author: Steere, J.

text:
    WINDEMERE-GRAND IMPROVEMENT & PROTECTIVE ASS’N v. AMERICAN STATE BANK OF HIGHLAND PARK.
    1. Equity — Jurisdiction — Enforcement of Building. Restrictions.
    The right and duty of a chancery court to enforce restrictions in a deed under its equitable jurisdiction is not absolute, but in the exercise of such jurisdiction the same general equitable considerations and rules are recognized as move the court in cases for specific performance of contracts.
    2. Same — Building Restrictions — Residential Purposes — Changed Conditions.
    The equity court will not enforce the provisions in a deed restricting the usé of the premises to residential purposes, where, since the dedication of the plat, the character of the locality has changed from a residential to a business section, and adjoining lots, originally containing the same-restrictions, have been freed therefrom, and are now used for business purposes.
    Appeal from Wayne; Dingeman, J.
    Submitted February 6, 1919.
    (Docket No. 106.)
    Decided May 2, 1919.
    Bill by the Windemere-Grand Improvement and Protective Association against the American State Bank of Highland Park and another to enjoin the violation of building restrictions. From a decree dismissing the bill, plaintiff appeals.
    Affirmed.'

      Roseoe C. Griffith, for plaintiff.

      J. Walter Dohany and Dohany & Dohany, for defendant bank.
   Steere, J.

Plaintiff’s bill of complaint was filed to enjoin construction by the defendant bank of a one-story reinforced concrete and stone bank building in alleged violation of certain building restrictions on lot 4 of Curry’s subdivision of Pallister’s subdivision of part of quarter section 4, 10,000-acre tract, in the village of Highland Park, Michigan. From a decree of the Wayne county circuit court in chancery dismissing said bill plaintiff has appealed, relying largely for reversal on Moore v. Curry, 176 Mich. 456, where the restrictions in this same subdivision were involved, reference to which may be made for a general understanding of the situation and comparatively recent developments in the locality up to that time.

Curry’s subdivision contains 312 lots, of which lots 1 to 12 inclusive are situated on the east side of Woodward avenue, lot 4 being at the northeast comer of Woodward and Windemere avenues, facing Woodward with its southerly side along the north side of Windemere, which extends east in the subdivision between Woodward and Oakland avenues. The lot is 53.92 feet in width fronting on Woodward, and 150 feet in depth with a 20-foot north and south alley at its rear, east of which the lots front on Windemere.

Lot 4 was deeded by Curry, one of the original platters of the subdivision, to John D.' Taylor on June 14, 1906. This deed contained substantially the same restrictions relative to residence purposes, etc., set out in Moore v. Curry, supra, authorizing, however, the erection of two dwellings on the lot, one on the front, “not less than 35 feet from the front line,” to cost at least $3,500, and one on the rear, “not less than 10 feet back from the street line,” to cost at least $2,500. Taylor conveyed the lot to one Burns by a deed containing those restrictions; Bums to one Blanck by a deed in regular form without the restrictions; Blanck and wife to the defendant Welt Company by conveyance without'the restrictions and the Welt Company sold to the defendant bank by a land contract without the restrictive clause. All of.these conveyances describe the property as lot number 4 of said subdivision according to the recorded plat thereof, giving liber and page. Upon the face of the original plat appears a blue line extending along and just north of the north line of Windemere avenue to Woodward including lot 4, on which is written, “building line 22 feet from street line.” It may be noted that the legal significance of this blue line was particularly urged for plaintiff in view of the issue developed on the hearing, it being then conceded, and testified by plaintiff’s witnesses, that Woodward avenue had become strictly a business street and there was no objection to the proposed building if kept north of this line. Plaintiff’s president testified of its character in part:

“We felt it was a business street and ought to be built up. * * * I want to see the business there. * * * This property, I understand, is worth over $700 a foot. * * * We don’t imagine it for a residence at all.”

Asked by the court, “What is the objection to this building?” he replied:

“There is no objection to it, * * * It is the objection to bottling up Windemere Avenue with prop? erty that they did not purchase for building purposes, that is the way that we have argued it up there.”

Of this issue, defendant’s counsel said: “As I understand it, the real contention is where the south line of this business block should be located”; to which plaintiff’s counsel replied: “That is it.”

The question of enforceable building restrictions has so frequently been before this court and discussed in its various aspects that further discussion of the settled rules would be but repetition. The urged limitation on equitable jurisdiction to enforce restrictive building covenants not found to have been affirmatively shown in Moore v. Curry, supra, is. conceded to exist here. There complainant sought to restrain the palpable violation of a restrictive covenant prohibiting the erection of a proposed business block upon which defendants had started work in a small way to test the attitude of residents in the district towards such an invasion. The only possible defense against the injunction suit which followed was that equity ought not to enforce the restriction because conditions had changed since the property was platted, and Woodward avenue had become an important and strictly business street. This was strenuously denied by plaintiff and found by the trial court not affirmatively shown after hearing witnesses and verifying their testimony by a personal inspection of the locality. On the record there made this court found no impelling reasons to disturb the conclusions reached by the trial court and affirmed the decree, without, however, foreclosing the privilege of “bringing to the attention of the court any marked change in the conditions of the property in the future.” Here the changed conditions there contended for and denied are conceded as to Woodward avenue and this lot, which it'is admitted only can and should be devoted to business purposes. The restriction to residential purposes is not only waived, but we-are told by plaintiff’s president that it is “felt” that Woodward' avenue as a business street ought to be building up and the desire is to see business built up there, plaintiff’s only claim being a qualified right to dictate on what portion of lot 4 the building, to which in itself there is no objection, shall be built.

The various conveyances of this lot describe it as “lot numbered four, on the east side of Woodward avenue, in Curry’s subdivision (etc.), as recorded September 11, 1905, in liber 24 of plats, page 19, Wayne county records.” It is contended for plaintiff that such reference to the plat in the deeds makes it a part thereof as completely as delineating it in the instruments would do, and therefore the blue line with the notation was a building restriction running with the land and binding on all grantees taking under such description.- The general rule as to the significance of reference in a deed to a plat in aid of description is of doubtful application for support of the claimed exacted covenant, or imposed restriction upon the use of lot 4, under the facts shown here. This plat is without restrictions or limitations of any kind, except what may be inferable from the blue line and memorandum as to building limit in connection with it. If the general plan of limitations and restrictions for residence purposes, shown to have been adopted in subsequent conveyances, had been fully declared and properly delineated in the plat as a general plan of imposed restrictions on the subdivision, and by apt reference to the restrictions therein they had been made part of the covenants in the deed, as a condition annexed to the grant, the rule invoked would be nearer in point. As this property was platted lot 4 and adjacent lots along the east side of Woodward avenue fronted on that street, extending back 150 feet to a north anfl south 20-foot alley, beyond which the directions of the width and length of the lots was changed and they were fronted on Windemere avenue, running back north to an east and west alley. It is fairly inferable from what appears on the plat itself that the blue line running along the north side of Windemere avenue was put there with particular reference to lots fronting on that street, and such seems clearly indicated by the deed of lot 4, fronting on Woodward, soon thereafter given by the platter to Taylor. It is admitted in the record that the deed from the platter for each lot “describes only that particular lot, and also names the restrictions on that lot, and has no reference to any other lot in the subdivision.” No reference is made in the deed'to a purchaser of any other lot to any restrictions on lot 4. The restrictions in the deed of lot 4 to Taylor make no mention of a 22-foot building line on Windemere, and as to that street expressly permit the building of a $2,500 residence on the rear of the lot within 10 feet of the street line, specifying a different building line for the front on Woodward avenue, which impliedly negatives the claimed inference from the blue line on the map of an intention to apply it to lot 4.

