People v. Buffalo Stone & Cement Co.

• Decision Date: 09 February 1892
• Citation: 29 N.E. 947,131 N.Y. 140
• Parties: PEOPLE v. BUFFALO STONE & CEMENT CO.
• Court: New York Court of Appeals Court of Appeals

131 N.Y. 140

29 N.E. 947

PEOPLE

v.BUFFALO STONE & CEMENT CO.

Court of Appeals of New York.

Feb. 9, 1892.

Appeal from superior court of Buffalo, general term.

Action to forfeit the franchises and annul the charter of the Buffalo Stone & Cement Company. Plaintiff obtained judgment, which was affirmed by the general term. Defendant appeals. Affirmed.

The other facts fully appear in the following statement by EARL, C. J.:

The defendant was organized as a corporation on the 18th day of August, 1885, under the general manufacturing act of 1848. Its capital stock was $90,000, divided into 90 shares, of $100 each. Prior to its incorporation the persons who proposed to take its stock entered into a written agreement that each subscriber for stock should pay 15 per cent. of the amount of his stock at the time of his subscription, and that the balance should be paid on calls to be made, not exceeding 10 per cent. at a time within 10 years. During the first two years of the defendant's corporate existence only 77 1/2 per cent. of the capital stock was paid in, and no more has been paid in since, and the annual report required by section 12 of the act for January, 1889, was not made. On the 2d of March, 1889, a petition, signed by various stockholders of the defendant, was presented to the attorney general, asking him to commence an action against the defendant to have its franchises forfeited and its charter annulled. Thereafter the attorney general made an application to a special term of the supreme court for leave to commence an action to annul the charter, and an order was made by the court on the 23d day of April, 1889, granting such leave, and this action was commenced on the following day. The action was brought to trial, and resulted in a judgment in favor of the plaintiff, dissolving the defendant, and forfeiting its rights, privileges, and franchises, and appointing a receiver of its property and effects. From that judgment the defendant appealed to the general term, and from affirmance there to this court.

Charles Daniels, for appellant.

Henry W. Brendel, for the People.

EARL, C. J., ( after stating the facts.)

Section 1798 of the Code provides that upon leave being granted as prescribed in the preceding section, the attorney general may bring an action against a corporation created by or under the laws of the state, to procure a judgment vacating its charter or annulling its existence, upon the grounds that it has ‘(1) offended against any provision of an act, by or under which it was created, altered, or renewed, or an act amending the same, and applicable to the corporation; or (2) violated any provision of law whereby it has forfeited its charter, or become liable to be dissolved, by the abuse of its powers.’ In such a case the attorney general may, upon his own information, or upon an application made to him by any citizen, move the court for leave to bring the action. He must determine, in the first instance, whether the public interests require that the action should be brought, and thus that it is his duty to bring it; and then he must make application to the court for leave to bring it, and the court may exercise its discretion whether or not it will grant the leave. We have several times held that its discretion in such a case is not reviewable in this court. Such an action may be brought by the attorney general in the name of the people without a relator, and it is then strictly a people's action. It is provided in section 1808 that, ‘in a case where the action can be brought only by the attorney general in behalf of the people, if a creditor, stockholder, director, or trustee of the corporation applies to the attorney general for that purpose, and furnishes the security required by law, the attorney general must bring the action, or apply for leave to bring it, if he has good reason to believe that it can be maintained. Where such an application is made, section 1986 of this act applies thereto.’ Section 1986 provides as follows: ‘Where an action is brought by the attorney general, as prescribed in this title, on the relation or information of a person having an interest in the question, the complaint must allege, and the title of the action must show, that the action is brought upon the relation of that person. In such a case the attorney general must, as a condition of bringing the action, require the relator to give satisfactory security to indemnify the people against the costs and expenses thereof. Where security is so given, the attorney general is entitled to compensation for his services, to be paid by the relator in like manner as the attorney and counsel for a private person.’ That provision applies only to cases where the action is instituted in the name of the people to protect or secure the interests of individuals, like the actions specified in section 1781 of article 2, and sections 1784 and 1785 of article 3, of the Code, and in all cases where mere private interests are sought to be promoted by the commencement of the action by the attorney general in the name of the people. But an action to annul a corporation, under article 4, is purely a people's action, and proceeds upon public grounds; and it cannot be said, within the meaning of section 1986, that any person who instigates such an action, or applies to the attorney general to have it commenced, has any interest in the questions involved in the action. The simple question to be determined in such an action is whether the existence of the corporation shall be permitted to continue, and it in no way concerns the rights and interests of the persons interested in the corporation, as between each other. It is simply a question between the corporation and the people, and to determine that question no individual need be present as a party to the action. Therefore it is of no legal consequence that some of the persons who applied to the attorney general to commence this action were the very trustees who omitted to make the annual report, as required by section 12 of the manufacturing act, or the very stockholders who omitted to pay for their stock. Their acts in no way prejudice the rights of the people. If a cause of forfeiture against the corporation exists, there is nothing in the conduct of any of the stockholders or officers of the corporation which can defeat the right of the people to enforce the forfeiture.

It is provided in section 12 of the manufacturing act of 1848 that every company formed under that act shall, within 20 days from the 1st day of January of each...