Perkins v. Company , 90 N.H. 534 ( 1940 )

The legislature has authorized the transfer of the "franchise, works or system" of a public utility to another one, provided the Public Service Commission "shall find that it will be for the public good and shall make an order assenting thereto." A dissenting stockholder of the transferor is to have his rights "regulated, protected and determined" by the statutes relating to the rights of a dissenting stockholder in a railroad corporation which leases its road to another corporation or unites with it to form a new one. P. L., c. 240, ss. 28, 30. A stockholder in a railroad thus dissenting may by petition to the Superior Court seek a determination of the value of his "stock, interest or property right taken." P. L., c. 246, s. 25. Provision for hearing, orders and payment is also made. Ib., ss. 27, 30, 31.

In 1883 an act (Laws 1883, c. 100) was passed, by which authority was given for a lease by one railroad corporation to another or for their union into a new corporation, if the lease or union was found to be for the public good (s. 17), with provision for the value of the interest of any stockholder who did not consent to exchange his stock for stock in the new corporation to be appraised (s. 19). On payment or tender of the amount of the appraisal the interest of the stockholder was to cease (s. 21).

The 1883 act contained no provision for compensation to stockholders dissenting to a lease of their railroad, and in Dow v. Railroad, 67 N.H. 1, decided in 1886, it was held that such stockholders were entitled to have the lease declared void, as being an unconstitutional interference with their property rights. "Eminent domain not being exercised over the plaintiffs' shares, it is necessary to observe the difference between that private authority over each share of the private property which its owner alone can give the majority, and that public agency which the public alone can give them." Ib., 5.

The decision led to an amendment of the 1883 act in 1889. The amendment (Laws 1889, c. 5) broadened the 1883 act by giving stockholders dissenting to a lease the same rights as in a dissent to union, and it enacted more specific procedure for enforcing a dissenter's right to have the value of his "stock, interest, or property right taken" determined, and paid or tendered (s. 1). It has not been materially changed in this respect by the later statutory revisions. (P.S., c. 156, s. 32; P. L., c. 246, s. 25).

The transfer of the Power Company's property to the Public Service Company having been found by the Public Service Commission to be for the public good and having been "duly authorized and approved" by the Commission, the authority given was an exercise of the power of eminent domain in the public interest, in respect to the Power Company's dissenting stockholders. The application for assent to the transfer necessarily included a request that the State's power of condemnation be exercised in respect to owners of interests who did not accept the terms offered them. The transfer could be perfected only by the taking of such interests. The exercise of the power was properly invoked, in view of the Public Service Company's status as a corporation serving a public interest. Rockingham c. Co. v. Hobbs, 72 N.H. 531. So far as the plaintiff's rights arising from ownership of his stock were taken from him without his consent, he was entitled to compensation in money equal to the value of his rights. The statute provides therefor, and for the manner of securing and obtaining it. As the prescribed method for the regulation, protection and determination (P. L., c. 240, s. 30) of his rights, it is designed by the statute to exclude other remedy and procedure for redress.

Under the view that a corporation, as an evolution from a partnership, is "`an association formed by the agreement of its shareholders,' and its existence `as an entity, independently of its members, is a fiction'" (Dow v. Railroad, supra, 3), the stockholders of the Public Service Company in association sought to acquire property belonging in ultimate ownership to the Power Company's stockholders. Some were willing and some unwilling to sell their ownership interests. Through eminent domain the interests of those unwilling might be acquired. Those willing to sell owed no fiduciary duty to the others not to vote for the transfer. If they thought the public good would be promoted by a transfer, they had no obligation to the stockholders who disagreed with them not to have that issue determined. Although the transfer was to be to themselves, their trusteeship did not require them to remain in association with the dissenters when it was duly found that the transfer was for the public good. If the public good justified the transfer, it was in the light of the fact that the transfer was to themselves. They were therefore not barred from seeking the transfer through associated or corporate action. The private right must yield to the public interest. Fairly, the statute permitting corporate consolidation, by its provision for the rights of dissenting stockholders, implies that the stockholders voting for consolidation have no relationship as trustees towards the dissenters in casting their vote. Whatever the self-interest of the required majority, the statute defines the rights of stockholders who dissent.

When two railroad corporations are united into a new one, it is not illegal if the new one is to be controlled and owned by the majority shareholders of the two which consolidate while the minority are opposed. This is the statutory contemplation, the provisions for protecting the interests of the minority making it clear that the majority are absolved from a fiduciary relation towards the minority in respect to the issue of consolidation. The minority are secured for the value of their interests, whether or not the majority act in self-interest. To hold that the majority may be barred by the dissent of the minority from seeking the ascertainment of the public good and claiming it, would give the individual an undue advantage at the expense of the public.

In some limited analogy, when property is sold at auction in partition proceedings, any owner of any interest may bid to become a purchaser. He owes no duty to the other owners to abstain. All owners are free to act solely in their own interest. So here the plaintiff if he saw fit might invest the proceeds of his stock in stock of the purchaser. If the analogy is only partial, it applies as far as the circumstances permit.

The plaintiff's right to adequate security for payment of the award to which he may be found entitled (Goodrich Falls c. Co. v. Howard,86 N.H. 512, 524) is not disregarded by the statute. While the transfer of the Power Company's property has been effected as between it and its transferee, the perfection of change of title will not be attained until the amounts due its dissenting stockholders are finally determined and payment or tender and deposit thereof made. P. L., c. 246, s. 33. The Public Service Commission's assent to the transfer was valid. It was a term of the assent necessarily implied that the transfer was subject to the condemnation statute. The plaintiff may claim that the transfer is ineffective to impair his security for payment, but not that the transfer is invalid.

It follows that the plaintiff has mistaken his remedy. If he is dissatisfied to take the amount offered for his stock, his relief is by proceeding under the statutory method marked out. (P. L., c. 246, s. 25 et seq.). By amendment this proceeding may invoke it. The issue of fact to be tried will be the market or best ascertainable value of his stock on the date of the transfer of the power company's property August 8, 1936. Gregg v. Railroad, 67 N.H. 452.

This opinion is not to be construed to imply that the plaintiff's claims would be upheld if the factor of eminent domain did not appear.

Case discharged.

All concurred.

ON REHEARING. After the foregoing opinion was filed the defendants' motion for rehearing was granted on the issue of the application of the utility regulation statute. The decision rested on a ground not presented in argument and the motion was granted to enable the parties to be heard respecting it.