Louisville & Nashville Railroad v. State ex rel. Gray

45 So. 296 | Ala. | 1907

DENSON, J.

On account of the difficult questions which are presented for consideration by this record, as well as the vast importance of the cause itself, the write? approaches the task of preparing the opinion with great diffidence.- However, counsel on both sides have ably argued, the cause at the bar, and have shown considerable industry and marked ability in briefing it. This has been most helpful to us, and for it all we make grateful acknowledgment.

The action is one in the nature of quo warranto, brought by the state of Alabama, on the relation of Henry B. Gray, against the Louisville & Nashville Railroad Company. The information, after showing that the South & North Alabama Railroad Company was incorporated or chartered in 1854 by a special act of the General Assembly of Alabama for the purpose of constructing, maintaining, and operating a railroad within the state of Alabama between Montgomery and Decatur, and after showing that the Louisville & Nashville Railroad Company is a foreign corporation organized under and by virtue of the laws of the state of Kentucky, and is doing business in the city and county of Montgomery, Ala., charges in a single paragraph, as follows: “Third. That at the time of filing this information or complaint, and. for many years prior thereto, the said Louisville & Nashville Bailroad Company, being such foreign corporation, is exercising and has exercised the franchise or franchises granted by the General Assembly of the state of Alabama to the said South & North Alabama Bail-road Company under and by virtue of the said act hereinabove referred to granting said charter, or is exercising the franchise or franchises of running a railroad and collecting tolls for the same between Montgomery, Ala., and Decatur, Ala., without any warrant or authority of law whatever; that in so oprating said railroad or exercising said franchise or franchises it is and has been unlawfully and without authority of law using, enjoying, and usurping the rights, privileges and franchises granted by the General Assembly of the state of Alabama, to a domestic or resident corporation, towit, the South & North Alabama Bailroad Company, or has been using, enjoying, and usurping a franchise or franchises which have not been granted to any person or persons by the state of Alabama; that in the use, enjoyment, or usurpation of said rights, privileges, and franchises the said Louisville & Nashville Bailroad Company, being a for eign corporation as aforesaid, is engaged in doing those things that are unauthorized by the laws of the state of Alabama, and which are unlawful under the laws of the state of Alabama, and is exercising and has exercised a privilege or privileges, franchise or franchises, within the state of Alabama, without any warrant or authority of law.” The prayer of the information is that “a writ of quo warranto or other appropriate writ be directed to the Louisville & Nashville Bailroad Company, commanding it to appear and show under Avhat warrant or authority of law it exercises the franchise or franchises of operating .and maintaining a railroad in the state of Alabama between Montgomery and Decatur, and to show cause, if any it can, why it should not be ousted therefrom.” A further prayer is for judgment against the Louisville & Nashville Railroad Company, “and that it be declared not entitled to the use, enjoyment, or exercise of the franchise or franchises which have heretofore been granted by the General Assembly of the state of Alabama to the South & North Alabama Railroad Company or to- exercise the franchise or franchises to maintain and operate a railroad within the state of Alabama between Montgomery and Decatur, and that the Louisville & Nashville Railroad Company may be ousted from the use and exercise of the said franchise or franchises.” This information is attacked- by demurrer, and the relator (appellee) insists that, the proceedings having been instituted for the purpose of ousting the respondent from usurpation, and not for the purpose of forfeiting a charter, the information constitutes no part of the pleadings; that it is not intended to tender an issue of fact, but its office is simply to furnish the court the information in reference to the alleged usurpation; and, therefore, that it cannot be the subject of attack by demurrer. Whatever may have been the common law in respect to this contention, our statutory system in respect to quo warranto proceedings has supplanted the common law, and constitutes “the only system of laws now obtaining in this state touching the remedy of quo warranto, or information in the nature of quo warranto; and a quo warranto proceeding which does not meet the statutory requirement as to parties and procedure cannot be maintained.” — State ex rel. Fitts v. Elliott, 117 Ala. 172, 23 South. 43; State ex rel. Johnson v. Mayor, etc., 142 Ala. 661, 38 South. 802; State ex rel. Johnson v. Southern B. & L. Asso., 132 Ala. 50, 31 South. 875. Our system of laws in regard to quo warranto is contained in chapter 94 of the Code of 1896 (sections 3417-3439, pp. 966-970). It seems, from a study of the system, too clear for argument that the information or complaint must be regarded, under the statutes, as the first step in the pleadings — as a part of the pleadings.- — State ex rel. Johnson v. Southern B. & L. Asso., supra. Neither of the sections composing chapter 94 makes any distinction in the proceedings, whether the action be commenced for forfeiture or for usurpation; and we find that section 3428 prescribes: “The complaint [information] in such action must concisely and clearly set forth the act or omission complained of.” It was within legislative competency to prescribe this rule, and, not having shown any distinction in this respect between actions for for-' feiture and actions for usurpation, the courts are not authorized to draw any, but should apply the rule to all informations alike. It follows that the information must be regarded as pleading, and may be the subject of demurrer for failure to comply with the requirements of the statute.

