US SUPREME COURT DECISIONS

A Constitution of New York, made in 1826, ordains that "corporations may be formed under general laws, but shall not be created by special act except in certain cases," and also "that all general laws and special acts, passed pursuant to this section, may be altered from time to time or repealed." And a statute of New York, passed A.D. 1828, enacts that

"The charter of every corporation that shall be thereafter granted by the legislature shall be subject to alteration, suspension, and repeal in the discretion of the legislature."

In this state of things, a general railroad law was passed in 1850, authorizing the formation of railroad corporations with thirteen directors. The formation of a company under this general law being subsequently contemplated, with a capital of $800,000, to build a road fifty miles long, the legislature authorized the City of Rochester to subscribe $300,000 to it; and enacted that if the company accepted the subscription, the city should appoint one director for every $75,000 subscribed by it, that is to say, should appoint four directors out of the thirteen contemplated; the other stockholders, of course, appointing the remaining nine. The company did accept the subscription, and the stockholders other than the city subscribed $677,500, but paid up only $255,000. Then the enterprise for all but eighteen miles of the road was abandoned. The city had paid its $300,000 subscribed. In 1867, the legislature passed another act giving the city power to appoint one director for every $42,855.57 of stock owned by the city, in other words, establishing the same ratio that existed among the subscribers for the stock at the time the original subscription was made. The effect was to give the city seven directors and to leave the other stockholders but six. These last stockholders, regarding the act of 1851 as making a contract that they should have nine directors and the city but four, and that the act of 1867 violated that contract, elected their old nine. Held, on a quo warranto, that the act of 1867 did not, in view of the state constitution and the act of 1828 making charters subject to alteration, suspension, and repeal, make such a contract, and that the act of 1867 was constitutional.

Section 1 of article 8 of the Constitution of the state, just named, adopted by it A.D. 1826, ordains as follows:

"Corporations may be formed under general laws, but shall not be created by special act except in certain cases. All general laws and special acts passed pursuant to this section may be altered from time to time or repealed. "

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And title 3 of chapter 18 of the first part of the Revised Statutes of 1828, enacts thus:

"The charter of every corporation that shall hereafter be granted by the legislature shall be subject to alteration, suspension, and repeal, in the discretion of the legislature."

With this provision of the constitution and this enactment of the revised statutes of the state in force, the Legislature of New York passed in 1850 a general act for the formation of railroad companies and the regulation of the same. This act authorized any number of persons, not less than twenty-five, to form a company for the purpose of constructing, maintaining, and operating railroads for public use, . . . and for this purpose to make and sign articles of association in which the name of the company should be stated, the places from which and to which the road was to be constructed, the amount of the capital stock, which should not be less than $10,000 for every mile of road constructed, the number of shares of which the capital stock should consist, and the names and places of residence of thirteen directors of the company who should manage its affairs for the first year, and until others were chosen in their place. Each subscriber was to state what number of shares he would take; and the articles were to be filed in the office of the secretary of state, and after certain formalities gone through with them, the persons who had subscribed the articles of association, and all who should become stockholders in the company, "shall," says the act,

"be a corporation by the name specified in such articles of association, and shall possess the powers and privileges granted to corporations, and be subject to the provisions contained in title 3 of chapter 18 of the first part of the Revised Statutes. [Footnote 1]"

The formation of a railroad company to be styled the Rochester and Genesee Valley Railroad Company, and to run between the City of Rochester and the Town of Portage, fifty miles south of it, being contemplated by a course which chanrobles.com-red

Page 82 U. S. 480

should run through the Town of Avon, about eighteen miles south of Rochester, an act of the state just named amending the charter of that city was passed July 3, 1851, by which its common council were authorized to borrow upon its credit $300,000, to be invested in the stock of the new company, and by virtue of the subscription thus authorized, the city was declared to acquire all the rights and privileges and be liable to the same responsibilities as other stockholders of the company, except as otherwise provided in the act. In case the railroad company elected to receive the subscription, the common council were authorized to nominate and appoint one director for every $75,000 of capital stock held by the city at the time of each election of directors, but the city could have no voice in the election of the remaining directors. On the 10th of July, 1851, the articles of association of the new company were filed in the office of the secretary of state, organizing the corporation under the general railroad act of 1850, already in part quoted. The corporation was declared in the article to be created for the purpose of constructing, owning, and maintaining a railroad from the City of Rochester to the Town of Portage, a distance, as already said, of fifty miles, with a capital stock of $800,000, divided into 8,000 shares of $100 each. On the 15th of June, 1852, the Mayor of Rochester subscribed for 3,000 shares of the stock of the company, and, on the same day, at a meeting of the directors of the railroad, such subscription was unanimously accepted. Other parties subscribed for stock to the amount of $677,500, so that the whole amount subscribed, including the stock taken by the city, was $977,500. The whole amount of capital stock fully paid up was:

By the City of Rochester . . . . . . $300,000

By all other parties . . . . . . . . 255,200

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Total amount . . . . . . . . . . . . $555,200

The balance of the stock subscribed was extinguished or forfeited before March 9, 1867. Before this time also the Rochester & Genesee Valley Railroad Company had abandoned chanrobles.com-red

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the construction of their road south of Avon, and assigned all their rights and franchises beyond that point to another corporation.

On the 9th of May, 1867, an act was passed, amending the act of 1851 by giving the common council authority to appoint one director for every $42,855.57 of stock owned by the city; in other words, establishing the same ratio that existed among the subscribers for stock at the time the original subscription was made. The effect of this act was to give the City of Rochester power to appoint seven of the thirteen directors, and the other stockholders six. At the next annual election, however, the stockholders, other than the city, alleging that the Act of July 3, 1851, made a contract between the city and the other stockholders, that the city should elect but four directors out of the thirteen, and that the act of 1867, authorizing the election of seven, violated the obligation of that contract, proceeded to elect one Miller and eight others directors as the directors eligible by them, and on the same day the common council, in pursuance of the act of 1867, appointed seven other persons as directors eligible by them. Thereupon, the attorney general of New York, on the relation of Powers and the six other directors appointed by the city, issued a quo warranto against Miller and his eight co-directors, and the case coming to the Court of Appeals that court held that the appointment by the city was valid, and the election of the nine directors by the other side irregular. Miller and his co-directors now brought the case here.

The only question involved was the constitutionality of the act of 1867. If that act was constitutional the decision of the state court was correct, and was to be affirmed. If the act was a violation of the Constitution of the United States, the decision was erroneous and was to be reversed. chanrobles.com-red

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