Pennsylvania Railroad v. Minis

Boyd, C. J, delivered the opinion of the Court. The bill in this case was filed by J. Livingston Minis ánd nine other-stockholders of the Horthern Central Bailway Company against the Pennsylvania Bailroad Company, the Philadelphia, Baltimore and Washington Bailroad-Company, the Union Bailroad Company and the Eorthern Central Bailwav Company. The Philadelphia,' Wilmington and Baltimore Bailroad Company, and the Baltimore and Potomac ⁴⁶⁴ Railroad Company were consolidated as one corporation in the name of the Philadelphia, Baltimore and Washington Railroad Company, under the provisions of Chapter 478 of the Acts of 1902, and neither of them is a party to this hill under its original name. The Union Railroad Company owns a line of railway running from a point on the Northern Central Railway at North street, in the City of Baltimore, east of Union Station, through what is called Union Tunnel, to tidewater at Canton, and also connects with what was formerly the Philadelphia, Wilmington and Baltimore Railroad at Bay Yiew.

In 1873 an agreement was made between the Baltimore and Potomac Railroad Company, the Northern Central Railway Company, the Union Railroad Company and the Western Maryland Railway Company, in which certain passenger and freight rates over the Union Railroad were agreed upon for those companies and also for the Philadelphia, Wilmington and Baltimore Railroad. That was somewhat changed by another agreement in 1875. The Baltimore and Potomac Railroad Company owned a railroad from Washington to Baltimore, and reached Union Station by using a part of the Northern Central tracks. The Western Maryland also connects with the Baltimore and Potomac near Fulton avenue, and runs on the tracks of the Baltimore and Potomac and the Northern Central in entering Union Station.

On February 14th, 1882, the Canton Company agreed with the Northern Central to sell the 5,940 shares of the Union Railroad stock owned hv it at $100 per share, and to purchase and deliver the remaining 60 shares ("there being 6,000 in all) at that price, if the holders would accept the price. That was done and the 6,000 shares were afterwards paid for and transferred to the Northern Central. The negotiations had actively begun in 1881 and there had been some intimation that if the Union Railroad could not be purchased an independent line would he built connecting the Northern Central, the Baltimore and Potomac and the Philadelphia, Wilmington and Baltimore, and giving the North- ⁴⁶⁵ em Central access to large terminals it had built at Canton after the agreement of 1873. The Union Railroad was subject to liens amounting to $1,500,000.00, — making the pur-, chase price equivalent to $2,100,000.00.

The Pennsylvania Railroad Company in 1873 became the owner of 48,240 of the 116,240 shares of the Northern Central then outstanding and still owned them in 1882; in 1881 it acquired by purchase a majority of the stock of the Philadelphia, Wilmington and Baltimore — having by June 16th of that year 217,819 of a total of 235,901 of shares of that company, and it owned the greater part of the stock of the Baltimore and Potomac Railroad Company. In 1887 a stock dividend of 6,000 shares was declared by the Union Railroad Company to the Northern Central as the holder of all of its original shares — making 12,000 shares of the Union Company outstanding, all of which were held by the Northern Central. Tn 1894 the Northern Central sold to the Philadelphia, Wilmington and Baltimore 5,000 of the shares of the Union Railroad and received therefor $110.00 a share ($550,-000.00) — thus giving the P., W. & B. a five-twelfth interest and retaining sevon-twelfths in the Northern Central. At that time tho P. R. R. hold 69,779 out of a total of 150,362 shares of the Northern Central, and since 1900 it has held a majority of the stock of that company.