The point is made by the demurrer that the information is indefinite and uncertain as to what franchise or franchises the defendant has been using, enjoying, and usurping. There can be no doubt that the information alleges conclusions of law and fact as constituting the offense or usurpation on the part of the defendant; and, while this form of pleading ordinarily may be permissible under our system, it will be observed that the acts alleged to have been, and as being, committed by the respondent, and which are relied on as constituting usurpation, are set forth in the alternative. In other words, the relator shifts his right of action from one ground to another in the same count. He states several acts of usurpation in the alternative or disjunctive, “so that it is impossible to say upon which of the two or more substantive averments he relies for the maintenance of his action.” Again, there is confusion and obscurity as to the ground upon which the relator bases his cause of action, or of what he would have the respondent ousted, so that-the respondent is not clearly informed of the matter to be put in issue. — Highland, etc., R. R. Co. v. Dusenberry, 94 Ala. 413, 419, 10 South. 274. It is not objectionable to rely on two or more grounds or usurpation in one information; but each ground should be stated in a separate count or paragraph, in order to attain that perspicuity and certainly which is required by the statute in such proceedings. — Code 1896, § 3428. As is said in the case last cited above: “Inextricable confusion of issues would result from the blending in one count of a number of distinct breaches of duty as independent grounds of recovery, to be chosen from and relied on at the election of the plaintiff.” And in State ex rel. Johnson v. Southern B. & L. Ass’n., 132 Ala. 50, 54, 31 South. 375, a quo warranto proceeding, it seems to be strongly intimated if not directly held, that the rule in respect to clearness, or precision of statement in pleading should, on account of the requirement of the statute (section 3428), be more strictly applied to information than to pleadings in ordinary cases. The demurrer on the ground under discussion should have been sustained. — L. & N. R. R. Co. v. Duncan & Orr, 137 Ala. 454, 34 South. 988; Southern Ry. Co. v. Bunt, 131 Ala. 591, 32 South. 507; Richmond, etc., Railroad Co. v. Weems, 97 Ala. 270, 12 South. 186.

The other point made by the demurrer to the information, and which is pressed upon our attention here, is “that the operation of a railroad in Alabama by a foreign corporation having the power under its charter to operate railroads in Alabama, after said corporation has complied with the laws of Alabama authorizing foreign corporations to do business in Alabama, is not tbe exercise of such a franchise as gives this court jurisdiction to try its right thereto by quo warranto proceedings, and said petition does not allege that the defendant is without such charter power, nor that it has not complied with the laws of Alabama authorizing foreign corporations to do business in Alabama.” It is sufficient to say of this ground of demurrer that the information avers that the operation of the railroad by the defendant within the state of Alabama was and is without any authority of law; and it was not incumbent upon the relator to go further, and allege that the defendant was without the charter power, nor that it had not complied with the laivs of Alabama applicable to foreign corporations doing business. If the defendant desired to present the question as to whether a foreign corporation, with charter powers granted by the Legislature of its parent state to operate a railroad in Alabama, may so operate a railroad in Alabama, without express charter power granted by the Legislature of this state or under its general laws, it might do so in its answer to the writ; and we find that the defendant adopted this course.

After the demurrer to the information was overruled, the defendant at different times filed 17 special pleas or answers, alleging facts and circumstances which are claimed to show a right in the defendant to operate the South & North Alabama Bailroad, and denying that it is exercising the franchise or franchises mentioned in the petition. Demurrers were interposed to each of these pleas. These demurrers were sustained, and, the defendant declining to plead further, a judgment of ouster was rendered. The defendant has appealed from this judgment. It would be unprofitable to attempt an analysis of the allegations of the different pleas, and the material facts will be stated as they appear by the pleadings as a whole.

The Louisville & Nashville Railroad Company is a foreign corporation, organized and existing under the laws of the state of Kentucky, with power and authority to construct, maintain, and operate railroads. By an act passed in 1878 (1 Acts 1877-78, p. 842, c. 278), in the preamble of which the South & North Alabama Railroad Company is specially mentioned, the charter was amended so as to authorize the “president and directors, with the assent and approval of a majority in interest of the stockholders of the company, present or represented at any annual or called meeting thereof, to operate, lease, or purchase, upon such terms as they deem best, any railroad in any other state or states deemed necessary for the protection of the interests of the stockholders.” This amendment to the charter was duly accepted by the stockholders and directors, and the company has ever since been acting thereunder, and exercising the authority and powers therein and thereby conferred upon it.' By an act passed in 1880 (1 Acts 1879-80, p. 61, c. 80) the charter of the Louisville & Nashville Railroad Company was further amended so as to give the company power and authority to purchase and hold a majority in amount of the capital stock of any railroad company and companies chartered by any other state. This act provided that it should be accepted by a majority in interest of the stockholders of the company present or represented by proxies at any annual or called meeting. This was done, and the company has ever since exercised the power conferred upon it by this act with the assent of its stockholders. Commencing on the 24th day of March, 1887, the defendant has done all that foreign corporations are required to do by the Constitution and laws of Alabama to entitle it to do business in the state.

