153 N.Y.S. 879 | N.Y. App. Div. | 1915
This is an action brought by the plaintiffs, as stockholders of the New York Central Bailroad Company, in their own behalf and in behalf of all other such stockholders, against the said company and certain other defendants, to enjoin the said company from issuing certain four per cent interest bearing bonds to replace and retire certain outstanding three and one-half per cent bonds as an incident of the proposed consolidation with that company of the Lake Shore and Michigan Southern Bail-way Company.
The contention of the plaintiffs is that such issue of the new bonds would violate both section 141 of the Bailroad Law and section 55 of the Public Service Commissions Law. At the Westchester Special Term for motions, upon a motion duly made, a temporary injunction was granted. The justice presiding wrote an opinion indicating that he sustained the plaintiffs’ contention. Very shortly thereafter, the case was tried at the Westchester Special Term for trials. The justice there presiding came to the opposite conclusion and accordingly gave decision to the defendants, upon which judgment was duly entered, from which the plaintiffs appealed to this court.
There appears to be no controverted question of fact in the
The sole question presented for determination by this appeal is whether or not the scheme of issuing four per cent bonds to refund and replace such part of the present three and one-half
“But in no case shall the capital stock of the corporation formed by such consolidation exceed the sum of the capital stock of the corporations so consolidated, at the par value thereof. Nor shall any bonds'or other evidences of debt be issued as a consideration for, or in connection with, such consolidation.” (Railroad Law, § 141.)
“Nor shall the capital stock of a corporation formed by the merger or consolidation of two or more other corporations, exceed the sum of the capital stock of the corporations so consolidated, at the par value thereof, or such sum and any additional sum actually paid in cash; nor shall any contract for consolidation or lease be capitalized in the stock of any corporation whatever; nor shall any corporation hereafter issue any bonds against or as a lien upon any contract for consolidation or merger.” (Public Service Commissions Law, § 55.)
It seems plain that such proposed issue of the new four per cent bonds can by no manner of construction be held to be in violation of said section 55 of the Public Service Commissions Law. Those new bonds are not proposed to be and will not in any sense be issued “ against or as a lien upon any contract for consolidation or merger.” The plain purpose of that particular statutory provision is to prohibit the capitalization, by a stock or bond issue, of the mere contract for consolidation. Here the bonds are to be issued as a result of the completed consolidation and to be the securities of the actually consolidated corporation.
It is my opinion that neither the said section 55 of the Public Service Commissions Law nor section 668 of the Penal Law, cited by the appellants’ counsel as indicating the public policy of the State, is to be construed as relating to the proposal of a plan for consolidation, and the offer therein of advantages to assenting parties to be realized as a result of the completed consolidation.
Moreover, it would seem that the prohibition contained in said section 141, being in derogation of the general authority to consolidate otherwise given, must be strictly, not broadly,
There seems to be no decision by any court directly in point upon this particular question. There are, however, several such decisions by the courts of other States applying this rule of construction to various constitutional and statutory provisions limiting the amount of municipal indebtedness. The learned justice at Special Term, in granting the motion for temporary injunction, stated in his opinion, in effect, that such provisions limiting municipal indebtedness must of necessity be so construed, as otherwise the principal and the interest to accrue in the future upon a relatively small municipal indebtedness would exceed the limit. It would seem that there was an equal argument from necessity in favor of holding that an advantage set forth in a proposal for such consolidation, to accrue to an assenting party from the consolidation, if effected, should not be regarded as a consideration given for such assent and so as violating said section 141.
Therefore, my conclusion is that the proposed issue of four per cent bonds to retire the present three and one-half per cent bonds will not violate either section 141 of the Bailroad Law or section 55 of the Public Service Commissions Law. Hence I advise that the judgment appealed from be affirmed, with costs.
Jenks, P. J., Thomas, Stapleton and Bioh, JJ., concurred.
The parties hereto having stipulated in open court that a justice may be substituted in place of Burr, J., deceased, Mr. Justice Mills was so substituted. Judgment affirmed, with costs.