People of the State of New York Schurz v. Cook

• Decision Date: 03 April 1893
• Docket Number: No. 139,139
• Citation: 13 S.Ct. 645,148 U.S. 397,37 L.Ed. 498
• Parties: PEOPLE OF THE STATE OF NEW YORK ex rel. SCHURZ et al. v. COOK, Secretary of State
• Court: U.S. Supreme Court

148 U.S. 397

13 S.Ct. 645

37 L.Ed. 498

PEOPLE OF THE STATE OF NEW YORK ex rel. SCHURZ et al.

v COOK, Secretary of State.

No. 139.

April 3, 1893.

This writ of error is brought to review a judgment of the supreme court of the state of New York, adopting and entering a decision of the court of appeals of said state in pursuance of a remittitur therefrom, on the ground that it gave effect to and enforced a law of the state, which, in violation of the constitution of the United States, impairs pairs the obligation of a contract. Whether there is a contract, and whether its obligation has been impaired, as claimed by plaintiffs in error, are questions which arise and are to be determined upon the following state of facts: Several railroad corporations, properly organized under the laws of New York and Pennsylvania, after duly executing mortgages upon their respective properties and franchises to secure the payment of bonds lawfully issued by them, were consolidated, under legislative authority from those states, into one company, which was incorporated February 14, 1883, under the name of the Buffalo, New York & Philadelphia Railroad Company. This new company, in pursuance of proper authority, also executed a mortgage upon its properties and franchises to secure the payment of bonds issued by it. Default was made in the payment of the bonds issued under and secured by each of these various mortgages, and foreclosure proceedings were instituted thereon, and the mortgages duly foreclosed, and the entire property and feanchises of all the companies, constituent and consolidated, were regularly sold under such foreclosure proceedings, and bid in by the plaintiffs in error as the representatives of the security holders, in pursuance of a scheme of reorganization previously agreed upon. The properties and franchises so sold and purchased were duly conveyed to the purchasers September 28, 1887, who thereupon adopted and executed articles of association under and in conformity with the provisions of the reorganization acts of the state, (chapter 430, Laws 1874, as amended by chapter 446, Laws 1876,) and having prepared a certificate of incorporation, as provided by said acts, setting forth, among other things not material to be noticed, that they had associated themselves together as a corporation to be known as the Western New York & Pennsylvania Railway Company, with a maximum capital stock of $15,000,000, divided into 150,000 shares, they presented said certificate to Frederick Cook, secretary of state, with the request to file the same in his office, such filing being required before the parties forming the organization could become a body corporate. They tendered the secretary of state, at the time of applying to have the certificate filed, the sum of $45 as the proper amount of fees for recording the same. The secretary refused to permit it to be filed, basing his refusal upon the provision of an act of the legislature known as chapter 143 of the Laws of 1886, which provided that any corporation incorporated under any general or special law of the state, having capital stock divided into shares, should pay to the state treasurer, for the use of the state, a tax of one eighth of 1 per centum upon the amount of capital stock which the corporation was authorized to have. The act further provided that 'the said tax shall be due and payable upon the incorporation of said corporation, or upon the increase of the capital stock thereof; and no such corporation shall have or exercise any corporate power until the said tax shall have been paid; and the secretary of state and any county clerk shall not file and certificate of incorporation or association until he is satisfied that the said tax has been paid to the state theasurer; and no such company incorporated by any special act of the legislature shall go into operation or exercise any corporate powers or privileges until said tax has been paid as aforesaid.' This act took effect immediately upon its passage. When the plaintiffs in error presented their certificate of incorporation to the secretary or state for filing, the taximposed by this act, amounting to $18,000, had not been paid or tendered to the state treasurer, and for this reason the secretary refused to file the certificate. Thereupon the plaintiffs in error applied to the supreme court of the state of New York, at special term, for a peremptory writ of mandamus to compel the secretary of state to file said certificate. The petition set out in detail the foregoing proceedings. In response to the order to show cause why the writ should not be granted, the secretary of state made return, stating, among other objections not material to this case, that the said Western New York & Pennsylvania Railway Company of New York, sought to be incorporated as a corporation, had neglected and refused to pay the incorporation tax imposed by the law of 1886, and that he could not be required to file the certificate until said tax had been paid. The special term denied the motion for a mandamus. From this order the relators appealed to the general term of the supreme court, which affirmed the action of the special term. 47 Hun, 467. The relators then appealed from the decision of the general term to the court of appeals, which affirmed the order of the former, (110 N. Y. 443, 18 N. E. Rep. 113,) and remitted the cause to the supreme court of the state, where judgment was entered in conformity with the decision of the court of appeals.