The South & North Alabama Railroad Company was organized under a charter granted by the Legislature of the state of Alabama in 1854 (Acts 1858-54, p. 318), empowering it to construct and operate a railroad within the state between the city of Montgomery and the city of Decatur. By this charter the company was empowered among other things, “to make any laAvful contract with any other railroad corporation in relation to the interest of the said company, and also to make joint stock with any other railroad corporation.’* This charter was several times amended: First, by an act approved February 23, 1860 (Acts 1859-60, p. 313) ; again,, by an act approved December 30, 1868 (Acts 1868, p. 494); and again, by an act approved February 26,1872 (Acts 1871-72, p. 325). All these amendments (the provisions of which it is not deemed necessary to state) were duly accepted by the stockholders of the company. Prior to the year 1871, the South & North Alabama Railroad Company had commenced and attempted to construct its railroad under its charter between Montgomery and Decatur, but by reason of the lack of necessary means and credit it failed to complete the road and was unable to do so. This was Avhen the relation between the two railroads which is complained of in the petition commenced. At the time when the South & North Alabama Railroad Company found itself unable to build its road, the Louisville & Nashville Railroad Company, which OAvned and operated a railroad from the city of Louisville, Kv., to the city of Nashville, Tenn., controlled and was operating another road, extending from Nashville to Decatur, in this state, under a lease dated May 4, 1871. These two roads formed a continuous line, and connected Avith the road of the South & North Alabama Railroad Company at Decatur. It may also be stated in this connection, although the fact may not be very material, that since January 12, 1881, the Louisville & Nashville Railroad Company has been operating a railroad in this state from Mobile to Montgomery under a lease, and since December 17, 1900, lias been operating this railroad as owner. These three lines of railroad — the line from Louisville to Nashville, the line from Nashville to Decatur, and the line from Mobile to Montgomery — together with the South & North Alabama Railroad, form a continuous line of railroad. The pleas go further, and •show that the Louisville & Nashville Railroad Company is operating a continuous through line of railroad of which the South & North Alabama forms a part, between New Orleans, Louisville, Cincinnati, and St. Louis.

But, going back to the year 1871, when the South & North Alabama Railroad Company was financially unable to complete its road, the Louisville & Nashville Railroad Company, which was then operating a continuous line of railroad from Louisville, Ky., to Decatur, in this state, was desirous of forming a connection with some road south; and, believing that the completion of the road of the South & North Alabama Railroad Company would afford that opportunity, if it could be assured that that road would be operated in harmony with its own road, it agreed to construct the road of the South & North Alabama Railroad Company, provided it could obtain a majority of the stock of that company, and be assured that its control of the majority of the stock, and therefore its power to control the policy and operation of the railroad, should not be lost by an increase of the capital stock. With this end in view, a contract was entered into by the two companies on May 10, 1871. By the terms of this contract the Louisville & Nashville Railroad Company undertook to complete the construction of the road of the South & North Alabama Railroad Company, charging therefor the actual cost price, to be paid in preferred stock of the latter company at 40 cents on the dollar. It was provided, among other things, that the South & North Alabama Railroad Company should issue to the Louisville & Nashville Railroad Company $2,000,000 of preferred stock, if legally entitled to do so, and that the latter company should have a right to vote this stock at all meetings of the stockholders. It was further provided that the South & North Alabama Railroad Company should obtain the legal authority to issue this preferred stock. Thereupon the Louisville & Nashville Railroad Company furnished the necessary means and completed the construction of the road' between Montgomery and Decatur shortly before October 1, 1872, on which day the road was opened for transportation of passengers and freight. But when the construction was completed the South & North Alabama Railroad Company did not have the means to equip the road, and Avas not in a financial condition to accept it from the Louisville & Nashville Railroad Company and operate it Avith its OAvn resources. To induce the Louisville & Nashville Railroad Company to operate the road in conjunction with its own lines, it elected tAvo officers of that road on its board of directors, and these officers were made, respectively, president and vice president and general manager of the South & North Alabama Railroad Company. These officials appointed several of the subordinate officers of the Louisville & Nashville Railroad Company to like offices of the South & North Alabama Railroad Company, for the purposes of economy and convenience in handling the joint traffic and other business of the two roads, but employed, as operating traffic and maintenance officers and agents persons who were not in any Avay connected Avith the Louisville & Nashville Railroad Company. The operations of the South & North Alabama Railroad Company Avere conducted in its OAvn name. The earnings of the road were not sufficient to pay expenses and interest, and the necessary funds were advanced by the Louisville & Nashville Railroad Company, and repaid to the extent of the earning's of the road. Monthly and annual accounts were made by the president to the directors of the road, and by the directors to the stockholders. The road continued to be operated in this way for a long time — nearly 15 years.

Thereafter, and for more than 20 years prior to the commencement of this suit, the Louisville & Nashville Railroad Company became and was the owner of a large majority of the common stock of the South & North Alabama Railroad Company, in addition to the §¡2,000,000 of preferred stock, and also became and was the owner of, or indorser upon, nearly all of its then outstanding bounded indebtedness. The formality of appointing the subordinate officers of the Louisville & Nashville Railroad Company was sometimes discontinued, and transportation and bills of lading were thereafter issued in the name of the former company, and an officer of that company was from time to time elected as the principal operating officer of the South & North Alabama Railroad Company, which continued to be operated as before ; the same character of expenses being charged to it and the same earnings being credited to it, so that the only change was in the name under which the operations of the road were conducted. Daily accounts of the operation of the railroad were kept, and monthly and annual accounts were made and submitted to the secretary of the South & North Alabama Railroad Company, and were furnished to the president of the company, and by him rendered to the board of directors, and by them submitted to the stockholders. In this manner -the railroad has been continuously operated for 20 years by the Louisville & Nashville Railroad Company. A large indebtedness was created, from year to year, in the operation and improvement of the railroad, and these debts were from time to .time passed upon and approved by the directors and stockholders of the South & North Alabama Railroad Company. Bonds were issued to the amount of $12,000,000, $8,000,000 of which were indorsed by the Louisville & Nashville Railroad Company, and $4,000,000 owned by it, while it also became entitled to $4,000,000 accumulated dividends. The operation of the South & North Alabama Railroad Company by the Louisville & Nashville Railroad Gompany was open and notorious, and publicly aDd generally known by the officers and citizens of the state of Alabama, during the entire time that it was so operated. During the whole period of this operation of its railroad by the Louisville & Nashville Railroad Company, the South & North Alabama Railroad Company has kept up and maintained its corporate organization. It has had its board of directors and other officers and necessary agents. Its stockholders have annually held their regular meetings, and have regularly, from year to year, elected a board of directors, which has convened in meetings from time to time as the interests of the company required, and transacted such business as was necessary to further the interests of the company. A number of additional facts are stated for the purpose of setting forth the equities of the case and appealing to the discretion of the court; but it is believed that the foregoing general review of the facts, as they are set forth in amended plea 16 and plea 17, is sufficient for our purpose.