It held in .'894, 81,612 shares of the Baltimore and Potomac out of a total of 98,285 and 217,819 out of 236,387 of the P., W. & B. Tn 1896 there was a stock dividend by the Union Railroad Company of 75 per cent., of which the P., W. & B. was allotted 3,750 shares and large cash dividends were declared from year to year by the Union Company. The plaintiffs contend that the sale of the 5,000 shares of the Union R. R. Co.’s stock to the P., W. & B. was at a grossly inadequate price, and that it was not believed by the directors that it was the real value of the same, but they “were actuated not by a desire to promote the interest of the Northern Central Railway Co., but by an intent to promote, ⁴⁶⁶ at its expense, the interests of the Pennsylvania Eailroacl Company through its subsidiary company, the Philadelphia, Wilmington and Baltimore Eailroad Company,” and they charge that the sale was not merely fraudulent in law, but was ultra vires. The bill prays that a decree be passed declaring the sale of the 5,000 shares of stock in 1894 fraudulent, ultra vires and void; that the Philadelphia, Baltimore and Washington E. E. Co. be decreed and required to re-transfer to the Northern Central the 5,000 shares sold to the P., W. & B. in 1894, and the 3,750 shares allotted to the P., W. & B. in 1896; and that it also be required to account for and pay to the ISTorthem Central all cash dividends received by it or its predecessor, the P., W. & B. R. R. Co., the northern Central restoring to it the price paid for the 5,000 shares, together with interest thereon from the date of payment by the P., W. & B.; and that all such cash dividends paid to the P., W. & B. or to the P., B. & W. be decreed to be distributed and paid to the several shareholders of the northern Central Railway Company. The lower Court passed a decree substantially as prayed for, excepting it provided for five per cent, interest, instead of six per cent., on the dividends to be returned, and also on the $550,000.00 after the first year, and did not direct the amount recovered to be distributed and paid to the shareholders.

The P. R. R. Co., the P., B. & W. R. R. Co. and the northern Central Ry. Co. entered an appeal from that decree, and the plaintiffs appealed from it, in so far as it omits or refuses to forthwith decree a distribution pro rata, among the stockholders of the northern Central of the money received for the benefit of said company as a result of this suit, and in regard to the interest. The negotiations for the purchase of the stock of the Union Company were carried on by Mr. B. F. newcomer, of Baltimore, at the instance of Messrs. George B. Eoberts, President, and A. J. Cassatt, Vice-President.

He was a director of the northern ⁴⁶⁷ Central and became a director of tbe P.; W. & B. on January 9th, 1882. Messrs. Eoberts and Cassatt occupied'those respective positions in the P. E. E. Co. and in the Northern Central. The theory of the defense is, that when the 5,000 shares of the Union E. E. Co. stock were transferred to the P., W. & B. E. E. Co. the latter company was contributing about 41 per cent, of the business of the Union E. E. Co., and that it was understood at the time of the sale in 1882 of the 6,000 shares to the Northern Central, that the stock was eventually to be apportioned between it and the P., W. & B. E. E. Co., in proportion to the business respectively furnished by them.

In a letter from Mr. B. F. Newcomer, addressed to “A. J. Cassatt, Esq., V.-P.,” dated December 15th, 1891, he said: “Brooks of his own accord opened the subject to the Union E. E. which gave me an opportunity of impressing upon him the fact that your purpose was .to construct at once an independent line to connect your two properties, and that no concession in tolls for the use of the Union E. E. no matter how great could ever be made satisfactory, and without-troubling you now with all that passed between — I will when I see you give you full particulars, and I think chances are very good that something practicable may grow out of it.” On December 22nd, 1881, Mr. Newcomer wrote a letter addressed to “Messrs. Geo. B. Eoberts, Pres., and A. J. Cassatt, V. P.,” in which he spoke of an interview with Mr. Brooks that morning in which he told him of their plan of running all freight destined for Canton by way of Port Deposit. Brooks said the Canton Company owned the property through which they would have to pass, and to his (Newcomer’s)- reply that if the Canton Company did not sell at a fair price its property could be condemned.