If conditions had continued as anticipated when this subdivision was platted and Highland Park remained a quiet village of suburban homes, the owner of lot 4 had the right under the residential restrictions imposed upon it to “bottle up” Windemere avenue and cut off the view towards Woodward to within 10 feet of the Windemere line, by the erection of two wooden dwellings at a total cost of $6,000. Under the conceded changed conditions the proposed expensive and attractive bank building only cuts off 8 feet more of the view from Windemere. This building is clearly shown to be a legitimate step in furtherance of building up Woodward avenue in that locality as a business street in harmony with what plaintiff’s president states is generally felt should be done. It is designed solely for a banking building, to be devoted exclusively to the increasing business of the defendant bank, which has outgrown the capacity of its rented quarters in Highland Park at the corner of Woodward and Cottage Grove avenues, where it has been located for between three and four years. To adequately and appropriately meet the demands of its banking business, this structure as planned and to be built, will be 60 feet in depth with a frontage of about 52 feet on Woodward avenue, its north side at the north line of lot 4 and its southerly side 2 feet north of its south line along Windemere. It is called a classical design, the exterior of white cut stone and ornamental work with large fluted column pilasters, “classical corners,” and large Roman arch windows, the design to be carried out on the Windemere side of the building also, in which will be four of the arch windows. It is not questioned that such a building is warranted under developed business conditions in that locality, and experienced real estate dealers testify the legitimate demand for business locations along Woodward avenue in that vicinity is such that the frontage of lot 4 is worth at a fair market value for business purposes $850 per foot, that it has no market value for residence purposes and no residences have been built in Highland Park on that street within the past six or seven years. Plaintiff’s president, in explaining how certain lots in close proximity on the same side of Woodward avenue had been “lifted out” of the restrictions by consent of the association, said: “We realized that this property was absolutely worth nothing except for business purposes.” This admission suggests as well in point the proposition that equitable jurisdiction of chancery courts to enforce restrictive covenants made in evident reference to a continuance of then existing and anticipated demand for quiet suburban homes, will not as a rule be exercised to compel observance of a residential restriction, which when imposed had in view use for dwelling purposes only of property which subsequently by unanticipated development and advance of business became, from changed conditions, strictly business property and no longer of use or value for the purpose to which it was restricted. 2 Devlin on Real Estate (3d Ed.), § 991c; Berry on Restrictions, § 403.

That there has been a marked change of conditions in that locality, especially in the character of Woodward avenue, from those shown as existing when Moore v. Curry, supra, was tried is admitted by plaintiff and emphasized by the testimony of its own witnesses. They testify that in 1905 when this subdivision was platted it was “a country section,” since which time Detroit has so developed and solidly grown to the northward that it now entirely surrounds Highland Park until it is impossible for the latter “to expand any further”; that “there has been a vast growth of manufacturing and business institutions out there, and Woodward avenue has greatly changed its character since 1913 — nearly all of the business places there have been built since 1911”; all Woodward avenue in that vicinity being “an exceptionally noisy, busy street and is growing more and more so every day” ; the lots fronting upon it being valuable only for business purposes and past imagining for a residence; nor has a dwelling facing Woodward avenue ever been built on any of the lots in that subdivision.

Plaintiff’s attitude is shown to have been in various instances actively repugnant to maintaining Woodward avenue' within the limits of this subdivision for residence purposes only according to the general plan adopted by the platter for its improvement and development now invoked, and has in its capacity as an improvement association contributed helpfully to developing that part of Woodward avenue as a business street by agreement with owners of certain lots in the subdivision fronting Woodward, upon which it was proposed to erect business blocks, that they “should be lifted out of the restrictions.” Lots 5, 6 and 7 in the subdivision, immediately north of the lot in question here, were thus emancipated by plaintiff. In some instances resort was had to the chancery court for ratification of the project through injunction proceedings, ostensibly instituted by plaintiff to enforce the restrictions and contested by the lot owner on the ground of changed conditions similar to those urged here by defendant, resulting in admittedly, consent decrees agreeable to previous agreements or understandings that such lots should be lifted out of the restrictions, with a provision in each decree that it should not operate as a waiver by plaintiff “or any other persons interested,” as to other lots in the subdivision. They certainly would not operate as a waiver by any other person not a party to the proceeding, but it may well be questioned how long the courts are open to plaintiff m its improvement and protective activities' for negative and affirmative action on a program of selective lifting of limitations on a street where it has by prior participation, in so practical and positive a manner, committed itself to the proposition of unquestioned changed conditions; and necessarily changed conditions of a kind not within contemplation of the parties when the limitations were imposed, which have so frustrated the general scheme then devised for use of the subdivision, so far as Woodward avenue is concerned, as to entirely defeat the object of the restrictive covenants, and in. various unanticipated ways materially affected the possible use and values of property fronting on that thoroughfare. With these changed conditions conclusively shown and conceded as to that street as it extends through the subdivision, the building and business limitations as to lots fronting on it become obsolete. It is here urged that a single and disputed feature of these residential restrictions should now be enforced against this lot as a matter of right in a court of equity on the strength of this questionable blue line.

The object and scope of the limitations in the deed to defendants’ grantors was in furtherance of a scheme by the platters of the subdivision to exclude all trade or business, and restrict its. use to residential purposes with only a restricted kind and number of dwellings built upon it. Concededly the servient estate on this lot is in effect and for practical purposes destroyed by the changed conditions which now make it unfit and worthless for such use. In Sharon Iron Co. v. City of Erie, 41 Pa. St. 341, it is said:

"A condition that destroys an estate is to be taken strictly, and it is established law that a condition once dispensed with, in the whole, or in part, is dispensed with forever, and as to all the land, for a condition is entire, and cannot be apportioned except by act of law.”

The right and duty of a chancery court to enforce restrictions under its equitable jurisdiction is not absolute. In the exercise of such jurisdiction the same general equitable considerations and rules are recognized as move the court in passing upon applications to compel specific performance of contracts. Certainly no decree of this court can retain or restore the quiet suburban conditions existing and contemplated when those residential restrictions were imposed. It cannot eliminate the “vast growth of manufacturing and business institutions out there,” and invasion of traffic which has made “all Woodward avenue in that vicinity” an exceptionally noisy and busy street. This unforeseen and radical change in condition and character of the street has defeated the object and purpose of the restrictive covenants upon this lot, which had relations to protecting the home, or dwelling house, and equity does not now, under the concessions and facts shown, demand that defendant be enjoined from improving and using as proposed this lot thus made worthless for residential purposes.

The decree dismissing plaintiff’s bill of complaint is affirmed, with costs.

Bird, C. J., and Ostrander, Moore, Brooke, Fellows, and Stone, JJ., concurred. Kuhn, J., did not sit.


source: Caselaw Access Project

author: Bird, C. J. Ostrander, J.

license: Public Domain

text:
    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 between 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 hy it.
    3. Same — Remedy oe Stockholders — Equity.
    A suit in equity to question the power of a railroad corporation 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 Michigan 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.

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

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

      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.

   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 Central-Canada 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 4%% bonds, $2,-000,000 of which have been issued and denominated “Series A.” This series was purchased by the stock-holding 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 officer's, 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 were a party'. Had the legislature intended to restrict the right to parties, it would have doubtless provided that “any party” aggrieved instead of “any person” aggrieved might review the proceedings. See 1 Words & Phrases, .p. 276.

We are of the opinion that the interest of these plaintiffs is sufficient to make them “aggrieved persons” within the meaning of the statute, authorizing a review of tÜé final orders of the commission. Counsels’ objection in this regard will be overruled.

