Company against the Narragansett Electric Lighting Company. On motions to dismiss, the superior court certified constitutional questions for determination. Questions answered, and cases remitted for further proceedings.

Claude R. Branch and Edwards & Angell, all of Providence, for Narragansett Cos.

Charles A. Coolidge, Jr., and Ropes, Gray, Boyden & Perkins, all of Boston, Mass., for certain bondholders of Narragansett Electric Co.

John P. Beagan, Joseph E. Beagan, and Robert P. Beagan, all of Providence, for respondents Beagan and Gray.

Charles R. Easton, of Providence, for respondent Sabre.

RATHBUN, J. We have for consideration two petitions in equity. In the superior court separate motions were made to dismiss each petition. Each motion raised upon the record constitutional questions which were certified to this court for determination. See section 5109, General Laws 1923.

The Narragansett Electric Lighting Company, a public service corporation, purporting to act upon legislative authority, transferred all of its franchises and other assets to the United Electric Power Company, a public service corporation, the name of which has since been changed to the Narragansett Electric Company. We will hereafter refer to the firstmentioned corporation as the old company and to the lastmentioned corporation as the new company. The old company filed the first petition, which prays: (1) That an appraiser be appointed to appraise the value of the stock owned in said company by stockholders who objected to said transfer. (2) That a decree be entered ordering the petitioner, the old company, to pay such dissenting stockholders the appraised value of their shares. The second petition which was filed by the Narragansett Company, a stockholder in the old company, prays for a dissolution of the old company.

Said motions to dismiss were filed by dissenting stockholders, who contend that the acts purporting to transfer the assets of the old company to the new company violated rights guaranteed to said stockholders by the Constitution of this state and the Constitution of the United States.

Before hearing the petitioners filed in this court motions to dismiss the respondents' motions to dismiss the petitions. The ground for the petitioners' motions was that the respondents are not entitled to have their motions granted because they have been guilty of laches. The motions of the petitioners are not in order. The causes were certified here for determination of the question of the constitutionality of certain acts of the Legislature "as raised in said motion, to dismiss." The petitioners' motions to dismiss are denied.

A group of persons interested in merging certain public service corporations doing business within this state were granted by act of the General Assembly a charter for a corporation with the name "United Electric Power Company," which name was later changed to "The Narragansett Electric Company," which we have referred to as "the new company." Section 3 of said act provides that the corporation may acquire the franchises and other property of the United Electric Railways Company, a corporation owning and operating street cars propelled by electricity. Section 4 of the act provides that:

"The corporation hereby incorporated may sell to any other corporation or corporations organized under the laws of this state and authorized to carry on a similar business in this state, and said other corporation or corporations may purchase and hold, all of the assets, property, rights, privileges and franchises of the corporation hereby incorporated, and any such other corporation or corporations may sell to the corporation hereby incorporated, and the corporation hereby incorporated may purchase and hold, all of the assets, property, rights, privileges and franchises of any such other corporation or corporations. Any such sale may be for such consideration, which may consist in whole or in part of stock, bonds, or other obligations of the purchasing corporation, as may be agreed upon by the parties to such sale. Any such sale shall be approved by vote of at least two-thirds in interest of the stockholders of the vendor corporation entitled to vote, at a meeting of the stockholders of such corporation duly called."

"Upon consummation of any such sale the purchasing corporation shall become vested with all the rights, privileges, powers and franchises held or enjoyed by the vendor corporation."

"If a sale be effected in accordance with the foregoing provisions hereof, any stock holder of the vendor corporation, who shall not have voted in favor of said sale either in person or by proxy, shall be entitled to the rights, and such vendor corporation shall be subject to the duties, obligations and liabilities set forth in section 56 of chapter 248 of the General Laws with respect to dissenting stockholders and to corporations which sell, lease and exchange their entire assets, respectively."

An amendment to this act of incorporation, approved April 14, 1927, amended section 5 of said act to read as follows: "Sec. 5. The corporation hereby incorporated may lease, purchase, acquire, hold, possess, enjoy, operate, use and dispose of such real and personal estate, rights, privileges and franchises within this state as may be necessary or convenient for the purposes for which said corporation is organized and may issue its capital stock, bonds, and other obligations in payment or part payment therefor, in the manner and with the approval hereinafter provided. Whenever the corporation hereby incorporated shall have received from the Narragansett Electric Lighting Company, a conveyance of all or substantially all of its assets, property, rights, privileges and franchises, which conveyance has been approved by vote of the holders of not less than two-thirds of its outstanding stock at a meeting called, notified and held in the manner prescribed in Section 4 of this act of incorporation, the corporation hereby incorporated may change its name to the Narragansett Electric Company; and by that name may hold, use, exercise and enjoy all the assets, property, rights, privileges and franchises of the corporation hereby incorporated and all the assets, property, rights, privileges and franchises of said Narragansett Electric Lighting Company so conveyed. Such change of name shall be authorized by a vote of the holders of not less than two-thirds of the outstanding stock of the corporation hereby incorporated, and shall become effective upon the filing with the Secretary of State of a certified copy of such vote and a certificate of the president or treasurer that all or substantially all of the assets, property, rights, privileges and franchises of the Narragansett Electric Lighting Company haye been so conveyed; provided, however, that nothing herein contained shall deprive any stockholder of the Narragansett Electric Lighting Company of any right secured to such stockholder under the third paragraph of section 4 of this act of incorporation or under section 56 of chapter 248 of the general laws in said section 4 referred to."

Said act of incorporation purports to authorize all corporations, "organized under the laws of this state and authorized to carry on a similar business in this state," to transfer for such consideration as may be agreed upon all franchises and other assets owned by such a corporation to the new company, provided such transfer "shall be approved by vote of at least two-thirds in interest of the stockholders of the vendor corporation." Section 5 as amended specifically mentions the old company and authorizes the new company to acquire and enjoy all of the franchises and other assets and property of the old company, provided the conveyance "has been approved by vote of the holders of not less than two-thirds" of the outstanding stock of the old company.

At a duly called meeting of the stockholders of the old company, a proposal to exchange all of the assets of said company for a certain fixed price, to be paid chiefly in bonds and other securities of the new company, was approved by a vote of more than two-thirds in interest of the stockholders of the old company. Soon after said meeting the old company transferred for the consideration stated in said proposal all of its assets, including franchises to the new company. It appears that the transfer has the approval of the stockholders holding more than 99 per cent. of the stock of the old company. The issues presented are raised by dissenting stockholders, who make varying contentions but join in opposing the petition to have the value of their stock determined by appraisal, and paid for on that basis, and also object to the petition to dissolve the old company. They ask for no affirmative relief. The dissenting stockholders will hereafter be referred to as respondents.

The decrees of certification order the two causes certified to this court on the question of the constitutionality of said act of incorporation and the amendment thereto "as raised in said motion to dismiss." The reasons set forth in said motion may be summarized as follows: The said act of incorporation and the amendment thereto are unconstitutional, null, and void, in that:

First, said acts deprive the respondents of certain remedies, in violation of article 1, §§ 5 and 10, of the Constitution of Rhode Island.

Second, said acts permit the taking of private property for private use and the taking of private property for public use without just compensation, in violation of article 1, § 16 of the Constitution of Rhode...