Opinion
Argued February 28, 1888
Decided March 20, 1888
William M. Evarts, Everett P. Wheeler, Robert Sewell, Esek Cowen and Charles P. Shaw for appellant.
Everett P. Wheeler for appellant. D.J. Dean for the Mayor, etc., respondent.
Waldo Hutchins, John M. Scribner, Edward Lauterbach, Robert H. Shannon, Delos McCurdy and William C. Trull for respondents.
When the petitioner's matter was before this court upon a previous appeal, it was decided that in certain respects the articles of association, as prepared by the mayor's commissioners, failed to comply with essential requirements of chapter 606 of the Laws of 1875, known as the Rapid Transit Act, under the provisions of which, certain individuals had sought legal incorporation by the name of "The New York Cable Railway Company." ( New York Cable Co. v. Mayor, etc., 104 N.Y. 1.) The decision referred to mentioned as one defect that the commissioners had not provided, as section 7 of the act required they should, for a release and forfeiture to the supervisors of the county of all the rights and franchises acquired by the company, in case of its failure to complete its railways within the prescribed times. A further defect in the organization of the company was that those commissioners had not decided, as it was required of them by section 5, upon plans for the construction of the railways and other appliances specified in that section, and a compliance with its requirements was essential to valid organization.
Because of the failure to comply with the requirements of the act in those respects, there was no valid organization of the incorporators. Those requirements are material and a compliance with them is a condition precedent, upon performance of which depend legal incorporation and the acquisition of powers and rights.
The opinion of this court was elaborate and comprehensive in its exposition of the statute and of the scheme embraced within its provisions, and it was concurred in, in the respects mentioned, by all the members of the court. Since that decision was made the appellants have sought to cure the defects in their organization and thus to remove the objection which existed to the exercise of corporate powers; and, to that end, have caused to be made amendments of the articles of association.
A meeting of the commissioners originally appointed by the mayor, and who prepared the articles of association, was called, and three attended. They proceeded to amend the articles by inserting a provision for the release and forfeiture of corporate rights and franchises, as section 7 of the Rapid Transit Act required it should be; and they made locations of works and detailed plans of construction for the railways to comply with section 5. The directors of the company met and they ratified and approved the action of the commissioners and filed an amended certificate of incorporation.
The appellants insist that, by virtue of the proceedings which have been taken and had, they are now validly organized and have legal capacity to carry out corporate aims and purposes. Their argument, in effect, is based on these grounds, namely: That chapter 135 of the Laws of 1870 gave authority to the directors to so amend; that the mayor's commissioners had the power, as it was their duty, to reconvene and to amend, and that the amendments, when made, relate back and operate to give to the incorporators existence as a corporation de jure. They also contend that no legal objection exists to the confirmation of the report of the commissioners as to the surface railways; for, in that respect, this court's decision did not affect.
We think that the argument of the learned counsel for appellants proceeds upon a misapprehension of the effect of the decision of this court. The defects pointed out were fatal and were not of a nature which permitted of amendments which might relate back with force and curative effect. RAPALLO, J., said, referring to petitioner's organization, "unless validly organized in pursuance of the Rapid Transit Act, it acquired no right to construct the road, and, consequently, could not demand that the Supreme Court confirm the report of its commissioners as a substitute for the assent of a majority of the property owners and the order of confirmation would be of no avail if granted." ( N.Y. Cable Co. v. Mayor, etc., supra.)
No powers, authority or franchises were conferred directly by the legislature on the petitioner. The act only prescribed the proceedings by which such could be acquired; and upon a substantial compliance with its material requirements necessarily depend the due organization and constitution of the corporation. Not to incorporate a provision for release and forfeiture as required by the act, and to leave the question of plans of construction of the railway and its appliances undetermined, and to relegate it to the discretion of the directors of the company, were material departures from the commands of the act. The act required, in its seventh section, that "the commissioners shall prepare appropriate articles of association for the company * * * in which said articles of association shall be set forth and embodied, as component parts thereof, the several conditions, requirements and particulars by said commissioners determined pursuant to sections 4, 5 and 6 of this act, and which further shall provide for the release and forfeiture to the supervisors of the county of all rights and franchises acquired by such corporation in case such railway or railways shall not be completed within the time and upon the conditions therein provided." The clause as to forfeiture, which the commissioners substituted for the specific provision contained in the act, was in clear violation of the legislative command; while the plans of construction did not furnish a knowledge of the kind of road, or of the degree to which the streets would be obstructed, or of the efficiency of the proposed mode of construction. The plans were not such as when the local authorities and property owners were applied to for their consents, they had before them the necessary materials to form an intelligent judgment whether the scheme proposed should or should not be assented to. The substantial nature and the fatal effect upon petitioner's attempted incorporation of the omissions adverted to, are no longer subjects open to discussion. The determination by this court was after the fullest hearing, and it was found that the incorporators never acquired the franchise to be a corporation. Essentials for a corporate existence were wanting. The powers given by the act of the legislature had not been exercised in such mode as to confer upon the association of individuals a corporate capacity, and there was lacking the possession of faculties and powers for the performance of those acts which alone can be performed by the perfect statutory creature.