2. Has a Michigan railway corporation the power to guarantee the obligations of another railway company?

It is the contention of plaintiffs that a railway corporation has no such power unless expressly granted by the legislature, and that the legislature in this State has not done so. The question appears to be one that is settled by authority. It is said in Cyc.:

“As a general rule a railroad company, like other private corporations other than surety or guaranty companies, has no power to enter into any contract or indorsement by which it becomes a guarantor or surety, or otherwise lends its credit to another person or company, even though it may derive some indirect benefit from the guaranty, except, in so far as it is expressly authorized to do so by its charter or other statute, and except where the power to do so is implied from the company’s general powers, as being necessary and proper to enable it to accomplish dhe objects for which it was created, and in the conduct of its business, and where such a guaranty or a contract to give one, is for an unauthorized purpose, it has been held that it is strictly ultra vires, unlawful and void and incapable of being made good by ratification or estoppel.” 33 Cyc. p. 455.

In Ruling Case Law, it is said:

“A railroad corporation, unless authorized by its act of incorporation or by other statutes to do so, has no power to guarantee the bonds of another corporation; and such a guaranty, or any contract to give one, if not authorized by statute, is beyond the scope of powers of the corporation, and incapable of being made good by ratification or estoppel. Accordingly though a railway company may have implied power to establish elevators to further its business, it has. no power to guarantee the payment of dividends to the subscribers of stock in an elevator corporation.” 7 R. C. L. p. 605.

In Cook on Corporations, it is said:

“One of the most important and yet difficult branches of railroad corporation law is the question whether one railroad corporation may guarantee the bonds or dividends of another railroad corporation. The power of a railroad corporation, in this respect is much more restricted than that of a trading or manufacturing corporation, because the former is a quasi public corporation, and its powers are strictly construed. Moreover the location of its railroad is specified in the charter, and the guaranty of the bonds or dividends on the stock of another railroad corporation is much the same as buying the stock of the latter, which is not legal, unless expressly authorized by the charter or the statutes of the State. A railroad corporation has no implied power to guarantee the bonds or dividends on the stock of another railroad corporation. * * * The power of a railroad company to consolidate with or purchase the railroad of another company, does not give power to guarantee the bonds of the latter company, without such a consolidation or purchase.” 3 Cook on Corporations (7th Ed.), § 775.

These texts, which are supported by numerous cases cited, establish the general rule that one railway company may not guarantee the obligations of another railway company unless authorized to do so by the power which created it. This is the doctrine contended for by the plaintiff and is not denied by the defendant. Counsel cite several provisions from the railroad laws of this State which they argue have some bearing on the question. They follow:

“To cross, join and unite its railroads with any other railroad now or hereafter constructed under any law whatever at any point on its route; * * * and to make all such business arrangements as said companies may agree upon.” 2 Comp. Laws 1897, § 6234, subdivision (6).
“And any company organized under this act may make any arrangement with any other railroad company, whether organized or incorporated under this act or any other act, for running its cars over the road of such other company, or for the working and operating of such other roads as said companies shall mutually agree upon; and any companies organized or incorporated under this or any other act whose lines are connected, may enter into any arrangements for their common benefits, consistent with and calculated to promote the objects for which they were created.” * * * 2 Comp. Laws 1897, § 6253.
“To borrow such sums of money as may be necessary for completing, finishing, equipping or operating their road, or any part thereof, or for paying any indebtedness necessarily incurred for completing, finishing or operating their road, or any part thereof; and to issue and dispose of their bonds or obligations for any amount necessarily borrowed for such purpose, for such sums and for such rate of interest, not exceeding ten per cent., as they may deem advisable, and to mortgage their corporate property and franchises and the income thereof, or any part thereof, to secure the payment of any debt contracted or to defray any expenditure by the company for the purpose aforesaid.” 2 Comp. Laws 1897, § 6263.
“It shall be lawful for any railroad company organized, or that may be organized, under the laws of this State, to sell, lease and convey its road * * * or any part or portion thereof, to any other railroad company, whether organized within or without this State; and to acquire by lease or purchase from the owner of any other railroad such road, together with the rights and franchises connected therewith, or any part or portion thereof, whether located within or without this State, * ' * * to acquire and use such road, rights and franchises by purchase of the stock, or otherwise, as may be agreed between the parties interested, said railroads not having the same terminal points, and not being competing lines.” Act No. 30, Pub. Acts. 1901 (2 Comp. Laws 1915, § 8435).

Counsel have not pointed out any express provision which authorizes, a Michigan railroad company to guarantee the obligations of another company, neither have they pointed out any single provision from which that power may be implied, but the argument is that the State has manifested a broad and liberal policy toward the development of railways, and that this power may be inferred from the several provisions taken together. Counsel have cited the following cases in support of their argument: Dewey v. Railway Co. (1892), 91 Mich. 351; Lisman v. Trust Co. (1914), 211 Fed. 413; Harrison v. Railway Co. (1882), 13 Fed. 522; Tod v. Land Co. (1893), 57 Fed. 47; Central Railroad & Banking Co. v. Trust Co. (1902), 114 Fed. 263; Chicago, etc., R. Co. v. Howard (1868), 7 Wall. (U. S.) 392; Rogers L. & M. Works v. Railroad Ass’n (1888), 34 Fed. 278; Arnot v. Railway Co. (1876), 67 N. Y. 315; Marbury v. Land Co. (1894), 62 Fed. 335; Fidelity Trust Co. v. Louisville Gas Co. (1904), 118 Ky. 588 (81 S. W. 927); Ellerman v. Railways Co. (1891), 49 N. J. Eq. 217 (23 Atk 287); Davenport v. Stone (1895), 104 Mich. 521 (53 Am. St. Rep. 467); Zabriskie v. Railroad Co. (1859), 23 How. (U. S.) 381; Green Bay, etc., R. Co. v. Steamboat Co. (1882), 107 U. S. 98 (2 Sup. Ct. 221); Pittsburgh, etc., R. Co. v. Bridge Co. (1889), 131 U. S. 371 (9 Sup. Ct. 770); Fort Worth City Co. v. Smith Bridge Co. (1894), 151 U. S. 294 (14 Sup. Ct. 339); Central Trust Co. v. Railway Co. (1898), 87 Fed. 815; Low v. Railroad Co. (1877), 52 Cal. 53 (28 Am. Rep. 629); Atchison, etc., R. Co. v. Fletcher (1886), 35 Kan. 236 (10 Pac. 596); Eastern Township Bank v. Railroad Co. (1889), 40 Fed. 423.

We have examined these cases and are satisfied that they do not infringe the general rule. An analysis of them will show that wherever the liability of the indorsing company has been upheld, the authority for the indorsement has been found, either in legislative provisions or in the fact that the indorsing company was the owner of the bonds which it had indorsed, or that the bends were in the hands of bona fide holders, or for other reasons which made it an exception to the general rule.

■ After a careful examination of the railroad legislation of this State, we are satisfied that there is no express provision therein which will permit the Michigan Central or the New York Central railroad companies to guarantee the bonds of the Toronto, Hamilton & Buffalo Railway Company, which it does not own, nor do we think there is any statutory provision from which the implied power can be reasonably inferred.

