People ex rel. New York Telephone Co. v. Public Service Commission, Second District

Lyon, J.: On August 6, 1912, The Metropolitan Telephone and Telegraph Company, an organization incorporated under the laws of the State of Delaware, hereinafter called the Delaware corporation, made application to the New York Telephone Company, a domestic corporation located in the city of New York, engaged in the business of furnishing telephone service, for the installation of telephones in the applicant’s office in the city of New York. The applicant signed the usual contract required by the New York Telephone Company, and gave its check for the advance payment required. On or about the 22d day of August, 1912, the New York Telephone Company returned such contract, repaid such advance payment and refused to furnish telephone service to applicant, stating as the reason for such refusal that the corporate name of the applicant was the same as that of the predecessor of the New York Telephone Company. On or about the 30th day of August, 1912, Metropolitan Telephone and Telegraph Company, a domestic corporation, hereinafter called the New York corporation, was duly incorporated, its certificate of incorporation being filed and recorded in the office of the clerk of the city and county of New York on that day. On or about September 16, 1912, the New York corporation filed with the Public Service Commission, Second District, its complaint that the New York Telephone Company refused to furnish complainant telephone service at its office in the city of New York, and asking that the Commission make an order requiring the New York Telephone Company to install a switchboard and furnish such service. Thereupon the Commission forwarded a copy of the complaint to the New York Telephone Company, accompanied by an order requiring that the matters complained of be satisfied by said company or that the charges made in said complaint be answered in writing by said company. The New York Telephone Company duly answered said complaint putting in issue the allegations as to the incorporation of complainant, alleging that the application for such service was made by the Delaware corporation having the same name as the complainant; that the New York Tele — 159 — phone Company found that it could not properly and lawfully furnish service to the complainant by reason of the facts set up in the second defense in said answer, causing such reason for declining to furnish such service to be communicated verbally to said Delaware corporation. The said facts set up in the second defense were that during the entire period between the years 1880 and 1896 the Metropolitan Telephone and Telegraph Company, a New York State corporation, hereinafter called the original corporation, having its principal place of business in the city of New York and being the only company engaged in the telephone business within the city of New York, transferred all its assets to the New York Telephone Company, which assumed all its liabilities and which has since operated said telephone system; that at the time of said transfer in 1896 there were outstanding bonds of said original corporation to the amount of about $1,900,000 and that about $1,500,000 thereof are yet outstanding; that said original corporation continues in existence for the purpose of discharging its debts, collecting and distributing its assets and doing all other acts required by suit or otherwise for the purpose of adjusting and winding up its affairs, and that the assumption by the complainant of the name “ Metropolitan Telephone and Telegraph Company,” and its incorporation in New York State were in violation of and a fraud upon the laws thereof in that the name of the complainant was the same as that of said original corporation, and that the use of such name by the complainant would deceive the public, thereby causing great injury to the public, to the New York Telephone Company and to said original corporation. The matter came on for hearing before the Public Service Commission October 14, 1912, the Metropolitan Telephone and Telegraph Company of New York and the New York Telephone Company each appearing by counsel. On October 15, 1912, said Commission granted an order that the New York Telephone Company furnish telephone service to the complainant and place complainant’s name in its directory upon complainant complying with all reasonable rules and regulations and making payment for such service one month in advance, and that the New York Telephone Company notify the Com — 160 — mission within five days after the receipt of the order whether it had accepted and obeyed the same. On or about the nineteenth day of October the New York Telephone Company notified said Commission in writing that it declined to accept and obey said order, and notified the Commission that it was then engaged in the preparation of a petition for a rehearing and stay of operation of said order and would present the same to the Commission forthwith. Immediately thereafter the New York Telephone Company presented to said Commission its petition for rehearing and reconsideration of the case, alleging that said order made by the Commission was erroneous, unjust and unreasonable for the reasons therein specified, which in brief were (1) that the application August sixth for telephone service was made by the Delaware corporation, and that the record contains no evidence that complainant demanded telephone service prior to» the making of the order; (2) that the entire capital stock of the New York corporation was unlawfully issued, and later, at the suggestion of the Commission, was canceled, and that at the time said order was made the New York corporation had no capital stock whatever outstanding, had never commenced the transaction of business and was not a legally existing corporation; (3) that said corporation was not legally incorporated in that it had failed to comply with section 6 of the General Corporation Law (Consol. Laws, chap. 23; Laws of 1909, chap. 28), as amended by chapter 638 of the Laws of 1911 and chapter 2 of the Laws of 1912, relating to corporate names; (4) that said order disregarded the fact that the said original corporation of 1880 still continued in existence and would until its obligations and affairs had been adjusted and wound up, and that until such time the bondholders of the original corporation were entitled to the corporate name to the exclusion of the complainant, and that the only means by which the original corporation could be deprived of such right was by a judgment of a court of competent jurisdiction; (5) that the order was erroneous, unjust and unreasonable in that it compelled the New York Telephone Company to enter into contractual relations with and to advertise an alleged corporation having the same name as that of the original corporation whose bonds the New — 161 — York Telephone Company had assumed, to the damage of said respondent, of the holders of the bonds and of the public generally; and (6) that said order was also erroneous, unjust and unreasonable in that the New York corporation in adopting said name was acting not in good faith but fraudulently for the purpose of deceiving the public as to the value of and into the belief that the bonds issued by it and by the Delaware corporation were the bonds of the original corporation. The petition for rehearing then alleged that the original corporation was about to institute an action in equity to restrain the New York corporation from in any way using said corporate name, and to restrain the New York Telephone Company from contracting with the New York corporation or in anyway recognizing the use of the