The pleas filed by the respondent which set up the foregoing facts are attacked by the relator (appellee) on the grounds of duplicity, and that they do not set out facts showing a justification or defense; and it is urged that the demurrers interposed to the pleas are sustaina,ble on these grounds alone. In respect to the first point, that the pleas are duplex, it is sufficient to say that “under our system of pleading duplicity in the allegations of a plea is no ground for demurrer, except as to pleas in abatement. This defect was, at common law, the subject of special demurrer; and special demurrers are now abolished by statute, except, in effect, as to dilatory pleas.” — Lewis v. Lee County, 66 Ala. 480; Cannon v. Lindsey, 85 Ala. 198, 202, 3 South. 676 ,7 Am. St. Rep. 38. Appellee relies on the case of Capital City, etc., Co. v. State ex rel., etc., 105 Ala. 406, 18 South. 62, 29 L. R. A. 743. An examination of the opinion in that case will show that plea 1 was under discussion, and that the plea was condemned, not because it was duplex, but because it failed to deny the ground for forfeiture alleged in the information. What was said by the court in respect to duplicity was not in condemnation of the plea on that ground, for that proposition was not before the court for consideration; but it was said by the court that “to give the plea the construction that it was intended in the latter clause to aver that defendant had furnished pure water all the while, would make the plea duplex and inconsistent with itself.” Evidently this was said argumentatively, for the learned judge who wrote the opinion was well aware of the fact that duplicity is no longer a ground of demurrer, except in dilatory pleas. So it must be held that the insistence that the pleas are duplex cannot be sustained.

After due consideration, it is thought that we may, without putting either side to this controversy to any disadvantage, pretermit discussion of the case in any other phase than that which is given it by plea 16 as amended and plea 17. In other words, as will be discoverable from the further discussion of the case and the conclusion which will follow that discussion, it is our opinion than these two pleas present the meritorious and full defense to the action; and it is unnecessary to incumber the opinion with a discussion of propositions which might in the end he merely abstract. Futher, while these pleas may contain redundant statement, they are not subject to the demurrers made. Stated broadly, the question for decision is whether the Louisville & Nashville Railroad Company is entitled to operate the railroad of the South & North Alabama Railroad Company under the contract or arrangement set forth in the pleas.

There can be no question that the charter of the Louisville & Nashville Railroad Company, as amended, empowers it to operate any railroad in this state, so far as the state of Kentucky can confer that power. In an amendment to its charter it was authorized “to operate, lease, or purchase, upon such terms or in such manner as they (its president, directors, and stockholders) may deem best, any railroad in any other state or states deemed necessary for the protection of the interests of the stockholders.” There also can be no question that this foreign railroad corporation, which has done all that was required of it by the laws of this state in order to do business therein, is, by virtue of sections 1170 and 1117 of the Code of Alabama of 1896, empowered to enter into the contract or arrangement described in the pleas with any connecting railroad in this state which is itself entitled to avail itself of the benefits of these statutory provisions. We are not prepared to- say that this railroad can enter into any contract relations contemplated by these provisions of our statutes with a railroad company of this state which is not itself empowered to enter into the same relation. The learned judge of the city court (as shown by his opinion embodied in the brief of appellee’s counsel) took the view that it was not enough that the contract or arrangement which was entered into by the Louisville & Nashville with the South & North Alabama Railroad Company was within the power of the former company, but that it must also appear that it was within the competency of the South & North Alabama Railroad Company as well. Since it is not necessary to determine this question, in view of the conclusion at which we have arrived, it will be assumed that the decision of the city court upon this question Avas correct. It is, therefore, necessary to ascertain the poAvers Avhich the South & North Alabama Railroad Company enjoys under its charter proper, and also the powers which it possesses, if any, under the general statutes of Alabama.

. The act of 1854 (Acts 1853-54, p. 318) under which the South & North Alabama Railroad Company Avas organized gave “permission to make any lawful contract with any other railroad corporation, in relation to the interests of said company, and also to make joint stock with any other railroad corporation.” It is contended by counsel for appellant that this provision of its original charter empoAvered the company to make the arrangement with the Louisville & Nashville Railroad Company which is involved in this controversy. This proposition is vigorously assailed by counsel for the appellees, and was declared by the judge of the city court to be untenable. This is also a question which we are not called upon to decide, and it may be assumed, for the purposes of this opinion, that the poAver claimed was not conferred upon the South & North Alabama Railroad Company by its charter proper. If it is conceded that the original charter of the South & North Alabama Railroad Company, conferred by the special act under which the company was organized and by the amendments to that act, does not confer authority upon the company to enter into a contractual arrangement by which the operation of the railroad is intrusted to a foreign corporation, it remains to be determined whether authority can be and has been derived from sections 1170 and 1171 of the Code of Alabama of 1896. For convenient reference, the provisions of these sections of our statutes will be transcribed.

