157 Wis. 73 | Wis. | 1914
Lead Opinion
I.
The application for leave to commence an action in this court to annul defendant’s corporate franchise, presented this proposition: Assuming that the remedy sought is appropriate under any circumstances which might be disclosed consistent with admitted facts, and that the statute as to changing the fundamentals of a railroad corporation, denominated an amendment in sec. 1820, R. S. 1878, applied to defendant when the occurrence happened which was intended to work an increase in the amount of its capital stock, — first to $155,000,000 and second to $250,000,000, and it, nevertheless, did not comply therewith by filing papers in the office of the secretary of state, evidencing the changes; but there was no intention of thereby defying the law, the defendant acting under advice of counsel and in good faith believing it possessed authority to make such changes in execution of a spe* cial charter power on the subject and the state, by silencej with full, or reasonable means of knowledge of the facts, ae-'
The foregoing states, briefly, the whole case as first presented. It does not follow as matter of course, that, because there is ground for forfeiture of a corporate franchise, this court should permit its jurisdiction to be used to that end. Rights as regards remedies may, by" interfering equities, under some circumstances, be lost by the state as well as by individuals. It has no vested or inherent right in such matters which it may use unjustly and oppressively, being dependable, as it is, for vitality of such rights, upon the original jurisdiction of this court, which is said to be “unlimited in extent,” “undefined in character,” — Att’y Gen. v. Railroad Cos. 35 Wis. 425; State ex rel. Fourth Nat. Bank v. Johnson, 103 Wis. 591, 79 N. W. 1081,— clothed with sovereign authority of the people, — so,- necessarily, as limitless as the exigencies of situations requiring judicial interference. Such was the wise purpose of the framers of the constitution, — State ex rel. Umbreit v. Helms, 136 Wis. 432, 118 N. W. 158,—to create a power equal to all emergencies, to be
The stated proposition seems to be decidedly ruled in defendant’s favor by these principles. Time may be so characterized by circumstances as to estop the state from enforcing legal rights and require the court, in the exercise of sound judicial discretion, to refuse to open its doqr to an effort to that end.
An application for leave to use the original jurisdiction of this court to annul a corporate franchise, is addressed to sound judicial discretion and should not be permitted as to a going corporation, carrying out the design of its creation, performing duties of a quasi-public character, having to do with the daily necessities of a large number of people and involving large investments in which many innocent persons are pe-cuniarily interested in its undisturbed continuance, unless there is a clear, wilful misuse, abuse, or nonuse, of the franchise sought to be forfeited, or an intentional or inexcusable violation of law, striking at the very groundwork of the contract between the sovereign power and the corporation, whereby the latter fails to fulfil the very design and purpose of its organization, and there is no other way of adequately meeting the case.
Those principles are familiar and control any situation to which they apply. Whether the facts call for such application or not in any given situation, depends upon matters of fact to be evidentiarily established and judicially found, if not admitted. Activity of the power is fenced closely about by equitable principles, the objective, in each case, being justice, reasonable doubts, inter partes, to be resolved in favor of public interests. This court has many times applied these
Thus it will be seen that the duty here, at the start, was plain. There was no wilful defiance of law,- — only, at most, a good faith, nonnegligent mistake of law, in which the state-as well as the corporation participated, without, necessarily, any real injury to the public. What the real right of the matter was, when the petition was presented, as at every point of time since the alleged nonfeasance occurred, was involved in such doubt that only this court could solve it and, though solved in favor of the state,.such solution would not furnish any legitimate basis for discretionary activity of this, court looking to an annulment of defendant’s existence, in the absence of defiance of the thus established law and perhaps no way being open to adequately punish the corporation and vindicate the dignity of the law without serious detriment to the public and innocent proprietors of stock.
In the situation indicated, this court might have dismissed plaintiff’s application and left the attorney general to proceed, at his convenience and as he might see fit, to seek redress in some other way; but, in harmony with the practice and policy to promote the most direct and speedy termination of controversies, practicable, especially where great public interests are involved, it used its authority, as regards the time and manner of affording use of its jurisdiction, by denying use thereof for the purpose requested; but retaining-the petition as initiatory to appropriate proceedings to secure a judicial determination as to whether defendant had
Thus, — fully reserving all questions on the merits as they might in the future appear, in case of defendant’s conduct subsequent to determination of its duty being such as to render a second application for termination of its existence appropriate, a writ was issued, appropriate to such determination and to coercion, if need be or advisable, as to performance of such duty. This manner of retaining a subject matter once brought within the court’s jurisdiction and speeding its judicial settlement, regardless of whether the manner of approach to the court be strictly appropriate or not, has become a matter of settled policy, to the end that justice be not delayed by want of co-operation here in securing a speedy termination of controversies, or hesitation in directing the proper proceeding to that end, shaping the direction to fit the exigencies of the particular situation, and without any necessary restraint by precedent.
