Commonwealth v. New York

Opinion, Mr. Chief Justice Paxson :

This was an information in the nature of- a quo warranto, filed by the attorney general, the object of which was to es-cheat to the commonwealth certain lands in Elk county, alleged to be held by or for the defendant railroad company. The facts, as disclosed by the evidence and admitted by the parties, do not. differ essentially from those in Commonwealth v. Railroad Co., reported in 114 Pa. 840 . This is really a branch of the same proceeding, but for lands lying in a different county. The present case has been twice argued, a re-argument having *605 been ordered of our own motion, and has received careful consideration. This was due to the gravity of the questions involved and the amount in controversy.

It was alleged, in the first place, by the commonwealth that the railroad company had violated § 5, article XVII. of the constitution of this state. The said section is as follows :

“ No incorporated company doing the business of a common carrier shall directly or indirectly, prosecute or engage in mining or manufacturing articles for transportation over its works; nor shall such company, directly or indirect!}7, engage in any other business than that of common carriers, or hold or acquire lands, freehold or leasehold, directly or indirectly, except such as shall bo necessary for carrying on its business; but any mining or manufacturing company may carry the products of its mines and manufactories on its railroad or canal, not exceeding fifty miles in length.”

It will be noticed that this clause in the constitution affixes no penalty for its violation. It is conceded that, for a violation of the organic law, a Pennsylvania corporation, or a foreign corporation having or exercising corporate franchises within this commonwealth, would forfeit such franchises. This, however, would not involve an escheat or confiscation of its property. For present purposes, we must regard this constitutional provision as out of the case. The question here is whether the real estate in controversy is liable to escheat. This is not a proceeding to forfeit the company’s franchises, but to escheat its lands. It must rest, if it can be sustained at all, upon the act of April 26, 1855, P. L. 829, the fifth section of which provides that:

“No corporation.....shall.....hereafter acquire and hold any real estate within this commonwealth directly in the corporate name, or by or through any trustee or other device whatsoever, unless specially authorized to hold such property by the laws of this commonwealth.”

This is the prohibition of the act. The penalty for its violation is contained in section 9. It is as follows :

“That all property hereafter acquired and held by persons, corporations, or associations forbidden by this act to hold the same, .... and all such hereafter acquired and'held beyond the limit prescribed as aforesaid by this act, shall escheat *606 to this commonwealth, and, upon the same being adjudged to have escheated under proceedings in court by quo warranto in all respects as is provided by law in the case of the usurpation of any corporate franchise, the same shall be taken in possession and disposed of,” etc.

It was not alleged that the defendant railroad company held the title to any of the lands in controversy, either in its corporate name or by or through a trustee. The contention of the commonwealth was that the title thereto was held by the Northwestern Mining & Exchange Company, defendant; that all of the stock of said last-named company was held by the said railroad company, and that the placing of the title in the former company was a mere “ device ” to enable the railroad company to hold lands indirectly which it was forbidden by the act of 1855 to hold directly, or by or through a trustee. Whether it was such “ device ” was the question we directed to be submitted to the jury when the other branch of the case was here, reported in 114 Pa. 340 .

It is not denied that the Northwestern Mining & Exchange Company is a Pennsylvania corporation, and authorized by its charter to hold these or similar lands, and to carry on the business of mining, milling, smelting, and refining gold, silver, copper, iron, lead, and other ores, coal and other minerals. Nor was it denied that under the act of April 15, 1869, P. L. 31, the New York, Lake Erie & Western Railroad Company had the right to purchase and hold all or any portion of the stock of the Northwestern Mining & Exchange Company. The said act expressly declares:

“ That it shall and may be lawful for railroad and canal companies to aid corporations authorized by law to develop the coal, iron, lumber and other material interests of this commonwealth, by the purchase of their capital stock and bonds, or either of them, or by the guaranty of or agreement to purchase the principal and interest, or either, of such bonds.”