Brooks said he would bring before the jury all the correspondence they had had with the Northern Central “to induce them to land the Union E. E. and that the measure of damages would be the value of the Union E. E. — as well as the property through which the tracks would pass — to this I replied that ⁴⁶⁸ the Eorthern Central Bailway Oo. and its implied promises or implied obligations had nothing to do with it, as these tracks would be branches of the P., W. & B., a different corporation having no connection with the E. 0. By. Oo.” Mr. Brooks said he would feel it his duty to see that the Oanton Oo. was compensated for the large outlay made by it in the construction of the Union B. B. The letter goes on to say: “I told him then that the only way to accomplish that was to have an interview with his directors and managers at the earliest date possible and offer you the Union B. B. property at a price that would induce you to take it off their hands, before it was rendered useless.” The Oanton Company, of which Mr. Brooks was president, owned the Union Bailroad Company, as well as a great deal of property near Oanton. Mr. Eewcomer wrote to Mr. Oassatt on January 2nd, 1882, that Mr. Brooks had called on him to say that it was impossible to get his Eew York directors at a meeting until after the holidays.

On January 9th, 1882, Mr. Eewcomer wrote to Mr. Cassatt that “this morning he (Brooks) called upon me with the enclosed letter, and whilst it is much below anything he has yet named I told him it would scarcely be entertained, but that I would forward it for the purpose of ascertaining what Mr. Boberts and yon had to say about it.” The letter from Mr. Brooks bore the same date (January 9th, 1882) and began: “I am directed to offer ‘Union Bailroad’ for sale to the Pennsylvania Bailroad Company and associates (not to any other party) for the sum of one million dollars subject to its bonded debt of fifteen hundred thousand dollars?’ After referring to the property, he concluded: “The causes that lead to this offer you are aware of. The Oanton Oompany built the Union road and would expect in event of sale some assurances as to general policy, that the same would not be inimicable to her large interests.” The record does not disclose the details of the transactions between the date of the ⁴⁶⁹ letter from Mr. Brooks and that of the final consummation of the sale. In a letter of January 19th, 1882, from Mr. Newcomer to Mr. Cassatt, after speaking of negotiations for lots at Canton near the elevator of the Northern Central, he concluded by saying: “I received Mr. Roberts’ letter this morning and saw Brooks today but said little to him as it will take him a day or two to properly digest Mr. Roberts’ views and to get over his idea that he is making a great sacrifice in offering the Union R. R. stock at $1,000,000.” Mr. Roberts’ letter was not introduced in evidence and hence we have no means of knowing what was in it. However, an agreement was entered into between the Canton Company and the Northern Central Railway Company on the 14th of February, 1882, by which the Canton Company sold to the Northern Central 5,940 shares of stock in the Union R. R. held by it at par ($100 per share), subject to existing mortgages of $1,500,000.00 — the sale to take effect March 1st, 1882, — “at which time the voting privilege of said stock is to be transferred to the Northern Central Railway Company.” Amongst other things, it was agreed that “The Northern Central Railway Company, as purchaser, their successors and assigns, or whatever corporation or persons shall actually become the purchaser thereunder, shall hereafter, as a condition of said purchase, execute such an agreement in detail as shall protect and in no manner oppose or conflict with the development and general business interests of the Canton Company.” The Canton Company also agreed to deliver the other sixty shares at par providing the holders of said stock would accept the price.

The agreement referred to was executed by the Northern Central, the Union Railroad and the Canton Company on April 13th, 1882. In the annual report of the president of the Northern Central to the stockholders for the year ending December 31st, 1881, submitted at their meeting on February 23rd, 1882, he dwelt at some length upon the purchase. He said in part: “It may not be known to all the shareholders of ⁴⁷⁰ your company that, in order to enable your traffic to reach tidewater, and be interchanged with the Philadelphia, Wilmington and Baltimore Railroad at Baltimore, it was necessary to use the Union R. R., which was built to give your road connection with the property of the Canton Company at tidewater, and to form a connecting link with the Philadelphia, Wilmington and Baltimore R. R. and the Baltimore and Potomac R. R.” He said that the contract between the Eorthern Central and the Union Railroad for the use of its road, made in 1873, was then considered reasonable and proper, but the great increase of tonnage and the low rates prevailing had made what was originally a fair contract a burdensome one. The board therefore deemed it necessary for the interests of the company, and the proper development of its traffic, that they should have their own line extended to tidewater.

