State Pub. Utilities Comm'n ex rel. Clow v. Romberg

• Decision Date: 08 December 1916
• Docket Number: No. 10821.,10821.
• Citation: 114 N.E. 191,275 Ill. 432
• Parties: STATE PUBLIC UTILITIES COMMISSION ex rel. CLOW et al. v. ROMBERG.
• Court: Illinois Supreme Court

275 Ill. 432

114 N.E. 191

STATE PUBLIC UTILITIES COMMISSION ex rel. CLOW et al.

v.ROMBERG.

No. 10821.

Supreme Court of Illinois.

Oct. 24, 1916.

Rehearing Denied Dec. 8, 1916.

Appeal from Circuit Court, Sangamon County; James A. Creighton, Judge.

Proceedings by the State Public Utilities Commission, on the relation of Adam S. Clow, and others, against Edwin Romberg. From a judgment of the circuit court of Sangamon county, affirming an order made by the Commission, defendant appeals. Judgment affirmed.Burkhalter, Grossberg & Newfield, of Chicago, for appellant.

Rosenthal & Hamill, of Chicago (John P. Wilson and Charles H. Hamill, both of Chicago, of counsel), for appellees.

COOKE, J.

On September 20, 1915, the Atlantic & Pacific Telephone & Telegraph Company (hereinafter referred to as the Atlantic & Pacific Company) and certain individuals as a committee representing certain stockholders and bondholders of the Interstate Independent Telephone & Telegraph Company (hereinafter referred to as the Interstate Company) and bondholders of the Northwestern Telephone Company, filed their joint petition with the State Public Utilities Commission, praying that said commission grant leave to the Atlantic & Pacific Company to purchase, and leave to said committee and the stockholders and bondholders represented by them to sell and deliver to the Atlantic & Pacific Company, certain shares of the capital stock and certain bonds and equipment trust notes of the Interstate Company and certain bonds of the Northwestern Telephone Company. Subsequently the American Telephone & Telegraph Company (hereinafter referred to as the American Company) filed its petition, setting forth that it is a corporation organized under the laws of the state of New York; that it owns all of the capital stock of the Atlantic & Pacific Company; that it has power to operate, and does operate, long-distance telephone lines in Illinois and other states, and owns a large number of shares of stock in other telephone companies engaged in the transmission of local telephone messages; that the proposed purchase of the shares of stock, bonds, and equipment trust notes of the Interstate Company and of the bonds of the Northwestern Telephone Company by the Atlantic & Pacific Company is at the direction and for the use of the American Company, it being the intention, subject to the regulations of the Commission,to incorporate parts of the physical property of the Interstate Company with the physical property of some one or more of the subsidiary companies of the American Company. The prayer of the supplemental petition was that the application of the Atlantic & Pacific Company for leave to purchase shares of stock and securities of the Interstate Company and bonds of the Northwestern Telephone Company be treated as an application on behalf of the American Company.

The Atlantic & Pacific Company is a corporation organized under the laws of New Jersey, is affiliated with the American Company, and is part of the Bell system. The Interstate Company is also a corporation organized under the laws of New Jersey. The Interstate Company owns all of the property of the Northwestern Telephone Company, subject to the lien of a trust deed securing bonds of the Northwestern Company. Some time prior to August 1, 1912, the American Company, controlling the Bell system, or some one of its subsidiary companies, acquired a majority of the shares of the capital stock of the Interstate Company and a majority of the bonds and equipment trust notes of that company. The Interstate Company is engaged in the business of operating telephone lines and exchanges in many cities and towns in the northern half of Illinois in competition with the Bell system. For a number of years it has been operating at a loss, and has been unable to meet its obligations as they have matured, or to furnish adequate service to the public. A bill having been filed in one of the United States district courts on behalf of the holders of equipment trust notes issued by the Interstate Company, charging that the Interstate Company was insolvent and praying for the appointment of a receiver, certain of the stockholders of the Interstate Company organized themselves into a committee and opened negotiations with the American Company with a view to ascertaining whether the American Company would purchase for itself, or on behalf of some of its subsidiary companies, the shares of stock and the bonds and equipment trust notes not then held by or for it. After several months of negotiations the Atlantic & Pacific Company, a subsidiary of the American Company, submitted a written offer to said committee for the consideration of the holders of the stock and securities of the Interstate Company, proposing to purchase: (1) All or not less than 90 per cent. of the outstanding bonds of the Interstate Company not owned by the American Company or its subsidiary companies at 46 per cent. of their par value; (2) all or not less than 90 per cent. of the outstanding capital stock of the Interstate Company not owned by the American Company or its subsidiary companies at 4 per cent. of the par value thereof; (3) all or not less than 90 per cent. of the outstanding equipment notes issued by the Interstate Company not owned by the American Company or its subsidiary companies at 70 per cent. of the par value; and (4) all or not less than 90 per cent. of the outstanding bonds of the Northwestern Telephone Company not owned by the American Company or its subsidiary companies at 46 per cent. of the par value; provided, however, that the proposed purchase should receive the approval of all federal, state, and municipal authorities whose consent to the transaction should, in the opinion of the purchaser be desirable; and provided, further, that said securities, upon delivery to the purchaser should be accompanied by resignations of the directors and other officers of the Interstate Company, to take effect upon their acceptance.

