Where plaintiff in error contends that the purpose for which his
property has been condemned is not a public use, that the
condemnation is unnecessary in order to obtain the desired end, and
that the proceedings and state statute on which they are based
violate the due process clause of the Fourteenth Amendment and
impair contract rights, federal questions are involved and, if not
frivolous, the writ of error will not be dismissed.
It is within the power of a state to provide for condemnation of
minority shares of stock in railroad and other corporations where
the majority of the shares are held by another railroad corporation
if public interest demands, and the improvement of the railroad
owning the majority of stock of another corporation may be a public
use if the state courts so declare, and the condemnation under §§
3694, 3695, Public Laws of Connecticut, of such minority shares of
a corporation is not void under the impairment clause of the
Constitution either because it impairs the obligation of a lease
made by the corporation to the corporation obtaining the shares by
condemnation or because it impairs the contract rights of the
stockholder.
78 Conn. 1 affirmed.
The facts are stated in the opinion.
Page 203 U. S. 375
MR. JUSTICE McKENNA delivered the opinion of the Court.
This writ of error brings up for review a judgment of the
Supreme Court of Errors of the State of Connecticut rendered in a
proceeding under the statutes of that state for the condemnation of
two shares of stock owned by plaintiff in error in the New Haven
& Derby Railroad Company.
There was a demurrer to the application, which was overruled by
the advice of the Supreme Court of Errors, the judgment on demurrer
having been reserved, under the practice of the state, for the
advice and consideration of that court. 77 Conn. 417. Upon the
hearing, judgment was rendered for defendant in error, which was
affirmed by the Supreme Court of Errors. 78 Conn. 1.
Defendant in error is the lessee of the New Haven & Derby
Railroad Company, and has acquired all of the shares of stock of
the latter road except the two shares owned by plaintiff in
error.
That the lease and acquisition of stock are valid under the laws
of the state is decided by the Supreme Court of Errors, and it is
sought by proceedings under review to obtain the two
Page 203 U. S. 376
shares of stock owned by plaintiff in error, under §§ 3694 and
3695 of the General Statutes of Connecticut, which are as
follows:
"SEC. 3694. In case any railroad company, acting under the
authority of the laws of this state, shall have acquired more than
three-fourths of the capital stock of any steamboat, ferry, bridge,
wharf, or railroad corporation, and cannot agree with the holders
of outstanding stock for the purchase of the same, such railroad
company may, upon a finding by a judge of the superior court that
such purchase will be for the public interest, cause such
outstanding stock to be appraised in accordance with the provisions
of section 3687. When the amount of such appraisal shall have been
paid or deposited as provided in said section, the stockholder or
stockholders whose stock shall have been so appraised shall cease
to have any interest therein, and on demand shall surrender all
certificates for such stock, with duly executed powers of attorney
for transfer thereon, to the corporation applying for such
appraisal."
"SEC. 3695. If any person holding a minority of the shares of
stock in any corporation referred to in section 3694 cannot agree
with the railroad company owning three-fourths of such stock for
the purchase of his shares, he may cause the same to be appraised
in accordance with the provisions of section 3687. When such
appraisal has been made and recorded in the office of the clerk of
the superior court of any county where such railroad company
operates a railroad, and the certificates for such stock, with duly
executed powers of attorney for transfer thereon, have been
deposited with such clerk for such railroad company, such appraisal
shall have the effect of a judgment against such company and in
favor of the holder of such stock, and at the end of sixty days,
unless such judgment is paid, execution may be issued."
The purpose of the acquisition of the stock is to enable
defendant in error to improve the New Haven & Derby
Railroad.
Page 203 U. S. 377
It is contended by plaintiff in error (1) that the purpose for
which the stock is sought to be obtained is not a public use; (2)
that defendant in error has the power and authority to make the
improvements mentioned in its application, which would be as
advantageous as taking the stock; (3) the proceedings and statutes
are in violation of the due process clause of the Fourteenth
Amendment to the Constitution of the United States, and impair the
contract rights of plaintiff in error as stockholder of the New
Haven & Derby Railroad Company, and his rights in, under and by
virtue of the lease to defendant in error.
These contentions raise a federal question, and we cannot say
that it is frivolous. The motion to dismiss is therefore
denied.
(1) The power of the state to declare uses of property to be
public has lately been decided in
Clark v. Nash,
198 U. S. 361, and
in the case of
Strickley v. Highland Boy Mining Company,
200 U. S. 527.
These cases exhibit more striking examples of the power of a state
than the case at bar. In the first case, the statute of the state
permitted an individual to enlarge the ditch of another to obtain
water for his own land; in the second case, the statute authorized
the condemnation of a right of way to transport ore from a mine to
a railroad station. In the first case, it was said that the public
policy of the state, declaring the character of use of property,
depends upon the facts surrounding the subject. In the second case,
it was said, commenting on the first,
"it proved that there might be exceptional times and places in
which the very foundations of public welfare could not be laid
without requiring concessions from individuals to each other upon
due compensation, which, under other circumstances, would be left
wholly to voluntary consent."
The case at bar does not need the support of such broad
principles. The ultimate purpose of defendant in error in the case
at bar is the improvement of the New Haven & Derby Railroad,
which
"connects [we quote from the opinion of the Supreme Court of
Errors] at
Page 203 U. S. 378
New Haven, on the east, with four, and at its western terminals
with two, important railroad lines owned by the plaintiff
[defendant in error], and forms a link in an all-rail route between
Boston and the West, which is the only one controlled by the
plaintiff, and the only one of any kind controlled by it over which
goods can be transported with assured dispatch in all weathers and
at all seasons."
In this purpose the public has an interest, and to accomplish it
the court applied the statute. The court observed:
"To develop this route so as best to serve the public interest
requires the laying of additional tracks on the New Haven &
Derby Railroad and other extensive and very costly improvements.
The lessor company has neither means nor credit whereby this can be
effected on advantageous terms. The plaintiff could and will effect
it, and at much less cost, if it can acquire the two outstanding
shares of the stock of the lessee. They are owned by the defendant,
who refuses to agree on terms of purchase."
(2) The contract which it is contended was impaired is the lease
of the New Haven & Derby Railroad by defendant in error. The
lease is for a period of ninety-nine years from July 1, 1892 at a
rental of four percent per annum upon the capital stock, together
with the payment of taxes, assessments, and interest upon the
funded debt. Associated with this contention there is another, more
general, to the effect that the statute impairs the contract rights
of plaintiff in error as a stockholder of the New Haven & Derby
Railroad Company. We do not find it necessary to give precise and
separate discussion to these contentions. They seem to us to be but
parts or incidents of the contention that the stock is sought for a
private use. If they are not incidents of that, they are answered
and opposed by the case of
Long Island Supply Company v.
Brooklyn, 166 U. S. 685.
Whatever value the lease gives the shares of stock will be
represented in their appraisement.
Judgment affirmed.