For that purpose they had careful surveys and estimates made, the result of which showed that it would be more advisable to acquire the ownership of the present line, if it could he had at a fair price, than to incur the expense and difficulty of the construction of a new line. Eeg'otiations were accordingly opened on the part of the company with the Canton Company which resulted in the purchase. He said: “The gross earnings of the Union Railroad Company for the past year were $287,295.00; expenses, $61,324.00; net earnings, $225,971.00. Of the gross earnings your company paid $254,365.10.

As the charges upon the traffic referred to were fixed by the contract, and as the traffic was steadily increasing, it will readily be seen that the purchase of this line must result in a large and direct pecuniary saving to- your company, besides giving it what is essential to its interests — an absolute ownership of a line extending to tidewater, and a connection with the Philadelphia, Wilmington and Baltimore R. R... now owned and operated in harmony with your system.” At a special meeting of the directors of the Eorthern Central held on February 14th, 1882, the annual report of ⁴⁷¹ the president was adopted and the secretary was directed to have it distributed to the stockholder’s and to present it at the stockholders’ annual meeting to be held on February 23rd instant. It was resolved, “That the contract for the purchase of the capital stock of the Union Railroad Company, as negotiated by Mr. Newcomer, for and on behalf of this company, be approved”, and that the thanks of the board be tendered to Mr. Newcomer. At the annual meeting of the stockholders on February 23rd, 1882, the action of the board was approved, and for the purpose of providing the means to pay for the capital stock of the Union R-. R. Co., and for other purposes of the company, the board was authorized to increase the capital stock of the Northern Central to an amount not exceeding $6,500,000.00.

Subsequent reports of the president and general manager from time to time referred to the ownership of the road, and there can be no doubt that it was purchased by the Northern Central, whatever. interest any other company was understood by the parties to have in it. The stock stood in its name and the dividends, including a stock dividend in 1886 of 6,000 shares, v. out. to it. ■ None of those facts are denied by the defendants, and they were proven by the records of the company, as well as admitted in the answers of the defendants. The defendants claim, however, that while all that is true, it was understood by the officers of the several companies that it was bought in the interest of the other companies under the control and management of the Pennsylvania Railroad Company, as well as in the interests of the Northern Central. Mr. George C. Wilkins was in 1875 superintendent of the Baltimore Division of the Northern Central from Baltimore to Marysville, Pa., of the Baltimore and Potomac and of the lines south of Washington to Quantico, Va.

He continued in that position until April, 1882, when he was made superintendent of the Union Railroad, and in the autumn of that year was made general superintendent of the line from Marysville, Pa., to Quantico, Va. On January 1st, ⁴⁷² 1883, he was made general agent of all the properties the P. R. R. Co. had any interest in about Baltimore, namely, the Northern Central, the P., W. & B., the Union R. R. Co. and the Baltimore and Potomac, and held that position until he retired in 1905. On November 18th, 1881, he wrote to Mr. Thomson, general manager, that he thought “the time has come to open negotiations with the Canton Co., as they are evidently disposed to deal with us in a friendly spirit, and I think it much better to buy the Union Eailroad if it can be secured at a reasonable price, which I think it can, than to build a new road.” He testified that Mr. Newcomer was selected to conduct the negotiations, but he knew that a line was projected to connect the P., W. & B. and the Baltimore and Potomac — it was proposed to parallel the Union E. E. and also to turn to the proposed road the heavy through trafile of the Northern Central. He said that line was intended to serve both — “Primarily the P., W. & B. and the Baltimore and Potomac”.