Section 1170 is as follotvs: “A corporation, chartered under the laws of this or any other state heretofore or hereafter created for the purpose of building, constructing, or operating a railroad, may, at any time, by means of subscription to the capital of any other corporation or company, or otherwise, aid such corporation or company in the construction of its railroad, for the purpose; of forming a connection with the road owned by such corporation or company furnishing aid; or any railroad corporation, organized in pursuance of the laws of this or any other state, may lease or purchase any part or all of any railroad constructed by any other corporation or company, if the lines of such road are continuous or connected, upon such terms and conditions as may be agreed on between the corporations or companies respectively; or any two or more railroad corporations or companies, whose lines are so connected, may enter into any arrangement for their common benefit, consistent with, and calculated to promote the objects for which they were created; but no such aid shall be furnished, nor any purchase, lease, or arrangement, perfected, until a meeting of the stockholders of each of such corporations or companies has been called by the directors thereof, at such time and place, and in such manner as they shall designate; and the holders of a majority in value of the stock of such corporation or company, represented at such meeting, in person or hy proxy, and voting thereat, shall have assented thereto.”

Section 1171 is as follows: “Any railroad company, incorporated by the laws of any other state and now owning or operating, or which is or may be authorized to own or operate, by lease or otherwise, any railroad in this state, is authorized and empowered, upon the resolution of its board of directors, to aid any railroad company incorporated under any general or special law of this state, in the construction, renovation or operation of its railroad, by the endorsement or guaranty of its securities which have been or may be issued for such purpose, in such manner as may be agreed upon by the board of directors of the contracting companies, or by leasing, or by guaranteeing the rentals of any lease of any such railroad, on such terms as may be agreed upon by the respective boards of directors.”

In contending that these sections of the Code can have no application to the South & North Alabama Railroad Company, the appellees invoke the doctrine of the Dartmouth College Case, 4 Wheat. (U. S.) 518, 4 L. Ed. 629. This railroad was incorporated under a special act passed by the General Assembly in 1854, and thereafter the charter was several times amended by special acts with the consent of the corporation. No power to alter or amend the charter was reserved in any of these acts. It is argued that since the charter was granted prior to the adoption- of the Constitution of 1875, which subjects the charters of corporations to repeal or amendment by the Legislature, it could not be altered or amended by any act of the Legislature, and no general laws passed subsequent to the granting of the charter could be made applicable’to it.' This may be conceded, so far as any act of the Legislature alone is concerned. Prior to the adoption of the Constitution of 1875, the General Assembly in the absence of a reserved power, could not amend or modify the corporate charters granted by it, in any: material respect; and, since the contract obligation involved in the grant of a charter is protected by the Federal Constitution, the power to amend or modify charters which had been granted to corporations could not be conferred upon the state legislative body by the Constitution of 1875. But, although a corporate charter is a contract within the Federal Constitution prohibiting the impairment of the obligation of contracts, it is subject to the ordinary rules governing subsequent modifications of contracts by the parties. The inviolability of the charter of a corporation from impairment by legislative action, in the absence of the reservation of power to revoke, change or modify the charter, may be bargained away by the corporation. — Mobile, etc., R. Co. v. Steiner, 61 Ala. 559, 592, and authorities there cited. A corporation may even consent to a destruction of the corporate life by forfeiture and surrender. — Mobile, etc., R. Co. v. State, 29 Ala. 573, 586. And a corporation may be brought within the operation of laws enacted after the granting of the charter, by accepting them as amendments to its charter. It appears in this case that the charter of the South & North Alabama Railroad Company was thrice amended by special acts which were accepted by the corporation. Likewise a corporation may be brought within the operation of a general law, with the consent of the corporators.

The Constitution of 1875, Avas expressly designed to effect this result with respect to corporations which were beyond legislative control.. It not only subjects the charters of corporations existing at the time of the adoption of the Constitution, whose charters were revocable, and the charters of corporations thereafter created, to the power of the General Assembly to alter, revoke, or amend, but it clearly contemplates the bringing of the charters of corporations which are beyond legislative control, because no right to amend or modify their charters was reserved in the acts creating them, within that and other powers of the Legislature. Section 3 of article 14 provides that “the General Assembly shall not remit the forfeiture of the charter of any corporation now existing, or alter or amend the same, or pass any general or special law for the benefit of such corporation, other than in execution of a trust created by law or by contract, except upon condition that such corporation shall thereafter hold its charter subject to the provisions of this Constitution.” Section 25 of article 14 provides that “no railroad, canal, or other transportation company, in existence at the time of the ratification of this Constitution, shall have the benefit of any future legislation by general or special laws, except on the condition of complete accepance of all the provisions of this article.” Both of these provisions contemplate the enactment of general laws for the benefit of corporations whose charters protect them from legislative invasion of the powers granted, subject to the condition that these corporations, in order to avail themselves of the benefit of such laws, waive the inviolability with which they are invested and subject themselves to the power of control conferred upon the General Assembly by the Constitution. It is not true that merely because a corporate charter was granted before 1875, and no right to alter or amend was reserved, no general law passed subsequent to the granting of the charter can be made applicable to the corporation. .V general law which is fairly applicable to all corporations of the class to which such a corporation belongs, may be made applicable to it, by the action of the corporation, in accepting and holding its charter, subject to the provisions of the Constitution. Sections 1170 and 1171 of the Code of 1896 are general statutes, and their provisions are fairly applicable to all corporations of the class to which the South & North Alabama Railroad Company belongs. So it follows that this railroad company, although organized under a charter granted long before 1875, which could not be modified without the consent of the corporation by the General Assembly, could nevertheless enjoy the benefits of these statutes by accepting the provisions of article 14 of the Constitution and thereby bringing its charter powers within legislative control.

