Opinion · Supreme Court of the United States
Minnesota v. Northern Securities Co.
Minn. v. N. Sec. Co., 184 U.S. 199 (1902)
- Type
- Opinion
- Court
- Supreme Court of the United States
- Jurisdiction
- Federal
- Date
- 1902-02-24
- Topic
- general
Me. Justice Shieas, after making the above statement, delivered the opinion of the court. Whether a bill in equity filed in this court, in the name of a State, which seeks to prevent by injunction a corporation organized under the laws of another State, with power to acquire and hold shares of the capital stock of any other corporation, from obtaining and exercising ownership and control of two or more competing railroad companies of the complainant State, so as to evade and defeat its laws and policy forbidding the consolidation of such railroads when parallel and competing, presents the case -of a controversy of a civil nature whereof this court has jurisdiction under the Constitution and laws of the *235 United States, and whether the bill in the present case is of that description, or whether it is the case of a suit brought by a State to enforce its penal statutes, and hence within the principle of the decision in Wisconsin v. Pelican Insurance Co., 127 U. S. 265, are questions which have been ably discussed by counsel. • But it is not necessary for us to consider and answer those questions, for, in view of the nature of the facts presented and the remedies prayed for in the bill proposed to be filed, we think that the suit is defective' for want of essential parties whose rights would be vitally affected by the relief sought therein.
Citator
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Headnotes
- Civil Procedure — Pleading In equity, all persons materially interested, either legally or beneficially, in the subject matter of a suit must be made parties so that a complete decree binding all of them may be made, thereby enabling the court to render complete justice between the parties, preventing future litigation and a multiplicity of suits, and ensuring that no injustice is done to parties before the court or to others interested in the subject matter. Story's Eq. Plds. sec. 72
- Civil Procedure — Pleading Parties to a bill in equity fall into three classes: formal parties; persons having an interest in the controversy who ought to be made parties so that the court may finally determine the entire controversy and do complete justice by adjusting all the rights involved, commonly termed necessary parties; and persons who not only have an interest in the controversy but an interest of such a nature that a final decree cannot be made without affecting that interest. Shields v. Barrow, 17 How. 130
- Civil Procedure — Pleading Persons whose interests are separable from those of the parties before the court, so that the court can proceed to a decree and do complete and final justice without affecting persons not before it, are not indispensable parties; but persons having an interest of such a nature that a final decree cannot be made without either affecting that interest or leaving the controversy in a condition where its final determination may be wholly inconsistent with equity and good conscience are necessary parties. Shields v. Barrow, 17 How. 130
- Civil Procedure — Pleading Courts of equity follow an established practice of dismissing the plaintiff's bill if it appears that granting the relief prayed for would injuriously affect persons materially interested in the subject matter who are not made parties to the suit; this practice is founded on clear reasons and may be enforced by the court sua sponte, though not raised by the pleadings or suggested by counsel. Shields v. Barrow, 17 How. 130; Hipp v. Babin, 19 How. 271, 278; Parker v. Winnipiseogee Lake Cotton & Woolen Co., 2 Black 545
- Civil Procedure — Pleading No court can adjudicate directly upon a person's right without the party being either actually or constructively before the court, and this principle applies equally to all courts of equity whatever their structure as to jurisdiction; accordingly, a Circuit Court can make no decree affecting the rights of an absent person, nor any decree between the parties before it which so far involves or depends upon the rights of an absent person that complete and final justice cannot be done between the parties to the suit without affecting those rights. Mallow v. Hinde, 12 Wheat. 193, 198; Hogan v. Walker, 14 How. 36; California v. Southern Pacific Co., 157 U.S. 229
- Civil Procedure — Equity Rule 47 — Effect of the Act of February 28, 1839 Equity Rule 47 is only a declaration, for the government of practitioners and courts, of the effect of the Act of Congress of February 28, 1839, and of the previous decisions of the Supreme Court on the subject of that rule; notwithstanding the Act and the forty-seventh rule, the principle remains true that no court can adjudicate directly upon a person's right without the party being actually or constructively before the court. Hogan v. Walker, 14 How. 36
- Civil Procedure — Federal Jurisdiction — Nonjoinder of Absent Defendants Under the Act of Congress of February 28, 1839, when a suit at law or in equity in a United States court has several defendants, any one or more of whom are not inhabitants of or found within the district where the suit is brought, or do not voluntarily appear, the court may entertain jurisdiction and proceed to trial and adjudication between the parties properly before it, and the nonjoinder of absent parties constitutes no matter of abatement or other objection to the suit; however, the judgment or decree rendered shall not conclude or prejudice other parties not regularly served with process or not voluntarily appearing to answer. 5 Stat. 321, § 1
- Civil Procedure — Federal Jurisdiction — Scope of the Act of February 28, 1839 The Act of February 28, 1839 relates solely to the nonjoinder of persons not within the reach of the court's process, and does not affect any case where persons having an interest are not joined because their citizenship is such that their joinder would defeat the jurisdiction; as to suits in equity, the Act is no more than a legislative affirmance of the rule previously established by Cameron v. McRoberts, Osborn v. Bank of the United States, and Harding v. Handy, under which the nonjoinder of a party who could not be served with process would not defeat the jurisdiction. 5 Stat. 321, § 1; Cameron v. McRoberts, 3 Wheat. 591; Osborn v. Bank of the United States, 9 Wheat. 738; Harding v. Handy, 11 Wheat. 132
- Civil Procedure — Pleading Where parties who should be joined cannot be joined, the bill must be dismissed for want of parties. California v. Southern Pacific Co., 157 U.S. 229
- Civil Procedure — Supreme Court — Original Jurisdiction The Supreme Court cannot exercise original jurisdiction in a suit between a State on the one hand and a citizen of another State together with citizens of the complainant State on the other. California v. Southern Pacific Co., 157 U.S. 229
- Civil Procedure — Pleading When it appears to a court of equity that a case otherwise presenting ground for its action cannot be dealt with because of the absence of essential parties, the court usually sustains the objection while granting the complainant leave to amend by bringing in such parties; but leave to amend is useless and should not be granted where it appears that those parties are beyond the reach of the court's jurisdiction, or that making them parties would defeat the court's jurisdiction.
- Federal Courts & Jurisdiction — Jurisdiction — Indispensable Parties and Constitutional Jurisdiction Federal constitutional jurisdiction does not extend to a case where indispensable parties would have to be made defendants and their joinder would defeat that jurisdiction; accordingly, where indispensable parties are absent so that a court of equity cannot proceed, and the court's constitutional jurisdiction would not extend to the case if those parties were made defendants, leave to file the proposed bill must be denied. U.S. Const. art. III, § 2
- Remedies — Procedure — Substance of the Bill and Final Complete Justice A court will examine the substance of a proposed bill to determine whether it discloses a case for a decree that would do final and complete justice between the nominal parties without vitally affecting absent persons.
- Remedies — Procedure — Scope of the Dismissal Ruling A conclusion that a suit cannot be entertained for want of necessary and essential parties implies no opinion beyond that jurisdictional question.
- Civil Procedure — Federal Jurisdiction — Civil Controversy over Foreign Corporation's Control of Competing Railroads A suit to prevent a foreign corporation from acquiring and exercising ownership and control of two or more competing railroad companies of a State, so as to evade that State's laws and policy forbidding consolidation of such parallel and competing railroads, presents a controversy of a civil nature over which the federal courts have jurisdiction under the Constitution and laws of the United States.
- Civil Procedure — Pleading Stockholders of a corporation have a right to be represented in litigation affecting their interests by the corporation whose stock they hold, and their rights ought not to be affected without a hearing; minority stockholders of railroad companies are not represented by a company that holds only a majority of the stock of those companies.
- Business & Corporate Law — Directors — Public and Private Interests Directors of railroad companies are appointed to represent and protect not merely the private and pecuniary interests of the stockholders, but also the rights of the public at large, which is deeply concerned in the proper and advantageous management of these public highways.
- Remedies — Practice — Representation of Both Sides and the Public Interest A State, when it voluntarily becomes a complainant in a court of equity, cannot claim to represent both sides of the controversy; where the State is the complainant, the public interest can only be represented by the presence of the railroad companies as parties defendant, and in making an investigation a court of equity must insist that both sides of the controversy be adequately represented and fully heard.
MINNESOTAv. NORTHERN SECURITIES CO.,184 U.S. 199(1902)
22 S.Ct. 308
MINNESOTAv. NORTHERN SECURITIES COMPANY.
ORIGINAL.
No. 10. Original.
Argued January 27, 1902.
Decided February 24, 1902.
ON the 7th day of January, 1902, came the State of Minnesota,
by Wallace B. Douglas, its Attorney General, and moved the court
for leave to file a bill of complaint against the Northern
Securities Company, a corporation of the State of New
Page 200
Jersey. Thereupon the court directed that notice of such
application should be given to the defendant, and set the motion
for argument on January 27, 1902, when it was duly heard.
The bill proposed to be filed was in the following terms:
To the Judges of the Supreme Court of the United States of
America:
Your oratrix, the State of Minnesota, complainant, by Wallace
B. Douglas, Attorney General thereof, brings this its bill of
complaint against the Northern Securities Company, a corporation
organized under and by virtue of the laws of the State of New
Jersey, and alleges:
I.
That by an act of Congress, entitled "An act for the admission
of Minnesota into the Union," approved May 11, A.D. 1858, the
said State of Minnesota was admitted into the Union upon an equal
footing with the original States.
II.
That said Northern Securities Company is a corporation
organized as hereinafter alleged, under and by virtue of the laws
of the State of New Jersey, and is a citizen of the State of New
Jersey.
III.
A.
That by an act of the Congress of the United States, of March
12, 1860, extending to the State of Minnesota the swamp lands
grant theretofore made to the State of Arkansas, and by various
subsequent acts, the Congress of the United States donated to the
State of Minnesota from the public domain large quantities of
lands situated within the State of Minnesota, and of the value of
several millions of dollars. That the State of Minnesota now has
left and undisposed of more than three million acres of said
lands, of the value of more than fifteen million dollars, much of
which said land is located in the territory traversed by the
railroads of the Great Northern and Northern Pacific Railway
Companies, as hereinafter alleged. That the value of said land,
and the salability thereof, depends
Page 201
in very large measure upon having free, uninterrupted and open
competition in passenger and freight rates over the lines of
railway owned and operated by said Great Northern and Northern
Pacific Railway Companies.
That many of said lands are vacant and unsettled and located
in regions not at present reached by railway lines, and depend
for settlement upon the construction of lines in the future; that
it has heretofore been the practice of said Great Northern and
Northern Pacific Railway Companies, respectively, to extend spur
lines into territory adjacent to each of said roads, as well as
into new territory, for the purpose of developing such territory,
as well as to obtain traffic therefrom; that such new lines have
been built in the past very largely by reason of the rivalry
heretofore existing between said companies, for existing, as well
as new business; that under the consolidation and unity of
control hereinafter set forth, such rivalry will cease, and many
of the lands now owned by the State of Minnesota will not be
reached by railroads for years to come, if at all, owing to such
combination and consolidation removing all rivalry and
competition between said companies; that the settlement and
occupation of said lands will add very much to their value, and
such occupation will depend entirely upon the accessibility of
railway lines and transportation facilities for marketing the
products raised thereon; that if said lands are sold and become
occupied, they will add very largely to the taxable value of the
property of the State, and that said lands cannot be sold or the
income of the State increased thereby without the construction of
railroad lines to, or adjacent to, the same.
