exercise of governmental power which has been granted to one corporation vests in another corporation which is its successor, it is to be kept in mind that the immunity is not transferable unless the state, either in the original exemption, or by subsequent statutes, authorizes or directs the transfer of the exemption to a successor in title; and "in determining whether a transfer to another was authorized or directed every doubt is resolved in favor of the continuance of the governmental power, and clear and unmistakable evidence of the intent to part with is required." 39 Where a company was incorporated for the purpose of acquiring the property of another railroad, which was accomplished by a lease of the road followed by the purchase of its shares of stock, and the statute authorizing such purchase provided that the "estate, property, rights, privileges and franchises" of the selling company should vest in the purchasing company, it was contended that the effect of the transfer was to vest in the purchasing corporation the exemption from the expense of street pavement which the selling corporation possessed by statute. However, the Supreme Court of the United States, in deciding this question in 1906, held as follows: (1) In determining whether a transfer of the exemption was authorized or directed, "every doubt is resolved in favor of the continuance of the governmental power and clear and unmistakable evidence of the intent to part with it is required;" (2) a legislative authorization of the transfer of the "estate" of the selling corporation is not sufficient to include an exemption from the taxing or other power of the state; (3) the word "privileges," as used in the statute, is not sufficiently broad to embrace within its meaning such an exemption, notwithstanding earlier

39 Rochester R. Co. v. Rochester, 205 U. S. 236, 248, 51 L. Ed. 784, aff'g 182 N. Y. 99, 116, 70 L. R. A. 773, 74 N. E. 953.

Speaking with reference to the possession by a company, resulting from a merger of a number of other companies, of a special privilege which had been granted to one of the constituent corporations, Chief Justice Fuller said: "By the state constitution the general assembly was forbidden to make any irrevocable grant of special privileges or immunities,' and the general rule is that a special statutory exemption, such as immu

nity from taxation, from the right to
determine rates of fare, or to control
tolls, and the like, does not pass to
a new corporation succeeding others
by consolidation or purchase, in the
absence of express direction to that
effect in the statute.
* And

the same rule is applicable where the
constituent companies are merely
owned and operated by one of them
as authorized by the legislature. An
exemption held by the latter would
not pass to the others unless so
provided." People's Gas Light &
Coke Co. v. Chicago, 194 U. S. 1, 16,
48 L. Ed. 851.

It was

decisions of that court tending to a contrary conclusion. also held in that case that no corporation can receive by transfer from another an exemption from taxation or governmental regulation which is inconsistent with its own charter or with the constitution or laws of the state then applicable, notwithstanding, under legislative authority, the exemption is transferred by words which clearly include it.41 It has also been held, in effect, that even when a statute confers upon a corporation in general terms "all the rights, powers, franchises, and privileges" of another corporation, it should not be construed as conferring rights and privileges which are detrimental to the public, unless there is something else to show that the legislature so intended.42

Of course, if corporations are united in such manner that one continues to exist as a corporation, owning and operating its property, by virtue of its own charter, the corporation thus continuing to exist holds its immunities and exemptions in respect to the property to which they apply; 43 but this rule does not apply where one corporation leases its property and then sells its stock to another company, which results in the selling corporation being without shareholders, without officers to manage the business, and without the right lawfully to do business.44

§ 4723. Exemptions of officers and stockholders as distinguished from exemptions of corporations. An act authorizing consolidation and conferring on the new corporation the franchises, exemptions, etc., of each of the constituent corporations does not include an exemption of stockholders in the old companies from the payment of corporate debts or liability therefor, since a distinction must be ob

40 Rochester R. Co. v. Rochester, 205 U. S. 236, 51 L. Ed. 784, aff'g 182 N. Y. 99, 70 L. R. A. 773, 74 N. E. 953, 98 N. Y. App. Div. 521, 91 N. Y. Supp. 87, and citing in support of the last proposition Gulf & S. I. R. Co. v. Hewes, 183 U. S. 66, 46 L. Ed. 86; Phoenix Fire & Marine Ins. Co. v. Tennessee, 161 U. S. 174, 40 L. Ed. 660; Chesapeake & O. R. Co. v. Miller, 114 U. S. 176, 29 L. Ed. 121.

41 The reason is that "those who seek and obtain the benefit of a charter of incorporation must take the benefit under the conditions and with the burdens prescribed by the laws

then in force, whether written in the constitution, in general laws, or in the charter itself." Rochester R. Co. v. Rochester, supra.

42 Covington & L. Turnpike Road Co. v. Sandford, 164 U. S. 578, 41 L. Ed. 560; Phoenix Fire & Marine Ins. Co. v. Tennessee, 161 U. S. 174, 40 L. Ed. 660.

43 Central Railroad & Banking Co. v. Georgia, 92 U. S. 665, 23 L. Ed. 757; Tomlinson v. Branch, 15 Wall. (U. S.) 460, 21 L. Ed. 189.