But the question arises whether this company has accepted the provisions of the Constitution. It does not appear that there has been any express, formal, and recorded act of acceptance, either by the board of directors or the stockholders. It must therefore be determined whether a formal acceptance is necessary. By section 25 of article 14 of the Constitution of 1875 a company of the class to which this railroad belongs cannot have the benefit of future legislation “except on the condition of complete acceptance of all the provisions of this article.” It will be observed that no particular form or mode of acceptance is prescribed. In this respect the provision differs from similar provisions in the Constitutions of other states which require the filing of an acceptance in the office of the Secretary of State.-— Const. Idaho, art. 11, § 7; Const. Ky. § 190; Const. Mont. art. 15, § 8; Const. Utah, art. 12, § 2. The Texas Constitution contains a provision which in this respect, is substantially the same as the provision in our Constition. — Const. Tex. art 10, § 8. But it does not appear that the provision has been construed by the courts of that state in any reported case, so that we approach the question without the aid of previously expressed judicial opinion. It is safe to say that since no formal act of express acceptance is prescribed by the Constitution, as is done in the Constitutions of other states, no formal act indicating express acceptance is necessary. If we are to construe this provision as requiring some formal act of express acceptance, we should be at a loss to determine the principle upon which the court could proceed in deciding just what formal act would be sufficient to constitute an acceptance. But it is enough to say that we are unable to read into the Constitution a requirement which was not put there by its makers.

The phraseology of the provision does not require any express acceptance. The provision says, in effect, that no company of the kinds mentioned shall have the benefit of. any future legislation, except on the condition of the complete acceptance of all the provisions of article 14. It is just as reasonable to understand this to mean that a company which avails itself of and enjoys the benefits of future legislaron does so on condition that it completely accepts all of the provisions in the article as it is to understand it to require some express act of complete acceptance, the nature of which is not even remotely indicated. In other words, the acceptance and enjoyment of the benefits of a law, which is cf such a nature that it may become applicable to the corporation if it so desires, operates itself as “a complete acceptance of all of the provisions” of the article. If this is so, a corporation which accepts the benefits of a general law which is fairly applicable to all corporations of the class to which it belongs impliedly accepts all of the provisions of article 14 of the Constitution. In State v. Montgomery Light Co., 102 Ala. 594, 15 South. 347, it was held that a valid acceptance by a corporation of the benefits of a latv enacted in pursuance of section 3 of article 14 of the Constitution implies acceptance upon the condition named in the Constitution. This is a reasonable view. It has long been the policy of this and other states to encourage corporations to divest themselves of the inviolability with which they were clothed by the doctrine declared in the Dartmouth College Case, and to bring themselves within the control of the legislative power. This policy is advanced by holding out to corporations which hold charters that are not subject to any reserved right of the state to modify in material respects the ben: efit of statutes containing provisions which will induce them to surrender their .mmunity from legislative control. And in view of this long-established policy it is not to be presumed that the Constitution makers intended to place obstacles in the way of accomplishing this result by prescribing inconvenient formalities.

The conclusion that it was wholly reasonable for the Constitution to provide that an acceptance of the benefits of a general laAV by a corporation of the class Avith Avhich Ave are dealing constitutes an acceptance of the provisions of the Constitution is in a measure strengthened by the fact that this very thing is expressly done in the Constitution of Mississippi. Section 179 of that Constitution contains substantially the same provisions as those found in section 3 of article 14 of our Constitution, and then adds the following: “And the reception by any corporation of any provision of any such laws, or the taking of any benefit or advantage from the same, shall be conclusively held an agreement by such corporation to hold thereafter its charter and franchises under the provisions hereof.” Even Avhen formal and affirmative acts, indicating an express acceptance by corporations of amendments to their charters by which rights and powers under their existing charters are relinquished, have been prescribed, it has been held in some cases that the prescribed mode of acceptance is not the only one in which a valid acceptance may be indicated and effected, in Zabriskie v. Cleveland, etc., R. R. Co., 64 U. S. 381, 16 L. Ed. 488, the essential facts of the case, so far as the question under discussion here is concerned, were that in 1852 the state of Ohio enacted a law for the creation and regulation of corporations which contained a provision that “any existing corporation might accept any of its provisions, and when so accept-ted, and a certified copy of their acceptance is filed with the Secretary of State, that portion of their charters inconsistent with the provisions of this act shall be repealed.” The railroad company, without signifying its acceptance in the prescribed manner, proceeded to exercise a right given in one of the provisions of the act, by indorsing a guaranty upon certain bonds of another railroad company. In a suit by a stockholder of the Cleveland, etc., Railroad Company to enjoin the directors from paying interest on the bonds thus guaranteed, it whs held that as between the parties to the record the acceptance of the act might be inferred from the corporators themselves. The corporation, having executed the powers and claimed the privileges conferred by the statute, could not exonerate itself from responsibility by asserting that it had not filed the evidence required by the statute to evince its decision. In Augusta, etc., R. Co. v. City Council of Augusta, 100 a. 701, 28 S. E. 126, it appears that the plaintiff railroad company had been incorporated by a special act in 1866 “for the full term of 30 years.” In 1889 the Legislature passed an act to continue the charter in force for a further period. This act, among other things, declared that the company might “at any time, by a majority vote of the stockholders surrender their present charter before the expiration thereof and accept this new charter, with all its privileges and liabilities.” The question arose as to whether the renewal act had been accepted. The company had not pursued the method of acceptance pointed out in the act itself, viz., by surrendering the old charter before its expiration and accepting the new one with all its privileges and liabilities. It had, however, made an application, under and by virtue of the renewing act, to the city of Augusta, in which the railroad was located, for certain valuable privileges and franchises, which it obtained, used, and enjoyed, and afterwards sold to another corporation. It was held that the method prescribed by the renewing act was not the exclusive manner in which the new charter could he accepted. The same result was accomplished by the application to the city council.

