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Cornell University Library HE2791.I29 E24 '" 'miihiR^iiii^ii """'^ °' ^°°^ County, II 3 1924 030 109 411 olin Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/cletails/cu31924030109411 IN THE Superior Court of Cook County Illinois IIM CHANCERY. GEORGE F. EX>MUNDS, JOHN A. KAS-"" SON, STUYVESANT FISH and WILL- IAM H. EMRICH, ' Ctmplainants , vs. ILLINOIS CENTRAL RAILROAD COMPANY et al., Defendants.^ Bill. " No. 263420—9150 On Motion to Dissolve Preliminary Injunction. BRIEF FOR COMPLAINANTS. HENRY W. LEMAN, Solicitor for Complainants. EDGAR F. FARRAR, FRANK H. CULVER, Of Counsel. Geo. Honutein Co., Printer, Chicago. "\J Amended Bill of Complaint State of Illinois, ) County of Cook, j In the Stjpbrioe Cotjet op Cook County, In Chancery. To the Honorable, the Judges of swid Court, in Chancery Sitting: Your orators, Gteorge F. Edmunds, John A. Kas- SON, Stuyvesant Fish, and William H. Embich, most respectfully show unto the Court : 1. That they and each of them are now and have been for some time past stockholders of record of the Illinois Central Railroad Company, owning the fol- lowing number of shares duly registered oh the books of said company, to-wit, George F. Edmunds, of the State of Vermont, 630 Shares John A. Kasson, of the State of Iowa, 360 " Stuyvesant Fish, of the State of New York, 12,452 " William H. Enarioh, of the Stat© of Illinois, 5 " and as such stockholders are duly qualified to vote at the corporate elections and all meetings of the stockholders of said company ; that they bring this ac- tion, as such stockholders, in their own behalf, and in behalf of all the stockholders of said Illinois Cen- tral Railroad Company similarly situated, who may unite with them and become parties complainant to this bill of complaint; 2. That the said Illinois Central Railroad Com- pany is a corporation of the State of Illinois, having its principal office in the city of Chicago, state and county aforesaid, and within the jurisdiction of this Court, and organized and created by a special act of the Legislature of the State of Illinois, approved Feb'- ruary 10th, 1851, to which special act, for greater cer- tainty, your orators refer and make a part of this their bill of complaint, the same as if said special act were herein set forth in full, to which special act there have been from time to time certain amend- nients made by the Legislature of said State of Illi- nois, which are not material to the subject matter of this bill, and of which said corporation has taken ad- vantage from time to time, as well as of certain gen- eral acts of the Legislature of the State of Illinois, not material to the subject matter of this bill ; 3. That said Illinois Central Railroad Company, under the powers aforesaid, owns, leases and oper- ates about 4,459.14 miles of railroad, of which about 2,042.96 miles are in the State of Illinois, and the bal- ance of said mileage is in the states of Wisconsin, Indiana, Iowa, South Dakota, Minnesota, Kentucky, Tennessee, Mississippi, Louisiana and Alabama, said roads constituting generally a system of Nortli and South, roads leading through the Middle West and Mississippi Valley, from the North and the North- west to the South, and generally from Chicago on the North and Omaha on the Northwest, to New Orleans on the South, with a Gulf terminus at New Orleans, Louisiana ; 4. That the present outstanding capital stock of said Illinois Central Railroad Company consists of nine hundred and fifty thousand four hundred X950,- 400) shares of One Hundred Dollars each, aggregat- ing the sum of Ninety-five Millions and Forty Thou- sand Dollars ($95,040,000.00) ; 5. That the present Directors of said Illinois Cen- tral Railroad Company are His Excellency, Hon. Charles S. Deneen, Governor of the State of Illinois, ex-officio, Charles M. Beach, who resides at Hartford, Connecticut, James T. Harahan, who resides at Chi- cago, Illinois, John Jacob Astor, John W. Auchin- closs, James DeW. Cutting, Stuyvesant Fish, Robert Walton Goelet, Alexander G. Hackstaff, Edward H. Harriman, Walther Luttgen, Charles A. Peabody, and Cornelius Vanderbilt, all of whom reside or do busi- ness in the city of New York, New York ; 6. That under the charter of said Illinois Central Railroad Company the terms of office of said Alex- ander G. Hackstaff, Stuyvesant Fish, John Jacob As- tor, and Edward H. Harriman expire on the sixteenth day of October, 1907, and that on said day, at 12 o'clock noon, in the office of said company in the city of Chicago, a meeting of the stockholders of said Illi- nois Central Railroad Company, who were of record §ind registered as such stockholders on the 23rd day of September, 1907, will be held to consider and vote upon such matters as are brought before said meet- ing; that at said meeting an election will be held to elect four Directors, to fill the vacancies caused by the expiration of the terms of the Directors aforesaid, which said election will be conducted and supervised directly or indirectly, by said James T. Harahan, President of said Company, or by one of its Vice- Presidents, in the absence of the President, or by some committee of directors or stockholders, or by tellers or commissioners of election, appointed either by the presiding officer of said meeting or elected by the stockholders present at such meeting, and that the persons so appointed or elected or the officers of such Company, or the said meeting of stockholders itself, will be charged with the duty of determining and de- ciding what stockholders are present in person or by proxy, and what stockholders in person or by proxy are entitled to vote at such meeting and election ; 7. That the Union Pacific Railroad Company is a railroad corporation of the State of Utah, organized and existing under the laws of that State, which owns and controls by lease or otherwise about 5,588.10 miles of railroad, situated in the States of Washing- ton, Oregon, Idaho, Wyoming, Utah, Montana, Col- orado, Kansas, Nebraska, and Iowa, constituting gen- erally a system of East and West roads, leading from the Middle West to the Pacific coast and connecting with the lines leased and controlled by said Illinois Central Railroad Company at Council Bluffs, Town, and also connecting Avith said Illinois Central Rail- road Company at New Orleans, Louisiana, through the lines of the Southern Pacific Company, a corpora- tion wholly dominated and controlled by said Union Pacific Railroad Company, 8. That Edward H. Harriman, who is a director of the Illinois Central Railroad Company, is a director and the President of said Union Pacific Railroad Com- pany and the Chairman of its Executive Committee; that Robert Walton Groelet and Charles A. Peabody are also directors of said Union Pacific Railroad Com- pany; 9. That said Harriman, by some means unknown to to your orators, completely dominates and influences all of the directors of said Union Pacific Railroad Com- pany and all the directors of said Illinois Central Rail- road Company, except (Amendment of November 29, 1907) "His Excellency, Charles 8. Deneen" said Charles M. Beach, James DeW. Cutting, and Stuy- vesant Fish, and that the directors of both said com- panies, so dominated and influenced by him, being so entirely under his influence that they move and act, speak and vote merely to register his will in all mat- ters concerning said Union Pacific Railroad Company and said Illinois Central Railroad Company; 10. That under the guidance and influence of said Harriman, said Union Pacific Railroad Company, a foreign corporation to the State of Illinois, and or- ganized and existing under the laws of the State of Utah, has for some time past been attempting to get control of, for its own purposes, said Illinois Cen- tral Railroad Company, in order that it may have it operated, not as an independent corporation as its charter and the laws of the State of Illinois require, seeking only its own interests and benefits and the interests and benefit of its stockholders, and of its patrons living along its lines and doing business with it, but as a subordinate instrumentality of said Union Pacific Railroad Company, as a mere feeder to its lines, and as a cheap inlet and outlet for its traffic east and south of Council Bluffs, Iowa, and north and east of New Orleans, Louisiana, giving it the lean part of traffic interchanged between said companies, to the great and irreparable injury and damage of the business of said Illinois Central Railroad Company, and of its stockholders ; 11. That this design began to show itself in the year of 1906, when said Harriman, then President of said Union Pacific Railroad Company, at the election of directors of said Illinois Central Railroad Com- pany, held on October 17th, 1906 (concealing from the world and from all the stockholders and directors of said Illinois Central Railroad Company, except his own associates among the directors of said Union Pa- cific Railroad Company, the enormous purchases of the stock of the said Illinois Central Railroad Com- pany made by said Union Pacific Railroad Company under his advice, all of which purchases are herein set forth more in detail), attempted to elect one Henry W. DeForest a director in said Illinois Cen- tral Railroad Company, the said Henry W. DeFor- est being then and now a director in the Southern Pa- cific Company, a corporation of which said Harriman was and is the President and w'hich is wholly con- trolled and dominated by said tJnion Pacific Railroad Company; that because said Stuyvesant Fish, then the President of said Illinois Central Railroad Com- pany, opposed and defeated the election of said De- Forest, and because he opposed and refused to yield to the attempts of said Harriman to control said Illi- nois Central Railroad Company in the interest of said Union Pacific Railroad Company, said Harriman used his dominating influence with the majority of directors of the Illinois Central Railroad Company to depose Fish from the Presidency of said company, and elected said James T. Harahan, who is completely un- der the control of said Harriman, the President of said company, as the successor of said Fish; 12. That in pursuance of the design aforesaid to control said Illinois Central Railroad Company in the interest and for the benefit of said Union Pacific Rail- road Company as herein set forth, the Board of Di- rectors of said Union Pacific Railroad Company, by proceedings had on the 19th and 31st days of July, 1906, respectively, authorized the purchase of 105,000 shares of the capital stock of said Illinois Central Rail- road Company from the firm of Kuhn, Loeb & Co., and 90,000 shares of said stock from three of its own directors, Edward H. Harriman, James Stillman, and Henry H. Rogers, and further authorized the pur- chase from said Harriman of the majority of the stock of the Railroad Securities Company of New Jersey, a mere stock, and bond holding company, with- out power or authority to own or operate a railroad, and which had as its sole assets, except cash, 95,000 shares of the capital stock of the Illinois Central Rail- road Company; that the Executive Committee of said Union Pacific Railroad Company, by proceedings had on October 25th, 1906, ratifiefi the action of said Har- riman, who reported on that date to' said executive committee a purchase by himself individually from Stuy\'^esant Fish of additional shares in said Railroad Securities Company of New Jersey to the amount of 6,625 shares of its preferred stock and 11,925 shares of its common stock, and also reported this purchase as one made for the account of said Union Pacific Rail- road Company, thus making said Union Pacific Rail- road Company own 18,984 shares of the preferred stock of said company out of a total issue of 19,369 shares and also own 34,154 shares of the common stock of said company out of a total issue of 34,864 2/10 shares; that the purchase aforesaid by said Union Pacific Railroad Company of said 195,000 shares of the stock of said Illinois Central Railroad Company was perfected on August 9th, 1906, the purchases of the 9 Harriman stock in said Railroad Securities Company- were perfected on August 9th, 10th and 16th, 1906, respectively, and the purchase of said Fish stock in said Railroad Securities Company was perfected on October 25th, -1906; that said Harriman used 8,769 sliares of the stock of said Illinois Central Railroad Company, owned and purchased on August 9th, 1906, by said Union Pacific Railroad Company, for the pur- pose of making a part payment for said Fish stock, thus reducing the direct holdings by said Union Pa- cific Railroad Company of the stock of said Illinois Central Railroad Company from 195,000 shares to 186,231 shares ; 13. That, although said Harriman, Peabody, and Groelet were present, as directors of said Union Pa- cific Railroad Company, at the meetings at which said stock of said Illinois Central Railroad Company was bought, yet all this ownership and control of 29.6% of the stock of said Illinois Central Railroad Com- pany by said Union Pacific Railroad Company, was studiously concealed by said Harriman, Peabody and Goelet, from the public and particularly from the stockholders, directors, officers and officials of said Illinois Central Railroad Company, and was first brought to light and to the knowledge of the public, in January, 1907, by the Interstate Commerce Com- mission during the progress of an investigation made by it, "In the Matter of Consolidations and Combina- tions of Carriers, Relations between such Carriers, and Community of Interests therein, their Rates, 10 Facilities and Practices," all of which will more fully appear by the published official proceedings of such investigation, and also by the Report of the said In- terstate Commerce Commission, No. 943, a copy of which is hereto annexed, marked "Exhibit A," and made a part hereof, to which for greater certainty reference is hereby had; 14. That such was the eagerness of said Union Pa- cific Railroad Company to hold and control as large a proportion as possible of the stock of said Illinois Central Railroad Company, that it violated its char- ter and the laws of the State of Utah, under which it is organized, in acquiring said stock of said Rail- road Securities Company, a mere holding company, and not in any manner belonging to the class or classes of corporations in which railroad corporations, under the laws of the State of Utah, are permitted to pur- chase stock so that the ownership of the stock of said Railroad Securities Company by said Union Pacific Railroad Company is ultra vires and null and void ; 15. That the acquisition of said 29.6% of the stock of said Illinois Central Railroad Company by said Union Pacific Railroad Company is a part and parcel of an unlawful scheme and plan of said Union Pacific Railroad Company in restraint of interstate com- merce and in violation of the laws of the United States regulating interstate commerce and foreign commerce, and in violation of the laws of the State of Illinois, to monopolize, control and dominate all the interstate, intra-state and foreign commerce of the United States, 11 and to eliminate all competition among common car- riers of freight and passengers, by concentrating in the hands of said Union Pacific Eailroad Company the con- trol of all the principal transportation corporations by land between Canada and the Grulf of Mexico and be- tween the Atlantic and the Pacific oceans, and by sea between the western ports of the United States and the far East, and the coastwise traffic on the Atlantic and Pacific coasts, which control it is seek- ing to get by the purchase and ownership of large blocks of stock in such principal transportation cor- porations, so that it can control the election of direc- tors in such corporations and the business of such companies ; that in pursuance of and in the execution of its purpose and design said Union Pacific Railroad Company has, either in its own name or in the name of the Oregon Short Line Railroad Company, a coi- poration in which said Union Pacific Eailroad Com- pany holds substantially all the stock, acquired and now holds large blocks of stock in the following trans- portation corporations, to-wit, the Southern Pacific Company, the San Pedro, Los Angeles & Salt Lake Railroad Company, the Central Pacific Railroad Com- pany, the Oregon & California Railroad Company, the Northern Pacific Railroad Company, the Atchison, Topeka & Santa Fe Railroad Company, the Illinois Central Railroad Company, the Baltimore & Ohio Railroad Company, the Chicago, Milwaukee & St. Paul Railroad Company, the Chicago & Northwestern Rail- road Company, the New York Central & Hudson River 12 Railroad Company, the St. Joe & G-rand Island Rail- road Company, the Chicago & Alton Railroad Com- pany, the Oregon Railroad & Navigation Company, the Occidental & Oriental Steamship; Company and the Pacific Mail Steamship Company; that all the facts concerning this conspiracy against commerce by said Union Pacific Railroad Company and its coad- jutors are set forth more in detail in said report of said Interstate Commerce Commission, which is hereto annexed, marked "Exhibit A," and made a part of this bill, and to which for greater certainty reference is hereby had; that said report sets forth in detail the number , of shares of stock in said before-mentioned companies, acquired and owned by said Union Pacific Railroad Company and its subordinate company, said Oregon Short Line Railroad Company; that your ora- tors adopt the statements of said report, and charge and make the same a part of this their bill, to the same extent and as fully as if they were herein charged and set forth in full; that, as shown by said report, said Union Pacific Railroad Company owns and controls 103,431 shares of the preferred stock of the Chicago & Alton Railroad Company out of the total issue of 195,440 shares of such preferred stock; that up to a very late date said Union Pacific Railroad Company has, by an agreement with the Rock Island Company, which is the owner of 191,900 shares of the common and preferred stock of said Chicago & Alton Railroad Company, out of a total issue of 399,861 of such shares of common and preferred stock, been en- 13 titled to the absolute control and lias exercised such control of said Chicago & Alton Railroad Company in the alternate years since October, 1904 (an agreement which these companies now pretend is and has been lately abrogated), and which control the said Union Pacific Bail road Company was actually exercising in July, August, September, and October of 1906, through said Harriman as Chairman of the Executive Com- mittee of said Chicago & Alton Railroad Company at the very time said Union Pacific Railroad Company was secretly acquiring its large ownership of stock of said Illinois Central Railroad Company; that said Chi- cago & Alton Railroad Company is a corporation or- ganized and existing under the laws of the State of Illinois, and owns and operates a parallel and compet- ing line with the lines of said Illinois Central Railroad Company; that, as appears by said report of said In- terstate Commerce Commission, said Union Pacific Railroad Company owns and controls 36,900 shares of the capital stock of the Chicago, Milwaukee & St. Paul Railroad Company, or 6.34% of the common stock of said company; that said Chicago, Milwaukee & St. Paul Railroad Company owns and operates parallel and competing lines to some of the lines of said Illi- nois Central Railroad Company; that, as appears by said report, said Union Pacific Railroad Company owns and controls 25,720 shares of the common stock of the Chicago & Northwestern Railroad Company, or 3.32% of the common stock of said company; that said Chicago & Northwestern Railroad Company is a cor- 14 poration organized and existing under tlie laws of the State of Illinois, and owns and operates parallel and competing lines to some of the lines of said Illinois Central Eailroad Company; that it is contrary to the laws and to the public policy of the State of Illinois that any railroad company, foreign or domestic, should own or control stock under any conditions or circum- stances in parallel and competing lines of railroad, whether within or without said State of Illinois, and particularly in those parallel and competing lines char- tered and operating within the limits of said State of Illinois, and that the ownership and control by said Union Pacific Eailroad Company at the same time of stock in the Illinois Central Eailroad Company, the Chicago & Alton Railroad Company, the Chicago, Mil- waukee & St. Paul Eailroad Company, and the Chicago & Northwestern Eailroad Company, are ultra vires of said Union Pacific Eailroad Company, and the said Union Pacific Eailroad Company has no right, author- ity or power to vote and should not be permitted to vote said stock of said Illinois Central Eailroad Com- pany owned, held or controlled by it, for the purpose of controlling and electing the directors of said Illinois Central Eailroad Company in wliom by the charter of said company all the corporate powers are vested, or to vote said stock for any purpose whatever; 16. That in pursuance of its system of concealment of its ownership and control of such a large proportion of the stock of said Illinois Central Eailroad Company (a proportion, which is sufficient under ordinary clr- 15 cumstances, to give entire control of a corporation whose stock is held by some nine thousand (9,000) stockholders scattered all over the United States and Europe, many of whom do not vote, and few of whom attend the meetings of stockholders, as is the case of said Illinois Central Eailroad Company), the said Union Pacific Railroad Company has not transferred or caused to be transferred to itself on the books of said Illinois Central Railroad Company one single share of the 186,231 shares bought and paid for by it and now owned and controlled by it, but has put and kept such stock in the names of interposed persons who hold the same in their names for and on account of said Union Pacific Railroad Company, and in whose names said Union Pacific Railroad Company will seek to vote said stock at the meeting of the stockholders of said Illinois Central Railroad Company on said 16th day of October, 1907, or at any adjourned or post- poned meeting thereof, if any there be; that, as your petitioners are informed and believe, and, on such in- formation and belief, charge the fact to be, the follow- ing persons and firms are the interposed persons who hold said stock of said Illinois Central Railroad Com- pany in their respective names, which stock belongs to and is controlled by said Union Pacific Railroad Com- pany, to-wit, G-. W. Bovenizer, of New York, a clerk of Kuhn, Loeb & Co 17,400 shares C. D. Haines 4,700 " F. W. Kaletsch, Jr 17,000 " 16 E. Langenbach 13,600 E. H. Paul 9,200 Oscar Schwabe 15,000 S. Siegman 18,400 H. Woog 5,500 S. Haymann 11,500 Leon E. Stropp 9,^00 " James Herbert 4,000 " Rudolph Keppler & Co., of New York, brokers for Kuhn, Loeb & Co 4,900 " DeHaven & Townsend, of New York, brokers for Kuhn, Loeb & Co 4,900 " Williams & Nicholas, of New York, brokers for Kuhn, Loeb & Co 20,500 " (Amendment of December 26, 1907.) A. H. Combs <& Company 2,000 " Henderson d Company 3,900 " Edward Sweet & Co., of New York, brokers for Kuhn, Loeb & Co., or E. H. Harriman 10,000 " Degener & Burke, of New York, brokers for Kuhn, Loeb & Co., or E. H. Har- riman 4,000 " Groesbeck & Co., of New York, brokers for Kuhn, Loeb & Co., or E. H. Harriman 4,100 " H. W. DeForest, of New York, Direc- tor in Southern Pacific Railroad Co 1,140 " Harriman & Co., of New York, brok- ers for Kuhn, Loeb & Co., or E. H. Harriman 11,411 ' ' W. S. McCrea, of Chicago, Illinois 10 " F. G. Hartwell, of Chicago, Illinois . . 10 " F. E. May, of Chicago, Illinois 10 " 17 E. A. Kelley, of Qhicago, Illinois 10 B. L. Mallory, of Memphis, Tennessee 10 D. W. Ross, of Chicago, Illinois 10 John Scott, of Memphis, Tennessee. . 10 Murray Howe, of Chicago, Illinois... 10 C. S. J. Ward, of Chicago, Illinois ... 10 A. G-. Hackstaff, of New York, New York 10 Thomas J. Dixon, of Chicago. Illinois. 10 J. B. Lord, of Chicago, Illinois 10 Albert W. Biggs, of Memphis, Tennes- see 10 C. N. Bureh, of Memphis, Tennessee. . 10 Charles Gr. .Smith, of Memphis, Ten- nessee 10 L. W. Fargo, of Chicago, Illinois 10 Frederick S. Winston, of Chicago, Illi- nois 10 Ralph M. Shaw, of Chicago 10 186,231 shares That said Kuhn, Loeb & Co., above referred to, are, and from the very origin of the Union Pacific Railroad Company, have been its bankers and financial agents ; that the eighteen persons last above named became stockholders of record on September 17th, 1907, by a simultaneous transfer from S. Haymann, a clerk of Kuhn, Loeb & Co. ; that F. S. Winston and Ralph M. Shaw were attorneys of the Chicago & Alton Railroad Company during E. H. Harriman's control of the same, and McCrea and Hartwell, May, Howe and Ward are connected with the People's Gas Company of Chi- 18 cago, a corporation of which said Winston is or was for many years the counsel and with which he has close relations; that B. L. Mallory is the brother-in-law of James T. Harahan, the president of the Illinois Cen- tral Eailroad Company, and Charles G. Smith is the associate or employe of Mallory; that D. W. Boss was for years private secretary of J. T. Harahan and is now connected with the Hewitt Mfg. Company, a cor- poration which sells supplies to the Illinois Central Eailroad Company, and in which a near relative of J. T. Harahan is interested; that John Scott is the Assistant Passenger Agent of the Illinois Central Rail- road Company at Memphis ; that A. Gr. Hackstaff is the Vice-President of the Illinois Central Railroad Com- pany and under the influence of E. H. Harriman; that Thomas J. Dixon is the son of Arthur Dixon, the prin- cij)al teaming contractor of the Illinois Central Rail- road Company in Chicago ; that C. N. Burch and Albert W. Biggs are attorneys of the Illinois Central Railroad Company at Memphis ; that L. W. Fargo is one of the principal officers of the American Express Company which has an exclusive contract to do express busi- ness over the Illinois Central Railroad Company's lines; that your orators cannot locate the said Kelly, but your orators are informed and believe, and on such information charge the fact to be, that said Harriman or his confederates caused the said stock belonging to the Union Pacific Railroad Company to be put in the name of each of said eighteen persons to qualify them to attend the meeting of the Illinois 19 Central Railroad Company aforesaid in person or by proxy and to participate in and vote at such meeting under his influence or direction, and that said persons and each of them had and have no right, title or in- terest of any kind or nature in .said stock so trans- ferred to them, but hold the same as interposed per- sons for the Union Pacific Railroad Company, and that such holdings are ultra vires, illegal, and null and void in law. 17. That the Railroad Securities Company here- inbefore referred to in this bill as the corporation holding Ninety-five Thousand Shares of the Capital Stock of the Illinois Central Railroad is a corporation of New Jersej^ whose corporate purposes are defined in the Second Article of its charter as follows: "Second. — The place in this State where the business of such Company is to be conducted is Jersey City, in the County of Hudson; and the objects for which the Company is formed are to purchase, receive, hold and own, bonds, mortgages, debentures, notes, shares of capital stock, and other securities, obligations, con- tracts and evidences of indebtedness of any railroad company or railroad corporation, and also of any ter- minal, express, warehouse, elevator, street car, trac- tion, gas, electric light or power, steamship or other company, corporation or association, and of any corpo- ration, any of the securities of which may be owned by, or the property of which may be operated by or in con- nection with the property of any railroad company, or of any company of the character hereinbefore de- scribed, or any part of whose stock, bonds, or other se- curities are held or owned by any such company; to 20 receive, collect and dispose of interest, dividends and income upon, of and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held or owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, con- tracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of indi- vidual ownership thereof, including the right to vote thereon; to do any and all acts and things tending to increase the value of the property at any time held by the Company ; to issue bonds and to secure the same by pledging or mortgaging the whole or any part of the property held by the Company, to sell or pledge such bonds for the proper corporate purposes; to issue stock, trust certificates against, and certificates, or other evidences of proprietary interest in, shares of stock owned by the Company, and to issue obligations and securities in such other forms as may from time to time seem advisable. Nothing herein is to be con- strued as intended to form a banking company, a sav- ings bank or a corporation intended to derive profit from the loan and use of money." as will more fully appear by a certified copy of its charter, to be produced in this court on the hearing; that said Edward H. Harriman is the president of said Company ; that of the 95,000 shares of stock in the Illi- nois Central Eailroad Company held by said Company as its sole asset except eash, 80,000 shares are pledged to the United States Trust Co., of New York, as trustee to secure the outstanding bonded indebtedness of said Company, amounting to $8,000,000.00 and 15,000 shares 21 remain by law in its treasury; that up to September 18th and 20th, 1907, all of said 95,000 shares of stock stood on the stock books of the Illinois Central Bail- road Company in the names of the Railroad Securities Company, as the owner thereof, but on the 18th day of September, 1907, five days before said stock regis- ters of said Illinois Central Railroad Company were closed so as to determine the stockholders who were entitled to vote at the meeting of the Illinois Central Railroad Company on October 16th, 1907, the said Har- riman, or his confederates, or the said Union Pacific Railroad Company, which owns and controls nearly all the stock of said Railroad Securities Company as above set forth, caused to be placed in the name of said E. H. Harriman 14,000 shares of its stock in the Illinois Central Railroad Company, and on the 20th day of September, 1907, caused to be placed one thousand shares of its stock in the Illinois Central Railroad Company in the names of the following persons and in the following amounts, to-wit, R. S. Lovett 100 shares D. W. Cornish 100 William Mahl 100 Maxwell Evarts 100 Fred V. S. Crosby 100 C. W. Weston, Jr 50 H. S. Bradt 50 Gordon M. Buck 50 J. B. Maxwell 50 Geo. E. Downs 50 22 Charles Franklin 50 Herbert B. Taylor 50 L. H. Cornell 50 P. H. Bosse 50 E. M. McCreary 50 That said E. H. Harriman is the President of the Union Pacific Railroad Company and Chairman of the Executive Committee of said Union Pacific Eailroad Company, and President of the Railroad Securities Company ; said R. S. Lovett of the City of New York is a director of the Union Pacific Railroad Company, that said W. D. Cornish, of South Orange, New Jersey, is a director of the Union Pacific Railroad Company, the said William Mahl of the City of New York is the Comptroller of the Union Pacific Railroad Company, the said Maxwell Evarts of the City of New York is the Attorney of the Union Pacific Railroad, the said Fred V. S. Crosby of Tuxedo Park, New York, is the Treasurer of the Union Pacific Railroad, the said H. S. Bradt of Concord, Staten Island, N. Y., is the Assist- ant Comptroller of the Union Pacific Railroad, the said Gordon M. Buck of Pelham, N. Y., the said Geo. E. Downs, of Brooklyn, N. Y., the said H. B. Taylor of the City of New York, and the said L. H. Cornell of the City of New York, are all directors of the Oregon Short Line Railroad Company, a corporation owned and controlled by the Union Pacific Railroad Com- pany, that the said Charles Franklin of the City of New York is attorney for E. H. Harriman or some of the companies controlled by him, and the said J. B. 23 Maxwell, of the City of New York, the said P. H. Bosse, of the City of New York, and the said B. H. MeCrearj^ of Elizabeth, New Jersey, are clerks and employes of the said Harriman or of the Union Pacific Railroad Company, or of some of its subordinate cor- porations ; that your orators are informed and believe, and on such information charge that none of the per- sons above named have now or ever did have any right, title or interest whatever in and to any of the 15,000 shares of stock now held in their names, but that each and every one of said shares is now the property of the Railroad Securities Company, and they were put into the name of said parties by fictitious dealings and simulated transfers, merely to qualify them to appear in person at the meeting of the stockholders of the Illinois Central Railroad Company on October 16th, prox., or to vote said stock at said meeting by proxy in the interest of the Union Pacific Railroad Company and that such holdings are illegal and null and void in law; 18. That Charles A. Peabody, director in the Union Pacific Railroad Company, and in said Illinois Cen- tral Railroad Company, is also a Trustee in. and the President of The Mutual Life Insurance Company of New York, a corporation created under the laws of the State of New York for the purpose of the insur- ance of lives and domiciled in the city of New York, and having no corporate powers whatever to own, operate and control a railroad, directly or indirectly, and no power whatever to vote, in person or by proxy, 24 as a stockholder in a railroad company organized and existing under the State of Illinois; that said The Mutual Life Insurance Company of New York has recorded in its name on the books of said Illinois Cen- tral Eailroad Company, and claims to own or hold 5,500 shares of the capital stock of said Illinois Cen- tral Eailroad Company; that said The Mutual Life Insurance Company of New York, under the influ- ence of said Peabody and of said John W. Auchin- closs and said Cornelius Vanderbilt, who are also trustees in said Life Insurance Company, all combin- ing, conspiring and confederating with said Union Pa- cific Railroad Company and its other directors and in furtherance of the execution of said schemes of said Union Pacific Railroad Company to control in its in- terest and to its benefit and advantage said Illinois Central Railroad Company, proposes and intends to vote said 5,500 shares of said stock of said Illinois Centra] Railroad Company at the meeting of the stockholders of said Illinois Central Railroad Com- pany to be held on October 16th, 1907, and at an ad- journed or postponed meeting, if any be held, and at subsequent meetings of the stockholders of said com- pany in such manner and upon such questions and for such candidates for directors as said Union Pacific Railroad Company, or said Harriman or his confed- erates, may direct ; 19. That whatever may be the right of said Union Pacific Railroad Company under the laws of said State of Utah, or the rights of said Railroad Securi- 25 ties Company under the laws of said State of New Jersey, or the rights of said The Mutual life Insur- ance Company of New York under the laws of the State of New York, to invest their funds or the funds of any one or more of them in the stock of said Illi- nois Central Railroad Company, yet under the laws and public policy of the State of Illinois they have not and none of them has any right, power or author- ity to own or hold said stock of said Illinois Central Railroad Company and particularly have no right to vote said stock at any meeting of the stockholders of said company, and that the owning or holding of said stock of said Illinois Central Railroad Company by said corporations or by any one or more of them, either in their own names or in the name or names of their interposed persons, is illegal, ultra vires, and null and void in law ; that what they cannot do directly they cannot do indirectly, and that therefore they can- not vote said stock by placing the same in the name or names of interposed person or persons, who may appear on the registry and records of said Illinois Cen- tral Railroad Comx>any as the owners or holders of said stock, when in truth and fact they have no interest of any kind or nature in said stock, but only a simu- lated and unreal paper title thereto. (Amendment of December 23, 1907 , inserted, in bill im- mediately foUoiving Paragraph 19 in said bill.) "And, Your Orators further aver that they made no application to the Board of Directors of said Illinois 26 Central Railroad Company to bring this suit to pre- vent and enjoin said Union Pacific Railroad Company and said UailrooA Securities Company and each of them from voting the stock held by them respectively in said Illinois Central Railroad Company at the annual meeting of the stockholders of said Company for the year 1907 and at all subsequent meetings of the stock- holders of said Company; FiKST, because, as Your Orators are advised by coun- sel and informed and upon such advice and informa- tion they charge and believe that they have the indi- vidual right as stockholders to appeal to this Court to prevent and enjoin from voting at the corporate meet- ings of the stockholders of said Illinois Central Rail- road Company, any corporation which is absolutely tvithout right under the laws and public policy of the State of Illinois, to hold and vote stock in said Illinois Central Railroad CoTnpany held by such corporations, particularly where such corporations, as in this case, are foreign corporations, united together by stock ownership under one management, and holding such a percentage of the stock of said Illinois Central Railroad Company as to give power to dominate and control all corporate meetings of the stockholders of said Com- pany, and such corporations are engaged in the un- lawful schemes and plans elsewhere set forth in detail in the Bill in this cause; Second, because it would have been an idle ceremony for your orators to have made such application, for the following reasons: 27 (a) that a majority of the directors of said Illinois Central Railroad Company would have to authorize or direct the bringing of said suit, and eight of said thir- teen directors, a majority of said hoard, to-wit: Ed- ward H. Harriman, Charles A. Peahody, Robert Wal- ton Goelet, John Jacob Astor, Cornelius Vanderbilt, Alrxander G. Hachstaff, James T. Harahan and John W: Auchincloss, believe, hold and maintain and have been ad,vised, that said Union Pacific Railroad Com- pany and said Railroad Securities Company, have, and each of them has, the