The argument of the learned counsel for the appellants does not meet these grave objections. Chapter 135 of the Laws of 1870, cited by counsel, is not available to the petitioner. That act provides as follows, namely: "The directors of any corporation organized under any general act for the formation of companies, in whose original certificate of incorporation any informality may exist by reason of an omission of any matter required to be therein stated, are hereby authorized to make and file an amended certificate of incorporation to conform to the general act, and upon the making and filing of such amended certificate the said corporation shall, for all purposes, be deemed and taken to be a corporation from the time of filing such original certificate."
It might be said that the omissions pointed out in petitioner's incorporation were more than informalities, and that they could not be called errors of form, or omissions which rendered the certificate imperfect on its face. They were radical defects and went to the very right of the incorporators to be a corporation de jure. But a complete answer is that the act of 1870 is inapplicable in its provisions to the Rapid Transit Act of 1875. That act was intended to embrace the whole law on the subject of the formation of companies thereunder and as to the framing and adoption of articles of association therefor. Under its provisions the power and authority to make articles of incorporation are conferred upon the mayor's commissioners alone. It is their exclusive function to prepare them and, when completed, to deliver to the directors a certificate setting forth the articles and the organization of the company for the purposes mentioned in the act. With this explicit language of the statute, we think no power can be implied for the making of any articles of association by the directors, and, as a logical consequence, none for the making by them of any amended certificate of incorporation. Nor is continuance of existence and power attributable to the commissioners whom the mayor appointed, so as to enable them to reconvene and to reform either articles or certificate. By the thirty-ninth section of the Rapid Transit Act it is provided that "the terms of office of said commissioners shall determine and expire with the performance of their functions as herein provided." Those functions, and the time within which they are to be performed, are prescribed with great particularity in the act. The successive steps towards the formation of a corporation under the act are laid down, and a limit of time is fixed for the taking of each step until that final one is taken when the commissioners deliver over to the directors their sworn certificate in duplicate "setting forth the articles of association and the organization of the company for the purposes in the act mentioned and provided for." That terminates their duties and ends their office. Thenceforth there remains for them no further exercise of powers given by statute, and they are functi officio. The statute prescribed the scope of their powers and duties, and the time within which they might act. The powers were delegated to them as a body created by force of the provisions of the act itself, and their performance was regulated and restricted by those provisions. It is not such a case as might be supposed where the statute is silent as to the mode or time of performance of official duties and a reservation of the exercise of further power upon the subject might be reasonably implied.
A fundamental objection, however, exists to the assertion of petitioner's claim here. The jurisdiction of the General Term of the Supreme Court to appoint commissioners depends for its exercise upon a refusal of the property owners to consent. The act makes especial provisions for obtaining the consent of the owners of one-half in value of the property bounded on the routes of the proposed railway and for a public notice by the mayor's commissioners, inviting the submission of plans for the construction and operation of such railway, and appointing a time and place for a meeting to decide upon such plans.
The original plans decided upon by the commissioners were adjudged to be in violation of the statute, and not plans at all, within its plain intent and requirements. Hence, the action of property owners in refusing their consent thereto can, in no sense, form any basis for petitioner's present application. The property owners and the local authorities, when applied to for their consent, must have offered to them, as a necessary prerequisite to an intelligent judgment, plans which leave no essential or material portions to the discretion of the company's directors. The present amended articles embodying new plans for construction of petitioner's railways have not been submitted for the inspection and examination of the property owners; nor has their consent been sought for as the act requires. Consequently the conditions for an exercise of power by the Supreme Court in this matter do not exist.
It was an essential part of the statute, and an initiatory step to further proceedings under it, that the approval of property owners should be sought under prescribed conditions, favorable for the examination of the proposed routes and the plans of construction and operation of the railways. The absence of any proof of a substantial compliance with those conditions deprives the petitioner of any standing in court to make the application in question. Commissioners appointed by the court would have no right to consider and determine upon plans to which the consent of property owners had not been asked. The views we have expressed make further consideration of the points argued in the elaborate brief of the counsel for the petitioner unnecessary.
The General Term were right in holding that they were without jurisdiction to entertain the petitioner's application, and their order should be affirmed, with costs.
All concur.
Order affirmed.