29 Mont. 428 | Mont. | 1904
after stating the case, delivered the opinion of the court.
At the hearing in this court counsel for plaintiff interposed motions to' dismiss both' appeals on various grounds, among others, that the order of October 23d is not appealable, and that the notice is ambiguous and uncertain, in that it does, not appear therefrom to which order it refers. There is no merit in the motion so far as it is directed at the appeal from the order of the court entered in the minutes granting the injunction. The notice is couched in separate paragraphs. By reading the first paragraph with each of the other two; there is a separate and distinct notice of each appeal, the notice being almost in the exact form of the one considered in In re Barker's Estate, 26 Mont. 279, 67 Pac. 941. It is a sufficient notice, for it is entirely clear that the respondent understood therefrom that the appellants intended to prosecute two appeals. The fact that
Counsel in their briefs have presented and argued many questions which are not pertinent in any manner to this investigation. Much of the appellants’ brief is devoted to an argument to show that the district court had no jurisdiction of the Amalgamated Company, because it had never been served with process nor had appeared in the action. It is not necessary to consider the question thus presented, because, if the district court had no jurisdiction of the Amalgamated Company Ijy service of process, that company is not aggrieved by the order. If it had jurisdiction, and the Amalgamated Company is aggrieved by the order, it took no- appeal, and can obtain noi relief from this court, except so far as the relief granted to the appealing defendants may incidentally affect its .rights.
Much argument in the appellants’ brief is. also devoted to the questions whether or not the Amalgamated Company is engaged in doing business in this state in violation of the law, and whether it is a monopoly and subject to the prohibition contained in Section 20 of Article XV of the Constitution, and the penalties provided by Section 321 of the Penal Code.
The plaintiff sues as a private citizen. He is not, as such, authorized to present, through the medium of a civil action, and try the issue, whether the defendant Amalgamated Company is doing business in this state in violation of a law. A determination of this issue as an independent ground of relief must be had, if at all, by the state, and in its own behalf,
Nevertheless, so far as the participation of the Montana corporation and its officers in an unlawful combination to create a monopoly subjects its property and franchises to forfeiture, and thus imperils the property rights of the minority stockholder, he has a cause of conqplaiut against it and them,- and may, through the medium of a court of equity, compel it and them to abandon such unlawful connection and return to a performance of their obligations under the charter contract of the company, to-wit, to accomplish, through its board of directors, the purpose for which it was formed, and by lawful means. The officers of a corporation are trustees; by their acts in engaging in an unlawful enterprise, and making the corporation a party to it, they are guilty of a breach of trust, and both they and the corporation can be held to account by a’, court of equity, at the suit of a minority stockholder who has- not participated in the violation of the law. (Cook on Corporations, Secs. 646, 647; Forrester et al. v. B. & M. C. C. & S. M. Co., 21 Mont. 544, 55 Pac. 229, 353.)
Tbe Amalgamated Company was organized under tbe laws of the state of New Jersey on April 21, 1899, tbe charter designating its principal office in Jersey City. Tbe incorporators were persons intimately associated with tbe authorities of tbe Montana Company. Its powers and objects are very extensive. It has tbe power, among other things: “(1) To carry on tbe business of mining, milling, concentrating, converting, smelting, treating, preparing for market, manufacturing, buying, selling, exchanging, and otherwise producing and dealing in gold, silver, copper, metals and minerals, and in tbe products and byproducts thereof of every kind and description, and by whatsoever process tbe same can be or may be hereafter produced ; and generally and without limit as to amount, to buy, sell, exchange, lease, acquire arid deal in lands, mines and minerals, rights and claims and in tbe above specified products, and to conduct all business appurtenant thereto. * _ * * (8) To purchase, subscribe for or otherwise acquire, and to bold tbe shares, stocks or other obligations -of any company organized under tbe laws of this state, or of any other state, or of any territory or colony' of tbe United States, or of any foreign country, and to sell or exchange the same, or upon a distribution of tbe assets or division of profits, to distribute any such shares, stocks or obligations or tbe proceeds thereof amongst tbe stockholders of this company.” Its capital stock was originally $15,000,000.