moral as well as the full legal right to hold and vote all the stock held by them, or either of them, in said Illinois Central Railroad Com- pany, and therefore would have regarded the bringing of such suit as a groimdless and vexatious action, which they have been advised, informed and believe would injure large interests throughout the country generally and also injure other corporations similarly situated, in which they are stockholders, bondholders, or direc- tors, and would also injure said Illinois Central Rail- road Company itself; (b) that three of said directors, to-wit: Edward H. Harriman, Robert Walton Goelet and Charles A. Pea- body, who are also stockholders in and directors of said Union Pacific Railroad Company, which holds sub- stantially all the stock of said Railroad Securities Com- pany-said Harrimo/n being the president of both com- panies — and all three of them having participated in the proceedings whereby said Union Pacific Railroad Company bought the stock of said Railroad Securities 28 Company, tvould not have permitted any sioch suit to be brought against either or both of said companies, because of their personal interests therein, and be- cause such suit would be an attach upon a transaction which they personally advised, promoted and partici- pated in, whereby said Union Pacific Railroad Com- pany was induced to expend and did expend more than $41,000,000 in the attempted purchase of said stocks, and because all three of them, through their connection with said Union Pacific Railroad Company as stock- holders and directors, were participants in and aiders and abettors of the unlawful and void schemes and plans of said Union Pacific Railroad Company else- where set forth in detail in the Bill in this cause; and that the five other directors, to-wit: John Jacob Astor, Alexander G. Hackstaff, James T. Harahan, Cornelius Vanderbilt and John W. Auchincloss would have been earnestly advised, solicited and directed by said Ed- ward H. Harriman not to vote for any resolution or direction to bring, or to authorize the bringing of such suit, and would have acceded to and followed such ad- vice, solicitation and direction, and would have voted with said Harriman, Peabody and Goelet, making a large majority of said Board of Directors, against any resolution or direction to bring or to authorize the bringing of such suit, for the reason that they are intellectually absolutely under the influence, control and domination of said Harriman and always have fol- lowed and, as Your Orators charge, always will follow his advice, opinion, suggestion and direction in all mat- 29 ters which come for consideration before said Board of Directors'of said Illinois Central Railroad Company; (c) that the personal hostility of eight of the direct- ors of said Illinois Central Railroad Company, to-wit: Eduard H. Harriman, Charles A. Peabody, Robert Walton Gaelet, John Jacob Astor, James T. Rarahan, Cornelius Vanderbilt, Alexander G. Hackstaff and John W. Auchincloss, being a large majority of said Board, to one of Your Orators, Stuyvesant Fish, is so great and so bitter that, even if the consideration above set forth did not exist and especially with such con- siderations existing as averred, they ivould have voted against any resolution or direction to bring this suit or any other suit having a similar object or purpose, be- cause they fear and believe that if said Union Pacific Railroad Company or said Railroad Securities Com- pany, or both, have no potver to vote and cannot vote the stock held by them respectively in said Illinois Central Railroad Company at the annual meeting of said Company for the year 1907 and at all subsequent meetings of stockholders of said Company, said Stuy- vesant Fish, at all such meetings of stockholders, would control and vote the majority of the stock of said Company, either in person or by proxy, as he has done for the last twenty-five years, and would cause himself to be elected a director — to defeat which elec- tion they are not devoting all their energies and influ- ence— amd said Stuyvesant Fish would also defeat the election of said eight last-named directors, when their 30 respective terms of office shall expire, their desire to hold such directorship being great and conswming ." (Amendment of December 16, 1907, by Striking Out Paragraph 20 of the Original Bill and Inserting IN Lieu and in Place Thereof, the Following, Viz:) "That it is the purpose and intention of said Union Pacific R. R. Co. and of said Railroad Securities Co., respectively, to vote, or to cause to be voted, said stock held by them respectively in said Illinois Central R. R. Co. at the meeting of said stockholders of said Com- pany to be held on said 16th day of October, 1907, and at any adjourned or postponed meetings thereof, and at subsequent meetings of stockholders of said Com- pany, both the stock standing in their names on the books and records of said Company, and the stock standing in the names of the interposed persons, pro- vided by said Union Pacific R. R. Co. and by said Rail- road Securities Co., and that said interposed persons will also attempt to vote said stock, either in their own name or names personally, or by proxies signed by them given to said James T. Harahan, or to said Alex- ander G. Hackstaff, or to some other person or per- sons, unknown to your orators,- that said stock in the Illinois Central R. R. Co. held by the Union Pacific R. R. Co. and held by the Railroad Securities Co. will be voted at said stockholders' meetings, and at all sub- sequent adjournments, stibsequent meetings and ad- journments thereof, of said stock^tolders in pursuance 31 and in execution of the design and purpose of the Union Pacific- R. R. Co., to dominate and control the Illinois Central R. R. Co., and in pursuance and in execution of its unlawful scheme and plan to motiop- olize, control and dominate the interstate, intrastate and foreign commerce of the United States, and to eliminate all competition among common carriers of freight and passengers, and to these ends, said stock icill he voted at the coming election of directors for the purpose of re-electing on the Directory of said Illinois Central R. R. Co., the said Edward H. Harriman, who is president of the Union Pacific R. R. Co. and chair- man of its executive committee, and the controller of the policy of the Union Pacific R. R. Co., and the said John Jacob Astor, and the said Alexander G. Hack- staff, who are under the domination and control of the said Echvard H. Harriman and the Union Pacific R. R. Co., and for some third person to be named and selected by said Harriman; and to these ends said stock will be voted at all subsequent elections so as to eliminate from the Board of Directors of the Illinois Central R. R. Co., all directors not under the influence and dom- ination of the Union Pacific R. R. Co., until said Board shall be entirely composed of persons dominated and controlled by the said Union Pacific R. R. Co., whereby the said Union Pacific R. R. Co. will succeed in carry- ing into execution pro tanto its unlawful and void plans and purposes aforesaid by the exercise of an ultra vires holding and voting of stock in the Illinois Central R. R. Co. in contravention of the laws and pub- -52 lie policy of the State of Illinois, and to the great and iireparahle damage and injury of your orators as stock- holders aforesaid and of all the other stochholders in Illinois Central R. R. Co.; that it is the intention and purpose of said Illinois Central Railroad Co., of its officers and directors, of its commissioners of election and tellers of election, to permit said stock so held or registered to he so illegally voted; that your orators as stockholders of the Illinois Central R. R. Co. as aforesaid, have no remedy to prevent such illegal ac- tion, except in a court of eqidty and by the means of the writ of injunction issued by this Honorable Court." Wheeefoee, the premises considered, your orators pray that the Writ of Injunction of this Honorable Court may be issued, under the seal of said Court and the signature of its Clerk, duly attested, directed to said Illinois Central Eailroad Company, the officers and stockholders of said Illinois Central Railroad Company, James T. Harahan, President of said Illi- nois Central Railroad Company, Alexander G-. Hack- staff, Secretary of said Illinois Central Railroad Com- pany, Hon. Charles S. Deneen, John Jacob Astor, John W. Auchincloss, James T. Harahan, Robert Wal- ton Goelet, Alexander G. Hackstaff, Edward H. Harriman, Walther Luttgen, Charles A. Peabody, and Cornelius Vanderbilt, Directors of said Illinois Cen- tral Railroad Company, and any committee on proxies and commissioners of election of said Illinois Central Railroad Company, Union Pacific Railroad Company, and its directors and officers. Railroad Securities Com- 33 pany of New Jersey, and its directors and officers, The Mutiial Life Insurance Company of New York, and its directors and officers, G. W. Bovenizer, C. D. Haines, F. W Kaletsch, Jr., E. Langen- bach, E. H. Pan], Oscar Schwabe, S. Siegman, H. Woog, S. Hayman, Leon E. Stropp, James Herbert; Eudolpb Keppler, E. E. VoUmer and Theodore A. Hellwig, partners as Rudolph Keppler & Co., A. H. DeHaven, W. B. DeHaven, S. J. Shaubaeker, B. F. Townsend, Jr., J. F. J. Murphy, and William D. Grange, partners as DeHaven & Townsend; Blair S. Williams and Robert C. Nicholas, partners as Will- iams & Nicholas; (Amendment of December 26, 1907.) A. H. Comhs, Homer A. Lattin and H. B. Combs, partners as A. H. Combs d Company; Norman Hen- derson and Louis Hatzfeld, surviving partners of the firm of Henderson S Company; William L. Bull, Frederick Bull, Henry W. Bull, R. M. Stuart Wortley, Frank L. Shoonmaker and Waldo S. Reed, partners as Edward Sweet & Co. ; George L. Degener, Rudolph Degener, and Charles H. Burke, partners as Degener & Burke; Ernest Groesbeck, Al- bert N. Harp and Walter P. Gardner, partners as Groesbeck & Co.; Henry W. DeForest; Oliver Harri- man, Jr. ; J. W. Harriman, T. Borden Harriman and J. H. McCuUough, partners as Harriman & Co. ; W. S. McCrea, F. G. Hartwell, F. E. May, E. A. Kelley, B. L. Mallory, D. W. Ross, John Scott, Murray Howe, C. S. J. Ward, Thomas J. Dixon, J. B. Lord, Albert W. 34 Biggs, C. N. Burch, Charles G. Smith, L. W. Fargo, Frederick S. AVinston, Ealph M. Shaw, R. S. Lovett, D. W. Cornish, William Mahl, Maxwell Evarts, Fred- erick V. S. Croshy, C. W. Weston, Jr., H. S. Bradt, Grordon M. Buck, J. B. Maxwell, George E. Downs, Charles Franklin, Herbert B. Taylor, L. H. Cornell, P. H. Bosse, R. M. MeCreary, and to their and each of their respective attorneys, solicitors, agents, employes, officers, directors, proxies, and alleged representatives, and to each and every of them, commanding them and each and every of them, and their and each of their respective attorneys, solicitors, agents, employes, di- rectors, officers, proxies and alleged representatives, that they, said Illinois Central Railroad Company, the stockholders of said Illinois Central Railroad Company, James T. Harahan, Alexander G. Hack- staff, Charles S. Deneen, John Jacob Astor, John W. Auchincloss, James T. Harahan, Robert Walton Goelet, Alexander G. Hackstaff, Edward H. Harri- man, Walther Luttgen, Charles A. Peabody and Cor- nelius Vanderbilt, directors of said Illinois Central Railroad Company, and any committee on proxies and commissioners of election of said Illinois Cen- tral Railroad ■ Company, and their and each of their respective attorneys, solicitors, agents, employes proxies, and alleged representatives, do desist and re- frain from permitting said Union Pacific Railroad Company, said Railroad Securities Company, and said The Mutual Life Insurance Company of New. York, to participate in or to vote, personally or by 35 proxy, at the meeting of the stockholders of said Illinois Central Railroad Company, to be held on said 16th day of October, A. D. 1907, or at any adjourned or postponed meetings thereof, or at any meeting of the stockholders of said Illinois Central Eailroad Company thereafter or at any time to be held, or to vote, directly or indirectly, or by proxy, or by or through any alleged represegitative or pretended owner of stock of said Illinois Central Railroad Com- pany, or by the proxy of any such alleged representa- tive or pretended owner, at said meeting of stock- holders on said 16th day of October, 1907, or at any subsequent meeting of the stockholders of said Illi- nois Central Railroad Company, any one or more of the shares of stock of said Illinois Central Railroad Company owned or held by said Union Pacific Railroad Company or by said Railroad Securities Company or by said The Mutual Life Insurance Company of New York, whether standing of record in the respective names of said Companies or in the name or names of any person or persons as alleged representatives or pretended owners there- of, in whose name or names said stock has been placed and is now held ; and that said Union Pacific Railroad Company, and its and each of its respective directors, officers, attorneys, solicitors, agents, employes, prox- ies, and alleged representatives or pretended owners, do absolutely desist and refrain from participating in or voting at, personally or by proxy, the meeting of the stockholders of said Illinois Central Railroad 36 Company, to be held on said 16th day of October, A. D. 1907, or at any adjourned or postponed meeting thereof, or at any meeting of the stockholders of the said Illinois Central Eailroad Company thereafter or at any time to be held, or from voting, directly or indi- rectly, by proxy or by or through any alleged repre- sentative or pretended owner or owners of stock of said Illinois Central Bailroad Company, or by the proxy or proxies of any such alleged representative or pretended owner, at said meeting of stockholders on said 16th day of October, A. D. 1907, or at any subse- quent meeting of the stockholders of said Illinois Cen- tral Railroad Company, any one or more of the 186,231 shares of stock of said Illinois Central Rail- road Company purchased by said Union Pacific Rail- road Company from said Kuhn, Loeb & Company, and from said Edward H. Harriman, Henry H. Rogers and James Stillman, and any other share or shares of stock of said Illinois Central Railroad Company owned or held by said Union Pacific Railroad Com- pany, without regard to the name or names in which said shares of stock or any one or more of them stand of record on the books of said Illinois Central Railroad Company ; and said Eailroad Securities Com- pany, and its and each of its respective directors, officers, attorneys, solicitors, agents, employes, prox- ies and alleged representatives or pretended owners, do absolutely desist and refrain from participating in or voting at, personally or by prosy, the meeting of the stockholders of said Illinois Central Railroad 37 Company to be held on said 16th day of October, A. D. 1907, or at any adjourned or postponed meeting thereof, or at any meeting of the stockholders of said Illinois Central Eailroad Company thereafter to be held, or at any time to be held, or from voting, directly or indirectly by proxy or by or through any alleged representative or pretended owner or owners of stock of said Illinois Central Railroad Company, or by the proxy or proxies of any such alleged representative or pretended owner at said meeting of stockholders on said 16th day of October, 1907, or at any subsequent meeting of the stockholders of said Illinois Central Eailroad Company, any one or more of the 95,000 shares of stock of said Illinois Central Railroad Com- pany held by said Railroad Securities Company, and any and all other share or shares of stock of said Illi- nois Central Railroad Company held by said Railroad Securities Company, without regard to the name or names in which such shares of stock or any one or more of them stand of record on the books of said Illinois Central Railroad Company ; and that said The Mutual Life Insurance Company of New York, and its and each of its respective directors, officers, attorneys, solicitors, agents, employes, proxies, and alleged rep- resentatives or pretended owners, do absolutely de- sist and refrain from participating in or voting at, personally or by proxy, the meeting of the stockholders of said Illinois Central Railroad Company, to be held on said 16th day of October, A. D. 1907, or at any ad- journed or postponed meeting thereof, or at any meet- 38 ing of the stockholders of said Illinois Central Bailroad Company thereafter or at any time to be held, or from voting, directly or indirectly, by proxy or by or through any alleged representative or pretended owner or owners of stock of said Illinois Central Eailroad Com- pany, or by the proxy or proxies of any such alleged representative or pretended owner, at said meeting of stockholders on said 16th day of October, A. D. 1907, or at any subsequent meeting of the stockholders of said Illinois Central Eailroad Company, any one or more of the 5,500 shares of stock of said Illinois Central Eailroad Company held by the said The Mutual Life Insurance Company of New York, and any other share or shares of stock of said Illi- nois Central Eailroad Company, owned or held by said The Mutual Life Insurance Company of New York, without regard to the name or names in which such shares of stock or any one or more of them stand of record on the books of said Illinois Central Eail- road Company; and that you, said Edward H. Harri- man, Alexander Gr. Hackstaff, G. W. Bovenizer, C. D. Haines, F. W. Kaletsch, Jr., E. Langenbach, E. H. Paul, Oscar Schwabe, S. Siedgman, H. Woog, S. Hay- man, Leon E. Stropp, James Herbert; Eudolph Kepp- ler, E. E. VoUmer and Theodore A. Hellwig, partners as Eudolph Keppler & Co.; A. H. DeHaven, W. B. De- Haven, S. J. Shaubacker, B. F. Townsend, Jr., J. F. J. Murphy and William D. Grange, partners as De- Haven & Townsend; Blair S. Williams and Eobert C. Nicholas, partners as Williams & Nicholas ; 39 {Amendment of December 26, 1907.) A. H. Com,hs, Homer A. Lattin and H. B. Combs, partners as A. H. Combs S Company; Norman Hen- derson and Louis E. Hatsfeld, surviwng partners of the firm of Henderson S Company; William L. Bull, Frederick Bull, Henry W. Bull, E. M. Stuart Wortley, Frank L. Shoonmaker. and Waldo S. Reed, partners as Edward Sweet & Company; George L. Degener, Rudolph Degener, and Charles H. Burke, partners as Degener & Burke; Ernest Grpes- beck, Albert N. Harp and Walter P. Gardner, partners as Groesbeck & Co.; Henry W. DeForest; Oliver Har- riman, Jr., J. W. Harriman, T. Borden Harriman, and J. H. McCullough, partners as Harriman & Co. ; W. S. MoCrea, F. G. Hartwell, F. E. May, E. A. Kelly, B. L. Mallory, D. W. Ross, John Seott, Murray Howe, G. S. J. Ward, Thomas J. Dixon, J. B. Lord, Albert W. Biggs, C. N. Burch, Charles G. Smith, L. W. Fargo, Frederick S. Winston, Ralph M. Shaw, R. S. Lovett, D. W. Cornish, William Mahl, Maxwell Evarts, Fred- erick V. S. Crosby, C. W. Weston, Jr., H. S. Bradt, Gordon M. Buck, J. B. Maxwell, George E. Downs, Charles Franklin, Herbert B. Taylor, L. H. Cornell, P. H. Bosse, and R. M. McCreary, and their and each of their respective attorneys, solicitors, agents, em- ployes, proxies and alleged representatives, do abso- lutely, desist and refrain from participating in or vot- ing at, personally or by proxy, the meeting of the stock- holders of said Illinois Central Railroad Company thereafter or at any time to be held, or from voting, 40 directly or indirectly, hy proxy or by or through any alleged representative or pretended owner of stock of said Illinois Central Bail road Company, or the proxy of any such alleged representative or pre- tended owner at said meeting of stockholders on said 16th day of October, A. D. 1907, or at any subsequent meeting of the stockholders of said Illinois Central Railroad Company, any share or shares of stock of said Illinois Central Railroad Company held by them respectively or standing of record in their respective names upon the books of said Illinois Central Rail- road Company, which was purchased by said Union Pacific Railroad Company from Kuhn, Loeb & Com- pany, Edward H. Harriman, James Stillman, and Henry H. Rogers, and particularly the shares of stock of said Illinois Central Railroad Company now stand- ing in their respective names or in the names of any one or more of them on the stock register of said Illi- nois Central Railroad Company, as herein particu- larly and specifically designated and set forth, to-wit, G. W. Bovenizer 17,400 shares; C. I). Haines 4,700 F. W. Kaletsch, Jr 17,000 E. Langenbach 13,000 E. H. Paul 9,200 Oscar Schwabe 15,000 S. Siegman 18,400 H. Woog 5,500 S. Hayman 11,500 Leon E. Stropp 9,200 James Herbert 4,000 41 Rudolph Keppler, E. R. Vollmer, and Theodore A. Hellwig, partners as Rudolph Keppler & Co 4,500 A. H. DeHaven, W. B. DeHaven, S. J. Shaubacker, B. F. Townsend, Jr., J. F. J. Murphy, and William D. Grrange, partners as DeHaven & Townsend 4,900 Blair S. Williams and Robert C. Nicholas, partners as Williams & Nicholas, 20,500 {AmendweMt of December 26, 1907.) A. H. Combs, Homer A. Lattin and H. B. Combs, partners as A. H. Combs & Company 2,000 Norman Henderson and Louis E. Hatzfeld. surviving partners of the firm- of Henderson & Com- pany 3,900 William L. Bull, Frederick Bull, Henry W. Bull, R. M. Stuart Wort- ley, Frank L. Sehoonmaker, and Waldo S. Reed, partners as Ed- ward Sweet & Co 10,000 George L. Degener, Rudolph Degener and Charles H. Burke, partners as Degener & Burke 4,000 Ernest Groesbeck, Albert N. Harp and Walter P. Gardner, partners as Groesbeck & Co 4,100 Henry W. DeForest 1,140 Oliver Harriman, Jr., J. W. Harri- man, T. Borden Harriman, and J. 42 H. McCullough, partners as Harri- man & Co., 11,411 W. S. McCrea 10 F. a. Hartwell 10 F. E. May 10 E. A. Keiley 10 B. L. Mallory 10 D. W. Ross 10 John Scott 10 Murray Howe W C. S. J. Ward 10 Alexander G. Hackstaff 10 Thomas J. Dixon 10 J. B. Lord 10 Albert W. Biggs 10 C. N. Burch '. 10 Charles G. Smith 10 L. W. Fargo 10 Frederick S. Winston 10 Ralph M. Shaw 10 and any share or shares of stock of said Illinois Cen- tral Railroad Company transferred to them or any one or more of them on September 16th, 1907, and Sep- tember 20th, 1907, from said Railroad Securities Com- pany, as more particularly and specifically designated and set forth herein, to-wi't, Edward H. Harriman 14,000 D. W. Cornish 100 R. S. Lovett 100 William Mahl 100 Maxwell Evarts 100 Frederick V. S. Crosby 100 43 C. W. Weston, Jr 50 H. S. Bradt 50 Gordon M. Buck 50 J. B. Maxwell 50 George E. Downs 50 Charles Franklin 50 Herbert B. Taylor 50 L. H. Cornell 50 P. H. Bosse 50- E. M. McCreary 50 or any one or more of said shares of stock; and that said writ of injunction may be by the decree of this Honorable Court made perpetual, and that it may be further decreed that neither said Union Pacific Bail- road Company, nor said Railroad Securities Company, nor said The Mutual Life Insurance Company of New York, have any right, power or authority to vote at any meeting of the stockholders of said Illinois Central Railroad Company any shares of stock of said com- pany which they or any one or more of them may own or hold, without regard to the name or names in which said shares of stock, or any one or more of them, stand of record on the books of said Illinois Central Railroad Company, and without regard to whether said com- panies or any one or more of them attempt to vote such stock, directly or indirectly, by or through any one or more of their or any of their interposed per- sons or holders or by or through the proxies of such interposed persons or holders. And your orators further pray that it may be ad- 44 judged and decreed by this Honorable Court that the shares of stock of said Illinois Central Eail- road Company standing of record in the name or names of any one or more of the persons or firms herein stated and herein charged to belong to said Union Pacific Eailroad Company or to said Railroad Securi- ties Conipany, are the stock of and belong to said Union Pacific Railroad Company, or to said Railroad Securities Company, respectively, and not the stock of the respective individuals or firms in whose names it stands of record on the books of said Illinois Cen- tral Railroad Company, as herein set forth. And your orators further pray that it may be ad- judged and decreed that all purchases of shares of stock of said Illinois Central Railroad Company by said Union Pacific Railroad Company, directly or in- directly, and all purchases of shares of stock of said Illinois Central Railroad Company by said Railroad Securities Company, directly or indirectly, be declared null and void and of no force and effect and beyond the corporate powers of said companies and of each of them in the State of Illinois, and that said companies and each of them be respectively condemned and or- dered to sell and dispose of said stock within a reason- able time, to be fixed by this Honorable Court. May it pi^ase youb honoes to grant unto your ora- tors the writ of summons in chancery, directed to the Sheriff of the said Connty of Cook, commanding him to summon the Illinois Central Railroad Company, James T. Harahan, Alexander G. Hackstaff, Hon. 45 Charles S. Deneen, John Jaeoh Astor, John W. Au- chincloss, Eobert Walton Goelet, Edward H. Harri- man, Walther Luttgen, Charles A. Peabody, Cornelius Vanderbilt, Union Pacific Railroad Company, The Mutual Life Insurance Company of New York, Rail- road Securities Company of New Jersey, G. W. Bovenizer, C. D. Haines, F. W. Kaletsch, Jr., E. Lan- genbach, E. H. Paul, Oscar Schwabe, S. Siegman, H. "Woog, S. Hayman, Leon E. Stropp, James Herbert, Rudolph Keppler, E. R. Vollmer, Theodore Hellwig, A. H. DeHaven, "W. B. DeHaven, S. J. Shaubacker, B. F. Townsend, Jr., J. F. J. Murphy, William D. Grange, Blair S. Williams, Robert C. Nicholas ; (Amendment of December 26, 1907.) A. H. Combs, Homer A. Lattin and H. B. Combs, partners, as A. H. Combs S. Company, Norman Hen- derson and Louis E. Hatzfeld, surviving partners of the firm of Henderson & Company; William L.' Bull, Frederick Bull, Henry W. Bull, R. M. Stuart Wortley, Frank N. Schoomaker, Waldo S. Reed, George L. Degener, Rudolph Degener, Charles H. Burke, Ernest Groesbeck, Albert N. Harp, Walter P. Gardner, Henry W. DeForest, Oliver Harriman, Jr., J. W. Harriman, T. Borden Harriman, J. H. Mc- Cullough, W. S. McCrea, F. H. Hartwell, F. E. May, E. A. Kelley, B. L. Mallory, D. W. Ross, John Scott, Murray Howe, C. S. J. Ward, Thomas J. Dixon, J. B. Lord, Albert W. Biggs, C. N. Burch, Charles G. Smith, L. W. Fargo, Frederick S. Winston, Ralph M. Shaw, 46 E. S. Lovett, D. W. Cornisli, William Mahl, Maxwell Evarts, Frederick V. S. Crosby, C. W. Weston, Jr., H. S. Bradt, Gordon M. Buck, J. B. Maxwell, George E. Downs, Charles Franklin, Herbert B. Taylor, L. H. Cornell, P. H. Bosse, and E. M. McCreary, who are hereby made parties defendant hereto, to be and ap- pear before this Honorable Court on the first day of next November Term, A. D. 1907, thereof, (Amendment of November 4, 1907.) "and answer this hill of complaint, hut not under oath, the ans'wers of said, defendants and each of them under oath heing herehy waived," then and there to abide by such orders and decrees as this Honorable Court may make and enter herein. And your orators further pray that there may be decreed to them, and that they may have, such other and further and general or special relief as the rights of your orators and the nature. of their case may re- quire or authorize, and as to this Honorable Court shall seem meet, and as may be agreeable to equity. And your orators will ever pray, etc. George F. Edmunds, By Henry W. liBMAN, Eis Solicitor. John A. Kasson, By Henry W. Leman, His Solicitor. Stuyvesant Fish, William H. Emrich. Henry W. Leman, Solicitor for Complainants Frank H. Culver and Edgar H. Farrar, Of Counsel, 47 State of Illinois, ] County of Cook. \ ' Stuyves-ant Fish, being first duly sworn, on oath de- poses and says that he is one of the complainants in the foregoing bill of complaint, and that he has read said bill of complaint, and knows the contents thereof, and that the same is true of his own knowledge, ex- cept as to those matters and things which are therein stated to be upon information and belief, and that as to those matters and things he believes it to be true. Sttjyyesant Fish. Subscribed and sworn to before me this 14th day of October, A. D. 1907. William F. Zibell, Notary Public, Cook County, Illinois. [Seal.] 48 {Memorandum.) On November 25th, 1907, the -bill was dismissed by the complainants as to The Mutual Life Insurance Company of New York. On December 26th, J.907, the bill of complaint as amended was dismissed by the complainants, as to L. W. Fargo, Frederick S. Winston, Ralph M. Shaw, Henry W. DeForest, W. S. McCrea, F. G. Hartwell (sued as F. H. Hartwell), F. E. May, E. A. Kelley, B. L. Mallory, D. W. Boss, John Scott, Murray Howe, E. J. E. Ward (sued as C. S. J. Ward), Thomas J. Dixon, J. B. Lord, Albert W. Biggs, C. N. Burch and Charles G. Smith On December 26th, 1907, the injunction issued in said cause was, on motion of the complainants, dissolved. As to the 100 shares of stock of the Illinois Central Railroad Company standing upon the books of said Illinois Central Railroad Company, in the name of Alexander G. Hackstaff, and As to all the shares of stock of Illinois Central Rail- road Company standing of record upon the books of the Illinois Central Railroad Company, in the name of Degener & Burke, in excess of thirty-nine hundred (3900) shares, and As to all the shares of stock of the Illinois Central Railroad Company standing of record upon the books of the Illinois Central Railroad Company, in the name of Harriman & Co. in excess of ninety-four hundred (9400) shares, and As to all shares of stock of the Illinois Central Rail- 49 road Company, standing of record upon the books of the IlHnois Central Eailroad Company in the name of S. Heyman, in excess of ninety-one hundred and thirty- one (9131) shares, and As to all shares of stock of the Illinois Central Bail- road Company standing of record upon the books of the Illinois Central Eailroad Company, in the name of S. Siegman, in excess of eighteen thousand and three hundred (18,300) shares. State of Illinois, | Cook County, j ^^■ In the Superior Court of Cook County, In Chancery. Geo. F. Edmunds et al., V. Illinois Central Railroad Company et al. ^Bill— 263420— 9150 Stuyvesant Fish^ being duly sworn, deposes and says that he is one of the complainants in the forego- ing bill of complaint, and that he is familiar with the facts therein set forth ; that the rig'hts of the said com- plainants will be unduly prejudiced if the injunction therein prayed is not issued immediately and without notice; that as special grounds for the issuing of said Writ of Injunction, without notice, this affiant says that the Union Pacific Eailroad Company is a corpo- ration of the State of Utah having its principal office in said state and is a non-resident of the State of Illinois, that the Railroad Securities Company is a corporation of the State of New Jersey, having its principal office in said state, and is a non-resident of the State of Illinois, that The Mutual Life Insurance Company of New York is a corporation of the State of New York, having its principal office in said state, and is a non-resident of said State of Illinois ; that Edward H. Hariiman and all the principal parties defendant to the foregoing bill of complaint, who are actively con- spiring^ and confederating together as set forth in said bill to the damage and irreparable injury of the com- plainants therein and the other stockholders of said Illinois Central Railroad Company, and practically all the parties defendant to said bill are non-residents of the State of Illinois and that their respective places of residence are set forth in said bill, and' that they are not at the present time in said State of Illinois, ac- cording to the best information and belief of this affi- ant, so that it is and will be impossible to give said parties defendant notice of the application for a Writ of Injunction ; that said meeting of stockholders of said Illinois Central Railroad Company will be held on the 16th day of October, 1907, at twelve o'clock noon, and that it is absolutely necessary that said "Writ of Injunction be issued and served, so far as may be possible, in sufficient time before said meeting to pre- vent the doing of the matters and things in said bill set forth and the consummation of the schemes therein charged; that it will be impossible to give notice and have a hearing of the application for a Writ of In- 51 junction before said meeting on October 16, 1907 ; that unless said Writ of Injunction be issued and served, so far as possible, immediately and without notice and before said October 16, 1907, said principal parties de- fendant to said bill will carry out their schemes, as therein set forth, and said shares of stock of said Illi- nois Central Railroad Company, as stated and set forth at length and in detail in said bill, will be illegally voted without right or authority in law and, if such illegal schemes and plans, as are set forth in said bill, be adopted at said meeting of stockholders great loss and damage will result to the complainants in said bill and they will suffer irreparable loss and injury, as is stated and set forth in detail in said bill, to which, for particulars, reference is hereby had. Stuyvesant Fish. Subscribed and sworn to before me this Fourteenth day of October, A. D. 1907. William F. Zibell, [Seal.] Notary Public, Cook County, Illinois. I hereby recommend that a Writ of Injunction issue in accordance with the prayer of the within bill of com- plaint, without notice, upon complainants filing bond in the sum of Ten Thousand Dollars ($10,000), with surety to be approved, according to law. Dated : Chicago, October 14, A. D. 1907. Frank P. Schmitt, Master in Chancery. Master's fees, $5.00. Paid by complainants. Let the Writ of Injunction issue according to tlie prayer of the within bill of complaint, upon the com- plainants giving good and sufficient bond in the penal sum of Ten Thousand Dollars ($10,000), with surety to be approved by this court. Enter : Chicago, October 14th, 1907. Fablin Q. Ball, Judge. State or Illinois, } Cook County. \ ^^■ In the Supebior Court of the County of Cook and State of Illinois. In Chancery. Geo. F. EdmiTnds, et al., V. Illinois Central Raii^road Company, et al.. State of New York, ] County of New York. \ ^^• Stuy^t:sant Fish, a citizen of the State of New York, residing in Putnam county, said state, being duly sworn, deposes and says : Tliat he is a director of the Illinois Central Eailroad Company, and has been such since March 16th, 1877; that from May 18, 1887, to November 6, 1906, he was president of said railroad company, previous to which time he had been vice-president, second vice-president and treasurer of said company, and that he is and has for many years been familiar with -the methods General Number 269,420, fBill. 53 adopted by the Illinois Central Eailroad Company of keeping its stock registers, stock ledgers and other books relating to the holdings of shares in said com- pany. That James DeW. Cutting is also a director of said company. That at a meeting of the Board of Directors of the Illinois Central Railroad Company, held in New York, September 11, 1907, Director Cutting offered the fol- lowing resolution: ' ' E-ESOLVED, That the secretary be directed to at once furnish to any director who shall apply to him for it, a list of the names of all stockholders, with the num- ber of shares held by each." Which, being seconded, it was then moved that said resolution be referred to the Committee on Law and Finance, for a report on next Wednesday, which motion prevailed. At the next meeting of said Board of Directors, held September 18, Director Fish offered the following reso- lution : ' ' Whereas, The Committee on Law and Finance has not reported in respect to the resolution referred to it September 11, 1907, which reads: 'Resolved, That the secretary be directed to at once furnish to any director who shall apply to him for it, a list of the names of all stockholders, with the num- ber of shares held by each.' ^ Therefore Resolved^ That said committee be dis- charged from such duty, and that the resolution as offered September 11, be now acted on. ' ' 54 Whereupon at the suggestion of Director Harriman, the chairman of the Committee on Law and Finance, a recess of five minutes was taken to allow that com- mittee to prepare a report. The committee reported that they had reached the conclusion to decline the resolution which i)irector Cutting had offered on Sep- tember 11, and that the officers be directed to exhibit the stock list to any director asking such privilege. This report from the Committee on Law and Finance was accepted and placed on file. That in company with said Cutting the deponent ex- amined the stock registers, stock ledgers, stock books and stock lists of the Illinois Central Railroad Com- pany at the office of said company in New York, on Wednesday, October 2, 1907; that he continued with said Cutting engaged on such work until ten o'clock on the night of that day ; and that on Thursday, Octo- ber 3, 1907, he and said Cutting resumed such exam- ination, and remained at work thereon until after six 'clock in the evening of that day. Deponent further says that the said stock registers, stock ledgers, stock books and stock lists of said rail- road company show : 1st. That no stock whatever stands, or has stood, at any time within five years at least, on said books in the name of the Union Pacific Railroad Company. 2nd. That there are no large blocks or holdings of stock shown on said books which could represent the one hundred and eighty-six thousand two hundred and thirty-one (186,231) shares of stock of the Illinois Cen- 55 tral Railroad Company owned by the Union Pacific Eailroad Company and bought by it in 1906 from Kuhn, Loeb & Co., and E. H. Harriman, H. H. Eogers and James Stillman, except the blocks of said stock standing in the following names, which are notoriously those of either the clerks or tlie brokers of 'Kuhn, Loeb & Co. or E. H. Harriman, to-wit, G. W. Bovenizer 17,400 shares C.D.Haines 4,700 " F. W. Kaletsch, Jr 17,000 " E. Langenbach 13,600 " E. H. Paul 9,200 " Oscar Schwabe 15,000 " S. Siegman 18,400 " H. Woog 5,500 S. Hayman 11,500 Leon E. Strppp 9,200 James Herbert 4,000 Rudolph Keppler & Co 4,500 DeHaven & Townsend 4,900 Williams & Nicholas 20,500 Edward Sweet & Co 10,000 Degener & Burke 4,000 " Groesbeek&Co 4,100 " H. W. DeForest 1,140 " Harriman & Co 12,005 " 3rd. That on September 17th there was transferred on said books from out of the name of S. Hayman, one hundred and eighty (180) shares of stock into the following eighteen names in the amounts set opposite them respectively: i i i i i i i i 56 W. S. McCrea 10 shares F. a. Hartwell 10 F. E. May 10 E. A. KelJey 10 B. L. Malloiy 10 D. W. Ross 10 Jolui Scott 10 Murray Howe 10 C. S. J. Ward 10 A. G. Hackstaff 10 Thos. J. Dixon 10 J. B. Lord 10 Albert W. Biggs 10 C. N. Burch 10 Charles G. Smith 10 L. W. Fargo 10 F. S. Winston 10 Ealph M. Shaw 10 4th. That said stock books show eighty thousand (80,000) shares of the Illinois Central Railroad Com- pany's stock stand registered in the name of the Rail- road Securities Company. 