Baltimore & O. Tel. Co. of Baltimore County v. Interstate Tel. Co.

• Decision Date: 07 February 1893
• Docket Number: 28
• Parties: BALTIMORE & O. TEL. CO. OF BALTIMORE COUNTY et al. v. INTERSTATE TEL. CO.
• Court: U.S. Court of Appeals — Fourth Circuit

54 F. 50

BALTIMORE & O. TEL. CO. OF BALTIMORE COUNTY et al. v. INTERSTATE TEL. CO.

No. 28

United States Court of Appeals, Fourth Circuit.

February 7, 1893

C. J M. Gwinn, for appellants.

N. P Bond, R. D. Morrison, and C. E. Warner, for appellee.

Before BOND and GOFF, Circuit Judges, and SIMONTON, District Judge.

SIMONTON District Judge.

The Baltimore & Ohio Railroad Company used in connection with its railroad system lines of telegraph wires, with poles and plant. They facilitated the business of the railroad. With the view of diminishing the expense of this telegraphic system, and of increasing its usefulness, the Baltimore &amp Ohio Railroad Company determined to open it by use by the public. Pursing this plan, it extended its lines in many directions. Between the years 1877 and 1885, it established a system of more than 6,000 miles of poles, and 47,000 miles of wire, costing millions of dollars. The method adopted by the Baltimore & Ohio Railroad Company in developing this plan was the formation of a number of corporations in several states of the Union, all bearing the distinctive prefix 'Baltimore & Ohio,' and known respectively as the Baltimore & Ohio Telegraph Company of Illinois, or of Ohio or of New Jersey, etc., as the case may have been. Each corporation had small capital. The corporators were officials of the railroad company and the capital stock was all paid by the railroad company. At the head of all this telegraphic system, as its general manager, was David H. Bates. He held his position by the appointment of the Baltimore & Ohio Railroad Company, directly. At one time after this appointment he filled the place of president of the Baltimore & Ohio Telegraph Company of Baltimore City, which was the central part of the system. When the use of this company was discontinued, he in like manner became the president of the Baltimore & Ohio Telegraph Company of Baltimore County. The last-named company was incorporated 2d November, 1885. Its capital stock was $100,000. All of its corporators were officials of the Baltimore & Ohio Railroad Company. Every dollar of the capital stock was paid by this railroad company, for whom, and for whose use, the nominal stockholders held the stock. This new corporation, the Baltimore & Ohio Telegraph Company of Baltimore County, became the center of the telegraphic system. It controlled and operated all the lines theretofore controlled or operated by the railroad company and its telegraph corporations. It was in possession and control of the plant on the lines of the railroad company, and outside and beyond these lines owned valuable plant. Although its capital was but $100,000, its outlay extended into millions and was supplied by the railroad company. The record does not disclose whether it had any money in its treasury. All requisitions for money were made by the manager upon its treasurer, who was also treasurer of the railroad company, and these were met promptly. In the mode of dealing between the railroad company and the telegraph company, these were treated as advances. At one time there was a plan projected whereby a contract or purchase should be executed between the two companies, and a bond or bonds were to be executed by the telegraph company to the extent of $6,000,000, to be secured by a mortgage of the plant, and intended to cover all money transactions between them. The bond or bonds were executed. The mortgage never was executed. All of the transactions and expenditures of the telegraph company were under the supervision and control of the railroad company. It is difficult to fix the exact relation between these two companies,-- whether the railroad company exercised its control as the sole stockholder,-- that is to say, as the only person having any beneficial interest in its stock,-- or whether as the principal controlling its agent, or whether the telegraph company was one of the bureaus or departments of this great railroad system, for one of the bureaus or departments of this great railroad system, for which a charter of incorporation had been obtained simply for convenience, or whether it exercised control as lessor over its lessee, or as creditor over its debtor. Be this as it may, the identity in action of the two corporations was complete. On 17th December, 1885, the Baltimore & Ohio Telegraph Company of Baltimore County entered into a contract with the Interstate Telegraph Construction Company of Michigan, followed by a supplemental contract made 30th November, 1886. These contracts related to the extensions of the line of telegraphic communication and territory. They contained certain covenants which need not be detailed. While these agreements were in full force and operation,-- that is to say, on 15th October 1887,-- the Baltimore & Ohio Railroad Company, for the sum of $5,000,000, and the payment of $60,000 per year for 50 years, sold and conveyed to the Western Union Telegraph Company the entire line and system operated, controlled, and owned by The baltimore & Ohio Telegraph Company of Baltimore County, and all the plant and privileges connected therewith. It also directed and accomplished the assignment and transfer to the Western Union Telegraph Company of all the capital stock in the Baltimore & Ohio Telegraph Companies heretofore referred to. After this conveyance and transfer the Baltimore & Ohio Telegraph Company of Baltimore County could not any longer perform its covenants with the Interstate Telegraph Company, having been denied of its property and plant thereby. Thereupon the...