II.
Whether the facts alleged on behalf of the state and conceded by defendant show that the latter violated the law as claimed is very much narrowed by State ex rel. Minneapolis, St. P. & S. S. M. R. Co. v. Railroad Comm. 137 Wis. 80, 117 N. W. 846. Counsel for defendant, in harmony with its claim of good faith, appreciate the logic of that case and confess its authority; but maintain that there is a vital distinction between the situation there dealt with and the one before us.
These points of harmony between the former and present situation clearly exist: Sec. 1772, R. S. 1878, as to amendments to corporate charters did not, originally, apply to railroad corporations, nor was there any clear •specific provision on the subject in the chapter relating to such corporations, nor any provision as to payment of a certain amount per
Thus it will be seen that by the change there was no express mandate to file proof of a change increasing capital stock, but such filing was referred to as something to be done as matter of course. Payment of the fee was not made incidental to the duty to file. In harmony with sec. 1772 it was made a duty incident to the act of increasing the stock.
The statutes were not, materially, changed thereafter until ch. 507, Laws of 1905. Thereby sec. 1772, as before, referred to railroads as well as other corporations, but payment of the charge per thousand dollars was increased to one dol
As indicated, that the statute in 1898, dealt with all corporations as to conditions of increasing capital stock, there is no question. There is no mistaking the words “every corporation organized and doing business under the laws of this state which may hereafter increase its capital stock,” etc. While perhaps the precise point now of whether that refers to railroads existing under special laws was not here before,
What has been said is emphasized by the fact that, in the general scheme for dispensing with the power to grant special corporate charters and providing for the organization of corporations under general laws, existing corporations, so far as practicable, were brought into harmony therewith by sec. 1829, in that it provided that they should “have and possess all the powers and privileges and be subject to all the duties, liabilities and restrictions prescribed by this chapter, and shall also have all peculiar rights and privileges granted to them respectively by their charters or any special law not inconsistent with these statutes.” Thus all parts of ch. 87, including that in relation to changing the amount of capital stock under sec. 1826, and that in relation to filing amendments and the payment of fees under sec. 1820 and sec. 1772, were written into every special railroad charter. The full scope of the legislative purpose to thus put railroad corporations into one class so no subsequent special legislation would be needed to enable them to carry out the design of their ere-
Counsel for plaintiff urge that such changes as those in question were not expressly provided for by the general law, and that it should be restrained to its particular subject. The purpose, the letter, and the spirit of the general law seem inconsistent with that view, as what follows with the foregoing seems to show.
The constitutional amendments adopted in 1871, prohibiting the granting of corporate powers and privileges, except to cities, sec. 31, art. IY, and commanding the legislature to “provide general laws for the transaction of any business that may be prohibited by section thirty-one of this article, and all such laws shall be uniform in their operation throughout the state,” sec. 32, art. IV, led to the enactment of the general laws under consideration. It is evident that the legislative purpose was to create a comprehensive scheme covering the whole field, — to respond so fully to the constitutional mandate as to render special legislation, later, entirely unnecessary. That the essentials of a complete system were thought to include one for amending special charters without calling upon the legislature for special assistance, is quite manifest. That is particularly indicated by see. 1790, in that it affords corporations of the kind mentioned in ch. 86 of the Statutes, but organized under special laws, power to amend their charters. That being so, it would be strange indeed if there were no such power in the companion scheme as to railroad corporations. The harmony and completeness of the scheme, evidently intended, suggests that. From an original
If we keep in view that a change in fundamentals is an amendment, regardless of whether it is called such or not, we will have little or no difficulty in perceiving that corporate power to amend special railroad charters was conferred quite as fully in the general law as to railroad corporations as such power was respecting ordinary corporations. 1st. Sec. 1820 refers to changes in fundamentals of railroad corporations as amendments; 2d. Sec. 1829 confers all powers granted by the general laws upon every existing railroad corporation, to-be exercised subject to “all the duties, liabilities and restrictions prescribed” by ch. 87 of the Statutes, including the conditions of making amendments prescribed by sec. l'T/T2 in connection with sec. 1820; 3d. Sec. 1831 confers power to build branch lines and make extensions, sec. 1832 power to make other changes in plan of road, and sec. 1835 to changing corporate name. Each applies to any corporation organized under the laws of this state; but before being exercised corporate action is necessary as in case of a change in fundamentals ; 4th. A change under sec, 1826 by reference to sec. 1772 and sec. 1820, is required to be evidenced, as we have seen, upon the records of the secretary of state and a change under either secs. 1831, 1832, or 1835 is expressly required to be likewise evidenced.
