Hart v. Boston, Hartford & Erie Railroad

| Conn. | Nov 15, 1873

Park, J.

By a statute passed in 1869, entitled an “ act relating to corporations,” (Acts of 1869, page 219,) it is provided that “ the Superior Court, as a court of equity, may on the application of any stockholder in any corporation organized under the laws of this state, wind up the affairs of the corporation, and dissolve the same, whenever it shall appear to the court that the corporation has voted to wind up its affairs, or has abandoned the business for which it > was organized, and has neglected for an unreasonable time to wind up its affairs, and distribute its effects among its stockholders.” The Superior Court has found that the respondents have abandoned the business for which they were organized, and have neglected for an unreasonable length of time to wind up their affairs and distribute their effects among their stockholders, unless the facts of the case, as they appear in the report of the committee, shall show as matter of law that such was not the case.

The questions of law referred to are quite numerous, and arise out of the complicated affairs of the respondent corporation ; but we are unable to discover that any of them relieve the respondents from the operation of the statute.

It is insisted, in the first place, that the court below had no jurisdiction over the respondents, or over their property, on account of the decree in bankruptcy which has been passed against the respondents by the District Court of the United States in the neighboring state of Massachusetts. But we think the bankruptcy proceedings cannot operate to impair the right of this state to dissolve a corporation created by the laws of this state. What this state gave in this respect, this state can take away, notwithstanding the United States may have acquired jurisdiction over the property of the corporation sought to bo dissolved. The jurisdiction of the two governments is separate and distinct. The one may have the right, by instituting proceedings in bankruptcy, to wind up the affairs of a corporation, and distribute its effects among its creditors; but it belongs to the other to annul the charter which it gave; and its right in this respect must be exclusive and supreme. It follows, therefore, that while the right of the court, under the statute of 1869, to appoint receivers to administer the assets of the corporation, may have been superseded by the proceedings in bankruptcy, the provision of the statute with regard to the dissolution of the respondents’ franchise, remains applicable and in full force. We see nothing, therefore, in this claim which can avail the respondents.

Again, it is said that this corporation exists, not only by the laws of this state, but also by the laws of the states of Massachusetts, Rhode Island and New York, into whose territory its franchise extends; and that therefore the statute of this state does not apply to the case; that it can apply only to a corporation created by the authority of this state alone, and that this state can not by its solo action take away a franchise given by other states as well as by this state. But there is nothing in the case that tends to show that the action of these states was concerted or concurrent. Each state acted independently of the others, and we see no reason why the authority of this state over the charter originally granted by it, should be abridged by the proceedings of other states. The decree of dissolution will extend only to the Connecticut charter, leaving the grants of other states unaffected thereby.

It is further claimed that the respondents have never abandoned the business for which they were organized, and have never neglected, for an unreasonable length of time to wind up their affairs and distribute their effects among their stockholders, within the meaning of the statute under which the proceedings are instituted ; that there must be some voluntary act of abandonment, and some voluntary neglect to perform the corporate acts specified, in order to bring the case within the purview of the statute. The claim is that all the acts and all the omissions of the respondents in this relation have been forced upon them by a power which they had no means of resisting ; and that therefore there has been no voluntary abandonment of their corporate business, and no voluntary neglect to do the corporate acts required of them.

The error of the respondents consists in confounding the abandonment of their business with the causes that may have compelled it. Abandonment consists in a great measure of intent, and is always voluntary, no matter whether the causes which induce it are within the control of a party or not. A man may abandon a hopeless cause as well as a prosperous one. A seaman may abandon a sinking ship in a violent storm, as well as a staunch ship in fair weather. It is true he has no control over the tempest, or over the sinking condition of his ship, but still the act of abandonment will be as much voluntary in the one case as in the other, for he has it in his power to abide by the ship and go down with it if he pleases, or to leave it at his discretimr. One thing or the other he must do, and he chooses abandonment. The question we have to consider in this part of the case is, whether the respondents could abandon the business for which they were organized, although it appears that obstacles -were thrown in their way by legal proceedings that rendered it impossible for them longer to continue their business, or, having discontinued, to resume it. The question is one of law. The court below has disposed of the question of fact; and without dwelling longer upon the subject, we are inclined to think that it might be done, and that consequently this claim of the respondents is without foundation. We are.also inclined to think that the expression in the statute, “ has neglected for an unreasonable time,” &c., means the same thing as “ shall fail for an unreasonable time,” &c.; and that consequently the claim which the respondents make upon this point is without foundation. The object of the statute is a speedy winding up of the affairs of a corporation, when the object for which the corporation was organized has been abandoned; and it is clear that the mischief which the statute seeks to remedy would exist as much, if a corporation should from any causo fail for an unreasonable length of time to wind up its affairs after its business had been abandoned, as it would if the corporation should voluntarily neglect for tlio same period of time to do the same thing.

Again, it is claimed that if the court has the authority to pass a decree of dissolution against this corporation it is manifestly inequitable for it to do so under the circumstances of the case. It is said that if this decree is passed, the officers of the respondent corporation will he unable to assist the assignees in bankruptcy in their endeavors to obtain restitution of a large amount of the assets of the corporation which have been fraudulently misappropriated. If the property of this corporation has been fraudulently misapplied, we certainly desire that it may be recovered, and should regret to do anything that might seem to throw difficulties in the way of such a result; hut we are unable to discover how the corpus of this corporation, which has long since been practically defunct, and has only a technical existence at the best, could bo used to any advantage in any such effort. We are also unable to discover why the officers of the corporation may not continue to render their assistance to the assignees in bankruptcy, as well after this decree of dissolution as before. The whole authority is in the hands of the assignees. They represent the interests of all parties concerned. This decree cannot affect them, or their efforts to recover the property which has been squandered, if such is the fact.

We think therefore that we ought to advise the Superior Court to grant the prayer of the petition.

In this opinion the other judges concurred.