Brown v. Atlanta Railway & Power Co.

Cobb, J. 1. Corporations, using that term to designate organizations merely claiming or alleged to be corporations as well as those which are in all respects legally constituted, have been divided into three classes, corporations de jure, corporations de facto, and corporations by estoppel. Corporations de jure have been de — 468 — fined to be those whose legal right to exist can not be questioned even by the State itself. The expression “ de facto corporations ” is generally used to denote associations exercising corporate powers under color of a more or less legal organization. One who has contracted with a corporation as such is estopped to deny its existence as a corporation at the date of the contract, in any suit arising thereunder, and such a corporation has been, it seems to us with great propriety, designated a corporation by estoppel. See Notes of John Lewis, Esq., to Vanneman v. Young, 3 Am. R. & Cor. Cas. 662 (52 N. J. L. 403), and authorities there cited. Where there can not be a corporation de jure there can not be one de facto. In order to constitute a corporation de facto, it is necessary that there should be either a charter or a law under which such a corporation could exist with the powers it assumes to exercise, and a colorable compliance with the requirements of the charter or the law and a user of the rights claimed under the same. See Georgia Southern & Florida R. Co. v. Trust Co., 94 Ga. 306, 316, and cases cited. Whether or not the rule, that there must be a charter or a law authorizing the creation of a corporation and a colorable compliance with the terms of such charter or law, applies to corporations by estoppel, is a question upon which there is some conflict of authority. The better doctrine seems to be that estoppel prevails notwithstanding the law under which the corporation claims to exist may be unconstitutional or otherwise invalid. See the notes to Yanneman v. Young, supra, and cases therein cited; G. S. & F. R. Co. v. Trust Co., 94 Ga. 315, and cases cited. The power to create corporations resides in the State. If there is nothing in the constitution limiting or restricting the authority of the lawmaking body in this respect, this power is to be exercised by it. When this power is possessed by the State legislature, the question whether a given company of individuals has a legal corporate existence is to be determined by ascertaining whether the legislature has given its consent to the existence of such a corporation, either by the passage of a general law providing the manner in which corporations of that character may be formed, or by a special charter, if the legislature has authority to create corporations in this manner, and by ascertaining further whether there has been a compliance with the terms of the charter, whether the same be granted by special enactment or under the provisions of a general — 469 — law. If the corporation has a charter issued to it in the manner prescribed by law, and has in its organization complied fully with every requirement of the charter, then,, even as against the State, the corporation has a right to exist, and is technically a de jur,e corporation. In order, therefore, to constitute a de jure corporation, when the power to create corporations is vested in the legislature, it is necessary that the legislature should consent to the existence of the corporation in the manner and form in which it is asserting its right to exercise corporate functions. If the lawmaking body gives its consent that a company of individuals may exercise corporate power in a given way, the right of such company of individuals to exercise such authority can not be attacked collaterally by any one against whom the corporation may be proceeding within the limits of its organic powers, and not even the State itself will be. permitted to question the right of the corporation to exist and exercise the powers which the legislature has consented it should exercise, so long as the corporation is not guilty of any act which would be a sufficient reason for the State to institute a proceeding to forfeit the charter of the corporation. If a corporation has been formed, and is exercising corporate authority under color of a charter irregularly granted, or under a law authorizing the grant of corporate powers to such a corporation, it is well settled that defects in the organization of such a corporation can be cured by an act of the legislature which either expressly or impliedly declares that such corporation has a right to exist without regard to such defects. 1 Thomp. Cor. §512; 1 Mor. Cor. §20; Taylor, Priv. Cor. §157; Central Co. v. Alabama Co., 70 Ala. 120, s. c. 9 Am. Cor. Cas. 8. This has been held to be true even in cases where the lawmaking power of the State was prohibited by the constitution from creating the corporation in the first instance. See Central Co. v. Alabama Co., supra. If the lawmaking power of the State can, by giving its consent to a company of individuals to exercise corporate functions, confer upon such a company corporate authority which it would not have in the absence of legislative consent, on account of the failure to comply with the requirements which the law imposed upon persons desiring to form corporations, we can see no good reason why a company of individuals assuming to be a corporation under an erroneous impression as to their right to exercise corporate powers — 470 — might not become a corporation de jure by subsequent