corporate name by any corporation other than said original corporation. At or about the same time the said original corporation presented to the Public Service Commission its petition for leave to intervene, alleging in general the grounds therefor, stated in the said petition of the New York Telephone Company, and alleging that the purpose of incorporating the New York State corporation was the sequestrating and holding within the State of New York the said corporate name with the fraudulent and unlawful design of interfering with or preventing the original corporation from using its own corporate name. To the petition of the New York Telephone Company for a rehearing the New York corporation interposed its answer. On the 11th day of November, 1912, the Public Service Commission granted orders denying the petition of the original corporation to intervene and also denying the petition of the New York Telephone Company for a rehearing. On or about the 29th day of November, 1912, said original corporation filed with said Commission a petition for a rehearing of the application for leave to intervene, which on or about the second day of December said Commission denied. On the third day of December the New York Telephone Company obtained a writ of certiorari to review the aforesaid action of the Public Service Commission, and on the sixth day of December said original corporation also obtained a writ of certiorari for a like purpose. Returns — 162 — to said writ were duly made December fourteenth. By order granted December eighteenth upon stipulation of the attorneys for the respective parties the two proceedings were consolidated under the title hereinbefore stated. I think that the orders granted by the Public Service Commission were warranted and that its action should be confirmed. As to the defense interposed by the answer of the New York Telephone Company that the application for telephone service was made by the Delaware corporation and not by the New York corporation, there is no merit. No application whatever for telephone service was required before filing the complaint. In fact no complaint was necessary, as the Commission had the right to act of its own motion. (Pub. Serv. Comm. Law [Consol. Laws, chap. 48; Laws of 1910, chap. 480], §§ 96, 97, added by Laws of 1910, chap. 673; City of Troy v. United Traction Co., 202 N. Y. 333.) The complaint purported to have been made by the New York corporation, and while it alleged the doing by it of certain acts which were in fact done by the Delaware corporation, yet the answer thereto recognized the complainant as the New York corporation, and the hearing was had before the Public Service Commission upon that theory. In fact, it is practically immaterial which company made the complaint, as the representative of the respondent stated at the hearing that the New York Telephone Company would not put the name Metropolitan Telephone and Telegraph Company in its directory for anybody. As to the contention of the New York Telephone Company, and of the original Metropolitan Telephone and Telegraph Company, that the New York corporation had not the right to use the name of the original Metropolitan Company, it appears as hereinbefore stated that the original Metropolitan Company was voluntarily dissolved in August, 1896, pursuant to the provisions of chapter 932 of the Laws of 1896 (adding to Stock Corp. Law [Gen. Laws, chap. 36; Laws of 1892, chap. 688], § 57; since amended by Laws of 1900, chap. 760; now Gen. Corp. Law [Consol. Laws, chap. 23; Laws of 1909, chap. 28], § 221). Thereafter its existence and power to act as a corporation was limited by that statute to satisfying any existing obli — 163 — gations, collecting and distributing its assets and doing all other acts required to be done by it in order to adjust and wind up its business and affairs, with the right to sue and subject to being sued, until its affairs were fully adjusted and wound up. In connection with the proceedings for such dissolution the original corporation had transferred all its assets, not including its franchise to do business, to the New York Telephone Company, which assumed and agreed to pay all its debts, including said bonds. Thus the original corporation was practically wound up, as it had no property left with which to pay its bonds or other indebtedness. That the payment of its bonds was amply provided for is shown by the fact that they command a considerable premium and are seldom offered for sale. So far as appears the original corporation does not seem to have held meetings of its stockholders or directors or to have kept up its organization. The Legislature having declared that proceedings pursuant to the provisions of chapter 932 of the Laws of 1896 should work a dissolution of the corporation, no judicial or other determination of that fact was necessary, but the corporate life became extinct except as the right to wind up its business was saved by the provisions of such statute. (Sturges v. Vanderbilt, 73 N. Y. 384.) Under this condition of affairs as to the original corporation, the New York corporation was incorporated, taking a name which the Secretary of State certified to be unlike that of any corporation existing in this State as shown by the records of his office. As related to any action of the Public Service Commission the incorporation of the New York corporation was valid and the purpose for which it was incorporated and the business which it purported to be carrying on was legitimate. The Public Service Commission had no authority to assume the powers of a court of equity and determine as to the respective rights of the various corporations to the use of the name Metropolitan Telephone and Telegraph Company, nor to adjudicate as to the various matters set forth in the petitions which are the foundations of these proceedings. The Public Service Commission is an administrative body established by the Legislature for the paramount purpose of protecting and enforcing the rights of the public, and the statute creating the Commis — 164 — sion should be construed with that in view. (People ex rel. Binghamton L., H. & P. Co. v. Stevens, 203 N. Y. 7.) The decision of the Public Service Commission was correct. However, since the decision was made an action in equity has been brought by the original corporation, its directors and trustees, a holder of its bonds, and the New York Telephone Company against said New York and Delaware corporations to restrain them from using said corporate name, in which action the Appellate Division of the First Department has recently enjoined the use of such name by the defendants during the pendency of the action. (Metropolitan Tel. & Tel. Co. v. Met. Tel. & Tel. Co., 156 App. Div. 577.) While the action of the Public Service Commission should be confirmed, the order that the New York Telephone Company shall furnish telephone service to the New York corporation and place its name in its directory should not be effective during the period within which an injunction restraining the New York corporation from using such name shall be in force. The action of Public Service Commission should be confirmed, with fifty dollars costs and disbursements, the order granted by the Commission not to be effective, however, while an injunction restraining the New York corporation from using said name shall be in force. All concurred. Determination of the Public Service Commission confirmed, with fifty dollars costs and disbursements, the order granted by the Commission not to be effective, however, while the injunction granted by the Appellate Division, First Department, in the action referred to in the opinion herein shall be in force.