State v. Port Royal & Augusta Ry. Co.

45 S.C. 470

Opinion

The opinion of the Court was delivered by

Mr. Justice Pope.

On the 27th day of January, 1893, these actions were commenced. The complaint sets forth with great care circumstances that may be thus partially summarized: In 3857 an act was passed by the General Assembly of this State incorporating certain persons under the name of the Port Royal Railroad Company, whose object was the construction of a line of railroad leading from the harbor at Port Royal, in this State, towards the city of Augusta; and such corporation, desiring to construct their railway into the city of Augusta, in the State of Georgia, obtained the passage by the legislature of the last State of a charter authorizing said original corporators to construct and extend such Port Royal Railroad across the Savannah River, and into the city of Augusta. The railroad was not rapidly constructed, and in 1870 the General Assembly of South Carolina continued the charter, but provided in the act that the railroad should be completed during the year 1871. Bonds were issued by the corporation, secured by a mortgage of the railroad property. Upon default being made in the payment of interest on said bonds, a suit in foreclosure of the mortgage was begun in the Circuit Court of the United States for the district of South Carolina, and an ancillary suit in the Circuit Court of the United States for the district of Georgia, and under a decree therein in both of said courts the railroad property was sold, and was purchased by certain individuals, who, on the 29th day of June, 1878, in compliance with a statute of the State of South Carolina, and a similar statute of the State of Georgia, on the 29th day of June, 1878, filed in the office of the secretary of state of the States of South Car°üna and Georgia, respectively, a notice that they would operate said railroad under the new name of the Port Royal and Augusta Railway Company. Under this new arrangement, $750,000 of stock was issued, each share being of the value of $100, and the holder of each share was entitled to one vote. Also $1,500,000 of general mortgage bonds were issued, the holders of said bonds being entitled to one vote for each $100 of the face value thereof. Under this arrangement, the railroad was very successfully managed. Large compresses were erected at Port Royal; grain elevators, extensive warehouses, workshops, and roundhouses were also built in said Port Royal. These arrangements and the management of the railroad contributed largely to the welfare and benefit of the public. But, in the year 1881, the Central Railroad and Banking Company, a creature of the legislature of the State of Georgia, which had been chartered in 1835, and which owned the Central Railway Company, in said State, running from the city of Savannah into the interior of the State, purchased a majority of the capital stock and general mortgage bonds of the Port Royal and Augusta Railway Company, and elected such directors as they chose, and with such control placed the president and other general officers of the Central Railroad and Banking Company in control of this South Carolina corporation. It is claimed that under this new control the wharfs, grain elevators, and warehouses at Port Royal were left idle, and rotted from disuse. Also the workshops were removed from Port Royal. And, further, that, instead of said railroad being run in the interest of the public in South Carolina and that portion of Georgia through which it passed, it was devoted to building up the commerce of the city of Savannah, and the business of the Central Railroad. Complaints being made, the General Assembly of South Carolina passed, in 1891, a joint resolution, empowering the attorney general of the State to investigate the conduct and management of said railroad, and if, in his judgment, cause exist therefor, that he institute proceedings to revoke the charter theretofore granted to the aforesaid company, and that he report his action to the next General Assembly. That about the 4th day of July, 1892, the Central Railroad and Banking Company being insolvent, and anxious to make terms with its creditors, through its president, H. M. Comer, exhibited a bill in equity in the United States Circuit Court for the district of Georgia, in the name of the Central Railway and Banking Company, as plaintiff, against the Farmers’ Loan and Trust Company of New York, and others, as defendants, whose object was the appointment of a permanent receiver for the Central Railroad and Banking Company. That in the said bill, after reciting the embarrassed financial condition of the said Central Railroad and Banking Company of Georgia, it set out the facts that numerous other railroads were owned or controlled by the said Central Railroad and Banking Company, forming part of what was therein styled the Central Railroad System, and for them a receiver was also requested at the hands of the Court, “to secure the integrity of this