Statement of the Case. rendered, which was the case here, we do not consider ourselves bound by such decision unless we regard it as intrinsically sound. Enfield v. Jordan, 119 U. S. 680; Bolles v. Brimfield, 120 U. S. 759. Still, even in such a case, the construction put upon a state statute by the Supreme Court of such State is entitled to our respectful consideration; and we do not hesitate to adopt it as a true construction in the present case, where we have reached the same conclusion upon an independent reading of the statute. Our conclusion, upon the whole case, is that the town of Okolona had no power to issue the bonds in suit, and that the judgment of the court below must be Affirmed. PEOPLE ex rel. SCHURZ v. COOK. ERROR TO THE SUPREME COURT OF THE STATE OF NEW YORK. No. 139. Argued March 15, 1893. - Decided April 3, 1893. 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 Statement of the Case. its obligation had been impaired, as claimed by plaintiffs in error, were questions which arose and were 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 properties 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 of 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 Statement of the Case. 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 per centum 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 any 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 of 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 Argument for Plaintiffs in Error. 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. Mr. George Zabriskie for plaintiffs in error. The provisions of the Railroad Law of New York, enabling the incorporated purchasers of railroads and franchises sold under foreclosure to possess, exercise and enjoy the property purchased, formed part of the mortgagor company's charter and constituted a contract between the State and the mortgagor company for the benefit of the bondholders and ultimately for the benefit of the purchasers. Fletcher v. Peck, 6 Cranch, 87; Dartmouth College v. Woodward, 4 Wheat. 518, 547; Greenwood v. Freight Company, 105 U. S. 13, 20; New Orleans Gas Company v. Louisiana Light Company, 115 U. S. 650, 660; Brooklyn Park Commissioners v. Armstrong, 45 N. Y. 234. The franchises which the corporation mortgages, and which the State stipulates to confer upon the incorporated purchasers, are rights or privileges which are essential to the operations of the corporation, and without which its road or works would be of little value, such as the franchise to run cars, to take tolls, to appropriate earth and gravel for the bed of its road, or water for its engines and the like. They are positive rights and privileges without the possession of which the road of the company could not be successfully worked. Morgan v. Louisiana, 93 U. S. 217, 223. When there is a judicial sale under a mortgage authorized by the State, covering franchises, those franchises which are necessary for the use and enjoyment of the road pass, under the legislation of New York, to the purchasers in the sense indicated in Memphis Railroad Co. v. Commissioners, 112 U. S. 609; and purchasers under a foreclosure sale of mort Argument for Plaintiffs in Error. gaged property derive their title (through the State, in the case of franchises) from the mortgagee. The foreclosure cuts off the equity remaining in the mortgagor, and leaves the title conveyed by the mortgage absolute. Packer v. Rochester & Syracuse Railroad, 17 N. Y. 283, 287. But the franchises being derived originally from the State, are transferable from the mortgagee only to the extent, and in the manner, and to the persons prescribed by the State. The State has given express authority, and its own contract, to transfer them to the mortgagee; and it is needless to consider whether or not this grant would in the absence of further express language imply a further agreement, quasi ex contractu, that if the mortgagee were obliged to resort to his security for the collection of his debt, and realize his security in the usual way, by foreclosure of the mortgagor's equity, and a sale, passing title to the purchasers, the State would also grant to the purchasers the same franchises which had been transferred to the mortgagee, and sold by judicial process; because there is no room for an implied covenant, since the State has entered into an express covenant on this point by those provisions of the charter which relate to mortgaging and the rights acquired by purchasers under foreclosure; by which the State agrees to grant to the purchasers, when incorporated, the same franchises and other rights that belonged to the corporation which last owned the railroad. These franchises and other rights, however, do not comprise the power to act in a corporate capacity, which does not belong to the corporation, but to the corporators. Southern Pacific Railroad v. Orton, 32 Fed. Rep. 457; Memphis &c. Railroad v. Commissioners, 112 U. S. 609; People v. Coney Island Railway, 89 N. Y. 75. But the State does exact that the purchasers shall become a corporation; and it is only to such corporation, and not to the purchasers themselves, that the State agrees to grant the franchises. When the mortgages, under which the plaintiffs in error claim title, were made and the bonds were issued under them, all the existing legislation of the State as to the title which passed, under the mortgages, to the mortgagees, and their VOL. CXLVIII-26 |