63 How. Pr. 14 | N.Y. Sup. Ct. | 1881
On the 13th day of July, 1881, John F. Dillon and Amos L. Hopkins were appointed receivers of the Manhattan Railway Company, which was and is still a corporation formed under chapter 606 of the Laws of 1875.
The appointment was made in an action commenced by the attorney-general, entitled, “The People of the State of New York, plaintiffs, agt. The Mamihatta/n Pailway Company, defendants,” which sought to dissolve and extinguish the corporate life of the defendant, upon the ground, as stated in the complaint, that it “ is and for more than one year last past has been insolvent.”
The action in which such appointment was made has not proceeded to final judgment, but is now at issue by the service of an answer, verified by the oath of the president of the defendant, which among other averments and denials, contains the following:
“ Third. It denies that it is, and for more than one year-last past has been insolvent. It further denies that it has remained insolvent for one year.”
The receivers are temporary and holding their positions under the power conferred upon the court by section 1788 of the Code.
Among the property which such receivers now hold, are the elevated railroads owned by the Hew York Elevated Railroad Company, and the personal property belonging and appurtenant thereto, which were leased to the Manhattan Railway Company by a written and sealed instrument bearing date May 20, 1879.
The present application, which is on behalf of the Hew York Elevated Railway Company, is by petition to this court, which appointed the receivers, to restore to it its railroads and property held by the receivers as the property of the Manhattan Railway Company under said lease.
Having stated some of the prominent facts involved in this motion and its object, it will be necessary also to mention some others somewhat in detail, that the questions involved may be understood and intelligently discussed.
On the 20th day of May, 1879, as preliminary to the leases which were executed on the same day, the Mew York Elevated Railroad Company, as the party of the first part, the Metropolitan Elevated Railway Company as the party of the second part, and the Manhattan Railway Company as the party of the third part, entered into a written agreement by which it was agreed that each of the parties of the first and second part should execute to the party of the third part, “ leases of their respective railways, and other property, rights and franchises of every description, including patent rights, substantially in the form hereto annexed.”
The object of the agreement is, by a recital therein contained, declared to be “ for the purpose of avoiding the danger of crossing elevated railway tracks upon the same level, and otherwise securing to the people of Mew York the advantages of safer and more rapid transit through the action of one directing body.”
The instrument also, among other things, provided for the completion by the owners of certain portions of the railway structures of the Metropolitan Elevated Railway Company, and of the Mew York Elevated Railroad Company, and ■for the building of certain other parts at the joint expense of ¡the two, and prescribed (as already stated) the form of the lease to be executed 'by the said two companies to the Manihattan Railway Company, and the amount of the rent.
The Manhattan Company, “ in addition to assuming pay
Under the clause just stated, the bonds provided for were executed, which were exchanged for stock in the Manhattan Bailway Company, whereby the New York and Metropolitan Companies, or their stockholders, became the owners of the entire capital stock of the Manhattan Company, then amounting to $13,000,000.
It was further agreed that “ whenever, in any fiscal year, the Manhattan Company shall elect to declare a dividend of more than ten per cent, on its capital, stock,” the said Manhattan Company “ shall pay to the New York and Metropolitan Companies a sum sufficient to enable them to pay as large a dividend in excess of ten per cent on the stock of the New York Company and Metropolitan Company as shall be declared on the stock of the Manhattan Company.”