B.
That the State of Minnesota is now and for many years past has
been the owner of, and continuously maintained, an educational
institution for the benefit of its citizens, known as the
University of Minnesota; also a large number of hospitals for the
insane, within its territorial limits; also five normal schools
for the education of teachers within the State; also a state
training school for boys and girls; also several state schools
for the education, care and maintenance of the deaf, dumb,
Page 202
blind and feeble-minded; also a state school for indigent and
homeless children; also a state penitentiary and reformatory.
That for many years past the State of Minnesota has
continuously maintained and supported each of said institutions,
and in the care, maintenance and management thereof has been
compelled to and in the future, of necessity, will annually
purchase large quantities of supplies for said institutions,
including provisions, clothing and fuel, a great portion of which
the State of Minnesota is compelled to ship over the different
lines of railway owned and operated by the Northern Pacific
Railway Company and the Great Northern Railway Company.
That the State of Minnesota is compelled to expend annually
more than seven hundred thousand dollars in the operation and
maintenance of said public institutions, most of which sum is
raised by general taxation upon the lands and other property of
the citizens of the State of Minnesota, and situated therein.
That the amount of taxes which said State of Minnesota can
collect, and the successful maintenance of its said public
institutions, as well as the performance of its governmental
functions and affairs, depends largely upon the value of the real
and personal property situated within its territorial limits, and
the general prosperity and business success of its citizens. That
the value of said real and personal property of the citizens of
the State of Minnesota, as well as their business success and
general prosperity, depend very largely upon maintaining in said
State free, open and unrestricted competition between the railway
lines of said Great Northern and Northern Pacific Railway
Companies respectively within said State.
C.
That it has been the settled policy and practice of the State
of Minnesota since its organization as a Territory to develop the
resources of the State by encouraging railroad building therein,
and in furtherance of this policy the Territory of Minnesota, by
an act thereof, under the date of May 22, 1857, granted to the
Minnesota and Pacific Railroad Company a charter, and in
consideration of the construction and maintenance of a line of
railway in Minnesota, by said company, said Territory donated
Page 203
to it out of its public domain about seven hundred thousand acres
of land. That said Minnesota and Pacific Railroad Company
thereafter became insolvent, and all its property was placed in
the hands of a receiver; that such proceeding were thereafter had
that all the property of the last named company, including said
land, was duly sold and conveyed to the St. Paul, Minneapolis and
Manitoba Railway Company, hereinafter mentioned.
That the State of Minnesota, by an act of its legislature, and
in consideration of the construction and maintenance of a line of
railway by the Great Northern Railway Company, hereinafter
referred to, between St. Cloud and Hinckley, a distance of
eighty-four miles, donated and conveyed to said last named
company upwards of four hundred thousand acres of land then owned
by and situated in the State of Minnesota, which said land was
then worth more than one million dollars. That in carrying out
said policy, and in aid of the building of railways within the
State of Minnesota, there has been granted out of the public
domain within the limits of the State of Minnesota upwards of
10,500,000 acres of land, nearly all of which has been granted to
said Great Northern and Northern Pacific Railway Companies, and
the subsidiary companies owned and controlled by them.
D.
That by an act of the legislature of the State of Minnesota,
approved March 3, 1881, entitled "An act granting swamp lands to
aid in the construction of the main line of the road of the
Little Falls and Dakota Railway Company," and which now is a part
of the Northern Pacific Railway Company system, hereinafter
referred to, the State of Minnesota donated to said Little Falls
and Dakota Railway Company two hundred and forty-three thousand
five hundred and ninety-one (243,591) acres of land situated in
and then belonging to said State, in consideration of the
construction and maintenance by said last named railway company
of a line of railway extending from Little Falls to Morris, in
the State of Minnesota.
IV.
Your oratrix further alleges that immense quantities of wheat
Page 204
and other products are shipped annually from East Grand Forks,
Crookston, Moorhead, Fergus Falls and other competitive points
within the State of Minnesota, and all on the lines of railway of
the said Great Northern and Northern Pacific Railway Companies,
hereinafter referred to, to the cities of Duluth, St. Paul and
Minneapolis, within the State of Minnesota. That nearly all of
the shipment of such products made from the above named initial
points are consigned to various citizens at either the city of
Duluth, St. Paul or Minneapolis over one or the other of said
lines of railroad last above named. That enormous quantities of
merchandise have been and will continue to be shipped annually
over said lines of railway, between the cities of St. Paul and
Minneapolis and various other cities and villages along said
lines of railway situated within the State of Minnesota, and
which are purchased and used entirely by the people of said
State. That the competition in both freight and passenger traffic
to and from said places has always been sharp and active between
said railway companies, and has secured to the residents of said
cities, as well as the State of Minnesota, and to the State of
Minnesota itself, much lower rates for both freight and
passengers than would otherwise have been obtained, or than will
or can be obtained in case the consolidation or unity of control
and management of said Great Northern and Northern Pacific
Railway Companies, hereinafter alleged, is not enjoined as herein
prayed.
V.
That the Great Northern Railway Company is a corporation
organized and existing under and by virtue of the laws of the
State of Minnesota, to wit, under an act duly passed by the
Territory of Minnesota, entitled "An act to incorporate the
Minneapolis and St. Cloud Railroad Company," approved March
first, A.D. 1856, and various subsequent acts of the State of
Minnesota amendatory thereof and supplemental thereto,
respectively entitled as follows:
"An act to amend an act entitled `An act to incorporate the
Minneapolis and St. Cloud Railroad Company,' passed March 1,
1856." Approved February 23, 1864.
Page 205
"An act of the legislature of the State of Minnesota entitled
`An act granting swamp lands to aid the Minneapolis and St. Cloud
Railroad Company in building branches to connect with the Lake
Superior and Mississippi Railroad and the Winona and St. Peter,
or any other railroad in southern Minnesota.'" Approved February
11, 1865.
"An act to amend an act entitled `An act to incorporate the
Minneapolis and St. Cloud Railroad Company,' approved March 1,
1856, and to repeal certain portions of an act amending the
charter of said company, passed February 23, 1864." Approved
February 28, 1865.
"An act to amend an act entitled `An act granting swamp lands
to aid the Minneapolis and St. Cloud Railroad Company in building
branches to connect with the Lake Superior and Mississippi
Railroad and Winona and St. Peter Railroad, or any other railroad
in Southern Minnesota.'" Approved March 5, 1869.
"An act to amend the charter of the Minneapolis and St. Cloud
Railroad Company." Approved March 6, 1869.
"An act to amend the charter of the Minneapolis and St. Cloud
Railroad Company." Approved March 2, 1870.
"An act to extend the time for the construction and completion
of the branch of the Minneapolis and St. Cloud Railroad Company."
Approved March 11, 1879.
"An act to amend an act entitled `An act granting swamp lands
to aid the Minneapolis and St. Cloud Railroad Company in building
branches to connect with the Lake Superior and Mississippi
Railroad and the Winona and St. Peter Railroad, or any other
railroad in southern Minnesota,' approved February 11, in the
year of our Lord one thousand eight hundred and sixty-five, as
amended." Approved March 10, 1885.
That on the 16th day of September, 1889, the corporate name of
said company was duly changed to the Great Northern Railway
Company. That during the year 1889 said railway company caused to
be constructed a line of railway extending from St. Cloud,
Minnesota, to Hinckley, Minnesota, which line was immediately
conveyed to the St. Paul, Minneapolis and Manitoba Railway
Company, a corporation duly organized and existing
Page 206
under and by virtue of the laws of the State of Minnesota,
hereinafter referred to as the Manitoba Company. That said
Manitoba, Company, prior to the first day of February, 1890, had
built, purchased and put in operation various lines of railway
within the State of Minnesota, as well as in the States of North
Dakota, Montana, Idaho and Washington, connecting by rail the
cities of St. Paul and Minneapolis, within the State of
Minnesota, and various other cities and villages within said
State, with each other, and with Puget Sound, on the Pacific
Ocean; which said railways are hereinafter more particularly
described.
That on the first day of February, 1890, said Manitoba Railway
Company leased to the said Great Northern Railway Company, for a
period of nine hundred and ninety-nine years, all of the lines of
railway, including the rolling stock then owned and controlled by
said Manitoba Company; that ever since said last named date said
Great Northern Railway Company has continued to and now does
control, operate and maintain each and all of said lines as one
complete railroad system. That said lines of railway so
constructed by said Manitoba Company and now so controlled,
operated and maintained by said Great Northern Railway Company
under said lease, are described as follows:
A line of railway extending from St. Paul, Minnesota, via
Minneapolis, Elk River, St. Cloud, Sauk Center, Fergus Falls,
Glyndon, Crookston to the northern boundary line of the State of
Minnesota at St. Vincent.
Another line of railway extending from Minneapolis, Minnesota,
along the western bank of the Mississippi River to St. Cloud,
Minnesota.
Another line of railway extending from St. Cloud easterly to
Hinckley, Minnesota.
Another line of railway extending from Elk River, Minnesota,
northward to Malaco, Minnesota, on the line of the St. Cloud and
Hinckley Branch, last above referred to.
Another line of railway extending from Minneapolis, Minnesota,
to Breckenridge, Minnesota.
Another line extending from Sauk Center, Minnesota, to Park
Rapids, Minnesota.
Page 207
Another line of railway extending from Hutchinson Junction to
Hutchinson, Minnesota.
Another line of railway extending from Benson, Minnesota,
thence in a westerly direction to the western boundary line of
the State; thence to Watertown, South Dakota.
Another line of railway extending from Evansville, Minnesota,
westerly to the state boundary line, thence to Ellendale, North
Dakota.
Another line of railway extending from Moorhead, Minnesota,
westerly to the state boundary line; thence to Wahpeton, North
Dakota.
Another line of railway extending from Moorhead, Minnesota, to
Crookston, Minnesota.
Another line of railway extending from Barnesville, Minnesota,
to Moorhead, Minnesota.
Another line of railway extending from Carman, Minnesota, to
Foster, Minnesota.
Another line of railway extending from Crookston, Minnesota,
to Red Lake Falls and Thief River Falls, Minnesota.
All of the foregoing lines being situated in the State of
Minnesota, except as hereinafter otherwise expressly stated.
That said Great Northern Railway Company now either owns or
controls, and operates and maintains, by virtue of said lease, a
line or system of railways connecting with said lines above
referred to, and extending from the western boundary line of the
State of Minnesota through the States of North Dakota, Montana,
Idaho and Washington, to Puget Sound on the Pacific Coast. The
said railway lines covered by said lease, or owned by said Great
Northern Railway Company, aggregate a total of about four
thousand five hundred miles.