5th. That on September 18th, 1907, fourteen thou- sand (14,000) shares of stock standing in the name of the Railroad Securities Company were transferred to E. H. Harriman, and that on the 20th of September one thousand (1,000) shares of stock standing in the name of said Railroad Securities Company were trans- ferred to the following persons in the amounts set op- posite their names respectively: 57 R. S. Lovett 100 shares D. W. Cornisli 100 Wm. MaM 100 Maxwell Evarts 100 Fred V. S. Crosby '. 100 C. W. Weston, Jr 50 H. S. Brandt 50 Gordon M. Buck " 50 J. B. Maxwell '. 50 Geo. E. Downs 50 Charles Franklin 50 Herbert B. Taylor 50 L. H. Cornell 50 P. H. Bosse 50 E. M. McCreary 50 And further more deponent sayeth not. Stxjyvesant Fish. Subscribed and sworn to before me this 8th day of October, 1907. And I do here further certify that I am under the laws of the State of New York author- ized to take and administer oaths. Thomas B. Clifford, [Seal.] ^ Notary Public, City and County of New York. Subscribed and sworn to before me this Fourteenth day of October, A. D. 1907. William F. Zibell, [Seal.] Notary Public, Cook County, Illinois. 58 State op Illinois, Cook County. ^ ^^• In the Sttpeeior Couet of the County op Cook and State op Illinois. In Chancery. Bill. General Number 269,420. Geo. p. Edmunds et al. V. Illinois Central Railroad^ Company et al. State of New York, ^ County of New York. \ ^^■ James DeW. Cutting, a citizen and resident of the City of New York, in the State of New York, being duly sworn, deposes and says that he is a director of the Illinois Central Railroad Company; that he was present at the meetings of the Board of Directors of said company held on September 11 and September 18, 1907, respectively; that he has read the affidavit of Stuyvesant Fish in this cause; that he is familiar with the matters in said affidavit related ; that he made the examination of stock registers, stock ledgers, stock list and other stock books of the Illinois Central Rail- road Company, on Wednesday and Thursday, October 2 and 3, 1907, at the office of said company in the City of New York, in company with said Stuyvesant Fish, and that the statements contained in the affidavit of said Stuyvesant Fish are true and properly recited in said affidavit. James DeW. Cutting. 59 Subscribed and sworn to before me this lOtb day of October, 1907. And I do here further certify that I am under the laws of the State of New York authorized to take and administer oaths. P. V. Manning, [Seal.] Notary Public, City and County of New York. 60 Exhibit "A" to Bill. BEFORE THE INTERSTATE COMMERCE COMMISSION. No. 943. IN THE MATTER OF CONSOLIDATIONS AND COMBySTATIONS OF CAEEIERS, RELATIONS BETWEEN SUCH CARRIERS, AND COMMUNITY OF INTERESTS THEREIN, THEIR RATES, FA- CILITIES, AND PRACTICES. Report of the Commission. Lane, Commissioner: On the 15th of November, 1906, the Commission on its own motion instituted the above-entitled proceed- ing by making the following order : Whereas the act to regulate commerce provides that the Commission "shall have authority to inquire into the management of the business of all, common carriers subject to the provisions of this act, and shall keep itself informed as to the manner and method in which the same is conducted," and also requires the Commission "to execute and enforce the provisions" of said act; And whereas it appears to the Commission that consolidations and combinations of carriers sub- ject to the act and the relations now and here- 61 tofore existing between such carriers, including community of interests therein, and the prac- tices and methods of such carriers affecting the movement of interstate-commerce, the rates received and facilities furnished therefor should be made the subject of investigation by the Commission, to the end that it may be fully informed in respect thereof, and to the further end that it may be ascertained whether such consolidations, combinations, relations, commu- nity of interests, practices, or methods result in vio- lations of said act or tend to defeat its purposes : It is ordered that a proceeding of investigation and inquiry into and concerning the matters above stated be, and the same is hereby, instituted, and that the same be set for hearing at the United States court rooms in the city of New York, N. Y., on the 28th day of December, 1906, at 11 o'clock a. m., the further hearing to be continued at such times and places as may be required. The investigation so far conducted under this order has related mainly to certain transactions of the Union Pacific Eailroad Company, including the ac- quisition of control of the Southern Pacific Company, the purchase of large amounts of stock of various railroad companies, and other matters of kindred im- port. Testimony was taken at New York on the 4:th and 5th of January; at Chicago on the 8th, 9th, and 10th of January; at Seattle on the 21st of January; at Portland on the 24th and 25th of January; at San Francisco on the 29th, 30th, and 31st of January; at Los Angeles on the 7th and 8th of February; and again at New York on the 25th, 26th, 27th, and 28th 62 of February. On the 4tli and 5th of April counsel were heard in oral argument and briefs submitted. The facts disclosed by the inquiry have been carefully considered and are made the subject of this report. The Habbiman Policy. Within three years after the reorganization of the Union Pacific Eailroad Company in 1897 Mr. Ed- ward H. Harriman became the dominating spirit in that corporation. As chairman of the executive com- mittee he exercises powers that are well-nigh absolute. The directors have delegated their power "to; manage and direct all the business and affairs of the com- pany" to an executive committee of five members, who shall act "in such manner as such committee shall deem best for the company's interest in all cases in which specific directions shall not have been given by the board," and in turn the chairman of the execu- tive committee is authorized to represent that body when it is not in session. Accordingly we find that in 1902 Mr. Harriman was "authorized to borrow such sums of money as may be required for the uses of this company, and to execute in the name and on behalf of this company a note or notes for the amounts so borrowed." The investigation showed that in prac- tically all the great transactions of this company Mr. Harriman, as chairman of the executive committee, acted upon his own initiative, and his acts were sub- sequently ratified and approved by the executive com- mittee. It may fairly be said, therefore, that the poli- 63 cies and purposes of the Union Pacific have been those of Mr. Harriman. When the Union Pacific was reorganized it owned 1,822.59 miles of railroad, extending from Comicil Bluffs, Iowa, to Ogden, Utah, from Julesburg to Den- ver, from Denver to Cheyenne, from Kansas City to Denver (formerly known as the Kansas Pacific), and various branches extending into the territory on each side of these main lines. Previous to the reorganiza- tion the old company had control, through stock own- ership, of the Oregon Short Line and Utah Northern Eailway and the Oregon Railroad & Navigation Com- pany. These companies were also reorganized, and shortly after the foreclosure sale the Union Pacific Railroad Company acquired by stock ownership the control of these companies, and has since acquired substantially all their stock. The Oregon Short Line owns the lines of railway from Granger, Wyo., on the Union Pacific, to Huntington, Oreg., and from Salt Lake City to Butte, Mont. The Oregon Railroad & Navigation Company owns the lines from Huntington, Oreg., to Portland, Oreg., together with a number of important branch lines in the States of Washington, Idaho, and Oregon. Prior to the acquisition of the control of the Southern Pacific by the Union Pacific, the Oregon Railroad & Navigation Company also owned and operated a line of steamers from Portland to San Francisco and a line of steamers from Port- land to Japanese and Chinese ports. The Union Pa- cific also owned one-half the stock of the Occidental 64 & Oriental Steamship Company, which owned and operated a line of steamers plying between San Fran- cisco and oriental ports. EXPANSION OP UNION PACIFIC CONTROL. With these properties as a nucleus, and with the credit based on these assets, the Union Pacific has in the past six years so grown in power and influence that at this time it controls every line of railroad reaching the Pacific coast between Portland on the north and the Mexican border on the south — a dis- tance as great as that from Maine to Florida — ex- cepting alone the Santa Fe line, in which it has a large stock interest; and of his ability to "take" this road at any time the law will permit Mr. Harriman ex- presses no doubt. Among the lines thus brought under the same control, in addition to the Union Pacific, Oregon Railroad & Navigation Company, and Oregon Short Line, are these: The San Pedro line, running from Salt Lake City, through IjOs Angeles, to San Pedro Harbor, on the Pacific coast, projected and begun by Senator Clark as an independent line, which Mr. Harriman stopped and absorbed. All the lines of the Southern Pacific Company (a holding corporation), including — The Southern Pacific "Sunset Route," running by two routes from San Francisco to Los An- geles, and thence through Arizona, New Mexico, 65 Texas, and Louisiana to New Orleans, with many extensive brandies ; The Central Pacific "Ogden Route," running from Ogden to San Francisco and from Eoseville (near Sacramento) to the Oregon State line, with several branches ; The Oregon & California Railroad, running from Portland to the California State line, which, with the Central Pacific's "Shasta Route," con- nects Portland with San Francisco. In addition, the Union Pacific controls every regu- lar line of trans-Pacific steamships operated out of the Pacific coast ports south of Puget Sound; also the Pacific mail line, plying between San Francisco and Panama; and the Morgan Line of freight and passen- ger carriers, operated between New York City, Ha- bana, New Orleans, and Galveston. Mr. Harriman may journey by steamship from New York to New Orleans, thence by rail to San Fran- cisco, across the Pacific Ocean to China, and, return- ing by another route to the United States, may go to Ogden by any one of three rail lines, and thence to Kansas City or Omaha, without leaving the deck or platform of a carrier which he controls, and without duplicating any part of his journey. He has further what appears to be a dominating con- trol in the Illinois Central Railroad, running directly north from the Gulf of Mexico to the Great Lakes, paralleling the Mississippi River; and 2,000 miles west of the Illinois Central he controls the only line 66 of railroad paralleling tHe Pacific Coast and running from the Columbia Eiver to the Mexican border. Within a year his sphere of influence has extended eastward; the Union Pacific and Oregon Short Line have acquired 18.62 per cent, of the stock of the Balti- more & Ohio, at a cost of $45,466,960, and have in- vested $19,634,324.93 in New York Central & Hudson River stock. That it is only the law which prevents the concen- tration i]:ito Mr. Harriman's hands of every railroad line lying between Canada and Mexico is the frank ad- mission of Mr. Harriman himself made at the hearing. Questioned by the Conunission as to where his policy of acquisition was to stop, Mr. Harriman said : A. I would go on with it. If I thought we could realize something more than we have got from these investments T would go on and buy some more things. ** ****** Q. Supposing that you got the Santa Fel A. You would not let us get it. Q. How could we help it? A. How could you help it? I think you would bring out your power to enforce the conditions of the Sher- man anti-trust act pretty quick. If you will let us, I will go and take the Santa Fe to-morrow. Q. You would take it to-morrow? A. Why, certainly I would; I would not have any hesitation; it is a pretty good property. Q. Then it is only the restriction of the law that keeps you from taking it? A. I would go on as long as I live. Q. Then after you had gotten through with the 67 Santa Fe and had taken it, you would also take the Northern Pacific and Great Northern, if you could get them? A. If you would let me. Q. And your power, which you have, would gradu- ally increase as you took one road after another, so that you might spread not only over the Pacific coast, but spread out over the Atlantic coast? A. Yes. To gather under one head all existing transconti- nental lines, or as many as possible, and to exclude the incoming of all competitors, became manifestly the Harriman policy, which was inaugurated in 1901 by the issuance of $100,000,000 of convertible bonds by the Union Pacific. With the proceeds of these bonds the Union Pacific purchased control of the South- ern Pacific Company, and a majority of the outstand- ing stock of the Northern Pacific Railway Company, which latter incidentally carried with it control of one- half of the stock of the Chicago, Burlington & Quincy Railway Company, the stock of which had been pur- chased jointly by the Northern Pacific and G-reat Northern Companies and their collateral trust bonds issued therefor. Possession of these lines would have given to the Union Pacific absolute mastery over every avenue leading to the Pacific Coast within the United States save that afforded by the G-reat Northern Rail- road on the northern border of the country, and that offered by the Santa Fe upon the southern. This plan, if executed, would have subjected to a common will •68 and policy nearly one-half of the territory of the United States — a comparatively undeveloped, rapidly growing, and extremely rich territory, into which must necessarily extend the population and business of the eastern States. It has been, however, no part of the Harriman pol- icy to permit the properties which were brought under the Union Pacific control to degenerate and decline; as railroads they are better properties to-day, with lowers grades, straighter tracks, and more ample equip- ment than they were when they came under that con- trol. Large sums have been generously expended in the carrying on of engineering works and betterments which make for the improvement of the service and the permanent value of the property. The control of the Northern Pacific and the Burling- ton by the Union Pacific was prevented eventually by the decision of the Supreme Court of the United States in the case of Harriman v. Northern Securities Com- pany, in which that court held that it would be in vio- lation of the Sherman Act for the Union Pacific to control these railways, as they were competing lines. The Southern Pacific remains within the control of the Union Pacific. "' CONTBOL OF THE SoXJTHBRN PACIFIC. In all of its acquisition of stock control in other rail- roads the Union Pacific has either purchased the stocks directly itself or through the Oregon Short Line Eail- road Company, which it owns and controls, and which 69 for the purposes of tliis report will be considered as the Union Pacific. In the year 1901 the Union Pacific acquired 750,000 shares out of a total of 1,978,492 shares of Southern Pacific Company stock, and subse- quently acquired 150,000 additional shares, making a total of 900,000 shares, or 45.49 per cent, of the total stock issue of the Southern Pacific Company. There- after, when the preferred stock of the Southern Pa- cific Company was issued, the Union Pacific subscribed for its proportion, to-wit, 180,000 shares, out of a total of 395,688 shares; so that at the present time the Union Pacific owns 1,080,000 shares out of a total of 2,374,180 shares. The Southern Pacific Company is a holding corpor- ation. It was organized under a special charter of the State of Kentucky in 1884, and was authorized to ac- quire by purchase or otherwise the stocks, bonds and securities of railway and steamship companies. Shortly after its organization it acquired the stocks of and controlled, and still does own the stocks of and con- trol, a system of railroad extending from Ogden, Utah — where it connects with the Union Pacific — to San Francisco, Cial. ; from San Francisco to Portland, Oreg. ; and from San Francisco, through California, Arizona, New Mexico, Texas, and Louisiana, to New Orleans ; and has since acquired a line of railroad into Mexico. It also owns and controls a line of steamships from Gralveston, Tex., and from New Orleans, La., to New York and Habana. It is unnecessary to detail each separate railway corporation owning the sections 70 of the various lines in these States; it is sufl&cient to say that through stock ownership it controls the en- tire Southern Pacific system, commonly known as the "SiTuset Eoute." Of some of these lines the Southern Pacific Company has a lease and also owns the stock; of other lines, notably the Texas lines, it is simply a stockholding company, and controls them in that way. Among the lines so owned and controlled is the Cen- tral Pacific Railroad Company, organized under the laws of Utah on July 29, 1899. This company was originally the Central Pacific Railway Company, or- ganized under the laws of California, which, with the Western Pacific Company (which was also organized under the laws of California and subsequently con- solidated with it), constructed the line from San Fran- cisco to Ogden, where it connected with the Union Pa- cific. This is the line originally known as the Central Pacific, which was to be operated with the Union Pa- cific as hereinafter stated. It subsequently acquired the line from Roseville (near Sacramento), Cal., to the Oregon State line, which was constructed by the Cali- fornia & Oregon Railroad Company, organized under the laws of California. The California & Oregon Rail- road Company, of Oregon, constructed the line from Portland to the California State line, which company still owns that line. The Central Pacific company, therefore, owns the line extending from Ogden, Utah, to San Francisco, Cal., and the line from Roseville, Cal., to the Oregon State line. It has a capital stock of $67,275,500, par value, of common stock, and $12,- 71 800,000 of preferred srtoek all of which is owned by the Southern Pacific Company; and the Southern Pacific Company also has a lease of its line. It was only the , line from Ogden to San Francisco, however, which was required by the act of Congress, hereinafter re- ferred to, to be operated in connection with the Union Pacific. Immediately, however, upon the purchase of the Southern Pacific Company's stock the Union Pacific began the unification of the two organizations and the exercise of a control over the Southern Pacific which has effected a substantial elimination of competition between these two lines. The Union Pacific and Oregon Short Line have at each annual meeting of the stockholders of the South- ern Pacific Company since 1902 voted a majority of the stock represented at such meetings and have elected the directors and other officers. For several years last past the Union Pacific and Southern Pacific have had a majority of common directors, the same president, vice-president, director of traffic, director of main- tenance and operation, secretary, treasurer, comp- troller, auditor, legal department and other chief offi- cials. "WHiereas formerly the two companies had sep- arate commercial agents in the principal cities through- out the United States, soliciting traffic over their re- spective lines, they now have common agents and so- licitors who represent the unified Union Pacific and Southern Pacific system. While the Union Pacific, through the Oregon Short Line, does not own a ma- 72 jority of the stock of the Southern Pacific, yet it ap- pears by the testimony that its control over it is, for all practical purposes, as absolute as though it owned every share; and it was admitted by Mr. Harriman that the Union Pacific controls the Southern Pacific. ELIMINATION OF COMPETITION. Before the acquisition of its stock by the Union Pa- cific, the Southern Pacific Company, with its lines of rail and steamships, was engaged in competition with the Union Pacific for traffic moving between the Pacific seaboard and between the Atlantic seaboard and ori- ental ports. Through their several connections by rail these lines were also engaged in competition for traffic from practically all points east of the Missouri River between the Great Lakes and the Grulf of Mexico. From Atlantic seaboard territory east of Buffalo and Pitts- burg rates have generally been the same upon business destined to the Pacific coast, whether moving by the all-rail route, including the Union and Central Pacific, or moving by rail to an Atlantic port, thence by water to New Orleans and Galveston, and thence by Southern Pacific rails to Los Angeles, San Francisco, or Port- land. Eates from this same Atlantic seaboard territory on traffic moving by the Southern Pacific steamships and its rail connections to Colorado common points have likewise been the same as on traffic carried by rail over the Union Pacific lines to such points, and of such traffic there is a great and increasing volume. It is doubtless true the competition which previously ex- 73 isted was not as complete as if the Union Pacific liad a line of its own into San Francisco, instead of turning traffic over to the Central Pacific at Ogden. For all this traffic there exists at present no actual competi- tion between the Union Pacific and the Southern Pa- cific lines. Pinor to the enactment of the interstate-commerce law the Union Pacific and Southern Pacific belonged to what was known as the Transcontinental Pool, in which each was regarded as a competitor of the other and was accordingly awarded an allotted percentage of transcontinental business; and there is on file with this Conunission a contract made in March, 1893, known as the Agreement of the Trans-continental Freight-Eate Committee, to which contract both the Union Pacific and the Southern Pacific were parties, and under which all of the traffic west of the Mis- souri River and passing through the gateways of St. Paul, Minneapolis, Sioux City, Omaha, Kansas City, and Sabine Pass, to and from California and Oregon, was treated as competitive trans-continental business. The Union Pacific had access over the Oregon Short Line and Oregon Railroad & Navigation Company's line to Portland, and thence it could enter into compe- tition with the Southern Pacific steamsliip lines for Alaskan, Oriental, and South Sea business. The Union Pacific also had an interest in the Occidental & Orien- tal steamship line operated out of San Francisco to Oriental ports. It also appears that the Oregon Rail- road & Navigation Company has always had a line of 74 steamships plying between Portland and San Francis- co, which has at times done considerable business of cer- tain classes, and has been and still could be made a factor in competition. In 1900 the Southern Pacific Company purchased a majority of the stock of the Pacific Mail Steamship Company, which has for many years been the largest carrier of Oriental traffic to this country, and which has operated a line of steamships in connection with the Panama Railroad, by which Panama route traffic in large quantities has moved from Atlantic ports to Pa- cific coast points in competition with the all-rail car- riers. By virtue of the consolidation of the Union Pacific and Southern Pacific steamship companies all competi- tion between these steamship lines has been destroyed ; and there is some evidence on the record tending to show the impossibility of maintaining an independent steamship line running out of any of these ports with- out the consent of and arrangement with a connecting rail carrier. The Santa Fe Company formerly had a line of steam- ships to the Orient connecting with its road at San Di- ego, Cal. Under an arrangement with the Pacific Mail Steamship Company for a division of the oriental bus- iness brought to this country by that company, and the other steamship lines for which the Pacific Mail acts as agent (including, singularly enough, a Japanese line known as the Nippon Yusen Kaisha), this independent Santa Fe line was abandoned in 1901. The percentage 75 of this Oriental trafSe allotted to the Santa Fe and the Southern Pacific, respectively, has varied from time to time; bnt the understanding is that the amount to be delivered to the Santa Fe shall approximate 25 per cent of the total. This San Diego steamship line was not a financial success ; and it is no doubt the truth that the Santa Fe officials were pleased to be relieved of the burden of its maintenance in return for a not incon- siderable proportion of the freight brought to San Francisco by the longer-established lines. CONSIDERATIONS OF NATIONAL, POLICY. It is a matter of large significance that our trade re- lations with the newly acquired territory of Hawaii and our Philippine dependencies, to say nothing whatever of the newly awakened lands on the other side of the Pacific Ocean, must depend to no slight degree upon the competitive relations between rail carriers reach- ing our Pacific coast ports. There is a further consideration of national policy arising out of the history of the Union Pacific, the Central Pacific, and the Southern Pacific roads whidh distinguishes a combination of such roads. The Union Pacific and the Central Pacific were born out of nation- al sentiment and need. The nation felt the necessity for rail connection to its isolated Pacific coast terri- tory, and for this purpose, and to an unprecedented degree, pledged its own credit and donated its own lands to create a national highway between the Mis- souri River and the Bay of San Francisco. In every 76 statute passed by Congress affecting these two roads there is to be found proof of the existence of such a policy. They were to be built toward each other — one from the east and the other from the west— and were to form one continuous line, which was to remain for all time available to the business and governmental necessities of our people. Under the act of June 20, 1874, "any officer or agent of the companies" (Cen- tral Pacific, Western Pacific, Union Pacific, Kansas City & Denver Pacific) "authorized to construct the aforesaid roads, or of any company engaged in oper- ating either of said roads, who shall refuse to operate and use the road or telegraph under his control, or which he is engaged in operating, for all purposes of communication, travel, and transportation, so far as the public and the Government are concerned, as one continuous line, or shall refuse in such operation and use to afford and secure to each of said roads equal ad- vantages and facilities as to rates, time, and transpor- tation, without any discrimination of any kind in favor of, or adverse to, the road of business of any or either of said companies, ' ' is deemed guilty of a misdemean- or and punishable by fine not exceeding $1,000 and by imprisonment of not less than six months. The fact that the Union Pacific and Central Pacific companies were thereafter separately reorganized under the laws of Utah and acquired these lines does not relieve them from the public obligations imposed by the acts of Con- gress. {Union Pacific Railroad Company v. Mason City & Fort Dodge Railroad Company, 199 U. S., 169.) 77 The Union Pacific was therefore forever guaranteed, "without purchase, a connection with the Central Pacific upon terms as favorable as might be given to any other connection. In the construction of these roads the people had in view the protection of the frontier in time of war, the settlement of a great wilderness west of the Missouri River, and the development of its resources ; and to this end it was determined to procure the construction of a transcontinental line and to maintain it as a free, open, and continuous line of communication connect- ing with all railroads reaching Council Bluffs on the east, so that the public should have the benefit of a con- tinuous line of transportation from the east to the Pa- cific coast unhampered by reason of the separate own- ership and control of these lines of transportation. It is a fact that most of the lines of railway reaching Council Bluffs and Omaha were constructed with the view of connecting at these points with the Union Pa- cific railroad as the principal transcontinental line to and from the Pacific coast; and the Grovernment has, perhaps, a peculiar obligation to maintain the free- dom of this line. In no other portion of the country is the Federal Government expending such large sums for pur- poses of development as in this great western region tributary to the Union Pacific and the Southern Pacific, and in no other part of the United States is the com- merce of the country dependent upon so few railways covering so vast a territory and controlled by so few 78 men; and in no part of the United States could such control have such far-reaching effect. The body of transcontinental and foreign commerce through Pacific ports has grown to enormous proportions, and its en- couragement and development are of vital interest to the American people. It is claimed by the Union Pacific that the principal reason for acquiring the Southern Pacific was to ob- tain the Central Pacific connection from Ogden to San Francisco. It is undoubtedly true that this is a desir- able connection for that company ; but, as we have seen, whether purchased or not, the Central Pacific is re- quired to form a through line of transportation with the Union Pacific and not to discriminate against it in the receipt and transportation of freight and through trafiic. The public is entitled to all the advantages of this line as a competitive line of transportation with other transcontinental railways. The various lines which now compose the Southern Pacific from New Orleans to California were also built under patronage of the Federal Government by the donation of many millions of acres of Grovemment land, and formed an independent and separate route. While Congress did not prohibit in express terms the union of these great Federal railroad systems, it is hardly to be believed that such prohibition would not have been imposed had it been thought that in the course of time they would have been brought under a single con- trol. 79 Control, of San Pedro, Los Angeles & Salt Lake Railroad Company. In or about the year 1902, William A. Clark and his associates commenced the construction of a line of rail- way from San Pedro and Los Angeles, Cal., to Salt Lake City, Utah. At that time the Oregon Short Line Railroad Company owned about 512 miles of railroad situated south and southwest of Salt Lake. About 324 miles of this was main line, running from Salt Lake to Caliente, Nev. ; the rest was branches. Many years before, the predecessor of said Oregon Short Line, having in contemplation an extension of its line of road to the southwest, had acquired rights of way in the State of Nevada, upon which a small amount of grad- ing had been done ; but the construction of the line had been abandoned, the gTading had gone to decay, and the right of way so obtained had been for years sold for taxes. At the time Clark and his associates commenced the construction of their road there was no competition for traffic in and out of southern California as against the Southern Pacific, except such competition as was main- tained by the Santa Fe. The San Pedro and Salt Lake road was projected as an independent competitive 'line with the expectation that it would exchange business at Salt Lake City with the Union Pacific system and with the Denver & Rio Grrande-Missouri Pacific system, thus making in effect two new overland routes from the Mississippi River to Los Angeles. 80 Mr. Clark and his associates began by acquiring tax titles and sueli other titles as could be obtained to the old grade of the Oregon Short Line and other aban- doned rights of way and by relocating right of way for themselves. These abandoned rights of way were part- ly situated in a mountain canyon in the State of Neva- da, known as the Meadow Valley Wash. This can- yon is about 100 miles in length. Surveying parties were also put at work locating a line from Salt Lake toward the west ; and other surveying parties were put at work locating a line through the Cajon Pass, in California, and thence to the northeast in the State of Nevada, and that portion of the line between Los An- geles, Cal., and Riverside, Cal., was constructed. At this stage the Oregon Short Line, claiming to be the successor of the former owners of the right of way and grade through the Meadow Valley Wash, instituted legal proceedings to assert this ownership as against the Clark line. It is a fair inference that this was done for the purpose of preventing the construction by Clark and his associates of a line competitive with the South- ern Pacific system. The Short Line also began the construction of a line leading toward the Meadow Val- ley Wash from its line in southern Utah, and threat- ened, in case Clark and his associates were successful in constructing a line of railway from Salt Lake to San Pedro, to parallel said road throughout. In this contest between the Short Line and the Clark road the canyon known as the Meadow Valley Wash appears to have been a strategic point of vital impor- 81 tance. It was possible, but not practicable, to construct two lines of railway through this canyon. After some months of the above and additional litigation, Mr. Clark and his associates abandoned their purpose of constructing and maintaining an independent competi- tive line. A settlement and agreement was made be- tween William A. Clark, representing the San Pedro Company, and Edward H. Harriman, representing the Oregon Short Line and Union Pacific. A preliminary contract was entered into July 9, 1902, which resulted in a permanent contract dated June 7, 1903. This final contract was between William A. Clark, Edward H. Harriman, and the Farmers' Loan & Trust Company. The tru.st companj^ was to hold the stock of the San Pedro Company and act as trustee. The substance of this agreement was that the Oregon Short Line con- veyed its 512 miles of railway south of Salt Lake to the San Pedro Company. The San Pedro Company was capitalized at $25,000,000, one-half of the stock thereof belonging to the Oregon Short Line Company and the other half to Clark and his associates. The stock was deposited with the Farmers' Loan & Trust Company as trustee. Shares were to be issued to pro- posed directors in order to qualify them, and trus- tees' certificates for the remaining shares were to be issued to William A. Clark, trustee, and Edward H. Harriman, trustee, by the trust company. In substance, the trust agreement provided that Mr. Harriman and Mr. Clark were to agree upon a board of directors. If they should fail to agree; each was to nominate one- 82 half of the board and the trustee was to issue a proxy to some person or attorney to vote the shares for the persons so nominated. This made a joint control of the San Pedro Company. A further agreement was made between the Oregon Short Line, the Union Pacific, and the San Pedro com- panies, by which, among other things, it was agreed that the San Pedro and Short Line companies should not invade each other's territory northward and south- ward, respectively, from Salt Lake City, by building or aiding in the building of any main or branch lines of road other than those enumerated in the agreement. It was also provided that in the interchange of traf- fic as against competitors preference should be given each to the other by the contracting parties ; business moving between points on the San Pedro line in Utah and points on the Short Line and Union Pacific aind their connections was to be forwarded exclusively over the Short Line and Union Pacific. The San Pedro Company covenanted also to contract with the South- ern Pacific Company to in the first instance adopt as its own rates all lawful rates used by the Southern Pacific for handling local traffic which was or might be subject to competition between the Southern Pacific and the San Pedro Company, and also to contract that therea'f ter neither party should change such rates with- out the consent of the other party, unless it was made necessary in order to meet the rates of another compet- iftg line of railroad. To carry out this agreement a contract was made 83 between the Southern Pacific Company and the San Pedro Company, articles II and III of whitih read as follows : Article II. In partial consideration of the said covenants and agreements of the said Southern Company, contained in Article I hereof, said San Pedro Company hereby cove- nants and agrees with said Southern Company that it will, upon the execution of this agreement, adopt, print, publish, and put in force at all points upon its leased, owned, or operated railroad, for the handling of local business thereon, the lawful rates, tariffs, classifica- tions, and charges used by said Southern Company for the handling of any local business which may be the subject of competition between them. Abticle III. Each party hereto mutually covenants and agrees to and with the other that after the adoption and putting in force of rates as provided by Article II hereof, neith- er of them shall or will change any such rates without the consent of the other party hereto unless such change may be made necessary in order to meet the rates, charges, classifications, or taritfs of any other company or competing line of railroad or to conform to the final decree or judgment of some court of competent juris- diction, or some lawful and valid requirement of State or national law. It is claimed by the Southern Pacific Company that these articles relate only to traffic local to the State of California and the contract was not, therefore, in viola- tion of the laws of the United States ; but in our opin- ion this contract can not be so construed. 