Commonwealth v. Louisville Property Co., 139 Ky. 689

Commonwealth v. Louisville Property Co.

139 Ky. 689 | Ky. Ct. App. | 1909

Lead Opinion

Opinion of the Court by

Judge O’Rear

Affirming-

This action was instituted against two corporations to escheat certain unimproved land in Bell *691county, Ky., because the corporations had owned the lands for more than five years, when during the whole of that time the ownership of that property was neither proper nor necessary for carrying on the legitimate business of the corporations, or of either of them. The corporations sued are the Louisville Property Company and the Louisville & Nashville Railroad Company. The lands were conveyed to the corporation the Louisville Property Company during the year of 1902. The allegations of the petition, to which a general demurrer was sustained, and the petition dismissed in consequence, are as follows, so far as it states the facts relied on against the Louisville Property Company: “The plaintiff, the commonwealth of Kentucky, further says that the said defendant Louisville Property Company has been the owner and in possession of the said land embraced by the said deeds to it since the respective dates of said deeds conveying said property to it, and for a period of more than five years before the. institution of this action and the filing of this petition. Plaintiff further says that none of said lots or tracts of land are used by said corporation in connection with the legitimate business authorized under its charter, nor is any of said lots or parcels of land necessary or proper for the carrying on of the legitimate business of said corporation, and same having been held by said Louisville Property Company for more than five years continuously last past, each and every one of said lots, parcels, or tracts of land has escheated and reverted to the state of Kentucky, and that the said state of Kentucky is now entitled to the possession of same.” It was also alleged that the property company was organized and empowered to buy, sell, and lease land. In an amended petition, *692supplementing the averments of the original petition, is the attempt to state the cause of action against the railroad company. The allegation is that the railroad company furnished the money with which to buy the land, that it really owns the land, that the Louisville Property Company is “a holding corporation” for the railroad company, that “some or a majority of the stock” of the Louisville Property Company is owned by persons who are also stockholders of the Louisville & Nashville Bailroad Company, and that the property is not proper or necessary for the use of the railroad company.

The provisions of law under which the petition was framed are section 192 of the Constitution and section 567, Ky. St. The section of the Constitution is: “No corporation shall engage in business other than that expressly authorized by its charter, or the law under which it may have been or hereafter may be organized nor shall it hold any real estate, except such as may be proper and necessary for carrying on its legitimate business, for a longer period than five years, under penalty of escheat.” The section of the statute is as follows: “Sec. 567. No corporation shall engage in business other than that expressly authorized by its articles of incorporation or amendments thereto; nor shall any corporation, directly or indirectly, engage in or carry on in any way the business of banking, or insurance' of any kind, unless it has become organized under the laws relating to banking and insurance; nor shall any corporation hold or own any real estate, except such as may be necessary and proper for carrying on its legitimate business, for a longer period than five years under penalty of escheat.” We hold that if the fact is that the Louis*693ville & Nashville Railroad Company provided the money to hny the land, and caused the title to he taken to a dummy corporation created at the instance of the railroad company, whether its stockholders and those of the railroad company were the same or not, so that the railroad company might in reality hold the title to the land in spite of the Constitution and statute, the land would be subject to ■escheat. Corporations may endure always. The public policy of this state, declared by the section of the Constitution quoted, is to prevent the title to real estate being taken to corporations in this state, ■and held interminably, when not necessary and proper for the carrying on of the legitimate business which the corporation was specifically authorized by this state to do. What is prohibited cannot be done by indirection, any more than it could have been by direct violation of the Constitution.

It is argued that, as the Louisville Property Company was authorized by its charter to “purchase, hold, lease, sell, convey, and otherwise use, manage and dispose of all kinds of real or personal or mixed property wherever situated in the United States of America,” its holding- the property for longer than five years cannot be held to he either improper or unnecessary to the carrying on of its legitimate business. We construe the charter of that company to mean that it was empowered to deal in real estate. That means to buy and sell real estate, and to hold it for a reasonable time until it can sell it. If it had been the purpose of the corporation only to hny and “hold” lands, and if -that purpose was not an infringement of the Constitution, then it would be possible for a corporation to own all the land in course of time, and to hold it always. That was the *694very thing the Constitution was aiming to prevent. We will not construe an open expression in a corporate charter so as to make it conflict with the Constitution, when another construction in harmony with the Constitution is susceptible from the language of the charter. If the Louisville & Nashville Railroad Company does actually own the land, as charged, and if it is not necessary and proper for the conduct of its legitimate business, then it is immaterial what the powers expressed in the charter of the property company may be.

Appellee railroad company argues that the expression in section 192 of the Constitution, “as may be proper and necessary,” is used in reference to the future; that, if it now appears that it may be necessary in the future for the railroad company to own these coal and timber lands, the Constitution does not forbid it. But the section is dealing with a situation five years next preceding the time it may be invoked. It has no reference to the future.