The object of this legislation is obvious. It was to authorize railroad and canal companies to employ their capital and credit to aid in the development of the mineral resources of the commonwealth. Such development, as every one knows, is in many instances beyond the reach of individual enterprise. It was easy enough to form corporations with all the requisite *607 powers for this purpose. It was a very different thing to find capitalists to take their stocks or bonds. Hence it was that the legislature gave to railroad and canal companies the power to purchase both stocks and bonds of such companies. Nor was any limitation placed upon this power. They might buy a portion or all of the stock. It probably never occurred to the legislative mind that, while the purchase of a portion of the stock of a mining company would be aiding such corporation to develop the mineral resources of the state, the purchase of a majority of or the whole of the stock of such company might be held to be a “device” to evade the act of 1855. However that may be, the act of 1869 was evidently intended to legalize, and perhaps encourage, railroad and canal companies to invest in this species of mining companies. It involved, necessarily, the control of such companies by the corporations making such investments, to the extent of the stock held by them. A majority of the stock controls the corporation; the corporation controls the land held by it. In this sense, and to this extent, the act of 1869 enabled railroad companies to control real estate, the title to which they were forbidden to hold directly or indirectly by the act of 1855. It must not be forgotten, however, that controlling real estate, by means of the ownership of a majority of the stock of such corporation, is a very different matter from holding the title to such real estate. The one is legalized by the act of 1869; the other is forbidden by the act of 1855.

It appears by the evidence that the railroad company purchased the charter of the mining company, and retained all of the stock thereof, except the number of shares requisite to qualify the directors. It is admitted that the whole interest in the stock of the mining company was owned and controlled by the railroad company. It was contended that this was not aiding the mining company, but was a mere scheme or “ device ” to hold lands in violation of law. This was the view taken of it by our Brother Sterrett, in the former opinion of this Court, and in that case it was directed that the question whether it was a “ device ” to evade the act of 1855 should be submitted to a jury. That case was not heard before a full bench; those who heard it were not unanimous; it involved a question of grave importance, and a majority of those who *608 heard the argument were in favor of taking the verdiet of a 'jury upon the facts. As the question is now presented here, and as it was presented below, there are no disputed facts. It is conceded that at the time these proceedings were commenced the title to the lands was in the Northwestern Mining & Exchange Company; that the said company was expressly authorized by law to hold them; that the stock of said last-named corporation is held or controlled by the railroad company, which company is in terms authorized by the act of 1869 to hold it; that the stock so held is personal property, and that the railroad company does not hold the title to said real estate, or to any portion of it either in its own name, or by or through a trustee. With the facts upon the record undisputed, we cannot evade the responsibility of this case by throwing it upon a jury. With the facts admitted, it is the duty of this court to pass upon their legal effect, and the verdict of a jury could not aid us. Moreover, if we submit this question to a jury, we would have no rule whatever. Different juries, in different counties, might find conflicting verdicts, in which case we would have the strange result that in one county the transaction would be held to be legal, while in an adjoining county it would be held to be illegal. We were informed upon the argument, and have no doubt of its truth, that a vast amount of real estate in this commonwealth is held by corporations similar to the Northwestern Mining & Exchange Company, and chartered by the state for the purpose, inter alia, of holding the title to such property; that the stock of said companies is largely held by railroad corporations, in pursuance of the act of 1869, and that the said real estate is in whole or in part controlled by the latter class of corporations, by means of their stock. If in all such cases the question whether the holding of such stock is a “ device ” on the part of the railroad companies to evade the act of 1855 must be submitted to a jury, the consequences might be very serious and destructive of vested rights. To say the least, it would introduce an element of uncertainty into the titles to a large amount of property, which it would be difficult for a purchaser to protect himself against. The possibility of such results admonishes as to move with caution, and to hesitate ere we finally adopt a principle which may lead to such confusion.

*609 If there is anything that is clear in this case, it is that the defendant railroad company has no title, legal or equitable, to this land. Its whole title thereto, in fee-simple, passed bjr the conveyance to the Northwestern Mining & Exchange Company. Attention is again called to the act of 1855; and, at the risk of being prolix, I repeat it:

“ No corporation.....shall.....hereafter acquire and hold any real estate within this commonwealth, directly in the corporate name, or by or through any trustee, or other device whatsoever, unless specially authorized to hold such property by the laws of this commonwealth.”