84 Since the hearing in this matter this traffic contract has been abrogated and canceled by the Southern Pa- cific Company and the San Pedro, Los Angeles & Salt Lake Eailroad Company, and notice thereof given to the Commission. The ground of such cancellation, as stated by the counsel of the company, is that the leg- islature of California at its last session enacted a stat- ute prohibiting contracts in restraint of competition, and that the validity of said contract would be open to question upon the taking effect of said act. Interest of the Union Pacific in Other Eoads. The Union Pacific Railroad Company has not con- fined its corporate energies and powers to the acquisi- tion and management of lines of transportation, but has issued a great volume of stock and securities with which it has purchased stocks of other railways. It has been known for a number of years that the Union Pacific, and under its direction the Oregon Short Line, had acquired stock in the Northern Pacific and in the Southern Pacific; but the amount of stocks purchased in other railways, and the extent to which the Union Pacific had become a great investment company, was first developed upon this hearing. It appears by the plan of reorganization that the Union Pacific Railroad Company, prior to such reor- ganization, had outstanding a total funded debt of $140,425,862, and stock in the amount of $60,868,500, making a total of $201,294,362. This did not include its collateral trust obligations on stocks and securities owned in other roads. These collateral trust obliga- 85 tions did not participate in the reorganization. The total mileage of the company, was 1,822.59 miles. This road was reorganized; but by snch reorganization the total of its securities was not reduced. It issued against these 1,800 miles of road the following bonds and stocks: i per cent first-mortgage bonds $100,000,000 Preferred stock 75,000,000 Common stock 61,000,000 Total 236,000,000 It gave to the old first-mortgage bondholders new bonds to the par value of their old bonds and sub- stantially 50 per cent, in preferred stock. For an as- sessment on the common stock it gave preferred stock and for the common stock it gave share for share of the new common stock, thereby issuing $236,000,000 of securities in lieu of $201,294,362 of obligations out- standing at the time of the reorganization. It appears that some of the new securities were issued for equip- ment of the new company's lines. The exact amount is not revealed, but Mr. Kahn testified that he thought between $5,000,000 and $10,000,000. On January 31, 1901, as has already been stated, the Union Pacific, in pursuance of its purpose to purchase the stock of the Southern Pacific Company and the Northern Pacific Railway Company, issued $100,000,- 000 of convertible bonds, which were sold, and from which and the profits resulting from the fortunate in- vestment in Northern Pacific have flo-^ed the great body of the purchases of stock in other railways made by the Union Pacific. These convertible bonds have 86 all been converted into common stock, so that there is now outstanding $100,000,000 of common stock of the Union Pacific Railroad Company which has been is- sued and used exclusively for the purchase of stock in other railroads. The Oregon Short Line Eailroad Company also is- sued, and has now outstanding, $45,000,000 of bonds known as 4 per cent, refunding bonds, secured by a mortgage on its lines of railway, the proceeds of which have been used exclusively for the purchase of stock in other lines, and this last-named company in Sep- tember, 1906, gave its notes to Kuhn, Loeb & Co. for the purchase of Baltimore & Ohio stock amounting to $36,393,432. Thus the Union Pacific and its connecting and su- bordinate line, the Oregon Short Line, have assumed obligations which are now outstanding amounting to approximately $181,000,000, all of which has been used in the purchase of stock in other railroads. Soy them Pacific. — ^With the affairs of this company we have already dealt. The original 750,000 shares of Southern Pacific stock were purchased with the pro- ceeds of $4Q,000,000 of Union Pacific convertible bonds sold through Kuhn, Loeb & Co. Northern Pacific. — The Union Pacific purchased in 1901, at a cost of $79,459,691.36, what is believed to be a control of the Northern Pacific, and through it of the Chicago, Burlington & Quincy Railway. The Union Pacific sought in the dissolution of the Northern Se- curities Company to obtain control of the Northern 87 Pacific tlirougli stock ownersliip. Tlie Supreme Court, as before stated, lield sucli control to be in violation of the Sherman Act. Thereafter the Northern Securities Company was liquidated, and the Union Pacific re- ceived its pro rata share of stock in the Northern Pa- cific and Great Northern and Northern Securities stubs. Subsequently the Union Pacific acquired 37,444 additional shares of Great Northern stock, under rights, costing $3,744,400. Of these stocks the follow- ing sales were made: stocks. Number of shares. Sold fol^ 100,000 0.1871 240,300.8215 168,600.8949 $16,880,019.46 Northern Securities stubs Northern Pacific . * 56.13 60,166,357.97 Great Northern 49,801,576.47 Total 116,848,010.03 Leaving now in the hands of the Union Pacific and allied companies the following number of shares : Northern Securities stubs 7,249 Northern Pacific 41,528 Great Northern 90,364 Great Northern ore certificates (received on account of Great Northern stock) . . 90,364 The Santa Fe. — Mr. Ripley, president of the Santa Fe Company, testified in substance that in the summer of 1904 Mr. Harriman, Mr. Schiff, and Mr. Frick had a conversation with him, in which Mr. Harriman stated that he and some of his friends had been buying Santa Fe stock because they believed it was a good investment, and asked for representation on the Santa Fe board of directors. Mr. Ripley stated that under the cumulative system of voting they could have elected two directors whether he liked it or not, and 88 answered Mr. Harriman that if he and his associates would nanae two men who were not officials of compet- ing lines he would have them elected to the Santa Fe board. He said that he had investigated the matter and had satisfied himself that these gentlemen owned about one-seventh of the total issue of stock in the Santa Fe, or about $30,000,000 worth. Mr. Henry C. Frick and Mr. Henry H. Rogers were named, and were elected directors of the Santa Fe. They were at that time, and ever since have been, directors of the Union Pacific also. It appears, further, that the Oregon Short Line, on or about July 10, 1906, purchased $10,000,000 of the stock of the Santa Fe Company at a cost of $10,395,000. Whether this is a part of the stock previously owned by Mr. Harriman or the other directors of the Union Pacific he refused to state, so that we can not tell whether the amount of Santa Fe stock now controlled by the Union Pacific and its directors is $40,000,000 or $30,000,000. The control of this stock by the Union Pacific, it is safe to assume, has not been without effect upon the relations of these two companies. We have already noted the abandonment in about 1901 of a competing trans-Pacific steamship line running from San Diego, in consideration of a division of traffic with the Santa Fe; and now although about 60 per cent of the packing houses shipping citrus fruits out of southern Califor- nia are located upon the tracks of the Santa Fe, that traffic appears to be divided approximately upon the 89 following basis : Forty-five per cent each to the Santa Fe and the Southern Pacific, and 10 per cent to the San Pedro, Los Angeles &■ Salt Lake line. The close affiliation of the Southern Pacific and Santa Fe systems has been further shown by the re- cent incorporation of the Northwestern Pacific Eail- road Company, in which each interest is the owner of one-half of the capital stock. Prior to the organiza- tion of this corporation the Santa Fe and the South- ern Pacific companies owned certain distinct and sep- arate lines of railroad north of San Francisco Bay, those owned by the Santa Fe running southerly from Humboldt Bay and those owned by the Southern Pa- cific running northerly from San Francisco Bay. Both lines were actively engaged in construction work, each pushing into the territory of the other; the Southern Pacific lines reaching, out for the great timber dis- tricts surrounding Humboldt Bay and the Santa Fe lines extending southerly so as to make connection with the main line upon the Bay of San Francisco. Upon the incorporation of the Northwestern Pacific Company all of the lines owned by the Santa Fe and Southern Pacific were transferred to this new corpora- tion under a contract by which the lines now in exis- tence and the connections between the same to be con- structed by the Northwestern Pacific shall be owned by this new company, and the board of directors of the Northwestern Pacific is to be divided between the. Southern Pacific and the Santa Fe — an arrangement similar to that made between the Union Pacific and the 90 Rock Island as to the control of the Chicago & Alton, hereinafter described, and a history in all essentials parallel with that of the San Pedro road. Illinois Central. — The' Illinois Central can not be re- garded as a competing line with the Union Pacific; but it is a competing line with the Chicago & Alton Eailway, which is jointly controlled, through stock ownership, by the Union Pacific and the Rock Island, and is manifestly a competing line with the Rock Island. In connection with the Union Pacific the Illi- nois Central would be competitive with the Southern Pacific. It owns lines of railroad extending from Chi- cago to Omaha, St. Louis, and New Orleans. At Council Bluffs it connects with the Union Pacific, and at New Orleans with the Southern Pacific. A very considerable part of the business originating on the Illinois Central between Chicago and New Orleans des- tined for Pacific coast points may go by either route; that is, it may go south to New Orleans and thence via the Southern Pacific, or it may go to Omaha and thence via the Union Pacific. Before the control of the South- ern Pacific by the Union Pacific, these two companies were in active competition with each other for busi- ness originating on the Illinois Central system. The Illinois Central, as a glance at the map will show, is the eastern side of a railroad parallelogram, the other three sides of which are the Union Pacific and Short Line system to Portland on the north, the Southern Pacific system from Portland to Los An- geles on the west, and from Los Angeles to New Or- 91 leans on the south. Since June 30 of last year the Union Pacific has purchased 29.59 per cent of the cap- ital stock of the Illinois Central, or 281,231 shares out of a total of $950,400 shares. Mr. Kahn, of Kahn, Loeb & Co., testified that this was sufficient generally to secure a dominating interest in a railroad corporation. That Mr. Harriman-was not indifferent to the strate- gic value of the road with relation to the Southern Pa- cific and Union Pacific lines is manifest from the fol- lowing statement made by him to the Union Pacific board of directors as recorded in the minutes of the meeting of July 19, 1906 : That he believed it to be to the interest of the Union Pacific Eailroad Company to purchase stock of the Illinois Central Railroad Company; that, while the Union Pacific line served a large grain-producing ter- ritory, it had no line from that territory to the Gulf or to Chicago, and into the southeast; that the export of grain via the Gulf ports is likely to increase stead- ily; that the value and importance of a system of rail- roads extending from the Missouri Eiver, at and above Omaha and as far north as Minnesota and Wisconsin, and from Chicago and St. Louis on a low grade to New Orleans, as does the Illinois Central, will be enhanced by the construction of the Panama Canal, and the im- portance and value of such connections to the Union Pacific will be very great ; that, while the Illinois Cen- tral was generally recognized as an important and val- uable system of railroads, yet he believed its strategic value and importance was but little understood and ap- preciated even by some of those most active in its man- agement; and that while this stock appeared to be a 92 good investment at prevailing prices, he believed it could be made and in time was bound to become very much more valuable. Of the stock so purchased by the Union Pacific, E. H. Harriman owned 30,000 shares; H. H. Rogers, 30,000 shares; James Stillman, 30,000 shares; all of said parties being directors of the Union Pacific; and Kuhn, Loeb & Co., fiscal agents of the Union Pacific, 105,000 shares. Mr. Harriman declined to testify as to whether this stock was acquired by a syndicate or pool for the purpose of sale to the Union Pacific, or as to whether he was interested in the 105,000 shares which were bought from Kuhn, Loeb & Co. And Mr. Kahn, of that firm, declined to state whether any part of the 105,000 shares so sold was held by his firm for or on account of all or any of the directors of the Union Pacific. It is undoubtedly a fact that Mr. Har- riman dominates the Illinois Central; and in view of the large block of stock owned by the Union Pacific it is quite likely this power can be continued. Ordi- narily, where the stock of a railroad company is widely scattered, it is impossible to obtain a full vote at a stockholders' meeting; the management and control have possession of the stock books and the stock lists and can send out for proxies; and 30 per cent of the stock in a single ownership is frequently sufficient to control the management. 93 STOCKS PUECHASED SINCE JUNE 30, 1906. Without going further into details it is sufficient for the purpose of this report to say that the Union Pa- cific and the Oregon Short Line companies, from June 30, 1906, to February 28, 1907, purchased stocks, and paid on subscriptions to stocks, in railway and other transportation companies, as below shown: Issuing company and stock. Par value of total outstand- ing. Atchison, Topeka and Santa Fe: Preferred stock Common stock Baltimore & Ohio : Preferred stock Common stock Chicago, Milwaukee and St. Paul: Preferred stock Common stock Subscription to stock, 10 per cent, paid — 18,450 shares preferred 9,22.5 shares common Chicago and Northwestern : Preferred stock Common stock Fresno City Railway stock Illinois Central, stock New York Central and Hudson River, stock Northern Pacific : Subscriptions to 24,916 shares, 5 per cent paid Pacific Fruit Express, stock sub- scription, 10 per cent paid .... $131,486,000.00 102,000,000.00 60,000,000.00 152,330,060.00 49,654,400.00 58,18.3,900.00 1522,398.954.56 77,510,745.97 95,040,000.00 179,282,060.00 Amount purchased since June 30, 1906. Par value. $10,000,000.00 None. 7,206,400.00 32,334,200.00 None. 3,690,000.00 None. $2,572,000.00 495,650.00 a 28,123,100.00 14,285,745.00 Fraction of total. Fer cent. 7.61 12.01 21.23 3.32 29.59' 7.97 $10,395,000.00 6,665,920.00 38,801,040.00 5,997,750.24 184,500.00 92,250.00 $5,303,673.94 : 06,410.98 41,442,028.37 19,634,324.93 124,580.00 1,200,000.00 Per- ceatum price, average. 103.95 92.50 120.00 162.54 206.21 21.47 6 175.00 137.44 a 80,000 shares pledged to secure $8,000,000 par value of 4 per cent gold bonds of Railroad Securities Company. b Plus interest. Price exclusive of dividend of $3.50 per share, or 3 1-2 per cent of par. 94 Par value of total out- standing. Amount purchased since June 30, 1906. IsBuingr company and stock. Fraction Par value. of total. Cost. Per centum price, average. St. Joseph and Grand Island : First Preferred stock Second preferred stock 5,500,000.00 3,500,000.00 4,600,000.00 932,200.00 1,250,000.00 2,900,000.00 Per cent, 16.95 35.71 63.04 >2, 022,540. 00 39.80 Cost of above purchases of 130,368,688.46 1,601,330.00 Cost of above stated subscriptions Total cost of investment in stocks since June 30, 1906. 131,970,018.46 The stock in the St. Joseph and Grand Island Rail- road Company, described in the foregoing table, was purchased by the Union Pacific from Mr. Harriman while he was president of the comjoany, and he de- clined to state when he acquired that stock and what he paid for the same. CAPITALIZATION OF THE CHICAGO & ALTON. It developed during the inquiry that the Union Pa- cific Railroad Company in the year 1903 became the owner of 103,431 shares of the preferred stock of the Chicago &. Alton Railway Company; and the Commis- sion therefore deemed it important to inquire into the reorganization and capitalization of this company. Prior to 1898 the Alton road had been for many years under the control of Mr. T. B. Blackstone, as president, and had paid an average dividend exceed- ing 8 per cent per annum and in addition had ex- pended large sums out of earnings in the improvement of its property. As appeared by its books on December 31, 1898— 95 The cost of its road and equipment was $34,153,927 It had other assets amounting to 5,781,960 Making the total value of its property 39,935,887 Its total stock outstanding was 22,230,600 Its total funded debt 10,779,850 Its other liabilities were 940,957 33,961,407 About this time Mr. Edward H. Harriman, Mr. Mor- timer L. Sehiff (representing Mr. Jacob H. Schiff), Mr. George J. Grould, and Mr. James Stillman formed a syndicate to huj this stock, and bought it for $200 a share for the preferred and $175 a share for the com- mon, making the total cost of the shares purchased $39,042,200. In about seven years, to June 30, 1906, the outstand- ing capital- indebtedness of this company was expanded from $33,951,407 to $114,610,937, or an increase of about $80,660,000, and there was expended in actual improvements and additions to the property out of this capitalization only about $18,000,000, leaving an in- crease of its stock and liabilities, without one dollar of consideration, of about $62,660,000, or $66,190 per mile on the 946.66 miles of road owned by the com- pany on June 30, 1906. HOW THIS WAS ACCOMPLISHED. For the purpose of taking up the first-mortgage bonds on the road, amounting to about $8,500,000, the making of improvements and additions and for other corporate purposes, this syndicate placed a $40,000,- 000, three per cent, mortgage on the property, which, by its terms, could be extended and bonds issued in 96 addition to the forty millions. They sold the bonds to the stockholders for 65 cents on the dollar; and, as they had acquired substantially all of the stock, they obtained nearly all of the bonds. They owned at that time the following amount out of the total issue of stock : Preferred. Common. Total. Total outstanding 34,795 187,511 222,306 Total owned by syndicate 34,722 183,416 218,138 Balance in hands of public 73 4,095 4,168 These bonds were authorized by the stockholders on September 7, 1899. The tirst $10,000,000 thereof were issued about October 10, 1899, and through the syndi- cate managers (Kuhn, Loeb & Co.) were sold to Gold- man, Sachs & Co., who sold them to the New York Life Insurance Company for 96 cents on the dollar. Only $32,000,000 out of the $40,000,000 were sold, and the prices the syndicate received for the balance does not appear, but it does appear that Kuhn, Loeb & Co. sold $1,000,000 thereof to the Equitable Life Insurance Company in 1900 at 92, and $550,000 thereof later at 88 in 1901 ; and the market value of the bonds during the years 1900, 1901 and 1902 varied from 821/8 to 94, and has from that time to the present time varied from 78V2 to 86%. So that the syndicate must have reaped a profit on these bonds of about $8,000,000, which could have been and should have been reaped by the railroad company. Seven millions of the $40,000,000 authorized have been pledged as security for $5,000,000 borrowed by 97 the railroad company and the remaining million Js held in the treasury. Out of the 65 cents on the dollar thus realized by the railroad company the principal stockholders voted themselves a dividend of 30 per cent on the common and preferred stocks. The total dividend amounted to $6,669,180, and as it appears they owned more than 98 per cent of the stock they received nearly all of it. This dividend was not reported to the Interstate Com- merce Commission. There was no other money in the treasury, outside of the proceeds of these bonds, with which to pay a dividend. In order to find an excuse for borrowing money to pay the dividend, Mr. Harriman, who was in control of the financial affairs of the road, caused $12,444,- 177.66 to be credited in December, 1899, to "Construc- tion expenditures uncapitalized." As a matter of fact, all money which had been previously used for better- ments of the property had been annually appropriated by the board of directors and charged against the in- come of the property, in addition to paying the divi- dends; so that all the money so appropriated had been once paid out of income and had, during many years, been charged off to operating expenses. All of this $12,444,177.66 apparently had not been expended even under the former management. Mr. Harriman and his associates went back to the report of Mr. Blackstone to his board of directors of December 31, 1888, and found he had estimated that, taking into account the losses sustained by the original stockholders in the 98 foreclosure prior to 1863 and the amount which the Chicago & Alton Eailroad Company had expended from year to year in additions to the property, etc., and taking into account the sinking-fund bonds which had been paid and canceled out of earnings, the prop- erty of the company was worth $11,750,000 in excess of its original cost. This $11,750,000 was taken as the starting point, thereby capitalizing the losses of the original stockholders in the foreclosure sale of the old Joliet and Chicago road, which appears by the testi- mony to have occurred prior to 1863; to which was added estimated sums paid out of earnings for better- ments and improvements of property down to the time of the acquisition of the property by the syndicate, Harriman, Schiff, Gould, and Stillman, and this amount was capitalized. Against this amount they. charged the dividend of $6,669,180. They also charged against this account, as "Discount on bonds," the sum of $8,155,751.40. These charges exceeded the total of $12,444,177.66, so-called "Construction expenditures uncapitalized," by $2,380,753,74, and the books were balanced by transferring this excess to the profit and loss account. This manner of accounting would have the effect of covering up the payment of the dividend out of the proceeds of the mortgage and the discount on the bonds, so that one reading the annual published report of the company would not see the true state of facts. The Commission can not say this was the object, but 99 one expert railroad accountant testified tliat tliis would be the effect. Furthermore, instead of paying all of the coupons outstanding on the prior mortgage bonds and canceling them, as was contemplated when the $40,000,000 mort- gage was made, $973,477 of these coupons were, from 1901 to 1905, carried as an asset in the treasury of the Alton Company, imder the head of "Funded interest account," and on June 30, 1905, credited to assets and charged to capital account of the Chicago & Alton Railroad Company. The assets and the profit and loss account of the company were swollen by this trans- action to tlie extent of $973,477; thus, in fact, tui'ning a debt or obligation of the company, which should have been paid and canceled, into an asset, and capitalizing the same. TRANSFER TO THE RAILWAY COMPANY. Having acquired the stock of the Chicago & Alton Eailroad Company, this syndicate organized the Chi- cago & Alton Railway Company under the laws of Illi- nois. They transferred their stock of the railroad company to an intermediary, one Louis L. Stanton, who had no interest therein. Stanton entered into a pretended contract with the new railway company whereby the new company was to buy from him their stock of the old railroad company for the following sums: For their 34,722 shares of preferred stock, which had cost them $6,944,400, and on which they had re- 100 ceived a specia] dividend of $1,041,660, according to this contract they obtained, in cash, $10,000,000. For their 183,224 shares of common stock, trans- ferred to the railway company, which had cost them $32,064,200, and on which they had received a special dividend of $5,496,720, they received $194,890 shares of preferred and 195,428 shares of common stock, a total of 390,318 shares of the new company. It does not appear what they sold this stock for, but it does appear that the Union Pacific Railroad Com- pany bought, in 1904, 103,431 shares of the preferred at $86.50 a share. It appears that Harriman, Schiff, Gould, and Still- man also owned a line of railroad 58 miles long, which there is some evidence to show had cost them very much less than $3,000,000. This railroad was also transferred to the intermediary, Stanton, who sold it to the new company for $3,000,000 cash. So that by this transaction the syndicate were to receive in cash $13,000,000 and all of the stock of the new company in exchange for about 98 per cent of the stock of the old company and the railroad 58 miles long. To raise the $13,000,000 in cash, the shares of the old railroad company were first mortgaged for $22,- 000,000, and the bonds were nominally sold to Kuhn, Loeb & Co. for $13,000,000 cash, or a little less than 60 cents on the dollar. As a matter of fact, it appears by the testimony of Mr. Harriman that Mr. Stanton never owned any of the stock or the railroad, but was a mere intermediary. 101 What these bonds were worth does not appear, but it does appear that they were sold in the market, from 1900 down to the present time, at from 761/2 to 861/2; and that during two or three years after the issue thereof they ranged from 78 to 86I/2. Mr. Harriman testified that lae had no books to show the profits on these bonds and had no l<:nowledge of what he and his associates made in the transaction. During all these years Mr. Harriman was chairman of the executive committee of the Chicago & Alton Eailroad Company and of the Chicago & Alton Rail- way Company, had charge of their financial affairs, and was voted $104,722.22 for his services as chairman of the executive committee from 1900 to 1904. This mortgage made by the Chicago & Alton Railway Company, covering the stock of the railroad company, also covered about 34 miles of prospective railroad which the company contemplated constructing and whfch it was authorized to construct under its charter and organization. But all the bonds were sold, and no bonds were left to raise money with which to con- struct the line thus contemplated. So that, when the new management took hold of the Alton on the 1st of October, 1906, it found that this line, in process of construction, had already been mortgaged, the bonds sold, and no funds reserved with which to complete the construction. On or about March 8, 1906, the Chicago & Alton Eailroad Company and Chicago & Alton Railway 102 Company were consolidated. At this time the liabili- ties on the road were as follows: FUNDED DEBT. C. & A. R. R. Co. 3 per cent refunding bonds a $45,350,000.00 C. & A. By. Co. 31/2 per cent first-lien bonds 22,000,000.00 0. & A. Rv. Co. 4 per cent collateral tmst notes 5,000,000.00 $72,350,000.00 Equipment trust obligations 3,130,756,71 Current liabilities 2,354,000.15 Deferred liabilities 380,299.23 2,734,299.38 GUARANTEED STOCK. J. & C. R. R. Co. 7 per cent guaranteed capital stock $1,500,000.00 K. C, St. L. & C. R. R. Co. 7 per cent guaranteed preferred stock 1,750,000.00 K. C, St. L. & C. R. R. Co. guaranteed common stock 114,200.00 L. & M. R. R. Co. 7 per cent guaranteed preferred stock 329,000.00 $3,693,200.00 CAPITAL LIABILITIES. C. & A. R. R. Co. (consolidated) capital stocks: Cumulative 4 per cent prior lien and participating $899,300.00 Noncumulative 4 per cent preferred stock 19,544,000.00 Common stock 19,542,800.00 $39,986,100.00 121,894,356.09 a Less : 3 per cent refunding bonds, pledged as collateral to the $5,000,000 of 4 per cent collateral trust notes 7,000,000.00 3 per cent refunding bonds remaining in the treasury 1,000,000.00 8,000,000.00 Total liabilities 113,894,356.09 Taking the original cost of the property as it stood upon the books of the Alton Company December 31, 1898, as $39,935,887, adding the amount which appears by the testimony of Mr. Harriman, Mr. Felton, and Mr. Hillard to have been spent upon the property out of the new capital issued after Mr. Harriman and his associates obtained control of the road, to-wit, about $18,000,000 (including the cost of the 58 miles of the Peoria road at $3,000,000), it shows that the foregoing liabilities of over $113,894,000 were placed upon prop- erty which had originally cost approximately fifty- eight millions, or an increase of stock and liabilities 103 upon the road for which not a dollar of tangible prop- erty had been added of practically $56,000,000. It was admitted by Mr. Harriman that there was about sixty millions of stock and liabilities issued against which no property had been acquired, and this is undoubtedly an accurate estimate. It further ap- pears by the testimony of Mr. Hillard that since the Harriman control has ended and the road was turned over to the Eock Island the company has been com- pelled to issue $2,260,000 of car-trust notes to acquire equipment needed in the business of the company ; that the present management found the company without any money to buy necessary equipment or to build 34 miles of railroad which the company had contemplated constructing and on which the Harriman management had placed a mortgage, sold the bonds, but had left no funds in the treasury to complete. INDEFENSIBLE FINANCING. From this brief synopsis of the exploitation of the Chicago & Alton, it is evident that its history is rich in illustrations of various methods of indefensible financ- ing. First came the profit to the stockholders arising out of the sale to themselves of $32,000,000 of bonds at 65, which sold for several succeeding years for 821/^. to 94. Second came the 30 per cent dividend based on amounts expended from income for improvements, much of it nearly thirty years before, and recently capitalized. Third came the psuedo transfer to Stan- ton, and his contract under which the new company 104 paid $10,000,000 in cash for preferred stock which had cost less than $7,000,000. Fourth came the conversion of 183,224 shares of common stock in the Railroad Company into 395,428 shares of common stock plus 194,890 shares of the preferred stock in the Railway Company, part of which was sold to the Union Pacific at 86y2 a share. Fifth came the sale of the St. Louis, Peoria & Northern for $3,000,000 cash. Sixth came whatever interest the syndicate may have had in the sale to Kuhn, Loeb & Co. of $22,000,000 of bonds at 60 cents on the dollar. Seventh came the fee of $100,000 to Mr. Harriman for financing the enterprise. This analysis is no doubt incomplete, but it is suggestive. By way of justification or excuse we are told that the methods of the financing of railroads which pre- vailed in the year 1900 are now obsolete, owing to a higher degree of conscientiousness among financiers; and, moreover, that the Chicago & Alton should not be regarded as an isolated instance, inasmuch as it was dealt with much as many other roads were at that period. The first of these statements is, we trust, true; the latter statement is not calculated to uphold the value of American railroad securities. It is true, however, as contended, that a close ex- amination of the method of capitalization adopted in the case of the Chicago & Alton shows that while the total of bonds and stocks was doubled, there was no such proportionate increase in the fixed charges of the railroad. Under the Blackstone management, when 105 8 per cent was paid on the stock and but a small bonded debt rested on the property, the yearly charges for dividends and interest amonnted to $2,792,986, whereas with the greatly increased present capitalization the yearly fixed charges amount to but $3,471,590. This, of course, takes no account of the present common stock, upon which no dividends are paid. The plan adopted was to substitute long-term bonds and guar- anteed stock bearing an exceptionally low rate of in- terest for common stock which paid a large dividend and for bonds about to mature bearing a high rate of interest. Thus the property was not burdened with an interest payment proportionate to the increase in capitalization, no matter how great the profits made from the reorganization. However, these bonds must some time be paid; they live for fifty years as a debt of the railroad, and the stock will control a property which it did little, if anything, to create. JOINT CONTROL OP ALTON. The common stock of the Chicago & Alton Railway has evidently been sold on the market, for it appears by the testimony of Mr. W. H. Moore and Mr. D. Gr. Reid that the Rock Island Company owns 191,900 shares of common and preferred, mostly common. As before stated, in 1904 the Union Pacific Railroad Com- pany purchased 103,431 shares of the preferred stock of the Chicago & Alton Railroad Company. On or about October 4, 1904, a contract was entered into be- tween E. H. Harriman, Jacob H. Schiff, James Still- 106 man, and E. S. Lovett (who were in fact trustees for the Union Pacific Eailroad Company), and W. B. Leeds, W. H. Moore, D. Q. Eeid, and J. H. Moore (who were in fact trustees for the Eock Island Company), and the Central Trust Company of New York, trustee. The contract was amended by a contract of January 30, 1906, by which Mr. Leeds assigned his interest to W. H. Moore, D. G. Eeid and J. H. Moore. Under this contract the stock owned by the Union Pacific and certain of the stock owned by the Eock Island — constituting a controlling interest in the Alton Com- pany — were deposited with the Central Trust Com- pany of New York, as trustee, under substantially the following arrangement: Each party agreed to deposit 103,431 shares of stock. The trustee was to vote the shares of stock at the annual meeting to be held in 1905 in favor of the election as directors of two per- sons to be named by Harriman and his associates and of two persons to be named by Moore and his asso- ciates. At the annual meeting of 1906 the shares were to be voted in favor of one nominee named by Harri- man and his associates and three nominees of Moore and his associates; and at each annual meeting there- after for the election of directors the trustee .was to so vote the stock for the election of directors of the rail- way company that in each alternate year the Union Pacific was to have a majority of the directors and the Eock Island Company the minority; and each other alternate year the Eock Island Company was to have the majority and the Union Pacific the minority, there- 107 by giving the control of the road one year to the Union Pacific and the next year to the E-ock Island. At the time of the last hearing in this matter this contract was still in force, bnt notice has been given to the Commis- sion that by agreement between the parties thereto it has been abrogated and annulled. It would appear, therefore, that the Chicago & Alton is now controlled through stock ownership by the Chicago, Rock Island & Pacific Railway Company, which owns a line of rail- way from Chicago to Kansas City, which is parallel and competing with the line of the Chicago & Alton Railway Company between the same points. Incidentally, it may be observed that the bankers who manage these operations appear to be richly re- warded. The testimony shows that Kuhn, Loeb & Co. received 5 per cent, or five millions of dollars, on the $100,000,000 of Union Pacific convertible bonds above mentioned, one-half of which was retained by them and the other half given to the syndicate to whom the bonds were sold. On the 750,000 shares of Southern Pacific which the Union Pacific purchased at $50.61 per share, the same banking house received a commission of $2.50 a share. They received a like commission of $2.50 per share on the Chicago & Alton stock sold to the Union Pacific at $86.50 per share. It is significant that a member of this firm refused to disclose the extent of its interest in these securities. 