This same question, upon application of the New York Central Railroad Company, was before the public utilities commission of the State of Ohio. The Ohio commission granted the prayer, of the petition (in so' far as. they had the power to do so). The Supreme Court, upon appeal, held that the commission was without power under the laws of Ohio to authorize the New York Central Railroad Company to guarantee bonds of the Toronto, Hamilton & Buffalo Railway Company, which it did not own. Having arrived at the conclusion that the laws of Michigan do not authorize it, this case is a direct adjudication upon this question and we think should be followed by us. The conclusion of Mr. Justice Johnson, who considered the question, in an exhaustive and able opinion, concludes: has no authority to go beyond that and guarantee bonds which it does not own.” Pollitz v. Public Utilities Commission, 96 Ohio St. 49 (117 N. E. 149, L. R. A. 1918D, 166).

“We think that the applicant has the right implied from and incidental to the exercise of powers conferred by express statutory provision in Ohio, to sell bonds which it may acquire from the Hamilton company under the circumstances set out and to guarantee such bonds as part of the transaction, in order to sell them to the best advantage. But we think it

Our conclusion is that these railroad companies have no power-to guarantee the bonds of the Toronto, Hamilton & Buffalo Railway Company, which they do not own, and that the action of the Michigan railroad commission in authorizing them to guarantee the bonds of that company was an unauthorized act upon its part.

3. Another question should be noticed in view of arguments recently advanced. The argument is made that as the commission is a trier of facts only and has no judicial power, it is of no consequence that it has assumed to pass upon legal questions which are not within its jurisdiction; that such action will neither add to nor take away any of the rights of the parties, and, therefore, the writ should be dismissed because improvidently issued. It is for precisely this reason that the defendants have invoked the remedy of certiorari which the statute gives. It is the position of petitioners that the commission had no power to authorize the interested Michigan railways to guarantee the bonds of another railroad company, especially one operating in and subject to the laws of a foreign country. It is because this order of the commission is in excess of its jurisdiction that they want the order set aside.

If the argument to which we have referred is the proper view, why should we review drain proceedings where the drain commissioner has exceeded his authority, and why should we review the void acts of a highway commissioner in laying out a highway? Why not say the acts are void and cannot affect the legal rights of the parties and refuse to entertain the writ? It may be answered that the statute provides the remedy of certiorari in drain and highway proceedings. So it does in this proceeding and if it cannot be used where the commission has acted in excess of its statutory authority, it is extremely doubtful whether it can be made use of in reviewing legal questions. This court has said on more than one occasion that certiorari was the proper remedy to get rid of a void judgment. Lake Shore, etc., R. Co. v. Hunt, 39 Mich. 469; Harbour v. Eldred, 107 Mich. 95.

In considering the office of the writ it is said in 5 R. C. L. p. 252:

“Accordingly it has been held that the void judgment of a justice of the peace rendered after he has lost jurisdiction of the cause may be reversed by certiorari. So, too, the writ may be brought to quash an assessment made by a State board of equalization, or to review the determination of a board of police commissioners where they have acted judicially, or to review the proceedings of a court martial. It is also the proper remedy where the officials of a municipal corporation acting judicially in the enactment of an ordinance are without jurisdiction or are otherwise acting illegally.”

It. is true the Michigan railroad commission is not a judicial body, it is a ministerial body, but it has quasi judicial powers and necessarily must decide in each case whether it has jurisdiction of the subject-matter tendered. If it errs in this respect and holds that it has jurisdiction when it has none, it would seem as though there should be some method of correcting it. Upon this subject, it is said in the same work:

“When a new or summary jurisdiction is created, the proceedings so authorized, whether in a court or not, if of a judicial or quasi judicial character and not subject to review by writ of error or by appeal, may be removed to and reviewed by a superior court by virtue of this writ. At common law the writ was issuable before the proceeding's instituted had culminated in a trial, order or judgment, and was based on the absence or the excess or usurpation of jurisdic tion on the part of the tribunal from which the proceedings were removed.” Id. p. 253.

Again:

“In the absence of statutory provisions, limiting the scope of the writ of certiorari, the rule maintained by the weight of authority is that its office extends to the review of all questions of jurisdiction of power and authority of the inferior tribunal to do the action complained of, and all questions of irregularities in the proceedings, that is, of the question whether the tribunal has kept within the boundaries prescribed by the express terms of the statute law or well settled principles of the common law.” Id. p. 259.

See, also, Gregg v. Hatcher, 94 Ark. 54 (125 S. W. 1007, 27 L. R. A. [N. S.] 138, 21 Ann. Cas. 982); Wulzen v. Board of Supervisors, 101 Cal. 15 (35 Pac. 353, 40 Am. St. Rep. 17); City of Los Angeles v. Young, 118 Cal. 295 (50 Pac. 534, 62 Am. St. Rep 234); Board of Aldermen v. Darrow, 13 Colo. 460 (22 Pac. 784, 16 Am. St. Rep. 215); Kenyon v. Brightwell, 120 Ga. 606 (48 S. E. 124, 1 Ann. Cas. 169); White v. Wagar, 185 Ill. 195 (57 N. E. 26, 50 L. R. A. 60); People v. Superior Court of Cook County, 234 Ill. 186 (84 N. E. 875, 14 Ann. Cas. 753); U. S. Standard Voting Machine Co. v. Hobson, 132 Iowa, 38 (109 N. W. 458, 7 L. R. A. [N. S.] 512, 119 Am. St. Rep. 539, 10 Ann. Cas. 972); State v. Board of Com’rs of Hughes Co., 1 S. D. 292 (46 N. W. 1127, 10 L. R. A. 588); Tomlinson v. Board of Equalization, 88 Tenn. 1 (12 S. W. 414, 6 L. R. A. 207); City of Grand Rapids v. Braudy, 105 Mich. 670 (32 L. R. A. 116, 55 Am. St. Rep. 472); LeRoy v. Mayor, etc., of New York, 20 Johns. (N. Y.) 430 (11 Am. Dec. 289).

In the last named case it was said:

“The general superintending power of the court to award certiorari not only to inferior courts, but to persons invested by the legislature with power to decide on the principle or rights of the citizen, even in cases where they are authorized by statute finally to hear and determine, has been frequently exercised, is considered as well established by the common law, and can only be taken away by express words.”

If the order of the commission giving the railways the authority to guarantee the bonds of another railway company is without authority of law, then that order should be set aside. If it is not set aside the interested railways will undoubtedly proceed to act upon the void order so made by the commission, and after the guaranty is made and the bonds get into the hands of bom fide holders, it will lessen the value of these objections in the courts. To avoid these consequences was one of the purposes of the commission act (3 Comp. Laws 1915, § 11945 et seq.), namely, to prevent illegal issues of stocks and bonds before issue rather than to litigate the questions after they were issued and after they had passed into the hands of good faith holders. The order complained of should be set aside. No costs will be allowed.

Kuhn, J., concurred with Bird, C. J.

Ostrander, J.