*

George Zabriskie, for plaintiffs in error.

[Argument of Counsel from pages 400-404 intentionally omitted] S. W. Rosendale, for defendant in error.

Mr. Justice JACKSON delivered the opinion of the court.

The present writ of error is prosecuted to review and reverse this judgment, on the ground that the decision of the court of appeals, in enforcing the provisions of the law of 1886 against the relators, plaintiffs in error, and requiring of them the payment of one eighth of 1 per centum upon the amount of the capital stock of the company sought to be incorporated, as a condition precedent to the filing of the certificate and becoming a body politic and corporate under the name of the Western New York & Pennsylvaia Railway Company of New York, impaired the obligation of a contract made and entered into between the state and the several corporations and mortgagees thereof, to whose rights, properties, and franchises the plaintiffs in error, under the foreclosure proceedings aforesaid, had succeeded. Their claim is that, under and by virtue of the provisions of the Laws of 1874, as amended in 1876, embodying the alleged contract with the state, they are entitled to be incorporated, and cannot lawfully be required to pay any tax to the state before becoming a corporation and acquiring the right to exercise corporate functions and franchises. The act of 1874, as amended in 1876, is by its caption entitled 'An act to facilitate the reorganization of railroads sold under mortgage, and to provide for the formation of new companies in such cases.' The provisions of the statute, so far as material to this case, are the following:

'In case the railroad and property connected therewith, and the rights, privileges, and franchises of any corporation, except a street-railroad company, created under the general railroad law of this state, or existing under any special or general act or acts of the legislature thereof, shall be sold under or pursuant to the judgment or decree of any court of competent jurisdiction made or given to execute the provisions or enforce the lien of any deed or deeds of trust or mortgage theretofore executed by any such company, the purchasers of such railroad property and franchises, and such persons as they may associate with themselves, their grantees or assignees, or a majority of them, may become a body politic and corporate, and as such may take, hold, and possess the title and property included in said sale, and shall have all the franchises, rights, powers, privileges, and immunities which were possessed before such sale by the corporation whose property shall have been sold as aforesaid, by and upon filing in the office of the secretary of state a certificate, duly executed under their hands and seals, and acknowledged before an officer authorized to take an acknowledgment of deeds, in which certificate the said persons shall describe, by name and reference to the act or acts of the legislature of this state under which it was organized, the corporation whose property and franchises they shall have acquired as aforesaid, and also the court by authority of which such sale shall have been made, giving the date of the judgment or decree thereof authorizing or directing the same, together with a brief description of the property sold, and shall also set forth the following particulars:

'(1) The name of the new corporation intended to be formed by the filing of such certificate.

'(2) The maximum amount of its capital stock, and the number of shares into which the same is to be divided, specifying how much of the same shall be common, and how much preferred, stock, and the classes thereof, and the rights pertaining to each class.

'(3) The number of directors by whom the affairs of the said new corporation are to be managed, and the names and residences of the persons selected to act as directors for the first year after its organization.

'(4) Any plan or agreement which may have been entered into pursuant to the second section thereof.

'And upon the due execution of such certificate, and the filing of the same...