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POLLITZ v. MICHIGAN RAILROAD COMMISSION.

1. RAILROADS - MICHIGAN RAILROAD COMMISSION - POWERS - JUDICIAL QUESTIONS. The statute (Act No. 144, Pub. Acts 1909, as amended by

Act No. 259, Pub. Acts 1915, 2 Comp. Laws 1915, § 8161 et seq.) does not commit to the Michigan railroad commission for decision any questions which may arise be tween an applying corporation and its stockholders, or between the corporation and the State, and the jurisdiction of the commission may not be extended merely by raising before it questions which are judicial in character

and properly for the courts to determine.? 2. SAME-CERTIORARI-QUESTIONS REVIEWABLE.

Upon certiorari to review an order of the Michigan railroad

commission, the Supreme Court will not review an opinion of the commission based upon evidence; neither will it review any matter not committed to the commission for

decision and not decided by it. 3. SAME-REMEDY OF STOCKHOLDERS_EQUITY.

A suit in equity to question the power of a railroad corpo

ration to guarantee the bonds of another railroad of which it is part owner is the proper remedy of objecting stockholders of the corporation so guaranteeing said bonds, rather than certiorari to review the action of the Michi

gan railroad commission authorizing said guaranty.' 4. SAME-ULTRA VIRES-QUESTIONS REVIEWABLE.

Where the evidence is insufficient for the Supreme Court

to determine that the commission should have found that the guaranteeing of said bonds was ultra vires (admitting that the commission had power to decide said question), its order authorizing such guaranty will, upon certiorari to review said order, be affirmed, since the question of

ultra vires can be determined upon a trial of the issue. BIRD, C. J., and KUHN, J., dissenting.

Certiorari by James Pollitz and another to review an order of the Michigan railroad commission authorizing the New York Central Railroad Company and the Michigan Central Railroad Company and others to guarantee the payment of bonds. Submitted June 28, 1917. (Docket No. 84.) Writ dismissed May 29, 1919.

*See notes in 45 L. R. A. (N. S.) 629; 47 L. R. A. (N. S.) 1167. See note in L. R. A. 1918D, 175.

Orla B. Taylor (Elijah N. Zoline, of counsel), for appellants.

Alexander J. Groesbeck, Attorney General (Frank E. Robson and Robert J. Cary, of counsel), for appellee.

BIRD, C. J. (dissenting). This proceeding is certiorari to the Michigan railroad commission to review its order authorizing the New York Central Railroad Company and the Michigan Central Railroad Company to join with the Canada Southern Railway Company and the Canadian Pacific Railway Company in guaranteeing $2,000,000 par value of the bonds of the Toronto, Hamilton & Buffalo Railway Company.

The Toronto, Hamilton & Buffalo Railway Company is a Canadian railway owning about 120 miles of railway, extending westerly from Hamilton around the end of Lake Ontario to Waterford and Welland, connecting at those points with the Michigan CentralCanada Southern lines, with the Canadian Pacific at Hamilton, and with the New York Central at Niagara Falls. Its authorized capital stock is $5,500,000, divided into 55,000 shares, of which 45,125 shares have been issued, and are owned as follows: New York Central Railroad Co.....

.16,766 Michigan Central

9,842 Canada Southern Railway Co...

6,271 Canadian Pacific

.12,246 In August, 1916, the Toronto, Hamilton & Buffalo Railway Company executed a mortgage on all of its property, securing $10,000,000 of 412% bonds, $2,000,000 of which have been issued and denominated

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“Series A." This series was purchased by the stockholding railways at 90% of its par value, in the following amounts: New York Central Railroad Co....

$500,000 Michigan Central

250,000 Canada Southern Railway Co..