The Michigan railroad commission,upon the separate applications of the New York Central Railroad Company and the Michigan Central Railroad Company, made its orders, identical in substance and effect, that made upon the application of the Michigan Central Railroad Company reading as follows:

“Application having been filed on the 26th day of September, 1916, by the Michigan Central Railroad Company for authority to guarantee the bonds of the Toronto, Hamilton and Buffalo Railway Company, to the amount of $2,000,000.00, and hearing having been had thereon on the 27th day of September, 1916, and
“It satisfactorily appearing that the Toronto, Hamilton and Buffalo Railway Company is a railroad corporation organized and existing under the laws of the Dominion of Canada, owning a railroad, extending from Waterford to Hamilton, and from Hamilton to Welland, with an extension from Hamilton towards Toronto, and an extension from Smithville to Port Maitland, all in the Province of Ontario, Canada, and connecting with the railroad owned by the Canada Southern Railway Company and operated under lease by the Michigan Central Railroad Company at Welland and Waterford, and with the Canadian Pacific Railroad at Hamilton, and that the Michigan Central Railroad. Company is a railroad corporation organized and existing under the laws of the State of Michigan, owning a railroad extending from Detroit, Michigan, to Chicago, Illinois, and operating under lease the railroad of the Canada Southern Railway Company extending from Windsor to Suspension Bridge in the Province of Ontario, Canada, and
“That the capital stock of the Toronto, Hamilton and Buffalo Railway Company now issued and outstanding is 45,125 shares of the par value of $100.00 each, which is now owned in the amounts hereinafter set forth by the following railroad companies: The Michigan Central Railroad Company, 9,842 shares, the Canada Southern Railway Company, 6,271 shares, the New York Central Railroad Company, 16,766 shares, the Canadian Pacific Railway Company, 12,246 shares, and
“That under date of August 1, 1916, the Toronto, Hamilton and Buffalo Railway Company executed its consolidated mortgage, to the Guarantee Trust Company of New York, trustee, as security for its fifty-year gold bonds to be issued to an amount not exceeding $10,000,000.00, of which bonds to the amount of $2,000,000.00 designated Series A and bearing interest at the rate of 4% per cent, per annum, have been issued and sold jointly to the Michigan Central Railroad Company, the Canada Southern Railway Company, the New York Central Railroad Company and the Canadian Pacific Railway Company, and that' the proceeds of the sale of said bonds are to be or have been used to pay outstanding, unfunded indebtedness of the Toronto, Hamilton and Buffalo Railway Company, representing expenditures incurred on the capital account and for the corporate purpose of said-the Toronto, Hamilton and Buffalo Railroad Company, and that the said companies so purchasing said bonds intend to sell the same at the best price “which can be obtained and use the proceeds to reimburse their respective treásuries for the moneys advanced by each to pay for said bonds and, that in order to secure an adequate price it will be necessary for said companies to guarantee jointly and severally the payment of the principal and interest of said bonds as they become due, and
“This commission being of the opinion that the use of the money to be acquired by said the Michigan Central Railroad Company by the sale of said bonds so guaranteed by the Michigan Central Railroad Company and the other purchasing companies, jointly and severally, is reasonably required for the purpose of said the Michigan Central Railroad Company and for the purpose of enabling it to reimburse its treasury on account of said purchase,—
“Therefore, By virtue of the authority vested in us by law, It Is Hereby Ordered:
, “(1) That said the Michigap Central Railroad Company be and is hereby authorized and empowered to join with the Canada Southern Railway Company, the New York Central Railroad Company and the Canadian Pacific Railway Company, and jointly and severally guarantee the payment of the principal and interest of $2,000,000.00 of the bonds of the Toronto, Hamilton and Buffalo Railway Company, as they become due according to the terms of said bonds secured by said mortgage executed by the said the Toronto, Hamilton and Buffalo Railway Company, to said Guarantee Trust Company of New York, trustee, under date of August 1, 1916, designated as Series A, and bearing interest at the rate of 4% per cent, per annum.
“ (2) That said the Michigan Central Railroad Company make verified report to this commission of its doings under and by virtue of this, order every six ■ months from the date hereof, and until it shall have been reimbursed from the sale of said bonds so to be guaranteed for the amount originally expended by it in said joint purchase of said bonds.”

This on September 27,1916. On November 8,1916, plaintiffs in certiorari, Pollitz and Venner, filed a petition with the commission, reciting the granting of the orders above referred to, stating that Pollitz is a stockholder in the New York Central and Venner a stockholder in the Michigan Central Railroad Company, denying that either of said corporations has power to make the contract of guaranty referred to in the said orders of the commission, and setting up further:

“VI. That if the contention of these petitioners is sound, to-wit: that there is no statutory authority in any of the States aforesaid expressly permitting such guaranty of bonds as is involved in this matter, which they are advised is the case, then they respectfully submit that this commission ought not to place its stamp of approval on such guaranty not only because it is unauthorized, but for the reason that such' approval will be used to aid the sale of said bonds to innocent investors.
“VII. These petitioners make this application in good faith for the purpose of assisting this commission to reach a rightful determination of the matters involved; of preventing said Michigan Central and New York Central Railroad Companies from placing upon the market any bonds stamped with their illegal guaranty, and of protecting the investing public against the same.
“VIII. To the end, therefore, that your petitioners may have an opportunity to be heard and that the commission may receive further proof or information which will enable it to more justly determine whether the application should be granted, a rehearing of said matter is hereby respectfully applied for.” * * *

The objections and contentions of the petitioners were amplified and elaborated in a paper filed December 15, 1916, and, in substance, they amount to the following:

(a.) The Michigan Central was without authority under the laws of the State of Michigan, and the New York Central was without authority under the laws of the State of Michigan and the other States under which it is organized, to guaranty bonds of the Toronto, Hamilton & Buffalo Company.

(b) There is no constitutional or statutory authority in Michigan authorizing such guaranty.

(c) The railroad companies were not authorized to make a joint guaranty.

id) As to the New York Central the action was erroneous because:

1. It is without a legal board of directors.

2. Several members of the board of directors as now constituted, own shares of stock in express and other freight and transportation companies, contrary to the statutes of Ohio.

3. The laws of the several States under which it is organized control its action in Michigan and do not authorize the proposed guaranty.

4. It,has violated the Federal laws commonly known as the Sherman and Clayton acts, and has violated certain anti-trust acts of the State of Michigan.

The commission denied the rehearing and thereupon Messrs. Pollitz and Venner sued out the writ of certiorari to review the action of the Michigan railroad commission in the premises. In their petition for the writ, after averring that neither corporation has power to make the. Contract of guaranty proposed to be made, it is further asserted that petitioners as shareholders are subjected to grave danger of loss and damage in case of the default of the corporation issuing the said bonds, are aggrieved by the ultra vires acts of the petitioning corporations and by the final order of the commission.

It is obviously of the first importance to discover the nature and the extent of the powers conferred upon the Michigan railroad commission in this behalf and the force and effect of the orders which it has made. For this purpose reference must be made to Act No. 300, Public Acts of 1909 (2 Comp. Laws 1915, § 8109 et seq.), Act No. 144, Public Acts of 1909, and Act No. 259, Public Acts of 1915 (2 Comp. Laws 1915, § 8161 et seq.). In so far as the powers and duties of the commission are herein involved, they will be found defined in the last two acts mentioned. It has no judicial or legislative powers, is an administrative energy, and with reference to most matters committed to it, and as to those here involved, is a trier of facts. See Michigan Cent. R. Co. v. Railroad Commission, 160 Mich. 355; Detroit, etc., R. Co. v. Railroad Commission, 171 Mich. 335, 346; Grand Rapids, etc., R. Co. v. Railroad Commission, 183 Mich. 383, 392. All that the railroad companies interested here could secure from it, all that it is empowered to give them, is an order authorizing what they desire to do,

“stating that in the opinion of the commission the use of the capital or property to be acquired to be secured by .the issue of such stock, bonds, notes or other evidences of indebtedness, is reasonably required for the purposes of such * * * corporation.” * * *

It is assumed that the opinion is to be based upon evidence; but the opinion having been formed favorably to the applying corporation, the order, or authorization, issues as of course. The language of the statute conveys no idea of committing to the commission for decision any of the numerous questions which may arise between an applying corporation and its stockholders, or between the corporation and the State, and no argument is required to prove that the jurisdiction of the commission may not be extended merely by raising before it questions which in our scheme of government are judicial in character and properly for courts to determine. See Chicago, etc., R. Co. v. Railroad Commission, 162 Wis. 91 (155 N. W. 941); People v. Railway Co., 273 Ill. 440 (113 N. E. 68); People v. Railroad Commissioners, 158 N. Y. 421 (53 N. E. 163). The opinion of the commission does not make valid corporate action which as to the State, or stockholders, is invalid. It conducted in this case an inquisition, in behalf of the public, upon the application of a corporation, with respect to a single subject.

