State Ex Rel. City Council Op Spartanburg v. Spartanburg

• Decision Date: 15 November 1897
• Court: South Carolina Supreme Court
• Parties: STATE ex rel. CITY COUNCIL OP SPARTANBURG v. SPARTANBURG, C. & G. R. CO. et al.

28 S.E. 145

51 S.C. 129

STATE ex rel. CITY COUNCIL OP SPARTANBURG

v.SPARTANBURG, C. & G. R. CO. et al.

Supreme Court of South Carolina.

Nov. 15, 1897.

Corporations—Franchise—Forfeiture — When Declared.

1. A corporation is not ipso facto dissolved by the failure to do something prescribed in its charter, rendering it liable to forfeiture, but the corporation continues de facto until forfeiture is declared in a direct judicial proceeding for that purpose, unless the legislature, by clear and unmistakable language, declares that the franchise shall expire ipso facto on the happening of such event.

2. The charter of a railroad provided that all powers, rights, privileges, and immunities granted thereby should cease and be void unless said company should build, equip, and put in operation at least one-half mile of the road within six months, and complete it to specified points within three years, from the passage of the act. Held, that failure to complete the road as prescribed was merely cause for forfeiture, and did not ipso facto dissolve the corporation.

3. A court will not declare the forfeiture of a franchise of a corporation merely on a motion, made in an action brought against it for that purpose.

Appeal from common pleas circuit court of Spartanburg county; Ernest Gary, Judge.

Action by the state of South Carolina, on the relation of the city council of Spartanburg, against the Spartanburg, Clifton & Glendale Railroad Company, to declare a forfeiture of defendant's charter. Pending the action, plaintiff moved to amend by making the Ætna Light & Power Company a party defendant. From an order granting said motion, and an order denying a motion by defendant Ætna Light & Power Company to set aside the service of summons and complaint on it, defendants appeal. Affirmed.

Hydrick & Wilson, for appellants.

R. R Carson and Duncan & Sanders, for respond ent.

JONES, J. This action, commenced In June, 1893, was brought to obtain a decree of forfeiture of the charter of the Spartanburg, Clifton & Glendale Railroad Company. The defendant answered, and the case was duly docketed for trial. Nothing seems to have been done in the case until in October, 1896, when the plaintiff, alleging that the Ætna Light & Power Company claimed to be possessed of, or to have some interest in, the franchise of the Spartanburg, Clifton & Glendale Railroad Company, moved to amend by making the latter named company a party defendant. The.ÆEtna Light & Power Company did not appear in resistance of this motion, but the attorneys who had answered for the Spartanburg, Clifton & Glendale Railroad Company appeared, and resisted the motion, claiming that the Spartanburg, Clifton & Glendale Railroad Company was defunct, by reason of the forfeiture of its charter, and that the action had thereby abated; submitting an affidavit, to the effect that said company had failed to complete its railroad to Glendale and Clifton Nos. 1 and 2 within three years from the passage of the act of incorporation, as required by the eighth section of said act. The circuit judge held that the defendant had the right to exercise its charter privileges or franchise until failure to complete it's road within three years from the passage of the act of incorporation is judicially determined; and, this action being for that purpose, he declined to determine that question on the motion. He therefore granted the motion to amend. After service of the amended summons and complaint, the Ætna Light & Power Company moved to set aside the service, on the ground that the original action had abated by the forfeiture of the charter of the Spartanburg, Clifton & Glendale Railroad Company. This motion was refused.

It is clear that the judgment of the circuit court must be affirmed. It is a well-established doctrine in the courts of the United States and of nearly every state in the Union, including our own, that a corporation is not Ipso facto dissolved by an act of nonuser or misuser, which is a cause of forfeiture, and that the franchise remains in force until the forfeiture is declared in a direct judicial proceeding brought by the state against the corporation for that purpose. Mr. A. C. Freeman, in an able and exhaustive note on the subject of forfeiture of corporate franchises, in State v. Atchison & N. R. Co. (Neb.) 8 Am. St. Rep. 179 (s. c. 38 N. W. 43), collects the authorities in support of this doctrine from text-books, from decisions of the United States court, and of about 30 states in the Union. See, also, note to Railway Co. v. Nave (Kan. Sup.) 5 Am. St. Rep. 803 (s. c. 17 Pac. 587...