250,000 Canadian Pacific

1,000,000 The owners of these bonds, being desirous of selling them to the investing public, concluded that the price obtainable therefor would be materially enhanced if the owning companies jointly and severally guaranteed the principal and interest. In view of this they entered into such agreement. In pursuance of this plan the New York Central and the Michigan Central Railroad companies each filed its petition with the Michigan railroad commission, praying for its approval. A hearing followed and the prayer of the petition was granted on September 27, 1916. On November 8th following, the petitioners as stockholders of the New York Central and Michigan Central railroad companies filed their objections to the order and petitioned the commission for a rehearing, the principal objection being that the commission had exceeded its authority in authorizing these railways to guarantee the bonds of another railway company. After a legal argument of the questions involved the commission decided it had the power to grant the order theretofore made and the rehearing was denied. This court then ordered, upon application of petitioners, the issuance of a writ of certiorari to review the proceedings.

1. Before proceeding to consider the questions raised by plaintiffs, attention should be given to the claim of the railways on behalf of the commission, that plaintiffs are not "persons aggrieved" within the meaning of the statute and, therefore, the proceeding should be dismissed. The statute referred to is Act No. 144, Pub. Acts 1909, as amended by Act No. 259,

Pub. Acts 1915 (2 Comp. Laws 1915, $ 8161 et seq.). This is the act which confers jurisdiction upon the railroad commission to act in such matters. It provides for a review of the final orders of the commission in the following words:

“The Supreme Court, upon petition of any person aggrieved, may review by certiorari any final order of determination of the commission.”

It is said by counsel for defendant that the corporate affairs of these railway companies are managed and directed by their directors and officers, and that plaintiffs, as mere stockholders, have no right to meddle therewith. Plaintiffs concede this to be the general rule if the subject-matter of the controversy be one in which the officers and directors of the corporation are acting within their authority and discretion and in good faith, but they assert and base their whole contention upon the legal proposition that the Michigan railroad commission has made an order in excess of its authority, and that in authorizing these two railroads to guarantee the obligations of another railway it has authorized an act in excess of the franchise rights of the railways. In short, that the commission has authorized the railways to do an act which is ultra vires, and they insist that when this state of affairs exists a stockholder has a right to intervene and prevent it.

It is said in Ruling Case Law that:

"If the officers of a corporation wrongfully deal with its property, to the injury of the stockholders, the latter may maintain a bill against the corporation and its officers for relief against such misappropriation.

* * A minority of the stockholders may maintain a suit in equity against the directors, against the corporation and against all others, whether the individuals or corporations, assisting them or confederating with them, to restrain such corporation and directors thereof from doing acts which amount to violation of charters, or to prevent any misapplication of their capital or profits, which might result in lessening dividends of stockholders, or value of their shares, if acts intended to be done create what in the law is denominated a 'breach of trust.' 7 R. C. L. p. 316, and cases cited.

See, also, Miner v. Ice Co., 93 Mich. 97 (17 L. R. A. 412); Flynn v. National Bank, 122 Mich. 642; Torrey v. Cement Co., 150 Mich. 86; Robinson v. De Luxe Motor Car Co., 170 Mich. 163.

"And it has been held that where a corporation is doing acts not in its power, a single stockholder may maintain a suit to stop or prevent it.” Byrne v. Manufacturing Co., 65 Conn. 336 (31 Atl. 833, 28 L. R. A. 304); Smith v. Stage Co., 18 Abb. Pr. (N. Y.) 419; Leslie v. Lorillard, 110 N. Y. 519 (18 N. E. 363, 1 L. R. A. 456).

“And it makes no difference that the acts complained of are beneficial to him or the corporation, as he has a right to stand on his contract." Central R. Co. v. Collins, 40 Ga. 582.

It is quite evident under the practice above indicated that were plaintiffs knocking at the door of an equity court with the same complaint that is here made, they would be admitted. This being so, we think it follows that their interest in the controversy, as stockholders, is sufficient to enable them to intervene in a special proceeding like the present one to prevent the consummation of illegal acts upon the part of these corporations, and if met with an adverse verdict, to appeal therefrom. See People, ex rel. New York Edison Co., v. Willcox, 207 N. Y. 86 (100 N. E. 705, 45 L. R. A. [N. S.] 629).

The provision of the statute authorizing a review of the orders of the commissions is very broad. It gives the right to "any person" who is aggrieved to have a review. If counsel are right in their contention no one would be entitled to a review unless he

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