129 A. 67 | Pa. | 1925
Argued February 3, 1925. The Borough of Ambridge filed this bill in equity against the three defendants in which it prayed a decree requiring specific performance of their alleged duty to repair certain of its streets by repaving the same between the street railway tracks therein and one foot on the outside thereof, conformably to the provisions of an ordinance of the borough, and further, should there be a default in compliance with the decree for specific performance, that an injunction be granted restraining defendants from the operation of street railway lines within the borough.
The learned chancellor who heard the cause entered a decree as requested against the Pittsburgh and Beaver Street Railway Company, directing it to repair the streets in the manner provided by the borough ordinance and, upon its failure so to do, enjoining it from the operation of its street railway lines within the borough. The bill was dismissed as against the two other defendants, Beaver Valley Traction Company and Philadelphia Company. Appeals were taken by plaintiff and by the Pittsburgh and Beaver Street Railway Company; the latter has been discontinued and we have to consider *8 only the appeal of the borough from the dismissal of its bill as to the two other defendants.
It would seem from appellant's printed and oral arguments that its claim for relief is really directed against the Philadelphia Company and that the Beaver Valley Traction Company is but an incidental party to the litigation. Indeed, appellant's counsel in his brief says that his entire argument goes to the error of the lower court in dismissing the bill as against the Philadelphia Company.
The Pittsburgh and Beaver Street Railway Company was organized for the purpose of operating street railways in certain municipal divisions of Allegheny and Beaver Counties, among them the plaintiff borough. It was formed by the merger of two other companies to which the plaintiff borough had granted consent to operate street railways in certain of its highways, upon condition that they would pave the portion of the streets occupied by their tracks and one foot outside thereof, in like manner as the balance of the streets shall be paved, and maintain the paving. There is no denial that the Pittsburgh and Beaver Street Railway Company is bound by this consent ordinance. It is unable to comply with the terms of the enactment and do the paving because of its financial condition. The Beaver Valley Traction Company was likewise incorporated for the purpose of operating lines of street railway in Beaver and Allegheny Counties. All of the capital stock of the latter company and of the Pittsburgh and Beaver Street Railway Company is owned by the Philadelphia Company, which was organized under the special Act of Assembly of March 22, 1871 (Acts of 1873, P. L. 955), and given very wide powers. It owns all of the capital stock of the street railway lines in and adjacent to the City of Pittsburgh, as well as the capital stocks of many other public utilities in that area.
Appellant's counsel thus phrases his conception of the issue to be decided "We admit that a holding company *9 owning all the capital stock of a street railway company, ipso facto, is not liable for street paving. Does it become liable when it exercises an admitted power to control and makes the underlying company the instrumentality or adjunct of its business."
As we gather it, the pith of appellant's argument is that whatever the corporate structure may be underlying Philadelphia Company's stock ownership, it actually operates the street railways in plaintiff borough and the Pittsburgh and Beaver Company has so lost its corporate identity in the Philadelphia Company, as an edjunct thereof, that in law the latter is the true and only operator, or, if the corporate entity of the Pittsburgh and Beaver Company cannot be ignored, the Philadelphia Company has joined hands with it in such a way that both are operators and both liable for the paving. The base upon which the argument for the Philadelphia Company's liability therefore is made to stand is that it is an operator in fact. If this base crumbles, the argument falls. The circumstances out of which appellant seeks to construct the base, have for cement the close relations between the two companies. As to this the chancellor said: "The testimony discloses a very close relationship between the three companies, defendants. The actual facts are undisputed; the only difficulty is with respect to the inferences that reasonably may or necessarily must be drawn therefrom."
Appellant relies for its conclusion that the Philadelphia Company actually operates the street railway within its limits upon a showing that the board of directors of all of the Philadelphia Company's underlying companies, including the Pittsburgh and Beaver Company, are composed of its employees, who do not own the qualifying shares standing in their names; that the Philadelphia Company's president and others of its officers are officers of the Pittsburgh and Beaver Company and of all the underlying companies; that the Philadelphia Company has advanced large amounts of capital to the Pittsburgh *10 and Beaver Company on open book account, and owns in addition to its stock all outstanding bonds; that the board of directors of the Pittsburgh and Beaver Company meets with great irregularity and only for the purpose of authorizing important contracts; that through one of its subsidiaries, an electric power company, the Philadelphia Company provides the electrical power for operation of the Pittsburgh and Beaver Company; that many important actions affecting the Pittsburgh and Beaver Company were taken by its officers, who are also officers of the Philadelphia Company, without action by the board of directors, and that, generally stated, there is unitary operation and control of all the companies under the dominion of the Philadelphia Company.