What, then, is there here for this court to review? Clearly, it will not review an opinion of the commission based upon evidence. It is quite as clear, I think, that it will not review any matter not committed to the commission for decision and not decided by it.

It is provided in the act that—

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

—and this provision is made the ground of an argument in behalf of plaintiffs in certiorari. The statute in this respect is, in my opinion, declaratory of the law. This court is empowered by the Constitution to issue writs of certiorari and hear and determine them. There is no provision in the act for the issue of the writ of mandamus and yet it is obvious that this court may, upon proper showing, use the writ to set the commission in motion, although not to require it to reach a particular decision. Writs of certiorari do not issue as of course, nor should this statute be construed so as to require the issue of the writ except in cases in which, the statute aside, it is considered by the court to be an appropriate remedy. Plaintiffs in certiorari are not parties to the inquisition which was conducted by the commission. That they would be admitted, in a court of equity, in a suit against the corporation, to question its power to guarantee the bonds referred to in the order of the commission, is not a fact supporting an argument in favor of their right to raise the question in this court in this proceeding. Quite the contrary. They have an adequate remedy, and no opinion of the commission and no order which this court may properly make in the premises can be urged for or against their right to pursue it in a court having jurisdiction.

I have assumed, without, however, considering or deciding, that the application of the railroads to the commission presented, within the terms of the act, a case for their opinion.

In my opinion, the writ was improvidently granted and the proceeding should therefore be dismissed, with costs against plaintiffs in certiorari.

Assuming that the commission had power to decide (I have pointed out that it did not decide) whether the proposed action of the petitioning railroads is ultra vires, or, as seems to be suggested, that, if it has not this power, still it ought to refuse to sanction the proposed action because such action would be ultra vires, upon what evidence is this court to determine that the commission, upon the application of plaintiffs in certiorari, ought to have granted a rehearing and upon the rehearing ought to have decided that the proposed action is unlawful? No testimony addressed to this issue was offered. Such evidence as the record affords is to be found in the petitions of the’railroads and in the statements of their counsel addressed to the commission at the hearing. What the commission found'is.'stated, so far as the commission regarded it as necessary to do so, in the recitals found in its order above set out. In explanation and amplification of the facts there recited, the pertinent statements of counsel for the railroads are here given:

“The Toronto, Hamilton and Buffalo is a Canadian company, operating a line between Buffalo and Hamilton, with branches that touch upon the Michigan Central, and another branch which works off towards Buffalo, so that they operate as a connecting line between the Canadian Pacific and the New York Central ^and Michigan Central lines, and results in a very profitable and desirable — I won’t say profitable, because it is only recently the road has shown any profits, but it is a desirable connection both for freight and passengers for Canadian connection passing by way of Toronto and then working down to the north and northwest. The entire stock of the company, which is four million and a half in round numbers, is owned by the Michigan Central, the Canada Southern, New York Central and Canadian Pacific. Their shares are not equal, that is, they are not equal holdings. The Michigan Central and Canada Southern together own about fifteen thousand shares; the New York Central sixteen thousand, the Canadian" Pacific twelve thousand. Now, under previous arrangements, which have been in existence for a good many years, the railroads in interest have furnished money necessary to keep the company going, to make its proper capital investments by way of investments in the road and all that sort of thing, and have stood as sponsors and guardians for various obligations they have had to incur to make these investments from time to time. Now' there is a mortgage upon the Toronto, Hamilton and Buffalo at present of $3,280,000. This mortgage, the present mortgage, — consolidated mortgage, authorizes the total issue of ten million dollars, out of which it is proposed to set aside sufficient to refund the first' mortgage outstanding; and machinery for that refund-; ing, either by purchase or substitution, etc., is set out to greater or less extent in the mortgage itself. Then' it proposes next following that to issue two million' of bonds. That two million to take care of present1 floating indebtedness which amounts, as shown by the petition, in round numbers — there are notes outstanding alone of $1,300,000 — by reference to the mortgage you will see there are other obligations, the obliga-' tions amounting all told to something like $1,600,000 in round numbers, then to use the balance of the two million dollars for further improvements upon the road. Then, after that, the balance of it is to be issued for such future uses as may be desired. At the present time it is only sought, in this particular application, to issue two million dollars for the purpose of taking care of floating and outstanding indebtedness.
“Now the Toronto, Hamilton and Buffalo itself will be a very difficult property, in the present financial conditions, to float those at any fair prices and so the bonds have been taken in equal proportions by the four stock owners of the road, the Canadian Pacific one-fourth, New York Central one-fourth, Michigan Central one-fourth and Canada Southern one-fourth. Of course the Canada Southern, that is taken care of by the Michigan Central which is lessee and large owner of stock of the Canada Southern. Those have been taken over at ninety, -as between the Toronto, Hamilton and Buffalo and the paying companies. Now it is proposed, in order to put those out upon the market and realize the money to pay themselves for this purchase and this investment, each of the companies desire to join and all agree to join in a joint and several guarantee of the bonds so that they may be put out and sold upon the market at sufficient to realize and refund this ninety per cent. Now that, in brief, is the situation. * * *
“Chairman Hemails: It isn’t any increase in the debt of any of the parties, either the guarantors or the subsidiary companies?
“Mr. Robson: No, simply a shifting of the present form of indebtedness in its ultimate result.
“Chairman Hemans: Unless in the discount of the bonds.
“Mr. Robson: To that extent, of course, and that is a question of financial markets, just what you can borrow money for of course. * * *
“Up to the last year or two as a matter of fact, the Toronto, Hamilton and Buffalo has a deficit; I couldn’t tell you in its actual operation. It has taken care of its. current obligations, but in its operations, one end or another has been a deficit; but I can’t say accurately as to just the period it has commenced to earn money and show a surplus. The statement here shows at present they have a small surplus and that is an accumulation in all, in a rough way I should say, probably in the last three or. four years has it been able to show any prospects for the future. The prospects of course are fairly good, depends upon what the business and relations between the two countries are, but the statement here shown that it has a profit and loss of a million and a half.”

Analyzed, the facts produced show, in substance and effect, that all of the issued stock of the Toronto, Hamilton & Buffalo, the Canadian railway, is owned by the Michigan Central, Canada Southern, New York Central and Canadian Pacific railroads — not jointly, not in equal amounts. Independent of the ownership of the stock, each of these railroads has an interest in the continued operation of the said Canadian railway. It is a valuable connection for each of the interested roads. It may be assumed that the value of the association is the base upon which the financial interest is rested. Whatever affects the integrity and prosperity of the Canadian railroad affects, alike, each of the stockholding railroads. Measured in money invested, their interests are unequal; in every other sense their interest in maintaining the road, its integrity and prosperity, is mutual. To the end, the mutually desirable end, to which the whole arrangement is projected, each of the stockholding railroads has advanced money — not in equal amounts, not represented by a joint account, but to the' extent evidenced by the bonds of the Canadian road which they severally hold. That road cannot be divided up; it is an entity. Consequences of default in the payment of principal or interest of its bonded debt cannot be wholly apportioned between the interested companies by the stock and the bonds held by each. There can be no piecemeal bankruptcy of the road, and the default of the road issuing the bonds and the default of the guarantor of the bonds will affect in exactly the same way the entire interest of each interested company. Under the circumstances related, in order to make a market for the bonds, to secure proceeds for refunding the money already advanced and for financing the road generally, the interested companies ask the commission to sanction the guaranty of all the bonds by each of them. The bare recital of the facts disclosed by the record suggests that there may be, must be, other facts, circumstances, conditions, affecting the question of ultra vires, which can be produced upon a trial of the issue. And the facts disclosed do not necessarily and inevitably lead to the conclusion that the proposed action is unlawful. Therefore, in any view of the matter, the court shoüld refuse to disturb the order of the commission.