He was then asked: “Can you state from your information on the subject at the time in what interests the project of acquiring the Union Eailroad was started ?” and replied: “Unquestionably in the interest of the three railways in interest, namely, the Northern Central, the Baltimore and Potomac and the P., W. & B. It was so understood by all parties, I am sure, including myself.” Mr. John P. Green was assistant to the president of the P, E. E. Co', until October 1st, 1882, when he was elected fourth vice-president. He held executive positions after that until he was retired as first vice-president in 1909. He was also a director of the P. E. E. after October, 1882. He was a director and member of the road and finance committees of the Northern Central in 1881 and 1882.

He was elected second vice-president on March 1st, 1883, and was an executive officer of that company until his retirement. He was elected a director of the P., W. & B. E. E. Co., “on January 13th, 1881'-' (the record so states, but is probably ⁴⁷³ an. error), and second vice-president on February 27th, 1893, and was an executive officer until his retirement. In answer to the question whether he was acquainted with the negotiations for the purchase of the Union E. E. Co., the reasons for the same, and the intention with which it was acquired, he said: ‘‘The reasons for purchasing the same were very clear. The Union Eailroad Company was owned by a private corporation, the Canton Company, and through the ownership of the Union Eailroad it controlled the link between the Philadelphia, Wilmington and Baltimore road on one side, which the Pennsylvania Eailroad had acquired in the early part of 1881, and the Northern Central and the Baltimore and Potomac on the other; and it was necessary, in the judgment of the Pennsylvania Eailroad Company, to either acquire the ownership of that line, or, in case they could not make any arrangement for its purchase, to build another line between those points.

The question was brought to the front practically as soon as the Pennsylvania Eailroad Company became the owner of the P., W. & B. Their intention in purchasing it was to do what the Pennsylvania Eailroad Company always tried to- do, and that was to- control the terminals or the terminal roads over which the traffic in its system had to pass. That is pretty much the whole story.” At the time of the purchase the Northern Central was furnishing nearly 90 per cent, of the business of the Union E. E. Co. The P E. E. Co. obtained control of the P., W. & B. in June, 1881, and immediately went to work to develop its southern business over the P., W. & B. and the B. & P. The gross earnings of the Union E. E. Co. increased from $229,443.83 in 1882, to $604,899.68 in 1893 — the year before the transfer to the P., W. & B. of the 5,000 shares. It cannot be doubted that credit for the success of all of these roads — -including the Northern Central — was due in part to the management of the P., E. E. Co. The officials of the Northern Central, the Baltimore and Potomac and, after control of it was acquired, the P., W. & B. were officials ⁴⁷⁴ of the P. E. E. Co. Had the P., W. & B. not been acquired by the P. R. R., the Union R. R. would in all probability not have been the marvelous success that it turned out to be, and it is equally true that the Horthern Central could not have received the immense income it did receive from the Union E. E. Co. had not the P., W. & B. been purchased by the P. E. E. The direct route of the latter system between Hew York and Philadelphia and other cities north of Baltimore on the one hand, and those south of it on the other, was over the P., W. & B., and as the latter was furnishing over 41 per cent, of the business over the Union E. E. every principle of equity and justice demanded that it should receive some recognition of the business furnished by it to this short, but important link in the system, which had been acquired in the name of the Horthern Central. but no one can doubt from the evidence was acquired at the price it was because its owners feared that the P. E. E. Co. would build another road, if it could not secure that one. Mi\ Brooks’ letter of January Gth, 1882 shows what he had in mind and he was directed by his board to offer the road “to the Pennsylvania Railroad Company and associates (not to any other party)”, and the agreement of February 15th, 1882, for the sale of the stock of the Union E. E. Co. shows that while the Horthern Central was the named purchaser it was believed, if not known, that some other company or companies had some interest in it, for it was not in the usual terms, but reads “the Horthern Central Eailway Company, as purchaser, their successors and assigns, or whatever corporation or person shall actually become the purchaser thereunder” — the author of the expression doubtless having in mind the P. E. E., which was the company the Canton Company was most interested in binding.