Evidently we must survey the subject discussed from the viewpoint of the legislature when it responded to the command to provide by general laws for doing the business formerly done by special enactments. It was the granting of corporate power by special act, which was prohibited. ' The language is general. The legislature might well have supposed, probably did suppose, that to enlarge a corporate power
We are not unmindful of what was said in Att’y Gen. v. Railroad Cos. 35 Wis. 425, 528, as to the effect of the constitutional amendment of 1871 upon existing special charters. The precise point under consideration then was whether such amendment so limited sec. 1, art. XI, of the constitution as to power to alter or amend or repeal corporate charters that, as to existing charters, they could only be thus dealt with by general laws. The court felt bound to save such power, thought to have been designed to prevent corporate charters from beiUg beyond legislative interference under the rule in the Dartmouth College Case (Dartmouth College v. Woodward, 4 Wheat. 518), if that were possible. So, by construction and logic which has not since been questioned, it was held that the reserved power Was not affected by the prohibitory section. That was repeated in Black River Imp. Co. v. Holway, 87 Wis. 584, 59 N. W. 126. Whether such decisions mean that legislative power to act, specially, remains •as to special corporate charters existing at the time of the amendment of 1871, unaffected thereby — revising the same, enlarging old powers, granting new powers, and even changing the original design so as, in practical effect, to make a new corporation, — the court has not yet ventured to say. The question was raised in Att’y Gen. v. S. & St. C. R. Co. 93 Wis. 604, 67 N. W. 1138, as to the charter now before us, but was not decided. We do not need to decide it now, though if it were necessary to the case, the radical change in defendant’s charter would furnish opportunity to meet the question squarely. In any event, as we have before indi
Now, how is the situation above indicated changed by the passing of ch. 244, Laws of 1895 ? It did not give the corporation any power which it did not possess before. Sec. 11 of the charter of 1870 was superseded by a section on an entirely •different subject, — that of increasing capital stock, — which is, in the main and in the whole, as regards this case, a mere rewriting into the special charter of sec. 1826 which was •there before by force of sec. 1829.
It is argued that what seems to be a mere change in form of the corporate power to change the character of the corporation as to the amount of capital stock, is a new power. We ■apprehend such claim would not be made except for the false premise, as it appears to us, that the provisions in the general •.statute as to changes in capital stock do not characterize the special charter. That the purpose was to write, unmistakably, the general statute provisions into the special charter, .to all intents and purposes creating evidence of an existing ■condition, is evidenced by the fact that the old provision on the subject of capital stock was not retained and made to harmonize with the rewritten general law. It was dropped out ' and, at the end, expressly repealed, leaving nothing in the ■charter, for the time being, as to authorized capital stock, except, possibly, recognition of existing stock by the introductory words of the change: “The capital stock of said company may be increased.” The purpose to retain the advantage of sec. 1820, sec. 1826, and sec. 1829 of the general laws, and “all the rights, powers, privileges and immunities conferred (upon railroad corporations by” “chapter 87 of the Revised Stat
If what has been said were otherwise, it would be quite, a grave question whether it is competent for the legislature to repeal the general law as to a particular corporation, putting that in a class by itself, so that, whereas all other railroad corporations would be powerless to change the amount of their corporate stock without complying with the general law as to filing proof of corporate action in the matter with the secretary of state and payment of an excise fee of one dollar per thousand dollars of the increase, the particular corporation may do so. It is not likely that the legislature thought of so discriminating. It would require manifest intent to warrant the court in holding that it did.
The manner in which defendant exercised its supposed power after the amendatory act of 1895 confirms what has been said. Such manner constitutes a striking practical con
The reason of the statute as to filing proof with the secretary of state and payment of the excise fee does not rest in any mere name but the fact that it is a change in the fundamental features of the corporation. Can there be any doubt •but what a fundamental change, whether made by the legislature directly or by the corporation itself by legislative authorization, is an amendment, whether calléd by that name or not ? It matters not whether the constitution of the corpora
The result of the foregoing is that it was the duty of defendant on each occasion of its increasing its capital stock, to' file proof thereof with the secretary of state and comply with all conditions to validity.