The leases, as has been before stated, bear- the same date with the t/ri-parte agreement—May 20, 1879 — and were both in the same form and upon the same terms. That from the New York Company contained recitals as follows: That both it and the Metropolitan owned lines of elevated railway in the city of New York, part finished and other portions in process of construction, which on account of their crossing each other at various points could not be run with dispatch and safety to the public under two different managements, and that the system of roads, both for the public convenience
After the recitals, which in substance have been given, the lease proceeds to say: “Mow, therefore, this indenture witnesseth, that the Mew York Company, for and in consideration of the rents, covenants and agreements hereinafter mentioned, reserved and contained on the part and behalf of the Manhattan Company to be paid, kept and performed, hath granted, demised and leased, and by these presents doth demise, grant and lease unto the Manhattan Company ah and singular the railroad' or railway now owned, operated or constructed by it in the city of Mew York, as above described, and all and singular the unfinished portions thereof now under construction, together with all its franchises, rights and privileges relating thereto, or to the construction and operation of its entire railway as authorized, subject to the said mortgage and to the terms and conditions under which said franchises are held by the company, with all and singular the right, title, estate and interest which the Mew York Company has in any real estate in the city of Mew York heretofore acquired by it, or which it may hereafter acquire under contracts already made
“ To have and to hold the said railways, premises and appurtenances unto the Manhattan Company and its successors for the term of nine hundred and ninety-nine years from the date of organization of the Manhattan Company, to wit, Hov ember first, eighteen hundred and seventy-five, or so long as it shall continue to exist as a corporation and be capable of exercising all the functions herein stipulated on its behalf, the Manhattan Company and its successors yielding and paying therefor unto the Hew York Company, its successors and assigns yearly, in each and every year during the term hereby granted, the yearly rent of ten thousand dollars, payable semi-annually on the first days of January and July, during the said term, the first payment of five thousand dollars to be made on the first day of July, eighteen hundred and seventy-nine, and keeping and performing all and singular the covenants and agreements hereinafter set forth, to be by the Manhattan Company kept and performed.”
The granting and habendvm clauses have been given in full, as the relief asked for depends largely upon their language.
The lease also contains covenants and stipulations to the effect following: The Manhattan Company obligated itself to pay the principal and interest of the Hew York Company’s first mortgage bonds as they matured; to pay each and every year to the Hew York Company, beginning with the first day of October, 1869, “ six hundred and fifty thousand dollars, free of all taxes, in equal quarter-yearly payments of one hundred and sixty-two thousand five hundred dollars each, on the first days of January, April, July and October in each year, the first of such payments to be made on the first day of January, eighteen hundred and eighty; ” to make out and furnish to
The New York Elevated Railroad Company asks for the surrender to it of its railroads and structures upon the following grounds: First. That the lease has expired by its express terms, it being stipulated in the habendum clause that the holding was not to continue absolutely for 999 years, but it was likewise to terminate and end by the failure of the Manhattan “ to exist as a corporation,” and also by its becoming incapable “ of exercising all the functions ” specified in said lease on its part to be observed and-' kept. The termination is claimed to have been reached: 1st. By the appointment of the temporary receivers; and 2d. By the actual insolvency of the corporation. Second. By the failure of the Manhattan Company to pay the taxes levied and imposed. Third. By reason of its not performing certain other stipulations and agreements in the lease; and fourth. By supplemental petition presented since the argument upon the original application, the grounds of which have just been stated, the restoration of the property is sought for the reason that the Manhattan Railway Company is now in default ninety days upon its payments, and that the petitioner is consequently entitled to a surrender of the property.
Before discussing the questions presented it is proper to state that when the lease was made the individuals who largely controlled the New York Elevated Railroad Company were-the same persons who controlled the Manhattan Company. The ability of the Manhattan Company to fulfill the obliga^tions imposed by the lease depended, as was well known by the lessors, upon its success in business. It had no capital,, as has been before stated, except the leases. Its stock — $13,000,000—had been all transferred to the New York and Metropolitan Companies in payment for such leases. That, stock has largely been placed upon the. market and sold, and'
The grounds of the application will be considered in the order already stated, and in their discussion several facts in addition to those which have been narrated will be mentioned.
First. Has the term ended by .reason of the appointment of temporary receiver, or the actual insolvency of the Manhattan Company, if it is insolvent?
