Bonaparte v. Baltimore, Hampden & Lake Roland Railroad

Irving, J., delivered the opinion of the Court. By chapter 284 of the Acts of the General Assembly -of 18T2 was passed the Act entitled “An Act to incorporate the Baltimore, Hampden and Lake Roland Railroad Company.” The first section of the Act names certain persons as commissioners to take subscriptions to the capital stock of the company; and in case of the •death, resignation or refusal to serve of any of the persons named as commissioners, a majority of the remaining commissioners were given authority to appoint others. By the second section of the Act the subscribers to the stock, and their successors and assigns, are declared incorporated into a company by the name of “Baltimore, Hampden and Lake Roland Railroad Com ³⁴² pany,” with perpetual succession under that name, with power of holding, purchasing, and encumbering property for the purposes of the corporation. The third' section makes the capital stock of the company to consist of shares not exceeding two thousand in number, of the valuq of fifty dollars per share; five dollars of which was to be paid at the time of subscription, and the residue in such instalments as the-president and directors should determine.

By the fourth section, as soon as five hundred shares should be subscribed, the commissioners to take the subscriptions, were authorized by publishing notice as prescribed, to call a meeting for the election of seven directors, who on being elected should elect a president, for whose qualification the fifth section provides. The sixth section gives the company thus incorporated power to construct a railroad with one or two tracks, and necessary sidings for the transportation of travelers or freight by horse power, and gives the company the exclusive use of any streets or county roads over which they may wish to lay their tracks between Boundary Avenue and Lake Roland; “provided said track or tracks are constructed in such manner as not to interfere with the travel on said streets or roads.” The seventh section provides for the condemnation of the right of way and estimating damages and benefits. The eighth section preseribes the rate of fare, not exceeding five cents per mile, or for the fraction of one. The ninth section authorizes the borrowing of money to the extent of twenty-five thousand dollars; the tenth authorizes the making of by-laws, rules and regulations and the appointment and employment of officers.

The eleventh section provides “that said company shall commence said railway within three years from the passage of this Act, and complete the same in ten years.” By the twelfth and last section the Act is made to go into- ³⁴³ effect upon its passage, and the right to alter, amend or repeal is reserved to the Legislature. The appellant is a property owner residing on Roland Avenue, which is opened as a public avenue” or highway, of the width of sixty feet, past his property; and has filed his bill for an injunction restraining the appellees from the construction of their road which has been begun. He charges that the tearing up and obstruction of the avenue as is proposed is without lawful authority and will be an unlawful obstruction of the appellant in going to and from his premises. He avers that what is being done is not for the purpose of using horses for the road, but with the design of using electricity as a method of propulsion.

He sets up in his bill and contends in argument, that the Act of Assembly, relied on by the appellees as an Act of incorporation, is void because it is in conflict with the provisions of Art. 3, section 48, of the Constitution, which prohibits the granting of charters to corporations when there is a general law under which they may be formed, as appellant contends that there is. 2. That it was not accepted in time to confer on the corporation the powers which are claimed for it; or to create a corporation at all; and thirdly, that if originally accepted in time the charter gives no right to the corporation to lay down their tracks in the highway without the consent of the county commissioners, which has not been obtained. The appellees deny all these several propositions, and the Court below agreed with the appellees in reference to them, and refused the preliminary injunction which was asked, and from that refusal this appeal was taken. The appellees have moved to dismiss the appeal because it is contended that this particular case does not fall within the provisions of section 29 of Art. 5 of the Code!

When the bill was filed and preliminary ³⁴⁴ injunction was asked for, instead of granting the injunction at once and outright, the Judge set a day for hearing, and, until that hearing could he had, the Judge passed a restraining order. The contention of the appellees is, that this restraining order was a preliminary injunction and the order of the Court passed after the hearing which was appointed, was the dissolution of the injunction already granted. When the Court passed the order setting a day for hearing and meanwhile restraining the appellees till the hearing, it is very evident that the Court was not acting finally on that application for preliminary injunction. The Court wanted opportunity to consider whether a case was made for preliminary injunction, and therefore ordered a hearing, on the application made by the bill.

When that hearing was had the preliminary injunction was refused, and the order refusing the same is the subject of the appeal. We think it does fall within the statute, and that appeal was properly prayed and granted. The motion to dismiss must be overruled. For the purpose of deciding this case we need not consider the question whether the Act of Assembly, under which the appellee claims corporate powers was constitutionally enacted.

We may assume, without so deciding, that it was; for conceding that it was lawfully passed, we are of opinion that the appellee never acquired lawful corporate existence under it. If it did not acquire corporate life under that Act, the injunction should have gone. The statute appointed commissioners to take subscriptions for the stock of the road it authorized to be built upon specified conditions and within certain limitations as to time. Those commissioners were not declared to be incorporated.

They were the mere agents of the State to offer the charter to subscribers willing to accept it as offered. State vs. Bull, 26 Conn., 179 . Those who should become subscri ³⁴⁵ bers for stock of the corporation intended to be formed, were by the second section of the Act declared incorporated. The Act went into effect on the day of its passage, and made a corporation possible, but the stock had to be taken as prescribed before there would he incorporators to accept the charter offered them.

