Opinion
(Filed 6 December, 1904.)
1. Railroads — Consolidation of Corporations — Corporations — Laws (Private) 1901, Ch. 168 — Laws 1835-'36, Ch. 25.
Under Laws (Private) 1901, ch. 168, certain railroads are authorized to consolidate.
2. Railroads — Corporations — Consolidation — Eminent Domain — Stockholders.
An act authorizing the consolidation of certain railroad corporations upon a vote of a majority of the stockholders, allowing a stockholder actual value for his stock in lieu of taking stock in the consolidated company, is valid.
3. Railroads — Consolidation of Corporations.
Where the Legislature provides a method for assessing the value of stock owned by persons who do not desire to take stock in a consolidated company in lieu thereof, the mode prescribed is exclusive and must be followed.
4. Railroads — Corporations — Laches — Equity.
Where a stockholder fails for two years to bring an action to annul a consolidation with another corporation, and meanwhile third persons have obtained interests in the consolidated company, a court of equity will not grant the relief demanded.
ACTION by R. P. Spencer and another against the Seaboard Air Line Railway Company and another, heard by Brown, J., at February Term, 1904, of WAKE. Appeal by the plaintiffs from a judgment upon a demurrer ore tenus at October Term, 1904, of the Superior Court of WAKE.
Busbee Busbee for plaintiff. (117)
Day Bell, T. B. Womack, Shepherd Shepherd, and Murray Allen for defendant.
DOUGLAS, J., dissenting.
The plaintiff attacks the validity of the contract of consolidation or merger whereby the Raleigh and Gaston Railroad Company, together with a number of other companies owning and controlling connecting lines, became a part of the Seaboard Air Line system, upon several grounds which it will be convenient to consider in the order in which they are discussed in the very excellent brief of her counsel. It is, of course, conceded that as the cause was disposed of by his Honor in the Superior Court and is before us upon a motion to dismiss as upon a demurrer ore tenus, every allegation made in the complaint, with such construction thereof as is most favorable to the plaintiff, must be taken as true. This, of course, is so for the purpose of drawing the legal conclusions therefrom. The plaintiff says that certain acts of the defendant are ultra vires. This is a conclusion of law to be drawn from the facts stated. It is also to be noted that although the complaint makes no reference to the several statutes enacted by the General Assembly, which, being private acts, do not come under our cognizance unless referred to and proven, his Honor's judgment expressly refers to at least one of them, and in the argument before us counsel treated them as being properly before us. The plaintiff says that a careful analysis of chapter 168, Private Laws 1901, fails to show that any authority is conferred upon the Seaboard Air Line Railway Company to consolidate, merge with, or purchase from any other railroad than the Seaboard (118) and Roanoke Railroad Company. That the statute conferring such extraordinary power upon railroad corporations should be clear and explicit — leaving nothing to construction or doubt. Why that single corporation should have been named in conferring the power and other railroad companies referred to in general terms does not very clearly appear. We think, however, that by a fair and reasonable interpretation of the language of the act the Raleigh and Gaston Railroad Company is included among those companies with which the Seaboard Air Line Company is empowered to consolidate, "and any railroad or transportation company now or hereafter incorporated by the laws of the United States or any of the States thereof." In conferring power upon other companies to consolidate the language is equally comprehensive — "power being hereby granted to any railroad or transportation company or companies now or hereafter incorporated by or under any act or acts of the General Assembly of the State of North Carolina," etc. The Raleigh and Gaston Railroad Company certainly comes within this classification. It would seem to follow that the other provisions of the act, unless otherwise expressed, must be construed as referring to all companies thus included in the class upon which the power is conferred to consolidate. Any other construction would render nugatory the power conferred. The plaintiff next insists that no consolidation can take place unless the power to so consolidate is expressly conferred upon both consolidating corporations. This proposition is sustained by the authorities cited. The reasons therefor are manifest. 10 Cyc., 293. We think that such power is conferred upon both corporations. Chapter 168, section 1, expressly confers upon the Seaboard Air Line Railway Company the power, "with the approval of two-thirds in amount of its stockholders, etc., to lease, operate, consolidate with, or otherwise acquire," etc. As we have seen, the power is conferred upon the Raleigh and (119) Gaston Railroad Company to enter into the contract of consolidation, etc.