It will be observed that the prohibition of the act is of a threefold character, viz.: (a) Holding real estate in its corporate name; (5) by means of a trustee; and (c) by any device whatever. It must be conceded, indeed it is not denied, that there is no violation of the first two prohibitions. It is equally clear to my mind there is no violation of the third, for the reason that the railroad company has, as before stated, no title to the real estate of any kind. If it has no title, how can it hold title by a “device?” The only answer that has or can be made to this is that the company controls said real estate. If we concede this proposition, where, in the act of 1855, is there to be found a prohibition of a railroad company controlling the use of real estate ? The act strikes only at the holding of the title; and, as it is a highly penal statute,' — penal to the extent of practically confiscating all real estate held in violation thereof, — we are not at liberty to extend it beyond its terms. The legislature may have had good reasons to prohibit railroad companies from holding the title to large bodies of mining lands. They may not have had the same reasons to move them to prohibit all control over them. At any rate, they have not done so, which is sufficient for our purpose.

As before observed, this is a question of escheat. It must be manifest that, before there can be an escheat of these lands under the act of 1855, it must appear that the defendant railroad company holds the title thereto in its corporate name, or by or through a trustee, or by some device by means of which said company not only controls the lands, but enjoys the beneficial ownership thereof. In other words, it must have either the legal or the equitable title, or it has no title whatever. If it *610 has no title, there can be no escheat of the lands as real estate. The third section of the act of 1855, which does not appear to hare been heretofore called to our attention, provides:

“ That the shares held by shareholders in all incorporated land and building associations^ and mining and manufacturing companies, shall be taken to be personal property, conferring a right to receive dividends of the profits and proceeds of the real estate held by such companies, but not to create any title in the shareholder in or to such real estate, which shall be subject only to the liens of and be fully conveyed by the corporation holding the title and owning the same. ”

This section of the act of 1855 is a distinct declaration by the law-making power that shares of stock held in a mining company are personal property, and create or give no title to the holder of such shares in or to any of the real estate held by such company. How, then, is it possible to escheat it as real estate, belonging to or held for the company owning the shares ? The law having fixed its character, I do not see how the parties can change it, even by a “ device.”

The act of April 8, 1881, P. L. 9, enacts:

“ That where any conveyances of real estate in this commonwealth have been made by any alien, or any foreign corporation or corporations of another or of this state, to any citizen of the United States, or to any corporation chartered under the laws of this commonwealth and authorized to hold real estate, before any inquisition shall have been taken against the real estate so held to escheat the same, such citizen or corporation, grantee as aforesaid, shall hold and may convey such title and estate indefeasibly as to any right of escheat in this commonwealth, by reason of such real estate having been held by an alien, or corporation not authorized to hold the same by the laws of this commonwealth.”

While I do not consider this act important in the determination of this case, as the contention of the commonwealth cannot be sustained for the reasons already given, it is proper to say that it appears to condone the alleged offence, so far as the legislature may lawfully do so. It removes the penalty of es-cheat imposed by the act of 1855. It may be said, however, that it is controlled by section 10, article XVII. of the constitution, which declares:

*611 “No railroad, canal, or other transportation company, in existence at the time of the adoption of this article, shall have the benefit of any future legislation by general or special laws, except on condition of complete acceptance of all the provisions of this article.”

In the absence of any evidence that the defendant company had accepted the provisions of the above article, it is urged that it cannot claim the benefit of the act referred to. It is doubtless true that, before a railroad company can enjoy the benefit of new legislation enlarging its powers or increasing its facilities, it must formally accept all of the provisions of the seventeenth article of the constitution relating to railroads and canals. This question, however, is not raised. The act of 1881 is in the way of the commonwealth. No one doubts that the act of 1855, imposing the penalty of escheat, could at any time have been repealed by the legislature. The repeal of the act would have been an answer to this proceeding. The commonwealth would have nothing to rest it upon. The act of 1881 does not in terms repeal the act of 1855, but it removes the penalty. This information was not filed until several years after the passage of the act of 1881; nor had any inquisition been taken against the real estate in controversy, until after it had been conveyed to the Northwestern Mining & Exchange Company. The case comes, therefore, precisely within the terms of the act of 1881, and, were we in doubt as to our former position, we might well affirm the judgment upon this ground alone.

We have considered this case solely upon the power of the commonwealth to escheat the lands. No question is raised under the constitutional provision referred to, and none is decided.

Judgment affirmed.

Mr. Justice Sterrett and Mr. Justice Clark dissented.