The argument urged in favor of an affirmative answer to the first branch of this question is founded upon the habendum clause of the lease, which provides: “ The Manhattan Company and its successors ” may have and hold “ the said railways, premises and appurtenances * * * for the term of nine hundred and ninety-nine years from the date of organization of the Manhattan Company, to wit, November first, eighteen hundred and seventy-five, or so long as it shall continue to exist as a corporation, and be capable of exercising all the functions herein stipulated on its behalf; ” and such argument is in brief this: An order has been issued in this action, enjoining and restraining the Manhattan Company, its officers and agents, from interfering with its corporate property, and placing such property in the hands of temporary receivers, as provided by section 1788 of the Code of Civil Procedure, and therefore the company is not now capable of exercising the functions stipulated and provided for in the lease. The soundness of this argument depends, of course, upon the meaning of the clause in the lease which has just been given. Did the contracting parties intend that any order made by any court or judge which had power to grant it, and which
It is claimed, however, that even though the appointment of the receivers has not terminated the lease, that the Manhattan company is actually insolvent, and that consequently its term is ended, because it is no longer “ capable of exercising all the functions ” stipulated in the lease on its part to be observed and kept. This proposition presents the second ground upon which the expiration of the lease is claimed, and it again involves the meaning of the clause in the lease, which has already been partially discussed. In what sense is the word “capable” therein used? Was the lease to expire whenever, from financial embarrassment, the company was unable to meet its engagements, or was it to terminate only when the corporation, from some legal cause, became incapable to fulfill its agreements ? From the connection of this expression by the copulative conjunction “and,” with the provision that the lease should continue for 999 years, “ or so long as it shall continue to exist as a corporation,” and from the further fact that the consequences of the non-fulfillment of its pecuniary obligations tó the landlord companies are elsewhere in the same instrument distinctly provided for and
The precise word used will be noted. It is “capable” and the clause containing it reads, “ or so long as it shall continue to exist as a corporation and be capable of exercising all the functions herein stipulated on its behalf.” There is, it seems to me, both in law and in common speech, a difference between the words “capable” and “able.” An individual, for instance, may be capable of conveying or devising property, though he may not be able to do so because he has none; he may also be capable of exercising the functions of a citizen, though from his physical surroundings he may not be able to exercise them. These illustrations show that the word “ capable ” has reference to the legal capacity of parties, whilst the other, “ able,” though sometimes used in the same sense as the former, involves, in addition, the exterior surroundings. Bouvier thus defines the word “capacity:” “Ability, power, qualification or competency of persons, natural or artificial, for the performance of civil acts depending on their state or condition as defined or fixed by law; as the capacity to devise, to bequeath, to grant or convey lands, or to take and hold lands; to make a contract and the like.” This definition completely covers the point under discussion. The lease to the Manhattan Company continued for 999 years, or so long as the corporation was legally capable of fulfilling its stipulations in the lease contained. Ho other expiration and ending of the term by lapse of time is provided for, though it is true that by subsequent provisions of the same agreement the rights acquired thereunder might become lost and forfeited by the failure to do that which it had covenanted to perform.
In addition to the difficulties' to the surrender of the property on the grounds now under consideration, which have
As to the alleged forfeiture of the lease by the failure of the Manhattan Company to pay the taxes which have been imposed, and which is the second general point the motion presents, there are two answers, either of which must be fatal to the demand of the property upon that ground: First. The petitioner, the Hew York Elevated Railroad Company, has, by the consent of its officers and legal advisers, approved and urged the resistance to their payment, and that which it has encouraged cannot be claimed as a forfeiture of the lease. Second. The Manhattan Company has paid all taxes which it is advised are legal, and the attempt by lawful means to avoid the payment of a greater sum cannot be a violation of the terms of the lease, for it is only required to pay taxes duly and properly assessed.
In regard to the third point made by the petitioner, the non-performance by the Manhattan Company of provisions of the lease — the keeping of the railroad of the petitioner in repair and the preservation of its property — it is only necessary to observe that the affidavits upon this point are too conflicting to justify a conclusion upon the facts, and the remedy must be sought by action.