It is true that the Baltimore and Susquehanna E. E. Co., one of the constituent companies of the Horthern Central, had in mind as early as 1853, the desirability of reaching tidewater at Canton, and by the Act of 1853, Chapter 191, ⁴⁷⁵ it was given power to extend its road by steam to tidewater. An ordinance of the City of Baltimore was passed in 1854 providing for the construction of a branch by it, over a route similar to that of the Union E. E. The construction of the road was actually begun by the Northern Central, which was incorporated in 1854, and was a consolidation of the Baltimore and Susquehanna and some roads in Pennsylvania, authorized by the legislatures of the two States. But it was finally abandoned by the Northern Central, which then turned its attention to helping the Union E. E., but in the report of 1868 said that road had been compelled to suspend, at least temporarily. Einally in 1873- it made the agreement with that company for the use of its road above referred to, but in its report for 1874 it said “it will be necessary to obtain more favorable terms for such tonnage than the existing contracts secure.” With the exception of some efforts which Mr. Wrenshall said he thought were made a year or two before the purchase, further active efforts seemed to have ceased until a few months after the P. E. E. obtained control of the P., W. & B., when negotiations were renewed and resulted in the purchase.

The P. E. E. then owned the greater part of B. & P. stock and of the P., W. & B. stock, but less than a majority of the Northern Central. It could have put the Union stock in the name of either of the three companies, or in all or any two of them, instead of in the one. The offer of sale was to the P. E. E. and associates, and the fear that it would build another line was undoubtedly the inducement for the Canton Company to sell at the price it did. The annual report of the P. E. E. for 1882 speaks of the purchase by the Northern Central and said: “The acquisition of this line has largely tended to strengten and improve the position of that company in Baltimore, and gives your company the indirect control of the connecting link in that city between the Philadelphia, Wilmington and Baltimore, the Northern Central and the Baltimore and Potomac Eail ⁴⁷⁶ roads.” The only reasonable explanation that can be given for placing the stock in the name of one, instead of all of the allied companies of the P. R." R., is that the Northern Central was then the principal contributor to the business of the Union R. R., and as it was a part of the-system of the P. R. R., and the other stockholders were then working in harmony with it, it was not deemed material as to which company held the stock of the Union R. R. It was not a purchase of a property of doubtful value so long as the P. R. R. system controlled the three companies which were then or were to be its feeders, for although circumstances, such as building a competing line, might prevent it becoming much more valuable than it then was, it could still be used by the Northern Central for its purposes, and there was no danger of it losing by the investment made in its name.

The extent of the benefit to the other two was undertermined and unknown, but inasmuch as the business of the Northern Central alone insured it against loss, no injustice could be done it by making it the purchaser. It in fact has not only not lost, but on a net investment of $50,000.00 owns a controlling interest in the company which has been freed from the liens of a million and a half dollars, besides paying such large dividends. If it had originally been taken in the name of either the P., W. & B. or the B. & P., or both, the stockholders of the Northern Central might have had reason for complaint, unless there had been some satisfactory arrangement with it, such as the defendants claims was the understanding as to the P., W. & B., or as to the tolls. As matters stood in 1893 and 1894, and had stood since 1882, the Northern Central was the undoubted holder of all the stock of the Union R. R. Co., and 5,000 of the 12,000 shares of stock of the Union R. R. were transferred to the P., W. & B., virtually at par, as the $50,000 does not seem to have been originally a part of the purchase price.

