U.S. Supreme Court
People ex Rel. Schurz v. Cook, 148 U.S. 397 (1893)
People ex Rel. Schurz v. Cook
Argued March 15, 1893
Decided April 3, 1893
148 U.S. 397
The authority conferred by the Act of the Legislature of New York of May 11, 1874, c. 430, p. 547, as amended by the Act of June 2, 1876, c. 446, p. 480, upon purchasers at a foreclosure sale of a railroad, to organize a corporation to receive and hold the purchased property creates no contract with the state.
The imposition, under the provisions of the Act of the Legislature of New York of April 16, 1886, c. 143, of a tax upon a corporation so organized after the passage of that act by purchasers who purchased at a foreclosure sale made before its passage for the privilege of becoming a corporation violates no contract of the state, and is no violation of the Constitution of the United States.
This writ of error was brought to review a judgment of the Supreme Court of the State of New York adopting and entering a decision of the Court of Appeals of said State in pursuance of a remittitur therefrom on the ground that it gave effect to and enforced a law of the State, which, in violation of the Constitution of the United States, impairs the obligation of a contract. Whether there was a contract and whether chanroblesvirtualawlibrary
its obligation has been impaired, as claimed by plaintiffs in error, are questions which arise and are to be determined upon the following state of facts. Several railroad corporations, properly organized under the laws of New York and Pennsylvania, after duly executing mortgages upon their respective properties and franchises to secure the payment of bonds lawfully issued by them, were consolidated under legislative authority from those states into one company, which was incorporated February 14, 1883, under the name of the Buffalo, New York and Philadelphia Railroad Company. This new company, in pursuance of proper authority, also executed a mortgage upon its properties and franchises to secure the payment of bonds issued by it. Default was made in the payment of the bonds issued under and secured by each of these various mortgages, and foreclosure proceedings were instituted thereon, and the mortgages duly foreclosed, and the entire property and franchises of all the companies, constituent and consolidated, were regularly sold under such foreclosure proceedings and bid in by the plaintiffs in error as the representatives of the security holders in pursuance of a scheme of reorganization previously agreed upon. The properties and franchises so sold and purchased were duly conveyed to the purchasers September 28, 1887, who thereupon adopted and executed articles of association under and in conformity with the provisions of the reorganization acts of the state, c. 430 of the Laws of 1874, as amended by c. 446 of the Laws 1876, and having prepared a certificate of incorporation, as provided by said acts, setting forth, among other things not material to be noticed, that they had associated themselves together as a corporation to be known as the Western New York and Pennsylvania Railway Company, with a maximum capital stock of $15,000,000, divided into 150,000 shares, they presented said certificate to Frederick Cook, Secretary of State, with the request to file the same in his office, such filing being required before the parties forming the organization could become a body corporate. They tendered the Secretary of State at the time of applying to have the certificate filed, the sum of $45 as the proper amount chanroblesvirtualawlibrary
of fees for recording the same. The secretary refused to permit it to be filed, basing his refusal upon the provision of an act of the legislature known as chapter 143 of the Laws of 1886, which provided that any corporation incorporated under any general or special law of the state, having capital stock divided into shares, should pay to the state treasurer, for the use of the state, a tax of one eighth of one percentum upon the amount of capital stock which the corporation was authorized to have. The act further provided that
"the said tax shall be due and payable upon the incorporation of said corporation, or upon the increase of the capital stock thereof, and no such corporation shall have or exercise any corporate power until the said tax shall have been paid, and the Secretary of State and any county clerk shall not file and certificate of incorporation or association until he is satisfied that the said tax has been paid to the state treasurer, and no such company incorporated by any special act of the legislature shall go into operation or exercise any corporate powers or privileges until said tax has been paid as aforesaid."
This act took effect immediately upon its passage. When the plaintiffs in error presented their certificate of incorporation to the secretary or state for filing, the tax imposed by this act, amounting to $18,000, had not been paid or tendered to the state treasurer, and for this reason the secretary refused to file the certificate. Thereupon the plaintiffs in error applied to the supreme court of the State of New York at special term for a peremptory writ of mandamus to compel the Secretary of State to file said certificate. The petition set out in detail the foregoing proceedings. In response to the order to show cause why the writ should not be granted, the Secretary of State made return, stating, among other objections not material to this case, that the said Western New York and Pennsylvania Railway Company of New York, sought to be incorporated as a corporation, had neglected and refused to pay the incorporation tax imposed by the law of 1886, and that he could not be required to file the certificate until said tax had been paid. The special term denied the motion for a mandamus. From this order the relators appealed to the general term of chanroblesvirtualawlibrary
the supreme court, which affirmed the action of the special term. 47 Hun. 467. The relators then appealed from the decision of the general term to the Court of Appeals, which affirmed the order of the former, 110 N.Y. 443, and remitted the cause to the supreme court of the state, where judgment was entered in conformity with the decision of the court of appeals. chanroblesvirtualawlibrary