Subscribers to the extent of twenty-five thousand dollars, with five dollars per share actually paid in were necessary to justify an organization as a corporation. Before there could be an acceptance of the charter and its conditions and limitations, subscribers to the extent mentioned we$e necessary. They were incorporated, and not the commissioners. The latter being the State’s agents to make the offer, could not accept it.

They need not be stockholders, and might never be such; and until they should become subscribers for stock they could have no voice in the matter. Confessedly no stock subscriptions were made till September, 1891; which was more than nineteen years after the passage of the Act tendering the charter upon the terms and limitations mentioned in it, and more than nine years after the time limited for completing the road. Construing the Act, as is our first duty, we think it intended to offer the corporate existence and corporate powers mentioned in the Act to such stock subscribers as could accept the offer on the conditions annexed. The commissioners named wmre charged with a specific duty.

They could do nothing which the Act did not authorize them to do. They could offer nothing to subscribers but what was given them to do; and it was their duty so to discharge their functions that the conditions of the offer might, by possibility, be complied with. Certain limitations were imposed in the Act. The road was to be commenced within three years, and was to be completed within ten years, from the passage of the Act.

The commissioners to take subscriptions must act therefore within such time that subscribers to the stock, ³⁴⁶ who were to he the corporation, could accept the conditions annexed, and could make the effort, at least, to do what was authorized. When therefore the commissioners delayed action until the limitations imposed hy the Act had fully attached, and the time limited for beginning and finishing the road had long passed, it would seem to he clear that the powers of the State’s agents were at an end; and their power must he enlarged hy legislative action to justify their doing anything under the Act. They had no right to offer to subscribers anything hut the charter with its conditions; and when the conditions became impossible of compliance, before the State’s agents offered it to anybody, it is clear that they were functi officio, and the Act itself was no longer operative. It perished under its own limitations, and required legislative action again to vitalize it.

The Legislature was influenced hy what was supposed to he the public interest, no doubt, at the time when the Act was passed. Such a mode of conveyance for passengers and freight was deemed necessary for the public good at that time, and authority was given to form a corporation to meet the existing exigency. As was said in the case of the State vs. Bull, 26 Conn., 179 : “We can not suppose it was creating a supernumerary charter, to he laid away among the State records to await convenience or necessity of future times.” In the case of the State vs. Bull the charter was not forfeited. That was not a case of forfeiture.

The corporation was declared never to have come into legal existence; that the commissioners, acting as State’s agents, had not acted within a reasonable time, and had surrendered their authority hy their delay. They had once offered the charter for subscription of stock, and the requisite stock was not taken. Ten years afterward the commissioners again took subscriptions and the amount of stock, which the law had required should he taken before organization, ³⁴⁷ was taken and the company proceeded to organize; hut the Court said the commissioners on the part of the State to take subscriptions had no longer any authority to act, and that the charter was therefore not accepted in time. It is true that this decision was made in a proceeding on the p'art of the State; but the grounds of the decision are such as show that like objections ought to be entertained at the suit of anybody injured by the doings of a corporation claiming existence through void proceedings.

The acceptance must not only be within reasonable time, hut it must be of that which is offered.' 1 Morawetz on Corporations, p. 22; State vs. Bull, 26 Conn., 179 ; Hammond vs. Straus, 50 Md., 12 . In the last cited case this Court said acceptance is essential to the existence of a corporation, and whether there was an acceptance was a question for a jury under the direction of the Court as to what will amount to an acceptance. The case in which this Court said that was one at law, where the existence of the corporation was in issue. Here the case is in equity and the whole matter is for the Court.

The legal existence of a corporation is always open for inquiry. Hammond vs. Straus, 50 Md., 12 ; Smith vs. Silver Valley Mining Co., et al., 64 Md., 85 ; Lyons vs. Orange, &c., Railroad Company, 32 Md., 18 ; Agnew vs. Bank of Gettysburg, 2 H. & G., 493 . Acceptance being essential, it becomes a condition precedent to corporate life. Whether that has been done within a reasonable time is a question of law for the Court on the facts before it, for decision by the Court, when arising in equity, or for instruction to a jury when the facts are to be found by it.

Loring vs. City of Boston, 1 Metc., (Mass.,) 409; Chicago & Great Eastern R. R. Co. vs. Dane, 43 N. Y., 240 ; Mizell vs. Bennett, 4 Jones, (N. C.,) 429; Hammond vs. Straus, 53 Md., 12 . The time for finishing the road under the law expired in 1882, ³⁴⁸ and no effort to get subscribers appears to have been made up to that time; or, if there was such effort, nothing was accomplished until September, 1891, when subscriptions were made and organization was effected. This was nearly ten years after the expiration of the ten years limited for completing the road. Was this an acceptance of the charter as offered?

It is admitted that acceptance was necessary, but the appellee claims this was all the acceptance which was required. The terms of the offer could not then be accepted nor complied with. They were impossible. Being impossible of acceptance or of execution, counsel for the appellant most pertinently and forcibly suggests how such an acceptance differs from one made before any limitation had attached, and within undeniably reasonable time, but with express rejection of the time limit?

