State v. Port Royal & A. Ry. Co.

• Decision Date: 23 November 1895
• Docket Number: 3,683.
• Parties: STATE et al. v. PORT ROYAL & A. RY. CO. KING et al. v. SAME et al.
• Court: South Carolina Supreme Court

23 S.E. 363

45 S.C. 413

STATE et al. v. PORT ROYAL & A. RY. CO.

KING et al. v. SAME et al.

No. 3,683.

Supreme Court of South Carolina

November 23, 1895

Appeal from common pleas circuit court of Beaufort county; Aldrich Judge.

Action by the state and by Henry B. King against the Port Royal & Augusta Railway Company and others. From the order authorizing the issuance of receiver's certificates defendants appeal. Affirmed.

The opinion of Judge Aldrich in the court below was as follows:

"This matter now comes before the court on return to a rule and restraining order issued herein, on the 27th day of January last, upon motion of the attorney general, directing the defendant to show cause before me, at Aiken, upon the 4th day of February, why the injunction therein prayed for should not be continued, and the temporary appointment of a receiver made permanent. At the request of the defendant with the consent of plaintiff, the hearing was postponed until the 11th day of January, under agreement that, for the convenience of all parties, said hearing should be had in the city of Charleston.

"The complaint in this action is in the nature of an information filed in the name and on behalf of the state by the attorney general. It alleges that the defendant the Port Royal & Augusta Railway Company is a corporation created by and existing under the laws of the state of South Carolina for the purpose of establishing communication by railroad from the waters of Port Royal Harbor, in the neighborhood of Beaufort, to some point on the Savannah river, passing near the Saltkehatchie bridge, and that the said company is authorized under its charter to construct such a railroad by a route to be determined by the said company. It recites the sale of the first railroad company, and the formation of the present corporation, under the act of this state approved the 24th day of March, 1876, to enable the purchasers of railroads to form corporations and to exercise corporate powers. It further alleges that after the incorporation of the said company the state of Georgia passed an act to charter the Port Royal Railroad Company; recites that, whereas the legislature of the state of South Carolina had incorporated a railroad company to build a railroad from the waters of Port Royal Harbor, in the neighborhood of Beaufort, to the Savannah river, and it was deemed proper to confer on the same company corporate powers in Georgia, and to grant the right to construct the portion of railroad in that state, such persons as were made a body corporate by the laws of South Carolina were created a body politic and corporate in the state of Georgia, with the right to continue and construct their road from the boundary between the two states to the city of Augusta; that the said Port Royal & Augusta Railway Company therefore holds its legal existence in South Carolina solely under the charter so granted to it by the state, and, in the state of Georgia, under the charter granted to it under the laws of that state; that the sole right of being possessed by the said defendant was to enable it to maintain a railroad from the waters of Port Royal Harbor to the inland city of Augusta, and the section beyond, so that the public convenience and traffic should be increased,--a new and independent outlet to be opened up between the interior of the state of Georgia and the ocean port of Port Royal Harbor; and that it was for the accomplishment of this undertaking that the defendant was intrusted with the great and valuable franchise to be a common carrier, and also to exercise in its undertaking the sovereign right of eminent domain. It further alleges that the defendant, after its reorganization, followed the true objects of its charter, and discharged the public trusts confided to it by the sovereign power, and until the unlawful ownership and control by the Central Railroad & Banking Company of Georgia, the defendant, and those interested in it, made great advances in the line of its corporate life and existence; that the said Central Railroad Company was a railroad corporated under the laws of Georgia; that in addition to its own line it operated, by lease or other control, a large number of railroad lines in the state of Georgia and this state, and also steamship lines from Savannah, the terminus of its own line, to New York, Philadelphia, and Boston; that important portions of its property consisted of railroad lines from the interior, and especially from Augusta to Savannah, and that the line from Augusta to Savannah naturally competed with the Port Royal Railroad, drawing freight and passengers from the same section; that about May, 1881, the Central Railroad Company determined to obtain control of the Port Royal Railroad; that for that purpose it commenced buying the stock