legislative consent. A company of individuals who assume to act as a corporation when they have not complied with the law providing for the organization of such a corporation are as guilty of a usurpation as would be a company of individuals who assume to act as a corporation without any authority of law whatever. As against the State, neither company has become a corporation, nor can become one without the consent of the State; and if one can become so with such consent, it would seem to follow that the legislature has authority to declare that the other might also. In the absence of constitutional limitations, the lawmaking body of the State has authority to declare upon what terms individuals may exercise corporate powers, and also that an existing company of individuals shall be thereafter a corporation; and if such company of individuals proceed under the authority thus granted, they will be, even as against the State itself, a legally organized corporation. The important thing to be ascertained is whether the State through its constituted authorities has given its consent that the company of individuals shall be a corporation and exercise corporate powers.. The manner in which the lawmaking power gives its consent is, in the absence of constitutional restrictions, entirely immaterial. Any act of the legislature from which its consent can be inferred that a certain body of individuals shall be,, a corporation and exercise corporate powers of a certain character is all that is necessary to confer upon such individuals these powers. The legislature can give its consent that those who have usurped corporate power in the past may lawfully exercise such power in the future; and this is true whether such usurpation has been done under color of a charter issued pursuant to a law, or under color of a charter issued by an officer in violation of law. Even if the General Assembly, as was contended in the argument, had no authority, at the time that the general railroad act of 1881 was passed, to declare that charters to railroads could be issued by the secretary of State, and such act was violative of that provision of the constitution which prohibits the General Assembly from devolving upon officers of the executive department either legislative or judicial duties, this would not prevent the General Assembly from afterwards expressly recognizing and giving its consent to the existence of corporations formed under this alleged invalid law. — 471 — By an application of the principles above announced it is to be determined whether the Atlanta Railway and Power Company is a corporation of this State, authorized to exercise the corporate powers claimed by it as a strfeet-railway company. On the 16th day of May, 1891, what purported to be a charter under the general railroad law of 1881 (Code of 1882, § 1689(a) et seq.) was granted to the Atlanta Consolidated Street Railroad Company. The name of this company was afterwards changed to the Atlanta Railway and Power Company. On August 31, 1891, an act was approved declaring that all general laws of this State for the incorporation of railroads were applicable to all street and suburban railroad companies to be thereafter incorporated. Acts 1890-91, vol. 1, p. 168. On the same day an act was approved which declared that “all charters heretofore granted by the secretary of State to street and suburban railroad companies are hereby confirmed and declared to have had full effect from their dates.” Acts 1890-91, vol. 1, p. 169. In Dieter v. Estill, 95 Ga. 370, it was held that in 1889 the General Assembly could constitutionally grant a special charter to a street-railroad company, even if the act of 1881, providing for the incorporation of railroad companies, was a general law within the meaning of that provision of the constitution which declares that no special law shall be passed in any case for which provision has been made by an existing general law, for the reason that the act of 1881 did not apply to street-railroad companies. There was, on May 16th, 1891, no law of this State authorizing the secretary of State to grant a charter to a street-railroad company. It is unnecessary to determine what was the legal status of the Atlanta Consolidated Street Railroad Company between the date of the alleged charter issued to it by the secretary of State and the date of the act of the General Assembly purporting to confirm such charter. The question to be determined is, what was the legal status of this alleged corporation after the passage of the confirmatory act of 1891. It is not claimed that it is a corporation hy estoppel as against the plaintiff in error; for he has had no dealing with the persons composing this alleged corporation which would estop him from bringing in question their right to exercise corporate powers. If they are exercising such powers under color of the confirmatory act of 1891, their company would, under the principles above referred to, clearly be a de facto corporation from the date of the — 472 — passage of that act, and as such entitled to exercise the powers sought to be exercised by it, as -against any one except the State. But does not the confirmatory act of 1891 do more than merely furnish color.of authority to this company? When the General Assembly convened in 1891, the condition of affairs in reference to street-railroad companies in this State was this: There were street-railroad companies claiming to be corporations under authority of charters issued to them by the secretary