In re Consolidated Gas Co.

In the year 1884, by an instrument in writing duly executed, and dated September 37th of that year, and filed in the clerk’s office of the county of New York and in the office of the Secretary of State at Albany on the 10th day of November, 1884, the following duly chartered companies, existing and doing business under general or special laws of this state in the manufacturing business of making and distributing gas, to wit, the New York Gaslight Company, the Manhattan Gaslight Company, the Metropolitan Gaslight Company of the City of New York, the Municipal Gaslight Company of the City

It will thus be seen at a glance that what is sought to be accomplished in such a proceeding is the extinguishment of the corporate life of this company, a penalty which, if successfully invoked, has been fittingly denominated the “extreme rigor of the law.” The lawmaking power of the state itself, impressed with the momentous character of this proceeding and with the necessity of guarding and protecting its own creations against whimsical, unwise, or precipitate litigation in suits of this nature, has enacted that they can only be instituted by the Attorney General when he is directed to do so by the Legislature or by obtaining leave of the court (sections 1797, 1798, 1799 of the Code). The caution, deliberation, and careful scrutiny with which the courts must proceed when called upon to pronounce judicial execution of corporate life is best shown by quoting some extracts from the opinion of the Court of Appeals. Judge Finch, writing in People v. North River Sugar Refining Co., 121 N. Y. 582 , 24 N. E. 834 , 9 L. R. A. 33 , 18 Am. St. Rep. 843 , therein says:

“Its infliction [corporate death] must rest upon grave causes and be warranted by material misconduct.” Its life “may not be destroyed without clear and abundant reason,” and when the state summons a defendant to a judicial

tribunal for the infliction of corporate death “by that process it assumes the burden of establishing the charges it has made, and must show its warrant in facts for the relief which it seeks. * * * It must show on the part of the corporation accused some sin against the law of its being which has produced or tends to produce injury to the public.” The transgression must not “be merely formal or incidental, but material and serious, and such as to harm or menace the public welfare.”

It might be said that this applies with particular force to the safeguards and protection that should hedge about the actual trial of the issues after the same had begun, but has little adaptation to the present motion, where leave is sought merely to institute such proceedings, wherein it must be conceded that it is the policy of the law to clothe the petitioner with the administrative duty of determining whether the public interests are to be conserved by instituting such an action. But, as in the case at bar, where practically no issue of fact is raised which, under section 1800 of the Code, would call for the determination of the jury, and seemingly nothing remains to be decided but pure questions of law, it behooves the court, and is incumbent upon it as a solemn duty, to examine into all of the averments of the petition and the proof and authority offered in support thereof with a like degree of care as though it were called upon to pass judgment of dissolution, and, concluding as to that, frame his determination in the exercise of his judicial duty on the question of granting the leave to precipitate the suit as the equities and justice of the case demand. In its last analysis the gravamen of the charges against the company is based upon the following alleged facts: First. That the charter and

its corporate life has long since terminated by expiring under the limitations placed thereon by the life-giving power, and hence by its present continuance in business it is exercising powers not conferred by law, and has therefore offended against the act under which it was created and under which its several constituent companies were created. Second. That since the amalgamation of the several companies the Consolidated Company has purchased stock in kindred gas and electric light companies with the intent and effect of creating a monopoly therein, whereby it is asserted it has violated and offended against the law in an abuse of its corporate powers.

As to the condition presented under the first charge, whatever rights of property, privileges, franchises, and interests these constituent companies had under their individual incorporations, or which they duly and regularly became possessed of by purchase or other acquisition in due legal form, and to which they were rightfully entitled at the time of amalgamation, passed under the provisions of the act and the terms of the agreement to the Consolidated Company, and as to this proposition there neither is nor can be any serious cavil or dispute. Each of the several constituent companies had their being from the sovereign power of the state by either special act of legislation or through the authority conferred by general laws. And in but one instance, viz., the Harlem Gaslight Company, can there be found even a suggestion of limitation upon the corporate life created thereunder by which death through expiration can now be claimed, and in this instance of exception, while its certificate of incorporation under the general laws,

“Provided that no public street, lane or highway in the city of New York shall be dug into or in any wise injured or defaced without the permission of the corporation of said city first had and obtained.”