So the pretended changes were not effectual. Let it be conceded, for the case, that it was competent for the state to waive-performance of such duty or become estopped by conduct from insisting upon it; that there was no waiver seems plain, since-there was no express or implied intention to waive. It would,, in any event, take a very strong case to warrant holding that the mere negligences or mistakes of public officers constitute a waiver of performance of an important duty created for protection of the public • interests. There was no known right, here, there was a mutual supposition that the duty in question; did not exist. If there is any fault in the matter it rests-more at the door of the defendant than that of the state.
Is there any good ground for the claim that the state has-
Such an estoppel as the one under discussion goes no further than the reason for it,- — to protect the party in whose favor it arises. Being based on equitable principles, countervailing equities, so far as they go, are to be considered.
In this case no damage could, in the natural course of things, accrue to defendant by reason of any fault of the state; conceding, for the point that there were such fault, other than such as would result from the increase of stock being held irremediably invalid. If the right to proceed to that extreme be waived, conditionally or coercively be put aside, there is no room left for any real damage to defendant unless it should be required to now comply with the statute as it presently exists, whereas had the duty been seasonably
As to the first increase, to burden defendant with the condition of performing the neglected duty as the statute now is, would penalize defendant for the enrichment of the state in the sum of $150,000 on account of what seems clear to have been an innocent mistake in which distinguished legal advisers participated, — a mistake not involving anything more than mere error of judgment, after a careful professional study of the subject. There is no principle which requires or justifies that. The court charged with the duty of administering justice according to the equities of the case would not hesitate to deny relief which would mean such consequences, especially if the technical wrongdoer does not evince a disposition to defy the law when authoritatively declared, as seems to be the attitude of defendant.
It follows from what has been said, that the defendant should perform now, as it originally ought to have performed and without any greater burden than would have been incidental to performance then. The question has not been passed without thought of whether the value of the use of the excise fee of $95,000 which defendant has gained and the state has lost should be added to the amount the state should receive, and the duty of complying with the law not only be declared but performance only conditioned upon payment of such value in addition to the principal sum.
The value of the use of the deferred payment cannot well be exacted as interest upon a debt, nor can it be regarded as
We have reached this point without needing to refer to authority outside our statutes and the decision in State ex rel. Minneapolis, St. P. & S. S. M. R. Co. v. Railroad Comm. 137 Wis. 80, 117 N. W. 846. Construction of the statutes, the principles of the former decision, and familiar elementary principles, have seemed to be sufficient for guidance. Hence we have not burdened this opinion by referring to and discussing the many authorities with which the industry of eminent counsel has favored us.
We yet have the question of whether the state is barred by some statute of limitations from efficiently insisting upon per-, formance of the neglected duty, so far at least as concerns the excise fee. This is not discussed in the briefs of counsel for defendant as to the second increase of stock As to that laches only seems to be relied on as a bar, which, in our judgment, does not apply for reasons already sufficiently stated. We find nothing in the authorities cited out of harmony therewith.
Reference is made to sec. 4229 and sec. 4222, Stats. 1911, and sec. 4229 and sec. 4222, sub. 4, R. S. 1878, as precluding the state from insisting upon performance of the neglected' duty as to the first increase. We are unable to find anything in either provision which deals with such a situation as we
However, the primary right and the remedy to vindicate it are not affected by the incidental benefit to the state of a pecuniary nature. Whether the incident be the main thing the Attorney General had in view, and the primary right a mere instrumentality to secure it, or the real right is the main thing and the incident is secondary, in fact as well as in purpose, makes no difference. The action of the Attorney General is conformable to his duty and commendable.
The idea is advanced that the first increase of stock, if invalid in the beginning, was validated by ch. 193, Laws of 1899. That was an amendment to sec. 1153 of the Statutes prohibiting the issuance of authorized stock for less than a money value consideration corresponding to the face of the stock. Its purpose was to cure defects in stock which had been put afloat in violation of such prohibition. It was not intended to cover an invalid increase of stock or an illegal change of any kind in- corporate status. Neither does the act, in terms or spirit, have the remotest bearing on the situation in hand.
We have now considered all the points suggested in the return to the writ of mandamus, which seem to merit discussion, except one in respect to nature of the relief appropriate to the case. Prefacing with a brief recapitulation of the status as we find it, will suggest pointedly the nature of such relief. We have seen this:
Secs. 1820, 1826, and 1829 of the Statutes and all parts of the general law as to the power and government of railroad
On the subject of increasing capital stock the special law and the general laws are in harmony. The change in capital stock in question answers to the calls of see. 1826 and its nature is not affected by the fact that such section, in substance, was changed from a part of defendant’s charter by force of the statute to a part thereof thereby and expressly as well.