The court below found as a fact, upon evidence justifying the finding, that "While the Philadelphia Company owns the stock [of the Pittsburgh and Beaver Company] the lines of street railway [in question] are operated by Pittsburgh and Beaver Street Railway Company as a separate and distinct system." He further found "The operation of street cars in said borough and over Merchant Street under said rights, powers and franchises is by said Pittsburgh and Beaver Street Railway Company, and not by either or both of the other defendants herein, nor by the defendants herein jointly." "Findings of fact by a chancellor have the effect of a verdict of a jury and will not be disturbed on appeal where there is evidence to support them": Glenn v. Trees,
We adopt as our own this summing up of the case by the chancellor: "While the Philadelphia Company, by its stock ownership, is in a position to control both the Beaver Valley Traction Company and the Pittsburgh and Beaver Street Railway Company, yet its power is not in law the control itself. Its stock ownership gives it the right and the power to elect directors of its own *11 choosing, and in this way it is undoubtedly able indirectly to impose its will in matters of management and control; nevertheless, both subsidiary companies own their own property and franchises and their respective boards of directors are in direct management of their affairs. No question of taxation is involved in this case; nor is there any charge of fraud, bad faith, concealment or oppression; the law will therefore not disregard the corporate forms under which these concerns handle their business, . . . . . . The physical property and the franchise of the Pittsburgh and Beaver line are in its name and owned by that company. The Philadelphia Company, eo nomine, could not dispose of a dollar's worth thereof; nor could it, eo nomine, operate cars over the Pittsburgh and Beaver lines or make any use whatever of the latter's rights and franchises. The Philadelphia Company is no more liable for the incidents pertaining to the operation of the Pittsburgh and Beaver lines than the stockholders of the Philadelphia Company, in whom the control of that company, is of course ultimately lodged."
To sustain its position that the Philadelphia Company is liable for the repaving of the streets, appellant relies upon such cases as Pennsylvania Canal Co. v. Brown, 235 Fed. 669; Southern Pacific Terminal Co. v. Interstate Commerce Commission,
It is admitted by appellant throughout its printed brief that mere stock ownership is not sufficient to fix the Philadelphia Company with responsibility. We repeat what was said in Monongahela Bridge Co. v. Pittsburgh Birmingham Traction Co.,
In the pending case there is no allegation, much less evidence, of fraud or bad faith, unfair dealing or the commission of unlawful acts on the part of the Philadelphia Company which appeared in some at least of the cases upon which appellant relies, as a very brief summary of them will show. Pennsylvania Canal Co. v. Brown, 235 Fed. 669, turned on the question of bad faith and unfair dealing on the part of a holding company, it being found by the court that the Pennsylvania Railroad Company owned practically all of the stock of the Pennsylvania Canal Company and had guaranteed to purchase interest coupons of the Canal Company in event of default and that the railroad company had caused the affairs of the canal company to be so conducted as to virtually wipe out a sinking fund intended for the payment of interest and retirement of the bonds. In that case, the court said the railroad company "had voluntarily assumed a contractual obligation" in connection with the mortgage and had (p. 680) "created the canal company for its own use, acquired a complete control *13
over it by acquiring nearly all its stock, organized it by electing officers from its own directorate, participated in the obligation of a mortgage, the advantages of which it conceived and announced, and to the complete terms of which it subscribed, reacquired the pledged properties from time to time as it needed them, through the acts of the two corporations, upon terms fixed by the same men acting as directors for both, with the consent of the trustee of the mortgage who was always a high official of the railroad company or of a subsidiary company and permitted moneys to be diverted from its sinking fund to its own advantage. By this conduct the canal company was made and continued to be merely an adjunct or instrumentality of the railroad company, and, with respect to the bondholders as third persons, the legal fiction of separate corporate responsibility, based upon distinct corporate existence, disappeared." Southern Pacific Terminal Co. v. Interstate Commerce Commission,
What was said by the Supreme Court of the United States in Pullman's Palace Car Co. v. Missouri Pacific Railway Co.,
Under the facts as they appeared before it, and in the light of the governing legal principles, the court below determined the case in the way it should be decided.
The decree is affirmed at appellant's cost.