and bonds, being and having a voting power of the Port Royal Railroad Company until it acquired the majority, whereupon the positions occupied by the officers and directors of the Port Royal Railroad Company were filled by directors selected by the Central Railroad Company, some of the directors, as all of the chief executive officers, being at the same time officers of both companies; that the management of the Port Royal Company by the officers so selected by the Central Railroad Company was greatly to the detriment of the Port Royal Company; that it failed to carry out the purposes for which it was incorporated, or to carry into effect the public enterprise originally contemplated in its organization; that the purpose of the said Central Railroad Company in so acquiring this control was to prevent the development of a powerful competing road; that the Port Royal Railroad, by so allowing itself to be continued under the control of this competing line, had abused its chartered privileges,--had forfeited the same and its rights to continue to be a corporation. The complaint further alleges that the said Central Railroad Company had no rights except those conferred upon it by its charter, or by the general laws of the state of Georgia; that under its charter it had no right to hold the stock of the Port Royal Railroad Company, nor had it any right under the general laws, as such holding was contrary to the provisions of the constitution of Georgia; that therefore, lacking power under its charter, and being interdicted by the general laws of Georgia, the Central Railroad Company could not exercise in South Carolina powers which it could not exercise in the state of Georgia, in which it was created, and that neither the laws nor public policy authorized or permitted it to hold and own such stock, and that the said control and exercise of the charter and franchise of the Port Royal Railroad Company by the Central was ultra vires, unlawful, and against public policy, and a misuse of the franchise as granted by the state of South Carolina; that on the 4th day of July, A. D. 1892, the Central Railroad Company filed its bill in the United States circuit court for the Southern district of Georgia, verified by the oath of its president, H. M. Comer, alleging that it was insolvent, and asking that it be placed in the hands of a receiver. The bill further alleges that the Central Railroad owned or controlled a large number of other roads, forming part of what is called the 'Central Railroad System,' and that it asked that a receiver be appointed for these several corporations, 'in order to secure the integrity of its system'; that the Port Royal Railroad was among these corporations, the allegations of the bill being that the Central Railroad Company owned stocks and bonds of the Port Royal Railroad, as therein set out; that to this bill an answer was filed by H. M. Comer, in the name of the Port Royal Railroad Company, acquiescing in the appointment of a receiver; that on the 14th day of July, 1892, without argument or discussion, the said H. M. Comer was made permanent receiver of the said Central Railroad, and also of the Port Royal Railway. And the complaint further alleges that the said proceedings were beyond the jurisdiction of the said United States court, and that the action of that court was largely controlled by the fact that such proceedings were entirely by consent, no resistance having been made by any party thereto; that thereafter the said Central Railroad Company filed a bill in the United States court for South Carolina, called an 'ancillary bill,' in which it alleged that it held stock and bonds in the Port Royal Railway Company, and asked that H. M. Comer be appointed receiver therefor in South Carolina; that said order was made by consent, no argument being had, but that these proceedings did not vest in the court any jurisdiction, either in matter of form or matter of substance. And the complaint alleges that, by reason of the failure of the directors of the Port Royal Railway Company to protect the road in such proceedings, its rights and interests have been disregarded, injured, and jeopardized, and its franchise surrendered, in the hands of a foreign corporation and its receiver. The complaint then brings to the attention of the court the action of the legislature of South Carolina in having this matter inquired into by the attorney general, the report of the attorney general, the message of the governor, and the passage of a joint resolution directing the attorney general to institute proper legal proceedings to remedy the evils referred to, and to compel the Port Royal & Augusta Railway Company to live up to the obligations imposed by its charter; to prevent the continuance of the unlawful control of the said Central Railroad & Banking Company, directly or indirectly, or to forfeit the charter of the said Port Royal & Augusta Railway Company, if such a course was necessary

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