People v. New York, Chicago & St. Loius Railroad

Landon, J.,

(dissenting.) The original Hew York, Chicago & St. Louis Railroad Company, organized in June, 1887, under the general railroad laws of this state, had a capital stock of $4,500,000. Its line of railroad" was wholly within this state, extending from Buffalo to the state line between Hew York and Pennsylvania. Upon its organization it paid the tax of one-eighth of 1 per centum upon its capital stock, as required by chapter 143, Laws 1886. That tax is imposed by said act upon every corporation having capital stock divided into shares “incorporated by and under any general or special law of this state.” In August, 1877. this Hew York corporation, pursuant to the provisions of chapter 917, Laws 1869, consolidated with a Pennsylvania railroad corporation, having a line of railroad extending across the state of Pennsylvania from its Hew York to its Ohio boundary, and forming a continuous line of railroad with that of the Hew York company. The Pennsylvania company had a capital stock of $8,000,000, and the capital of the consolidated company was declared to be $7,500,000. Ho franchise tax was paid upon the capital stock of the consolidated company. This company assumed the name of the Hew York, Chicago & St. Louis Railroad Company. In September, 1887, the Hew York, Chicago & St. Louis Railroad Company, as thus enlarged, pursuant to the provisions of said act of 1869, consolidated with both an Ohio railroad company and an Indiana railroad company, one owning a line of railroad across the state of Ohio, and the other across the state of Indiana, which formed, with the Hew York and Pennsylvania lines, a continuous line of railroad from Buffalo to the state boundary line between Indiana and Illinois. This consolidated company assumed the name of the Hew York, Chicago & St. Louis Railroad Company, and declared its capital stock to be $30,000,000, which amount was the aggregate of the capital stock of all the constituent companies. Ho franchise tax was paid upon the capital stock of this consolidated company. The plaintiff demands judgment in this action for the amount of the tax at the rate of one-eighth of 1 per centum upon $7,500,000, the capital stock upon the first consolidation, and at the like rate upon $30,000,000, the amount of the capital stock upon the last consolidation. The contention of the defendant is that upon neither consolidation was any company “incorporated by or under any general or special law of this state, ” within the meaning of chapter 143, Laws 1886. It was undoubtedly the purpose of the act of 1869 to form new corporations by the consolidation of constituent companies in the cases specified in the act, merging the old companies into the new, except so far as the act preserves the old companies in existence in order to uphold the rights of creditors. Chapter 917, Laws 1869, as amended by chapter 685, Laws 1881, provides: “Section 1. It shall and may be lawful for any railroad company or corporation, organized under the laws of this state, or of this state and any other state, and operating a railroad or bridge either wholly within, or partly within and partly without, this state, to merge and consolidate its capital stock, franchise, and property with *642the capital stock, franchise, and property of any other railroad company or companies organized under the laws of this state, or under the laws of this state and any other state, or under the laws of any other state or states, whenever the railroads or branches, or any part of the railroad or branches, of the companies or corporations so to be consolidated, shall or may form a continuous or connected line of railroad with each other, or by means of any intervening railroad, bridge, or ferry.” The second section of the act prescribes the methods to be pursued to effect such consolidation and merger, and characterizes the result as a “new corporation.” The third section provides that the constituent corporations, when so merged and consolidated, “shall be deemed and taken to be one corporationand the fourth section declares that “all and singular the rights, privileges, exemptions, and franchises of each of said corporations, parties to the same, and all the property, real, personal, and mixed, •and all the debts due, on whatever account, to either of said corporations, as well as all stock subscriptions and other things in action, belonging to either of said corporations, shall be taken and deemed to be transferred to and vested in súch new corporation.” The fifth section makes the “new corporation” liable for the debts of the old, except mortgages, but the old corporations “shall be deemed to continue in existence to preserve the rights of creditors. ” The sixth section limits the taxation upon the property of the new corporation to such of its real estate as is situate within this state, and to such proportion •of its capital stock and personal property as the number of miles of the whole line of road bears to the number within this state. We held in People v. Rice, 11 N. Y. Supp. 249, that a corporation formed under chapter 960, Laws 1867, by the consolidation of two domestic manufacturing corporations, each of which upon its separate organization had paid the organization tax, was required, upon such consolidation, to pay the tax under chapter 143, Laws 1886; that a new corporation had been formed, and the constituent corporations had ceased to exist. But both constituent companies were domestic corporations, and jurisdiction over both was wholly in this state. The cases there cited of Shields v. Ohio, 95 U. S. 319; Railroad Co. v. Maine, 96 U. S. 499; and Railroad Co. v. Georgia, 98 U. S. 359,—were cases of the consolidation of domestic corporations. Railroad Co. v. Wheeler, 1 Black, 286; Quincy Bridge Co. v. Adams Co., 88 Ill. 615; Railway Co. v. Auditor General, 53 Mich. 91, 18 N. W. Rep. 586; Railway Co. v. People, 123 Ill. 467, 14 N. E. Rep. 874; State Treasurer v. Auditor General, 46 Mich. 229, 9 N. W. Rep. 258. Such, also, was the character of the constituent companies in Clearwater v. Meredith, 1 Wall. 25, and McMahan v. Morrison, 16 Ind. 172. But it is also clear from the authorities that when a consolidation is effected of corporations of different states, under the enabling statutes of the respective states, no new corporation, as an entirety, is formed, but each constituent remains in severalty, just as much the creature and creation of its parent state as it was before the consolidation. The authorities upon this subject in the