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Statement of the Case.

pany in jointly and severally guaranteeing the payment of the principal and interest of said bonds as they come due.

From the petition and conceded facts, it appears that the entire capital stock of The Toronto, Hamilton & Buffalo Railway Company is owned by The New York Central Railroad Company, The Canadian Pacific Railway Company, The Michigan Central Railroad Company and The Canada Southern Railway Company in the proportions stated. These companies and the T. H. & B. company have contracted that the line of the latter should continue to be worked and operated for the mutual benefit and advantage of all of said companies, subject to the powers of the board of railway commissioners for Canada.

The applicant company owns a majority of the stock of the Michigan Central company, for which it in turn leases the line of the Canada Southern from the Detroit river to the Niagara river, connecting with the T. H. & B. at Welland and Waterford, and with the Canadian Pacific at Hamilton. The cantilever bridge over the Niagara into New York state, where connection is made, is part of the leased line.

By an act of the Canadian parliament, approved May 18, 1916, the acquisition of the T. H. & B. bonds by the applicant, the Michigan Central, the Canada Southern, and the Canadian Pacific, was sanctioned. In the act the contract itself is set out in haec verba. The T. H. & B. was authorized to issue its consolidated mortgage bonds not to ex

Statement of the Case.

ceed $10,000,000, and agreed to issue the same from time to time for its proper corporate purposes, with the consent of the four owning railroad companies, which “will jointly acquire the said bonds as and when issued, upon such terms as may be mutually agreed.”

Article 6 of the agreement contains the following:

“(b) That when and so often as any of said

“ consolidated mortgage bonds are, with the consent of said other railway companies, parties hereto, issued by the Hamilton Company as herein provided, the said other railway companies will jointly acquire the said bonds as and when issued, upon such terms as may be mutually agreed;

"(c) That upon the acquisition by the said other railway companies of the said consolidated mortgage bonds of the Hamilton Company, as in the preceding paragraph hereof provided, the same shall be disposed of for their joint account, and that in order to negotiate and sell the same to the best advantage, the said other railway companies will execute upon each of the bonds, as and when disposed of, their guaranty in the following form (or in such other form as they may agree upon) to-wit:

"'For value received, The Michigan Central Railroad Company, The Canada Southern Railway Company, The New York Central Railroad Company and The Canadian Pacific Railway Company do hereby jointly and severally guarantee the payment of the principal and interest of the within

Statement of the Case.

bond according to its tenor, to the legal holder thereof.''

Under the terms the owning companies agreed to contribute towards their common liability under the guaranty in the following proportions:

The Michigan Central, 124 per cent.,
The Canada Southern, 124 per cent.,
The New York Central, 25 per cent.,
The Canadian Pacific, 50 per cent.

And they agreed that they would not sell any part of their holdings of T. H. & B. stock, but would retain the same during the continuance of the agreement.

On August 1, 1916, the T. H. & B. executed its consolidated mortgage securing its bonds for $10,000,000, and thereafter issued $2,000,000 of these bonds at 41 per cent. and sold them to the owning companies, which bought them at 90 per cent. of their face, and contributed to the purchase price as follows:

The Canadian Pacific, $900,000,
The Michigan Central, $225,000,
The Canada Southern, $225,000,
The New York Central, $450,000.

It further appears that the owners of these bonds desire to sell them in order to reimburse their treasuries for the moneys so advanced, and that to secure an adequate price therefor it is necessary to guarantee payment thereof jointly and severally, and that the New York Central has never capitalized such purchase by the issue of its own securities.

Statement of the Case.

After the hearing the commission made the following order: “Ordered that said The New York Central Railway Company be and it hereby is authorized, in so far as this Commission may grant said authority, to join with said The Michigan Central Railroad Company, The Canada Southern Railway Company and The Canadian Pacific Railway Company in guaranteeing the payment of the principal and interest of said bonds of The Toronto, Hamilton & Buffalo Railway Company, Series A, amounting to $2,000,000, as they become due, by executing upon each of said bonds the following guaranty: 'For value received The New York Central Railroad Company, The Michigan Central Railroad Company, The Canada Southern Railway Company, and The Canadian Pacific Railway Company hereby jointly and severally guarantee the payment of the principal and interest of the within bond, according to its tenor to the legal holder thereof.'

On January 6, 1917, "James Pollitz, as holder of 120 shares of stock of The New York Central Railroad Company, and Clarence H. Venner, as holder of 375 shares of stock of The New York Central and Hudson River Railroad Company and 14 shares of stock of The Lake Shore and Michigan Southern Railway Company” (the two last-named companies being constituents of the applicant's consolidated corporation), filed their application for a rehearing before the public utilities commission upon the grounds:

"First: That the applicant is not lawfully

Opinion, per JOHNSON, J.

organized, being an illegal consolidation and without a lawful board of directors.

“Secondly: That the applicant lacks the corporate power and is wholly unauthorized by any law or statute to guarantee the bonds of The Toronto, Hamilton & Buffalo Railway Company, or to enter into the obligation of guaranty conemplated by the application and order.

“Thirdly: That the applicant, by its ownership and control of parallel and competing lines, is a monopoly, doing business in violation of the laws and statutes of the state of Ohio, of the other states wherein its lines run, and of the United States, and that its application is in furtherance of such violation.

“Fourthly: That the application is insufficient upon its face.

“Fifthly: That upon the evidence herein the application cannot be lawfully granted.

“Sixthly: That the Commission erred in granting the application.”

This application was overruled and this proceeding is brought to set aside the order of the commission.

Messrs. Henry, Fauver, McGraw & Thomsen, for plaintiffs in error.

Mr. Joseph McGhee, attorney general, and Mr. S. H. West, for defendant in error.

JOHNSON, J. The application was based upon the provisions of Section 614-53, General Code,

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