states which contributed to its existence, and therefore not controlled by state statutes affecting corporations organized under the laws of the statute-making state. "In its organization and action, and the practical management of its property, it was one corporation, * * * though, in its relations to any state, it was a separate corporation, governed by the laws of that state as to its property therein." Graham et al. v. Boston, H. & E. Railroad Co. 118 U.S. 161, 169, 6 S. Ct. 1009, 1013, 30 L. Ed. 196. Such a consolidated corporation is not a foreign corporation in any of the states which authorized its existence. "It is a domestic corporation in each of them. It is a single corporation in must of its features. In other features it is two corporations acting together as one.It is a single corporation with two parent who live apart and act independently, each having absolute control in his own domain. It owes allegiance and is subject alike to each, and is dependent upon each alike for future favors." Attorney General v. New York, N.H. & H. Railroad Co., 198 Mass. 413, 84 N.E. 737, 738.
New York courts have distinguished consolidated multiple corporations formed under the laws of several states, from corporations organized and existing under the laws of New York, both with regard to tax statutes and to other state limitations, and have recognized the limitation of the state's power to regulate the general corporate affairs. We are therefore bound by the principles thus established and are precluded from adopting the interpretation urged by the complainant. There can be no doubt that regulations and limitations of Pennroad stockholdings and transfers concern general corporation affairs extending beyond state boundaries, and they are therefore not subject to the restrictions of the New York statute in question. Having determined that the New York laws do not control the validity of Pennroad's purchases in this case, it becomes unnecessary to discuss the question as to wehther or not the New York statute may be enforced by courts other than those of that state, and we pass on to a consideration of the Massachusetts statute.
The Massachusetts statute involved in the complaint was obviously designed, like the New York statute, to protect Massachusetts railroads from the control of holding companies. It prohibits certain corporations from holding more than 10% of the stock of Massachusetts railroad corporations, and to that extent the issue with regard to the Massachusetts act is the same as that discussed and determined in connection with the New York statute. The conclusion reached is adequately supported by the Massachusetts cases. Attorney General v. New York, N.H. & H. Railroad Co., 198 Mass. 413, 84 N.E. 737; Brown et al. v. Boston & Maine R.R., 233 Mass. 502, 124 N.E. 322. The defendants further argue that the Massachusetts statute is, by its own terms, inapplicable to the Pennroad purchases and an examination of the act seems to confirm this contention.
That act declares that no corporation organized under or subject to Chapter 437 of the Massachusetts Business Corporation Law 1903 shall hold more than 10% of a Massachusetts public service corporation. It is found upon inspection that Chapter 437 relates only to domestic corporations and obviously was not intended to apply to foreign corporations, especially those not doing business in Massachusetts. The Supreme Judicial Court of Massachusetts has also said that under the terms of the statute, "Only domestic corporations are forbidden to hold more than ten per cent of the stock of such a company". Flynn v. Commissioners of Department of Public Utilities, 302 Mass. 131, 18 N.E.2d 538, 540. The Massachusetts statute clearly has no effect upon the purchase and holding of Boston & Maine stock by Pennroad and the complainants' third cause of action must likewise fall.
In passing upon the purely legal issues involved, it seems proper to comment upon other issues raised by the able arguments of counsel. The New York act is a penal one providing a penalty for its violation, and yet it appears that no effort has been made by any public officer to enforce the penalty or to nullify the Pennroad holdings during the many years of the alleged violation. Even though the mere passing of time may not preclude the imposition of the penalties by the state for a continuing offense, it seems incredible that this court should now be asked to give effect to the statute by persons other than those intended to be benefited by the act. There is no law of this jurisdiction which renders the Pennroad's holdings unlawful nor does it appear that there is any breach of the law of the corporate domicile. The limitation, if any, must be found in foreign statutes which have not been enforced by officials charged with their enforcement over a long period of years, and unless compelled by the authority of established law, this court should decline the responsibility of enforcing or giving effect to the statutes in question.
The New York Statute is regulatory and gives the state officials the power to challenge, in proper proceedings or by the imposition of penalties, the alleged illegal transfer and holding of the stock. "This is a right of the state and should not be a matter of solicitude on the part of the plaintiff" ( Kansas City S.R. Co. v. Chicago Great Western R. Co., D.C., 58 F.2d 810, 811), and he may properly be denied the opportunity to exercise in this proceeding the rights and privileges which obviously belong to the state which enacted the statute. While an equity court is always ready and willing to extend its remedies in aid of complainants whose rights have been affected, we are convinced that to hold the defendant directors liable merely on the ground that a state law has been violated and without a showing that such violation was, through negligence or otherwise, the cause of the alleged loss, would be unjust and inequitable. No actual loss has been alleged, nor has it been shown that the Pennroad's holdings are in any actual jeopardy. There is, of course, the possibility that New York state authorities might seek to enforce the act or to declare invalid the Pennroad holdings, but in view of the decisions cited and the probability that regulation of holdings in interstate railroads may be assumed by the federal government in furtherance of its transportation policy, such possibility seems quite remote.
The right of a state to regulate or limit the corporate affairs of railroads engaged in interstate commerce must be restricted to matters pertaining to the operations and affairs exclusively within its borders and properly within its police powers. We know of no principle which requires the extension of even that right to an individual for the purpose of enforcing the state regulations in a foreign jurisdiction in the interest of establishing such individual or corporate loss as is here claimed; and in the absence of any averment that the alleged unlawful investment was the actual cause of a provable loss the complainants' causes must fail.
The conclusion that the state statutes in question are not applicable necessarily infers that the complainant has no right to seek the enforcement of those statutes in this proceeding, and no other equitable rights having been shown, the bill of complaint is dismissed.
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