That many of said railroads above described being located
within the State of Minnesota, were built by subsidiary companies
or corporations, and said Great Northern Railway Company now owns
all of the capital stock of such corporations in addition and as
supplemental to said lease; and in addition thereto said Great
Northern Railway Company owns all of the capital stock of the
Eastern Railway Company of Minnesota, a corporation organized
under the laws of the State of Minnesota,
Page 208
and which owns and operates a railway line extending from the
cities of St. Paul and Minneapolis to Duluth, Minnesota; and from
Duluth, Minnesota, to Bemidji, Minnesota; and by virtue of such
ownership of stock said Great Northern Railway Company dictates
the policy of said railway company and controls the lines of
railway and properties of said Eastern Railway Company, and
operates the same as a part of the Great Northern system of
railway.
That said Great Northern Railway Company also owns all of the
capital stock of the Willmar and Sioux Falls Railroad Company, a
corporation owning a railroad extending from Willmar, Minnesota,
to Yankton, South Dakota, and by virtue of such ownership of
stock dictates the policy of and owns and controls the railway
line and property of said Willmar and Sioux Falls Railroad
Company.
That all of the railways and railway lines hereinbefore
described are operated and controlled by and form a complete
system under the name of said Great Northern Railway Company.
That the charter of said Great Northern Railway Company
provides as follows: "That all of the affairs and business of
said company shall be conducted by or under the direction of a
board of directors, and they are authorized, for the purposes
specified in this act, to make and establish regulations and
by-laws, and to do all things necessary to be done and not
inconsistent with the Constitution and laws of the United States,
or the laws of this Territory, or this act."
Your oratrix further alleges that the board of directors of
said Great Northern Railway Company, at the time of the
organization of the Northern Securities Company, hereinafter
referred to, to wit, on or about the 13th day of November, 1901,
was and now is composed of the following named persons, to wit:
James J. Hill, James N. Hill, Samuel Hill, William P. Clough,
Edward Sawyer, M.D. Grover, Jacob H. Schiff and Henry W. Cannon;
and at said date the managing or executive officers of said
corporation were and now are as follows: President, James J.
Hill; Vice President, William P. Clough; Secretary and Assistant
Treasurer, E.T. Nichols. That on
Page 209
said last named date said Great Northern Railway Company had
issued, and there was then outstanding, a total of one hundred
and twenty-five million dollars, par value, of the capital stock
of said corporation, and your oratrix is informed and believes,
and upon information and belief alleges, that said James J. Hill
was on said last named date the owner of or in possession and
control of, or had subject to his direction and disposition, more
than a majority of said capital stock so outstanding.
VI.
That the Northern Pacific Railway Company was formerly a
corporation organized and existing under and by virtue of an act
of the Congress of the United States, entitled, "An act granting
land to aid in the construction of a railroad and telegraph line
from Lake Superior to Puget Sound on the Pacific Coast, by the
northern route," approved July 2, 1864; and a joint resolution of
Congress extending the time for the completion of said railroad
until July 1, 1868; and a joint resolution granting the consent
of Congress provided for in section ten of said act,
incorporating the Northern Pacific Railroad Company, approved
March 1, 1869; the joint resolution of Congress granting the
right of way for the construction of a railroad from Portland,
Oregon, to a point west of the Cascade Mountains in Washington
Territory, approved April 1, 1869; the joint resolution of
Congress authorizing the Northern Pacific Railroad Company to
issue its bonds for the construction of its road, and to secure
the same by mortgage, and for other purposes, approved May 31,
1870. And complainant asks leave to refer to and have each of
said acts and resolutions considered as though fully herein set
forth.
That under and in pursuance of the said several acts and joint
resolutions of Congress, the Northern Pacific Railroad Company
constructed and put into operation, prior to January 1, 1890, all
of its main line of road, extending from Ashland, in the State of
Wisconsin, westward across the States of Minnesota, North Dakota,
Montana and Idaho, and in the State of Washington to Walla Walla
Junction; also all that other part of its main line of railroad
extending from Portland,
Page 210
Oregon, to Tacoma, Washington; also the whole of its Cascade
Branch, extending from Pasco Junction, in the State of
Washington, to Tacoma, in the State of Washington.
That said Northern Pacific Railroad Company had also, prior to
said first day of January, 1880, acquired and then owned all of
the capital stock of the following named railroad companies and
corporations, to wit, the St. Paul and Northern Pacific Railroad
Company, a corporation organized under the laws of the State of
Minnesota, and which then owned a railroad extending from St.
Paul, Minnesota, to Brainerd, Minnesota; and from Little Falls,
Minnesota, to Staples, Minnesota; also of the Duluth and Manitoba
Railroad Company, a corporation organized under the laws of the
State of Minnesota, and which then owned a line of railroad
extending from Winnipeg Junction, Minnesota, via Red Lake Falls,
Minnesota, to the western boundary line of said State, and thence
to Grand Forks, North Dakota; and thence to the international
boundary line between the state of North Dakota and Canada; also
of the Duluth, Crookston and Northern Railroad Company, a
corporation organized under the laws of the State of Minnesota,
and which then owned a railroad extending from Fertile Junction,
Minnesota, through Crookston to Carthage Junction, Minnesota;
also of the Little Falls and Dakota Railroad Company, a
corporation organized under the laws of the State of Minnesota,
and which then owned a railroad extending from Little Falls,
Minnesota, to Morris, Minnesota; also of the Northern Pacific,
Fergus Falls and Black Hills Railroad Company, a corporation
organized under the laws of the State of Minnesota, and which
owned a line of railroad extending from Wadena, Minnesota, thence
westerly to the western boundary line of the State; and thence to
North Dakota points; also all of the capital stock of various
railroad corporations or companies organized in the States of
North Dakota, South Dakota, Montana and Washington, which owned
and operated various railway lines in said States respectively.
The said railway lines built by said companies within the State
of Minnesota, as well as those built outside of the State of
Minnesota, and the capital stock of the corporations so building
said lines, and
Page 211
owned by said Northern Pacific Railroad Company, as hereinbefore
alleged, were operated, managed and controlled by said Northern
Pacific Railroad Company as a system of railway or railways
extending from and between various points in the State of
Minnesota, more specifically hereinafter referred to, through
said State and thence to the Pacific Coast; and aggregate about
four thousand five hundred miles of railway.
VII.
That the Northern Pacific Railway Company is now and for
upwards of five years last past has been a corporation organized
under and by virtue of the laws of the State of Wisconsin; said
corporation being organized during the year 1895. That thereafter
and prior to the time said Northern Pacific Railway Company
became possessed of and the owner of the railway lines and
property formerly owned and operated by said Northern Pacific
Railroad Company, said Northern Pacific Railway Company filed
with the Secretary of State of the State of Minnesota, in
accordance with the terms and provisions of the laws of said
State of Minnesota, a duly authenticated and certified copy of
its articles of incorporation, and thereupon said Northern
Pacific Railway Company became a corporation of and within the
State of Minnesota, and subject to all of the laws, regulations
and provisions of said State of Minnesota relating to railway or
railroad corporations, including those acts or parts of acts
hereinafter specifically pleaded or referred to.
That under the charter or articles of incorporation of said
Northern Pacific Railway Company the powers of said company are
delegated to and exercised by a board of fifteen directors; that
during the month of April, 1901, the following-named persons
constituted and now are the members of the board of directors of
said last named company: James J. Hill, Robert Bacon, George F.
Baker, E.H. Harriman, H. McK. Twombly, Brayton Ives, D. Willis
James, John S. Kennedy, Daniel S. Lamont, Charles S. Mellen,
Samuel Rea, William Rockefeller, Charles Steele, James Stillman
and Eben B. Thomas. That on the 13th day of November, 1901, J.
Pierpont Morgan, with certain other persons to your oratrix
unknown, but who
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were acting with said Morgan, owned and had in their possession,
or held under and subject to their control and disposition,
upwards of eighty-five per cent of the total capital stock of
said Northern Pacific Railway Company then outstanding. That the
total amount of capital stock of said Northern Pacific Railway
Company then issued and outstanding amounts to one hundred and
fifty-five millions of dollars, par value, seventy-five millions
of dollars of which was preferred stock, subject to retirement as
provided by the articles of incorporation and agreement under
which the same was issued.
That during the year 1893 the said Northern Pacific Railroad
Company became insolvent, and all of the property of said last
named company, of whatever kind or character, was duly placed in
the hands of receivers appointed for that purpose by the Circuit
Court of the United States for the Eastern District of Wisconsin;
and thereafter, in proceedings ancillary thereto, by the various
Circuit Courts of the United States in whose jurisdictions said
property was located. That after said Northern Pacific Railway
Company had filed its said articles of incorporation in the State
of Minnesota and had become subject to its laws, and during the
year 1896, said Northern Pacific Railway Company duly purchased
and became the owner of the entire railroad properties and
railway lines, including the right of way, rolling stock and
capital stock, formerly owned by said Northern Pacific Railroad
Company; and immediately thereafter entered into the possession
thereof; and at all times since has continuously owned and
operated each and all of the said lines of railway so situated
within the State of Minnesota, and which connect the cities of
St. Paul and Minneapolis and Duluth, and various other villages
and cities within the State of Minnesota, and connect with the
lines of railway outside of said State of Minnesota.
That during the year 1899 said Northern Pacific Railway
Company purchased, and ever since has owned and operated, a line
of railway extending from the cities of St. Paul and Minneapolis
to Duluth, Minnesota; that said last named line parallels and is
a competing line of railway for both freight and passenger
traffic with the line of railway between said
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Minneapolis and St. Paul and Duluth, hereinbefore described, and
which is owned by said Eastern Railway Company of Minnesota, but
operated, controlled and managed by said Great Northern Railway
Company as a part of the system of said last named company, as
hereinbefore alleged.
That the lines of railway now owned and operated by said Great
Northern Railway Company within the State of Minnesota are
parallel and competing lines for freight and passenger traffic
with the lines of railway now owned, operated and controlled by
said Northern Pacific Railway Company within the State of
Minnesota, between the following points in said State, to wit:
The cities of St. Paul and Minneapolis and the city of Duluth,
Minnesota, and the various cities and villages between said
points; also between the cities of St. Paul and Minneapolis and
Crookston, Minnesota, by way of Fergus Falls and the various
cities and villages between said points; also between the cities
of St. Paul and Minneapolis and Crookston by way of Breckenridge,
and the towns and cities between said points; and also between
the cities of Duluth and Crookston, and the cities and villages
between said points, as well as the country adjacent to the lines
of railway between each and all of said cities; and the said
lines of railway owned, operated and controlled by said Great
Northern Railway Company, and also the lines of railway owned,
operated and controlled by said Northern Pacific Railway Company
which connect with the said lines of railway owned, operated and
controlled by each of said companies respectively within the
State of Minnesota, are parallel and competing lines through the
States of North Dakota, Montana, Idaho and Washington to Puget
Sound on the Pacific Coast for passenger and freight traffic.
That during all of the time aforesaid each and all of said lines
of railway were maintained and operated by said respective
companies as common carriers of freight and passengers within the
State of Minnesota; and that said companies are now, and for
upwards of eleven years last past have been, the only railway
companies owning or operating lines of railway crossing the State
of Minnesota and connecting the Pacific Ocean by rail with points
in Minnesota; also the only lines of railway traversing east and
west
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the northern tier of States of the United States lying west of
the Mississippi River, and connecting such territory and
territory tributary thereto by rail with the Pacific Ocean; and,
with one exception, the only lines of railway crossing the north
half of the State of Minnesota in any direction.
