Continental Securities Co. v. Interborough Rapid Transit Co.

• Decision Date: 28 December 1908
• Citation: 165 F. 945
• Parties: CONTINENTAL SECURITIES CO. v. INTERBOROUGH RAPID TRANSIT CO. et al.
• Court: U.S. District Court — Southern District of New York

165 F. 945

CONTINENTAL SECURITIES CO. v. INTERBOROUGH RAPID TRANSIT CO. et al.

United States Circuit Court, S.D. New York.

December 28, 1908

[Copyrighted Material Omitted] [Copyrighted Material Omitted]

Stephen M. Yeaman (J. Aspinwall Hodge, of counsel), for complainant.

Cravath Henderson, & De Gersdorff, for Interborough-Metroplitan Co., Metropolitan St. Ry. Co., New York City Ry. Co., and Metropolitan Securities Co.

Alfred A. Gardner, for Interborough Rapid Transit Co.

Nicoll, Anable, Lindsay & Fuller, for Thomas F. Ryan and others.

RAY District Judge.

The Continental Securities Company, a corporation organized and existing under the laws of the state of New Jersey, on its own behalf and on behalf of all stockholders of the defendant Interborough Rapid Transit Company who are similarly situated and who choose to come in, etc., brings this suit in equity against the defendants: (1) To have a certain alleged plan, scheme, and conspiracy set forth in the complaint, and pursuant to which there has been transferred or delivered to the Interborough-Metropolitan Company or to the Windsor Trust Company a large majority of the capital stocks of the Interborough Rapid Transit Company, Metropolitan Street Railway Company, and Metropolitan Securities Company, heretofore entered into by and between, or adopted by, or concurred in by the defendants in this action, adjudged unlawful, null, and void and of no effect, and also to obtain a decree that all acts done under or pursuant to the said plan, scheme, and agreements were and are in violation of the laws and public policy of the state of New York, of the rights of the Interborough Rapid Transit Company, of this plaintiff as a stockholder therein, and of other stockholders similarly situated, and were and are null and void and of no effect. (2) To have it adjudged and decreed that the transfer and delivery of the large majority of the capital stock of the Interborough Rapid Transit Company to the Interborough-Metropolitan Company, and the deposit with and pledge of said stock to the Windsor Trust Company, was and is illegal, void, and of no effect. (3) To have it adjudged and decreed that the said Interborough-Metropolitan Company now is, and since a date mentioned has been, an unlawful combination and monopoly in violation of the laws and the public policy of the state of New York, of the rights of the said Interborough Rapid Transit Company, and of those of the complainant and of all other stockholders similarly situated; and also to have a decree that all acts and things done or procured to be done by the said combination and monopoly, or by any of the defendants herein, under or pursuant to the said scheme and conspiracy, are and always have been null and void and of no force or effect. (4) To have a judgment or decree that a trust agreement entered into March 5, 1906, by and between the Interborough-Metropolitan Company and the Windsor Trust Company pledging the capital stock of the Interborough Rapid Transit Company to secure the payment of certain bonds of the said Interborough-Metropolitan Company, and issued in exchange for shares of the capital stock of the Interborough Rapid Transit Company, was and is illegal, null, and void and of no effect, and that the said bonds were issued illegally and without consideration, and are null and void and of no effect; and to have a decree that all the shares of the capital stock of the Interborough Rapid Transit Company held by the Windsor Trust Company under an agreement made March 5, 1906, belong to and are the property of the holders of certain collateral trust bonds, etc. Other relief by way of injunction, etc., is also demanded, but such relief and the right thereto is incidental to and dependent upon a right to the main relief demanded.

The defendant companies are New York corporations; defendant Thomas F. Ryan is a citizen and resident of the state of Virginia; the defendant Lane is a citizen and resident of the state of Massachusetts; and the other individual defendants are citizens of the state of New York.

