16 F.2d 988 | 7th Cir. | 1926
This action was for damages for breach of a written contract between plaintiffs, a committee holding for foreclosure prior lien mortgage bonds of the Chicago, Peoria & St. Louis Railway Company, then in default, and defendant. A general demurrer to plaintiffs’ declaration was sustained, and judgment entered thereon.
The terms of the contract, so far as here material,-are: That plaintiffs should bring to a. judicial sale the property covered by the mortgage, and, if no bid was made at
The defenses are: That the contract is ultra vires, because defendant had no power to purchase the stock or guarantee the bonds; that the contract cannot be enforced, because not approved by either the Illinois Commerce Commission or the Interstate Commerce Commission.
’ Plaintiffs contend: (a) That the transaction was to be a lawful sale and purchase through foreclosure proceedings; (b) that what was said in the contract to be a guaranty was in fact not a guaranty, but an act for defendant’s own benefit and within its implied powers; (c) that if it was a stock purchase, it was an aet within defendant’s general authority to conduct a railroad business, there being no limitation upon such authority, except the Illinois constitutional inhibition against one railroad acquiring parallel or competing lines; and (d) that the time for submission to either commission had not arrived.
Of the many questions raised, we deem it necessary to consider but one. Under the holding of this court in East St. Louis Connecting Ry. Co. v. Jarvis, 92 F. 735, the effect of what defendant undertook to do was to consolidate its road with the corporation which was to take the title to the property under the proposed foreclosure. Both companies were Illinois corporations, subject, so far as any consolidation might be concerned, to the Publie Utilities Act of Illinois. See definitions, section 10, and intercorporate relations, section 27, Cahill’s Ill. Revised Statutes, c. Illa. “The powers given the commission are of regulation and control over the corporation after its organization, except in the case of consolidation of public utility corporations under section 27, which requires the consent of the commission to the consolidation.” N. Y. Central R. R. Co. v. Stevenson, 277 Ill. 474, 479, 115 N. E. 633, 635.
Whether all the provisions of section 27 apply to railroad corporations, to the extent of repealing some of the provisions of the Illinois Railroad Incorporation Aet, we do not deem it necessary to determine. It seems clear that the contract here in question comes squarely within the provisions of the last paragraph of section 27e of the Publie Utilities Act:
“Every assignment, transfer, lease, mortgage, sale,- or other disposition or. incumbrance of the whole or any part of the franchises, licenses, permits, plant, equipment, business or other property of any publie utility, or any merger or consolidation thereof, and every contract, purchase of stock, or other transaction referred to in this section, made otherwise than in accordance with an order of the commission authorizing the same, except as provided in this section, shall be void.”
Without the consent of the commission, all such contracts are void. It is not contended that it is not necessary to have the contract approved at some time by the Illinois commission, and it is conceded that it was not so approved, but it is urged that that time had not arrived, before the breach. In support of that contention, our attention is directed to the language of section 27, which says that, in proceedings before the commission, to obtain the authorization provided for therein, there shall be set forth the complete terms of the proposed contract, etc. It is necessarily true that that which parties propose to do must be determined before it can be carried before the commission, but it is only the.proposed contract, not a consummated and already binding contract, that is to be so presented.
It is further urged that it is not necessary to go to the commission in advance, because the commission has no arbitrary powers, but must approve the contract. In view of the statute, that argument falls by its own weight.
Plaintiffs place reliance upon C., M. & St. P. Ry. Co. v. Eranzen, 287 Ill. 346, 122 N. E. 492. That was a condemnation suit,
The court further said (page 358 [122 N. E. 497]): “Though the consent and approval of the Public Utilities Commission are necessary to the validity of a contract for the joint use of the cut-off, it was not necessary that the contract should have been made or the consent and approval of the Public Utilities Commission obtained before the exercise of the right to condemn land for the connecting tracks.”
In short, that is a holding that no contract for operation was necessary to the right to condemn, but that such a contract is invalid without approval of the commission. It was incumbent on plaintiffs to aver in apt words all things necessary to show a valid contract, and there are here no such averments.
The judgment is affirmed.