of State, which conferred upon them such of the powers embraced in the general railroad law of 1881 as were applicable to companies of that character. There must have been doubt in the mind of the General Assembly at that time as to whether the general railroad law of 1881 was applicable to street-railroad companies. The above-mentioned legislation during that session on the subject of street-railroads is all that is necessary to show the existence of this doubt. Street-railroad companies were in existence, assuming to exercise the corporate powers mentioned in the general law of 1881 under charters granted by the secretary of State; and it could be easily foreseen that other street-railroad companies were to be organized in the future. It was incumbent, therefore, upon the General Assembly, in order to relieve doubt and avoid confusion in reference to the matter, to pass legislation which would fix the legal status of the existing street-railroad companies and also provide for the incorporation of such companies in the future. It is to be kept in mind that, at the time this session of the General Assembly convened, there was nothing in the constitution of the State which at all restricted the power of the General Assembly as to the manner in which charters to street-railroad companies should be granted, and there was in existence no general law on the subject which could, in any view, have the effect of prohibiting the passage of even special charters, if the General Assembly saw proper to do so. This being true, the General Assembly was in complete control of this matter. In the exercise of the power it thus had, it passed, as above appears, two acts, each approved by the Governor on the same day, one providing that in the future all street and suburban railroad companies might be incorporated under the provisions of the general railroad law of 1881, and the other that the charters theretofore issued by the secretary of State under that law should be confirmed and made valid. Each of these — 473 — acts is a general law; one applies to all street-railroad companies thereafter organized; the other to all street-railroad companies theretofore organized under charters granted by the secretary of State. See Union Savings Bank v. Dottenheim, 107 Ga. 606. The power of the General Assembly to pass these two general laws at that time can not be at all questioned. The street-railroad companies organized prior to the confirmatory act of 1891 were not organized under any charter which could be lawfully issued to them, nor was there any law for the incorporation of such companies, and it may be that they were not even corporations de facto. But be this as it may, they were in existence, they were assuming to exercise corporate functions which could only be granted by the State, and even treating them as bald usurpers of every power they attempted to exercise, the General Assembly — the body vested with authority to create corporations — had ample power at that time to forgive the usurpation and say to them, “ For the future you may legally exercise corporate powers of that character which you have in the past merely usurped.” Is not the true" construction of the confirmatory act of 1891 one which would mate the General Assembly simply say to these usurping corporations, “Henceforth you have the consent of the State to exercise powers which heretofore you have never had”? Whether the General Assembly could at that time confirm and render valid acts of these corporations performed prior to the passage of the confirmatory act it is not necessary in the present case to decide; but that the General Assembly had authority to say to them that they might in the future exercise the corporate powers attempted to be conferred in the invalid charters which they obtained is beyond all question. If this is true, every street-railroad company organized under a charter granted by the secretary of State prior to the passage of the confirmatory act of 1891 would, upon the acceptance of the provisions of that act, become not only as to every person who dealt with it, and every person against whom it proceeded under the authority of the general railroad law of 1881, but also as against the State itself, a de jure corporation. The acceptance by the corporation of the provisions of the confirmatory act may be express, by resolution upon its minutes, or implied from the fact that after that date it sought to exercise powers which could be lawfully exercised only under the provisions of the act. A street-railroad company after the date — 474 — of this act found attempting to exercise corporate powers would be presumed to be doing so legally; the presumption being that it was acting under the confirmatory act of 1891 rather than under the prior invalid charter without regard to the confirmatory act. And this presumption would prevail until it was shown that it had expressly repudiated any right conferred upon it by the confirmatory act of 1891. 