VIII.
That the Chicago, Burlington and Quincy Railway Company is
and, for many years last past has been, a corporation duly
organized and existing under and by virtue of the laws of the
State of Illinois; and, as such, until the disposition of its
capital stock as hereinafter alleged, owned, operated and
controlled an extensive system of railway lines extending from
the city of Chicago, in the State of Illinois, in a westerly
direction to the city of Denver, in the State of Colorado; and
also in a westerly and northwesterly direction from said city of
Chicago, to the city of Billings, in the State of Montana; which
last named point is a junction and competitive point for freight
and passenger traffic with the said Northern Pacific Railway
Company; and also from said city of Chicago to the cities of St.
Paul and Minneapolis, in the State of Minnesota; and in addition
to said main lines, owned, operated and controlled a large number
of connecting and tributary lines, extending to various cities
and towns in the States of Illinois, Iowa, Missouri, Wisconsin,
Minnesota, Nebraska, Kansas, Wyoming and Montana. That the total
mileage of said railway company is approximately seven thousand
four hundred miles. That during the year 1901 the said Great
Northern Railway Company and said Northern Pacific Railway
Company jointly purchased ninety-eight per cent of the total
capital stock of said Chicago, Burlington and Quincy Railway
Company, aggregating approximately one hundred and seven millions
of dollars, par value, and now own the same; and issued in
payment therefor the joint bonds of said Great Northern and
Northern Pacific Railway Companies, payable in twenty years from
the date thereof, and bearing interest at the rate of four per
cent per annum, payable semi-annually. That said Great Northern
and Northern Pacific Railway Companies issued and delivered in
exchange for each
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one hundred dollars in amount of said Chicago, Burlington and
Quincy Railway Company stock two hundred dollars in amount of the
said bonds.
That under and by virtue of the purchase of said stock the
joint ownership and control of the said Chicago, Burlington and
Quincy Railway Company is vested in and ever since has been
exercised by the said Great Northern and Northern Pacific Railway
Companies.
IX.
That the defendant Northern Securities Company is a
corporation organized, existing and doing business under and by
virtue of the laws of the State of New Jersey. That said
corporation was organized on the 13th day of November, A.D. 1901,
with its principal office for the transaction of its business
located at the city of Hoboken, county of Hudson and State of New
Jersey, and is a citizen of the State of New Jersey.
That the articles of incorporation of said Northern Securities
Company are as follows:
CERTIFICATE OF INCORPORATION OF NORTHERN SECURITIES COMPANY
STATE OF NEW JERSEY,ss:
We, the undersigned, in order to form a corporation for the
purposes hereinafter stated, under and pursuant to the provisions
of the act of the legislature of the State of New Jersey,
entitled "An act concerning corporations (Revision of 1896), and
the acts amendatory thereof and supplementary thereto," do hereby
certify as follows:
First. The name of the corporation is Northern Securities
Company.
Second. The location of its principal office in the State of
New Jersey is at No. 51 Newark street, in the city of Hoboken,
county of Hudson. The name of the agent therein, and in charge
thereof, upon whom process against the corporation may be served,
is Hudson Trust Company. Such office is to be the registered
office of the corporation.
Third. The objects for which the corporation is formed are:
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(1) To acquire by purchase, subscription or otherwise, and to
hold as investment, any bonds or other securities or evidences of
indebtedness, or any shares of capital stock created or issued by
any other corporation or corporations, association or
associations, of the State of New Jersey, or of any other State,
Territory or country.
(2) To purchase, hold, sell, assign, transfer, mortgage,
pledge, or otherwise dispose of, any bonds or other securities or
evidences of indebtedness created or issued by any other
corporation or corporations, association or associations, of the
State of New Jersey, or of any other State, Territory or country,
and, while owner thereof, to exercise all the rights, powers and
privileges of ownership.
(3) To purchase, hold, sell, assign, transfer, mortgage,
pledge, or otherwise dispose of, shares of the capital stock of
any other corporation or corporations, association or
associations, of the State of New Jersey, or of any other State,
Territory or country; and, while owners of such stock, to
exercise all the rights, powers and privileges of ownership,
including the right to vote thereon.
(4) To aid in any manner any corporation or association of
which any bonds, or other securities or evidences of indebtedness
or stock are held by the corporation; and to do any acts or
things designed to protect, preserve, improve or enhance the
value of any such bonds or other securities or evidences of
indebtedness or stock.
(5) To acquire, own and hold such real and personal property
as may be necessary or convenient for the transaction of its
business.
The business or purpose of the corporation is from time to
time to do any one or more of the acts and things herein set
forth.
The corporation shall have power to conduct its business in
other States and in foreign countries, and to have one or more
offices out of this State, and to hold, purchase, mortgage and
convey real and personal property out of this State.
Fourth. The total authorized capital stock of the corporation
is four hundred million dollars ($400,000,000), divided into four
Page 217
million (4,000,000) shares of the par value of one hundred
dollars ($100) each. The amount of the capital stock with which
the corporation will commence business is thirty thousand
dollars.
Fifth. The names and post-office addresses of the
incorporators, and the number of shares of stock subscribed for
by each (the aggregate of such subscriptions being the amount of
capital stock with which this company will commence business) are
as follows:
Number
Name and post office address.of shares.
George F. Baker, Jr., 258 Madison avenue, ............... 100
New York, New York.
Abram M. Hyatt, 214 Allen avenue, ....................... 100
Allenhurst, New Jersey.
Richard Trimble, 53 East Twenty-fifth street, ........... 100
New York, New York.
Sixth. The duration of the corporation shall be perpetual.
Seventh. The number of directors of the corporation shall be
fixed from time to time by the by-laws; but the number, if fixed
at more than three, shall be some multiple of three. The
directors shall be classified with respect to the time for which
they shall severally hold office by dividing them into three
classes, each consisting of one third of the whole number of the
board of directors. The directors of the first class shall be
elected for a term of one year; the directors of the second class
for a term of two years; and the directors of the third class for
a term of three years; and at each annual election the successors
to the class of directors whose terms shall expire in that year
shall be elected to hold office for the term of three years, so
that the term of office of one class of directors shall expire in
each year.
In case of any increase of the number of directors the
additional directors shall be elected as may be provided in the
by-laws, by the directors or by the stockholders at an annual or
special meeting, and one third of their number shall be elected
for the then unexpired portion of the term of the directors of
the first class, one third of their number for the unexpired
portion
Page 218
of the term of the directors of the second class, and one third
of their number for the unexpired portion of the term of the
directors of the third class, so that each class of directors
shall be increased equally.
In case of any vacancy in any class of directors through
death, resignation, disqualification or other cause, the
remaining directors, by affirmative vote of a majority of the
board of directors, may elect a successor to hold office for the
unexpired portion of the term of the director whose place shall
be vacant, and until the election of a successor.
The board of directors shall have power to hold their meetings
outside the State of New Jersey at such places as from time to
time may be designated by the by-laws, or by resolution of the
board. The by-laws may prescribe the number of directors
necessary to constitute a quorum of the board of directors, which
number may be less than a majority of the whole number of the
directors.
As authorized by the act of the legislature of the State of
New Jersey passed March 22, 1901, amending the seventeenth
section of the act concerning corporations (Revision of 1896),
any action which theretofore required the consent of the holders
of two thirds of the stock at any meeting after notice to them
given, or required their consent in writing to be filed, may be
taken upon the consent of, and the consent given and filed by,
the holders of two thirds of the stock of each class represented
at such meeting in person or by proxy.
Any officer elected or appointed by the board of directors may
be removed at any time by the affirmative vote of a majority of
the whole board of directors. Any other officer or employe of the
corporation may be removed at any time by vote of the board of
directors, or by any committee or superior officer upon whom such
power of removal may be conferred by the by-laws, or by vote of
the board of directors.
The board of directors, by the affirmative vote of a majority
of the whole board, may appoint from the directors an executive
committee, of which a majority shall constitute a quorum; and to
such extent as shall be provided in the by-laws, such committee
shall have and may exercise all or any of the powers of
Page 219
board of directors, including power to cause the seal of the
corporation to be affixed to all papers that may require it.
The board of directors may appoint one or more vice
presidents, one or more assistant treasurers, and one or more
assistant secretaries; and, to the extent provided in the
by-laws, the persons so appointed respectively shall have and may
exercise all the powers of the president, of the treasurer, and
of the secretary, respectively.
The board of directors shall have power from time to time to
fix and to determine and to vary the amount of the working
capital of the corporation; to determine whether any, and if any,
what part of any accumulated profits shall be declared in
dividends and paid to the stockholders; to determine the time or
times for the declaration and the payment of dividends; and to
direct and to determine the use and disposition of any surplus or
net profits over and above the capital stock paid in; and in its
discretion the board of directors may use and apply any such
surplus or accumulated profits in purchasing or acquiring its
bonds or other obligations, or shares of the capital stock of the
corporation, to such extent and in such manner and upon such
terms as the board of directors shall deem expedient; but shares
of such capital stock so purchased or acquired may be resold,
unless such shares shall have been retired for the purpose of
decreasing the capital stock of the corporation to the extent
authorized by law.
The board of directors from time to time shall determine
whether and to what extent, and at what times and places, and
under what conditions and regulations, the accounts and books of
the corporation, or any of them shall be open to the inspection
of the stockholders, and no stockholder shall have any right to
inspect any account or book or document of the corporation,
except as conferred by statute of the State of New Jersey, or
authorized by the board of directors or by a resolution of the
stockholders.
The board of directors may make by-laws, and, from time to
time, may alter, amend or repeal any by-laws; but any by-laws
made by the board of directors may be altered or repealed by the
stockholders at any annual meeting, or at any special
Page 220
meeting, provided notice of such proposed alteration or repeal be
included in the notice of the meeting.
In witness whereof, we have hereunto set our hands and seals,
the twelfth day of November, 1901.
GEORGE F. BAKER, JR. (L.S.)
ABRAM M. HYATT. (L.S.)
RICHARD TRIMBLE. (L.S.)
Signed, sealed and delivered in presence of —
GEORGE HOLMES.
STATE OF NEW YORK, |
COUNTY OF NEW YORK,ss:
MANHATTAN, |
Be it remembered, that on this twelfth day of November, 1901,
before the undersigned, personally appeared George F. Baker,
Junior, Abram M. Hyatt, Richard Trimble, who, I am satisfied, are
the persons named in and who executed the foregoing certificate,
and I, having first made known to them, and to each of them, the
contents thereof, they did each acknowledge that they signed,
sealed and delivered the same as their voluntary act and deed.
GEORGE HOLMES,
Master in Chancery of New Jersey.
Endorsed: "Received in the Hudson Co., N.J., Clerk's office,
Nov. 13, A.D. 1901, and recorded in Clerk's Record, No. ___, on
page ___. Maurice J. Stack, Clerk. Filed Nov. 13, 1901, George
Wurts, Secretary of State."