The increases of defendant’s capital stock are referable to sec. 1826 and the other sections of the statutes mentioned and were intended to be so, and have no different status when squared with the special law, than when with the general law.
An inarease of capital stock of a corporation under a law as expressed in sec. 1826 of the Statutes, whether denominated an amendment or not is such in fact and is denominated such in sec. 1820 of the Statutes and treated as such in sec. 1772 of the Statutes.
The excise fee imposed by the statute as a condition of a valid increase of corporate stock, is an incident of a fundamental change in the corporate charter whether made directly by the legislature or by execution of a delegated power to make the change.
A change in the fundamentals of a corporation which it is empowered' to make by a statutory method, is an amendment, and the result of the execution of a corporate power, whether such power rests in special or in general legislative grant.
The defendant breached its duty to the state in failing to file with the secretary of state proof of the proceedings in respect to each of the pretended increases of capital stock and neglecting to pay the excise fee of one dollar per thousand dollars as to the several increases.
Regardless of what might be the result of a further neglect to obey the law in respect to such increase of stock, since the
The mere delay under the circumstances, does not involve waiver on the part of the state of the duty of defendant to obey the law nor estop it from insisting upon performance of such duty.
In the circumstances stated, the defendant should be permitted and required to do what it has heretofore neglected to do, and without any unnecessary increase of burden as a condition thereof and the late performance having the effect to validate the- increased stock from the beginning by denying the use of judicial remedies to question it or by judicially declaring that the late performance shall have original validity.
As above indicated, the defendant should not be unnecessarily burdened in respect to performing presently the neglected duty. To the end that such end may be logically accomplished as well as that the late performance may clearly have original validity, may not the duty be now done nunc pro tunc, as the term is used in judicial proceedings ? Counsel for defendant urge that such should be the termination of this litigation in case of conclusions being reached that it breached its duty as we have found was the case.
The Attorney General suggests that the power to require a thing to be done, nunc pro tunc, applies only to control by a court of its own proceedings with reference to acts done without the proper record having been made or some preliminary essential act being performed; that the court has no jurisdiction to apply that doctrine to such a case as this and thus supersede the requirements of the statute and control the administration by a state officer, who is not before the court and whose duties are prescribed by law.
True, in general, and perhaps, technically, as it is understood in the law, the judicial function as to nunc pro tunc orders appertains to corrections in judicial proceedings. But courts, constitutionally given the broad jurisdiction vested here, possess inherent authority to do things within a very broad field which makes for justice between parties.' It is not arbitrarily limited by precedent in respect to what may be ordered or permitted to be done, presently, with original validity, which ought to have been done before. In all such matters the court acts nunc pro tunc or in the nature of that. The mere name is of little consequence. The whole subject is within the field of equity wherein the power of this court is too broad for any one to safely venture to place any precise limits upon it.
There are few situations in which the court under its broad power cannot permit a thing to be done with original validity
Wherefore it is thus considered:
By the Gourt. — The motion to quash the alternative writ of mandamus is denied. A peremptory writ of mandamus is ordered to be issued requiring defendant to file as in the first writ required, and the state through its secretary to receive the documents required to be tendered and file the same on receipt of ninety-five thousand dollars ($95,000) as and for the excise fee of one dollar per thousand dollars of the second increase of stock; the filing and payment to have such original validity as regards the status of the two increases of stock as to preclude the state from using any remedy hereafter against defendant for its failure to seasonably perform its duty in respect to the two increases of stock.
Dissenting Opinion
(dissenting). My brethren will, I am sure, acquit me of any intentional discourtesy when I say that it seems to me there is a fatal confusion of thought in arriving at the conclusion in this case.
This is not an action by the state to recover fees, but simply an action to compel the defendant to obey the statute requiring corporations to file a copy of each amendment to their articles of incorporation with the secretary of state. The. state contends that the defendant has amended its articles of incorporation; the defendant contends that it has not. The question to be solved is therefore very simple, and it would seem that it ought to be very easy of solution when, as here, the evidentiary facts are not in dispute.
The defendant is not a corporation organized under the general railroad incorporation law, which requires the making and filing of articles of incorporation (as was the defendant
Dissenting Opinion
I agree with the foregoing dissenting opinion.