The petition, however, is fatally defective. It-does not.allege that the Louisville & Nashville Railroad Company has for five years held, in its name or in that of its agent, the “holding” company, the title to -the land, when for that time it was not proper and necessary for the railroad company to carry on its legitimate business. The allegation is that it is not necessary now, not that it was not necessary and proper -two years ago, or other time than at the present. The circuit court properly sustained the demurrer.

Judgment affirmed.

Rehearing

*695Response to Petition eor. Rehearing by

Judge 0 ’Rear.

Counsel for appellee urge that we withdraw all that part of the opinion in this case which discusses the effect of a holding by a dummy corporation created, financed, and officered by another, of land held in violation of the Constitution of this State. Also, what was said in the opinion construing the charter of the holding company. It is argued that ■this matter, in view of the conclusion reached by the court, was obiter dictum. We do not so understand it. The question was, what was necessary to be stated under the section of the constitution and the statute involved and cited, to support the cause of action asserted. To decide whether the petition before us was sufficient it was necessary to state what was required to be set out. In doing so, the purpose of the law must be shown, as well as the acts necessary to bring the case within its meaning. Then the acts charged must be measured by the standard, determined as the proper one. Of a petition upon a note, its sufficiency could not be well decided and explained unless it was said what would be the necessary allegations to have been made. Then if the facts alleged did not satisfy the standard of pleading, it would follow that the petition was bad. All that was said in the opinion was germane to the discussion and decision of the point involved, however narrow it finally became because of the paucity of the allegations of the pleading. The court is required to deliver written opinions. Here the sufficiency of a petition drawn under the statute is involved. We decided that the petition was defective. We are required to state the reason or reasons why it was defective. To do so, we must inter*696pret the statute so as to learn and to state its. meaning, and must then explain what is necessary to bring the ease within the statute so expounded. If we conclude that the petition is bad,, all' that has been said leading up *to that conclusion, is not dictum because the state of facts necessary to have been alleged to make a good petition, are shown not to have been stated. The matter objected to is not obiter dictum.

The petition for rehearing also says:

“We also think that the court is in error in denying, if that is what it meant to do, the right of a corporation to hold land longer than five years without penalty of escheat, where the lands have not within that time been used in the business of the corporation, even though there is a reasonable expectation that the lands may be necessary for use in the business of the corporation in the future.”

. The complaint doubtless rests upon the clause in the opinion saying:

“The section is dealing with a situation five years next preceding the time it may be invoked. It has no reference to the future.”

It is true that the sections deal with a past condition. But that does not mean that the future was eliminated from the consideration. It may well be the contrary. If the corporation acquires land “necessary and proper for carrying on its legitimate business,” if necessary, and proper when acquired or at any time within five years after it is acquired, its future use and availability may be considered in determining whether the quantity acquired, and the time of bringing it into actual use make it “proper and necessary for carrying on the legitimate business” of the corporation. It is not essential to. the validity, of the holding that the land be imme*697diately “used” by the corporation. It must only be “necessary” and “proper” for carrying on the corporation’s legitimate business. In a certain sense whatever property a corporation may own may be necessary to enable it to maintain itself. But the -sense here is narrower than that. It restricts such holding of land to such as is proper, that is, suitable in kind and location, and as may be required, to enable it to engage in the business which its charter expressly allows. A coal mining company may therefore own coal lands, although not mining every part of them at the time, because coal lands are both necessary and proper for carrying on its legitimate business. So, a corporation created to manufacture lumber may own timber lands in excess of the quantity then being cut from. ■ But a railroad corporation has not the right, therefore it is not proper, for it to own vast bodies of coal and timber land, although it uses both coal and timber in its business — one for fuel, the other for crossties and car building. Coal and timber may be said to be necessary and proper for its use, but land on which there are timber and coal is not necessary. So, it may be conceded that a railroad corporation might own a coal mine for its immediate use, or growing timber, but it has not the right to engage commercially in mining and selling coal, or manufacturing lumber. If all the railroad corporations should determine that all the coal lands of this state were necessary, that is, would at some time in the future be necessary, to enable them to carry on their business of operating railroads, it would be possible for these common carriers, under appellee’s version of the constitution, to monopolize not only the coal which they consumed, but all they carried to the market for *698sale — for who can say that all the coal will be more than sufficient to supply all the railroads with fuel for all time? A railroad corporation may sell its coal although it may be deemed necessary and proper for carrying on its business that it be retained.- A railroad also uses crude' and finished oils*, iron and certain machinery. May the railroad therefore acquire unlimited oil wells, iron ore deposits, and foundries’, holding them idle until such time as it sees proper to open them to the market? The suggestion, no less than it may own unlimited lands containing coal and timber, mocks the Constitution.

The holding company in this case, as alleged is only a “holding” company. To hold lands interminably is not a business.

The opinion can not be construed as a menace to corporations acquiring land for the business for which they are chartered to do. There is no threat that they must bring all such land into actual use within five years or suffer escheat. The only limit as to the time such corporations may own such lands is the limit in their charters.