
    Duncan F. Cameron and Henry Huss, Resp’ts, v. The New York & Mount Vernon Water Company et al., App’lts.
    
      (Supreme Court, General Term, Second Department,
    
    
      Filed December 14, 1891.)
    
    1. Corporations—Sale op stock—Estoppel.
    Where the entire capital stock of a corporation has been sold with Iheassent of its stockholders to another corporation, said stockholders take no interest in the latter company, have no right to its scrip, and are estopped, from claiming that such company had no right to make the purchase.
    3. Same—Consolidation.
    Two water companies, being corporations of the same nature and covering the same territory, may consolidate, although organized prior to the act of 1890.
    Appeal from order denying motion to vacate a preliminary injunction which restrains the consolidation of the defendant corporations, or any of them.
    
      John B. Gleason, for app’lts; A Ibertus Perry {M. J. Keogh, off counsel), for resp’ts.
   Barnard, P. J.

In 1873 a company to furnish pure water to the village of Mt. Yernon was incorporated under the village water works act, with a capital of $25,000, under the name of the Mt. Yernon Water Company. In 1886 the defendant, the New York & Mt. Yernon Water Company, was incorporated under the-general act authorizing the formation of corporations for manufacturing and other purposes. This company obtained a contract-from the village in March, 1886, to furnish water, if pure, for twenty years. An exclusive privilege for establishing and maintaining water works within and near the village was given by ordinance of the village. The stock of the Mt Yernon Water Company was purchased by the new company, and held for the-stockholders in the same. The stockholders in the old Mt Yernon. Water Company were paid the full par value of their stock, and as the object was to exterminate the prior company, and merge it in the N. Y. & Mt. Vernon Water Works Company, no right exists in the stockholders of the old company to demand new scrip for the stock for which they have been paid. No new right exists in respect thereto beyond whatever advantage may result from the purchase of the old stock to the stockholders in the new compan}'.

The consolidation appears to have been mutually agreed upon, and the acquiescence of the old company has been so long continued that justice cannot be now done after the use of the franchise and the property of the corporation has been delivered over to the new company. The village of Mt. Vernon is not a party, and the plaintiffs have no duty in respect to the rights or obligations of the village. The sole question, therefore, is whether the Mt. Vernon Water Works Company can consolidate with a corporation known as the New York City Suburban Water Company, incorporated under the general law in respect to the formation of manufacturing corporations. The corporations are of the same nature, and they cover the same territory. In such a case the consolidation is authorized, or was at the passing of the resolution by the two companies to be consolidated, under chap. 374, Laws of 1877. All the steps taken towards consolidation were in conformity with the act permitting the consolidation and the repeal of the consolidation act in 1891, subsequent thereto, preserved such inchoate and incompleted acts.

The order should therefore be reversed, with costs and disbursements, and the motion to dissolve the injunction granted, with costs.

Pratt, J.

The injunction was continued in this case on the assumption that the proposed consolidation of the two water works corporations was without lawful authority. Respondents’ counsel justify the injunction solely on those grounds. They contend that the laws in force prior to May 1, 1891, so far as they authorized consolidation, have been repealed by the new business-corporation law, chap. 567, and the stock corporation law, chap. 564, passed in 1890. They insist that consolidation cannot' be effected under the stock corporation law, because its tendency would be to prevent competition, and because it would be against public policy. The facts are substantially undisputed.

I am unable to accept the respondents’ view.

.The consolidation of corporations engaged in the same general line of business is not against public policy. The legislature has permitted it for years, and still permits it. Laws 1867, chap. 960 ; 1877, chap. 374; 1884, chap. 367; 1890, chap. 567, § 13. There is a great difference between the consolidation of two corporations into one new corporation, and the combination between two existing corporations for the prevention of competition. The former is permitted and the latter is condemned.

It is not necessary to point out the distinction so far as the public or private good is concerned. It is enough that the legislature has drawn the distinction. See § 13, chap. 567, 1890, ■and § 7, chap. 564, 1890.

I do not think that the new acts have repealed the old provisions which authorized consolidations. They have simply continued them. True, the old acts appear to be included in the schedule of acts repealed; but the saving and construction clauses of both acts which authorize and provide for consolidation, clearly. show that there has been no material change in the law. Existing rights of existing corporations are all saved by § 22, chap. -567; § 24, chap. 563 and § 71, chap. 564. Certainly two new corporations might be organized now under the new law to do ■the business of supplying water for a village, because it is a “ lawful business.” Section 2, chap. 567, Laws 1890. The effect of ■the repealing clause is to require new corporations to organize ■under the new general law instead of under the old laws. Certainly two new corporations, like the two in question, might consolidate under this new law, but they could not maintain their separate existence and combine to prevent competition between them or between themselves and others; and if such new ones could consolidate under this new law, then the express provisions of § 13 authorize the same thing by old corporations doing the same ■business as new ones organized under the new laws.

Turning now to the saving clause we read that the repeal of a law by that act “ shall not affect or impair any * * * right ¡accruing, accrued or acquired prior to May 1, 1891, under or by virtue of any law so repealed; but the same may be asserted * * * as fully and to the extent as if such law had not been repealed.” Hence, if the old corporation had a right to consolidate under the old laws that right would seem to be saved by’ this clause. And, again, we read in § 23 that where the provisions of this new law are substantially the same as those existing April 30, 1891, they shall be continued as a continuation of such old laws and not as new enactments; and, so far as they differ, they are to be deemed mere modifications or amendments of old laws.

I regard it as plain that the object of all these new provisions was simply in the line of codification. It, therefore, seems to me that the injunction proceeds upon an erroneous theory.

Perhaps some question might have arisen as to the right of the .H. Y. & Mt. Yernon Water Co. to hold the stock of the Mt. Yer-non Water Co. by purchase, if the complaint had not alleged that that purchase was made with the assent of the stockholders of the former. But it appears that such purchase was made with the assent of those stockholders. Hence, the purchase itself cannot be the subject of complaint by any of those stockholders. They are estopped to question the purchase, nor can any stockholder of the Mt. Yernon Water Co. be heard to question the purchase or holding. All the individual holders of that company have sold out. It has all been purchased by the H. Y. & Mt Yernon Water Co.

The complaint assumes that that purchase was made for the purpose of a distribution of that stock among the stockholders of the H. Y. & Mt. Yernon Water Co. I do not so understand their rights. Such a distribution would have been a dividend in property which had been purchased and paid for with capital of tne N. Y. & Mt. Vernon Water Co. In other words, it would have been a dividend out of capital, which could not have been contemplated. On the contrary, the purchase of that stock made it a. part of the property of the company, and not as a special trust for' its stockholders. Their interests in that property were the same-as in any other property of their company; and since that company has the right to consolidate with the New York City Suburban Water Co., it would seem that that stock or its proceeds-will have to abide the event of the effort to consolidate.

The order should be reversed, with ten dollars costs and the disbursements on this appeal to the defendants, and the original injunction should be vacated.  