It is equally true that in every instance when it was incumbent upon them to do so each of said corporations made the necessary application and the same was granted by the municipal authority. What the local government bestowed by its act has been construed and designated variously., Taken by itself, as a mere license or privilege (City of Brooklyn v. Jourdan, 7 Abb. N. C. 23 ); then, again, something more than a grant of a mere license or permit—a franchise to lay its mains and lines to deliver its product (People ex rel. Woodhaven Co. v. Deehan, 11 App. Div. 176 , 42 N. Y. Supp. 1071 , approved by Court of Appeals in Ghee v. Northern Union Gas Co., 158 N. Y. 510 , 53 N. E. 692 ). In construing the character “of the municipal authorities act in granting similar permission under the transportation corporation act, call it by whatever title you will, license, permit, privilege, or give it the greater dignity of franchise, when it is once extended, it vests in the corporation receiving it a perpetual property in the lands constituting the streets of the municipality, to be taken from it only for cause and by due legal process.

But what about the, limit of time definitely fixed in these municipal acts, to wit, in the case of the New York Gaslight Company and the Manhattan Gaslight Company, fixed, respectively, as ending May 12, 1853; the Metropolitan as ending not later than December 22, 1888; the Municipal Gaslight Company as ending not later than March 22, 1907? They are without significance in any degree as bearing upon the corporative life of these companies. If there is any substance at all in their so fixing definite periods of limitation, in my judgment it is only possible to find it when viewing it as determining for what period of time (once giving its consent) they will allow the streets to be "dug into,” without any reference or bearing whatsoever on the question of future maintenance or operation of the plant once installed and established within the limit of time fixed by its consent to open the streets in the original placing. That is the full extent and effect to be spelled out of such limitation. That was all that was intended, and if aught else was sought to be established it was a nullity, and the attempt is void. Otherwise note the condition that would be wrought. An inferior local legislature (one in fact having its being from the same source), the aldermen or common council of a city, might by their act abridge the life of a corporation created by the sovereign power of the state, which by its act or creation placed no limitation on the existence 'of the body it gave life to. To emphasize the absurdity of such a proposition, take the case of one of the constituent companies with a definite and fixed period of existence, grant

The wisdom, necessity, and farsightedness of such provision in chartering grants of this character appeals with peculiar force to one when he contemplates the havoc, confusion, and detriment to public welfare and interests the unrestrained, uncontrolled acts of opening our streets without right of local regulations and the power to impose conditions as to all three of these features would certainly work. To such an extent the provisions calling for local consent as a prerequisite appeals to reason and is sound; but any interpretation or construction extending it beyond that, and to the extent of giving the local authorities any right to limit the life of a corporation, becomes illogical and unphilosophical, without reason or justification. Even the long period of time fixed in these local grants for the exercise of the rights vouchsafed by their consent, namely, 20 and'30 years, affords no argument that such consent runs rather to maintenance of plant and the operation of franchise rights than to the mere installation of the plant. Take the time of granting of some, as far back as 1823. It was not to be supposed that the enormous plant of the corporation or of its constituent parts, embracing as it now does the entire present street area of thesé two boroughs of Manhattan and the Bronx, would at the time of granting the consent be immediately laid, not only in the

I do not think there is need for further elaboration on this point beyond referring to the fact that this precise question is now before the federal courts of the United States upon the report of a master, who has stated to the Circuit Court of the United States, after an examination into the merits, that these franchises are valid and existing; and while I am not prepared to accept—res adjudicata—by force of that report, I would without hesitation restrain any action on this question until the final adjudication by the federal courts in recognition of the comity that should exist under such circumstances, as recently splendidly presented by the Appellate Divisions of the First and Second Departments of this state.

