Buell v. Baltimore & Ohio Southwestern Railroad

Majority

p. 236

Franklin S. Buell, Respondent, v. The Baltimore and Ohio Southwestern Railroad Company, Appellant, Impleaded with Others.

Headnote

Consolidation of two foreign corpoi'ations— a creditor of one of them may thereafter-serve process on a person who was its president at the time of the consolidation — his term of office presumed to continue.

Where two corporations, organized under the laws of the State of Ohio, are consolidated on November 1, 1893, under a statute of that State which provides, that “ All rights of creditors, and all liens upon the property of either of such, companies, shan be preserved unimpaired, and the respective companies may be deemed to be in existence to preserve the same; and all debts, liabilities and.

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duties of either of said companies shall henceforth attach to the new company and be enforced against it to the same extent as if such debts, liabilities and duties had been contracted by it,” jurisdiction of one of the consolidated companies may, in an action commenced on May 2, 1898, upon a claim preserved by such statute, be obtained by service of process upon the person who was president of the defendant corporation when the consolidation was effected.

For the purpose of sustaining the jurisdiction of the court over such corporation it may be assumed, in the absence of any proof upon the subject, that, the term of office of such president was one year; and the rule may be invoked that where officers of a corporation are elected annually or for a definite term they •continue in office until others are elected in their place.

Appeal by the defendant, The Baltimore and Ohio Southwestern Railroad Company, from so much of an order of the Supreme ‘Court, made at the Erie Special Term and entered in the office of the cleric of the county of Erie on the 2d day of December, 1898, us denies the motion to set aside service of the summons herein on the defendant, The Baltimore and Ohio Southwestern Railroad Company.

On the 1st day of November, 1893, the defendants, the Baltimore and Ohio Southwestern Railroad Company and the Ohio and Mississippi Railroad Company, were, by virtue of the laws of the State of Ohio, consolidated under the name of “ The Baltimore & Ohio Southwestern Railway Company,” since which time both roads have been owned and operated by the new company.

The plaintiff is the owner and holder of a number of bonds which were issued by the Baltimore and Ohio Southwestern Railroad Company prior to its consolidation. These bonds, by their terms, provide that, subject to the payment of taxes, rentals, running expenses and the interest upon certain first mortgage bonds, the holders thereof shall be paid the annual net earnings of the company, not exceeding, however, five per centum of the amount of the bonds ; and in his complaint the plaintiff alleges that, after the consolidation was effected, the new company issued several series of bonds secured by mortgages upon all of the property which came into its possession as a result of the consolidation, and that, disregarding the plaintiff’s rights and without his consent, the net earnings of the consolidated companies have been applied to the payment of the interest upon these new bonds.

This action, which was begun May 2, 1898, is brought to have

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such portion of the net earnings of the new company as is applicable thereto devoted to the payment of the interest upon the plaintiff’s bonds, and to enjoin the further diversion and appropriation thereof to the payment of junior debts and obligations.

Upon the 1st day of Hovember, 1893, Edward R. Bacon was, and for a long time prior thereto had been, the president of the Baltimore and Ohio Southwestern Railroad Company, having his office at Ho. 2 Wall street in the city of Hew York ; and when that company was merged into the Baltimore and Ohio Southwestern Railway Company Mr. Bacon became the president of the new company, and as such retained his office at the same place.

Upon the commencement of this action the Baltimore and Ohio Southwestern Railroad Company was made a party defendant, and the summons therein was served upon Mr. Bacon as its president. Thereafter a motion was made at Special Term to set aside such service, and from the order denying the same this appeal is taken.

John G. Milburn and James McC. Mitchell, for the appellant.

Frank Rumsey, for the respondent.

Both the Baltimore and Ohio Southwestern Railroad Company and the Ohio and Mississippi Railway Company owed their corporate existence, in part at least, to the laws of the State of Ohio, and their consolidation was effected by means of another law of that State known as the “ Consolidation Statute,” which provides, among other things, that “ All rights of creditors, and all liens upon the property of either of such companies, shall be preserved unimpaired, and the respective companies may be deemed to be in existence to preserve the same; and all debts, liabilities and duties of either of said companies shall thenceforth attach to the new company and be enforced against it to the same extent as if such debts, liabilities and duties had been contracted by it.” (Ohio R. S. § 3384.)