Moore, Steeee, Brooke, and Stone, JJ., concurred with Ostrander, J. Fellows, J., did not sit.


author:
Bird, C. J.
      Ostrander, J.

text:
    VENNER v. MICHIGAN RAILROAD COMMISSION.
    Railroads — Michigan Railroad Commission — Powers—Authorizing Issue of Capital Stock — Statutes.
    The Michigan railroad commission has authority, under Act No. 259, Pub. Acts 1915 (2 Comp. Laws 1915, § 8161), to authorize a railroad corporation to issue capital stock to reimburse it for money spent out of its income from time to time for property added to its assets; it being too narrow a construction of the statute to hold that such authority should be secured before the expenditures are made. Bird, C. J., dissenting.
    See note in 38 L. R. A. 616.
    Certiorari by Clarence H. Venner and another to review an order of the Michigan railroad commission granting permission to the New York Central Railroad Company to issue bonds.
    Submitted October 9, 1917.
    (Docket No. 58.)
    Writ dismissed May 29, 1919.

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

      Alexander J. Groesbeck, Attorney General (Robert J. Cary, Frank E. Robson, and Samuel H. Kelley, of counsel), for appellee.
   Bird, C. J.

(dissenting). The New York Central Railroad Company filed its application with the Michigan railroad commission, praying permission to issue $25,000,000 of new capital stock to reimburse its treasury for expenditures already made on capital account. Accompanying the petition was a schedule of the expenditures which it desired capitalized.

The plaintiffs, as stockholders of that company, appeared before the commission and opposed the granting of the order prayed for. A hearing followed in which plaintiffs participated but at the conclusion thereof their objections were overruled and the prayer of the petition granted. Later, upon application of plaintiffs, this court issued a writ of certiorari to review the proceedings.

1. The objections to the order of the commission which appear in the affidavit for the writ are not confined to the items contained in the schedule, but go further and question the validity of the organization of the New York Central Railroad Company, its consolidation with the Lake Shore & Michigan Southern Railway Company, and its investments in stocks and bonds of Other railroads.

It may be well at the outset to say that we think the questions raised by plaintiffs affecting the legality of the organization of the New York Central Railroad Company and its consolidation with the Lake Shore & Michigan Southern Railway Company are not appropriate questions for the commission upon this inquiry. Neither do we think the legality of its investments heretofore made is a proper inquiry for the commission. The Michigan railroad commission is not a court but an administrative board with supervisory powers. Had it concluded that plaintiffs’ contentions were right in respect to these matters, it could have made no enforceable order concerning them. How far, however, the commission may consider the investments of an applicant in determining whether added capital is reasonably required for the purposes of the corporation, we need not inquire at this time, as the appeal must be disposed of upon other grounds. The questions with which the commission are concerned are those arising out of the petition filed. The' New York Central Railroad Company is asking permission to capitalize certain expenditures and investments paid for, principally, out of income within five years preceding July, 1916. If the .commission has jurisdiction in the premises its duty is to examine the items and determine whether the money was devoted to lawful purposes and whether they were reasonably required for the purposes of the corporation.

2. We are confronted at the outset with a serious. question raised by the plaintiffs and one affecting the power of the commission to make any order of approval. Plaintiffs assert that the commission is without authority to make any order in the premises because from the petition it appears that the expenditures have already been made and that the commission has no power to approve securities to reimburse the treasury of the corporation after the expenditures have been made. A solution of this question makes necessary a consideration of the act which confers jurisdiction of such matters upon the railroad commission. The material provisions of the act are:

“Sec. 1. Any corporation or association except municipal corporations, organized and existing, or which may hereafter be organized or authorized to do business under the laws of this State, or any lessee or trustee thereof, or any person or persons owning, conducting, managing, operating or controlling any plant or equipment within this State used wholly or in part in the business of transmitting messages by telephone or telegraph, producing or furnishing heat, light, water or mechanical power to the public, directly or indirectly, and any railroad, interurban railroad or other common carrier may issue stocks, bonds, notes or other evidences of indebtedness payable at periods of more than twelve months after the'date thereof, when necessary for the acquisition of property, the construction, completion, extension or improvement of facilities or for the improvement or maintenance of service or for the discharge or lawful refunding of obligations: Provided, and not otherwise, that there shall have been secured from the Michigan railroad commission an order authorizing such issue and the amount thereof, and stating that in the opinion of the commission the use of the capital or property to be acquired to be secured by the issue of such stocks, bonds, notes or other evidences of indebtedness, is reasonably required for the purposes of such person, corporation or association. Any such person, corporation or association desiring authority to issue stocks, bonds, notes or other evidences of indebtedness shall make written application therefor to the said commission in such form as the commission may require. After receiving such application, said commission may, for the purpose of enabling it to determine whether it should grant such authority, make such inquiry or investigation, hold such hearings and examine such witnesses, books, papers, documents or contracts as it may deem of importance in enabling it to reach a determination. If the applicant shall fail, neglect or refuse to furnish any or all of the information required by said commission, or if the said commission shall so direct, an appraisal of the property of said applicant shall be made by a disinterested person or persons to be appointed by said commission and whose compensation shall be fixed by said commission, the entire expense of making such appraisal to be borne by said applicant. * * * If from the application filed' and such other information obtained from the investigation herein authorized, the said commission shall be satisfied that the funds derived from such issue of stocks, bonds or notes are to be applied to lawful purposes and that such issue and amount is essential to the successful carrying out of such purposes, then said commission shall grant authority to make the issue applied for, and in granting such authority, the said commission may impose as a condition of the grant such reasonable terms and conditions as to the commission may seem proper: Provided, That any such person, corporation or association may issue notes for lawful purposes, payable at period of not more than twenty-four months} without authority from said commission; but no such notes shall in whole or in part, directly or indirectly, be refunded by any issue of stock or bonds or by any evidence of indebtedness running for more than twelve months without the consent of said commission: Provided further, That the provisions of this act shall apply to all stock, shares, bonds or notes issued to or taken by the incorporators or their agents, assigns or trustees of any such corporation or association in the first instance.” * * * Act No. 259, Pub. Acts 1915 (2 Comp. Laws 1915, § 8161) *

The language of the act taken as a whole indicates that it was contemplated by the legislature that the application should be made and the approval of the commission secured before the expenditures are made upon capital account if the intention be to later capitalize them. The act provides that “after receiving such application, said commission may, for the purpose of enabling it to determine whether it should grant such authority, make such inquiry or investigation, hold such hearings and examine such books, papers, documents or contracts as it may deem of importance in enabling it to reach a determination.” Also that it may order an appraisal of the property involved. These provisions indicate that the investigation and appraisal shall take place in advance of the expenditures. Again, the commission is authorized in granting its approval to do so upon certain conditions. This would authorize the commission to impose a condition that the securities should be sold only as fast as the work progressed. This provision also indicates that the legislature had its eyes on future expenditures rather than upon past ones. Again, the commission is authorized to determine whether the expenditures are to be made for lawful purposes. The abuses which the act was created to prevent give the impression that it was intended by the legislature that the commission should pass upon the lawfulness of the expenditures before they were made, and if found unlawful to prevent them from being made. This view is in keeping with the theory that the general power of the commission is preventive rather than corrective.