108 Conclusions. The effect of the control of the Southern Pacific by the Union Pacific has been to unify and amalgamate the management of these two railway companies and their steamship lines, and to eliminate competition be- tween them in transcontinental business and in busi- ness to and from oriental ports. The Union Pacific, as has been shown, controls the San Pedro, Los Angeles & Salt Lake Railroad, the stock of which is deposited in the hands of a trustee. This line was originally intended as an independent road, extending from Salt Lake, where it connects with the Union Pacific and with the Denver & Eio Grande, to Los Angeles and San Pedro, Cal. There is therefore no competition between this line and the Union Pacific and Southern Pacific. It appears that the Union Pacific also owns $10,- 000,000, par value, of the stock of the Atchison, Topeka & Santa Fe Railway Company, and about $30,000,000 more is owned by individuals connected with the Union Pacific, making $40,000,000, or substantially 17 per cent, of the entire capital stock of the Santa Fe Com- pany. Who owns this stock, outside of the $10,000,000, Mr. Harriman declined to state. Two directors of the Union Pacific are also directors of the Santa Fe Com- pany; and there is now a division of the oriental traffic by the Pacific Mail Steamship Company between the Union Pacific and the Santa Fe systems. It appears that there has also been a division of the fruit traffic 109 between certain California territory and tlie east, eacli taking a certain percentage; and that north of San Francisco the Union Pacific and the Santa Fe have joined and amalgamated their interests in the North- western Pacific Eailroad, and that a joint control has been inaugurated similar to that of the Alton. Prior to the acquisition of the Southern Pacific by the Union Pacific, the Denver & Eio Grrande system, extending from Denver, where it connects with various lines to the east, to Salt Lake and Ogden, was given equal facilities over the Central Pacific, and thereby practically formed another transcontinental line. Since the amalgamation of the Union Pacific and Southern Pacific, and the construction of the San Pedro road, this line has been denied equal facilities in the receipt and transportation of freight over the Central Pacific and the San Pedro lines. Its business, therefore, has decreased, and its ability to compete with the Union Pacific and Southern Pacific impaired. On this ac- count the Gould lines are aiding the construction of an- other line from Ogden to San Francisco. The joint control of the Alton Eailway by the Union Pacific and the Chicago, Rock Island & Pacific Eail- way Company has undoubtedly eliminated competition between the Alton and the Eock Island between Chi- cago, St. Louis and Kansas City. These are conspicuous illustrations of the develop- ment of the theory of "community of interest" and "harmony of management," which Mr. Harriman sug- 110 gested when he demanded representation upon the Santa Fe board. If the policy of purchasing and controlling stocks in competing lines is permitted to continue, it must mean suppression of competition. Recommendations. (1) The function of a railroad corporation should be confined to the furnishing of transportation. Rail- roads should not be permitted to invest generally in the stocks, bonds, and securities of other railway and of steamship companies, except connecting lines, for the purpose of forming through routes of transporta- tion, including branches and feeders. It is in the in- terest of the public to facilitate the consolidation of connecting lines. The credit of a railway company is founded upon the resources and prosperity of the coun- try through which it runs. Its surplus funds and credit should be used for the betterment of its lines and in extensions and branches to develop the country contiguous to it. The testimony taken upon this hear- ing shows that about 50,000 square miles of territory in the State of Oregon, surrounded by the lines of the Oregon Short Line Railroad Company, the Oregon Railroad & Navigation Company, and the Southern Pacific Company, is not developed ; while the funds of those companies which could be used for that purpose are being invested in stocks like the New York Central and other lines having only a remote relation to the territory in which the Union Pacific system is located. Ill Hailroad securities slioiald be safe and conservative investments for the people. To this end the risks of the railroad should be reduced to a minimum. Every- one knows that railway securities fluctuate more or less, according to the prosperity of the times, and also by reason of the wide speculation in such securities. It therefore adds an element of hazard to a railroad's capital and credit to have its funds invested in the stocks of other companies, thereby endangering its sol- vency and its ability to pay reasonable dividends upon its own capital stock. It is a serious menace to the financial condition of the country to have large rail- way systems fail to meet their obligations or go into the hands of receivers, and the object of legislation and administration should be to lessen the risks of railway investments. (2) It is contrary to public policy, as well as un- lawful, for railways to acquire control of parallel and competing lines. This policy is expressed in the Fed- eral laws and in the constitutions and laws of nearly every State in the Union. We have examined the con- stitutions and laws of all the States, and tind in about forty of them prohibitions against consolidation of capital stock or franchises of competing railways, or the purchase and acquisition by a railway of compet- ing lines. Competition between railways as well as between other industries is the established policy of the nation. And while the acquisition of a small minority of the stock of a competing line might not decrease the- competition, yet the acquisition of any consider- 112 able amount of stock, with representation on the board of directors of such railway, unquestionably has the effect of diminishing competition and lessening to that extent its effectiveness. So long as it is the policy of the General Government and of the States to maintain competition between naturally competing lines, the ownership of any stock by one railway in a compet- ing railway should not be permitted, and such lines of railway should be prohibited from having any common directors or oflficers. (3) The time has come when some reasonable regu-' lation should be imposed upon the issuance of securi- ties by railways engaged in interstate commerce. We are aware that in the construction of new lines of rail- way, developing new territory, it has been necessary in many instances to sell railway securities at large discount, and to sell bonds with stock bonuses, and even in such cases it has many times been difficult to raise the necessary capital. Men will not invest their money and take the risk for small rates of interest. But this principle does not apply to old established railway systems having good credit. Such railways should be prevented from inflating their securities for merely speculative purposes.' Railroads should be en- couraged to extend their systems and develop the coun- try. It is of the utmost importance, also, that railway securities should be safe and conservative investments for the public, and should yield good and ample return for the money invested. Reasonable regulation will tend to make them safer and more secure investments. 113 and thereby benefit, not only the railway companies, but the public. State of Illinois, , !' County of Cook. In the Superior Court of Cook County. In Chancery. No. George F. Edmunds et al., Complainants, vs. Illinois Central Railroad Com- pany et al., Defendants. Stuyvesant Fish, being duly sworn, deposes and says that it is true as stated in the affidavits filed in this case that he, at the various and sundry annual meetings of the Illinois Central Railroad Company, has voted the stock of the Railroad Securities Com- pany, under the proxies of said company; that such proxies were voted by him just as he voted thousands of other proxies given him by stockholders, as a whole and at one vote; that at none of said meetings was there any contest or any objection made to the voting of siaid stock or of any stock the proxies of which were held by affiant ; that affiant is not a lawyer and never had occasion to examine into the legal right of the Railroad Securities Co. to own and vote stock in the Illinois Central R. R. Co., and always assumed and believed that they had such legal right so to vote until 114 he was advised to the contrary by his counsel in the month of September, 1907. That there are various and sundry false and misleading statements made in the affidavits filed in this cause by E. H. Harriman, Chas. A. Peabody, J. W. Auchincloss and Cornelius Vanderbilt which affiant proposes to contradict by a subsequent affidavit to be filed in this case, which affi- davit cannot be prepared within the short time since these affidavits were brought to affiant's notice, he* not having seen said affidavits until within the last 24 hours, having arrived in Chicago from his home in New York on the morning of Wednesday, Dec. 11, 1907. (Signed) Sttjyvesant Fish. Sworn to and subscribed to before me this Twelfth day of December, 1907. (Signed) James R. Collins, Deputy Sup. Court Clerk. Filed December 12th, 1907. 115 State or Illinois, Cook County. \ ^^^ In the Superior Court of Cook County, Illinois. George F. Edmunds, et al., Illinois Central Railroad Co., et al. Bill 263420—9150 Stnyvesant Pish, being duly sworn, deposes and says that he is a citizen of the State of New York, residing at Garrison, in Putnam county, of said state ; that he is a director, and has been a director, of the Illinois Central E. B. Co. continuously since March 16th, 1877; that from the date of his first election as director he has successively held the offices of treas- urer, second vice-president, sole vice-president and president of said company; that he was elected presi- dent of said company on May 18th, 1887, and remained such president until November 7th, 1906; that begin- ning with the annual meeting of stockholders held in March or May, 1882, and from that time down to and inclusive of the year 1906, the majority of the stock- holders of the Illinois Central R. R. Co. annually en- trusted him with their proxies ; that holding such prox- ies he elected and put on the board of directors of the Illinois Central R. R. Co. E. H. Harriman, J. T. Hara- han, J. W. Auchincloss, John Jacob Astor, Cornelius Vanderbilt, Robert W. Goelet, Charles A. Peabody, and every person, who in or since the year 1882, has been elected a director of said company, excepting only 116 A. G. Hackstaff, who was appointed by the board, pending action by the stockholders, to fill a vacancy caused by the death of Mr. J. C. Welling, which oc- curred in November, 1906; that he put said K W. Goelet on the board of said company at his written re- quest on the ground that his father had been for many years a director in said company; that to show the control of Harriman over said Goelet, affiant avers that the latter on the eve of his departure for Europe in September, 1906, parted from this affiant in the most friendly and amicable manner, saying that he would spend the winter abroad, but on the cable of said Har- riman, returned to the United States in order to attend the special meeting of the directors on November 7, 1906, called for the purpose of deposing affiant from the presidency ; concealed his presence in this country from affiant, attended the meeting and voted against affiant, and returned to Europe the nest day; that affiant gave J. T. Harahan his first position in the com- I)any as second vice-president and brought about many and large increases in his salary, and refused to con- sent to his displacement on the demand of said Harri- man and said Peabody when several years ago said Harahan fell sick, the said Harriman and said Pea- body claiming that he had outlived his usefulness to the property; that all of said persons above named, who have made affidavits filed in this cause, were always upon the most kindly personal relations with affiant and they and he always agreed thoroughly as to the policy and the management of the Illinois Central 117 E. E. Co., and that there was perfect hannony between affiant and th6 said persons until in the winter of 1904 and 1905, when said Harriman and said Peabody, who were then also directors of the Union Pacific E. E. Co., attempted to procure the establishment in the Illinois Central E. E. Co. of an executive committee to w'hich the discretionary powers of the board of directors were to be delegated ; that affiant strenuously opposed, and eventually defeated this attempt; that the defeat of this attempt, as affiant subsequently discovered, raised against him the hostility of said Harriman and Pea- body, who became subsequently additionally embit- tered against affiant because affiant refused to be a party to a whitewashing report of the officials of the Mutual Life Insurance Company, the investigation of which created such a stench in the nostrils of the American people ; that in or about the winter of 1904-5 began the large purchases of Illinois Central stock by Kuhn, Loeb & Co., the fiscal agents of the Union Pa- cific Eailroad Company; that these purchases excited the suspicion of affiant and he called on Kuhn, Loeb & Co., who stated to him that the purchases were made by them and their friends solely as an investment and not for any jjurpose of getting control; that at that time the said Harriman held on the books of the Illi- nois Central E. E. Co. 5,130 shares, of which 5,000 shares really belonged to the Eailroad Securities Com- pany and not to himself ; that in the suromer of 1906, pursuant to a practice, which, with the knowledge of every director, he had followed for more than twenty 118 years, at his own expense and not at the expense of the Illinois Central R. E. Co., affiant sent out a circular in his individual name asking the stockholders of the com- pany to send to the secretary of the company in Chi- cago their proxies running to him for the approaching annual meeting ; that he had during all those years sent out like circulars in his own behalf without consulta- tion with the board, or action by it, and that this was done with the full knowledge of all the directors and without any objection by them ; that, to his surprise, at a meeting on the 18th of July, 1906, objection was for the first time made in the board to the solicitation of proxies by affiant, when said Peabody moved that a committee of directors named by him be appointed to solicit from the stockholders their proxies; that affiant immediately stated that he saw that this was a device to put the control of the Illinois Central R. R. Co. into the hands of the Union Pacific R. R. Co., of which said Harriman, Peabody and Gf-oelet were directors and also members of the Illinois Central Board, each of whom being present at the time; that affiant further said that he would not be a party to any such scheme, and that as there was a bare quorum present, he would break it by leaving the room, which he immediately did ; that this led to a conference on July 26th between affiant, Peabody and Harriman, at which time it was agreed that the vacancy in the board caused by the death of William Morton Grinnell, would be filled by the selection of a third person who should be a man of character, independent of any clique, who would rep- 119 resent the whole body of stockholders equally, and especially one in no way connected with the Union Pa- cific E. E. Co. ; that the method of selecting this man had not yet been determined when that conference was closed, as it was, because of other engagements of the parties, Peabody and Harriman desiring that he be selected by the board of directors officially, and affiant holding that he should be selected by the directors in- dividually and not by the board, as the company had, on a former occasion, been advised that such official selection by the board would be illegal ; and it was fur- ther agreed that the parties should meet the next day before the board meeting; that on the next morning, July 27th, the parties met in the office of the Illinois Central E. R. Co. and a memorandum was drawn up as follows : "Agreed July 27th, 1906, 10 a. m. ' ' Three out-going directors to be re-elected. "Mr. Grinnell's successor to be selected by a ma- jority of the several directors acting. "Mr. Peabody 's resolution of July 18th to be with- drawn and not to be revived this year. "Mr. Harriman will ask that the Harriman, Kuhn, Loeb proxies be given to Mr. Fish." This agreement was signed by Peabody, Harriman and affiant; that, as the agreement of July 27th was originally drafted and agreed to it contained the words "Union Pacific proxies" in the last clause, but when this was presented to said Harriman for signature he asked that the words "Union Pacific" be stricken out, 120 saying that there were no Union Pacific proxies, and those words were thereupon stricken out by affiant; that affiant had put the words "Union Pacific" proxies into the draft of this agreement because he began to suspect that the large purchases of stock which had been made by Kuhn, Loeb & Co. in 1904-5 had really been made for the Union Pacific R. R. Co., although he had no exact knowledge on the subject; that, as is stated in the bill of this cause, and shown by the testi- mony taken before the Interstate Commerce Commis- sion, at the very time this agreement was made said Harriman, Peabody and Goelet, with the other direct- ors of the Union Pacific R. R. Co., had already, and on July 19, 1906, taken steps to buy for the Union Pacific R. R. Co. the shares of stock in the Illinois Central R. R. Co. and the Railroad Securities Co. mentioned m the bill in this case ; that affiant, not being a lawyer as said Peabody is, made the profound mistake of not re- quiring the embodiment in this written agreement, made July 27, 1906, of tha agreement which had been made on the previous day, July 26, 1906, relative to the kind of person who was to be-selected by the directors to fill the vacancy caused by the death of Mr. Grinnell, and advantage has been taken of this omission on the part of affiant to charge him with breach of faitb when ■ he refused to elect Mr. DeForest, when in truth and in fact the selection of Mr. DeForest, the personal at- torney of Mr. Harriman, and a director in the South- ern Pacific Company, a corporation dominated by the Union Pacific R. R. Co., was a gross breach of the 121 promise made to affiant, and of the essence and purpose of the agreement; that on October 10th, 1906, said Harriman handed to affiant the original docu- ments, copies of which are hereto annexed marked A, B and C, the originals of which are herewith pre- sented in open court for inspection; Document "A" being a letter signed by Peabody, Vanderbilt, Luttgen and Harriman, selecting Henry W. DeForest to fill said vacancy in the board, on which letter the names written in pencil on the lower left hand corner are in the handwriting of said Harriman, as indicating the persons whom he wished to sign said letter; that the document "B" is a cable despatch addressed to Harri- man by Goelet from Vienna (Wien), Austria, which is dated September 28, 1906; and the document "C" is a telegram addressed to Harriman by Auchincloss from Bar Harbor; that on the 11th of October, 1906, said Harriman delivered to affiant the letter and en- velope, copies of which are annexed to this affidavit and marked " D, " the originals _of which are herewith presented in open court for inspection, signed by Auchincloss ; that the documents above described show, and affiant charges, that said Harriman selected De- Forest and communicated with said Peabody, Vander- bilt and Luttgen, and with said Groelet, and with said Auchincloss in order that they should ratify his selec- tion, which they promptly did; that on October 10th, 1906, when affiant received the first three of these documents, he immediately notified said Harriman and the other directors present that he would not vote the 122 proxies in Ms hands for Mr. DeForest, as his selection was a violation of the agreement entered into as afore- said, but that affiant would accept any independent man, conformable to the said agreement, and one not connected with the Union Pacific E. E. Co.; that as soon as affiant had made this declaration, war against him was instigated by said Harriman and said Pea- body, who sent their personal attorney, William Nel- son Cromwell, Esq., from New York to Chicago to at- tend the stockholders' meeting of the Illinois Central E. E. Co. on October 17th, 1906, and to demand in the presence of the stockliolders that affiant should elect Mr. DeForest, all of which will more particularly ap- pear by the stenographer's minutes of the proceedings of that meeting, a copy of which will be made part of this affidavit; that at said meeting the affiant refused to vote the proxies known as the " Harriman^Kuhn- Loeb" proxies, and voted only such proxies as had come to him in due course in response to his personal circular; that the averment in the letter, attached to the affidavit of defendants, Harriman, Peabody and Goelet, addressed to affiant by certain directors under date of November 7, 1906, purporting to give their rea- son for not voting for affiant as president, that affiant planned not to elect the three out-going directors, is ab- solutely false and untrue ; on the contrary affiant avers that he carried out said agreement in good faith by . electing the out-going directors and by electing J. DeW. Cutting as an independent stockholder, not be- longing to any clique and not affiliated with the Union 123 Pacific R. R. Co. ; and affiant further states that after the said meeting of stockholders had adjourned, a special meeting of the directory of the Illiaois Central R. E. Co. was held in New York on November 7, 1906, at the dictation of said Harriman, who drew up the notice for said meeting, wrote on such notice the names of the directors who were to sign it, and sent it around and got such directors to sign it, all of which facts affi- ant charged without contradiction at said meeting on November 7, 1906, said Harriman being present, all of which will appear by the minutes of said meeting as corrected by the minutes of the meeting of November 28th, 1906; that as affiant was entering the office of the Illinois Central R. R. Co. in New York to attend said meeting on November 7th, 1906, he was handed the let- ter which the Harriman directors of the board of the Illinois Central R. R. Co. had that day signed giving their pretended reasons for not re-electing him presi- dent, which letter affiant charges was prepared and written by William Nelson Cromwell, the personal at- torney of Harriman and Peabody, and expresses sim- ply the resentment and chagrin of those persons in being detected, exposed and foiled in their attempt to put another Union Pacific man on the board of the Illinois Central Company; and affiant further states that the reasons set up in the affidavits filed in this case for refusing to elect him president by the aforesaid Harriman, Auchincloss, Goelet, Vanderbilt and Pea- body, are false and fictitious, and were manufactured after the event; that from a time prior to affiant's elec- 124 tion as a director in 1877, the custom of the Illinois Central K. R. Co. was to loan its idle funds to its officers and directors and to tirms of which they were memhers and to corporations of which they were officers, in the same way and to the same extent as it loaned to others; that the custom continued until the Spring of 1906 ; that affiant then recommended to the board of directors the adoption of a by-law forbidding the loans to officers, directors, or to iirms of which they were members or to corporations of which they were officers; that said proposed by-law was on the motion of said Peabody amended by striking out the prohibition of loans to corporations of which officers or directors of the Illinois Central R. R. Co. were officers, and that, in such amended form, said by-law was adopted, on or about the month of May, 1906; that during such period from 1877 to the adoption of said by-law, which was introduced as aforesaid by affiant, the Illinois Central R. R. Co. repeatedly loaned money to its directors and officers; that the said Harriman and Peabody were among those directors of the com- pany to whom it loaned money and that the said com- pany never lost one dollar by reason of the loans to affiant or to any other of its directors or officers ; that said loans made to affiant were properly entered on the books of the company, were known to the directors, and with others were reported as satisfactory by the auditing committee ; that the collateral on which said loans were made was ample and marketable at the time they were made, but in the panic of 1903 (just as has 125 liappened in the panic of 1907) said collateral became to some extent impaired in market price and when some of the directors criticised the loans they were paid by affiant ; that in order to demonstrate that the making of said loans to affiant was not considered any breach of his trust by the directors, it is sufficient to say that the same directors who now makes these affi- davits re-elected him president of the company in No- vember, 1903, after affiant's loans had been fully dis- cussed and before they were paid; re-elected him president in 1904; re-elected him president in 1905; and increased his salary in 1905 by the amount of $10,000 a year ; that the statement in the affidavits to the effect that some of the directors wished then to remove affiant from the presidency, affiant believes to be false and untrue, arid charges it to be manufactured for the purposes of the case, as no such intimation was at that time made by any of said directors to affiant; and affiant says that all of the general charges against hira in the affidavits, as to his managing the company without the consent of the board and independent thereof, as to loans made by him to others, and as to deposits of the funds of the Illinois Central R. B. Co. made by him, are in general false and untrue, and where true in statement were manufactured after the event in order to justify the action of those persons in deposing affiant from the presidency of the Illinois Central E. R. Co., and to hide their subserviency to their lord and master, E. H. Harriman; that no criti- cism was ever at any time made to affiant by any of the 126 directors on affiant's discharge of his duties as presi- dent of the company ; that affiant always consulted the board as to all important acts; that affiant was con- stantly, though without success, urging the directors to meet more frequently in order that they might con- sider the business of the company; that no objection was at any time, or under any circumstances, made to affiant by any of the directors of the company to any deposits of the funds of the company made by affiant, or to any loans by the company to third persons ; that the loan of $57,000 referred to in the affidavits was made in 1902 on what were then ample collateral se- curities, received as such in all banks and trust com- joanies of New York, which collateral became impaired by the panic of 1903 that brought disaster to many per- sons and corporations previously supposed tO' be sound and solvent; that said loan was reduced to $38,000 by cash payment, and as the company has bought in and owns the collateral which has not yet been liqui- dated, the company may not lose a cent on such loan ; that, with the exception of said loan, the Illinois Cen- tral R. E. Co. never lost a cent on the many millions of dollars of loans and deposits made under affiant's management of the Illinois Central; that the Trust Company of the Republic, in which affiant deposited part of the I. C. funds, at present known as the Com- monwealth Trust Co., is now and always has been a perfectly solvent concern, and the funds of the Illinois Central Company deposited in that company were never for a moment at risk; that no objection or criti- 127 cism was at. any time made to affiant by any of the directors in regard to these deposits; that it is true that affiant is a director in the Missouri Pacific E. E. Co. and a member of its executive committee, and that said company and its connections are in some respects competitive with the Illinois Central E. E. Co., but the charge that affiant is seeking to control the Illinois Central E. E. in the interest of the Missouri Pacific E. E. is a mere slander, as is made manifest by the statement that affiant owns only 500 shares of the Missouri Pacific stock, worth about $28,000, and owns, 12,452 shares of Illinois Central stock, the market value of which today is more than a million and a half dol- lars, and that so far as affiant loiows, none of those connected with the management of the Missouri Pacific E. E. is a stockholder in the Illinois Central E. E. Co. ; that it is true that this affiant is soliciting proxies for the coming Illinois Central stockholders' meeting and that he has sent out circulars to the stockholders giving the facts as he believes and knows them to be as to the Union Pacific's control of the Illinois Central E. E. as the latter 's directory is now constituted, and in making this charge he has done nothing more than state what the Interstate Commerce Commission found to be the fact in an independent and exhaustive exam- ination of the doings of Harriman and the Union Pa- cific E. E., an examination to which affiant was not a party, and in the court of which affiant was not a wit- ness ; that it is true that if he gets a majority of the proxies he proposed to put the said Harriman off the 128 board of directors of the Illinois Central E-. R. Co.; that he has pledged himself to his constituents to do this, and he deems it his duty to do so, both in his own interest as the holder of 12,452 shares of the stock of the said company, in the interest of the whole body of the stockholders of said company, in the interest of the patrons of the road, in the interest of the people of the State of Illinois, and in the interest of all the people of the United States to whom the removal of suCh an indi- vidual as Harriman is shown to be by the Interstate Commerce Commission Report 943, annexed to' the bill in the cause, would be a welcome sign of returning morality in the management of the great corporations of the country ; that it is true that affiant is trying to prevent the Union Pacific R. R. Company from voting its stock in the Illinois Central R. R. Co., because with that stock as a nucleus it will always be possible for that company to control the I. C. Company absolutely; , that it is true that affiant is a candidate for a director- ship of the Illinois Central Company, as is his right and laudable ambition, because he is the largest bona fide individual stockholder of said company; because he has spent thirty years of his life in building up this great property; because he is familiar with every de- tail of its history and of its possibilities, and because he has the confidence and support of the large majority of stockholders excluding the stock controlled by the Union Pacific R. R. ; that it is true that affiant re- quested his co-complainants to join him in this suit, which, they as independent stockholders and two of 129 them citizens of national reputation, after due delib- eration decided to do, pursuing their own interests as such stockholders striving to protect their property from the clutches of Harriman, and that the allega- tions in the affidavits that this suit is prosecuted for affiant's sole interest and at his sole cost and risk, are absolutely false and untrue; that the Kensington & Eastern R. R. Co. and the Memphis & State Line E. R. Go. referred to in the affidavit of J. T. Harahan are the creatures of the Illinois Central R. R. Co., which caused them to be incorporated, which has advanced all the funds for their building, and which can hold their ofPer of sale to' the Illinois Central R. R. Co. open indefinitely until a vote of the stockholders of the Illi- nois Central R. R. Co. required by law can be obtained ; that the great importance of the Illinois Central R. R. Co. to the Union Pacific R. R. Co. is shown in the re- port of the Interstate Commerce Commission No. 943, made part of the bill in this cause, which contains the reasons given by Harriman in his own language to the board of directors of the Union Pacific when he ad- vised them to buy the stock of himself and his asso- ciates owned by them in the Illinois Central R. R. Co., and is further shown by the fact that, during the past fiscal year, the Illinois Central's deliveries of west- bound freight at Council Bluffs, Omaha and South Omaha, its points of connection with the Union Pacific, were nearly double what they were in 1906, although 130 its shipments of eastbound freight from those points were less this year than in 1906. Stuyvesant Fish. Subscribed and sworn to before me this thirteenth day of December, 1907. (Copy.) "A." New York, October 9, 1906. Stuyvesant Fish, Esq., Dear Sm: We select Mr. Henry W. DeForest, of New York City, to fill the vacancy in the board of directors of the Illinois Central Railroad Company, caused by the death of Mr. W. M. Grinnell, and request that he be elected to fill such vacancy at the stock- holders' meeting to be held on October 17th. Yours truly, [Signed] Charles A. Peabody, Cornelius Vandebbilt, W. Ltjttgen, E. H. Habeiman. (Written in pencil by E. H. H.) Peabody, Goelet, Harriman, Vanderbilt, j^uchincloss, Luttgen, Astor. 131 (Copy of Cablegeam) Marked "B." Sept. 28, 1906, 9 :46 A. M. From Wien, To Edward Hdrriman, 120 Broadway, N. Y. Letter not received favor deforest. Goblet. (Pencil notation) Eead to E. H. H. at Arden. (Copy op Telegram) Masked "C." Bar Harbor, Oct. 9, '06. E. H. Harrvman, N.Y. Despatch, received, will mail letter to-morrow. John W. Auchincloss. 11 A. M. Marked "D." Bar Harbor, Maine, Oct. 9th, 1906. Stuyvesant Fish, Esq., 11 Bway., New York. Dear Sir: We select Mr. Henry W. Deforest of N Y City to fill the vacancy in the board of Directors of the Illinois Central BE Co, caused by the death of Mr Wm M Grinnell, and request that he be selected to fill such vacancy at the stockholders' meeting, to be held on October Seventeenth. Yours very truly, John W. Auohincloss. 132 (Filed Dec. 16, 1907.) State of Illinois, \ County of Cook. \ In the Supebioe Coubt of Cook County, In Chanceky. George F. Edmunds et al., ^ vs. ^Bill 263,420— 9150. Illinois Central R. R. Co. et al. J Stuyvesant Fish, being first duly sworn, on oath de- ])oses and says that he is one of the complainants in the ahove entitled cause; that he resides at Garrison, in the County of Putnam, and State of New York ; that he is a director and has been a director of the Illinois Central R. R. Co. continuously since March 16th, 1877; that from the date of his first election as director he has successively filled the offices of treasurer, second vice-president, sole vice-president, and president of said company; that he was elected president of said company on May 18th, 1887, and remained such presi- dent until November 7th, 1906 ; that he was for about five years a stockholder in the Railroad Securities Co. in New Jersey, holding company one of the defendants to bill of complaint in this cause, and as such stock- holder he was and is familiar with the various pur- chases by said Railroad Securities Company of stock of the Illinois Central R.R.Co.,as well as the purchases under the rights of shareholders therein in the various increases of stock of said Illinois Central R. R. Co. ; that he has also read the affidavit of Joseph F. Titus filed 133 in this cause and knows the contents thereof. Deponent further says that all of the purchases of stock of the Illinois Central R. R. Co. made by said Eailroad Securi- ties Co. under the various rights aforesaid were made by said Railroad Securities Co. and paid for at par, to-wit, $100, for each share thereof. Deponent further says that he knows of his own knowledge that as to all of said purchases of Illinois Central R. R. stock, which said Railroad Securities Co. purchased under said rights aforesaid, and have sold and disposed of by it, were sold at a price largely in advance of the cost thereof to said Railroad Securities Co., and that by such purchases and sale aforesaid said Railroad Securities Co. have realized a large profit thereon. And further deponent sayeth not. Stuyvesant Fish. Subscribed and sworn to before me the Sixteenth day of December, A. D. 1907. Chablbs "W. Vail, Clerk Superior Court. ^No. 263,420. 