That said Northern Securities Company was incorporated at the
instigation and request, and under the direction of James J. Hill
and William P. Clough, and certain other stockholders of said
Great Northern Railway Company to your oratrix unknown, who were
cooperating with said James J. Hill and William P. Clough, and
who, with said Hill and Clough, owned and controlled, or have the
disposition and management, as hereinafter alleged, of a very
large majority of the capital stock of said Great Northern
Railway Company; and J. Pierpont Morgan and certain other
stockholders of said Northern Pacific Railway Company, to your
oratrix unknown, who were cooperating with said Morgan, and who,
with said Morgan,
Page 221
owned and controlled, or have the disposition and management of,
a very large majority of the capital stock of said Northern
Pacific Railway Company. That said Northern Securities Company
was formed by George F. Baker, Jr., and Richard Trimble, of the
city of New York and State of New York, and Abram Hyatt, of
Allenhurst, in the State of New Jersey, who adopted the said
articles of incorporation. That said three last named parties had
no interest in said corporation other than the formation of the
same for and at the request of said James J. Hill, William P.
Clough, J. Pierpont Morgan, and their several associate
stockholders of said Great Northern Railway Company and said
Northern Pacific Railway Company, as above alleged, acting in
concert with said parties.
That said James J. Hill, William P. Clough and J. Pierpont
Morgan, who, with their associates, did on said 13th day of
November, 1901, and prior thereto, own and control a large
majority of the capital stock of both said Great Northern Railway
Company and said Northern Pacific Railway Company, were prior to,
and at the time of, the organization of said Northern Securities
Company, almost continually in conference with each other and
with a large number of other stockholders of said Great Northern
Railway Company and said Northern Pacific Railway Company, but
whose names are to your oratrix unknown, considering such
organization and the scheme and agreement herein referred to, and
the means and manner by which the laws of Minnesota, hereinafter
referred to, could be most successfully evaded or avoided, all of
which facts were well known to the organizers of said Northern
Securities Company, including the parties executing the said
articles of incorporation. That said Northern Securities Company
was organized solely for the purpose of carrying out and
accomplishing the designs, agreement and plans of said James J.
Hill and J. Pierpont Morgan and their said associate
stockholders, as herein set forth, and to effect a consolidation
of the property, railway lines, corporate powers and franchises
of said Great Northern and Northern Pacific Railway Companies,
respectively, through said defendant the Northern Securities
Company.
Page 222
That prior to the organization of said Northern Securities
Company the said owners and holders of a large majority of the
capital stock of said Great Northern Railway Company, as well as
the owners and holders of a large majority of the capital stock
of said Northern Pacific Railway Company, as a part of the scheme
or plan herein alleged, as well as a part of the plan and purpose
of the organization of said Northern Securities Company, entered
into a mutual agreement or arrangement, the exact terms of which
are unknown to your oratrix, but which is in substance as
follows:
The said owners of a large majority of the capital stock of
said Great Northern Railway Company and said Northern Pacific
Railway Company mutually agreed with each other and certain
persons who thereafter became the officers and directors of said
Northern Securities Company, to transfer or cause to be
transferred to said Northern Securities Company in exchange for
the capital stock of said last named company substantially all of
the capital stock of said Great Northern Railway Company and said
Northern Pacific Railway Company, respectively; the said capital
stock of the Great Northern Railway Company to be transferred to
and exchanged for the capital stock of the said Northern
Securities Company on the basis of one share of the capital stock
of the Great Northern Railway Company for one and 80-100 shares
of the capital stock of said Northern Securities Company, and one
share of the common stock of said Northern Pacific Railway
Company for one and 15-100 shares of the capital stock of said
Northern Securities Company. The $75,000,000 of the preferred
stock of said Northern Pacific Railway Company to be retired in
accordance with the provisions of the articles of incorporation
of said Northern Pacific Railway Company, and the conditions and
agreements under which the same was issued; said retirement to
take place on the 1st day of January, 1902. The funds for
retiring said preferred stock to be raised by the issuance by
said Northern Pacific Railway Company of its negotiable bonds,
bearing date November 15, 1901, of the aggregate amount of
seventy-five million dollars, payable January 1, 1907, in gold
coin of the United States, with interest thereon at the rate of
Page 223
four per cent per annum, payable semi-annually in like gold coin,
from and after January 1, 1902. The said bonds, however, to be
convertible at the option of either the holders thereof, or said
railway company, into shares of the common stock of said Northern
Pacific Railway Company at the rate of one share of stock for
each one hundred dollars of the principal sum of such bonds, and
the said common stock, when so taken in exchange for such bonds,
to be converted into stock of said Northern Securities Company
upon the basis of one share for each one and 15-100 shares of
stock of said Northern Securities Company.
That said preferred stock could only be retired by resolution
of the board of directors of said Northern Pacific Railway
Company; that a very large majority of said preferred stock was
owned by certain individuals who were opposed to the agreement
and plan herein referred to relative to turning over the
management and control of said Northern Pacific Railway Company
to said Northern Securities Company, and the holding of its stock
by said Northern Securities Company; that the owners of said
preferred stock so opposed to said agreement and plan were also
owners of sufficient of the common stock of said Northern Pacific
Railway Company to give them a small majority of the total
capital stock of said Northern Pacific Railway Company; thus
making it necessary, in order to carry out the plan and agreement
herein set forth and to vest the management and control of said
Northern Pacific Railway Company in said Northern Securities
Company in the manner and for the purposes herein alleged, to
retire said preferred stock; all of which was well known to the
board of directors of said Northern Pacific Railway Company and
to said J. Pierpont Morgan and his associate stockholders of said
Northern Pacific Railway Company, as well as said Northern
Securities Company.
That on or about the 13th day of November, 1901, the board of
directors of said Northern Pacific Railway Company took such
official action as was necessary to retire said preferred stock
upon the basis and in accordance with the plan and agreement
herein set forth; and thereafter said preferred stock was retired
by the issuance of convertible bonds to the amount and
Page 224
in the manner herein alleged. That immediately after the
retirement of said preferred stock, said Northern Pacific Railway
Company, acting through its board of directors and executive
officers, exercised its right and option of declaring said bonds
to be convertible into the shares of the common stock of said
Northern Pacific Railway Company, and thereupon the same were so
converted and the common stock of said Northern Pacific Railway
Company issued in exchange therefor, upon the basis and for the
purposes herein alleged. That in order to prevent the persons who
owned said preferred stock, and who were opposed to the carrying
out of the plan and agreement herein referred to, from acquiring
a like control of the common stock, it was provided that the
$75,000,000 of common stock into which the said bonds were
convertible could only be subscribed for and taken by holders of
the then outstanding $80,000,000 of the common capital stock of
said Northern Pacific Railway Company; each share of said common
stock then outstanding entitling the owner and holder thereof to
take an additional seventy-five eightieths of a share of said
$75,000,000 additional common stock. That the retirement of said
preferred stock and the conversion of the said bonds into common
stock of said Northern Pacific Railway Company, and the exchange
of said common stock for stock of said Northern Securities
Company, as herein alleged, were each and all a part of the
agreement, plan and scheme of said J. Pierpont Morgan and his
said associate stockholders of said Northern Pacific Railway
Company who then and there owned and controlled a large majority
of the then outstanding common stock of said Northern Pacific
Railway Company, under and by which the complete management and
control of said Northern Pacific Railway Company was to be, and
was thereafter, turned over to and vested in said Northern
Securities Company in order that said Northern Pacific Railway
Company, its property and franchises, might be in effect
consolidated with the property and franchises of said Great
Northern Railway Company, as herein alleged. That said James J.
Hill and his associate stockholders of said Great Northern
Railway Company had full knowledge of and assisted in retiring
said preferred stock for the purposes and
Page 225
objects herein alleged. That as a part of said agreement and plan
entered into between said James J. Hill and his associate
stockholders and said J. Pierpont Morgan and his associate
stockholders, each and all of whom were then, and are now, acting
in concert for the purpose of evading and violating the laws of
the State of Minnesota, in the manner, for the purposes, and with
the object and design herein set forth, and in furtherance of
said purposes and design, and to avoid the effect of any
litigation which might be instituted to defeat the consummation
of the agreement, plan and scheme herein referred to of vesting
the complete management and control of the railway lines,
properties and franchises of said Great Northern and Northern
Pacific Railway Companies in said defendant Northern Securities
Company, said parties further undertook and agreed with each
other and the persons who thereafter became the officers and
directors of the defendant Northern Securities Company that
pending the delivery and transfer of a majority of the capital
stock of said Great Northern Railway Company to said Northern
Securities Company, the same should be held by or under the
control of some person or corporation to your oratrix unknown;
and that pending such delivery it was mutually agreed between
said Hill and his associate stockholders and said Morgan and his
associate stockholders and the persons who thereafter became the
directors and officers of the defendant, as well as the person or
corporation so temporarily holding said stock that the same
should be held during said period for the purposes above set
forth in trust for the use and benefit of the defendant, the
Northern Securities Company; and that during such time the
parties holding said stock should attend and vote the same at all
meetings of the stockholders of said Great Northern Railway
Company, in the interests of the defendant, and as directed by
the board of directors of said Northern Securities Company or the
executive committee thereof, or in unison with the stock of said
railway companies, actually assigned to and held by the
defendant. That said Northern Securities Company has not
purchased and does not intend to purchase the stock of either of
said railway companies, except by issuing its stock in exchange
for and in lieu of the stock of said railway companies
Page 226
on the basis and in the manner and for the purposes herein
alleged.
That for the unlawful purposes aforesaid the said Northern
Securities Company, by circular letter heretofore issued to the
public, has offered and is still offering to issue and exchange
for the capital stock of the said Great Northern and Northern
Pacific Railway Companies, capital stock of said Northern
Securities Company to the amount of one hundred and eighty
dollars par value thereof for each share of capital stock of said
Great Northern Railway Company, and to the amount of one hundred
and fifteen dollars par value thereof for each share of stock of
said Northern Pacific Railway Company. And that the said Northern
Securities Company is about to receive, on the basis aforesaid,
and will, unless enjoined therefrom, receive, hold and hereafter
control all the capital stock of said Great Northern and Northern
Pacific Railway Companies.
X.
That the organization of said Northern Securities Company in
the manner hereinbefore alleged, and the making of said agreement
or arrangement hereinbefore referred to, are each and all a part
of a scheme or plan on the part of said James J. Hill and his
said associate stockholders of the Great Northern Railway
Company, and J. Pierpont Morgan and his said associate holders of
the stock of said Northern Pacific Railway Company, under and by
which the said two last named railway companies are to be in
effect consolidated, and the complete management and control of
the business affairs of said corporations respectively placed in
one body and under the direction and control of one man or one
board of directors, through and by means of said defendant. That
pursuant to said plan, agreement and arrangement, and in
consummation thereof, and for the purpose of placing the complete
management and control of said Great Northern Railway Company and
said Northern Pacific Railway Company under one management, and
for the purpose of establishing, in effect, a consolidation of
said railway companies, together with said railway lines and
properties, in and through said defendant, the said J. Pierpont
Morgan
Page 227
and his associate stockholders have actually assigned and
delivered to said Northern Securities Company upwards of
eighty-five per cent of the total capital stock of said Northern
Pacific Railway Company; and your oratrix alleges, on information
and belief, that said James J. Hill, and his associates
stockholders of said Great Northern Railway Company have also
actually assigned and delivered to said Northern Securities
Company upwards of eighty-five per cent of the said capital stock
of said Great Northern Railway Company. That the sole purpose,
object and effect of the transfer of said stock by said James J.
