Reid v. Norfolk Southern R. Co.

• Decision Date: 28 May 1913
• Citation: 78 S.E. 306,162 N.C. 355
• Parties: REID v. NORFOLK SOUTHERN R. CO. et al.
• Court: North Carolina Supreme Court

78 S.E. 306

162 N.C. 355

REID v. NORFOLK SOUTHERN R. CO. et al.

Supreme Court of North Carolina

May 28, 1913

Appeal from Superior Court, Wake County; Garland Ferguson, Judge.

Action by Fergus Reid against the Norfolk Southern Railroad Company. From a judgment sustaining a demurrer to the complaint plaintiff appealed, and defendant, by affidavit, brought to the attention of the supreme Court a recent statute and moved for a dismissal of the case. Action dismissed.

The question whether a proposed merger of railroad corporations is contrary to public policy depends on the statute, and where a statute ratifies and validates the merger it is not contrary to public policy.

Under the rule that the Legislature may ratify and validate measures which it could have originally authorized when not interfering with vested rights, the Legislature may ratify and validate a merger of railroad corporations and acts done pursuant thereto.

The action was instituted by plaintiff as stockholder of the Norfolk Southern Railroad, alleged and for the purposes of this action admitted to be a corporation of the state of Virginia, and certain directors of said company, and also five North Carolina railroad corporations operating under charters of this state and having their properties here; the suit being to restrain said Norfolk Southern from incurring an indebtedness of $5,456,000 and executing a mortgage to secure same on all the properties of said Norfolk Southern Railroad, including the properties formerly owned by the North Carolina companies and which the Norfolk Southern had acquired. Among other things and as a basis for relief in this jurisdiction, it was alleged that the Norfolk Southern having purchased the capital stock of the North Carolina companies, had caused four of them to convey their properties to the fifth, the Raleigh, Charlotte & Southern Railroad, and that a certificate of merger had then been executed by the last-named company by which it was certified. "That the whole of the capital stock of said four railroads had been surrendered and transferred to it and its capital stock issued in exchange therefor as will appear by copy," etc., and that the indebtedness and mortgage referred to were for the purpose of obtaining the means to carry out said enterprise and to further extend and equip and operate the Raleigh, Charlotte & Southern Railroad, etc. It was further alleged that the Norfolk Southern was without power by charter or otherwise to engage in said business or incur an indebtedness therefor, and that the entire enterprise, in so far as it affected the railroads operating under such North Carolina charters, was contrary to our public policies and the express provisions of our statute law, etc. The defendants demurred, assigning for cause among others: (1) That the court has not and will not undertake to exercise jurisdiction and control over the ""internal management of the affairs of a corporation of the state of Virginia or the action of its officers and directors." (2) That under and by virtue of the various charter provisions annexed as exhibits to the complaint, the companies had the power to carry out the proposed undertaking, and there was nothing in the plan that was in any way contrary to the policies of statutes of this state etc. The demurrer having been sustained, plaintiff appealed to this court. Pending said appeal on notice duly issued defendant by proper affidavit brought to attention of court and filed a duly certified copy of an act of the last General Assembly (chapter 516, Laws 1913), and which in express terms ratified and made valid the said merger and all acts done pursuant thereto, with certain restrictions and provisos not relevant to the question as now presented, and on said statutes and by reason of the terms of same, moved the court to dismiss the case.

T. Lanier, of Oxford, and R. Randolph Hicks, of Norfolk, Va., for appellant.

W. B. Rodman, of Washington, N. C., R. N. Simms, of Raleigh, and Chadbourne & Shores, of New York City, for appellee.

HOKE, J. (after stating the facts as above).

It is well understood that our courts have not the power nor will they undertake to administer or control the internal affairs of a foreign corporation (Brenizer v. Royal Arcanum, 141 N.C. 409, 53 S.E. 835, 8 L. R. A. [N. S.] 235); and,...