44 Rochester R. Co. v. Rochester, 205 U. S. 236, 51 L. Ed. 784.

served between exemptions of the corporations and exemptions of the stockholders.45

§ 4724. Effect of constitutional limitations and provisions. A consolidation creates a new corporation 46 which derives its powers by grant from the legislature at the time of its birth. "This legislative grant cannot, of course, transcend the constitutional authority existing at the time it takes effect. If the grant of certain privileges is prohibited to the legislature by the constitution, they can no more be conferred upon a corporation formed by consolidation than upon any other corporation newly formed at that time. The fact that one or all of the constituent corporations possessed this privilege before their consolidation is immaterial. The consolidated corporation is created at the time of consolidation, its powers are conferred at that time, and such creation and grant of powers is necessarily subject to the constitutional provisions then in force." 47 For instance, if the consolidation dissolves the constituent corporations, the consolidated corporation does not succeed to the exclusive franchise possessed by one of the constituent companies so as to exclude a municipality which had granted the franchise from erecting its. own plant, where the constitution and laws of the state, at the time of the consolidation, but enacted after the franchise was granted, prohibited the granting of such exclusive privileges. 48 So where a state constitution provides that every new "grant of corporate franchises"

45 Minneapolis & St. L. R. Co. v. Gardner, 177 U. S. 332, 44 L. Ed. 793, aff'g 73 Minn. 517, 76 N. W. 282.

46 See § 4700 et seq., supra.

47 Note in 89 Am. St. Rep. 633. A railway which is consolidated with other roads after a new constitution has been adopted will be deemed subject to the provisions of the new constitution as to its privileges and franchises. San Antonio Traction Co. v. Altgelt, 200 U. S. 304, 309, 50 L. Ed. 491, holding that provision of the Texas Constitution of 1876 that all privileges granted by the legislature should be subject to its control applied to a consolidated corporation consolidated after the enactment of such constitution as af

fecting the extension of a franchise of a constituent company.

"In the absence of a reservation in the statute under which the consolidation takes place, of the rights of the constituent corporations, which would not exist under the law at the time of the consolidation, they are lost, and the consolidated corporation and its property, including that which came to it by the consolidation, becomes subject to the laws then in force, although the constituent companies would not have been subject thereto." Westminster Presbyterian Church v. Trustees of Presbytery of New York, 142 N. Y. App. Div. 855, 127 N. Y. Supp. 836.

48 Shaw v. Covington, 194 U. S. 593, 48 L. Ed. 1131.

shall be subject to the provisions of the constitution, a consolidation. is such a grant so as to make it subject to the new constitution forbidding exemptions, notwithstanding they were provided for in the charter of one or all of the constituent corporations.49 This rule applies to exemptions from taxation as well as other exemptions.50 In Arkansas, however, it was held that when the charter of a corporation confers upon it a special immunity or privilege, and also authorizes it to consolidate with any other similar corporation, and it enters into such a consolidation, the special immunity or privilege will pass to the new corporation, notwithstanding a constitutional prohibition against the grant of special privileges or immunities adopted by the people before the consolidation, but after the charter of the consolidating corporation.51 But the opposite view was taken by the Supreme Court of the United States, at least where the consolidation was not effected until after the change in the organic law.52

When a consolidation results in the creation of a new corporation as of the time of the consolidation, the consolidated corporation becomes subject to a constitutional provision in force at the time of the consolidation, imposing an individual liability upon stockholders of corporations.53

§ 4725. Effect of reservation of power to alter or repeal charters. When corporations which enjoy special privileges or exemp tions are consolidated under legislative authority, and a new corporation is created, and the consolidating corporations dissolved, the consolidated corporation is subject to a constitutional provision or a general law adopted or enacted after the creation of the consolidating corporations, but before the grant of authority to consolidate, reserving to the legislature the right to alter, amend or repeal charters, or withdraw franchises and privileges, subsequently granted, and,

49 Yazoo & M. Val. R. Co. v. Adams, 180 U. S. 1, 45 L. Ed. 395, aff'g 77 Miss. 194, 60 L. R. A. 33, 28 So. 956, 24 So. 200, 317.

50 See § 4727, infra. See also § 4649, supra.

51 Zimmer v. State, 30 Ark. 677. In this case, a railroad company having the power under its charter to consolidate with any other railroad company consolidated with another company after the adoption by the people of the state of a constitutional

prohibition against the granting by the legislature of special privileges and immunities. It was held, notwithstanding such prohibition, that the consolidated corporation acquired an immunity of officers and employees from road and jury service, which was enjoyed by the consolidating corpora tion under its charter.

52 St. Louis, I. M. & S. R. Co. v. Berry, 113 U. S. 465, 28 L. Ed. 1055.

53 Gardner v. Minneapolis & St. L. Ry. Co., 73 Minn. 517, 76 N. W. 282.

therefore, any privileges and exemptions enjoyed by the consolidating corporations, and passing to the consolidated corporation, are subject to such reservation of power.54

Privilege or exemption enjoyed by only one corporation. When a consolidated corporation acquires, by express provision or by implication, a special privilege or exemption which attached to the property of one only of the consolidating corporations acquired by it, the privilege or exemption is restricted to that property, and does not exist, in the absence of express provision therefor, with respect to the property derived from the other consolidating corporation, and as to which, in its hands, there was no such privilege or exemption. This rule has been applied to exemptions from taxation, but is equally applicable to other special privileges or exemptions.55