The evident purpose of the Legislature was to enable the Seaboard Air Line Railway to form by consolidation, merger or purchase a system of transportation through the State connecting with railroads in Virginia and South Carolina. The legislation in this State, together with that in Virginia, in regard to the Seaboard Air Line Company, which is expressly referred to in the preamble to chapter 34, Laws 1899, and chapter 168, Laws 1901, shows this to be the purpose and scope of the several statutes. This being ascertained, the principle by which we should be guided in interpreting the statute is thus stated: "Every statute is to be construed with reference to its intended scope and the purpose of the Legislature in enacting it, and where language used is ambiguous or admits of more than one meaning, it is to be taken in such a sense as will conform to the scope of the act and carry out the purpose of the statute." Black on Interpretation of Laws, 56 Endlich, 73.
It is settled that the power to consolidate may be conferred either in the charter or by a general enabling act. 10 Cyc., 289. The plaintiff next contends that, assuming that the statute confers the power upon the Raleigh and Gaston Railroad to consolidate, that such power can be exercised only by the unanimous consent of the stockholders. That a dissenting stockholder cannot be compelled to surrender his stock in the corporation and accept in lieu thereof stock in another company. That unless such power is conferred upon the majority of the stockholders in the charter, or by amendment thereto made before the subscription of the dissenting stockholder, an act of the Legislature conferring such power would be invalid as impairing the obligation of the contract between the stockholders. This proposition is amply sustained upon principle and authority. The Supreme Court of the United (120) States in Clearwater v. Meredith, 68 U.S. 25, discussing a statute permitting a consolidation of several railroad companies, says: "The power of the Legislature to confer such authority cannot be questioned, and without the authority railroad corporations organized separately could not merge and consolidate their interests. But in conferring the authority the Legislature never intended to compel a dissenting stockholder to transfer his interest because a majority of the stockholders consented to the consolidation. Even if the Legislature had manifested an obvious purpose to do so, the act would have been illegal, for it would have impaired the obligation of a contract. . . . When any person takes stock in a railroad corporation he has entered into a contract with the company that his interest shall be subject to the direction and control of the proper authorities of the corporation to accomplish the object for which the company was organized. He does not agree that the improvement to which he subscribed should be changed in its purpose and character at the will and pleasure of a majority of the stockholders, so that new responsibilities and, it may be, new hazards are added to the original undertaking. He may be willing to embark in one enterprise and unwilling to engage in another; to assist in building a short line railway, and averse to risking his money in one having a longer line of transit." Botts v. Turnpike Co., 88 Ky. 54, 2 L.R.A., 594; McCrary v. R. R., 9 Ind. 358. The defendant, conceding this to be the law, says that the statute conferring the power upon the several railroad companies consolidating, expressly provides for paying the dissenting stockholder the full value of his stock at the time of the consolidation. This provision can only be sustained by invoking the right of eminent domain and condemning the stock for a public use by making compensation therefor. The plaintiff contends that at the date of the charter (121) of the Raleigh and Gaston Railroad Company (1835), no power to amend charters of corporations was reserved by the Constitution of this State, and that under the decisions of this Court they come within the protection of the doctrine of the Dartmouth College case. That all of the stock was issued prior to the adoption of the Constitution of 1868, by which such power was reserved. He also says that no general statute was in force in this State authorizing such consolidation. This contention is undoubtedly correct. It will be noted, however, that chapter 168, Laws 1903, does not undertake to amend the charter of the company or to do more than empower a majority of the stockholders to consolidate with the other companies. It is an enabling act and imposes no duty or obligation upon the corporation or its stockholders. It must be conceded, also, that the act of the majority of the stockholders does not change the relation of the plaintiff towards the corporation. The Legislature in the exercise of its power confers upon the majority of the stockholders the power to consolidate