To go back for a moment in the order of events. Early in January, 1899, an agreement had been entered into between a number of the stockholders of the Montana Company and a committee consisting of Albert S. Bigelow, Edward C. Perkins and Sidney Chase, the first two being directors of the Montana Company, under the terms of which the stockholders were to and did deposit with the State Street Trust Company, a Massachusetts corporation, for safe keeping, their shares of stock in order to concentrate their power and effect an organization for the purpose of protecting the properties of the company from ruinous and groundless litigation which had, as was stated in the agreement, arisen in the courts of Montana. The Massachusetts corporation was a party to the agreement, but only for the purpose of acting as trustee. The members of the committee were, by the terms of the agreement, constituted sole agents and attorneys for the depositing stockholders. They were empowered by a majority to act for the stockholders in any man
The foregoing partial synopsis of the agreement sufficiently indicates its nature and purposes, and the extensive powers it conferred upon the committee. It does .not distinctly appear from the evidence that the committee had anything to do with the organization of the Amalgamated Company, but the intimate connection shown to exist between it and the' Amalgamated Company is made.manifest by the statement of the secretary and treasurer of the Amalgamated Company, contained in his deposition used at the hearing, that, though the acquired stock is owned by the Amalgamated Company, it is in fact held by the committee, while the company holds the certificates of deposit issued by the committee. What other agreement there was, if any, does nob appear. Nor does it appear, except indirectly, that one of the purposes of the organization of the Amalgamated Company was to acquire the stock of the Montana Company. From the facts stated, however, it would seem that the committee was merely an instrumentality devised to secure some sort of organization or combination of the interests of the Montana corporations, including the Montana Company, which finally culminated in the organization of the Amalgamated Company; for most of the persons engaged in the promotion of the scheme were officers and stockholders of the Montana corporations.
But be this as it may, all the corporations of which the Amalgamated Company has secured control, except the milling and
We thus have a combination of corporations, the dominant one of which is subject only to the laws of New Jersey, while the servient bodies were all organized and are subject to the laws of the state of Montana. Does this combination fall within the prohibition of the Constitution and of the Penal Code, sufraf
The Constitution declares: “No1 corporation, stock company, person or association of persons in the state of Montana, shall directly, or indirectly, combine or form what is known as a trust, or make' any contract with any person, or persons, corporations or stock company, foreign or domestic, through their stockholders, trustees, or in any manner whatever, for the purpose of fixing the price, or regulating the production of any article of commerce, or of the product of the soil, for consumption by the people. The legislative assembly shall pass laws for the enforcement thereof by adequate penalties to the extent, if necessary for that purpose, of the forfeiture of their property and franchises, and in case of foreign corporations prohibiting them from carrying on business in the state.” (Section 20, Article XV.)
The Penal Code re-enacts the substantive part of this section, and provides penalties for its violation and for other offenses. It is as follows: “Every person, corporation, stock company or association of persons in this state who, directly or indirectly, combine or form what is known as a trust, or make any contract with any person or persons, corporations or stock companies, foreign or domestic, through their stockholders, directors, officers, or in any manner whatever, for the purpose of fixing the price or regulating the production of any article of commerce, or of the product,of the soil for consumption by the people, or to create or carry out any restriction in trade, to
Article XY, supra, deals generally with the rights and.powers of corporations and associations of persons exercising any of the powers and privileges not possessed by individuals or partnerships, and their duties and purposes. It is prohibitory and restrictive in its general scope and purpose, the design of the convention in adopting its provisions'being to prevent combinations to restrict or repress competition in all industrial pursuits, and to protect the people in general, and the employes of a certain class, against both the legislature and combinations of capital, from unjust impositions. Certain combinations and consolidations are prohibited altogether, as having a necessary tendency to restrict competition, such as consolidation, by purchase or otherwise, by one railroad or other transportation company, with another having a competing line (Section 6), or the control of a telephone or telegraph company by another competing company (Section 14). Apart from- these prohibited combinations, the right of consolidation by corporations or associations engaged in these particular pursuits is not prohibited. Nor are such combinations, either of corporations or individuals, engaged in other pursuits prohibited, except as provided in Sec
S’ection 20 prohibits any combination or contract which has a particular purpose, to-wit, “fixing the price or regulating the production of any article of commerce, or of the product of the soil, for consumption by the people.” The terms “combine” and “form a trust” were evidently intended to bé read in connection with the expression “for the purpose,” etc., clearly implying that, in order to subject offenders to the severe penalties which the legislature might impose, there must be shown a specific intent to do the prohibited act, or that the association or combination necessarily tends to accomplish the same result. That this is the meaning is clear from the enumeration of persons who may not do the prohibited acts. Corporations, stock companies, natural persons, or partnerships are all included. If the criminal intent is not a necessary ingredient of the evil denounced, then all sorts of combinations are to be deemed prohibited, even ordinary copartnerships, as coming within the letter of the prohibition. Por the terms- “combine” and “form a trust” are of equal dignity. If the former is to be regarded as modified and explained by the clause “for the purpose,” etc., by the same rule must the latter also. .