Even though these decisions may not have any very direct bearing on the question under consideration, they have a persuasive value, and tend to confirm the belief that it is not going too far to hold that no formal act of acceptance was necessary in order to bring the Bouth & North Alabama Railroad Company within the article of the Constitution relating to corporations. If the implied acceptances in these cases were sufficient under the statutes prescribing a formal act of express acceptance, clearly the conduct of this company in availing itself of the benefits of general statutes is a sufficient acceptance within the meaning of the broad and general provision of our Constitution. Having, then, reached the conclusion that the Bouth & North Alabama Railroad Company could, by an acceptance of the benefits of sections 1170 and 1171 of the Code of 189(5, bring itself within the purview of section 25 of article 14 of the Constitution without any formal or express acceptance of the provisions of this article, it remains to he determined whether the company has ever availed itself of these statutory provisions. Upon this phase of the case very little need be said. Á reference to the facts of the case (which are stated above and need not be repeated here) will show that there can be no question that the company has long exercised the authority and privileges conferred upon railroad companies by these provisions. It assumed the exercise of these powers, it is true, before these provisions were enacted; but it has continued to exercise the same powers after these provisions became laws, and the time when these powers were first exerci s: ed does not seem to be material.

But it is contended by appellee that it is not alleged in the pleas how the provisions of sections 1170 and 1171 were accepted by the stockholders of the South & North Alabama Railroad Company — whether at a meeting or otherwise. The appellee contends, in effect, that the mere fact that the managing agents of the South & North Alabama Railroad Company may have availed themselves of sections 1170 and 1171 of the Code of 1896 in their conduct of the affairs of the railroad is not sufficient to show an acceptance of these statutes by the stockholders. It is insisted that before the provisions of these statutes could be read into the charter of the company, which the Legislature had no reserved power to alter or amend, the consent of the stockholders, and of all of the stockholders, would be necessary. It is further insisted that in order to show an acceptance of these statutes as, in effect, an amendment of the charter of the company, which was a contract between the slate and the company and the stockholders of the company, and therefore could not be altered or amended without the consent of all of the stockholders, there must have been some affirmative act on the part of the stockholders, and that, too, on the part of all of the stockholders, constituting an acceptance by them of these statutes. It is no doubt true that, when the state has not reserved the right to alter or amend a charter which it has granted, there is no power in the state either to restrict or to enlarge the corporate powers, except with the consent of the stockholders, and in some cases at least the consent of all of the stockholders may be necessary. — Mobile, etc., R. Co. v. State, 29 Ala. 586. And it is also true that it does not appear in this case that any express consent to the acceptance of the benefits of these statutes was given by the stockholders of the South & North Alabama Railroad Company.

But the question whether the stockholders have consented to an enlargement of or change in the corporate powers does not depend alone upon some affirmative act showing express consent. In State v. Montgomery Light Co., 102 Ala. 594, 15 South. 347, it appears that a corporation which had been chartered by a special act in 1853 took the steps prescribed by statute to enlarge its powers pursuant to an act passed in 1888. All the stockholders did not join in the required petition, but in a quo warranto proceeding to annul the charter it was held that the express consent of all of the stockholders, by applying for the enlarged powers, was not necessary, but that a silent acquiescence by them in the enlargement of the corporate powers was sufficient. The reasoning of the court in that case is applicable to the question under consideration. The South & North Alabama Railroad Company commenced to avail itself of the powers and benefits conferred upon railroads by sections 1170 and 1171 of the Code of 1896'in 1871, over 30 years before the petition in this cause was filed, and continued to do so after these sections were enacted up to the present time. The arrangement of the Louisville & Nashville Railroad Company and the South & North Alabama Railroad Company was open and notorious, and generally known to the public, and must have been well known to the stockholders of the latter company. During the period of the operation of the road by the Louisville & Nashville Railroad Company the stockholders have regularly held their annual meetings, electing directors and passing upon accounts of the earnings of the road and' upon debts incurred. No stockholder ever made any objection to the arrangement between the two companies until the relator made objection at a meeting in 1905. These and other facts stated in the pleas (16 and 17) present, not only a case where acquiescence on the part of the stockholders in the acts of the managing agents of the corporation may well be inferred, but a strong* case of implied consent.