134 (Filed January 6, 1908.) State op Illinois, | County of Cook. \ In the Supbeiob Court of Cook County. In Chancbby. George F. Edmunds et al., Complainants, vs. Illinois Centra] Eiailroad Com- pany et al., Defendants. William H. Emrich, being duly sworn, deposes and says that lie is one of the complainants in this cause; that in paragraph twelve (12) of the original bill herein, it is averred that the Union Pacific Bail- road Company owns and holds 18,984 shares of the ]3referred stock of the Railroad Securities Company, out of a total issue of 19,369 shares, and owns 34,154 shares of the common stock of said company, out of a total issue of 34,864 2/10 shares; that since said bill was filed it has come to the knowledge of complain- ants that the present open holding by the Union Pa- cific Railroad Company of the preferred and com- mon stock of the Railroad Securities Company is as follows, to-wit: 19,359 shares of preferred stock, out of a total issue of 19,369 shares, and 34,829 shares of common stock, out of a total issue of 34,862 2/10 shares, thus leaving only ten shares of preferred stock, and thirty-five and 2/10 shares of common stock in said company not openly owned and claimed by said 135 Union Pacific Railroad Company; that as appears by Article Fourth of the Charter of the Eailroad Securi- ties Company, a duly certified copy of which is an- nexed to and made part of this affidavit, there are nine directors in said company, so that exclusive of the stock openly oAvned and held by the Union Pacific Rail- road Company, there remain outstanding to qualify the said nine directors, only 45 2/10 shares of stock in said company; that affiant is informed and believes, and upon such information and belief charges, that the said 45 2/10 shares of stock in said company, so apparently available for the qualification of the di- rectors of said company, are actually owned and con- trolled by the said Union Pacific Railroad Company, who permits the same to stand in the names of said directors, they being mere dummies for the Union Pa- cific Railroad Company; that complainants in this cause obtained their information as to' the increase of the holdings of the Union Pacific Railroad Company in the stock of the Railroad Securities Company, from the annual report of- the Union Pacific Railroad Com- pany, for the year ending June 30th, 1907, dated De- cember 5th, 1907, and printed and given tO' the public on or about December 23rd, 1907, and a copy of which was obtained by one of the complainants in this cause on December 26th, 1907, after this cause had been argued and submitted; that on page thirteen (13) of said printed report, it appears that on June 30th, 1907, the holdings of the Union Pacific Railroad Company in the stock of the Railroad Securites Company were as 136 set forth in the original hill in this cause, and on page twenty-six (26) of said printed report, it appears that on Decemher 5th, 1907, the holdings of the Union Pa- cific Eailroad Company in the stock of the Railroad Securities C-ompany were as set forth in this affidavit, as appears by a copy of said report annexed tO' and made a part of this affidavit. And further this deponent sayeth not. (Signed) WiLLiAM H. Emeich. Subscribed and sworn to before me this 6th day of January, A. D. 1908. (Signed) William J. Lacey, Notary Public, Cook County, Illinois. [NoTAEiAL Seal.] IN THE Superior Court of Cook County IN CHA.NCERY. GEORGE F. EDMUNDS et al., Complainants, vs. ILLINOIS CENTRAL RAILROAD CO. et al., Defendants. . >M. 263420-9150 BRIEK FOR COML PLAIN ANXS. PREFACE. This case turns mainly on the law and public policy of the State of Illinois. One of the principal points in- volved is whether this State has a system of laws which peiTnits her great public service corporations, and par- ticularly the Illinois Central Railroad Company, in which the State has such a large pecuniary interest, to be controlled through stock ownership by foreign cor- porations like the Union Pacific Railroad Company, a Utah corporation towing in its wake the Railroad Securities Company, a New Jersey holding company, now become, for the purposes of this case, a phantom corporation, because every share of its capital stock is owned and controlled by the Union Pacific Railroad Company, When the defendants' counsel, with awe-stricken voices, seemed to be pleading with the court that the case ought not to go agains.t them because of the enormous value of the stock', whose voting power was attacked, the court silenced this argument by asking if the case were not to be decided on the same principles as if the stock involved were worth $5,000 instead of $45,000,000. The counsel then adopted another tack. They depicted, and still depict in their briefs, the in- jury that would come to other similar foreign corpora- tions that had come, as they claimed, into the State of Illinois, and bought stock in some of her public service corporations, if the court should declare in this case that no power exists in such foreign corporations to own and vote such stock. Considerations of this kind have no weight with courts of justice in determining what the law is. The anxiety of the defendants in behalf of these other wrong-doers appears to be much greater than the anxiety of these persons for themselves, as none of the latter, in spite of the great publicity of this suit, have appeared in the court as amici curiae to aid the de- fendants in maintaining- the legal points involved. We may, therefore, be permitted to express the doubt whether there are any other corporations situated similarly to the defendants in this case. If there are, the worst that can happen to them is that they may he compelled to dispose of their illegal stock holdings, and conform to the law and public policy of the State of Illinois, or go to the Legislature for ratificatory acts. The great evil of our time^ — one which presents to the American people a tremendous problem for solu- tion and one to which their attention is now being turned, because it is an evil of very recent growth — is the monopoly of trade and transportation brought about by stockholdings of one corporation in another. That such stockholdings are the mainspring of this evil is pointed out in a striking address, delivered October 22d, 1907, in the City of Chicago before the National Civic Federation, by Hon. Wade H. Ellis, Attorney Greneral of Ohio. He said: ' ' The present situation is intolerable. The cor- porate charters as now issued by some of the States are no longer mere grants of power to en- gage in business. They are commissions to de- stroy business. In the manner in which they are used to exploit industries and stifle competition among the people of inoffending sister States, they are more like the ancient letters of 'marque and reprisal, ' which authorized adventurous privateers to prey upon the commerce of the seas." It is perfectly natural that the counsel for the de- fendants, some of whom are the most distinguished trust organizers, advisers and defenders in this nation, should appeal to the court in behalf of this "intolera- ble situation, ' ' and warn the court of the far-reaching etfect of its decision in this cause on such gigantic and vicious monopolies as the United States Steel Corpora- tion, the American Telegraph & Telephone Company and others. We, on the contrary, expressing, we be- lieve, the sentiments of the great majority of the peo- jile, hope that this case will go for the complainants, and that it will be the entering wedge which will finally dissolve all these monopolizing stockholding combina- tions, and confine the piratical corporations of New Jersey and Utah to operations within the limits of the States that created them. The Federal government has already struck one ef- fective blow at this vicious system, in the Northern Securities case, and has thus broken up one of E. H. Harriman's schemes to control parallel and compet- ing lines of railroad by means of a holding company. It is now delivering another blow in the pending suit against the Standard Oil Company. This suit presents to the Courts of Illinois the opportunity to join as a pioneer state in this righteous crusade against preda- tory corporations, and to declare, what is a manifest fact, that the Utah Statute of 1907, which gives to Utah railroad companies power to own and control the stock of every transportation corporation by land or sea in this great country, and in all parallel and compet- ing lines outside of the State of Utah, is a practical at- tempt to evade the Northern Securities case, and sets -forth a policy which every other State of the Union will use its whole power to strike down. The defendants further take the ground that to main- tain the complainant's case, would be to destroy the value of bonds, issued upon the pledge of stocks held by foreign corporations in Illinois public service cor- porations. We deny this proposition absolutely. The farthest effect of the doctrine we contend for, would be to compel the pledgor of such stocks to sell and dispose of them. It would not affect the pledgor's right to have and receive the proceeds of the sale, or the accruing dividends on the stocks. It would not affect the right of the pledgees to sell such stocks or to buy such stocks themselves, or to receive the proceeds of the sale thereof. The rule we contend for, which we believe to be the true equitable rule, is that laid down by the Supreme Court of New York in the case of Mil- hank et al. v. The Neiv York, Lake Erie & Western R. R. Co. et als., 64 Howard Practice Reports, p. 20 (.30), and followed by the Supreme Court of Louisi- ana in State ex reJ. Jackson v. Netvman, 51 La. Ann., p. 833. The Milbank case was a bill by the holders of 49 shares of stock of the Buffalo, New York & Brie Rail- road Company, suing in their own behalf and in be- half of other stockholders, to restrain and enjoin the New York, Lake Erie & Western Railroad Company from voting the stock held by it in the Buffalo & Erie Company. The sole ground of the bill was that the 6 . New York Company had no power to own and vote stock in the Buffalo Company. The court maintained this contention and said (p. 30): "My conclusions, therefore, are that while the New York, Lake Erie & Western Railroad Com- pany is the owner of the stock in question, and has the right while it remains the owner, to collect and receive the dividends thereon, and has the right to sell and dispose of the same, it has not the right to vote thereon, and that the stockholders of the Buffalo, New York & Brie Railroad Company have the right to have it enjoined from so voting in case it threatened to do so." In the Jackson case one gas company operating in one part of the City of New Orleans had bought stock in another gas company, operating in another part of the city, and had voted such stock for many years at corporate elections. Its right to vote was finally chal- lenged at a corporate election, and it was denied such right by the commissioners of election. Its rejected vote was tendered for a directory which would have been elected if the vote was legal. This defeated directory by writ of quo warranto attacked the election of the directory declared elected by the commissioners. The court held that the vote was right- ly rejected, because it was ultra vires of the New Or- leans Gas Light Company to own stock in the other company, and it quoted the Milbank case and followed its doctrine, because it found that doctrine to comport with the principles of the Louisiana civil law which es- tablishes a difference between perfect ownership, i. e. ownership in which every element is complete, and im- perfect ownership, i. e. ownership in which some ele- ment is defective. This doctrine is further supported by the case of Parish v. Wheeler, 22 N. Y., 494, quoted by the defend- ants on pages 157-8-9 of Messrs; Herrick & Shaw's brief. One of the principal reasons laid down by the courts — and one, as we shall show later, entirely ignored by all the counsel for the defendants in all their argu- ments and briefs — why ownership of stock in one cor- poration is not permitted in another corporation is that it is against public policy that one corporation should be permitted to control another as the tendency of such control is towards monopoly. As this control is ef- fected by voting on such stock, it may correctly be said that when one corporation holds apparent title to stock in another the voting power of such stock is suspended or suppressed by such public policy as long as the stock is in the hands of such holder. The public policy is accomplished by denying to such holder the voting power, and hence such policy will not be carried to the point of destroying or injuring the pecuniary values or interests in the stock so at- tempted to be acquired. As soon as the stock is trans- ferred to a competent holder, the voting power in such competent holder revives and is complete, so that the enforcement of the law does not affect the selling value of such stock. 8 We have in this State a practical instance of the application of the doctrine, in the case of the Pullman Car Company. When the courts ousted it from its right to own the town of Pullman and its large hold- ings of the stock of the Pullman Iron & Steel Com- pany, because all such holdings were ultra vires of the corporation, was its pecuniary interest in all this property sacrificed and destroyed? Most certainly not. The corporation was permitted to sell and dis- pose of all of this property and to receive the avails thereof. The shares of stock in one corporation attempted to be owned by another corporation ultra vires, are not void. They are not cancelled or annulled by sucli attempted ownership. But for all purposes, except that of enabling the covporation to realize the pecuni- ary avails of such stock and to get rid of its ultra vires position, a court of equity will treat such at- tempted ownership as an absolute and radical nullity, and will not permit such corporation when challenged by another stockholder to exercise any of the rights or functions of a stockholder. Because the complainants- recognize this pecuniary interest in stock, attempted to be held by a corpora- tion ultra vires, they are charged with being incon- sistent, and with recognizing and conceding some hind of title in the corporation to such stock. We do not recognize that the corporation which, ultra vires, has stock registered in its name in another corporation has any title in its true sense to such stock. It has nothing but the equitable right to the pecuniary value of such stock, and the equitable right to dispose of the stock in order to realize that value. This rule is necessary to prevent injustice and the destruction of property values. No modern court would maintain any other rule, or consider for a moment the savage doctrine set up by the defendants that, because a cor- poration was without power to acquire stock and yet did purchase stock and pay for it and register it on the books of a corporation, no consequences of any sort legal or equitable flow from such action. The defendants' counsel also become almost pathetic in regard to the right of the holders of the $8,000,000 of the certificates issued by the Railroad Securities Company, and secured by the pledge of the 80,000 shares of stock in the Illinois Central Railroad Com- pany, the votiug of which is enjoined in this case. What possible harm can come to such certificate hold- ers by denying the stock the rig'ht to vote! In the first place, these certificate holders are mere money creditors, whose demands can be paid off at the vn.]l of the Securities Conipany on three months' no- tice before any interest date, and at a premium of five per cent. In the second place, neither the certificate holders nor their trustee have any rig'ht to vote the stock pledged to them, as the right to vote thereon is spe- cially reserved in the deed of trust itself by the Securi- ties Company until it defaults on its obligations to its creditors — a default not likely to happen, as the 10 stock pledged is worth, and always has been worth, a large percentage in excess of the deht for which it is pledged. In the third place, if the certificate holders should be compelled to take over the pledged stock in case of default by the Securities Company, the right to vote such stock would immediately exist in the hands of such certificate holders. As stated above, the stock itself is not void. The bonds of the Securities Com- pany are valid obligations. A court of equity will en- force the pledge of the stock as against the Securities Company. See Parish v. Wheeler, supra. It is further urged that, as the Eailroad Securities Company had voted its stock at previous corporate meetings, where its vote was necessary to make a two- thirds majority on resolutions, requiring such ma- jority, whereby the Illinois Central Railroad Company had purchased the property and franchises of other railroads, to hold now that such stock cannot be voted would cast a cloud upon the title to such acquired prop- erties, and therefore the court ought not so to hold. This is not only an argument ab inconvenienti, but it is without foundation in law, as all of those contracts of 2;)urchase are executed contracts, the property being delivered and the price paid, and cannot be attacked by anybody even upon the ground of ultra vires, much less upon the ground that a de facto stockholder of record had voted for the authorization of such con- tracts whose vote was unchallenged, but which might have been objected to. 11 It is further urged as a giound to deny complain- ants ' claim that the Illinois Central Railroad Company has now pending before its stockholders the proposi- tion to acquire two additional small branch lines, that it requires a two-thirds vote to make these acquisi- tions, that if the defendants cannot vote their stock this two-thirds vote cannot be obtained at the coming- meeting, thus necessitating a special meeting, or a postponement, with the risk of not being able to acquire these properties. Apart from this being an argument ab inconvenienti of the worst kind, it appeared by the uncontradicted affidavit of Mr. Fish, that these two small branch lines are the creatures of the Illinois Central Railroad Company, which organized them, con- structed them and which owns all the securities of such companies, and that it can postpone buying them indefinitely without risk. We submit that all of the above considerations, ad- vanced by the defendants, are mere scare-crows, which have no place in a legal argument to determine tlie rights of the parties. For these reasons, we have stated them by way of preface, and shall take no further no- tice of them, except to ask the court to note that in the Northern Securities case, 193 U. S., at page 280, coun- sel foretold the same dreadful results and made the same gloomy predictions uttered by counsel in that case. 12 STATEMENT OF CASE. The bill in this case is filed by four stockholders of the Illinois Central Railroad Company, G-eorge F. Ed- munds, John A. Kasson, Stuyvesant Fish and William H. Emrich, in their own behalf and in behalf of such other stockholders similarly situated as may join them. They hold 13,447 shares of the stock of said company of the par value of $1,344,700. The object of the bill is to enjoin the Union Pacific Railroad Company, a Utah corporation, and the Railroad Securities Com- pany, a New Jersey corporation, in which the Union Pacific Railroad Company holds all the stock, from voting at, the corporate meetings of the Illinois Central Railroad Company 281,231 shares of stock held by such corporations either in their own names, or in the names of certain interposed persons, in said Illinois Central Railroad Company. The original bill sought also to enjoin the Mutual Life Insurance Company of New York from voting 5,500 shares of stock in the Illinois Central Railroad Company owned by it, and to enjoin from voting vari- ous and sundry other persons whose stockholdings were charged to be for account of the two first named corporations. The complainants dismissed the bill as to the Mutual Life Insurance Company; and, the two corporations, having disclosed in their answers the names of the interposed persons who held the stock belonging to 13 them, the complainants, by appropriate dismissals, have confined the bill to the Union Pacific Railroad Com- pany, and the persons in whose names the stock owned by it stands, the. Railroad Securities Company, and ten of its directors out of thirteen, nine of whom are charged to be controlled by the Union Pacific Railroad Company, or its President, E. H. Harriman. Several amendments were filed to the bill. The bill as amended sets forth, as preliminary mat- ter, the charter of the Illinois Central Railroad Com- pany by special act of the legislature of Illinois of Feb. 10th, 1851; its ownership or control of nearly 5,000 miles of railroad, running through eleven states, with one branch to Omaha, and a terminus on the Gulf of Mexico at New Orleans; its outstanding capital stock of 950,400 shares of the par value of $95,040,000; the names of its 13 directors; the approaching annual meeting of the company, at which four directors were to be elected, which election was to be conducted or supervised by the officials of the company. It then avers that the Union Pacific Railroad Com- pany is a railroad corporation organized under the laws of Utah, owning and controlling nearly 6,000 miles of railroad stretching through ten states and connect- ing with the leased lines of the Illinois Central Rail- road at Council Bluffs, Iowa, and at New Orleans through the Southern Pacific Company, a corporation wholly controlled and dominated by the Union Pacific Railroad Company; that three of the directors of the Illinois Centra] Railroad Company, Goelet, Peabody 14 and Harriman are also directors of the Union Pacific Company. Harriman being the president of that com- pany and the chairman of its executive committee; that all of the directors of the Illinois Central Company, except Grovernor Deneen, Beach, Cutting and Stuyve- sant Fish, are completely dominated and influenced by E. H. Harriman, so that they move, act, speak and vote merely to register his will in all matters concerning the Union Pacific Railroad Company and the Illinois Cen- tral Eailroad Company; that for some time past the Union Pacific Railroad Company under the guidance and influence of Harriman has been attempting for its own purposes to get control of the Illinois Central Company, in order that it may have it operated, not as an independent corporation, as its charter and the laws of Illinois require, seeking its own interests and bene- fits and those of its stockholders and patrons, but as a subordinate instrumentality of the Union Pacific Com- pany, as a mere feeder to its lines, and as a cheap in- let and outlet for the Union Pacific traffic east and south of Council Bluffs, and north and east of New Orleans, giving it the lean part of all traffic inter- changed between said companies, to the great and irrep- arable injury and damage of the business of the Illi- nois Central Company and its stockholders; that this design began to show itself in the year 1906 when said Harriman, then concealing from the world and from all the stockholders and directors of the Illinois Central Company, except those of them that were also direc- tors of the Union Pacific Company, the enormous pur- 15 chases of stock in the Illinois Central Company already made, attempted to elect as a director of the Illinois Central Company one De Forest, then and now a di- rector in the Southern Pacific Company, a corporation of which Harriman was and is president, and which is wholly dominated and controlled by the Union Pacific Eailroad Company; that because Fish, then president of the Illinois Central Railroad Company, opposed and defeated the election of De Forest, and because he op- posed and refused to yield to the attempts of said Har- riman to control the Illinois Central Company in the interest of the Union Pacific Company, Harri- man used his dominating influence with the majority of the directors of the Illinois Central Company to depose Fish from the presidency and to elect as president James T. Harahan, who is completely un- der the control of Harriman: that in pursuance of the design aforesaid in July and October, 1906, the Union Pacific Eailroad Company bought from Kuhn, Loeb & Co. and from three of the directors, Harri- man, Stillman and Rogers, 195,000 shares of the stock of the Illinois Central Railroad Company, and 53,138 out of a total outstanding of 54,233 2/10 shares of the capital stock of the Railroad Securities Company, a New Jersey holding company which had as its only asset 95,000 shares of stock of the Illinois Central Company; that part of this stock in the Railroad Se- curities Company was purchased personally by Harri- man from Fish, Harriman using for that purpose 8,769 shares of stock in the Illinois Central Railroad 16 Company belonging to the Union Pacific Eailroad Companyj and getting his personal pnrchase accepted as a purchase for the Union Pacific Railroad Com- pany; that Harriman, Peabody and Goelet, directors in both the Illinois Central Company and in the Union Pacific Company, concealed all these large purchases of stock from the public and from their co-directors and from the stockholders and ofiicials of the Illinois Central Company, until they were divulged by an in- vestigation set on foot by the Federal Interstate Com- merce Commission in January, 1907; that the eager- ness of the Union Pacific Company to control as large a proportion of the stock of the Illinois Central Com- pany as possible is shown by the fact that it bought the stock of the Eailroad Securities Company although it had no power under the charter so to do ; that this acquisition of 29.6 per cent of the stock of the Illi- nois Central Company by the Union Pacific Company is part and parcel of an unlawful scheme and plan of the Union Pacific Company, in violation of the laws of the United States and of the State of Illinois, to monopolize, control and dominate all the inter-state and intra-state and foreign commerce of the United States, and to eliminate all competition among com- mon carriers, by concentrating in the hands of the Union Pacific Company the control of all the prin- cipal transportation corporations by land between Can- ada and the Gulf of Mexico and between the Atlantic and the Pacific oceans, and by sea between the west- ern parts of the United States and the far east and 17 the coastwise traffic on the Atlantic and Pacific coasts ; that in pursuance of and in execution of this purpose and design the Union Pacific in its own name, or in the name of the Oregon Short Line Eailroad Com- pany, a corporation in which the Union Pacific Com- pany owns substantially all the stock, has acquired and now holds large blocks of stock in sixteen transporta- tion corporations, the Southern Pacific Company, the San Pedro, Los Angeles & Salt Lake Railroad Com- pany, the Oregon & California Railroad Company, The Northern Pacific Railroad Company, the Atchison, Topeka & Santa Fe Railroad Company, the Illinois Central Railroad Company, the Baltimore & Ohio Rail- road Company, the Chicago, Milwaukee & St. Paul Railroad Company, the Chicago & Northwestern Rail- road Company, the New York Central & Hudson River Railroad Company, the St. Joe & Grand Island Rail- road Company, the Oregon Railroad & Navigation Company, the Occidental & Oriental Steamship Com- pany, and the Pacific Mail Steamship Company; that all of the facts concerning this conspiracy against commerce by the Union Pacific Company and its co- adjutors, are set forth in detail in the report of the Interstate Commerce Commission, No. 943, which re port is made part of the bill, and the statements of this report are adopted by the complainants and charged to the same extent and as fully as if they were set forth in the bill. The bill then charges that the Union Pacific Com- pany owns and controls 10.3,431 shares of the pre- 18 ferred stock of thg Chicago & Alton Kailroad Com- pany; that up to a late date, under an agreement (now claimed to be abrogated) with the Rock Island Com- pany, the owner of 191,900 shares of such stock, the Union Pacific had been entitled to and had exercised absolute control, in alternate years since 1904, over said Chicago & Alton Company, and was actually ex- ercising that control in 1906 at the very time it was secretly acquiring its large stock ownership in the Illinois Central Company; that said Chicago & Alton Company is an Illinois corporation and owns and op- erates a parallel and competing line with the lines of the Illinois Central Eailroad Company; that said Union Pacific Company owns and controls 36,900 shares of the capital stock of the Chicago, Milwaukee & St. Paul Eailroad Company, or 6.34 per cent of the common stock of said company ; that said Chicago, Milwaukee & St. Paul Railroad Company owns and operates parallel and competing lines to. some of the lines of the Illinois Central Railroad Company; that said Union Pacific Eailroad Company owns and con- trols 25,720 shares of the common stock of the Chi- cago & Northwestern Railroad Company, or 3.32 per cent of said common stock ; that said Chicago & North- western Railroad Company is an Illinois corporation and owns and operates parallel and competing lines to some of the lines of the Illinois Central Railroad Company; that it is contrary to the laws and to the public policy of the State of Illinois that any rail- road company, foreign or domestic, should own or 19 control stock under any conditions or circumstances in parallel and competing lines of railroad, whether within or without the State of Illinois, and particu- larly in those parallel and competing lines, chartered and operating within the limits of the State of Illi- nois; that the ownership and control by the Union Pacific Company at the same time of stock in the Illi- nois Central Railroad Company, the Chicago & Alton Railroad Company, the Chicago, Milwaukee & St. Paul Railroad Company and the Chicago & Northwestern Railroad Company, is ultra vires of the Union Pacific Railroad Company, and said company should not be permitted to vote the stock held or controlled by it in the Illinois Central Railroad Company for the pur- pose of controlling and electing the board of directors of the Illinois Central Company, in whom by the char- ter all the corporate powers of the company are rested, or to vote said stock for any purpose whatever. The bill next avers that in pursuance of its system of concealment of its ownership and control of such a large proportion of the stock of the Illinois Central Railroad Company, — a proportion which is sufficient under ordinary circumstances to give entire control of a corporation whose stock is held by some nine thousand stockholders scattered all over the United States and Europe, many of whom do not vote, and few of whom attend the meetings of stockholders, as is the case of said Illinois Central Railroad Company — the Union Pacific Railroad Company has not trans- ferred to itself on the books of the Illinois Central Rail- 20 road Company a single share of its purchases, but holds the same in the names of certain persons whose names are given, who are charged to be persons interposed witliout any interest in the stock at all. The bill next avers that the Eailroad Securitieis Company is a New Jersey corporation, whose cor- porate powers are defined in the Second Article of its charter, which is set out in full and which shows that it is a mere holding company for the stocks and securi- ties of public service corporations, and particularly of transportation companies ; that E. H. Harriman is the president of said company ; that of the 95,000 shares of stock in the Illinois Central Railroad, which are its sole asset, 80,000 shares are pledged to the U. S. Trust Co. of New York to secure its outstanding bonded in- debtednesB of $8,000,000, and stand on the books of the Illinois Central Company in the name of the Se- curities Company; that on Sept. 18th, 1907, five days before the stock books of the Illinois Central Railroad Company were closed for the annual meeting of Octo- ber 16th, the other fifteen thousand shares of Illinois Central stock owned by the Securities Company were put into the names of the president and other officials of the Union Pacific Railroad Company, who are charged to have no title thereto and to hold the same as interposed persons for the Securities Company. The bill next makes certain averments relative to the Mutual Life Insurance Company, which we omit because the bill has been dismissed as to that com- pany. 21 The bill next avers that, whatever may be the right of said Union Pacific Railroad Company under the laws of Utah, or of the Railroad Securities Company under the laws of the State of New Jersey to invest in the stock of the Illinois Central Railroad Company, yet under the laws and public policy of the State of Illinois neither of them has any right, power or au- thority to own or hold stock of the Illinois Central Company, and particularly no right to vote said stock at the stockholders' meetings of said company, and that such owning and holding of such stock either in their own names or in tlie names of interposed per- sons, who have only a simulated and paper title to such stock, is illegal, ultra vires, null and void. The bill next avers that complainants made no ap- plication to the Board of Directors to bring this suit. First, because they were advised that they have an individual right as stockholders to appeal to a court of equity to prevent and enjoin from voting at the cor- ])orate meetings of their own company any corpora- tion absolutely without right under the laws and pub- lie ]>olicy of the State of Illinois, to hold and vote stock in such company, particularly where such coi'porations are, as in this case, foreign corporations, united to- gether by stockownership under one management, and holding such a percentage of the stock of the Illinois Central Railroad Company as to give power to dom- inate and control all corporate meetings of the stock- holders of such company, and such' corporations are 22 engaged in the unlawful schemes and plans elsewhere set forth in detail in the bill. Second, because it would have been an idle ceremony to make such application for the following reasons : (a) That a majority of the directors of said Illinois Central Railroad Company would have to authorize or direct the bringing of said suit, and eight of said thirteen directors, a majority of said board, to-wit: Edward H. Harriman, Charles A. Peabody, Robert Walton Goelet, John Jacob Astor, Cornelius Vander- bilt, Alexander G. Hackstaff, James T. Harahan, and John W. Auchincloss, believe, hold and maintain and" have been advised that said Union Pacific Railroad Company and said Railroad Securities Company have, and each of them has, the moral right as well as the full legal right to hold and vote all stock held by them, or by either of them, in said Illinois Central Railroad Company, and therefore would have regarded the bringing of such suit as a groundless and vexatious action, which they have been advised, informed and be- lieve would injure large interests throughout the coun- try generally and also injure other corporations sim- ilarly situated, in which they are stockholders, bond- holders or directors, and would also injure said Illi- nois Central Railroad Company itself; (b) That three of said directors, to-wit: Edward H. Harriman, Robert Walton Goelet and Charles A. Peabody, who are also stockholders in and directors of said Union Pacific Railroad Company, which holds sub- stantially all the stock of said Railroad Securities Com- 23 pany — said Harriman being the president of both com- panies — and all three of them liaving participated in the proceedings whereby said Union Pacific Railroad Company bought the stock of said Railroad Securities Company and of said Illinois Central Railroad Com- pany, would not have permitted such suit to be brought against either or both of said companies, because of their personal interests therein, and because such suit would be an attack upon a transaction which they per- sonally advised, promoted and participated in, where- by said Union Pacific Railroad Company was induced to expend and did expend more than $41,000,000 in the attempted purchase of stocks, and because all three of them, through their connection with said Union Pacific Railroad Company as stockholders and directors, were participants in and aiders and abettors of the unlawful and void schemes and plans of said Union Pacific Railroad Company, elsewhere set forth in detail in the bill in this cause ; and that the five other directors, to- wit: John Jacob Astor, Alexander Gr. Hackstaff, James T. Harahan, Cornelius Vanderbilt and John W. Auchincloss, would 'have been earnestly advised, solic- ited and directed by said Edward H. Harriman not to vote for any resolution or direction to bring or to au- thorize the bringing of such suit, and would have ac- ceded to and followed such advice, solicitation and di- rection and would have voted with said Harriman, Pea- body and Goelet, making a large majority of said Board of Directors, against any resolution or direction to bring or to authorize the bringing of such suit, for the 24 reason that they are intellectually absolutely under the influence, control and domination of said Harriman and always have followed, and, as your orators charge, always will follow his advice, opinion, suggestion and direction in all matters which come for considera- tion before said Board of Directors of said Illinois Central Railroad Company; (c) That the personal hostility of eight of the di- rectors of said Illinois Central Railroad Company, to- wit : Edward H. Harriman, Charles A. Peabody, Rob- ert Walton Goelet, John Jacob Astor, James T. Hara- han, Cornelius Vanderbilt, Alexander G. Hackstaff and John W. Auchincloss, being a large majority of said board, to one of your orators, Stuyvesant Fish, is so great and bitter that even if the considerations above set forth did not exist and especially with such consid- erations existing as averred, would have voted against any resolution or direction to bring this suit, or any other suit having a similar object or purpose, because they fear and believe that, if said Union Pacific Rail- road Company or said Railroad Securities Company, or both, have no power to vote and cannot vote the stock held by them respectively in said Illinois Central Railroad Company at the annual meeting of said com- pany for the year 1907, and at all subsequent meetings of the stockholders of said company, said Stuyvesant Fish at all such meetings of stockholders would control and vote the majority of the stock of said company either in person or by proxy as he has done for the last twenty-five years, and would cause himself to be elected 25 a director — to defeat which election they are now de- voting all their energies and influence — and said Stuy- vesant Fish would also defeat the election of said eight last-named directors when their respective terms of of- fice shall expire, their desire to hold such directorship being great and consuming. The bill next avers that it is the purpose and inten- tion of the Union Pacific Eailroad Company and the Eailroad Securities Company to vote their stock in the Illinois Central Eailroad Company, both that standing in their own names on the books of the company and that held by their interposed persons, at the approach- ing annual meeting of October 16th, 1907, of the stock- holders of the Illinois Central Eailroad Company, and at all such subsequent meetings; that such stock will be voted at such meetings in pursuance and in execu- tion of the design and purpose of the Union Pacific Eailroad Company to dominate and control the Illinois Central Eailroad Company, and in pursuance and in execution of its unlawful scheme and plan to monopo- lize, control and dominate the interstate and foreign commerce of the United States, and to eliminate all com- petition among common carriers and to prevent and suppress competition, and to these ends the said stock will be voted at the coming election for the purpose of re-electing on the directory of said Illinois Central Eailroad Company the said E. H. Harriman, president of the Union Pacific Eailroad Company and chairman of its executive committee, and controller of the policy of the Union Pacific Eailroad Company, and John 26 Jacob Astor and Alexander G. Hackstaff , who are tmder the domination and control of said Harriman, and for some third person named and selected by Har- riman, and to these ends said stock will be voted at all subsequent elections so as to eliminate from the Board of Directors of the Illinois Central Railroad Company all directors not under the influence and domination of the Union Pacific Railroad Company, whereby said Union Pacific Railroad Company will succeed in car- lying into execution pro tanto its unlawful and void plans and purposes aforesaid by the exercise of an ul- tra vires holding and voting of stock in the Illinois Central Railroad Company, in contravention of the public policy of the State of Illinois and to the great and irreparable damage and injury of your orators as stockholders aforesaid ; that it is the intention and pur- pose of said Illinois Central Railroad Company, of its officers and directors, of its commissioners 'of election and tellers of election, to permit said stock so held or registered to be so illegally voted; that the complain- ants as stockholders have no remedy to prevent such illegal action except in a court of equity and by means of the writ of injunction. The bill then prays for an injunction against the Union Pacific Railroad Company, the Railroad Securi- ties Company, and various persons in whose names the stock of the Illinois Central Railroad Company held by said companies is carried, restraining them from permitting said stock to be voted at the annual meeting of the stockholders of October 16th, or at any adjourn- 27 ments thereof, or at any subsequent corporate meet- ings of stockholders. The relief prayed for is a per- petual injunction and that the two defendant companies that own stock in the Illinois Central Railroad Com- , pany be ordered to sell and dispose of such stock with- in a reasonable time to be fixed by the court. The bill was sworn to by Stuyvesant Fish, one of the complainants. The court ordered an injunction to issue upon a bond for $10,000. The bond was given and approved and the injunction issued October 14th, 1907. On motion of' some of the defendants, based on the claim that Harahan, the proxyholder for the Harri- man intei'ests, had votes enough to elect a board of directors without using the enjoined vote, an order was entered by consent on Oct. 15th, 1907, under the terms of which he could have exercised such a power if he had it at the stockholders' meeting which con- vened the next day. It was provided in that order that if the counting of the enjoined vote made a difference in the result of the election, then the stockholders' meeting should be adjourned to Deo. 18th, 1907. The object of this adjournment was to hear the enjoined parties on their right to vote. After the count of the proxies had proceeded for five days, it became mani- fest that the enjoined vote would determine the result of the election, and all parties agreed to a postpone- ment of this adjourned meeting to Dec. 18th. That date fell in the midst of the argument of the cause, and the annual meeting was postponed until March 28 2d, 1908, to enable the court to dispose of the issues as made. No answers, and no pleadings, except certain excep- tions to some allegations in the bill, have been filed by E. H. Harriman, Charles A. Peabody and R. W. Goelet, and nothing whatever has been filed by Luttgen except a short aJ05,davit. Five of the directors of the Illinois Central Railroad C'ompany, Astor, Hackstaff, Auchinoloss, Vanderbilt and Harahan, filed a joint answer in which they admit some of the averments of the bill, specially deny others, say they are not informed as to others, omit