with the other constituent companies and accept in consideration therefor such number of shares in the new or consolidated corporation as may be agreed upon. This can be done only with the consent of the Legislature. The Legislature having decided that such consolidation was promotive of the public welfare, recognized that it had no power to compel a dissenting stockholder to accept stock in the new corporation. Therefore, in the exercise of the right of eminent domain it empowers the corporation to condemn the stock of such dissenting stockholder when it cannot otherwise be acquired. This power is entirely distinct from the power to amend the charter. The right of eminent domain which resides in the State is defined to be "The rightful authority which exists in every sovereignty to control and regulate those rights of a public nature which pertain to its citizens in common, and to appropriate and control individual property for (122) the public benefit as the public safety, necessity, convenience or welfare may demand." Cooley Const. Lim., 524; 1 Lewis on Em. Domain, 1; 10 A. E., p., 1048. This right or power is said to have originated in State necessity and is inherent in sovereignty and inseparable from it. It is a part of the sovereign power of every State. R. R. v. Davis, 19 N.C. 451. When the State incorporated the Raleigh and Gaston Railroad Company a contract was entered into with the corporation, the obligation of which could not be impaired. The State did not in respect to the property of the corporation or its shareholders divest itself of or in any degree impair its right of eminent domain. The Legislature could not divest itself of a power so essential to the integrity of the State. Mr. Justice Daniel, in Bridge Co. v. Dix, 47 U.S. 531, says: "No State, it is declared, shall pass any law impairing the obligation of contracts, yet with this concession constantly yielded it cannot be justly disputed that in every political sovereign community there inheres necessarily the right and the duty of protecting and promoting the interests and welfare of the community at large. This power and this duty are to be exerted not only in the highest acts of sovereignty and in the external relations of the Government; they reach and comprehend likewise the interior polity and relations of social life, which should be regulated with reference to the advantage of the whole society. This power, denominated the eminent domain of the State, is, as its name imports, paramount to all private rights vested under the Government, and those last are held in subordination to this power and must yield in every instance to its proper exercise. . . . A correct view of this matter must demonstrate, moreover, that the right of eminent domain in nowise interferes with the inviolability of contracts; that the most sanctimonious regard for the one is perfectly consistent with the possession and exercise of the other." 10 A. E., p. 1050. "The Legislature has the power to authorize the consolidation of railroad (123) and other quasi- public corporations, without the unanimous consent of their stockholders, when it makes provision for appraising and paying for the stock of dissenting stockholders. This power is entirely unaffected by the constitutional prohibition against impairing the obligation of contracts and is based upon the sovereign power of eminent domain. Corporate shares, as well as other property, are subject to the paramount necessities of the State for the promotion of public interests." Noyes on Intercorporate Rel., 51; Black v. Canal Co., 24 N. J., Eq., 469. "In this busy age of restless activity and enterprise, when the brain of man is exhausting itself in his struggle with time and space, the two forces that most oppose his progress, the taking of private stock in such corporations to advance any of the purposes above indicated must be regarded as the taking of it for public benefit. There can be no doubt that a railroad company may be empowered to extend their road beyond the point to which it was built under the original grant, if proper compensation is provided for stockholders who may resist it, and I can see no difference in principle, whether the original company, in order to secure a through route under one management, is authorized to take the lands of individuals or to take the property which individuals have in the stock of an existing road. In the first case, for the purpose of establishing a through route, one kind of private property, to wit, the lands of individuals, are taken by the corporation; in another case another kind of property, to wit, the shares of stock of individuals in an existing company, are authorized to be condemned. . . . The same rule applies to both cases, unless property in stock can claim a superior right to protection. This, with all other private rights, is held under the dominant right of eminent domain."