If that had been done,with the Lyons and Orange Railroad case already cited staring at them, it would not have been contended that it would have been a valid acceptance. If not, why should it be a valid one, when parties wait till it is unnecessary to mahe the exception in relation to the time limit, because that has, by the' delay, been rendered an impossible condition ? We can see no escape from the conclusion that there is no difference, and that counsels question can only be so answered. But.the appellees’ counsel contend that this objection cannot, and no objection to the valid existence of this corporation can be made at this time, and in this way; and that it could only be made by the State on scire facias or by quo warranto.

It is unquestionably the law that a forfeiture for non-user or misuser, or for non-compliance with any of the conditions of the charter, after the corporation has once been legally created and invested with franchises, can only be availed of and declared at the suit of the State. The case of Canal Company vs. Railroad Company, 4 G. & J., 1 , is undeniable authority ³⁴⁹ for this statement of the law, and we do not question it: hut we do not think that case applies, nor do any that have followed its ruling, apply to the case we consider. This case is not one where forfeiture is asked to he declared. It is a question of legal hirth.

If the corporation had heen legally horn its life could only be forfeited, and its death declared at the instance of the State; hut whether it ever did ha-ve life, or in other words ever was horn, seems to us, upon both reason and authority, open to inquiry and contest at the instance of any one suffering from its unauthorized acts. If within a reasonable time after the passage of the law, for example, if before the time limit had attached in either of its aspects, the commissioners had taken enough subscriptions to enable the company to organize, and it had organized in acceptance of the ' charter, and then delays in the construction of the road had occurred, until it was impossible to comply with the requirements of the Act respecting the completion of the road, then we do not think any one could complain hut the State, for it could waive the conditions and limitations annexed to the charter. Had such a state of facts existed the Canal Case, 4 G. & J.,1, and the case of Hodges, et al. vs. Balto. Passenger Railway Co., et al., 58 Md., 620 , and the other cases of like character cited by appellees, would have applied, and this appellant could not he sustained in his application for injunction because of such failure, and for the reason that the corporation was only»' and legally in existence before the default made; and the State only could complain and ask a forfeiture.

This was so in the Canal Case. It had been fully invested with franchises, and made a corporation by the express language of the Act of Assembly. In that case and the others relied on there was no question of legal existence in the start. In Hammond vs. Straus, 53 Md., already cited, the corporators were named, and declared a cor ³⁵⁰ poration; but it was held to be a legitimate inquiry whether the corporation had accepted the terms of a certain charter; and that inquiry was made in a case where the State was no party to the proceeding.

A corporation as plaintiff asserting rights must establish its corporate existence to maintain its suit. That is the first step, if its existence be denied and put in issue. If it has committed a wrong and justifies because of corporate authority to do what is complained of, it must establish that authority. It will not do to say that because it claims to be a defacto corporation it must be assumed to be a legal corporation till the State claims it is not.

The common right of men to protection in the enjoyment of their rights forbids such assumption. A corporation cannot gain right to recognition as such simply by claiming to be such and holding itself out as such. Boyce vs. Trustees, &c., of the M. E. Church, 46 Md., 372 ; Agnew vs. Bank of Gettysburg, 2 H. & G., 493 . In the last cited case Judge Archer said: “Upon authority it is clear that the plaintiff, to maintain his case, must show that by law he has been effectually created a corporation. ” Franklin Fire Insurance Co. vs. Hart, 31 Md., 59 ; Lyons vs. Orange, Alexandria and Manassas Railroad Co., 32 Md., 18 ; and Smith vs. The Silver Valley Mining Co., et al., 64 Md., 85 , establish the same rule, viz., that whenever any act is essentially necessary to be done before a corporation can be regarded as in esse, that must be established or the corporation cannot be held to be a legal entity.

Fire Department of New York vs. Kip, 10 Wendell, 266 . The Act of 1872, chapter 284, did not create a corporation eo inslanti. It names as corporators future subscribers. It does use the term “hereby created,” but that means that when there are subscribers, such as the Act calls for, they are' hereby declared á corporation.

It provided for the formation of a corporation; ³⁵¹ but before there'could be one in esse there must be the requisite subscribers to the stock. We have already-said that such subscribers were not only necessary, but they must accept the charter as offered — that this became a condition precedent — that they must be legal subscribers capable of accepting, and must accept within a reasonable time. We have seen that, according to our construction of the statute, the powers of the commissioners, the State’s agents, - expired when they could no longer offer the charter, as framed by the Legislature, and that their act in taking subscriptions was void; and if. so it follows there were no legal subscribers. -But if that were not so, these subscribers did not accept within a reasonable time. It is not necessary for us to establish and laydown what in any given case is reasonable time; but we may safely say that, when nothing is done towards an organization and acceptance by subscribers, such as these were, until the full lapse of time within which they were to complete the road contemplated by the Legislature, that such acceptance was not within reasonable time.

The offer was