The act still further provides that the commission shall determine whether such issue and amount is essential to the successful carrying out of such lawful purpose. It is somewhat significant that the legislature used the words “is essential” instead of “was essential,” or as the New York act .provides “is or was necessary.” This provision likewise indicates that the legislature had a prospective instead of a retrospective view — that it had in mind what the corporation intended to do rather than what it had done.

The language of the.act, these express provisions and the general- purpose of the act considered together are persuasive that the legislature intended to confer power upon the commission to pass upon and approve expenditures on capital account before they were made and not afterward.

But it is argued that the commission could pass upon expenditures after they were made and if found unlawful and not reasonably required for the purposes of the corporation, it could then refuse to permit the issue of securities. Yes, the commission could do this but would that course be in keeping with the spirit and purpose of the act? In many cases it would be of no avail to the stockholder to deny the application after the expenditures had been made. If the investment or expenditure be an unlawful one or one not reasonably necessary, it- has been made and cannot usually be recalled without loss. The law seeks by this procedure to protect the stockholders and investing public against the issue of securities for reckless and unlawful expenditures. Peninsular Power Co. v. Secretary of State, 169 Mich. 595. The expenditures in question cover a period of five years. In half that time wild and reckless expenditures indulged in by a board of directors might wreck a solvent .railway corporation, and if it did, of what use would it be for the commission to order an appraisal of the property and impose conditions on the sale of the securities? Of what protection would it have been to the stockholders, of the New York and New Haven Railway, for a public utility board to refuse to give its approval to the expenditures of that company for railroads, steamboats and street and interurban railways five years after they were made? It is true, the commission could have withheld its approval but that would have been cold comfort to the stockholder.

Furthermore, if the New York Central could go on making expenditures on capital account for five years and then come before the commission and secure its approval to capitalize the same, it could go on indefinitely in this way, coming to the commission once in five years, and the result would be that the commission would never have an opportunity to pass upon the lawfulness of an investment, or whether it was reasonably required for the purposes of the corporation, until after the expenditure or investment had been made. The testimony shows, that the New York Central Railroád Company has spent upwards of $6,-000,000 in the last five years upon improvements, to real estate which it has acquired in recent years-in the city of New York, for which it desires to issue capital stock. Among the items in the schedule is one of $319,780.37, which the company has expended upon-the Hotel Biltmore in New York city, a property which has cost upwards of $5,600,000, and is a joint venture with the New York and New Haven Railway Company. Other expenditures which are sought to be capitalized are $197,190.30 invested in a building for the Adams Express Company; $836,007.41 in a mail and loft building; $160,947.51 in the United Cigar-Stores building; $1,450,000 advanced to the New York State Realty & Terminal Company, a corporation engaged in buying and selling New York city real estate, having also an interest in an electric lighting plant at Rochester, and owning a chain of retail stores at the Clearfield bituminous coal mines; $847,432.64 in a building for the American Express Company at 33d street and 11th avenue, some considerable distance from its 42d street terminal zone. Without passing upon the lawfulness of such investments by a railroad company, we are persuaded that Act No. 259 contemplates that before investments of this character shall be made, if capitalization be afterward intended, they shall be submitted to the commission, thereby giving the commission an opportunity to pass upon them and determine whether they are for lawful purposes, and whether they are reasonably required for the purposes of the corporation. Any other construction of the act would render the existence of the commission useless because corrective measures have always been available in the courts to test the validity of corporate action.

A further fact strengthens this view. The Michigan public utility act was taken bodily from the New York act. The New York act was passed in 190T. The Michigan act was passed two years later in 1909. In 1910, New York amended its act to empower the commission to approve the securities of certain corporations to reimburse their treasuries on account of expenditures on capital account already made. In doing so, however, the added power was carefully guarded. It is obvious from this action that the New York legislature did not regard the original act as broad enough to give the power here contended for. It is possible that some provision should be made to permit corporations, which in good faith make expenditures from income and which are chargeable to capital account, to capitalize such expenditures, but if it is to be done it is a matter of legislation and should be done by the legislature rather than by the courts.

This identical question has recently been decided adversely to defendant’s contention by the Ohio supreme court. A similar application was made to the public utilities commission of Ohio in respect to the same issue of stock to cover the same expenditures. The prayer of the petition was granted in part by the commission. On review in the supreme court the order of the commission was reversed. In so doing the court said, in part:

“On consideration whereof, the court finds that the expenditures set forth in exhibit A, which were the basis for the issue of the stock, authorization of which was prayed for in the application, and which was allowed by the order of the commission, under section 614-58, which provides that a public utility or railroad when authorized by order of the commission may issue stocks, etc., ‘when necessary for the acquisition of property, the construction, completion, extension or improvement of its facilities or for the improvement or maintenance of its. service, or for the reorganization or readjustment of its indebtedness and capitalization, or for the discharge or lawful refunding of its obligations, or for the reimbursement of moneys actually expended from income or from any other moneys in the treasury of the public utility, or railroad not secured or obtained from the issue of stocks, bonds, notes or other evidences of indebtedness, of such public utility or railroad within five years next prior to the filing of an application therefor as herein provided, or for any of the aforesaid purposes’ were not expenditures for the acquisition of property or for any of the other purposes mentioned in the section referred to, and, therefore, are not such expenditures as are authorized to be capitalized.
“It is, therefore, ordered and adjudged that the order of the commission be, and the same is hereby, reversed.” Venner v. Public Utilities Commission, decided February 25, 1919.

Our conclusion is that the commission has no power to authorize the issuance of securities to reimburse the treasury of a corporation for expenditures already made on capital account, except in so far as the statute itself may authorize it.

For the reasons indicated the order should be set aside.

Ostrander, J.

I assume that from time to time, in a period of five years, the New York Central Railroad Company might find it necessary and for the best interests of the company to acquire, by use of its income, fixed property and to develop the property which it theretofore owned. Whether the value of such acquired property should be reflected in an increase of capital stock might be a question not fairly determinable as the cases arose. Good management might eventually demand that an increase of capital stock equal to the money expended should be made. To secure the right to issue and sell the stock, the company finally applies for the sanction of the commission. It is contended that the commission is without power to sanction such proposed increase and sale of capital stock because—

■ “The language of the act taken as a whole indicates that it was contemplated by the legislature that the application should be made and the approval of the commission secured before the expenditures are made upon capital account if the intention be, to later capitalize them.”

In my opinion, this is too narrow a construction of the act. It is.required that the commission sanction an issue of capital stock. The proposed issue being submitted to it, the commission inquires whether the funds derived from such issue—

“are to bq applied to lawful purposes and that such issue and amount is essential to the successful carrying out of such purposes,”

—and, if satisfied, grants the authority. < The commission is concerned with the stock, or bond, issue, the foundation, security and necessity therefor, and the purposes to which the fund acquired by sales thereof are to be devoted. It. may be agreed that, generally, the powers of the commission are to be exercised to prevent and not to correct abuses. It does not follow that it must prevent an issue and sale of stock to reimburse the treasury of the company, when it is clear that no abuse has been or can be committed and that the increase of capital stock represents an increase of capital assets acquired, from time to time, out of income. The statute may fairly be construed as though it read as the New York act reads. It must be kept in mind that for supposed abuses of corporate management the courts are open to dissatisfied stqckholders.

In my opinion, the board acted in this matter within its powers and its order should not be disturbed.

Moore, Steere, Brooke, Stone, and Kuhn, JJ., concurred with Ostrander, J. Fellows, J., did not sit.