108 N.Y.S. 823 | N.Y. App. Div. | 1908
Lead Opinion
In this proceeding the Attorney-General seeks the leave o'f the court to bring an action against the Consolidated Gas Company of. Hew York to procure a judgment vacating the charter and annulling ■the corporate existence of the company.
The present appeal is from an order at Special Term refusing to give the desired leave. The application is made under section 1798 of the Code- of Civil Procedure, .which authorizes the Attorney-General to bring 'such-an action, in .certain- cages, upon obtaining leave so to do-from the court. Whether or not such leave should be given rests in each casé in the sound discretion of the court, and is not to be given as a matter of course. (Matter of Attorney-General, 81 Hun, 541.) Weight, undoubtedly, is to be given to the fact that the Attorney-General has felt it to be his duty to apply for the required leave, but the court is also charged with a duty in the premises to consider seriously whether upon the facts.
It appears from the petition that the Consolidated Gas Company of ¡New York was organized in 188.4 by the consolidation of six domestic gas light companies then engaged in manufacturing and selling gas in the city of New York, in which business the Consolidated Gas Company lias engaged since its organization. This consolidation was effected under the provisions of chapter 367 of the Laws of 1884, and, so far as appears, all the formalities prescribed by that act were, duly complied with. Subsequently and at divers times the Consolidated Gas Company has acquired by purchase, either the whole, or a majority of the capital stock, of a number of electric lighting and gas lighting companies, all of which it controls by virtue of its said purchases of stock. The grounds upon which the Attorney-General seeks to annul its charter are, first, that it has violated provisions of law whereby it has forfeited its charter and-become liable to be dissolved by the abuse of its corporate powers ; and, second, that it has exercised and is exercising franchises not conferred upon-it by law.
The charge that the Consolidated Gas Company has violated provisions of law and thereby forfeited its charter is based upon its purchase of the stock of other, and possibly competing, gas and electric lighting 'companies, the effect of which, it is said, is to create a monopoly and prevent competition. It is not to be denied that section 40 of the Stock Corporation Law (Laws of 1890, chap. 564, as amd. by Laws of 1892, chap. 688), which was re-enacted with an amendment by chapter 601 of the Laws of 1902, in terms permitted the purchases of stock. It provides that “ Any stock corporation * * * may purchase, acquire, hold and dispose of the stock, bonds * * of any corporation * * * if authorized so to do by a provision in the certificate of incorporation * * * or if the corporation whose stock is so'purchased * * * is engaged in a business similar to that of such stock corporation,” and under section 61, subdivision 3, of the Transportation Corporations Law (Laws of 1890, chap. 566) it seems that the Consolidated Company could have lawfully consolidated with the several companies of which it bought the stock. The learned Attorney-General
■The second ground upon which -the Attorney-General seeks to vacate the charter of the Consolidated Gas Company, and thus terminate its corporate existence, is that: “It lias, exercised and. is exercising franchises- not conferred upon it by law.” The basis for this contention is that -certain" consents or permits issued by the municipal authorities of the city of New York, to the -constituent companies by the consolidation of which; the Consolidated Ccm> paiiywas' created were so framed as to contain a limit of time during which they should continue to be effective, and that.that
The franchise to be a corporation and to transact business comes from the State, as does also the right, incidental and necessary to the enjoyment of the franchise, to lay pipes and mains in the streets, to maintain them when laid so long as necessary for the beneficial enjoyment of the corporate franchise, and for that purpose to dig into and open the streets. -The State might have given authority to open the streets without any consent from the local authorities and has done so in many cases, but in general and particularly in the case of the constituent companies mentioned in the petition it has required the consent -of the local authorities to be obtained before a street surface should be disturbed for the purpose of laying gas mains.
