CHAPTER XXV.

PRIVATE CORPORATIONS AND WORKS EXISTING IN TWO OR MORE STATES.

I. POWER TO SELL CAPITAL STOCK THEREOF ON EXECUTION.

II. POWER TO TAX MORTGAGE DEBT THEREOF BY THE STATES.

III.

IV.

LIABILITY TO SUIT FOR COMMON LAW CAUSE OF ACTION.

POWER OF UNITED STATES COURT AS TO MORTGAGE, FORECLOSURE
AND SALE OF PROPERTY SITUATED IN TWO STATES.

I. POWER TO SELL CAPITAL STOCK OF INTER-STATE WORKS ON EXECUTION.

Nice questions of law sometimes arise in regard to jurisdiction of State courts concerning inter-State corporate works of internal improvements.

Process from State Court. Thus, where the corporation and its work exist in two or more States, as, for instance, in the case of the Dismal Swamp Canal Company and its works, the corporation existing by law in both Virginia and North Carolina, and the works of the company being partly in each of these States, and the stock of the company being by statute declared real estate, it is held that it cannot be levied and sold on execution emanating from State courts of either of said States, if it is to be considered as savoring of the realty in reference to execution, levy and sale. 1

Savoring of the Realty. In such case the capital stock savors of the realty, which exists in part in each of the States, and the shares being on the whole amount thereof, and yet indivisible in themselves, it results that each share represents land in each of said States, and that a sale in one State cannot confer title to property locally situated in the other, nor to any part of the property situated in the State wherein the proceedings are had,

1 Cooper v. The Dismal Swamp Canal Co., 2 Murph. L. & Eq. (N. C.)

195; Rorer on Jud. & Ex. Sales, 2d Ed. § 1325.

inasmuch as the share interests are of an entirety and cannot be so separated as to affect only the property lying within the State where the sale is made. Hence, where an execution sale of capital stock of the Dismal Swamp Canal Company was made in North Carolina on process from a court of North Carolina, and the purchaser took proceedings in chancery against the company to enforce the transfer of the capital stock upon its books, the enforcement thereof was refused, on the ground that the sale was void for want of jurisdiction in the court under whose process the sale was made to reach the same by its process, if the stock was to be regarded as realty. But the supreme court of North Carolina seem disposed to regard the statutes declaring the capital real estate, as intended t, give it an inheritable character rather than to influence its liability to sale on execution, maintaining, however, as herein stated, that if it is to be considered as in that respect affecting its liability to levy and sale, then such disposition of it under State process would be a legal impracticability for the jurisdictional reasons already stated; and that, therefore, no execution sale of it could be made if it were real estate; that if it is to be regarded otherwise, then, as mere choses in action, the shares of stock could not be so sold, since in North Carolina choses in action or capital stock of a private corporation was not in law liable to levy and sale on execution. In order to more clearly illustrate the ruling of the court and character of the proceeding in that case, we annex here a marginal note of the material part of the opinion of the court.2

1 Cooper v. The Dismal Swamp Canal Co., 2 Murph. L. & Eq. (N. C.) 195; Rorer on Jud. & Ex. Sales, 2d Ed. § 1325.

2 Cooper v. Dismal Swamp Canal Co., 2 Murph. L. & Eq. 195. HALL, J.: "The last question submitted to this court should be first considered. Have the courts of North Carolina jurisdiction of the present suit? It is to be observed that the canal lies partly in Virginia and partly in this State, and that the acts of assembly incorporating the company give no preference to the courts of either State. And it is to be further observed that the office

of president and directors of the company has by these acts been located. It therefore follows that the courts of each State have equal jurisdiction; but the court in either State in which a suit shall be first properly instituted does, by such priority, oust all other courts of the jurisdiction during the pendency of such suit and while any judgment which may be regularly given in such suit remains in force.