2. The constitution declares that “The General Assembly shall not authorize the construction of any street passenger-railway within the limits of any incorporated town or city, without the consent of the corporate authorities.” Civil Code, §5782. It is contended that one effect of this provision of the constitution is to prohibit the General Assembly from delegating to any public officer the authority to grant a charter to a street-railway, company, but that this authority must be exercised directly by the General Assembly.' If it is meant by this contention that the General Assembly can not constitutionally vest in any public officer a discretion with reference to what corporate powers shall be given to street-railway companies, the contention is probably well founded. But if it goes to the extent of asserting that it is beyond the constitutional power of the General Assembly, after providing what powers shall be granted to street-railway companies and what shall be done by them in order to acquire such powers, to vest in some public officer of the State simply the duty of granting a charter authorizing corporations to exercise the powers set forth in the legislative act upon conforming to certain regulations, then the contention would not be well founded; and there seems to be no good reason why an act providing for the incorporation of street-railway companies and authorizing the secretary of State to grant them a charter could not have been constitutionally passed in 1891, though it was within the power of the General Assembly at that time, certainly prior to the passage of the act of August 31 of that year, providing a general law for the incorporation of street-railway companies, to grant by legislative enactment a special charter to a street-railway company. It is further contended that the provision of the constitution above quoted prohibits the General Assembly from granting, either by a special law or under the operation of a general law, a charter to a street-railway company which was to .operate within the limits of an incorporated town or city, until — 475 — the consent of the town or city was obtained to the incorporation of the company. The provision of the constitution does not so declare. The consent of the authorities of a city is not a condition precedent to the granting of a charter to a street-railway company. The consent of such authorities is, under the constitution, simply a condition precedent to the exercise by the company of the charter power to construct a railway upon the streets of the city. The General Assembly could in 1891 incorporate, either by a special or a general law, a street-railway company, and no matter how broad the act of incorporation was with reference to the power of the company to construct a street-railroad, it would give the company no authority to construct the road upon the streets of an incorporated town or city until permission had been obtained for that purpose from the corporate authorities. The corporation might be organized and might be in full legal existence and able to exercise all the corporate powers granted; but, under the constitution, before it could exercise any power with reference to using the streets of any town or city, it was required to obtain permission from the municipal authorities. But the permission of these authorities is not, under the constitution, a condition precedent to the obtaining of the charter, but is only a condition precedent to the use of the streets. 3. It is contended that even if the effect of the confirmatory act of 1891 would in any case make a street-railroad company theretofore existing a legal corporation, it will not in the case of the Atlanta Railway and Power Company, for the reason that the charter granted to it by the secretary of State, and claimed to have been atterwards confirmed by the act above mentioned, contained provisions, in reference to the purchase of lines of railway, which were in contravention of that provision of the constitution declaring that the General Assembly should not have any power to authorize any corporation to buy shares in any other corporation or to make any contract or agreement whatever which might have the effect or was intended to have the effect of defeating or lessening competition or encouraging monopoly. There are no provisions in the charter of the Atlanta Railway and Power Company in violation of that provision of the constitution referred to; and even if it could be shown that the company had entered into contracts or agreements which would be held in violation of the constitution, this would not in — 476 — terfere with its right to exist as a corporation or to exercise all the legitimate powers which had been conferred upon it, or to hold and enjoy property to which it had acquired title, so long as the State itself did not see proper to proceed against it upon the ground that it had acquired its property or some part thereof in a manner which was opposed to the policy of the law as it is set forth in the constitution of the State. The State alone can-raise questions of this character. They can not be. raised in a controversy between the corporation and a private citizen. See American Mortg. co. v. Tennille, 87 Ga. 30. 4. It is further contended that, as the constitution declares that private property shall not be taken or damaged for public purposes without just and adequate compensation being first paid (Civil Code, § 5729), the court erred in refusing to grant the injunction in this case, the plaintiff making a prima facie case and showing that his property would be damaged by the operation of the street-railway in the street adjacent to his residence. In reference to this contention, it is to be said that the evidence before the judge was conflicting on the question as to whether the building and operation of the street-railroad would damage the plaintiff’s property; and the refusal to grant the injunction being in effect a finding that it would not' be damaged, this court will not interfere with the discretion of the judge in refusing to grant the injunction. In addition to this, it is to be said that since the decision of this court in Moore v. Atlanta, 70 Ga. 611, it has been the settled law of this State that the court would not by an interlocutory injunction interfere with a public improvement in which no part of the property of the citizen was actually taken; and attention was called, in the opinion in that case, to the fact that the Supreme Court of Illinois had rendered a decision to the same effect, when dealing with a constitutional provision similar to ours and from which ours was taken. See also, in this connection, Hurt v. Atlanta, 100 Ga. 280. 