The committee submitted the proposal to the holders of the bonds, stocks, and equipment trust notes, and advised the acceptance of the offer and the deposit of the shares of stock and securities with the Northern Trust Company for delivery by the committee to the Atlantic & Pacific Company. Thereafter approximately 85 per cent. of the bonds, 86 per cent. of the shares of stock, and 98 per cent. of the equipment trust notes of the Interstate Company not already held by or in the interest of the American Company, and 93 per cent. of the bonds of the Northwestern Company, were deposited with the Northern Trust Company for delivery by the committee to the Atlantic & Pacific Company upon the terms stated in the offer made by that company. Edwin Romberg, the owner of 14 bonds of the Interstate Company and the holder in trust of two other bonds of that company, each bond being of the par value of $1,000, refused to accept the offer for the purchase of the bonds owned and controlled by him. The Atlantic & Pacific Company thereafter waived the requirement that at least 90 per cent. of each class of securities must be tendered, and offered to accept such shares of stock and securities as were on deposit with the Northern Trust Company on May 27, 1915.

Various telephone companies filed intervening petitions, setting up contracts for telephone connections with the Interstate Company and praying that their rights under such contracts be protected by the Commission in case the prayer of the petition should be granted. Romberg filed objections to the petition, based upon the ground that the ultimate object of the proposed purchase is the creation and perpetuation of a monopoly in the telephone business in the territory in which the Interstate Company and the Bell system are now both operating.

The respective parties offered evidence before the Commission, after considering which the Commission entered an order, finding the facts as above set forth, and that it is to the best interests of the Interstate Company, and the telephone-using public and of the people of the state of Illinois that the prayer of the original and supplemental petitions be granted on the terms and conditions specified in the order. The order granted leave to the Atlantic & Pacific Company to purchase the outstanding stock, bonds, and equipment trust notes of the Interstate Company and the bonds of the Northwestern Telephone Company at the price stated in the offer made by it, and authorized the Atlantic & Pacific Company to sell and transfer the same to the American Company, and authorized the latter company to hold, own, and control such bonds, stock, and notes; provided, however, that until the further order of the Commission the Interstate Company shall continue as a separte corporate entity, and shall be operated as such and shall keep up its equipment so as to provide adequate service; and provided, further, that all existing contracts between the Interstate Company and other companies shall be fully kept and performed, together with the division of business, rates, tolls, and charges and the routing of messages as provided in such contracts or by existing methods of handling business, all of which shall continue as they now exist; provided, however, that if any portion of the lines or plant of said Interstate Company (toll lines excluded) shall become so impaired that adequate service thereover shall be impossible, the Atlantic & Pacific Company may provide substitutes therefor, similar in quality and quantity, which will permit such service to be furnished the same as it would be furnished under existing contracts or methods of doing business if the lines of the Interstate Company were used. The order stated that it was entered upon the further condition that the money expended by the Atlantic & Pacific Company and the American Company in purchasing the stocks and securities above described should not be considered as an expenditure of...