Town of Hampton v. Hampton Beach Imp. Co.

• Decision Date: 29 April 1966
• Court: New Hampshire Supreme Court
• Parties: TOWN OF HAMPTON et al. v. HAMPTON BEACH IMPROVEMENT COMPANY, Inc., et al.

Page 442

218 A.2d 442

107 N.H. 89

TOWN OF HAMPTON et al. v. HAMPTON BEACH IMPROVEMENT COMPANY, Inc., et al.

Supreme Court of New Hampshire.

Argued Nov. 2, 1965.

Decided March 30, 1966.

Rehearing Denied April 29, 1966.

Cooper, Hall & Walker, Rochester, and Upton, Sanders & Upton, Concord (Robert W. Upton, Concord, orally), for plaintiffs.

McLane, Carleton, Graf, Greene & Brown and Robert A. Raulerson, Manchester, for defendants.

LAMPRON, Justice.

The first three transferred questions pertain to the effect on the lease of the dissolution as a corporation of the lessee Hampton Beach Improvement Company.

This lease had its origin at a town meeting held in Hampton on April 24, 1897 for, among other purposes, 'to see if the Town will pass any vote or votes relative to the leasing of any or the whole of the lower or Pines Marsh Beach to * * * parties who will open and improve the same for building purposes on some reasonable terms'. These premises 'were a narrow strip of undeveloped land consisting of barren sand dunes and marsh land.' This land lay between the Atlantic Ocean on the East and large areas of salt marsh on the West. The following vote was adopted at that meeting. 'Whereas the land owned by the Town extending from the Island Path to the river mouth not being utilized and will not be for any town purpose nor yield any income to the Town and whereas said land being so well located and so convenient for cottage purposes under the new system street railway travel it is capable of yielding a large income to the Town and greatly increase its taxable property and whereas there are responsible parties ready and willing to lease and improve the same for the town's interest-therefore resolve that the selectmen be instructed to lease the same to the Hampton Beach Improvement Company at such rental and under such conditions as will be for the best interest of the Town and for the most valuable improvement of said land'.

As stated in the preamble to the lease, the Company, which became the lessee, 'submitted to the selectmen * * * its proposition * * * which is the same set forth and contained in the lease * * * which * * * seems to the selectmen to be for the best interest of the Town and the most valuable improvement of said land'. By its terms, this lease for 99 years executed April 1, 1898, almost one year after the vote authorizing it, obligated the Company to pay an annual rental of $500; to construct and keep in repair at its own cost and expense cross streets between roads constructed by the Town; to prohibit the sale of intoxicating liquors on the leased premises; to restrict the type of buildings to be erected on the street facing the ocean; and to 'use its best efforts to lease lots of land from the leased premises and have cottages and dwelling houses erected thereon and bring taxable property into the Town and improve said leased premises for the best interests of the Town and will endeavor to have and maintain an orderly and respectable place there which shall be for the benefit and credit of said Town'. The lessor agreed to build and maintain a highway east of the leased premises. Without affecting its right to tax all buildings erected on the land, the Town agreed not to tax the leased land or if taxed to pay said tax or if paid by the lessee it was to be deducted from the annual rent.

The following facts are agreed on by the parties. The Company has constructed, maintained, and repaired at its own expense, fifteen cross streets between Ocean Boulevard, a highway constructed by the Town east of the leased premises, and Marsh Avenue (now Ashworth Avenue) another highway constructed by the Town west of the leased land. The Company has entered into subleases with the result that 'large, permanent and expensive improvements have been made and buildings erected so that at the present time all of the land presently occupied by the Company contains residential, commercial and other types of buildings. Since 1898, the Company has expended substantial sums of money in developing the leased area, promoting the leasing of lots therein and the erection of buildings thereon, and the building and repairing of streets and sidewalks'.

The parties are also in agreement on the following facts. During the early years, the Company had little, if any, profit from operations under the lease, but the profits since have greatly increased as has the value of the land under lease. 'In the year 1898 the Company had a net loss of $550.50 and in 1914 a loss of $1,950.99. Its net profits after taxes were $1,973.17, $4,654.12, $6,504.16, $10,680.34 and $17,129.25 for the years 1924, 1944, 1954, 1956 and 1962 respectively.' 'The fair market value of the land under lease, exclusive of additions and improvements made since the execution of the lease in 1898, is now not less than $300,000., while the leased premises occupy 'less than two percent of the total area of the Town' the assessed value of the property thereon represented $2,231,025. of the Town's total valuation of $20,062,859. in the year 1962.'