system;” and that among these railroads so stated to be owned or controlled by the Central Railroad and Banking Company was the Port Royal and Augusta Railway. That part of the relief asked for by the plaintiff in its bill was that the Court would appoint the same receiver for the Port Royal and Augusta Railway Company as for the plaintiff, so that the same might be operated jointly, and the “Central System be thus not dismembered.” Upon the filing of this bill, a rule to show cause was granted, requiring the Port Royal and Augusta Railway Company to appear and show cause why a receiver should not be appointed for it. On the 14th day of July, 1892, H. M. Comer, the president of the Central Railroad and Banking Company, was appointed temporary receiver of the railroads composing the alleged “Central System,” including the Port Royal and Augusta Railway Company. That to induce the Court to grant the order in question, the said H. M. Comer, acting as the president of the Port Royal and Augusta Railway Company, filed an answer in its name in said cause, and consented to this action being taken. On the same day such temporary receiver was made permanent receiver. Under such orders the said H. M. Comer, as receiver, took possession of defendant railway, and such receiver is operating said railway at the date of the complaint being filed. Subsequently to, but shortly after, the 14th day of July, 1892, an ancillary bill was filed by the said Central Railroad and Banking Company against the Farmers’ Loan and Trust Company and others, as defendants, and the Port Royal and Augusta Railway Company, in the Circuit Court of the United States for the district of South Carolina, praying the confirmation of the appointment of the said H. M. Comer, as receiver of the Port Royal and Augusta Railway Company, but that no subpoena was issued in said suit for the latter company; but that one of plaintiff’s solicitors, assuming to act for said last railway company, accepted service of said bill for it. That such solicitor for plaintiff asked and obtained the appointment of said H. M. Comer, as receiver of the Port Royal and Augusta Railway Company in South Carolina, who has taken possession of said railway company as such receiver. Further, it is alleged that said receiver is conducting the said railway company solely with a view to the benefit of the Central Railroad and Banking Company, an insolvent road, and entirely to the subversion of the charter duties of the Port Royal and Augusta Railway Company. It is alleged and charged that the failure of the president, directors, and other officers of the Port Royal and Augusta Railway Company to properly protect and answer for the said company, and by their improper and unlawful aiding and abetting the said Central Railroad and Banking Company of Georgia, and its plans and objects, the rights and interests of the Port Royal and Augusta Railway Company have been jeopardized and disregarded, and its franchises surrendered into the hands of a foreign corporation; and the said Port Royal and Augusta Railway Company has stripped itself of its property, and surrendered its franchises, abandoned its charter, and is no longer in position to fulfill its obligation to the public, and to discharge the public trust committed to it b.y the State of South Carolina. It is further alleged that the attorney general of the State of South Carolina, at the November, 1892, session of the General Assembly, reported to that body the result of his investigation into the conduct and management of the Port Royal and Augusta Railway Company; and thereafter his excellency, the governor of the State of South Carolina, in a special message to the General Assembly of said State, called attention to the violation of its charter and franchises by the said Port Royal and Augusta Railway Company, and urged the necessity of immediate steps on the part of the said General Assembly to protect the public interests by remedying the existing abuses, or by forfeiting the charter of the said railway company; and that the State of South Carolina, through its attorney general, now proceeding under the direction of the General Assembly, now brings this action in order to remedy and prevent, if possible, the unlawful acts of the said defendant railway company; or, on failure to accomplish this, to resort to the severe and sovereign remedy of an ouster and forfeiture of its charter and franchises. It further alleged that, pending the hearing and determination of this matter, the present directors, officers, and agents will remain in charge of the defendant railway company, and that they will persist and continue in the misuse and abuse of its franchises, and the defendant railway company will continue to permit and aid the said H. M. Comer to retain possession and use of its property; and that thus the said defendant railway company will, through the said receiver, persist in the violation and abandonment of the powers and duties and trust committed to it, etc.