5. It is further contended that the charter of the Atlanta Railway and Power Company is invalid, because it attempts to confer upon it the right to carry freight, for the reason that there is no law authorizing the granting of a charter to a street-railroad company to become a common carrier of freight. Even if there is contained in the charter of this company the power to become a common carrier of freight, so far as the present record is concerned it does not — 477 — appear that the company is attempting to exercise this power, and there is nothing to which our attention has been called in the present record to indicate that it is the intention of the railway company to use for this purpose the line of railway being constructed adjacent to the plaintiff’s property. If the power to authorize such a company to carry freight does not exist in the General Assembly, so much of the charter as refers to this power would be simply inoperative, and certainly would not affect its right to exercise the powrnrs lawfully conferred, at least so long as it does not attempt to exercise the power to carry freight. 6. By reference to the statement of facts which precedes this opinion it will be seen that there were two lines of railway from the center of the City of Atlanta going out in the direction in which the plaintiff’s property is located; one formerly owned by the Atlanta Street Railroad Company, which, after going a short distance on Washington street, left that street at Woodward avenue, and the other formerly owned by the Metropolitan Street Railroad Company,' which entered Washington street at Clarke street, and then proceeded along Washington to the city limits; the plaintiff’s residence being located on Washington street between Clarke street and Woodward avenue. ‘The property of both of the companies above named having been acquired by the Atlanta Railway and Power Company, it is its purpose to build its railway along Washington street from Woodward avenue to Clarke street, so as to have a continuous line along Washington street from the point where the Atlanta Street Railroad Company entered that street. As the Atlanta Railway and Power Company has. authority to construct a street-railroad along the streets of the City of Atlanta, if it has the permission of the city authorities, the fact that the construction of the line on Washington street from Woodward avenue to Clarke street would have the effect of uniting lines formerly belonging to two separate and distinct companies would furnish no sufficient reason for enjoining the construction of this line at the instance of an owner of property situated between Woodward avenue and Clarke street, even though such property-owner might be the holder of a share of stock in one of the companies whose property had been acquired by the Atlanta Railway and Power Company. There was evidence before the judge showing that this company had acquired the property of the other two companies, and having acquired this property, — 478 — there necessarily went with it the right to use it for any purpose and in any way in. which the purchaser saw proper, not prohibited bylaw or by its charter; and the fact that these two lines of railway had been formerly owned by two separate and distinct companies would constitute no reason for preventing a third company, which had- become the owner of the property of both, from laying an additional line of track and connecting the two tracks of the other companies and using the tracks so connected in such a way as was for the interest of the company, provided no obligation imposed upon the company by their charter, or by the terms of the purchase, or by the law of the State was violated. 7. In the confirmatory act of 189 lit was provided that, “When any street-railroad company, by incorporation or otherwise under general law, as aforesaid, has succeeded by purchase, or by such incorporation under general law, to the franchise or road of any other or former company or road, such successor company shall be liable for and shall carry out and discharge any and all obligations of such former company or road, as to schedule, line, or route, as such former company was liable for or subject to.” It is contended by the plaintiff that if the Atlanta Railway and Power Company should build the line from Woodward avenue to Clarke street, and thus connect the lines formerly owned by the two companies whose property it acquired, there.would be a change in the line or route of these old companies, which would necessarily bring about a change in the schedule, and that this would certainly be the case if the company abandoned the line on Woodward avenue and the line on Clarke street as well as the line on Pulliam street connecting therewith. The record does not disclose any effort or intention on the part of the Atlanta Railway and Power Company to