all refer- ence as to others, aver that Fish is a director in the Missouri Pacific Railroad, a parallel and competing line to the Illinois Central Railroad, set up a long string of charges against Fish as the reasons why they refused to re-elect him president, and then plead in behalf of the Railroad Securities Company an estoppel against the complainants' objections to its right to vote its stock in the Illinois Central Railroad Company. They decline to admit or deny the aver- ments of the bill as to the purchases of stock in the Illinois Central Railroad Company and the Railroad Securities Company by the Union Pacific Railroad Coni])any, and call for strict proof of it. They admit that the Union Pacific RJailroad Com- pany owns or controls some of the stock of the Illinois Central Company, but as to the number of shares of such stock they have no information, make no answer and call for strict proof. They say they are 29 not advised as to tlie powers of the Union Pacific Rail- road Company, but they deny that its ownership of part of the capital stock of the Illinois Central Com- pany is part and parcel of any unlaiwful scheme or plan of the Union Pacific Railroad Company. Nor are they advised as to the ownership by the Union Pacific Railroad Company of stock in the Chicago & Alton, of the Chicago, Milwaukee & St. Paul, or of the Chicago & Northwestern Companies, nor as to the purpose nor as to the effect thereof. No reference whatever is made in the answer to the Report of the Interstate Commerce Commission No. 943, the findings of which are made part of the aver- ments in the bill. Harahan, for himself alone, avers that he holds proxies for a large number of shares of stock in the Illinois Central Company, and that, unless restrained by the court, he expects and intends to vote them at the coming election for such persons as in his judg- ment are qualified to serve the best interests of the Illinois Central Railroad Company. The answer of the Railroad Securities Company admits some of the formal averments of the bill ; sets up an estoppel against the complainants' objections to its right to vote on its Illinois Central stock; avers that the 15,000 shares transferred on the books of the Illinois Central Company in September, 1906, were sold by it to the Union Pacific Railroad Company who directed it to be registered in the names of the per- sons set up in paragraph 17 of the bill ; avers that Fish 30 is a candidate for re-election as director; that he has appealed to the stockholders to send him their proxies, falsely pretending that he was denied re-election as president of the Illinois Central Company because of his insistence upon the preservation of the indepen- dence of the Illinois Central Railroad Company, whereas in truth and fact he was denied re-election as such president because of his misconduct in office ; that Fish is a candidate for election as president of the company; that the complainants, Edmunds, Kasson and Emrich, are supporters of his ; that this bill was filed and the application for injunction made for the purpose of enabling Fish and his associates, repre^ senting only a minority interest in the stock, to elect Fish and his nominees directors and thereby secure Fish's election as president, contrary to the wishes of the holders of the great majority of the stockholders; that Fish has solicited his co-complainants tO' permit him to use their names as complainants and that the entire expenses of the suit are being borne by him, the said suit being conducted in the interest of his cam- paign for re-election. It avers that it proposes to vote said stock at the annual meeting of 1907 for Har- riman, Hackstaff and Astor and a third person, an honest, independent and able business man, not identi- fied or connected with this defendant or with the Union Pacific Eailroad Company in any manner. It avers that its right to vote its stock in the Illinois Central Company is an important element of the large value of such stock, that it is a property right, and that under 31 the laws of New Jersey it lias the right to own and vote such stock. It avers that under the charter of the Illinois Central Company its shares of stock are personal property, that defendant acquired such shares in New York where the certificates now are. It denies that its acquisition of said shares^ and the right to vote the same is in contravention of any law of the State of Illinois. The answer of the Union Pacific Railroad Com- pany admits the preliminary allegations of the bill, avers that its lines form a connecting line with the Illinois Central lines at Omaha, and together they con- stitute a through line from New Orleans and all points on the Illinois Central lines between New Orleans and Chicago and points in the western states traversed by its own lines ; that the lines of the Illinois Central Railroad Company are not in whole or in part parallel and competing with any of the lines of rail- road of the Union Pacific or the Southern Pacific Company; denies that Harriman completely or in any respect controls any of the directors of the Union Pa- cific or of the Illinois Central companies; denies that it has ever been attempting to get control of the Illi- nois Central for its own purposes or that it has ever had any plans or purposes attributed to it in the bill; avers that it had power under its charter to acquire stock in the Illinois Central and that such acquisition was not contrary to the laws of Illinois; avers that it is in a position to give the Illinois Central Com- pany a large amount of tonnage if it wants to, or 32 to divert it to rivals of the Illinois Central ; tliat Fish, when president, advocated the construction of the lines of the Illinois Central connecting with the Union Pa- cific lines on the ground that the Illinois Central could acquire a large tonnage from the Union Pacific; ad- mits that in 1906 it acquired 186,231 shares of stock in the Illinois Central and gives the names of the persons in whose names the stock stands registered on the books; denies that it had such 'stock put into the names of such persons to conceal ownership, but says the stock was in such names when it bought it and was kept in such names according to usage and custom for convenience of handling; avers that in September, 1906, it bought 15,000 shaires of additional Illinois Central stock from the Railroad Securities Company and had it put in the names of the indi- viduals mentioned in the bill; admits that the election of De Forest, a director in the Southern Pacific Com- pany, was advocated by a majority of the Illinois Cen- tral directors, but only because he was a man of abil- ity, integrity and independent character, experienced in railroad affairs and for no other reason ; admits that the majority of the directors of the Illinois Central refused to vote for Fish as president and elected Hara- han president, but denies that such events had any relation to the designs attributed to it in the bill; avers that Fish was not elected because he was not a fit person in the judgment of the directors, and that Harahan was elected because he was the better man; denies that Harahan is under the control of either it- 33 self or Harriman, or that either itself or Harriman ever requested or intended to have Fish yield control of the Illinois Central Company to it ; avers that since Fish retired from presidency no change has been made in the officials of the Illinois Central, except one, caused by death, and no changes in traffic arrangements be- tween the Illinois Central and the Union Pacific and Southern Pacific Companies; denies that its acquisi- tion of stock in the Illinois Central is part and parcel of any scheme in restraint of interstate commerce or foreign commerce, or in violation of the laws of Illi- nois as averred in the bill, or that it is seeking to get by purchase and ownership of large blocks of stock of transportation companies, the control of -such cor- porations. (Note that nowhere in the answer of the Union Pacific Railroad Company and nowhere in the affidavits in support of that answer is there any state- ment of what the purpose of the Union Pacific Eail- road Company was in attempting to acquire such a large holding of stock in the Illinois Central Rail- road Company, or in any of the lines parallel and competing with it, or in any of the other corporations set forth in the bill. It cannot be claimed that these purchases were investments of its surplus funds be- cause it borrowed money and went heavily into debt in order to make the purchases.) Denies that it ever entertained or acted upon any such scheme or plan; avers that the ownership of the shares of stock by itself and the Oregon Short Line Railroad Company in the corporations set up in the bill has been and is 34 a matter of public record, and all such acquisitions of stock by both companies were valid under the laws of Utah and not in violation of the laws of the United States or of any state. As to Exhibit A, the' Interstate Commerce Com- mission Eeport No. 943, it declines to answer and says that "it is advised and insists that said exhibit and the averments of tlie bill of complaint with re- spect to said Exhibit A, and each of them, and the statements contained in said Exhibit A, and each of them, are immaterial and impertinent, and that this defendant by reason thereof is not required to make answer unto the same." The answer then admits that in 1904 it acquired 103,431 out of 399,861 shares of the Chicago & Alton Railway Company, but denies that it ever had a suf- ficient amount of such stock to control said company, or that it ever did become entitled to exercise abso- lute control of said company; avers that the pooling arrangement whereby its stock was voted in harmony with 191,000 other shares in the Alton was abrogated in June, 1907; that thereafter the majority of the capital stock of the Alton was acquired by the Toledo, St. Louis & Western Eailroad Company, a corporation in which it has no interest, which completely dominates and controls the policy and management of the Alton and that at the October election of 1907 in the Alton the defendant did not elect a single director. The answer further denies that the Union Pacific Railroad Company owns 36,900 shares of the Chicago, 35 Milwaukee & St. Paul Eailroad Company, but avers that said stock is owned by the Oregon Short Line Eailroad Company, that such ownership is only 3.43 per cent of total capital stock of said Chicago & Mil- waukee Companj^; and denies that it owns 25,720 of the Chicago & Northwestern Eailroad, but avers that said 25,720 shares are owned by said Oregon Short Line, and constitute only 2.58 per cent of the total capital stock of said Chicago & Northwestern Com- pany. It avers that these amounts are so small as to be insignificant ; that they were not acquired for the pur- pose of controlling or influencing the affairs of said companies; that they are not sufficient to give it a voice in the management of the affairs of either com- pany; and that it has never by its voting power on such stocks or otherwise been able to elect a director in either company. The answer further denies that defendants' owner- ship in stock in the Illinois Central Eailroad Company is ultra vires, or that it was acquired with the purpose or design of suppressing or limiting competition be- tween the defendant and the Illinois Central Company or between the Illinois Central Company and any other railroad company, and avers that at no time since it acquired its Illinois Central stock and had an oppor- tunity to vote on it, has it been in control of the Chica- go & Alton, or the Chicago, Milwaukee & St. Paul, or the Chicago & Northwestern Company. The answer then avers that by the charter of the Illi- 36 nois Central Company, its stock is personal property and may be transferred at such places as the directory may provide, that a by-law of said company enacted in 1851 provides that all transfers of stock shall be made in New York, at which place a transfer office has been maintained since the by-law was adopted; that defendant purchased its shares of stock in New York where the certificates were delivered to it and that they are still in New York in defendant's possession. The answer then repeats verbatim the averments of the answer of the Railroad Securities Company as to Fish's candidacy, solicitation of proxies, solicitation of his co-complainants, prosecution of the suit for his benefit, etc. Defendant then avers that it intends to vote its stock at the annual meeting for Astor, Harriman, Hackstaff and for some honest, independent and able business man, not identified or connected with the defendant and against Fish, because, while president, he showed him- self to be an unfit person to be a director ; that its stock in the Illinois Central Company is of great value, and one important element of that value is the right to vote it; that said right is a property right, and thai under the laws of Utah it has the right to hold and vote such shares and has the same right under the laws of Illi- nois. The position taken by the Illinois Central Railroad Company in this litigation is erratic and peculiar, and looks very much like trifling with the court. On the 15th of October, when motion was made to modify the 37 injunction, the learned and distinguished counsel for the company announced to the court that this cause was a fight between some of the stockholders of the com- pany, in which the company had no interest and in which it would occupy a neutral position. Thereafter on Nov. 22nd the company filed a demurrer in which it set up that it ought not to have been made a party to this suit. With this demurrer still on the record, the defendant oh December 12th made a motion without prejudice to its demurrer, to dissolve the injunction for want of equity on the face of the bill. The counsel then argued that the bill was without equity: First, because the bill shows no application was made to the directors to bring the suit, and fails to show suf- ficient reason for not making the application: Second, because the bill does not show any such im- pending injury or wrong as justifies the interposition of an injunction; Third, because the bill shows that the suit to enjoin the voting of the stock is premature, as the election can work no injury to complainants. The learned counsel for the Illinois Central Com- pany did not confine himself to these arrounds in argu- ment, but presented a strong and elaborate plea that the complainants had no case at all because the tivo defendant foreign corporations had the full right under the laws of Utah, Nen- Jersey and Illinois to hold and vote stock in the Illinois Central Railroad Company, and that the denial of this right to them would injure the Illinois Central Railroad Company, because it 38 would cast a cloud upon the title to some of its ac- quired properties, tlius constituting the company, speaking by its counsel, presumably under the direc- tion and authority of its directors, the unqualified de- fender and partisan of the Union Pacific Railroad Com- pany and the Railroad Securities Company. But the complainants having amended their bill after this argument was made, and set up in detail in para- graph 19A, the reasons why it would have been an idle ceremony for them to apply to the directors of the Illi- nois Central Eailroad Company to bring this suit, on the supposition that that company alone could bring it, it became necessary to make another shift of position. It became necessary to disappear as the defender and partizan of the two defendant foreign corporations, and to appear as a benign parens patriae who would have responded to the demand to bring this suit. Hence the defendant now appears with an elaborate answer in which it sets up that it has no knowledge of the cor- porate powers of the Eailroad Securities Company and that the owning and holding of stock by the Union Pacific and the Railroad Securities Company in the Illinois Central Company is a question of law which it submits to the court. More than half of this an- swer, from the middle of page 5 to the bottom of page 10, is devoted to an argumentative, insufficient and in- complete denial of paragraph 19A of the amended bill, setting forth the specific grounds why it would have been an idle ceremony for the complainants to have 39 asked the directors of the Illinois Central Company to bring this suit. The only complete and effective answer to this para- graph would have been to saif thai if the demand had been made the suit would have been brought. No such answer is made or is implied. This answer is supported by the affidavits of Astor, Hackstaff, Van- derbilt, Auchincloss, Harriman, Harahan, Groelet and Peabody, cast in the same language and following almost identically the argumentative, insufficient and incomplete averments of the answer, and by the affi- davit of Luttgen, who was not included in the aver- ments of paragraph 19 A of the bill. His affidavit is very short and very guarded. He does not deny that he or his co-directors are dominated by Harriman. He says that he has never voted prejudicially to the interests of the Illinois Central Company; that no con- tracts between the Union Pacific and the Illinois Cen- tral have been before the board for action for two years ; that no dealings have been had between the companies except track connections and use of depot at Omaha, negotiated by Fish, and for interchange of traffic and division of rates iii regard to which there have been no changes within the year. He denies that it would have been an idle ceremony to have made application to the directors to bring -this suit. He denies, on information and belief, that the majority of the directors had been advised tvhen this suit ivas brought, that the Union Pacific Railroad Company and the Railroad Securities Company had a moral or legal 40 right to vote their stock in the Illinois Central Com- pany. He says that before this suit was brought no question as to the voting of said stock, or as to Fish's plans to exclude it from voting, had arisen. None of the affidavit-makers say they would have authorized the bringing of the suit if application had been made. Surely the counsel for the railroad company was not aware when he filed this answer and prepared these affidavits for the directors that five of them, Astor, Hackstaff, Harahan, Vanderbilt eind Auchincloss, had on Nov. 23d filed a plea of estoppel in behalf of the Railroad Securities Company. The only material admission in the answer is that the Chicago & Alton, the Chicago, Milwaukee & St. Paul, and the Chicago & Northwestern Companies are owners of lines that compete with the lines of the Illi- nois Central Company. The only material denial in the answer is that of the averment in the bill that the 29.6 per cent of the Illi- nois Central Bailroad stock held and controlled by the Union Pacific Railroad Company is sufficient to give the latter control of its stockholders' meetings. This averment of the bill is not denied in any of the answers of the other defendants, nor is it referred to in the remotest manner in the affidavits of any of the parties defendant. In keeping with its new attitude as benign parens patriae, necessary to be assumed in order not to make contradictory its now strongly urged defense that complainants ought to have applied to it to bring tiiis 41 suit and that such application would not have been an idle ceremony, the brief filed in its behalf no longer argues and maintains the rights of the other defend- ants to vote their stock. The affidavits of Harriman, Peabody & Groelet, the three directors of the Union Pacific Railroad, follow almost verbatim the answer of the Union Pacific Eail- road Comp'any, containing the same conspicuous omissions, i. e., all reference to the purchase and ownership of the stock of the Railroad Securities Com- pany by the Union Pacific Company, all reference to the facts found in the Interstate Commerce Commis- sion report, all reference to the averment that the stockholdings of the Union Pacific Company in the Illinois Central Company are sufficient to control that company, and all reference to the charge that they con- cealed the Union Pacific's large purchases of stock from the officials and stockholders of the Illinois Cen- tral Company. The affidavits of Auchincloss and Vanderbilt are ])ractically identical. They say they are familiar with the Illinois Central Company's business, lines and traffic conditions; that its lines are not parallel and competing with the lines of the Union Pacific or the Southern Pacific Railroad, but are connecting lines; that large amounts of tonnage originate in the west and move over the Union Pacific and Southern Pacific lines to points on the Illinois Central lines, which is to the public advantage ; that the directors of the Illinois Central Company are not dominated by any one of 42 their number, but tbat eacti acts according to Ms in- dependent judgment; that Fish was not re-elected president because of the opposition of Fish to any alleged attempts of Harriman to control the Illinois Central in the interest of the Union Pacific Company, and that to the best of their knowledge and belief no such attempt was ever made; that Fish's retirement had no relation to any purchases of stock in the Illi- nois Central Railroad by the Union Pacific Company and was not due to the influence of Harriman; that the reasons actuating them in voting against Fish are set forth in two exhibits, one a letter to Fish dated November 7th, 1906, and in a circular to stockholders dated November 27th, 1907 ; that they voted for Hara- han because he was a man of strong and independent character, and had for seventeen years, as second vice- president, been charged with responsibility for its railroad operations ; that at no time since Fish's re- tirement and Harahan's election has there been before the board any proposition or suggestion whereby the Union Pacific Railroad Company could obtain any ad- vantage or profit at the expense of the Illinois Cen- tral Company; that no change has been made in traffic arrangements between the companies, and no effort to conduct the affairs of the Illinois Central Company in the interest of the Union Pacific Company; that Fish has been soliciting proxies to secure his election and that of his nominees as directors so that he can be elected president; that in his letter and appeals to the stockholders he has misrepresented the reasons for his 43 retirement as president ; that the majority of the stock- holders are opposed to the re-election of Fish as di- rector or as president ; and that the purpose of the in- junction, as they believe, is to permit Fish by the aid of a minority of the stock to be elected director and president. The affidavit of J. T. Harahan refers only to the proposition coming .before the stockholders' meeting to buy the Memphis & State Line Eailroad and the Kensington & Eastern Railroad, and to the necessity of letting the Union Pacific and the Eailroad Securi- ties stock vote at such meeting in order to get a two- thirds vote. The affidavit of Louis C. Fritch, assistant to the president of the Illinois Central Company, shows that at stockholders' meetings held in 1901, 1902, 1903, 1904, 1905 and 1906, the stock of the Railroad Secur- ities Company was voted for propositions to buy cer- tain railroads which required a two-thirds vote of the stockholders; that the vote of that company was cast by Stuyvesant Fish, its proxy, and was necessary to make the two-thirds vote. The affidavit of Joseph F. Titus, another assistant to the president, shows that for the purpose of rais- ing money for its corporate purposes the Illinois Cen- tral Railroad increased its stock twice in 1901 and twice in 1902, and that of this increased capital stock the Railroad Securities Company was permitted to subscribe at par for 42,647 shares for which it paid to the Company $4,264,700. 44 One of the affidavits of Stuyvesant Fish shows that this subscription was of great benefit to the Railroad Securities Company, because it was permitted to sub- scribe at par when the value of the stock was much greater, and that all the subscribed stock has been sold at a large profit leaving that company now with its original holdings of 80,000 shares. The affidavit of Charles C. Tegethoff, treasurer of the Railroad Securities Company shows that in the latter part of 1900, or early part of 1901, that com- pany purchased 80,000 shares of Illinois Central stock of which 26,500 were purchased from Stuyvesant Fish, who received in payment therefor $2,650,000 in bonds, and 18,550 in shares of the Securities Com- pany, which shares, minus 50 transferred to one Hut- chins, he continued to own until November 12, 1906, when he transferred them to E. H. Harriman; that Fish was elected a director of the Company in Octo- ber, 1901, and vice-president in December, 1902, and remained a director and vice-president until 1906; that in April, 1902, the Company issued $8,000,000 of Illinois Centra] stock interest certificates, and depos- ited and pledged with the U. S. Trust Company of Xew York, 80,000 shares of stock in the Illinois Cen- tral Company as security for such certificates; that such certificates were listed on the New York Stock Exchange and bought and sold on the market and large amounts of them are now in the hands of bona fide purchasers; that some of these certificates were issued during Fish's term of office as vice-president 45 and a large amount of them are outstanding signed by Fish on behalf of the company; that Fish received the proxy of the company to vote on its stock sit the Illinois Central meetings for 1901, 1902, 1903, 1904, 1905 and 1906; that Fish made special efforts, which are detailed, to get the company's proxy in 1905; that the sole asset of the Securities Company and the only asset it ever possessed, consists of shares of Illinois Central stock and the income and proceeds thereof; that all this stock was purchased in the City of New York and transferred to the company on the books of the Illinois Central Company at New York. To this affidavit is annexed a copy of the trust deed to the U. S. Trust Company, which shows that the right to vote on this stock is specially reserved in the Securities Company until it shall default on its obligations, and that these obligations are mere money obligations which can be called in and. paid with a premium of 5 per cent at will by the Securities Company on giving three months notice before any interest payment period. The affidavit of D. E. Burbank, assistant secretary of the Illinois Central Company, shows that Stuyve- sant Fish as proxy voted simultaneously the stock of the Eailroad Securities Company, the complainant Kasson, the complainant Edmunds, and individually voted his own stock at the annual meetings of the Illi- nois Central Company for the years 1901, 1902, 1903, 1904, 1905 and 1906; that the complainant Emrich bought 5 shares of stock in the Illinois Central Com- 46 pany in September, 1907, from one Jackson, who had purchased these five shares, together with other stock in 1907 from M. & H. Clarkson, E. F. Hutton & Co. and Wilfrid Wylie; that M. & H. Clarkson were stockholders in the company in the years 1902, 1903, 1904, 1905 and 1906, and had voted at the meetings in such years through said Fish, their proxy; that Hntton & Company were stockholders in 1903 and that year voted their stock by Fish as proxy; that said Hntton & Company were also stockholders in 1906 (but the aflfidavit does not state that they voted on such stock acquired in 1906, nor that the stock so acquired had ever been voted, nor that these persons were stockholders in 1904 and in 1905) ; that Wylie was a stockholder in 1906 and his stock was voted that year by Fish as proxy. It is on the facts stated in the affidavits of Titus, Fritch, Burbank and Tegethoff, that the Railroad Se- curities Company bases its claim of estoppel against the complainants. The counter-affidavit of Stuyvesant Fish shows that he had been a director of the Illinois Central Railroad Company continuously since March, 1877, and had since that date been either treasurer, or second vice presi- dent, or sole vice president, or president, the latter of- fice being held from May, 1887, to November, 1906; that from May, 1882, to October, 1906, the majority of the stockholders of the company had annually entrusted him with their proxies; that controlling these proxies he, himself, had put on the directory of the company all 47 of the persons who are now his enemies; that he put Goelet there at his personal solicitation based on the ground that his ( Goelet 's) father had been on the board ; that to show the control of Harriman over Goe- let, the latter went to Europe in September, 1906, to spend the winter, parted from Fish in the most amic- able manner, returned to the United States on the cable of Harriman to attend the meeting of the directory called by Harriman to depose Fish from the presidency, concealed his presence in this country from Fish, at- tended the meeting, voted against Fish and returned to Europe the next day; that Harahan was indebted to Fish for his position in the company, for numerous increases in salary, and when he fell sick, for his re- tention against the objection of Harriman and Pea- body, that the most kindly personal relations existed between afiiant and all the affidavit makers in this case, and perfect harmony between them in the policy and management of the company until the winter of 1904-5, when Harriman and Peabody, then directors in the Union Pacific Eailroad, tried to establish an executive committee, clothed with all the powers of the board (the court will note that the Interstate Commerce Com- mission finds that this was the device by which Harri- man exercised all the powers of the Union Pacific Eail- road and that this executive committee scheme was con- temporaneous with the purchases of large blocks of Hlinois Central stock by Kuhn, Loeb & Co., the fiscal agents of the Union Pacific Railroad Company, and Harriman 's associates in the handling of the Chicago & 48 Alton) ; that Fish opposed and defeated this sclieme and subsequently discovered that this defeat had ex- cited the hostility of Harriman and Peabody the latter of whom became subsequently embittered against him because he refused to be a party to a whitewashing re- port of the officials of the Mutual Life Insurance Com- pany; that about this time began large purchases of stock in the Illinois Central Company by Kuhn, Loeb & Co., fiscal agents of the Union Pacific Company, which excited his suspicions ; but they declared to him that they were mere investment purchases for them- selves and friends; that at that time Harriman owned in his own right only 130 shares of stock on the books of the Illinois Central Company, the other 5,000 shares standing in his name being the property of the Eail- road Securities Company ; that in the summer of 1906, in pursuance of a practice followed by him for more than 20 years with the full knowledge and acquiescence of the directors and without any objection from them, he sent out, at his own expense, his usual circular ask- ing the stockholders to send him their proxies for the coming annual meeting; that on July 18th (mark the date, and the proceedings taken next day, July 19th, in the Union Pacific Board to buy 195,000 shares of Illinois Central stock, and the majority of the Eailroad Securities Company stock, which owned as its only as- set 95,000 additional shares of such stock), to his sur- prise objection was for the first time made to his solici- tation of proxies, and Peabody moved that a commit- tee of directors named hy him, be appointed to solicit 49 proxies from the stockholders ; that he hnmediately de- nounced this motion as a device to put the control of the Illinois Central Eailroad Company into the hands of the Union Pacific Company, which already had three «of its directors on the Illinois Central Board, and broke the quorum ; that on July 26th at a conference between himself, Harriman and Peabody, it was agreed that the vacancy in the board caused by Grrinnell's death was to be filled by somebody not in anyway connected with the Union Pacific Railroad and the manner of selecting such person not being settled that day, the conference was adjourned until the next day, July 27th, when a document was signed by the three to the effect that the three outgoing directors were to be re- elected; that Grinnell's successor was to be chosen by a majority of the directors; that Peabody's resolu- tion of July 18th was to be withdrawn and not renewed this year and that Harriman would ask that the Kuhn- Loeb proxies be given to Fish ; that this agreement as originally drafted contained the words: "Union Pacific Proxies," but this was stricken out on Harriman 's statement that there were nO' "Union Pacific" proxies; that Fish put in these words because he began to suspect that the Kuhn-Loeb purchases were for the Union Pacific; that at the very time this agreement was made, Peabody, Harriman and Goelet as directors of the Union Pacific, had taken steps to acquire the stock in the Illinois Central men- tioned in the case" (note at this point the undenied charge that these men concealed all these purchases 50 from the officials and stockholders of the Illinois Cen- tral Company) ; that because Fish, not being a lawyer, failed to include in the written document of July 27th the agreement made the previous day that Grinnell's successor was not to be a Union Pacific man, advantage was taken of this omission to charge him with breach of faith when he refused to elect De Forest, Harri- man's personal attorney and a director in the South- ern Pacific, a corporation absolutely controlled by the Union Pacific Company, when the naming of De Forest was a gross breach of the promise made to him and of the essence and purpose of the agreement; that when Hariiman, on October 10th, 1906, handed Fish the original documents annexed to the affidavit, showing requests made to him by six directors to elect De For- est, he immediately refused to vote for De Forest, as his selection was in violation of the agreement, but that he ivould accept any independent man not connected with the Union Pacific Company (note that this im- portant averment is in no manner traversed in the re- ply affidavits of Harriman, Peabody and Groelet, and that the refusal of the directors to accept this reason- able and proper offer, their persistence in naming De Forest, their willingness to break up their years of friendly and harmonious relations with Fish, cannot be accounted for, in spite of their protestations, ex- cept by a fixed determination to force another Union Pacific man on the Illinois Central board) ; that when affiant refused to elect De Forest, Harriman and Pea- body began to make war on him and sent their per- 51 sonal attorney, Mr. Cromwell, to Chicago to demand of him before the stockholders' meeting that he elect De Forest; that he refused to use the proxies given him under the agreement, and carried out said agree- ment by electing the three outgoing directors and Mr. Cutting, an independent stockholder not connected with the Union Pacific (note that the purpose of con- cealing from Mr. Fish and the stockholders of the Illinois Central Company, the enormous stock hold- ings of the Union Pacific Company now becomes clear, as it is manifest that he would never have used his independently acquired proxies to put the two hostile directors, J. T. Harahan and Cornelius Vanderbilt, back on the board if he had known of such stock hold- ings. This concealment was necessary to trap the man who held the proxies, and acting in good faith with his associates he fell into the trap) ; that after the stock- holders' meeting of October, 1906, a special meeting of the board was called by Harriman, who drew up the notice, wrote on such notice the names of the directors who were to sign it and sent it around and got them to sign, all of which was charged by him without contra- diction at said meeting, as shown by its corrected min- utes; that as he was entering that meeting he was handed a letter prepared by Cromwell, the personal attorney of Harriman and Peabody, signed by nine directors, setting forth their pretended reasons for not electing him president (this letter is on the rec- ord, signed by nine directors, seven of whom were no parties to the agreement between Fish, Harriman and 52 Peabody, and three of whom, Astor, Hackstaff and Harahan, took no part in naming De Forest, and yet the sole ground set up in the letter iS Mr. Fish's re- fusal to comply with his agreement) ; that the reasons set up in the affidavits of Harriman, Auchinclbss, Goelet, Vanderbilt and Peabody (note that neither Hackstaff, Harahan, Astor nor Luttgen make any such charges in their affidavits) for not re-electing him president were false and fictitious and were manufac- tured after the event. These reasons are that Fish had borrowed money from the company on insufficient collateral, that he had made a loan on which the com- pany had lost money, that he had imperilled the funds of the company by deposit in a trust company, and that he had managed the company without the consent of the board and independent thereof. The affidavit goes on to show that all of the transac- tions as to his own loans, as to the particular loan com- plained of because resulting in loss, and as to the trust company deposits, occurred in 1903, and that the same directors who now make these affidavits re- elected him president in 1903, 1904 and in 1905 at an increased salary. He shows that Harriman and Pea- body themselves borrowed the company's money. He swears that the loans made to him were properly en- tered on the company's -books, were known to the di- rectors, and were, with other loans, reported as satis- factory by the auditing committee, that they were made upon ample collateral which became impaired by the panic of 1903, and when criticized by some of the di- 53 rectors were paid by him; that with the exception of the particular loan of $57,000 complained of, the Illi- nois Central Company never lost a dollar in the many millions of loans and deposits made by him; that said particular loan was made in 1902 on collateral, re- ceived as such in all banks and trust companies in New Yorlf, but that such collateral became impaired in the panic of 1903, was bought in by the company and has not yet been liquidated; that the trust company in which he deposited part of the company's funds is now and always has been a perfectly solvent concern, and the company's deposits in it were never for a mo- ment at risk; that no objection was made at any time or under any circumstances to any deposits or to any loans made by him; that no criticism was ever at any time made by any of the directors as to his discharge of the duties of president; that he always consulted the board as to all important acts and was constantly urging them to meet oftener to consider the compan3r's business. He admits that he is a di- rector in the Missouri Pacific Company and a member of its executive committee, which is in some respects competitive with the Illinois Central; and shows that the charge that he is trying to control the Illinois Central in the interest of the Missouri Pacific is a mere slander, demonstrated by the fact that he has a $28,000 interest in the one, and an interest of more than a raillion and a half in the other, and that no- body connected with the management of the Mis- souri Pacific is a stockholder in the Illinois Central. 