The defendant Interborough Rapid Transit Company was organized under the railroad law of the state of New York in May, 1902, for the purposes of equipping and operating the Rapid Transit Railroad, which was then a subway being constructed in the city of New York, at the expense of the city, under a contract with one John B. McDonald. The capital stock was fixed at $25,000,000, and $9,200,000 of such stock was subscribed and paid for at par, and $2,200,000 thereof was subscribed and paid for at the rate of $110 per share, and the remainder, or $13,600,000 thereof, was issued for the purpose of acquiring the capital stock of certain other corporations, including that of the Rapid Transit Subway Construction Company, and also the interests of all parties in the lease of the Rapid Transit Railroad theretofore made by the city of New York. In September, 1902, the capital stock of the Interborough Rapid Transit Company was increased to $35,000,000 for the purpose of enabling the company to provide the equipment for the operation of said Rapid Transit Railroad.

Up to the time of the formation of the combination and monopoly alleged in the complaint, the Interborough Rapid Transit Company was engaged in the maintenance and operation of said Rapid Transit Railroad and Subway, commencing at two points in the borough of the Bronx in the city of New York, and running through the borough of Manhattan in the city of New York to the Battery, and up to and including the month of January, 1903, was engaged in actual competition in the business of the transportation of passengers with the Manhattan Railway Company. Up to and including the time of the making of the alleged combination, conspiracy, and monopoly set forth in the complaint, it was also actively engaged in actual competition in the trade or business of operating railroads and transporting passengers in, to, or through the boroughs of Manhattan and the Bronx with the Metropolitan Street Railway Company and the Metropolitan Securities Company and New York City Railway Company, commonly known as the Metropolitan System of Surface Railroad. The Manhattan Railway Company was organized and exists under the railroad laws of the state of New York for the purpose of engaging in the trade or business of operating railroads and transporting passengers on elevated railroads above the streets in the boroughs of Manhattan and the Bronx, and which elevated railroads are parallel to, and until April, 1903, were in competition with, the Rapid Transit Railroad or Subway in the said boroughs operated by the Interborough Rapid Transit Company. In January, 1903, the entire railroad property of the Manhattan Railway Company was leased to the Interborough Rapid Transit Company for the period of 999 years, and since April 1, 1903, the Interborough Rapid Transit Company has operated said elevated railroad under said lease.

The Metropolitan Street Railway Company was organized under the railroad law of the state of New York with a capital stock of $52,000,000, and owns or controls by lease or stock ownership in subsidiary companies all of the passenger railroads operated upon the surface of the streets within the boroughs of Manhattan and the Bronx in the city of New York, including those owned or leased by the Third Avenue Railroad Company.

In February, 1902, all the railroad properties of the Third Avenue Railroad Company were leased to the Interurban Street Railway Company, now known as the New York City Railway Company.

The Metropolitan Securities Company is a corporation organized under the business corporation laws of the state of New York with a capital stock of $30,000,000, and owns all the capital stock of said New York City Railway Company, which was incorporated under the laws of the state of New York with a capital stock of $500,000. In February, 1902, said City Railway Company became lessee of the railroads of the Metropolitan Street Railway Company, including those owned by or leased to said Third Avenue Railroad Company for the term of 999 years from April 18 1902. The capital stock of the New York City Railway Company has been increased to $20,000,000 and all of its outstanding stock is owned by the Metropolitan Securities Company. From their organization and up to the date of the alleged illegal combination and monopoly complained of, the Metropolitan Street Railway Company, the Metropolitan Securities Company, and the New York City Railway Company were engaged, says the bill, in the maintenance and operation of the trade or business of operating railroads and transporting passengers upon all of the railroads operated upon the surface of the streets in the boroughs of Manhattan and the Bronx, city of New York, and up to that time were actively engaged in actual competition in said trade or business in said boroughs with the Manhattan Railway Company, and since October, 1904, the date of the opening of the Rapid Transit Railroad and Subway, and up to the said formation of the said combination and monopoly, the said metropolitan system of surface railroads was in active competition in the conduct of said trade or business with the Interborough Rapid Transit Company. Each of the railroad companies mentioned operated lines of road from points in the Bronx to the most southern point of Manhattan, known as the Battery, tapping the same territory and reaching common points, and under natural conditions were each and all competitors with each other in the trade or business mentioned, and prior to the combination, conspiracy, and monopoly complained of there was actual competition for business between the systems of the Interborough Rapid Transit Company, including the ...