"But the complainant has not applied to the proper jurisdiction. He ought to have applied to a court of common law for a mandamus to com pel the officers of the company to

II. POWER TO TAX MORTGAGE THEREOF.

Not Taxable in Either State. Mortgage bonds of a railroad corporation, created as a corporation by the laws of two different and adjoining States, and whose line of road is an entirety, and is partly situated in each of those States, and is in all its parts covered by the mortgage and bonds, as such entirety, cannot be subjected to taxation in and by either of said States.1

Such mortgage indebtedness rests for its security upon the credit and value of the entire line of road, its fixtures and franchises in both States, and which is indivisible, and so is each bond of the mortgage debt. The security being an entirety, and existing as it does locally in two different States, and is equally liable to sale in satisfaction of the mortgage debt. If one of these States may tax the whole, so may the other, and each will, in that case, tax interests and property situated in part without its territorial limits and jurisdiction, while neither that portion of the road situated in one or the other of these States is separately liable for any separate part of such indebtedness or bonds, but each is liable with all its interests for the whole. No portion of the bonds pertain to any one part of the road more than to another; and as there is no severance to the bonds, none can be made for taxation proportionate, or in reference to, the comparative work or line of road within the two different States. If taxable as to one bond, it is so as to all, and if in one State, so likewise in the other; and the result would be double taxation of the bonds or bondholders, and thus the burden would increase and be doubled again, if permissible at all, and the line of the road and its unity existed in still another one or more States. In the language of the United States supreme court, NELSON, J., as a better illustration than our language may give, "If Pennsylvania can tax these bonds, upon the same principle Maryland can tax them. * The only difference in the two cases is, that the line of road is longer within the limits of the former than the latter. Her tax would be a more marked one beyond the jurisdiction of the State, as the property and interests outside of its limits would be larger. The consequence of this taxation of three mills on the dollar, if permitted, would be double taxation of the bondholders. Each State could tax the entire issue of bonds. * * * The effect of this taxation upon the bondholders is readily seen. A tax of three mills per dollar of the principal at an interest of six per centum payable semi-annually, is ten per centum per annum of the interest. A tax, therefore, by each State at this rate amounts to an annual deduction from the coupons of twenty per centum; and, if this consolidation of the line of road extended into New York or Ohio, or into both, the deduction would have been thirty or forty. If Pennsylvania must tax bonds of this description, she must confine it to bonds issued

* *

exclusively by her own corporations.

*

*

To permit the deduction of the tax from the coupons in question, would be giving effect to the acts of the legislature of Pennsylvania upon the property and interests lying beyond her jurisdiction."

III. LIABILITY TO SUIT FOR COMMON LAW CAUSE OF ACTION.

Suit in Either State. A railroad company which is incorporated by two States, and which operates as one road in both States, is liable to an action in the courts of one of those States for dereliction of common law duties in the other State, as a common carrier, by discriminating between persons as to transportation on the road. The case cited of McDuffee v. The Portland & Rochester R. R. Co.2 was this: The Portland & Rochester Railroad Company, chartered by both the States of New Hampshire and Maine, and operating its road in both said States, discriminated in the State of Maine between certain persons in relation to the carriage, accommodations and price of carriage of express matter. There being a statute in New Hampshire inhibiting such discrimination, the plaintiff predicated his right of action upon such statute. Objection being made thereto, the court ruled that the statute but re-enacted the common law on the same subject, and which prevailed in Maine, and that, therefore, the common law right of action being essentially the same in both States, and the action being a transitory one, it might be maintained in the courts of New Hampshire, if the pleadings be so reformed as to make it an action at common law, saying nothing of the statute, and advised an amendment accordingly; and in so amending the court suggested, that it might be well to employ as much of the statutory language as practicable,

but without reference to the statute.

This proceeding was an action on the case, and the decision of the New Hampshire court asserts the right to maintain such an action, if for a common law cause, in one State for a cause arising in another State, when the laws of each on the subject of the right are as at common law, against a railroad corporation operating its road in both States. So, in the case of Harris v. The Baltimore & Ohio Railroad, a corporation created in Maryland,

1 McDuffee v. The Portland & Rochester R. R. Co., 52 N. H. 430;

Railroad Co. v. Harris, 12 Wall. 65. 252 N. H. 430.