federal and state courts appear to be uniform in the declaration of this result. Nashua & L. R. Corp. v. Boston & L. R. Corp., 136 U. S. 356, 10 Sup. Ct. Rep. 1004; Farnum v. Canal Corp., 1 Sum. 46; Muller v.Dows, 94 U. S. 444; St. Louis, A. & T. H. R. Co. v. Indianapolis & St. L. R. Co., 9 Biss. 144; Pennsylvania R. Co. v. St. Louis, A. & T. H. R. Co., 118 U. S. 290, 6 Sup. Ct. Rep. 1094; Racine, etc., R. Co. v. Farmers' Loan & Trust Co., 49 Ill. 331; Railroad Co. v. Wheeler, 1 Black, 286; Quincy Bridge Co. v. Adams Co., 88 Ill. 615; Railway Co. v. Auditor General, 53 Mich. 91, 18 N. W. Rep. 586; Railway Co. v. People, 123 Ill. 467, 14 N. E. Rep. 874; State Treasurer v. Auditor General, 46 Mich. 229, 9 N. W. Rep. 258. We are not cited to any authority holding otherwise. The conclusion seems to result from well-established principles. Every corporation is the creation of its own state, and cannot exist outside of it. It may, by t* e comity of other states, transact business or acquire property within them, but the entity or being *643which is created by law cannot transport its body beyond the state whose law .gives it existence and sustains it. Railroad Co. v. Wheeler, supra; Plimpton v. Bigelow, 93 N. Y. 592. No state can by its legislation or otherwise change the nature or character of a foreign corporation within the domicile of the latter. Two states have no power to unite in passing any legislative act; there can be no joint legislation, in the sense that the two states, by uniting or concurring in legislative action, can achieve a single result which either separately could not do. Nashua & L. R. Corp. v. Boston & L. R. Corp., and the cases supra. The state of New York may authorize its corporation to consolidate with a Pennsylvania corporation, so far as its business interests are concerned; but for it to declare that the union thereupon to result will be a new corporation formed of the two constituents, which shall -no longer separately exist, is to attempt to change the nature and dissolve the , existence of the Pennsylvania corporation, and replace it with a new corporation. This would be for it to attempt to extend its powers further than they can reach, and would, of course, be futile. Nor could it by its legislation bring the Pennsylvania corporation into the state of New York, or project the New York corporation into Pennsylvania. In the nature of things, the concurring legislation of the two states only results in each state acting upon its own corporation, and solely within its own territory; and hence there never can be one such power over both corporations as can pour or mingle them together, and thus make a fused or merged new corporation existing as an entirety in both states. It may be that each constituent would as to third persons, when justice required it, be estopped to deny the creation of the new corporation, but such an estoppel would not impose this tax. The new corporation, to be taxable under the act of 1886, must have been organized under some act of this state, and, if no act is competent to effect such an organization, the tax is not imposed. This state probably could authorize non-resident corporations to unite as corporators in forming a new corporation within this state, but that would be different from forming a new corporation by consolidation and merger. Consolidation and merger, and therefrom a new creation, imply power over each constituent in its own domicile. To enable each constituent to act in this state, is only the exercise of domestic power. In Nashua & L. R. Corp. v. Boston & L. R. Corp., 136 U. S. 356, 10 Sup. Ct. Rep. 1004, the Nashua Railroad Company was incorporated by the state of New Hampshire, in 1835, to construct and operate a railroad in that state to its Massachusetts boundary. In 1836 the state of Massachusetts incorporated another company, by the same name, to construct a continuation in Massachusetts of the New Hampshire railroad. -In 1838 both NewHampshire and Massachusetts passed acts to unite said corporations into one corporation. The Massachusetts act expressly made the stockholders •of the New Hampshire company stockholders of the Massachusetts company, and the union contemplated by the Massachusetts act was the enlargement of its corporation so as to merge the New Hampshire corporation into it. Thereupon a common stock was issued for the whole line, and one board of directors was provided, which managed the entire line of railroad in both states for 45 years. It was held that the identity of the New Hampshire corporation was neither destroyed nor merged with that of the Massachusetts corporation. The court said, (page 373, 136 U. S., and page 1007, 10 Sup. Ct. Rep.:) “The new corporation created by Massachusetts, though bearing the same name, composed of the same stockholders, and designed to accomplish the same purposes, is not the same corporation with the one in New Hampshire. Identity of name, powers, and purposes does not create an identity of origin or existence, any more than any other statutes, alike in language, passed by different legislative bodies, can properly be said to owe their existence to both. To each statute, and to the corporation created by .it, there can be but one legislative paternity.” Again, (page 382, 136 U. S. and page 1010, 10 Sup. Ct. Rep.:) “Railroad corporations created by two or *644more states, though joined in their interests, in the operation of their roads, in tile issue of their stock, and in the division of their profits so as practically to be a single corporation, do not lose their identity, and that each one has its existence and its standing in the courts of the country only by virtue of the legislation of the state by which it is created. The union of name, of officers, of business, and of property does not change their distinctive character as separate corporations.” The opinion reviews many of the cases above cited. While it might be competent for the legislature of this state to impose the organization tax upon the capital stock of its own corporation upon its participation in a consolidating agreement with foreign corporations, such is not the effect of the act of 1886. The tax is imposed upon the capital stock of a corporation organized under some law of this state, not-upon an agreement to merge what is not capable of merger, not upon an agreement to make a new corporation by methods and constituents which no legislative power can make into a new corporation. We conclude that judgment, under the submission, must be directed for the defendant, with costs.