Under the circumstances, and considering the nature of these proceedings, it is impossible to hold that the acts of the managing agents of the corporation, in accepting the benefits of sections 1170 and 1171 of the Code of 1896, have not been ratified by the stockholders. — State v. Montgomery Light Co., 102 Ala. 594, 15 South. 347; Cole v. Birmingham Union R. Co., 143 Ala. 427, 39 South. 403. In Com. v. Cullen, 13 Pa. 138, 53 Am. Dec. 451, although it appeared as a matter of fact that the stockholders had not acquiesced in a change in the corporate powers by a statutory enactment, the court was strongly of the opinion that in a proper case a long acquiescence by the stockholders of a company in the acts and declarations of the managing officers recognizing the act as an amendment of the charter might constitute conclusive evidence of assent to it. The court said: “Anciently, indeed, it was supposed that, from the very nature of an artificial corporate body, it could legally manifest its acts and conclusions only by the use of its corporate seal, affixed to a deed in pursuance of authority previously given. But this idea has long since given away to the more reasonable doctrine that the act or assent of a corporation may be inferred from such circumstances of commission or omission as would raise a similar presumption in favor of or against a natural person. * * * In this country, where private corporations are very, numerous, and constant use of their privileges naturally engenders indolence in the creation of regular evidence of corporate acts and negligence in its preservation, the recognition of presumptions as legitimate sources of proof was a legal necessity. While, therefore, a charter granted to persons who have not solicited it is said to be in fieri until after acceptance, yet it is not indispensable to show a written instrument, or even a vote acceding to the grant; for, unless the charter expressly prohibited, every formality may be presumed from a continual exercise of the corporate powers. This is also true of an assent to a new or additional charter by an existing corporation, which may in like manner be inferred from acts or omissions inconsistent with any other hypothesis; and where the new grant is beneficial in its aspect it is thought very little is required to found a presumption of acceptance.” — Goodin v. Evans, 18 Ohio, 150; Bangor, etc., R. R. Co. v. Smith, 47 Me. 34; Wetumpka, etc., R. Co. v. Bingham, 5 Ala. 657.

It is further contended by counsel for the appellee that the holders of a majority in value of the stock of the South & North Alabama Railroad Company have not assented to the arrangement entered into by the two railroads at a meeting of the stockholders called by the directors as required by section 1170. This is true; but this provision is not contained in section 1171, and it seems that the relations existing between these companies at the time of the enactment of this section of onr statutes receives ample recognition therein as a valid arrangement. However this may be, the objection that the assent of the stockholders prescribed in section 1170 was not given cannot be raised by the state in this proceeding. The state would, of course, protect a stockholder, through its judicial machinery, against the consequences of a disregard of this condition, if timely objection were made in a proper manner. But the state itself is not interested on its own behalf in having the prescribed meeting of the stockholders called. The provision was clearly intended especially for the benefit of the stockholders, who may waive compliance therewith, and who only may raise the objection of noncompliance. The formalities prescribed for the valid execution of a conveyance of property by a corporation are for the benefit of the shareholders of the company, and if they acquiesce others cannot complain. — West Point M. Co. v. Allen, 143 Ala. 547, 39 South. 351, 111 Am. St. Rep. 60. In Barrett v. Pollak Co., 108 Ala. 396, 18 South. 615, 54 Am. St. Rep. 172, it was held that subdivision 7 of section 1664 of the Code of 1886, requiring a certain consent of stockholders, manifested in a prescribed way, to authorize a pledge of its property by a corporation, was enacted for the protection of the stockholders, and a creditor cannot invoke it. In Nelson v. Hubbard, 96 Ala. 251, 11 South. 428, 17 L. R. A. 375, it was'held that 'the'provision of the Constitution (article 14, § 6) that “the stock and bonded indebtedness of corporations shall not be increased, except in pursuance-of general laws, nor without the consent of the persons holding the larger amount in value of stock, first obtained at a meeting to be held after 30 days’ notice is given in pursuance of law,” and that the statutory regulations in reference .to the giving of such notice (Code 1886, §§ 1562, 1572, 1664, 1667), are requirements for the benefit of stockholders, and compliance therewith may be waived by them. In delivering the opinion of the court, Walker, J., said: “The view generally accepted by other courts which have had occasion to determine the effect of similar provisions for notice to stockholders of a proposed increase of stock or bonded indebtedness is that the only object of the prescribed notice is to inform the shareholders and to afford them the opportunity of protecting their interests by demanding a compliance with the prescribed formalities. It has accordingly been held that the persons for whose protection the formalities are prescribed may waive a compliance therewith and consent that the corporation be bound by acts informally done. In other words, there can be no complaint by others when the stockholders themselves acquiesce in the disregard of the formalities prescribed for their benefit alone. * * * We think that the acts done in disregard of such formalities, when prescribed, may be avoided at the instance of any stockholder who has not waived the right to raise such an objection. But when all those persons whose interests can be protected by the giving of the prescribed notice deliberately waive the benefit of the provision, all reason for requiring a compliance with it is removed.” It may be that a statute prohibiting a corporation from borrowing, except with the consent of the holders of the large part in value of the capital stock expressed in a prescribed manner, is especially for the benefit of the stockholders, so that a loan obtained without this consent, if otherwise within the corporate powers, would be capable of ratification by the stockholders. — Southern, etc., Ass’n v. Casa Grande Stable Co., 119 Ala. 181, 21 South. 886. These cases give adequate support to the conclusion which we have reached on this point.

In conclusion, Avhile it may be true that the South & North Alabama Bailroad Company had not the power under its original charter to enter into the contract or arrangement relied on by the defendant (a point we do not decide), yet, when we read that charter in connection with the sections of the Code referred to, on the foregoing considerations, the conclusion that that contract or arrangement is intra Adres is to our minds irresistible. — St. Joseph, etc., R. Co. v. St. Louis, etc., R. R. Co., 135 Mo. 173, 36 S. W. 602, 33 L. R. A. 607. It follows that the judgment of the city court must be reversed, and a judgment Avill be here rendered, sustaining the demurrer to the information on the ground indicated in the opinion, and overruling the demurrers to plea 16 as amended and plea 17, and the cause Avill be remanded.

Beversed and rendered, and remanded.

Tyson, O. J., and Simpson and Anderson, JJ., concur.

Case Details

Case Name: Louisville & Nashville Railroad v. State ex rel. Gray

Court Name: Supreme Court of Alabama

Date Published: Dec 19, 1907

Citation: 45 So. 296

Court Abbreviation: Ala.