The prayer of the complaint demands judgment against the defendant railway company: (1) That the holding and ownership of the shares and bonds in defendant’s corporation by the Central Railroad and Banking Company, with the power to vote, be declared to be ultra vires, illegal, unauthorized, and against public policy, and void, and that the officers of the said defendant railway company be ousted and enjoined from in any manner recognizing or regarding such ownership and holding. . (2) That the control and management of the defendant railway company by the Central Railroad and Banking Company of Georgia, a rival and competing line, or any receiver or officer of the said Central Railroad and Banking Company, be declared against public policy, unauthorized, unlawful, ultra vires, and void; and that the officers and agents of the defendant railway company be enjoined and prevented from further obeying, or in any manner recognizing, the said control and management. (3) That the defendant company may be ousted and-enjoined from further permitting or suffering the said control and influence of the said Central Railroad and Banking Company of Georgia, or in any manner aiding or abetting the same. (4) That any officers, directors, and agents of the defendant company, elected or appointed by the illegal votes of the Central Railroad and Banking Company of Georgia, be declared to be disqualified from holding such positions; and that the defendant • company be ordered to take such steps as may be necessary, and as it may be able, to place its affairs and franchises in the hands of officers qualified, etc. (5) That the defendant company, as soon as it can elect lawful officers, be directed then to resume the management and control of its business in all of its departments. (6) That in the event the foregoing relief should fail to remedy the evils complained of, then, as a last resort, the charter of the defendant railroad be ousted and forfeited, and its franchises and corporate powers terminated. (7) That, pending the final determination of this action, a temporary receiver be appointed. This complaint was verified by the attorney general, on information and belief.

Judge James Aldrich, on the 27th day of January, 1893, granted an order appointing John H. Averill temporary receiver, and requiring the defendant company to show cause before him why such receiver should not be made permanent. By consent, the hearing was postponed from the early day fixed in the order until about the 11th of February, 1893, at which time the defendant railway company filed an elaborate return, which controverted many of the allegations of the complaint, and denied the right of action as well as the relief prayed for.

The first proposition raised was the question of jurisdiction, which was bottomed upon these facts: As soon as notice reached the defendant company of the order of Judge Aldrich of the 27th January, 1893, such defendant, by petition, and the usual bond in such cases required, sought to remove the action from the Court of Common Pleas for -Beaufort County, in the State of South Carolina, into the Circuit Court of the United States for the district of South Carolina, upon the ground that there were federal questions involved. Judge Aldrich declined to admit that his jurisdiction had been terminated by the compliance by the defendant companjr with the formal requirements of the law incident to the removal of causes from the State to Federal Courts. From this decision the defendant railroad appealed to this Court.

