Opinion
June Term, 1896.
John Sabine Smith, for the applicant.
William J. Kelly, for the Long Island Railroad Company and the New York and Rockaway Beach Railroad Company, remonstrants.
The application by The Kings, Queens and Suffolk Railroad Company for the certificate required by section 59 of the General Railroad Law (Chap. 565 of the Laws of 1890, as amended by chap. 676 of the Laws of 1892) has been denied by the State Board of Railroad Commissioners, and by this proceeding such railroad company asks for a reversal of such action and for an order of this court directing said board to issue such certificate. The method of procedure is modern, as applied to the organization of railroad companies, but the rules which govern applications of this character, while comparatively new, are nevertheless fairly well settled, and the province of this court as a tribunal of review is established and practically defined by authority. The application for the certificate was denied by the Board of Railroad Commissioners upon two grounds: First, that the railroad company had no legal existence as a corporation; second, that public convenience and necessity did not require the construction of the proposed road.
The basis of the first determination consisted in the fact that ten per cent of the minimum amount of capital stock had not been paid in in cash to the directors named in the certificate of incorporation, as required by subdivision 13 of section 2 of the Railroad Law. It was testified to upon the hearing before the board, by the president of the applicant, that no cash had been paid to the applicant on account of any subscriptions to its stock; that a check had been drawn by the applicant for $3,750, that sum being ten per cent of the subscriptions upon the minimum amount of the capital stock, to the order of three directors of that company. But this check had never been indorsed by the persons to whose order it was drawn; no money had ever been paid thereon, and at the time of the hearing the president of that company had the check in his possession. To meet this dilemma the attorney for that company gave proof tending to show that the failure to collect the money upon the check, and pay the same to the treasurer of that company, was the result of inadvertence; that in fact money to the amount of $60,000 and upwards had been paid in by the subscribers to the stock, all of which was subject to check, and he produced the cashier of the bank upon which the check was drawn, and where the money was deposited, who offered to certify the same as good, in the presence of the board. The board declined to direct the check to be certified, and the case was submitted to the board for their consideration as respects this question upon these facts. The penalty which the law prescribes for a failure to pay at least ten per cent of the subscriptions to the capital stock in cash is to render the filing of any certificate void. (Railroad Law, § 2, subd. 13.)
There is no qualification in favor of an inadvertent act, and no saving clause for failure however occasioned. The requirement is imperative, the penalty absolute. The applicant in seeking to avoid the force of the statute makes two answers: First, that the Board of Railroad Commissioners had nothing whatever to do with this question, as it was not within their province to determine it, and, second, that the filing of the certificate constituted the company a de facto corporation, and except by action at the instance of the People, through the Attorney-General, its legality as a corporation could not be inquired into. The requirement of the law is that the petitioner must have regularly complied with the statute at the time it makes application to the board for the certificate of public convenience and necessity. The petition in this proceeding so stated. The board is only authorized to act where there has been compliance with the law, and the whole proceeding until final authority is given to construct a railroad is tentative only. The corporation does not acquire its full franchises until the final certificate is given, and until that time arrives it is not only within the province of the board, but it is its duty to make inquiry into all prior proceedings, in order to determine that the thing which applies for the certificate of public convenience and necessity is of a character which the law recognizes and to which it contemplated that a certificate should be given. Such inquiry upon the part of the board in the present case led them to the conclusion, and the only one permissible upon the evidence, that the petitioner which called itself a corporation was not such in fact and law. In fact it was nothing which the statute recognized, and in consequence the board had no authority to grant it a certificate.
As applied to this proceeding the company was in no sense a de facto corporation. Organizations are many times upheld as de facto corporations where they have exercised acts of user and where for the protection of property rights and vested interests they are presumed to be legal bodies. But such cases have no application where the organization has exercised no functions, and where by the proceeding itself it seeks to be invested with corporate life and function. It is at that time subject to inspection for the very purpose of determining whether it exists as a legal body and for the further purpose of considering whether, its legality being established, it ought to be permitted to do the things which it was organized to do. But however it be treated, the statute made its certificate of incorporation void. All that it had done, therefore, was a nullity. In Brooklyn S.T. Co. v. City of Brooklyn ( 78 N.Y. 524) the command of the statute, to the company, was that it be organized and construct at least one mile of railroad within three years thereafter, and that in case of a failure to comply with such demand, "all the powers, rights and franchises herein and hereby granted, shall be deemed forfeited and terminated." It failed of compliance, and the court held that because of such failure it died as a corporation by the power of the statute. It was insisted there as here that it did not lose its charter and that its corporate functions did not cease, and could not cease, by the adverse action of any power, save through suit by the People, instituted by the Attorney-General for that purpose. The court condemned the claim, and held that it was the legislative intent, as derived from the language used, that upon a failure to comply with the command of the statute the corporate power should cease; that the statute created a forfeiture and not merely a cause for forfeiture. The language of the statute was less severe in that case than in the present, for here it makes it void. This case has been cited with approval many times. ( Matter of Kings County El. R.R. Co., 105 N.Y. 97-119 et seq.)
The following cases decide the same principle: Matter of B.W. N. Railway Co. ( 72 N.Y. 245); Farnham v. Benedict (107 id. 159); 1 Thom. Corp. § 226.
It has always been the rule that a void judgment was neither protection nor authority for any act, and that it might be attacked collaterally in any proceeding. ( Chambers v. Clearwater, 1 Abb. Ct. App. Dec. 341; Osterhout v. Hyland, 27 Hun, 167.)
The same principle is applicable to this proceeding, and the Board of Railroad Commissioners was bound, in the discharge of its duty, not only to notice the invalidity, but to act upon it.
So far as the denial of the certificate proceeded upon the ground that public convenience would not be conserved by and that public necessity did not require the construction of the road, we are of opinion that the determination of the board must be upheld. The evidence satisfactorily established that the proposed road for all practical purposes paralleled the roads of the remonstrants, and would have a tendency to destroy and impair vested property rights without any material benefit resulting therefrom. This condition made a case within the spirit of the Railroad Law, and justified the conclusion which the commissioners reached. Heretofore, in disposing of a similar question, we used this language:
"The burden rests upon the petitioner to show affirmatively that the commissioners erred in their determination, and the commissioners should be credited with some technical knowledge which this court is not presumed to possess." ( Matter of New Hamburgh R.R. Co., 76 Hun, 76.)
This view has been adopted in other departments of the State. ( Matter of Amsterdam, J. G.R.R. Co., 86 Hun, 578; Matter of Depew S.W.R.R. Co., 92 id. 406.)
We do not feel called upon to review all of the testimony which the commissioners had before them. We are content now to say that, within the rule of these authorities, the conclusion is easily sustained. So far as the affidavits and petitions of various persons resident in Brooklyn and elsewhere, which form so large a part of the record in this proceeding, are concerned, and so far as the charge of maintaining a monopoly finds place, we think that the discussion and decision in the Amsterdam Case ( supra), as well as the reasons assigned by the commissioners, furnish a sufficient answer.
We are not able to see, from a consideration of the whole of the proceedings, that the determination is contrary to the clear weight of the testimony, and, in consequence, we are not authorized to interfere with the conclusion on this ground.
It follows that the application should be denied, with costs.
All concurred.
Application denied, with costs.