The concluding and fourth ground upon which the petitioner’s right to recover possession of the property is based, is that the Manhattan Company is now in default for the nonpayment of its rent, and has been for the space of ninety days, which default, by the express terms of the lease, works
On the 2d day of July, 1881, a suit was commenced in the superior court of the city of New York by the petitioner, the New York Elevated Bailroad Company, as plaintiff, against the Manhattan Bailway Company as defendants, in which action an injunction order was obtained, which is still in force, whereby the Manhattan Company, its officers, agents, attorneys and servants “were enjoined from parting with any moneys then in their possession or under their control, or under the control of the said Manhattan Bailway Company, which had been received or might thereafter be received by it from passenger or other traffic on any of the railways of the said New York Elevated Bailroad Company, except as required strictly for the operation of the railways belonging to said New York Elevated Bailroad Company and leased to the said Manhattan Bailway Company.” It is difficult to see how the petitioner is in a position to enforce a forfeiture arising from the non-payment of money, when it has itself enjoined the tenant company from using the principal part of its revenue for any such purpose. W aiving, however, this point, there is another of great importance also made by said answers of the Manhattan Company and the receivers, which will now be stated.
It will be remembered that the capital stock of the Manhattan Company is $13,000,000. This entire stock was transferred and given to the New Ybrk Company and the Metropolitan Company in professed payment of the leases made to the Manhattan Company — $6,500,000 to each. It is true this was not directly done, for the form was the execution of two bonds by the Manhattan Company of $6,500,000 each, the one
It would, perhaps, be improper to express an opinion upon the merits of this action further thau to say that it presents reasonable grounds for judicial inquiry. - As a rule stock purchased of a corporation must be paid for either in cash or its equivalent, and if not so paid for the money which it represents can be recovered. The answer of the petitioning company is, of course, that the stock was paid for by the lease which it gave. Whether, however, this was a bona fide exchange of a substantial thing which the law can treat and regard as a payment for the stock transferred, or the contrary, is the point which that suit presents. Leaving out of view the very grave question of the power of the lessor companies to lease its roads, and of the lessee company to accept them —• which is not considered because not presented nor argued, but which leases, if illegal, because ultra vires, would leave the stock of the Manhattan Company entirely unpaid for — is it not most apparent that the innocent holders and purchasers of stock of the Manhattan Company have grave questions to submit to tile courts both as against the lessor companies and also their stockholders who placed the Manhattan stock upon the market to their great injury ? It is enough for present purposes, without passing directly upon the merits of the Watson suit, to say that that which is unjust is unlawful, and for every unlawful act done to another to his injury the law affords a remedy. Whether any of the apparently bald facts which have been mentioned can be explained so as to give them a different color is a question for the trial. As they
Thus far the questions which this application involves have been considered upon their merits and a conclusion adverse to the relief sought has been reached. There is another ground, however-, upon which the petition should be denied. Confessedly it is one addressed to the discretion of the court. In The People agt. The Erie Railway Company (54 How., 59) I expressed an opinion adverse to the disposal of grave and difficult questions of law and of fact upon motion rather than by action, and in that case refused the relief sought upon that ground, leaving the party petitioning to his remedy by action. There is nothing to distinguish this motion favorably from the one to which allusion has just been made. On the contrary, the present presents graver legal difficulties, more controverted questions of fact and much severer consequences than the other. In adhering to a former opinion, and denying this application upon the ground that the granting thereof would not be a wise exercise of judicial discretion, I follow convictions long since carefully adopted, strengthened by subsequent reflection and in accordance with judicial precedents (Angel agt. Smith, 9 Ves. Jr., 335; see opinion of lord Elden, p. 338; Emperingham agt. Short, 3 Hare, 461, 469, 470; Hauselt & Schroeder agt. Velmar, 3 Weekly Dig., 31; Iselin & Hunter agt. Port Royal R. R. Co., 6 Weekly Dig., 130; Palys agt. Jewett, 32 N. J. Eq., 302). To the general objection of deciding such grave questions as this application involves so summarily is added one growing out of the triparte agreement hereinbefore detailed. A sort of quasi partnership was thereby formed between the three contracting parties. The Metropolitan Company joins its objections to those of the Manhattan Company, and protests- against the