abandon the lines above referred to. This is probably why the judge refused to grant an injunction to restrain them from abandoning these lines, being of the opinion that there was not a sufficient showing before him that such abandonment was so probable that an injunction should issue to prevent it, even if the plaintiff would be entitled to an injunction if such abandonment was attempted. It is, therefore, not necessary to determine in this case whether, if the Atlanta Railway and Power Company were to attempt to abandon the lines on Woodward avenue and Clarke and Pulliam streets, the plaintiff would have a right to complain, either — 479 — as owner of property adjacent to one of these lines, or as the holder of stock in the company which was the former owner of one of the lines. But certainly an actual abandonment by the railway company of the Woodward avenue line and the Clarke and Pulliam street lines would not be a sufficient reason for enjoining the company from building a line from Woodward avenue to Clarke street, if the building of such line was authorized by the charter of the railway company as well as by the city authorities of Atlanta. The building of this line and the operation of cars thereon would not in any way affect the rights of the plaintiff as the owner of property on Pulliam street or as a stockholder in the company formerly owning the line of road on Pulliam street, or any right, if there is any, in the Woodward avenue line. If he has any rights as property-owner or otherwise in the other lines, such rights are not to be protected by preventing the construction of the additional line, but may be asserted whenever there appears to be a present purpose on the part of the railway company to abandon the lines in the continuance of which he may have a legal interest. What will, therefore, be determined in the present case is whether the Atlanta Railway and Power Company has authority to build its line along Washington street from Woodward avenue to Clarke street; and what will be the rights of the plaintiff, if he has any, under the confirmatory act of 1891, in reference to the lines, routes, and schedules of the Woodward avenue line and the lines of which the Pulliam and Clarke street lines formed a part, will not now be determined. It is entirely possible for the Atlanta Railway and Power Company to build a line from Woodward avenue to Clarke street and operate its cars upon that as a part of its Washington street line, and at the same time operate cars upon the route of which the Woodward avenue line formed a part, as well as upon the route of which the line along Pulliam and Clarke streets formed a part, in exact compliance with the obligations which rested upon the companies which were the former owners of these lines, as to schedule, lines, and routes. 8. Another reason urged why the court erred in not granting an' injunction is that the ordinance of the City of Atlanta under which the Atlanta Railway and Power Company claims the right to construct its line between Woodward avenue and Clarke street is void, for the reason that it is in conflict with a prior ordinance of the — 480 — city, declaring upon what terms the right to use the streets by street-railway companies shall be granted. If there is anything in the charter of the City of Atlanta which prohibits the mayor and general council from passing a special ordinance in conflict with a prior general ordinance, our attention has not been called to it; and unless there is a provision in the charter to that effect, the municipal legislature would have a right to pass an ordinance granting to a street-railroad company the right to use the streets upon certain conditions, or without conditions, notwithstanding the fact that there was in existence at the time of such grant an ordinance providing generally that street-railroad companies should be required to conform to certain named conditions. Especially would this be true in the present case, where the conditions from which the Atlanta Railway and Power Company was relieved, which relief is the subject-matter of the plaintiff’s complaint, were matters in which the city authorities representing the entire people of the city alone were interested, and which did not concern any individual citizen. 9. When a street-railway company is authorized to construct a line of railway in the streets of a town or city, after permission of the municipal authorities has been obtained for that purpose, and there is nothing in the charter of the company which expressly restricts it to building a single track along a street, such charter would authorize the building of a double track, provided the consent of the city authorities was obtained to the construction of the double track along its streets. There is no merit in the contention that a double-track railroad is two railroads, and that a single track is one railroad. The Atlanta Railway and Power Company may, under its charter, build as many double tracks along the streets of the City of Atlanta as it may lawfully obtain the consent of the city authorities to construct. 10. The evidence which was rejected by the judge does not seem to have been either material or relevant. After a careful consideration of the case as a whole, the conclusion is reached that the judge did not err upon any matter of law which was passed on by him, and did not abuse the discretion vested in him as to any matter of fact where the evidence was conflicting. Judgment affirmed. All the Justices concurring.