
    In the Matter of the Application of The New York Elevated Railroad Company. Matter of Clarkson et al.
    
    
      (Supreme Court, General Term, First Department,
    
    
      Filed February 18, 1892.)
    
    1. Railroads—Effect of a lease upon the lessor company.
    It is provided by chap. 254 of the Laws of 1867, that any railroad company which is the lessee of another may take a surrender or transfer of the stock of the road held under lease and issue therefor a like amount of its own stock; that when the greater part of the stock has been so surrendered the directors of the lessee company may become ex officio directors of the lessor company; that upon filing a certificate the estate and franchises of the company whose stock has been surrendered shall vest in the ■ company to whom the transfer has been made, and that the rights of stockholders who have not surrendered their stock and those of creditors shall not be- affected. Held, that the statute contemplated the continuing existence of both corporations.
    2. Same—Eminent domain—Abatement—Transfer of interest.
    Where an elevated railroad company of the city of New York began condemnation proceedings and was subsequently leased by another company, it did not thereby lose its right to continue the proceedings.
    Appeal from an order at special term appointing commissioners.
    
      Gannon & Atwater, for app’lts ; Davies & Rapadlo, for resp’t
   Lawrence, J.

This is an appeal from an order appointing commissioners to ascertain and appraise the compensation to be made the owners of or persons interested in certain property, easements or other interests taken by the petitioner for the purposes of its incorporation. It appears that these proceedings were commenced by the New York Elevated Railroad Company to acquire title to certain property mentioned in the petition, being certain easements appurtenant to premises abutting on the street through which the railroad ran.

The original petition was dated September 17, 1889, and was presented to the special term on October 21, 1889, and testimony was taken upon this application, but before any order was made the petitioner applied for leave to amend its petition, which was granted April 22, 1890. The appellants, in answer to the amended petition, alleged that the petitioner has lost its right to institute condemnation proceedings by reason of the fact that it had been merged and consolidated on the 3d of February, 1890, with the Manhattan Railway Company.

It further appears that by proceedings under chap. 254 of the Laws of 1867 the capital stock of the petitioner, the New York Elevated Railroad Company, has been surrendered or transferred to the Manhattan Railway Company, and that a certificate to that effect had, on that date, in accordance with the statute, been filed in the office of the secretary of state. As already stated, the appellants claimed that thereby the petitioner lost all right to carry on these proceedings. It is claimed that that result follows from the provisions of the act of 1867 above referred to, and that thereby the petitioner, in effect, ceased to be a corporation, and-lost all legal existence. The act of 1867 is entitled “ An Act in relation to railroads held under lease.” The first section is as follows:

“ Any railroad corporation created by the laws of this state, or its successors now being the lessee of the road or any other railroad corporation, may take a surrender or transfer of the capital stock of the stockholders, or any of them, in the corporation whose road is held under lease, and issue in exchange therefor the like additional amount of its own capital stock at par, or on such other-terms and conditions as may be agreed upon between the two corporations; and whenever the greater part of the capital stock of any such corporation shall have been so surrendered or transferred, the directors of the corporation talcing such surrender or transfer shall thereafter, on a resolution electing so to do, to be entered on 'their minutes, become ex-officio the directors of the corporation whose road is so held under lease, and shall manage and conduct the affairs thereof as provided by law; and whenever the whole of the said capital stock shall have been so surrendered or transferred, and a certificate thereof filed in the office of the secretary of state, under the common seal of the cor- - poration to whom such surrender or transfer shall have been made, the estate, property, rights, privileges and franchises of the said corporation whose stock shall have been so surrendered or transferred shall thereupon vest in and be held and enjoyed by the said corporation to whom such surrender or transfer shall have been made, as fully and entirely, and without charge or diminu*tian, as the same were before held and enjoyed, and be managed and controlled by the board of directors of the said corporation to whom such surrender or transfer of the said stock shall have been made, and in the corporate name of such corporation. The rights of any stockholder not so surrendering or transferring his ■stock shall not he in any way affected hereby, nor shall existing liabilities, or the rights of creditors of the corporation, where stock •.shall have been so surrendered or transferred, be in any way ,affected or impaired by this act."