1 Since the decision of this Court in the same case between the same parties, filed on the 23d day of November, inst., wherein we have unanimously decided that, under the latest decisions of the Supreme Court of the United States, which are carefully cited in the judgment announced by Mr. Justice Gary, we have no difficulty in reaching the conclusion that the Circuit Judge committed no error in holding that no cause for removal existed. After the Circuit Judge had announced such conclusions, instantly thereupon an appeal was taken by the defendant from his decision. And when it was proposed by the plaintiff to go forward in the further consideration of the case, the appellant insisted that the Circuit Court was ousted of jurisdiction because of the aforesaid appeal. This presents a nice question, and we will now consider it. Whenever a question of jurisdiction is suggested, great care is required of the Court, for, no matter what the issue raised may be, if it is not competent for the Court to hear and determine same, it is worse than time wasted to proceed. In the case at bar, it seems to us that this appeal involved the merits, for if, in the consideration of the question of removal, this Court had concluded that the Circuit Court had no jurisdiction, all of its subsequent proceedings would have been futile. Our leading case on this subject is Bank v. Stelling, 32 S. C., 102, which has been recognized and applied in the cases of Capell v. Moses, 36 S. C., 559; Sease v. Dobson, 34 S. C., 345. In the first case cited, a motion was made in the Circuit Court to set aside the service of the summons upon defendant, Stelling, which was refused by the Circuit Judge, and from this refusal an appeal was taken. This Court held that, pending such appeal, it was error for the Circuit Court to proceed with the hearing of the case, and in delivering the opinion of the Court on that appeal, the late Chief Justice Simpson used this language: “Here the intermediate decree of Judge Norton, holding that Stelling had been properly made a party, was a vital one to the jurisdiction of the Court over the person of Stelling; and he certainly had the right to have the judgment of the Court of last resort on the question, whether he was a party, before he could determine whether he should answer or not. This decree, we think, was appealable; and, being appeal-able, the Court below could not go on, and determine Stelling’s rights, when he was not a party, or at least when the question was pending in the Supreme Court.” Upon the same principles it would seem that, pending the appeal from the order of his Honor, Judge Aldrich, denying the right of removal, the Court below should not have gone on to consider any of the other questions in the case until the vital question of jurisdiction had been finally determined by this tribunal of last resort. If it should be said that this Court, having now reached the conclusion that there was no error upon the part of Judge Aldrich in the conclusion which he reached as to the question of jurisdiction, the error in proceeding to determine the other questions before the final determination of the question of jurisdiction becomes immaterial. But the answer is, that the very same thing occurred in the case of Bank v. Stelling, supra; for in that case, although the Court did determine (31 S. C., 360), that there was no error on the part of Judge Norton in holding the service of the summons on Stelling to be good, yet, as his Honor, Judge Wallace, had proceeded to hear the case before this Court had determined this question of jurisdiction raised by the appeal from the order of Judge Norton," he erred in so doing. While thus affirming the principles laid down in Bank v. Stelling, supra, we do not propose to apply such principles to these two cases for the following reasons: These questions have been fully and exhaustively argued before us, and it is deemed important that an early decision should be had. But we are careful to say that this action on our part must not be drawn into a precedent.

2 It is contended by appellant that the complaint is not properly verified. In appellant’s argument reliance is made upon the case of Smalls v. Wilder, 6 S. C., 402, which, however, does not support appellant’s position; for, in the case first cited, the affiant stated that the allegations of the complaint were “true and correct in all particulars,” without adding that such allegations were true “of his own knowledge,” while here there was no such defect. The attorney general of this State, who is the affiant, states that the foregoing complaint and information “are true of his own knowledge, except as to those matters therein stated on information, and as to those matters he believes [them] to be true.” Nor is this point sustained by the cases of Hecht v. Friesleben, 28 S. C., 181, relied on by appellant, or Burmester v. Moseley, 33 S. C., 251, for in both of these cases the allegations of the complaint were made as if upon affiant’s own knowledge, whereas the form of the verification showed conclusively that some of the allegations were intended to be made upon information and belief, but which were so intended it was impossible to ascertain. In the case at bar, however, some of the allegations in the complaint are expressly stated to be made upon information and belief, while there were others not so stated, and hence the form of verification adopted is unexceptionable.

3 The exceptions that raise the question in the second case, as to the right of some of the stockholders of the Port Royal and Augusta Railway Company to bring suit, cannot be sustained. There is quite sufficient in the record to bring this case within the principles laid down in Hawes v. Oakland., 104 U. S., 459, recognized and followed by this Court in Latimer v. Railroad Co., 39 S. C., 44.

4 With one additional observation, we are quite content to rest our conclusion upon all the other points raised by the appellant upon the decree thereon of Judge Aldrich, which, to that extent, at least, will be reported. The observation with which we desire to close is, that the complaint demurred to, because asking for the appointment of a receiver 'before judgment upon the merits, by its terms sets out that the appellant railway company, by its own act, and by the formal consent of its presiding officer, is already in the hands of a receiver, and, therefore,. is not being operated by its own officers.

It is the judgment of this Court, that the judgment of the Circuit Court involved in these appeals in both the cases here heard together be affirmed.