As to the question presented by the expiration of the 50-year period, for which by its certificate the Harlem Gaslight Company was to exist, that fact would not necessarily affect its rights to acquire property in the enjoyment of which its successors and assigns should be protected, and the title to these rights would not expire with the life of the corporation. Detroit v. Detroit Citizens’ Ry., 184 U. S. 368 , 22 Sup. Ct. 410 , 46 L. Fd. 592. It is within the power of the Legislature to extend the life of this company if it is necessary, and such corporations rarely end by the flowing out of their time. Miner v. N. Y. C. R. R., 123 N. Y. 242 , 25 N. E. 339 .- That the rights of said company did not run to its assignors cannot now be urged in view of the act under which the consolidation was permitted. But if any question possibly exists it will undoubtedly receive full attention at the hands of those most interested, as to this phase of the matter the local authorities, who already through the corporation counsel, by in

Now, as to the charge of abusing corporate powers, arising out of the purchase of stock of kindred companies, with the intent and effect, as claimed, of creating monopolies in the sale and distribution of gas and electricity. That the Consolidated Company has acquired by purchase the stocks of these companies named in the petition is conceded, but it asserts statutory authority for its transactions. Section 40 of the stock corporation law (Laws 1892, p. 1834, c. 688) not only authorizes a stock corporation to purchase and acquire the stock of a corporation engaged in a similar business, or with which it is authorized to consolidate, and issue its own stocks and bonds in exchange therefor, but it goes further and provides that the officers of the acquiring company are eligible as directors in the company whose stock has been acquired, and the corporation itself may exercise all the rights, etc., of an individual stockholder. And no limitation is placed upon the amount of stock that may thus be acquired by a kindred company up to the very last share, when merger may follow. Section 58, Stock Corporation Law (Laws 1896, p. 996, c. 932, as amended by Laws 1900, p., 1151, c. 476). And though as a result of the purchase’of the stock or the consolidation there arises an interference with competition, even then it is not to be discountenanced, but seems to have met with legal sanction, even when the precise ground or reason for purchase was openly asserted to be an effort to prevent ruinous competition. Rafferty v. Buffalo City Gas Co., 37 App. Div. 618 , 56 N. Y. Supp. 288 . And the presentation of the so-called anti-monopoly law in opposition and as prohibiting is of no force, first, because it cannot be applied and has no bearing on the transactions of which the petitioner complains. The two so-called anti-monopoly statutes have been declared to be little more than mere codification of the common law upon the subject (Matter of Davies, 168 N. Y. 89 , 61 N. E. 118 , 56 L. R. A. 855 ), and there is nothing .to be found in the later act to affect or limit the statutory provisions authorizing corporations to acquire stock as referred to foregoing, and therefore these provisions continue in force unimpaired, and while they do so one corporation may acquire the stock of another engaged in similar business to the full extent of the power granted, with all the consequences it necessarily involves. And by no construction will there be imported into a statute an inhibition or limitation which is not found within the plain purport thereof. Trenton Potteries Co. v. Oliphant, 58 N. J. Eq. 507 -524, 43 Atl. 723 , 46 L. R. A. 255 , 78 Am. St. Rep. 612 .

But we are not left to initiative assertion on this application that this anti-monopoly law has no application, because the case of Rafferty V. Buffalo City Gas Co., supra, was decided in February, 1899, and there was in existence then the anti-monopoly act of 1897 (chapter 383, p. 310, Laws 1897), which was substantially identical in every provision with chapter 690, p. 1514, of the Laws of 1899, differing only therefrom in the method of procedure to be followed thereunder. Consequently, when the Appellate Division in that case gave legal sanction and approval to such transactions, it must have determined that the same did not conflict with the provisions of this statute. It

It is therefore impossible to see where there is any “warrant in facts” presented that would justify the granting of this leave prayed for. The record is destitute of any proof to show this corporation guilty of any “material or serious transgression or misconduct” which would tend to “harm or menace the public welfare.” Its franchise rights are valid and existing. Whatever may be my personal opinion as to the wisdom or soundness of the policy of the state expressed in laws that gives this permission to these corporations to make such unlimited

The motion is denied. Settle order on notice.