The lessee Hampton Beach Improvement Company was founded in 1897 as a voluntary corporation under the provisions of chapter 147 of the Public Statutes which, with specified exceptions, authorized such corporations to carry on 'any lawful business'. P.S. 147:1, x. By virtue of Laws, 1919 ch. 92 authorizing and regulating business corporations, this Company could have voted to come within its provisions thereby obligating this company to make an annual return to the Secretary of State and to pay an annual fee. ss. 36, 38. There is nothing in the record indicating that such a vote was ever taken by it.

Laws 1933 Chapter 318 'repealed, revoked and annulled' the charters of '(a)ny corporation organized for profit before March 28, 1919, which had not made an annual return or paid a fee to the secretary of state' with certain exceptions not material here. However under its section 3 '(a)ny such corporation may reinstate itself as a corporation within two years after the date that this act takes effect' by making formal application for reinstatement and by the payment of fees, if any, in arrears, 'and the filing of annual returns required by law since January 1, 1926'. The parties agree that the 'Company did not apply for reinstatement, possibly because not formally notified of the annulment of its charter. In ignorance of its dissolution the officers and stockholders of the Company collected rents, executed subleases and in general exercised the rights and privileges of the Company, as lessee, as though its charter had not been revoked and annulled and did not learn that the charter had been annulled until the filing of this petition for declaratory judgment in 1955. The Town did not learn of the repeal and annulment of the charter until informed by its counsel shortly before the petition was filed'.

March 29, 1956 the intervenor, Hampton Beach Improvement Company, Inc. was organized as a business corporation in this State. Article 2 of its articles of agreement states in part as follows: 'The objects for which the corporation is established and the nature of the business to be transacted by it are as follows: To re-establish the corporate status of the Hampton Beach Improvement Company, a corporation duly organized under Chapter 147 of the Public Statutes of the State of New Hampshire in September, 1897. * * * It is the desire, intention and purpose of the incorporators to re-establish the corporate identity of the aforesaid company and to have the new corporation carry on the same business and have the same purposes as the aforesaid company prior to its dissolution by statute'.

It is agreed that 'the individual defendants are or were the stockholders of the dissolved corporation, who claim to have succeeded to its rights as lessee under the lease'. It is further agreed that as such sole stockholders they transferred "all their right, title and interest in and to the business, assets, rights, contracts, and any and all other property heretofore owned' by the dissolved corporation to the Hampton Beach Improvement Company, Inc. in exchange for its capital stock'. This latter corporation issued 40 shares of its stock in the same amounts and to the same stockholders who held stock in the old corporation at the time of its dissolution. These persons were members of the families of three of the original five persons to whom 40 shares of stock in the original corporation were issued.

I. The first three transferred questions read as follows:

'I. Did the revocation of the charter and dissolution of the Hampton Beach Improvement Company by Laws of 1933, Chapter 318, and the failure of the Company to reinstate itself as therein provided terminate the lease?

'II. If the dissolution of the Improvement Company did not terminate the lease, did its stockholders upon dissolution succeed to the lease and the rights and privileges of the Improvement Company under the lease?

'III. Do the peculiar terms of the lease defining the relation between the Town as lessor and the Improvement Company as lessee create a relation of trust and confidence which precludes the assignment or transfer of the lease to a successor or assignee without the consent of the Town?'

Setting aside question III for the present we advert to the first two questions. Laws 1933, chapter 319, by which the Company's charter was revoked, provided in its section 4 that such a corporation shall 'continue as a body corporate for the term of three years * * * for the purpose of * * * distributing its assets, including the disposition and transfer of all or any part of its property'. This evidences a repudiation of the early common law rule 'if it ever really was a rule' that all real estate held by a corporation at the time of its dissolution reverted to its grantors and all of its personal property vested in the sovereign for want of any other owner. 16A Fletcher,...