Slaughter v. Moore
| Decision Date | 10 April 1912 |
| Court | Court of Chancery of Delaware |
| Parties | STEPHEN SLAUGHTER, Receiver of the Delaware General Electric Railway Company, v. DAVID O. MOORE, LEWIS HEISLER BALL, MARTIN B. BURRIS and THOMAS N. RAWLINS |
BILL FOR THE RE-PAYMENT OF MONEY DEPOSITED WITH THE STATE TREASURER TO GUARANTEE THE CONSTRUCTION OF A RAILWAY. The Delaware General Electric Railway Company was duly incorporated on September 6th, 1899, under the general corporation law of the State of Delaware, and deposited $ 17,500 with the then State Treasurer, as required by § 105, c. 273, v. 21, Laws of Dealware. The right to this deposit was later assigned by the company to John B. Wharton and on April 4th, 1902, the company was voluntarily dissolved. In 1908 Stephen Slaughter was appointed receiver of said company pendente lite, took possession of all its assets, other than the deposit in question, and converted them into cash. Afterwards the said Stephen Slaughter was made permanent receiver and filed this bill against four persons individually, (one of whom was State Treasurer at the time of the filing of the bill and the other three were his predecessors in office), for the purpose of enforcing re-payment of the moneys deposited as aforesaid. Each of the defendants filed general demurrers to the bill, and the cause was heard on bill and demurrers. The facts are more fully set forth in the opinion.
Demurrers allowed and sustained.
Richard R. Kenney, of Dover, and Leo Belmont, of the Philadelphia Bar, for the complainant.
The purpose of the Act would seem to be plain. It is to secure the application of money subscribed for stock to build a railway in this State, the purpose for which it was subscribed by the stockholders. There is nothing in section 108 of the general corporation law to indicate that by making the deposit the corporation in any sense divested itself of its right of property in the money so subscribed. For the security of the stockholders who have subscribed the money the State, which has granted the franchise, undertakes to see that the amount required to be deposited for each mile of railway to be built is expended only and solely for that purpose. Neither the State nor anyone else can use it for any other purpose, and if it is not expended for the purpose for which it is intended it remains, as before, the property of the corporation and must be returned to it, or to its legal representatives, to be paid to creditors and to the stockholders who subscribed it for one purpose only, with the implicit understanding that if it is not used for that purpose it is to be returned. It would seem, therefore, that there could be no clearer case of a trust, which is one of the principal functions of this Court to protect and enforce.
The only sections of the general corporation law of the State of Delaware, referring to the incorporation and deposit of funds in the hands of the State Treasurer, "as custodian", and referring to any penalties and forfeitures in case of failure to complete any road, are sections 108 and 117. Section 108 sets forth in detail the steps to be taken to incorporate a railway company, and section 117 states, inter alia, "provided that if any such company or corporation organized under this Act shall fail to comply with the provisions of this section, it shall thereby forfeit the franchises given it by this Act."
There can be no question of the legal doctrine that the law abhors forfeiture, and any forfeiture by statute, or otherwise, must be strictly construed and plainly set out. Forfeiture can never be inferred. Booth on Street Railways, § 47; Cook on Corp., § 913; 19 Cyc. 1358; 6 Enc. of Law, 502; American Emigrant Co. v. Adams Co., 100 U.S. 61; Los Angeles University v. Swarth, 107 F. 798; Crawford, etc., Ry. Co. v. Meadville, 228 Pa. St 606; Sulphur Springs Ry. Co. v. St. Louis, etc., Ry Co., 2 Tex. Civ. App. 650, 22 S.W. 107. The only cases when forfeiture of money deposited has been allowed is where there was a specific agreement between the parties to forfeit in case of default. R. R. Co. v. Peekskill, 21 A.D. 94; Adams v. Ry. Co., 30 So. 58.