It is quite obvious, therefore, that whatever rights the plaintiff had as a creditor or lienor of either of the former companies have been expressly reserved to him by force of this statute. (Compton v. Ry. Co., 45 Ohio St. 592 .)

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That the plaintiff is a creditor of the Baltimore and Ohio Southwestern Railroad Company is not denied, and it is of no moment, so far as the present appeal is concerned, whether he can maintain his action or not; he has seen tit to bring it, and the sole question before us is: How may the court obtain jurisdiction of one of the parties defendant %

The Code of Civil Procedure (§ 432, subd. 1) provides that personal service of a summons1 upon a defendant, being a foreign corporation, must be made by delivering a copy thereof within the State “ to the president, treasurer or secretary ; or, if the corporation lacks either of those officers, to the officer performing corresponding functions under another name.”

Had this action been commenced prior to November 1, 1893, there could be no doubt that the defendant, the Baltimore and Ohio Southwestern Railroad Company, would have been brought into court by service of process upon Mr. Bacon, for it is conceded that at that time the company had a corporate existence and that Mr. Bacon was its president. It is contended, however, by the learned counsel for the appellant that the consolidation not only worked a. dissolution of both of the constituent companies, but that it likewise terminated the right of the respective officers thereof to represent their company in any manner whatever; and with certain qualifications we are disposed to assent to this proposition, for we entertain no doubt that for all purposes, save those specified in the statute, the prior companies were extinguished by the consolidation. (Compton v. Ry. Co., supra.) To illustrate: We have no hesitation in declaring that upon the 1st day of November, 1893, the Baltimore and Ohio Southwestern Railroad Company became so far extinct as h> be unable thereafter to transact the business of a common carrier independently of the new company into which it was then merged. Neither can we doubt that the consolidation of the two companies terminated the rights of the officers of each of them to exercise the functions of their respective offices in respect of any new business ; but, as we have seen, the Legislature of the State of Ohio, in providing a way by which the consolidation of two or more corporations could be effected, was very careriil to preserve unimpaired the rights of the creditors of the respective companies, and to that end to expressly declare that corporate existence should be deemed to

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■continue, and if it be true that there was no officer of either of the •consolidated companies upon whom process could be served after the consolidation took effect, the plaintiff would find himself in the ■anomalous, not to say absurd, situation of having certain legal rights preserved to him by express legislative enactment • without any power whatever to enforce them. We are not prepared to believe that this was either the design or the necessary effect of the statute from which we have quoted; for if the plaintiff has a legal claim against the Baltimore and Ohio Southwestern Railroad Company, and that company is an existing, going corporation for the purposes •of an action brought thereon, it must have some official representative whose duty it would" be to take notice of any steps taken by the plaintiff to enforce its claim. This is the prime object of all ■service of process for the commencement of a suit or other legal proceeding (Gibbs v. Queen Insurance Co., 63 N. Y. 114 ; Pope v. Terre Haute Car Mfg. Co., 87 id. 137 ), and in this particular instance it seems to have been accomplished, for no sooner was the summons herein served upon the former president of the corporation than the corporation appeared by attorney and moved to vacate the service.

The record before us does not disclose for what term the appellant’s president was elected, but it is reasonable to assume that it was for the period of one year; and there is an old rule which may be invoked to meet the present emergency to the effect that where ■officers of a corporation are elected annually or for a definite term, they continue in office until others are elected in their place. (People v. Runkel, 9 Johns. 147 ; 1 Wat. Corp. 195; State v. Bonnell, 35 Ohio St. 10 , 17.) And when the consolidation statute is considered in connection with this rule, we think it permits the conclusion that the appellant’s president, who was in office when the consolidation took place, continued to represent the appellant for the purpose of the service of process down to the time this action was commenced ; and, if so, then the order appealed from is right, and should be affirmed.

All concur; Follett, J., not sitting.

Order affirmed, with ten dollars costs and disbursements.

Cases cited

Gibbs v. Queen Insurance 63 N. Y. 114 N.Y. 1875-11-09 p. 240
People v. Runkel 9 Johns. 147 N.Y. Sup. Ct. p. 240