In a very able opinion by Bigelow, J., in Bridge Corp. v. Lowell, 70 Mass. 481, it is said: "Nor is the principle thus recognized any (124) violation of justice or sound policy, nor does it in any degree tend to impair the obligation or infringe upon the sanctity of contracts. It rests on the basis that public convenience and necessity are of paramount importance and obligation, to which, when duly ascertained and declared by the sovereign authority, all minor considerations and private rights and interests must be held, in a measure and to a certain extent, subordinate. By the grant of a franchise to individuals for one public purpose the Legislature does not forever debar themselves from giving to others new and paramount rights and privileges when required by public exigencies, although it may be necessary in the exercise of such rights and privileges to take and appropriate a franchise previously granted. If such were the rule great public improvements rendered necessary by the increasing wants of society in the development of civilization and the progress of the arts might be prevented by legislative grants, which were wise and expedient in their time, but which the public necessities have outgrown and rendered obsolete. The only true rule of policy, as well as of law, is that a grant for one public purpose must yield to another more urgent and important, and this can be effected without any infringement on the constitutional rights of the subject. If in such cases suitable and adequate provision is made by the Legislature for the compensation of those whose property or franchise is acquired, there is no violation of public faith or private right. The obligation created by the original charter is thereby recognized."
We have in the history of the Raleigh and Gaston Railroad Company a striking illustration of the operation of the principle so clearly stated by Justice Bigelow.
The right to take private property by condemnation proceedings for the purpose of constructing a railroad was first asserted, recognized, and enforced by this Court in R. R. v. Davis, 19 N.C. 456. Ruffin, (125) C. J., wrote for a unanimous Court an able and exhaustive opinion, tracing the power to its source and giving it the application asserted by the defendant in this case. This opinion has always been cited and approved in this Court as settling the law in this State. The same public convenience or necessity which would have justified taking the land of the citizen to open and construct a highway to meet the needs of the public in 1800 was invoked for taking the same land to meet the needs as they existed in 1836 to construct a railroad. The advancing needs and changed conditions in regard to transportation and travel is deemed by the Legislature to demand the formation of a great trunk line or interstate system of railroad in 1901. If the Seaboard Air Line Company had, instead of consolidating with the Raleigh and Gaston Railroad Company, constructed a separate line or track from Ridgeway to Raleigh, every foot of land on the route necessary therefor could have been condemned for that purpose. We can see no reason why, in the exercise of the same inherent sovereign powers, the Legislature may not empower the corporation to condemn the plaintiff's stock. Whether the power is in this respect wisely conferred or exercised is beyond our province to say. This is a question for the decision of the Legislature. We have examined with care all of the authorities cited by the plaintiff's counsel. In those cases where the consolidating acts are declared invalid, no provision is made for assessing the value and paying for the dissenting stock. We find no more difficulty in holding that the condemnation of plaintiff's stock is for a public use than did Ruffin, C. J., and his learned associates in finding that the railroad was originally constructed for such use. Clark and Marshall on Private Corp., 1051; R. R. v. R. R., 83 N.C. 489. We are of the opinion that the Legislature had the power to confer on the corporation the right to condemn the dissenting stock, and that upon a reasonable interpretation of the statute it has done so. We find no valid objection to the mode prescribed (126) for ascertaining the value of the stock; it is expressly provided that the value so assessed must be paid before the stock is transferred. It would seem that the mode prescribed is exclusive and must be pursued. R. R. v. McCaskill, 94 N.C. 751. It seems to us to be the only practicable remedy. The mode of trial is free from any reasonable objection.
There is another view of this case presented by the defendant's brief which we think fatal to plaintiff's action. The board of directors of the Raleigh and Gaston Railroad Company on 29 April, 1901, met and adopted a resolution reciting that the consolidation would greatly facilitate the business and promote the interests of the company, etc. Thereupon a meeting of the stockholders was duly called and 20 May, 1901, fixed as the day for such meeting. Notice thereof was duly served on the plaintiff and she filed her protest setting forth that notice of the meeting and the purpose thereof had been served on her. At the meeting she appeared by her attorney and entered her protest. The tellers reported that all of the stock, 14,988 shares, represented voted for the consolidation. It appears that the consolidation was entered into by eight separate railroad companies traversing hundreds of miles and representing millions of dollars of capital. The consolidation became operative at once, and new stock, common and preferred, to the amount of one hundred million dollars, together with bonds secured by mortgage to the amount of many million dollars, were authorized to be issued and executed. It is a matter of general and public information, and known to the Court by the records before us at each term, the published reports of the Corporation Commission, and other public and official sources that the consolidation of the roads forming the Seaboard Air Line system has become an accomplished fact, that vast private interests are involved and public duties assumed.