We think that under this section, notwithstanding the transfer -of the capital stock of the lessor to the lessee corporation, the' former does not cease to have a corporate existence. There can be no such thing as a lease without there are two parties to it, to wit: a lessor and a lessee, and it seems to us absurd to speak of a nailroad being held under a lease, if the corporation to which that railroad belongs has been entirely wiped out of existence.

Furthermore, an examination of the language of the first sec-in on of the act of 1867 satisfies us that the legislature did not intend that the effect of that act should be to entirely abrogate the -existence of the lessor corporation. The language is that the surrender or transfer of the capital stock in the corporation whose road is held under lease, and for which the capital stock of the lessee corporation is to be exchanged, may be made at par, or on such other terms as may be agreed upon between the two corporations. This section recognizes the existence of two corporations. Then comes the provision that whenever the greater part of thé capital stock of any such corporation shall have been so .surrendered, etc., the directors of the corporation taking such surrender, etc., shall thereafter, on a resolution .electing so to do, etc., become ex officio directors of the corporation whose road is so held under lease, and shall manage and conduct the affairs thereof as provided by law. Still the statute recognizes the lessor "•corporation as in existence.

Reading further on, we find it provided that whenever the capital stock shall have been so surrendered, etc., or a certificate thereof filed in the office of the secretary of state, etc., under the common seal of the corporation to whom such surrender, etc., shall have been made, the estate, property, rights, privileges, franchises of such corporation whose stock shall have been so surren■dered, etc., shall thereupon be held and enjoyed by such corporation to whom such surrender has been made as fully and entirely .•and without charge or diminution as the same were before held and enjoyed, and be managed and controlled by the board of directors of the said corporation to whom such surrender or transfer of said stock shall have been made and in the corporate name of such corporation.

It is further provided that the rights of a stockholder not so .surrendering or transferring his stock shall not be in any way effected hereby, nor shall existing liabilities or rights of creditors of the corporation, whose stock shall have been so surrendered or transferred, be in any way affected or impaired by this act We think a fair and proper construction of this language is that while the lessee corporation ig to manage and operate the railroad of then lessor corporation, the latter should not lose its corporate existence. The very fact that the rights of any stockholder who has, not surrendered his stock in the latter corporation are not to be-affected, indicates that the legislature recognized the existence of the lessor corporation, notwithstanding such transfer.

The case of the Memphis Railroad Co. v. The Commissioners, 112 U. S., 609, we think is in point in this case. It was there held that a franchise to be a corporation is distinct from a franchise as a corporation to maintain and operate a railroad, that the-latter may be mortgaged without the former, and may pass to a purchaser at a foreclosure sale. In that case Matthews, J., delivering the opinion of the court, says ;

“ The essential properties of corporate existence are quite distinct from the franchises of the corporation. The franchise of being a corporation belongs to the corporators, while the powers- and privileges vested in and to be exercised by the corporate body as such are the franchises of the corporation.”

If we are right in our construction of the act of 1867, we are of the opinion that by the proceedings taken thereunder, the petitioner did not lose its right to continue a proceeding commenced for condemnation of property before the transfer took place, or to-' authorize the Manhattan Railway Company to continue those proceedings in its name. Section 755 of the Code of Civil Procedure provides that an action does not abate by any event if the cause of action survives or continues, and by subd. 6 of § 3347 of that Code- that section is made applicable to special proceedings as-well as to actions. The right to condemn the property in question, therefore, has not abated or been lost by the lease made to-the Manhattan Railway Company. Section 756 of the Code of Civil Procedure provides that in case of a transfer of interest or a. devolution of liability, the action may be continued by or against, the original party. This section is also made "applicable to special proceedings by subd. 6 of § 3347 of the Code of Civil Procedure.

We are therefore of the opinion that the decision below was-right, and that the order should be affirmed, with costs and disbursements.

Yan Brunt, P. J., concurs.  