But at the same time no unbiased person can read this record without being impressed with the fact that the original purchase ⁴⁷⁷ was not intended to be for the benefit of the Eorthern Central alone, and it certainly was not intended to enrich the one of the companies forming the P. R. R. system at Baltimore at the expense of the other two. Mr. Eewcomer on Eovember 3, 1893, wrote Mr. Thomson, who was the Vice-President of the P. R. R., the Eorthern Central and the P., W. & B., that he understood he was to formulate something looking to a sale by the Eorthern Central of a portion of its stock in the Union R. R. to the P., W. & B. He accordingly prepared a statement in which he took the sources of revenue of the Union R. R. for 1892, and on that basis the Eorthern Central had earned 56.57 per cent., the P., W. & B. 41.77 per cent, and the B. & P. 1.66 per cent., and he said it was suggested that the Eorthern Central sell to the P., W. & B. 43 per cent, of the capital stock of the Union R. E. at par — giving the Eorthern Central 6,840 shares and the P., W. & B. 5,160 shares. In speaking of the amounts distributed to the two companies, beginning with the year 1890, he referred to a fact that appears in the record, that from that year the Eorthern Central had returned to the P., W. & B. certain amounts received by it from the dividends of the Union R. R. Co., which were supposed to compensate the P., W. & B. for the large amount of traffic it had furnished the Union R. R. Co. at the rates fixed in the agreement of 1873. On December 2nd, 1893, Mr. Oreen, Vice-President, wrote to Mr. Eewcomer that he had drafted a form of agi*eement between the two companies to cover the proposed purchase of stock in the Union R. R. He said he had submitted it to Mr. Roberts who thought it was about in the right form, and he would be glad to have Mr. Eewcomer’s views in regard to it.

On December 4, 1893, Mr. Eewcomer replied that he thought it covered the ground entirely and satisfactorily, and suggested that as the period was so near for declaring a dividend on the stock of the Union R. R., and ás the Union R. R. was about to make sale to the Eorthern Central of a num ⁴⁷⁸ ber of small tracts of land purchased by it since the stock was purchased, and as the deed would be executed before January 1st, 1894, that the contract for sale of the stock be not executed until after January 1st, to take effect from that date. That proposed agreement recited the purchase and ownership of the stock by the Northern Central; that the Union R. R. formed the connection between the Northern Central and the terminal facilities at Canton, and also the connection between the Northern Central and the Baltimore and Potomac on the one hand, and the P., W. & B. on the other, that a large amount of the traffic passing over the Union Railroad was contributed by the P., W. & B. and the proportion contributed from January 1st, 1890, to August 31st, 1893, was about 43 per cent.; that “Whereas, at the time of the purchase of the said Union R. R., it was the understanding of the said Philadelphia, Wilmington & Baltimore Railroad Company that its interest would thereafter be protected on a fair and equitable basis,” and other provisions. On December 5, 1893, that communication was referred to Mr. Frank Thomson, First Vice-Pres., by Mr. John P. Green, Second Vice-Pres., with request that he notice what Mr. Newcomer said in regard to the enclosed form of contract. On December 6th Mr. Thomson returned it to Mr. Green with the endorsement, “This contract looks all right now, and I think it will be well if you will have it put in proper shape for action of the Board.” It was however never executed, but Mr. Green testified “The subject matter of the agreement was afterwards covered and practically put into effect by resolutions of the Board of Directors of the two companies, the Northern Central and the P., W. & B.” Although that agreement was not executed, it was kept with the papers of the company and we now refer to it because it shows what the officer’s of the company understood to be the understanding in reference to the stock, and Mr.-Green in his testimony referred to it in that connection.

At a ⁴⁷⁹ meeting of the directors of the Northern Central, held February 15, 1894, the president laid before them a resolution received from the P., W. & B. and adopted by that company. It recited that whereas the Union E. E. is the connecting link between the road of that company on the one hand and the Northern Central and the Baltimore and Potomac on the other, and it is to the interest of the company that it should have a proper ownership in the capital stock of the Union E. E. by reason of it furnishing the most available line, not only for reaching the passenger station in Baltimore but for a connection with the Southern system of railways, and whereas about forty-one per cent, of the business of the Union Eailroad is controlled by this company, “Eesolved, that the Northern Central Eailway Company be requested to sell the Philadelphia, Wilmington and Baltimore Eailroad Company at least five hundred thousand dollars of the capital stock of said Union Eailroad Company of Baltimore, at a price not exceeding par.” The directors of the Northern Central adopted a resolution that it sell to the P., W. & B. at par five thousand shares of the capital stock of the Union Eailroad, as of January 1st, 1894, the purchase money to bear interest at six per cent, until paid. As of January 1st, 1894,