(127) The plaintiff, instead of asserting her rights promptly by an appeal to the preventive jurisdiction of the Court, waits more than two years before invoking the equitable power of the Court to declare invalid and set aside the consolidation. It is not to be understood that courts will refuse to protect the rights of a single stockholder if invaded by the majority, however large, or refuse relief against aggressions of consolidated capital, however powerful. The chancellor originally took jurisdiction in many cases because of the inability of the complainant to maintain his suit at law with his adversary because of his great power and large number of retainers. The question is not whether the plaintiff is without remedy, but whether the law has given to her an adequate remedy otherwise than by the exercise of the extraordinary power vested in the court. She demands that the court declare the charter of the Raleigh and Gaston Railroad Company forfeited; that the merger and consolidation be declared void as to her; that a receiver be appointed, etc.; that an accounting be had of the receipts of the company since the merger, etc. It is an elementary principle of equity jurisprudence that relief is granted to the vigilant and will be refused when there has been unreasonable delay amounting to laches. This is especially true where valuable rights have been acquired by innocent persons. This familiar principle was announced and enforced by this Court in Pender v. Pittman, 84 N.C. 372, Smith, C. J., saying: "But this equity ought to be promptly asserted and not deferred until by a sale other interests may intervene rendering it inequitable, if practicable, to reverse what has been done and restore matters to their former condition." In that case it was held: "That an injunction against carrying out a contract of sale made under a power contained in a mortgage, will not be granted when the relief to which the plaintiff considers himself entitled is not (128) sought until the sale has been made and the rights of a purchaser have intervened."
Mr. Noyes says: "Acquiescence for an extended period, during which time the interest of third parties have intervened, may itself constitute laches and prevent a stockholder from attacking a consolidation even on the ground of fraud." Intercorporate Rel., 49. The authorities upon this subject are uniform and abundant. As was said by Sir John Romilly, Master of the Rolls, "Shareholders cannot lie by, sanctioning or by their silence at least acquiescing in an arrangement which is ultra vires of the company to which they belong, watching the result; if it be favorable and profitable to themselves, abide by it and insist on its validity, but if it prove unfavorable and disastrous, then to institute proceedings to set it aside." Gregory v. Patchett, 33 Beav., 595. The proposition is tersely stated by Van Fleet, V. C., in Rabe v. Dunlop, 51 N. J., Eq., 48: "If he wants protection against an ultra vires act he must ask for it with sufficient promptness to enable the court to do justice to him without doing injustice to others." McVickers v. Ross, 55 N.Y. Sup. Court, 247; Watts Appeal, 78 Pa. St., 370; Kent v. Mining Co., 78 N.Y. 159.
We think that in any view of the case the plaintiff is not entitled to the extraordinary relief demanded. We are at a loss to see how it is practicable to preserve the status of the corporation, as she suggests, for her benefit. We notice that the defendant in its answer says that, notwithstanding the failure of the plaintiff to proceed to have the value of her stock ascertained within the time and by the method prescribed by chapter 168, Laws 1901, it is now willing to pay her the value thereof. His Honor granted to the plaintiff, with the assent of the defendant, the right to amend her complaint and have the value of her stock ascertained. He also directs upon the trial of that issue that the books of the corporation be produced, etc. We think that the order of his (129) Honor fully protects the rights of the plaintiff. She will have thirty days from the next term of the Superior Court to amend her complaint and proceed to have the value of her stock ascertained and judgment rendered therefor. Upon a full and careful consideration of the record, the agreement of counsel, and the authorities, we find no error in the judgment of His Honor.
No error.