Hill and his said associates and the said J. Pierpont Morgan and
his said associates to said Northern Securities Company was and
is to transfer to and vest in said defendant Northern Securities
Company the complete management and control of the respective
lines of railway and railway properties of each of said railway
companies within and without the State of Minnesota, and to place
the complete management and control of the same, and the power to
dictate the policy of each of said corporations, as well as the
power and authority to fix rates and charges for the
transportation of both freight and passengers within the State of
Minnesota, as well as without said State, in the hands of and
under the control of one party or board of directors, and thereby
create, foster and perpetuate a monopoly in railway traffic in
the State of Minnesota.
That the purpose, object and effect of the incorporation of
the defendant and the receipt by it of a controlling amount of
the capital stock of the said Northern Pacific and Great Northern
Railway Companies, as well as each act of the officers and board
of directors thereof, in entering into, adopting or executing the
agreement or plan herein set forth, including the issuance and
exchange of the capital stock of the Northern Securities Company
for the stock of the said Northern Pacific and Great Northern
Railway Companies on the basis hereinbefore set forth, was and is
to place the said railway companies and the property and
franchises thereof under a single management, and enable a single
party or body of men acting as the board of directors of the said
Northern Securities Company, or such executive committee as they
may designate, to fix all rates and
Page 228
charges for the transportation of passengers and freight over any
and all the lines of railway of each of said companies within the
State of Minnesota; to determine what trains shall be operated
over each or any of the lines of railway of each of said railway
companies, and to remove all competition in freight or passenger
traffic over said parallel and competing lines, and prevent the
building of lines into new territory as well as into the
territory now reached by only one of said lines of railway; that
the purpose of said agreement and of the parties thereto was the
creation of a trust or the formation of a combination by which a
monopoly of railway traffic in northern Minnesota and elsewhere
will be perfected; that the defendant company was organized for,
and is to be used as a medium through and by which this unlawful
agreement, purpose and object can, and, if not enjoined, will be
accomplished; that this agreement and the consummation thereof is
in restraint of trade, tends to create a monopoly in railway
traffic and is against public policy, and void.
That holders of a large majority of the capital stock of both
said Great Northern and Northern Pacific Railway Companies had
knowledge of, consented to, and assisted in carrying out the
agreement, arrangement and scheme herein set forth by which a
large majority of the capital stock of each of said railway
companies was to be exchanged for the capital stock of said
Northern Securities Company upon the basis and for the purposes
herein set forth; and the said stockholders of said Great
Northern and Northern Pacific Railway Companies so consenting to,
taking part and assisting in the formation of said Northern
Securities Company, and the perfecting of the agreement and
scheme herein set forth, constitute all of the stockholders of
said Northern Securities Company; and the board of directors and
executive officers of said Northern Securities Company
hereinafter named have been selected from and elected by such
stockholders of said Great Northern and Northern Pacific Railway
Companies.
That under the articles of association of said Northern
Securities Company, its corporate powers and entire business
management is vested in a board of directors consisting of
Page 229
such number as shall be fixed from time to time, by the by-laws
of said corporation, and the board of directors itself is
authorized to make such by-laws as it deems best, and from time
to time to alter, amend or repeal any by-laws. That the board of
directors of said company thereby has power to determine its own
number, and to adopt rules and regulations for its own conduct
and the conduct of the affairs of said corporation. The
articles of association further provide that said board of directors may
appoint an executive committee in the manner provided by the
by-laws of the company, which committee shall exercise all the
powers and duties of said board of directors.
That on or about the 14th day of November, A.D. 1901, the
following named persons were elected as and now constitute the
board of directors of said Northern Securities Company, to wit:
For the term of one year, James J. Hill, George F. Baker, Daniel
S. Lamont, James Stillman and N. Terhune; for the term of two
years, Samuel Thorne, Charles E. Perkins, Jacob H. Schiff and
William P. Clough; for the term of three years, John S. Kennedy,
D. Willis James, E.T. Nichols, Robert Bacon and E.H. Harriman.
That on the 15th day of November, A.D. 1901, said board of
directors met and elected the following executive officers of
said company, to wit: President, James J. Hill; First Vice
President, John S. Kennedy; Second Vice President, George F.
Baker; Third Vice President, D. Willis James; Fourth Vice
President, William P. Clough; Secretary and Treasurer, E.T.
Nichols.
Complainant further alleges that said James J. Hill and said
William P. Clough were, on said last named date, the President
and Vice President respectively of said Great Northern Railway
Company; and both were members of the board of directors of said
last named company. That said E.T. Nichols was, on said date and
now is, the Secretary and Assistant Treasurer of said Great
Northern Railway Company. That said James J. Hill and his
associates either own or have in their possession or under their
control, a large majority of the capital stock of said Great
Northern Railway Company. That said James J. Hill, Robert Bacon,
George F. Baker, E.H. Harriman, D. Willis James, John S. Kennedy,
D.S. Lamont and James Stillman were, on
Page 230
said 14th day of November, 1901, and now are members of the board
of directors of said Northern Pacific Railway Company, and
constitute a majority of the board of directors of said named
company.
That said James J. Hill and his associate directors and
officers of said Northern Securities Company own and control a
majority of the capital stock of said last named company; that
during the month of December, 1901, said Northern Securities
Company, through its directors and executive officers, began
dictating the policy and management of said Northern Pacific as
well as said Great Northern Railway Company, and ever since has
been and now is directing and managing the business and property
of both said Great Northern and Northern Pacific Railway
Companies, and determining and enforcing freight and passenger
rates on many of the lines of railway of said companies in the
State of Minnesota, together with the manner and means of
handling the freight and passenger business of said companies on
such lines of railway, and will continue so to do unless enjoined
as herein prayed.
That said Northern Securities Company has no authorized agent
or representative within the State of Minnesota on whom a summons
or other process in any legal proceeding may be served.
That the massing and concentration of said railway properties
and the control and management thereof in the defendant company
in the manner hereinbefore outlined, tends to and does create a
monopoly in railway traffic in the State of Minnesota, and tends
to and does deprive the State of Minnesota and the citizens
thereof of the privilege of competition in fixing charges and
rates of transportation for a large amount of freight transported
annually over the lines of railway of each of said railway
companies, between stations upon the lines of railway of both
said companies within the State of Minnesota.
That it has ever been a part of the settled and public policy
of the State of Minnesota to prohibit therein, in any way, the
consolidation in any manner of competing and parallel lines of
railway; and to this end the legislature of the State of
Minnesota did, in the year 1874, pass the following enactment,
which
Page 231
ever since has remained and now is a part of the statute law of
the State of Minnesota, known as chapter 29 of the General Laws
of 1874, to wit:
"SEC. 1. No railroad corporation, or the lessees, purchaser or
managers of any railroad corporation, shall consolidate the
stock, property or franchise of such corporation with, or lease
or purchase the works or franchise of, or in any way control any
other railroad corporation owning or having under its control a
parallel or competing line; nor shall any officer of such
railroad corporation act as an officer of any other railroad
corporation owning or having the control of a parallel or
competing line, and the question whether railroads are parallel
or competing lines shall, when demanded by the party complainant,
be decided by a jury as in other civil issues.
"SEC. 2. This act shall take effect and be in force from and
after its passage. Approved March 9, 1874."
That in the year 1881 the legislature of the State of
Minnesota passed the following enactment, which ever since has
remained and now is a part of the statute law of the said State
and known as chapter 94 of the General Laws of 1881, to wit:
"SEC. 3. No railroad corporation shall consolidate with, lease
or purchase, or in any way become the owner of or control any
other railroad corporation or stock, franchises, rights or
property thereof, which owns or controls a parallel or competing
line.
"SEC. 4. This act shall take effect and be in force from and
after its passage. Approved March 3, 1881."
That said Northern Securities Company is a railroad
corporation within the meaning of the laws of the State of
Minnesota; and the purpose, object and design of the said
organizers and promoters of said Northern Securities Company,
both in the organization thereof and in the making and carrying
out of the said plans, agreement and designs hereinbefore
referred to, was and is to violate the said legislative
enactments of the State of Minnesota, and to evade and escape the
provisions thereof; and it is the purpose, intent and design of
said corporation, its stockholders, directors, executive
committee, officers, agents and representatives, to violate the
said legislative enactments,
Page 232
and to evade and escape the terms and provisions thereof, and to
effect a consolidation of said railway corporations and
properties as herein alleged. That each and all the said acts are
violations and evasions of the said laws and the settled public
policy of the State of Minnesota, and unless said parties are
enjoined will cause the State of Minnesota irreparable injury.
That for many years last past it has been a part of the
settled policy of the State of New Jersey to permit the
consolidation of only such lines of railroad as are or can be
connected so as to form continuous lines of railroad, and not to
permit the consolidation of parallel or competing lines; and to
that end, in the year 1885, the legislature of the State of New
Jersey enacted a law which permits the consolidation of such
lines as shall or may form connecting or continuous lines of
railroads.
Your oratrix is informed and believes, and upon information
and belief alleges, that defendant is not the owner of any
property or stock or securities of any corporation, except as
above set forth, and is not engaged in any business whatever
except such as is incidental to the ownership of such stock and
the general management and control of said Great Northern and
Northern Pacific Railway Companies and the railway lines and
properties thereof.
Your oratrix further alleges that if the defendant is
permitted to control and manage the affairs of said Great
Northern and Northern Pacific Railway Companies, in a manner
hereinbefore alleged or otherwise, all competition between them
will forever cease, and a monopoly in railway traffic in
Minnesota be created, to the great and permanent and irreparable
damage and injury to the State of Minnesota and to the people
thereof, and in violation of its laws.
That your oratrix has and can have no other adequate remedy or
relief by action at law except as herein prayed for in equity.
To the end, therefore, that the defendant, the Northern
Securities Company may, if it can, show cause why your oratrix
should not have the relief herein prayed for, and that it may be
compelled to answer all and singular the premises, and all
matters and things herein stated, as fully and particularly as if
they were here again repeated, and said company thereunto
interrogated,
Page 233
and that the defendant may be required to answer without oath,
its answer under oath being hereby expressly waived; and that the
defendants may, by the decree of this court, be perpetually
enjoined and restrained:
First. From voting at any meeting of the stockholders of
either said Great Northern or Northern Pacific Railway Company
any of the capital stock of either of said companies by any means
or in any manner whatsoever, and from attending, by reason of
such ownership, possession or control of stock, either through
its officers or by proxy, or in any other manner, any meeting of
the stockholders of either of said companies.
Second. That the defendant, its stockholders, officers,
directors, or the executive committee thereof, its attorneys,
representatives, agents or servants, and each of them, be
enjoined and restrained from, in any way, aiding, advising,
directing, interfering with or in any way taking part, directly
or indirectly, in any manner whatsoever, in the management,
control or operation of any of the lines of railway of either of
said companies, or in the management or control of the affairs of
either of said companies.