There can be no possible discrimination upon any legal ground, or for that matter upon any common sense ground, between the relation of the Insurance Commissioner to funds deposited under the insurance laws of the State and that of the State Treasurer to the funds now under consideration. In each case the officer is merely a trustee virtute offlcii, and his duties are purely ministerial. Willson v. Swain, 60 N. J. L. 115. Upon dissolution of the corporation, all its property and assets, including this deposit, became a trust fund for creditors and stockholders. The common law rule of reverter and escheat of the corporate property is modified by courts of equity, which hold that the right of property of the corporation is preserved after dissolution for the benefit of creditors and stockholders and that the franchise alone, and not the property right, is terminated. Diamond St. Iron Co. v. Husbands, 8 Del.Ch. 205; Greenwood v. Freight Co., 105 U.S. 13; Elliott on Railroads, (2nd ed.) §§ 611-613; Eastman on Corp. § 618; Harmony Bldg. Asso. v. Berger, 17 Phila. 314. The dissolution in the case at bar having been under and in accordance with the law, the State has assented to it, and, therefore, necessarily to the return and administration of all its property, including the deposit.
The construction given to a similar statute in New Jersey is binding upon this Court. Wilmington City Ry. Co. v. Peoples Ry. Co., 47 A. 245. Undoubtedly under the law and practice in that State, as shown by the proof here produced, if the question had been brought before a court of equity, as is now done here, the trust would have been declared, and, its purpose having been accomplished, the money would have been ordered paid back. In the absence of a judicial decision, however, the Legislature intervened and by an act approved April 23rd, 1888, gave a legislative construction to the original Act, which is not only a reasonable and necessary interpretation of it, but, under the decision of the Court, must be presumed to be within the contemplation of our own Legislature when it adopted the New Jersey statute requiring a deposit, and is presumed to have been enacted in view of the construction given to the similar statute in New Jersey. 2 Suth. Constr., § 358; Rex v. Loxdale, 1 Burr. 445; Solomons v. Miller, 3 Exch. 773; Henry v. Tiloson, 17 Vt. 479; Coutant v. People, 11 Wend. 511; Pike v. Megoun, et al., 44 Mo. 491; Koshkonong v. Burton, 104 U.S. 668; Robertson v. Baxter, 57 Mich. 127. A practical executive construction of a former act will generally be presumed to have been had in view in the adoption of similar language in later Acts. State v. Moore, 50 Neb. 88, 6 Am. St. Rep. 538. Upon this principle, the Legislature of Delaware, when it enacted the provision in the terms of a New Jersey statute, which has been subsequently construed by the New Jersey Legislature, must be presumed to have had that construction in contemplation.
Whether this fund is a trust fund, or not, is to be decided, (a) from the condition under which the sums were deposited; and (b) from the construction of the statute under which it was deposited, which interpretation may be gathered from the judicial interpretation of the statute itself, or of the statute of New Jersey, from which the Delaware statute was taken almost in ipsissimis verbis.
This is not a suit against the State. It is erroneously urged that this is a suit against the State, but in the ruling case, under an identical statute, of Wilson v. Swain, 60 N. J. L. 115, the Supreme Court of New Jersey held that a suit against the State Treasurer to compel him to pay out the moneys deposited by a railway company, under conditions identical with ours, was not a suit against the State, and a mandamus was issued ordering him to pay the fund to the receiver of the corporation, which conditions are exactly identical with ours. Reagan v. Farmers' Loan & Trust Co., 154 U.S. 362; Ex parte Ayers, 123 U.S. 443; Pennoyer v. McConnaughy, 140 U.S. 1.
Andrew C. Gray, Attorney General, for the defendant, David O. Moore.
It may be accepted as a point of departure in question, that the State cannot be sued as defendant in any Court in this country without its consent, except in the limited class of cases in which a state may be made a party in the Supreme Court of the United States, by virtue of its special original jurisdiction conferred by the Constitution. This principle is conceded in all the cases. But in a desire to do what the Courts deem justice, which in many cases the courts feel will be defeated by an unwarranted extension of the above principle, they have in some instances held the State not to be a necessary party, though some interest of hers may be more or less affected by the decision. In many of these cases the action of courts has been based upon principles which have been upheld by the highest courts of this country. They may be divided into three classes:
1. It has been held in the classes of cases where property of the State, or property in which the State has an interest, comes before the Court and under its control in the regular course of judicial administration, without being forcibly taken from the possession of the government, that the State, if it chooses to come in, will be permitted to do so, and receive the same consideration as any other party interested in the matter.
2. Another class of cases is, where an individual is sued in tort for some act injurious to another, in regard to person or property, to which his defense is that he has acted under the orders of the government. In these cases he is not sued because he is an...
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