In these cases the right to lay mains comes from the State, permission to exercise the right being made dependent upon the consent of the local authorities. It was competent for the local authorities to give a general consent covering a fixed period of time, or running during the life of the corporation, or to give consents from time to time as the necessity for opening the street surface arose. Thé first alternative was chosen, and to each company was given a general consent, limited as to areas to which it applied, and as to the time during which it should remain effective. These periods of time have expired, and while it was undoubtedly competent for the local authorities to extend the time, or to have granted new consents, it appears that this had not been done, unless acquiescence
The order appealed from must be affirmed, with ten dollars costs and disbursements. . ..
Patterson, P. J., McLaughlin and Clarke, JJ., concurred; Laughlin, J., dissented.
Dissenting Opinion
I agree with the majority of the court that the continuance of the use of the gas mains and lateral house connections in .the streets of ¡New York city, after the period specified in the grants made by or consents given by the local authorities, affords no ground for a forfeiture of the franchises which the Consolidated Gas Company received from the State, for, in my opinion, such consents or grants are not franchises within the fair intent and meaning of the provisions of the Code of Civil Procedure (§ 1798 et seq.) with respect to annulling the charter, of a corporation, but are, more in the. nature of contracts between the gas companies and the city, and questions arising with respect thereto are to be adjusted between them and the city without the intervention of the State.
I am of opinion, however, that the learned Attorney-General, in charging and showing that the Consolidated Gas Company purchased a controlling interest in other gas companies and in electric light companies supplying gas or electricity for light, heat or power in the borough of Manhattan or The ¡Bronx for the purpose of obtaining a monopoly in the manufacture and sale .of gas or in.gen^ erating and furnishing electricity for light, heat or power, which are commodities in common use, and with a view to stifling competition in the manufacture or generation or sale, thereof, presénts a question of law as to whether the Consolidated Gas Company has not violated the provisions of section 1 of chapter 690 of the Laws of -1899, being the Anti-Trust Act, so called, and of section 7 of
The case of Rafferty v. Buffalo City Gas Co. (37 App. Div. 618) is not, I think, decisive of these questions, and Judge Holt in the United States Circuit Court, Southern District of Néw York, in Burrows v. Interborough Metropolitan Company (156 Fed. Rep. 389), recently, held with the contention of the Attorney-General that section 40 of the Stock Corporation Law (as amd. by Laws of 1892, chap. 688, and Laws .Of 1902, chap. 601), which authorizes one stock corporation to purchase and- hold -stock in certain other stock corporations engaged in a similar business, is limited and qualified by Hie provisions of section 7 of the same act (as amd. supra). ■ I refrain at this time from agreeing or disagreeing with Judge Holt’s construction, because the question is not presented for decision on the merits now, but I think that the questions áre of sufficient ' public importance to require that they shall be decided by the Court of Appeals, which can only be done, as matter of right, by permitting the Attorney-General to bring an action.. If such leave be not granted, then I think that this court should either modify the order of the Special Term denying the Attorney-General’s motion for leave to sue, by reciting that the denial is not in tlie' exercise of the discretion of the court, but upon the ground that the facts presented do not show a cause of ■ action, or else certify to' the Court of Appeals the question as to whether section 40 of the Stock Corporation Law is modified or qualified by section 7' thereof or by section 1 of the Anti-Trust Law, so called, in either of which cases I think •the Court of Appeals would decide the question upon the merits. (See Hewlett v. Wood, 67 N. Y. 394; People ex rel. Lehmaier v. Interurban R. Co., 177 id. 296; Matter of Thurber, 162 id. 244; Schneider v. City of Rochester, 155 id. 619; Birge v. B. I. B. Co., 133 id. 477, and cases cited; Matter of Davies, 168 id. 89.)
If the corporation has violated either of these statutes its charter ought to be annulled, and I think that the Legislature did not intend to authorize the court to refuse leave to bring the action when the court is of opinion that the action ought not to be brought, assum
I, therefore, vote for reversal of the order and for granting leave to bring the action.
Order affirmed, with ten dollars costs and disbursements.