The term “trust,” if assigned the meaning’; given to it by the text-writers (Cook on Corporations, - Sec. 503a; Spelling on Trusts, Sec. 121), includes any form of combination between corporations, or corporations and natural persons, for the purpose of regulating production and repressing competition' by means of the power thus centralized. It was first used in a narrower sense, we believe, of an organization formed by a combination of several corporations under one direction, by the de
The section of the statute quoted involves the same idea, and demands the same construction, though it is more specific in its provisions, and extends to and includes combinations in restraint of competition in transportation. It denounces every form of combination or contract which has for its purpose, directly or indirectly, the restraint of production or trade in any way or manner, or the control of the price of any article of consumption by the people. It was not the purpose of the convention, or of the legislature, to limit either the term used in the constitution, or in the statute, hy any narrow definition, but to leave it to the courts to look beneath the surface, and, from the methods employed in the conduct of the business, to determine whether the association or combination in question, no' matter what its particular form should chance to be, or what might be its constituent elements, is taking advantage of the public in an unlawful way. (Harding v. American Glucose Co., 182 Ill. 551, 55 N. E. 577, 74 Am. St. Rep. 189.) In each case, therefore, under these provisions, the nature of the arrangement or combination is a question of fact to be determined by the court from the evidence before it, or from the vice which inheres in the contract itself.
The facts in the record before us, tending to show the purposes and methods of the Amalgamated Company and associate corporations, do not justify the conclusion that the combination
It is not every act of a corporation, though unlawful, that will give the minority stockholder therein a right of action against it. So far as he is not injuriously affected, directly or indirectly, he has no ground to complain, and, until it makes such connections, or pursues such a course as to make it amenable to the law, he cannot be heard to question its action.
It is held by many courts that the mere possession of power by a combination of corporations or associations, or persons, to injuriously repress competition, to regulate production, and fix prices, is against public policy, and all such are by them declared illegal as against public policy. This is,' true of the Illinois Supreme. Court, as will be found by an examination of Harding v. American Glucose Co., 182 Ill. 551, 55 N. E. 577, 74 Am. St. Rep. 189. It is said in that case: “The material consideration in the case of such combinations is, as a general thing, not that prices are raised, but that it rests in the power and discretion of the trust or corporation taking all the plants of the several corporations to raise prices at any time, if it sees fit to do so.” This case is typical of the class which hold to this doctrine. But an examination of them will reveal the fact that, in each particular case before the court for consideration, it appeared either from the fact proved or admitted, or from the
What we bave said relates only to tbe evidence adduced at tbe bearing under tbe order to1 show cause. If upon tbe final bearing, after tbe issues are made up', it sboúld be made to appear tbat tbe associated companies are proceeding in violation of tbe law, tbe district court would be justified in issuing a perpetual injunction to restrain the Montana Company and its directors from further participating in tbe unlawful connection. This case does not fall within the principle of Forrester & MacGinniss v. B. & M. C. C. & S. M. Co., 21 Mont. 544, 55 Pac. 229, 353, as respondent contends.
Tbe contention is made by tbe appellants tbat one corporation may own and vote stock in another corporation, provided its charter authorizes it to do- so; tbat the Amalgamated Company has this- power under its charter; tbat tbe laws of tbe state under which it was created authorizes such a grant; and tbat it has a right to own and vote stock in any Montana corporation, even though it was acquired for tbe purpose of controlling it; and tbat tbe injunction was not properly issued. Tbe respondent admits tbat tbe Amalgamated Company is lawfully authorized by its charter to own and vote stock in any corporation, no matter where organized, but tbat it cannot exercise this power in Montana unless it is permitted to do- so by express provision of law authorizing corporations of Montana to do tbe same thing. There is no such provision of law, counsel say, and therefore tbe exercise of this power contravenes tbe provision contained in Section 11 of Article XY of tbe Constitution, which denies foreign corporations tbe enjoyment, within this state, of “any greater rights or privileges than those possessed or enjoyed by corporations of tbe same or similar character created under tbe laws of tbe.state.”