Third. That the said defendant, its officers, attorneys,
representatives, agents or servants, including its board of
directors, or any of its members as such, be enjoined and
restrained from exercising any of the powers or performing any of
the duties, or in any manner acting as a representative, officer,
member of the board of directors or employe, of either said Great
Northern or Northern Pacific Railway Company, or in any way
exercising any management, direction or control over the same.
Fourth. That said defendant, its stockholders, directors and
other officers, representatives and agents, be enjoined and
restrained from doing any and all acts and making any
arrangements or combinations by contract or otherwise having for
their object, effect or result the consolidation or establishment
of a joint management or control in any manner whatsoever of the
said Great Northern and Northern Pacific Railway Companies, their
lines of railway or properties.
Fifth. That the said defendant be enjoined from either
directly or indirectly holding, owning or controlling any of the
stock of
Page 234
either of said companies at one and the same time for any of the
purposes or objects alleged in said bill, or otherwise.
Sixth. That in case it shall appear upon the hearing that the
defendant owns or controls, or is acting in concert with the
owners of, a majority of the capital stock of either of said
railway companies, and owns or controls a minority of the stock
of the other of said companies, then that the defendant, its
officers, directors, agents, or representatives, be enjoined and
restrained from receiving, acquiring or controlling any
additional capital stock of such other railway company.
Seventh. And your oratrix further prays the leave of this
court to amend this, its bill of complaint, if amendment thereto
shall become necessary, including the right to bring in other
parties defendant for the purpose of giving force and effect to
any decree that may be made by the court herein.
And that complainant be granted such other and further or
different relief as the nature of this case may require, and as
shall be agreeable to equity and good conscience.
But it is not necessary for us to consider and answer those questions, for, in view of the nature of the facts presented and the remedies prayed for in the bill proposed to be filed, we think that the suit is defective for want of essential parties whose rights would be vitally affected by the relief sought therein.
The general rule in equity is that all persons materially interested, either legally or beneficially, in the subject-matter of a suit, are to be made parties to it, so that there may be a complete decree, which shall bind them all. By this means the court is enabled to make a complete decree between the parties, to prevent future litigation, by taking away the necessity of a multiplicity of suits, and to make it perfectly certain that no injustice is done, either to the parties before it, or to others who are interested in the subject-matter, by a decree which might otherwise be granted upon a partial view only of the real merits. When all the parties are before the court, the whole case may be seen; but it may not, where all the conflicting interests are not brought out upon the pleadings by the original parties thereto. Story's Eq. Plds. sec. 72.
The established practice of courts of equity to dismiss the plaintiff's bill if it appears that to grant the relief prayed for would injuriously affect persons materially interested in the subject-matter who are not made parties to the suit, is founded upon clear reasons, and may be enforced by the court,suasponte, though not raised by the pleadings or suggested by the counsel.Shieldsv.Barrow, 17 How. 130;Hippv.Babin, 19 How. 271, 278;Parkerv.Winnipiseogee Lake Cotton andWoolen Co., 2 Black, 545.
In the case ofShieldsv.Barrow, 17 How. 130, the question was fully discussed, and it was shown, upon a review of the previous cases, that there are three classes of parties to a bill in equity.Page 236They are: 1. Formal parties. 2. Persons having an interest in the controversy, and who ought to be made parties, in order that the court may act on that rule which requires it to decide on, and finally determine the entire controversy, and do complete justice, by adjusting all the rights involved in it. These persons are commonly termed necessary parties; but if their interests are separable from those of the parties before the court, so that the court can proceed to a decree, and do complete and final justice, without affecting other persons not before the court, the latter are not indispensable parties. 3. Persons who not only have an interest in the controversy, but an interest of such a nature that a final decree cannot be made without either affecting that interest, or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. The court in respect to the act of Congress of February 28, 1839,5 Stat. 321, and to the forty-seventh rule in equity practice, said (p. 140):
"The first section of that statute enacts: That when in any suit, at law or in equity, commenced in any court of the United States, there shall be several defendants, any one or more of whom shall not be inhabitants of or found within, the district where the suit is brought, or shall not voluntarily appear thereto, it shall be lawful for the court to entertain jurisdiction, and proceed to the trial and adjudication of such suit between the parties who may be properly before it; but the judgment or decree rendered therein shall not conclude or prejudice other parties not regularly served with process, or not voluntarily appearing to answer; and the non-joinder of parties, who are not so inhabitants, or found within the district, shall constitute no matter of abatement or other objection to said suit.
"This act relates solely to the non-joinder of persons who are not within the reach of the process of the court. It does not affect any case where persons, having an interest, are not joined because their citizenship is such that their joinder would defeat the jurisdiction; and, so far as it reaches suits in equity, we understand it to be no more than a legislative affirmance of the rule previously established by the cases ofCameronv.McRoberts, 3 Wheat. 591;Osbornv.The Bank of the UnitedStates,Page 2379 Wheat. 738, andHardingv.Handy, 11 Wheat. 132. For this court had already there decided that the non-joinder of a party who could not be served with process would not defeat the jurisdiction. The act says it shall be lawful for the court to entertain jurisdiction; but as is observed by this court, inMallowv.Hinde, 12 Wheat. 193, 198, when speaking of a case where an indepensable party was not before the court, `we do not put this case upon the ground of jurisdiction, but upon a much broader ground, which must equally apply to all courts of equity, whatever may be their structure as to jurisdiction; we put it on the ground that no court can adjudicate directly upon a person's right, without the party being either actually or constructively before the court.' So that, while this act removed any difficulty as to jurisdiction, between competent parties, regularly served with process, it does not attempt to displace that principle of jurisprudence on which the court rested the case last mentioned. And the forty-seventh rule is only a declaration, for the government of practitioners and courts, of the effect of this act of Congress, and of the previous decisions of this court, on the subject of that rule.Hoganv.Walker, 14 How. 36.
"It remains true, notwithstanding the act of Congress and the forty-seventh rule, that a Circuit Court can make no decree affecting the rights of an absent person, and can make no decree between the parties before it, which so far involves or depends upon the rights of an absent person, that complete and final justice cannot be done between the parties to the suit without affecting those rights."Californiav.Southern Pacific Co.,157 U.S. 229, was a case in several particulars like the present one. There a bill was filed in this court by the State of California against the Southern Pacific Company, a corporation of the State of Kentucky, claiming title and jurisdiction by the State over certain large tracts of land lying upon the shores of the bay of San Francisco and over the harbor waters of said bay, including San Antonio Creek, and averring that the Southern Pacific Company claimed adversely to the State, and was engaged in placing structures in and upon said tracts of land, thereby obstructing navigation in the bay and adjoining waters. The bill prayedPage 238for a decree quieting the title of the State and enjoining the defendant company from maintaining the structures that it had placed upon said tracts and the adjacent waters. The defendant company answered the bill, denying the ownership of the complainant in the premises in dispute, and setting forth its own title derived from the town of Oakland, as to the whole of the water front of that town, through one Carpenter, as grantee of said town by ordinance and deed of conveyance, and claiming that by subsequent mesne conveyances the said title and property had become vested, as to a part thereof, in the Central Pacific Railroad Company, and, as to another part, in the South Pacific Coast Railway Company, and in the defendant company as lessee. It further was claimed that certain ordinances and deeds of the town of Oakland operated as a grant by the city of Oakland and the State of California of the land to the Oakland Water Front Company, as grantee or alienee of Carpentier. The case was duly put at issue, and a commissioner was appointed to take testimony therein and to return the same to the court.
When the case came on for hearing it was held by this court that the city of Oakland and the Oakland Water Front Company were so situated in respect to the litigation that the court ought not to proceed in their absence. In reaching this conclusion the court reviewed the cases, including the cases above cited and others.
Upon the contention that the city of Oakland and the Oakland Water Front Company might be made parties defendant, and the court thus enabled to proceed with the case, the court held that this could not be done, because this court could not exercise original jurisdiction in a suit between a State on the one hand and a citizen of another State and citizens of the complainant State on the other. Accordingly, the bill was dismissed for want of parties who should be joined, but could not be without ousting our jurisdiction.
We shall, therefore, proceed to examine the substance of the bill proposed to be filed, in order to see whether it discloses a case in which a decree could be granted which would do final and complete justice between the nominal parties withoutPage 239vitally affecting other persons not before the court. As already stated, a conclusion reached that the suit cannot be entertained for want of necessary and essential parties, will not imply any expression of opinion beyond that question.
As the bill is set forth in full in the preceding statement, it will not be necessary to here repeat its allegations. They may be summarized as follows:
The complainant is the State of Minnesota; the defendant is the Northern Securities Company, a corporation of the State of New Jersey.
It is part of the policy of the State of Minnesota, as declared in the public statutes, to prohibit therein the consolidation in any manner of competing and parallel lines of railway. The statutes specially recited in the bill are the act of March 9, 1874, the first section whereof is in the following terms: "No railroad corporation, or the lessees, purchaser or managers of any railroad company, shall consolidate the stock, property or franchise of such corporation with, or lease or purchase the works or franchise of, or in any way control any other railroad corporation owning or having under its control a parallel or competing line; nor shall any officer of such railroad corporation act as an officer of any other railroad corporation owning or having the control of a parallel or competing line, and the question whether railroads are parallel or competing lines shall, when demanded by the party complainant, be decided by a jury as in other civil issues;" and the act of March 3, 1881, of which the third section is as follows: "No railroad company shall consolidate with, lease, or purchase, or in any way become the owner of or control any other railroad corporation or stock, franchises, rights or property thereof, which owns or controls a parallel or competing line."
The Great Northern Railway Company is a corporation organized and existing under an act duly passed by the Territory of Minnesota and under various subsequent acts of the State of Minnesota, and owns and controls, as lessee, several important lines of railroad, some only within and others extending beyond the State of Minnesota, and which are maintained by the Great Northern Railway Company as one complete system. ThePage 240board of directors of the Great Northern Railway Company, at the time of the organization of the Northern Securities Company, to wit, on or about November 13, 1901, was and now is composed of the following-named persons, to wit: James J. Hill, James N. Hill, Samuel Hill, William P. Clough, Edward Sawyer, Jacob H. Schiff and Henry W. Cannon. That on said last mentioned date the Great Northern Railway Company had issued and there was then outstanding a total of one hundred and twenty-five million dollars, par value, of the capital stock of said corporation, of which, it is alleged, that said James J. Hill was on said last mentioned date the owner of or had subject to his direction and disposition, more than a majority of said capital stock so outstanding.