We bave, then, tbe Amalgamated Company, a corporation duly authorized by its charter, under tbe laws of New Jersey,
The general rule is that one corporation cannot hold or vote stock in another unless expressly authorized so to do by the terms of its charter or by a statute. This was formerly the rule ^ in England (Green’s Brice’s Ultra Vires, 91) ; but it has been much relaxed by the later decisions, which recognize many exceptions (Id. 92, 93). The general rule prevails in the state and federal courts in this country. Iowa and Maryland are, possibly, the only exceptions. (Latimer v. Citizens' State Bank, 102 Iowa, 162, 11 N. W. 225; White v. Marquardt & Sons, 105 Iowa, 145, 74 N. W. 930; Booth v. Robinson, 55 Md. 419. The case of Califoria Bank v. Kennedy, 161 U. S. 362, 17 Sup. Ct. 831, 42 L. Ed. 198, is an example of the application of the rule. See, also, Parsons v. Tacoma Smelting & Refining Co., 25 Wash. 492, 65 Pac. 765; People ex rel. Peabody v. Chicago Gas Trust Co., 130 Ill. 268, 22 N. E. 798, 8 L. R. A. 497, 17 Am. St. Rep. 319, and cases cited; Thompson on Corporations, Sec. 1102; People v. North River Sugar Refining Co., 121 N. Y. 582, 24 N. E. 834, 9 L. R. A. 33, 18 Am. St. Rep. 843; Marble Co. v. Harvey, 92 Tenn. 115, 20 S. W. 427, 18 L. R. A. 252, 36 Am. St. Rep. 71.)
This is but a corollary of the- x>rincip-le that, on grounds of public policy, a corporation can do no other act or make any contract that is not expressly or impliedly authorized by1 its charter, read in the light of the general provisions of law on the subject. The converse of the rule is also generally recognized, to-wit, that a corporation is the creature of law, and may do- any act or enter into any contract exp-ressly or impliedly authorized by its charter or the law of its creation.
The Montana Company was organized on June 21, 1887, under Section 446, Eifth Division, Comp. St. 1887,—
It is therefore not against the public policy of the state for one corporation to hold and vote stock in another of like character. The provisions of the statutes supra are to be construed as amendments to the general laws authorizing the formation of corporations and defining their powers, within the purview of Section 11 of Article XV of the Constitution, supra. The public policy of the state varies from time to time. It is not to be measured by the private convictions or notions of the persons who happen to be exercising judicial functions, but by reference to the enactments of the lawmaking power, and, in the absence of them, to the decisions of the courts. When, however, the legislature has spoken upon a particular subject and within the limits of its constitutional powers, its utterance is the public policy of the state. (United States v. Trans-Missouri Ass’n, 166 U. S. 290, 17 Sup. Ct. 540, 41 L. Ed. 1007.) .
The Constitution (Article XV, Sec. 15) does not prohibit consolidations. Its prohibition extends only to any device by which an attempt is made to deprive the state courts of jurisdiction. Section 521 of the Civil Code expressly authorizes consolidations of domestic corporations. House Bill 132, supra, impliedly authorizes them, between domestic and foreign corporations, or, at least, goes to the extent of empowering one do
But counsel for respondent say that these statutory provisions do not apply to the Montana Company, because as to it, at least, having been enacted after its organization, they impair the obligation of the corporation contract, and thus infringe upon the rights of the plaintiff. It may be conceded that, so far as they attempt to increase the powers of that corporation without consent of all of its stockholders, they may be violative of the constitutional prohibition. But this objection does not arise as to corporations formed since their enactment. The holding of stock in a corporation by one person or another does not affect the rights of any other stockholder so long as the purposes of the corporate body are carried out under its charter for the benefit and profit of all the stockholders alike, according to the best judgment of those who have the active management of its business, and so long as the transaction by which the stock was obtained does not violate any provision of the statute or of the constitution. (Trust Co. v. Georgia, 109 Ga. 736, 35 S. E. 323, 48 L. R. A. 520.) Whenever, in the conduct of the business, the purposes of the charter of the Montana Company are ignored and the rights of the minority stockholders are disregarded, the courts of this state have ample power by way of injunction, or a receivership if necessary, to compel it to observe its contract obligations with the state and stockholders, notwithstanding its connection with the Amalgamated Company.
It does not appear from any evidence in the case that the Amalgamated Company, by any act of control over the Montana Company, has affected in any way the rights of the plaintiff as a stockholder. On this branch of the case, therefore, the plaintiff has no cause of complaint.
Inquiry was made of one of the witnesses at the hearing as to the ownership of the shares of stock which are the foundation of this action. The inquiry was made in an attempt to show that the shares, though'standing in the name of the plaintiff, are in fact owned by the Montana Ore Purchasing Company, a
Tbe order of tbe district court is reversed, and tbe cause is remanded for further proceedings.
Reversed and remanded.