The Northern Pacific Railway Company was organized under the laws of the State of Wisconsin of the year 1895, and afterwards, by filing a certified copy of its articles of incorporation, became a corporation of the State of Minnesota and subject to the laws of that State relating to railroad corporations. In the year 1896 the Northern Pacific Railway Company duly purchased and became the owner of the entire railroad properties and lines formerly owned by the Northern Pacific Railroad Company, and at all times since has continuously owned and operated each and all of said lines of railway situated within the State of Minnesota, and which connect the cities of St. Paul and Minneapolis and Duluth, and connect with the lines of railways outside the State of Minnesota. During the year 1899 the said Northern Pacific Railway Company purchased, and ever since has owned and operated a line of railway extending from the cities of St. Paul and Minneapolis to Duluth, Minnesota. Said last mentioned line parallels and is a competing line of railway for both freight and passenger traffic with the line of railway between said Minneapolis and St. Paul and Duluth, owned by the Eastern Railway Company of Minnesota, but which is operated, controlled and managed by said Great Northern Railway Company, as a part of the system of that company. The lines of railway now owned and operated by said Great Northern Railway Company within the State of Minnesota are parallel and competing lines for freight and passenger trafficPage 241with the lines of railway now owned, operated and controlled by said Northern Pacific Railway Company within the State of Minnesota; and also said lines of railway owned, operated and controlled by said Great Northern Railway Company, and also the lines of railway owned, operated and controlled by said Northern Pacific Railway Company, which connect with the lines of railway owned, operated and controlled by each of said companies respectively within the State of Minnesota, are parallel and competing lines through the States of North Dakota, Montana, Idaho and Washington to Puget Sound on the Pacific Coast, for passenger and freight traffic. That said companies are the only railway companies owning or operating lines of railway crossing the State of Minnesota and connecting the Pacific Ocean by rail with points in Minnesota.
That the Chicago, Burlington and Quincy Railway Company, a corporation of the State of Illinois, has, for many years last past, owned, operated and controlled an extensive system of railway lines, connecting the city of Chicago with the city of Denver, in the State of Colorado, and with the city of Billings, in the State of Montana, which last named point is a junction and competitive point for freight and passenger traffic with said Northern Pacific Railway Company, etc. That during the year 1901 the said Great Northern Railway Company and said Northern Pacific Railway Company jointly purchased ninety-eight per cent of the total capital stock of said Chicago, Burlington and Quincy Railway Company, aggregating approximately one hundred and seven million of dollars, par value, and now own the same, and issued in payment therefor the joint bonds of said Great Northern and Northern Pacific Railway Companies, payable in twenty years from the date thereof, and bearing interest at the rate of four per cent per annum, payable semi-annually. That the said Great Northern and Northern Pacific Railway Companies issued and delivered in exchange for each one hundred dollars in amount of said Chicago, Burlington and Quincy Railway Company stock two hundred dollars in amount of the said bonds; and that under and by virtue of the purchase of the said stock the joint ownership and control of the said Chicago, Burlington and Quincy Railway Company are vested in,Page 242and ever since have been exercised by, the said Great Northern and Northern Pacific Railway Companies. During April, 1901, and ever since, the following named persons constituted and now are the members of the board of directors of the Northern Pacific Railway Company: James J. Hill, Robert Bacon, George F. Baker, E.H. Harriman, H. McK. Twombly, Brayton Ives, D. Willis James, John S. Kennedy, Daniel S. Lamont, Charles S. Mellen, Samuel Rea, William Rockefeller, Charles Steele, James Stillman and Eben B. Thomas. On November 13, 1901, J. Pierpont Morgan, with certain other unknown persons, but who were acting with said Morgan, owned and had in their possession, or held and had subject to their control and disposition, upwards of eighty-five per cent of the total capital stock of said Northern Pacific Railway Company. The Northern Securities Company was organized on November 13, 1901, with its principal office at Hoboken, in the State of New Jersey, and the objects for which the corporation was formed, as stated in the articles of incorporation, are to acquire and hold, as investments, the bonds, securities and capital stock of any other corporation or corporations of the State of New Jersey, or of any other State, Territory or country, and while owner of said stock to exercise all the rights, powers and privileges of ownership, including the right to vote thereon; and it is declared that the corporation shall have power to conduct its business in other States and in foreign countries, to have one or more offices out of the State, and to purchase, hold and convey real and personal property out of the State.
It is alleged that the Northern Securities Company was incorporated at the instigation and request of James J. Hill, William P. Clough, and certain unknown stockholders of said Great Northern Railway Company, who, with said Hill and Clough, owned or controlled, or have the disposition and management of, a large majority of the capital stock of said Great Northern Railway Company, and with the cooperation of J. Pierpont Morgan and certain other unknown stockholders of said Northern Pacific Railway Company, who, with said Morgan, owned and controlled, or have the disposition and management,Page 243of, a large majority of the capital stock of said Northern Pacific Railway Company.
On November 14, 1901, James J. Hill, George F. Baker, Daniel S. Lamont, James Stillman, N. Terhune, Samuel Thorne, Charles L. Perkins, Jacob H. Schiff, William P. Clough, John S. Kennedy, Willis James, E.T. Nichols, Robert Bacon and E.H. Harriman were elected directors of the Northern Securities Company, and said directors on November 15, 1901, elected James J. Hill to be president, and John S. Kennedy, George F. Baker, Willis James and William P. Clough to be vice presidents, and E.T. Nichols, to be secretary and treasurer, of said company. It is alleged that the holders of a large majority of the capital stock of both said Great Northern and Northern Pacific Railway Companies had knowledge of and assisted in the formation of the said Northern Securities Company, and that such stockholders, so consenting and assisting, constitute all of the stockholders of said Northern Securities Company.
The bill charges that the purpose of the formation of the Northern Securities Company was to place the management and control of the Great Northern Railway Company and of the Northern Pacific Railway Company under one management, and to thus, in effect, establish a consolidation of said railway companies, and defeat and evade the statutes and policy of the State of Minnesota forbidding consolidation of parallel and competing lines of railway.
The relief prayed by the bill is that the defendant company be perpetually enjoined and restrained from voting, at any meeting of either said Great Northern and Northern Pacific Railway Company, any of the capital stock of either of said companies by any means or in any manner whatsoever, and from attending, by reason of such ownership, possession or control of stock, either through its officers or by proxy, or in any other manner, any meeting of the stockholders of either of said companies, and from, in any way, aiding, advising, directing, interfering with or in any way taking part, directly or indirectly, in any manner whatsoever, in the management, control, or operation of any of the lines of railway of either of said companies; and that said defendant, its officers, attorneys, representatives,Page 244agents, or servants, including its board of directors, or any of its members as such, be enjoined and restrained from exercising any of the powers or performing any of the duties, or in any manner acting as a representative, officer, member of the board of directors or employe, of either said Great Northern or Northern Pacific Railway Company, or in any way exercising any management, direction or control over the same; and that said defendant, its stockholders, directors and other officers, representatives and agents, be enjoined and restrained from doing any and all acts and making any arrangements or combinations, by contract or otherwise, having for their object, effect or result the consolidation or establishment of a joint management or control in any manner whatsoever of the said Great Northern and Northern Pacific Railway Companies, their lines of railway or properties; and that said defendant be enjoined from either directly or indirectly holding, owning or controlling any of the stock of either of said companies at one and the same time for any of the purposes or objects alleged in the bill, or otherwise, and that in case it shall appear upon the hearing that the defendant owns or controls, or is acting in concert with the owners of, a majority of the capital stock of either of said railway companies, and owns or controls a minority of the stock of the other of said companies, then that the defendant, its officers, directors, agents or representatives, be enjoined and restrained from receiving, acquiring or controlling any additional capital stock of such other railway company; and further for leave to amend the bill of complaint, if amendment thereto shall become necessary, including the right to bring in other parties defendant for the purpose of giving force and effect to any decree that may be made by the court herein.
More briefly stated, the case presented by the charges and prayers of the bill is that the State of Minnesota is apprehensive that a majority of the stockholders respectively of the Great Northern Railway Company and of the Northern Pacific Railway Company have combined and made an arrangement, through the organization of a corporation of the State of New Jersey, whereby such a consolidation, or what is alleged to amount to the same thing, a joint control and managementPage 245of the Great Northern and Northern Pacific Railway Companies, shall be effected as will operate to defeat and overrule the policy of the State in prohibiting the consolidation of parallel and competing lines of railway, and therefore appeals to a court of equity to prevent by injunction the operation and effect of such a combination and arrangement.
But at once, as we have seen, the court is put upon inquiry whether the parties and persons to be affected by such an injunction are before it.
The narrative of the bill unquestionably discloses that the parties to be affected by a decision of the controversy are, directly, the State of Minnesota, the Great Northern Railway Company, the Northern Pacific Railway Company, corporations of that State, and the Northern Securities Company, a corporation of the State of New Jersey, and, indirectly, the stockholders and bondholders of those corporations, and of the numerous railway companies whose lines are alleged to be owned, managed or controlled by the Great Northern and Northern Pacific Railway Companies.
Can such a controversy be determined with due regard to the interests of all concerned, by a suit solely between the State of Minnesota and the Northern Securities Company? It is, indeed, alleged that all of the stockholders of the Northern Securities Company are stockholders in the two railroad companies, and, therefore, it may be said that the latter stockholders are sufficiently represented in the litigation by the Northern Securities Company; but it is not alleged that the stockholders of the Northern Securities Company constitute or are composed of all the stockholders of the two railroad companies, and, in fact, the contrary is conceded in the allegations of the bill that a majority only of the stock of one, or perhaps both, of the two railroad companies is owned, or at least controlled and managed, by the Northern Securities Company. It is obvious, therefore, that the rights of the minority stockholders of the two railroad companies are not represented by the Northern Securities Company. They have a right to be represented, in the controversy, by the companies whose stock they hold, and their rights ought not to be affected without a hearing, even ifPage 246it were conceded that a majority of the stock in such companies, held by a few persons, had assisted in forming some sort of an illegal arrangement. Moreover, it must not be overlooked that it is not the private interests of stockholders that are to be alone considered. The directors of the Great Northern and Northern Pacific Railway Companies are appointed to represent and protect not merely the private and pecuniary interests of the stockholders, but the rights of the public at large, which is deeply concerned in the proper and advantageous management of these public highways. It is not sufficient to say that the Attorney General, or the Governor, or even the Legislature of the State, can be conclusively deemed to represent the public interests in such a controversy as that presented by the bill. Even a State, when it voluntarily becomes a complainant in a court of equity, cannot claim to represent both sides of the controversy. Not only have the stockholders, be they few or many, a right to be heard, through the officers and directors whom they have legally selected to represent them, but the general interests of the public, which might be deeply affected by the decree of the court, are entitled to be heard; and that, when the State is the complainant, and in a case like the present, can only be effected by the presence of the railroad companies as parties defendant.
Upon investigation it might turn out that the allegations of the bill are well founded, and that the State is entitled to relief; or it might turn out that there is no intention or design on the part of the railroad companies to form any combination in disregard of the policy of the State, but that what is proposed is consistent with that policy and advantageous to the communities affected. But, in making such investigation, a court of equity must insist that both sides of the controversy shall be adequately represented and fully heard.
When it appears to a court of equity that a case, otherwise presenting ground for its action, cannot be dealt with because of the absence of essential parties, it is usual for the court, while sustaining the objection, to grant leave to the complainant to amend by bringing in such parties. But when it likewise appears that necessary and indispensable parties are beyondPage 247the reach of the jurisdiction of the court, or that, when made parties, the jurisdiction of the court will thereby be defeated, for the court to grant leave to amend would be useless. Sec. 2 of Article 3 of the Constitution of the United States.
As then, the Great Northern and the Northern Pacific Railway Companies are indispensable parties, without whose presence the court, acting as a court of equity, cannot proceed, and as our constitutional jurisdiction would not extend to the case if those companies were made parties defendant, the motion for leave to file the proposed bill must be and isDenied.