54 He admits that he is soliciting proxies from the stock- holders of the Illinois Central; that he has sent out circulars to the stockholders giving the facts as he believes and knows them to be as to the Union Pacific's control of the Illinois Central as its directory is now constituted, and in making this charge he has done nothing more than state what the Interstate Com- merce Commission found to be the fact in an inde- pendent examination in which he was neither a party nor a witness ; that if he gets a majority of the proxies he proposes to put Harriman off the board for the reasons which he gives; that he is trying to prevent the Union Pacific Railroad from voting its stock in the Illinois Central Company, because with this stock as a nucleus it will always be possible for that com- pany to control the Illinois Central Company abso- lutely; that he is a candidate for a directorship in the company, as is his right and laudable ambition, because he is the largest individual stockholder of the company, because he has spent 30 years of his life in building it up, because he is familiar with every de- tail of its history and its possibilities, and because he has the confidence aiid support of the large majority of stockholders, excluding the Union Pacific stock; that he did request his co-complainants to join him in this suit, which they, as independent stockholders, two of them citizens of national reputation, aftef dne de- liberation, decided to do, pursuing their own interests as such stockholders, striving to protect their prop- erty from Harriman 's clutches, and that the allega- 55 tions in the affidavits that this suit is prosecuted for his sole interest and at his sole cost and risk are ab- solutely false and untrue; that the two railroads re- ferred to in Harahan's affidavit are mere creatures of the Illinois Central, which caused them to be in- corporated, advanced all funds for their building and which can hold their offer of sale open indefinitely un- til a proper two-thirds vote of the Illinois Central can be obtained; that the importance of the Illinois Cen- tral to the Union Pacific is shown by Harriman's own language advising the board of directors of the Union Pacific to buy the stock of the Illinois Central, which language is set forth in detail in the Interstate Com- merce Commission report, and by the fact that dur- ing the past fiscal j^ear the Illinois Central's deliv- eries of west-bound freight at Oriiaha to the Union Pacific have nearly doubled over the preceding year, while the east-bound deliveries of the Union Pacific to the Illinois Central were less. To this affidavit three reply affidavits were filed by Goelet, Peabody and Harriman only. Goelet admits that Fish put him on the board at his solicitation; that he went to Europe and parted from Fish in a most amicable and friendly manner ; that he returned to the United States to vote against him and did vote against him; that Harriman had nothing to do with his change of attitude to Fish, but that such change was due to Fish's violation of his agreement as to , the election of Grinnell 's successor, which he deemed so grave a breach of trust as to make it im- 56 possible to place or to continue him in any place of honor, trust or power, and he deemed it his duty to return to the United States to vote against the elec- tion as president of a man in whose reliability he had lost all confidence (a remarkable position for a young man to take in regard to his friend who had put him on the board — a position taken in regard of an agree- ment to which he was not a party and the details of which he never asked any explanation of from Mr. Fish, from whom he concealed his presence m this country) ; that he "approved the suggestion of Mr. De Forest as a suitable candidate for the directorate" (who made the suggestion? Fish swears that Harri- man made it and Goelet does not deny it), and favored him because of his personal knowledge of him as a lawyer of standing and character, and a railroad man of experience, and a gentleman of unimpeachable in- tegrity. He denies generally that any of the reasons heretofore given by him in his affidavit for refusing to vote for Fish is false or fictitious or manufactured after the event. But on the face of this last affidavit those pretended reasons are not set up as factors in changing his friendship for Fish, or in bringing him back to this country on Harriman's cable-call to vote against Fish. He then denies that the Union Pacific stock will be voted for the purposes charged in the bill, or that he has always followed the" advice of some one else in regard to the Illinois Central affairs, and avers that he has always followed his independ- ent judgment. 57 The affidavits of Harriman and Peabody are al- most word for word the same. They deny that any hostility arose against Fish because of the defeat of the executive committee plan, and aver they favored such a committee to exercise additional supervision and control over the company's business and to pre- vent abuses of the president's powers. They deny all averments as to the whitewashing report of the Mutual Life's affairs, and that Peabody 's motion to appoint a proxy soliciting committee was a device to control the Illinois Central by the Union Pacific, or was in- tended to produce or could produce such a result. They admit the agreement of July 27th and deny the averred agreement of July 26th as to the qualifica- tions of G-rinnell's successor. They admit that they favored the choice of De Forest, and say it was be- cause of his qualifications for the position. Harriman denies that De Forest was his personal attorney and says that his eligibility and qualifications were left to the consideration of the directors and that he did not dominate or control them or give them any di- rection as to voting for him (he does not deny the charge that he suggested De Forest and that the others ratified). They deny that the selection of De Forest was any breach of faith with Fish, and aver that Fish's refusal to elect him was a breach of honor without justification. They deny generally that the reasons given by them in their previous affidavits for not re-electing Fish were false or manufactured after the event (why did they not give these reasons at the 58 time, and why, after all these alleged reasons had occurred in 1903, did they retain their kindly and harmonious relations with Fish, and vote three times thereafter to make him president?). They specially deny that Fish's loans (which they vaguely aver to be large and on insufficient collateral) were made with the knowledge or approval of the directors. (They do not dejiy that they were properly entered in the books of the company and reported as satisfactory by the auditing committee. If such were the fact, how could they be unknown to the directors?) They aver, these loans were made by Fish to the great peril of the company upon his own responsibilty, and they say they reiterate the allegations in their previous aflS- davits as to Fish's transactions when- president. They admit that other directors got loans from the com- pany, hut aver that these loans were made on adequate collateral and were passed upon and approved by the company's constituted officers, while Fish made loans to himself. They deny that they ever asked the dis- placement of Harahan because he was sick. They deny tliat the Union Pacific or the Eailroad Securities stock will be voted for the purposes averred in the bill. Harriman denies that he controls or dominates any of tlie directors of the Illinois Central. The affidavit of Emrich, one of the complainants, shows that the Union Pacific Railroad owns every share of the stock of the Railroad Securities Com- pany, except 45 2/10 shares, which are necessary to qualify the nine directors, and that these 45 2/10 59 shares are held for its benefit. To this affidavit are annexed a certified copy of the charter of the' Rail- road Securities Company and the official report of the Union Pacific Railroad Company for the year 1906-7, dated Dec. 5th, 1907, and given to the public Dec. 23rd, 1907, the day the oral argument in this case closed. This report not only shows the increases between June 30th, 1907, and Dec. 5th, 1907, of the holdings by the Union Pacific Company in the Railroad Securi- ties Company, but it also shows that in the same in- terval (compare page 13 with page 26) the holdings of the Union Pacific Railroad Company (or its subor- dinate corporation, the Oregon Short Line Company, which of the two we cannot tell, as the affairs of the two corporations are treated in this report as if they were all Union Pacific matters) in the Chicago, Mil- waukee & St. Paul Railroad Company had increased from the 36,900 shares mentioned in the bill to 64,575 shares, and that since the date of the investigation by the Interstate Commerce Commission its holdings in the Chicago & Northwestern Railroad Company had increased from 25,720 shares mentioned in the bill to 32,150 shares, thus demonstrating a continuing and persistent purpose and object on the part of the Union Pacific Railroad Company to increase its holdings in the lines of railroad which are parallel and competing ■with the Illinois Central Railroad's lines. That re- port further shows that, since the date of the Inter- state Commerce Commission Report, its holdings in the Southern Pacific Company have increased from 60 1,080,000 shares to 1,242,000 shares, thus giving it a complete majority of the stock of the Southern Pacific Company. The answer of the Union Pacific Railroad Company was filed in the cause on Dec. 12th, 1907, and the actual facts, disclosed by the report not then made public, as to its then holdings, through the Oregon Short Line C'Ompany, of stock in the Chicago, Milwaukee & St. Paul and the Chicago & Northwestern were not dis- closed in this answer. The affidavit of the Union Pacific's president, Harri- man, and of two of its directors, Peabody and Goelet, verified in December, 1907, follows the same policy of concealment and silence shown in the answer. There is another affidavit from Stuyvesant Fish saying that up to September, 1907, when he was ad- vised to the contrary by his counsel, he always be- lieved that the Eailroad Securities Company had the right to hold and vote stock in the Ulinois Central Eailroad Company. As the Interstate Commerce Commission report, Xo. 943, is made part of the bill, and its findings are averred and adopted as part of the bill, charging the scheme and plan of the Union Pacific Railroad Com- ]>any to monopolize commerce, in violation both of the laws of the United States and the laws of Illinois by controlling large blocks of stock in transportation cor- porations, it becomes necessary to set those findings out in detail. The Union Pacific Railroad Company has declined to answer any of these averments, de- 61 daring them ''immaterial and impertinent." It sim- ply denies generally that it is engaged in any such scheme or plan as charged. The affidavits of Harri- man, Peabody and Goelet contain the same general denial. The bill is sworn. The answer is not sworn. The facts were found by the Commission contradic- torily with the Union Pacific Railroad Company and Harriman, who were heard by counsel before the com- mission made its report. While not of itself strictly prima facie evidence, yet, the dignity of the commis- sion as one of the great instrumentalities of the gov- ernment, which gave them power to make the investi- gation conducted by them, and the character of the investigation itself, which permitted a full hearing by the parties against whom we now seek to use the re- port, coupled with the fact that the findings of the commission are made part of the sworn averments of the bill, and are not in any manner denied, but sim- ply referred to as immaterial and impertinent, give the complainants the right to have these findings con- sidered as true for the purposes of the motion to dis- solve the injunction, already issued in the case. These material facts are that the policies of Harri- man are the policy of the Union Pacific Railroad Com- pany, of which he is the dominating spirit; that as chairman of the executive committee he exercises powers that are well-nigh absolute, because the board of directors has delegated all powers to the executive committee, and the chairman of the executive commit- tee represents that body when it is not in session ; that 62 in practically all the great transactions of the com- pany Harriman has acted on his own initiative, and the executive committee subsequently approved and ratified his acts; that with the properties originally owned by the old Union Pacific Railroad Company, re- organized, together with its subordinate companies in 1897, and with the credit based on these assets, the Harriman policy to gather under one head all exist- ing transcontinental lines, or as many as possible, and to exclude the incoming of all competitors, was inau- gurated in 1901 by the issuance of $100,000,000 of convertible bonds which was used for the purchase and control of the Southern Pacific Company, and the Northern Pacific Company; that the Union Paxiific's subordinate corporation, the Oregon Short Line, has issued bonds and notes to the extent of $81,393,432, the proceeds of which have been used to buy stocks in other lines ; that the lines in which these stock invest- ments have been made are: First, the Southern Pa- cific Company, a holding corporation which owns aad controls a system of railroads from Ogden, Utah, to San Francisco, from San Francisco through Cali- fornia, Arizona, New Mexico, Texas and Louisiana to New Orleans; a line of road into Mexico; a line of steamships from Galveston and New Orleans to Hav- ana and New York; all the lines of the Central Pa- cific Company extending from Ogden tO' San Fran- cisco, and from Roseville, California, to the Oregon state line, with several branches; the Pacific Mail Steamship Company, the largest carrier of Oriental 63 traffic to this country, and also the operator of a line of steamships in connection with the Panama Bail- road, forming a competitive line with all rail carriers from Atlantic to Pacific ports; the Oregon and Cali- fornia Railroad, running from Portland, Oiregon, to California state line and connecting Portland with San Francisco through the Central Pacific's Shasta route. Second, the San Pedro Line, running from Salt Lake City, through Los Angeles to the San Pedro Harbor on the Pacific Coast. Third, the Atchison, Topeka & Santa Fe system, one of the great trans- continental system extending from the Pacific Coast to the south and middle west. Fourth, the Northern Pacific Eailroad Company, a parallel and competing line with the Union Pacific. Fifth, the Baltimore & Ohio Eailroad. Sixth, the Chicago, Milwaukee & St. Paul Railroad. Seventh, the New York, Central & Hudson River Railroad. Eighth, the Illinois Central Railroad. Ninth, the St. Joseph & Grand Island Rail- road. Tenth, the Chicago & Alton Railway Company. The further facts found as to the effect of these stock acquisitions are that, as to the Southern Pa- cific Company, it is a parallel and competing line with the [Jnion Pacific Company, that it is absolutely dom- inated and controlled by the Union Pacific Company, and that all competition between it and the Union Pa- cific Company has been eliminated both in transcon- tinental business and in business to and from Oriental ports; that as to the San Pedro line, a competitive line, both with the Union Pacific and the Southern Pa- 64 cific, there is no competition with either of said com- panies; that as to the Atchison, Topeka & Santa Fe, a parallel and competing line, the Union Pacific has negotiated two of its own directors on its board; that there is now a division of Oriental traffic by the Pacific Mail Steamship Company between the Union Pacific and the Santa Fe, and a division of the east-bound fruit traflBc between the Santa Fe, Southern Pacific and San Pedro lines, in the proportion of 45 per cent to the two first and 10 per cent to the last, although 60 per cent of it orig-inates on the Santa Fe lines, and that north of San Francisco the Southern Pacific and Santa Fe have joined and amalgamated their interests by transferring their lines to the Northwestern Pa- cific Company and establishing a joint control over that company; that as to the Northern Pacific Com- pany, if the 'Union Pacific had not had its control of that company and through it, of the Chicago, Burling- ton & Quincy Railroad, broken up by the decision of the Supreme Court of the United States in the case of Ffarriman v. Northern Securities Company, posses- sion of these lines would have given to the Union Pa- cific absolute mastery over every avenue leading to the Pacific Coast within the United States except that afforded by the Great Northern Railroad on the north- em border, and that afforded by the Santa Fei upon the southern border; that as to the Illinois Central, it is an undoubted fact that Harriman dominates it, and in view of the large block of stock owned by the Union Pacific it is quite likely that this power can be con- 65 tinned, that ordinarily, where the stock of a railroad company is widely scattered, it is impossible to ob- tain a full vote at a stockholders' meeting; that the management and control have possession of the stock books and stock lists, and can send out for proxies; that 30 per cent (the Union Pacific owns and controls 29.59 per cent) of stock in a single ownership is fre- quently sufficient to control the management; that in connection with the Union Pacific the Illinois Central would be a eompetitve line with the Southern Pacific; that a very considerable part of the business orig- inating on the Illinois Central between Chicago and New Orleans, destined for Pacific coast points, may go by either the Union Pacific or the Southern Pacific ; that before the control of the Southern Pacific by the Union Pacific, these two companies were in active com- petition with each other for the business originating in the Illinois Central systems; that the Illinois Cen- tral is the eastern side of a railroad parallelogram, the other three sides of which are formed by the Union Pacific and Southern Pacific lines; that Harriman's own statement to the board of directors of the Union Pacific at the meeting of July 19th (the one at which he persua-ded the directors to buy the stock from him- self and his co-directors, and from the pool repre- sented by Kuhn, Loeb & Co., the members of which the parties have refused to disclose) ; that he was not indifferent to the strategic value of the Illinois Cen- tral lines to the Southern Pacific and Union Pacific lines. This statement of Harriman's is as follows: 66 "That he believed it to be to the interest of the Union Pacific Railroad Company to purchase stock of the Illinois Central Railroad Company; that, while the Union Pacific line served a large grain-prodncing territory, it had no line from that territory to the Gulf or to Chicago, and into the southeast; that the export of grain via the Gulf ports is likely to increase steadily; that the value and importance of a system of railroads extend- ing from the Missouri River at and above Omaha and as far north as Minnesota and Wisconsin, and from Chicago and St. Louis on a low grade to New Orleans, as does the Illinois Central, will be enhanced by the construction of the Panama Canal, and the importance and value of such con- nections to the Union Pacific will be very great; that, while the Illinois Central was generally rec- ognized as an important and valuable system of railroads, yet he believed its strategic value and importance was but little understood and appre- ciated even by some of those most active in its management; and that while this stock appeared to be a good investment at prevailing prices, he believed it could be made and in time was bound to become very much more valuable." The commission further finds, that as to the Chicago & Alton Railway Company, it is a competing line with the Illinois Central and with the Bock Island, and that the joint control of that company by the Union Pacific had undoubtedly eliminated competition be- tween the Alton and the Rock Island between Chicago, St. Louis and Kansas City. The commission finds that, as Mr. Harriman admits, 67 nothing but the law prevents tiie concentration in his hands of every railroad line lying between Canada and Mexico, that he would go on with his policy of acquisition as long as he lives, and if permitted, would get control of the Santa Fe, the Northern Pacific and the G-reat Northern, and would gradually increase, as he took one road after another, so that his control might spread not only over the Pacific Coast, but also over the Atlantic Coast. The findings of the commission show that in all of these prohibited lines, to-wit: the Santa Fe, Northern Pacific and Great Northern, the Union Pacific has a large stock interest, with two directors on the Santa Fe board, admitted there in development of the theory of "communitTy of interest" and "harmony of man- agement" suggested by Harriman when he demanded the representation. The commission finds that as a result of these transactions the Union Pacific controls every line of railroad reaching the Pacific Coast between Portland on the north and the Mexican border on the south — a distance as great as that from Maine to Florida, ex- cepting alone the Santa Fe line, in which it has a large stock interest, and on whose board it has two of its own directors ; that in addition it controls every regu- lar line of trans-Pacific steamships operated out of the Pacific Coast ports, south of Puget Sound; also the Pacific Mail line plying between San Francisco and Puget Sound and the Morgan line of freight and pas- 68 senger carriers, operated between New York City, Havana, New Orleans and Galveston. Its conclusion is that if the policy of purchasing and controlling stocks in competing lines is permitted to continue it must mean suppression of competition, and its conclusions, pertinent to this case, are that rail- roads should not be permitted to invest generally in the stocks, bonds and securities of other railways and of steamship companies, except connecting lines for the purpose of forming through routes of transporta- tion, including branches and feeders; that it is con- trary to public policy, as well as unlawful, for railways to acquire control of parallel and competing lines; that competition between railways as well as between other industries is the established policy of the na- tion, and that so long as it is the policy of the gen- eral government and of the United States to maintain competition between naturally competing lines, the ownership of stock by one railway in a competing line should not be permitted and such lines of railway should be prohibited from having any common direc- tors or officers. The facts set out by the commission as to the owner- ship of the stocks by the Union Pacific Railroad, and the Oregon Short Line, its auxiliary company, as it is called in the Union Pacific report, annexed to the affidavit of Emrich, in the various transportation cor- porations mentioned, are confirmed by that very Union Pacific report, so that there can be no doubt of these facts. 69 These stockholdings as they stood on Dec. 5th, 1907, are as follows: Great Northern Railway Co 126,509.6 shares Northern Pacific Railway Co 64,444 Atchison, Topeka & Santa Fe Co . . . 100,000 Chicago, Milwaukee & St. Paul Co. . 64,575 Chicago & Northwestern Ry. Co 32,150 New York Central & Hudson River Co. 142,857 Baltimore & Ohio Co 395,406 Southern Pacific Co 1,242,000 Chicago & Alton Railroad Co 103,431 Illinois Central Co. (including Rail- road Securities Co.) 281,231 On the above stated pleadings, exhibits and affi- davits, the case is before the court on motions made by defendants to dissolve the existing injunction here- inbefore granted. In support of these motions the de- fendants have filed four separate briefs which aggre- gate 495 pages. In the short time given us to answer these voluminous arguments and references to cases, it is impossible to do so in detail. We shall, there- fore, state the propositions which, in our judgment, the case presents, and discuss the defendant's argu- ments and authorities as incidents to these proposi- tions. 70 ARGUMENT. AS THE UNION PACIFIC BAILROAD COMPANY OWNS AND CON- TROLS EVEEY SHARE OF STOCK IN THE RAILROAD SECURI- TIES COMPANY, THE LATTER DISAPPEARS AS A FACTOR IN THIS CASE, AND IF THE UNION PACIFIC COMPANY, ON GROUNDS OF PUBLIC POLICY, CANNOT DIESJCTLY HOLD OR VOTE STOCK IN THE ILLINOIS CENTRAL COMPANY, IT CANNOT DO SO INDIRECTLY THROUGH A HOLDING CORPORA- TION OF WHICH IT IS THE SOLE STOCKHOLDER. The proposition laid down assumes, for the purposes of the argument, of course, that the Union Pacific Eail- road Company cannot, under the public policy of Illi- nois, own or vote stock in the Illinois Central Eailroad Company. We shall undertake to demonstrate this proposition in the next paragraph of this brief. When we stated to the court in oral argument that the dijfference between a corporation and its stockhold- ers was a mere legal fiction which the court would dis- regard whenever the public policy of the state required it, and were proceeding to quote authorities to support the statement, the court was so familiar with the prop- osition that counsel was informed that such quotation of authority was unnecessary. The distinguished counsel for the Union Pacific. Rail- road Company, Judge Lovett, frankly admitted in oral argument that the court, in proper cases, would look through the corporate organization to the stockholders behind the corporation. 71 Ever since Lord Mansfield's decision in Morris v. Pugh, 3 Burr., 1243, the legal fiction of the personality of a corporation has been established; but the same great judge held, in Johnson v. Smith, 2 Burr., 962, that for every other purpose than that for which it was in- vented a fiction of law can be contradicted. Hence it is manifest that a person who is prohibited from doing some act by law cannot hide behind the shell of a cor- poration, which considered as an entity, entirely dif- ferent from its stockholders, naight have power to do the act. As Morawetz says, Priv. Corporations (2nd Edi), 1: "Although a corporation is frequently spoken of as a person or unit, it is essential tO' a clear under- standing of many branches of the law of corpora- tions to bear in mind distinctly that the existence of a corporation independently of its shareholders, is a fiction; and that the rights and duties of an incorporated association are in reality the rights and duties of the persons who compose it, and not of an imaginary being." (See also Sec. 227.) The most conspicuous cases of the application of the doctrine are : State V. Standard Oil Co., 49 Ohio State, 137. People V. North River Sugar Refining Co., 121 N. T., 582. U. S. V. Milwaukee Refrigerator Transit Co., 142 Fed., 247, at p. 252. Southern Electric Securities Co. v. State, 44 Southern Eep., 785. 72 Ford V. Chicago Milk Shippers Assoc, 155 111., 166. Stockton V. Central R. B. Co., 50 N. J. Eq., p. 52. Central R. R. Co. v. Penn. Co., 31 N. J. Eq., 475. In the Stockton case, the Philadelphia & Beading Railroad Company, as a foreign corporation, had no power to lease the Central Railroad Company. It pro- moted the formation of a domestic company, called the Port Reading Railroad Company, which it controlled by stock ownership, and the lease of the Central Bail- road Company was made to this domestic corporation which had power to take it. The court, acting on the maxim, that equity would look at the substance and not at the outward form, held that the Port Reading Railroad Company was "in all things, save in its in- tangible and unsubstantial corporate entity/, the Phila- delphia & Reading Company" (pp. 74-5). The lease was declared void. In the Central Railroad case, a corporation which had no power of eminent domain procured the incorpora- tion of a railroad company under the general law to build a railroad, and controlled its stock. The court looked behind the corporation to its corporators and enjoined the railroad company from crossing the tracks of another company. This case was quoted with ap- proval by the Supreme Court of Illinois in Dunbar v. American Tel. Co., 224 111., p. 25, where a corporation attempted to justify its purchase ultra vires of stock 73 in another corporation by setting up that the purchase was made in the name of other persons, that the legal title vested in such other persons, and hence the doc- trine of ultra vires had no application. The court held that ' ' a. court of equity will look through all devices to discover and afford relief against the real situation" (p. 25), and whether the corporation bought the stock of the other corporation "by a direct purchase in its own name, or through the intervention of trustees, the want of power was the same, and the purchase was strictly iiUra vires, no matter what the device may have been." (p. 26.) Tt is settled by numerous authorities that where a corporation cannot hold and vote stock in another com- pany in its own name it cannot do so in the name of interposed persons: ClarJc V. Central R. R. of 'Ga., 50 Fed., 338. Great Eastern Ry. v. Turner, L. R, 8 Ch., 149. Central R. R. Co. v. Pa. R. R. Co., 31 N. J. E., 475. Marble Go. v. Harvey, 92 Tenn., 115. Mack V. De Bardeleben, 90 Ala., 396. Campbell v. Poultney, 6 G-ill. & J., 94. State V. Hunton, 28 Vt., 594. Martin v. Ohio Stove Co., 78 111. App., 105. It is therefore manifest that the Union Pacific Rail- road, if without power itself to own and vote stock in the Illinois Central, could not organize a holding com- pany, in which it owned all the stock, to buy the stock of the Illinois Central Company, 1A Sueh a device would be a fraud on the law so clear that no court would give it a moment's consideration. Is there any difference in substance between or- ganizing a holding company originally, and acquiring all of its stock, and purchasing every share of stock in a holding company, already organized, which has as its only asset stock in a corporation which the pur- chasing stockholder cannot own and vote? The evil is the same in the latter as in the former case. The object and purpose of the scheming cor- poration is the same. The manner in which its illegal object is sought to be attained is the same. Its rights in the corporation in which it buys all the stock are the same as in the corporation which its promotes. Is a burglary a less offense when operated by keys, found already prepared for the operator's hands, than it is if the operator prepares his keys The object of the law being to prevent the accomplishment of a purpose which it has stamped as illegal, and its policy being mercilessly to undermine and explode all subterfuges, it would necessarily regard the adoption of an exist- ing instrument, apt to evade its provisions, as unfavor- ably as it would regard the fashioning of such an 'in- strument brand new. There is no answer to this argument except to take refuge in the old fiction of the difference between the corporation, its rights, powers, duties and disabilities, and its stockholders and their rights, powers, duties and disabilities. And this is the only attempt made by the learned counsel to answer the proposition advanced 75 by us. (See Messrs. Herrick & Shaw's brief, from pages 59 to 62.) We therefore conclude that, for the purposes of this case, the Railroad Securities Company stands in the same relation to the Union Pacific Company as it was conceded on the argument that the Oregon Short Line stands in; in other words, that both of these corpora- tions are to be considered as the Union Pacific Rail- road Company and nothing more. The Interstate Com- merce Commission so treated both companies. The report of the Union Pacific Company treats the Oregon Short Line as part of itself. What distinction under the circumstances can be drawn between the Oregon Short Line's position and that of the Securities Com- pany? They are both corporations, with the same president as the Union Pacific, Mr. Harriman, and all of their stock is owned and controlled by the Union Pacific Railroad Company. The only asset of the Securities Company being its stockholdings in the Illi- nois Central Company, there could have been no pur- pose in the acquisition of all of its stock by the Union Pacific Company except the motive and desire to pos- sess and control that asset. Having thus had its soul and body transferred to the Union Pacific Company, it walks on the stage of this case as an unsubstantial ghost of a corporation, and will be regarded by the court for the purposes of this case as a phantom more diaphanous than even the tail of a comet. From the time that courts were established, there has been a race between the law-breaker and the chan- 76 cell or, the one inventing plans to evade tlie law in his efforts to do indirectly what he is prohibited from do- ing directly ; the other extending and developing the elemental principles of justice so as to circumvent all evasions, no matter how ingeniously devised. So far, only a few purblind chancellors have been willing to admit that "the ingenuity of law-breakers is more potent than the law." II. UNDEE THE LAW AND PUBLIC POLICY OF THE STATE OP ILLI- NOIS THE UNION PACIFIC RAILROAD COMPANY IS WITH- OUT POWER TO HOLD AND VOTE STOCK IN THE ILLINOIS CENTRAL RAILROAD COMPANY. (A) It has no such power, even considering it as simply a foreign railroad corporation operating a con- necting line. (B) It has no such power because of its simulta- neous ownership of stock in parallel and competing lines with the Illinois Central lines. (C) It has no such power because of the unlawful scheme in which it is engaged in monopolizing trans- portation and suppressing competition in violation of the laws of the United States and of the laws of Illi- nois, its. ownership of such stock being a part of such scheme. A. The consideration of the proposition that the Union Pacific Railroad Company has no power to own and 77 vote stock in the Illinois Central Railroad Company requires us to discuss, 1st, what is the law and public policy of Illinois generally as to the ownership of stock in one corporation by another? 2nd, what is the law and public policy of Illinois as to the ownership of stock by one railroad in another? 3rd, what rights, if any, greater than those of a domestic corporation has the Union Pacific Railroad Company, as a foreign corporation with the power under the laws of its domi- cile to own stock in an Illinois railroad company? First. The geneeal rule of the American common law that one cokpoeation cannot own stock in another corporation prevails in illinois. departures prom that etjlb are permitted in specific oases by specific statutes, but these departures confirm and do not overthrow the rule. In the case of People v. Pullman Car Co., 175 111. (at p. 159), decided in 1898, the court said: ' ' The pleas admit the appellee company has pur- chased and holds a majority of the shares of the capital stock of the Pullman Iron & Steel Com- pany, and aver further that said Pullman Iron & Steel Company was never a competitor in busi- ness with the defendant; that its products consti- tute a necessary part of the material required in the construction of the cars manufactured by de- fendant; that all its product is used and consumed by said defendant, and that the said corporation is, in effect, a mere department of defendant in its car manufacturing business, although existing 78 nominally as an independent- corporation. The right and power of a corporation to become a stock- holder in another corporation was presented to this court for determination in the case of People V. Chicago Gas Trust Co., 130 111., 268, and the conclusion arrived at was, that a corporation can- not become a stockholder in another corporation unless power to do so is specifically granted in its charter or necessarily implied from it. The con- clusion there announced is the prevailing doctrine in America and we see no. reason to depart from it. Such power is not specifically granted to the ap- pellee corporation, and there is no room for the contention that it' is possessed as an implied power." Counsel on the other side criticise this case in two ways: First, they say it was a quo warranto case. What if it was? A principle of law is the same no mat- ter what kind of a case it may arise in. Second, they say that the facts in the case showed that the Pull- man Company owned the majority of the stock in the Iron & Steel Company. That is true, but the court does not pitch its decision on any such majority own- ership. It does not intimate that the law would be otherwise if such ownership had been of a minority of the stock. The ease of People v. Chicago Gas Trust Co., 130 111., 268, decided in 1889, quoted by the court in the Pull- man case as authority for its declaration in that case fully sustains it. The point was fully discussed in the briefs of coun- 79 sel. It is formulated by the court on page 280 of tEe opinion, and the conclusion of the court is stated on page 286 in the following language: ' ' The power to purchase and hold stock in other companies must be the subject of legislative grant, if not in all cases, at least in cases where it can- not be implied from the powers expressly granted. The general incorporation law contains no grant of such power by the legislature. Can a corpora- tion, organized under that law, be clothed with such a power by merely naming it in the statement filed with the Secretary of State? We think not." This case also is said to be a quo warrcmto case, and to be based on facts which show that the purpose of the corporation attacked was unlawful. The court based its opinion both on the ground that the corporation had no power either by grant or by incident to own stock in another corporation and that the purpose of the cor- poration was, on the face of its charter, illegal. In the case of McCoy v. World's Columbicm Exposi- tion, 87 111. App., 605, the court said, at page 607: "It is no doubt the law in this state that a cor- poration cannot become a stockholder in another corporation, unless power to do so is specifically granted in its charter, or necessarily implied from it. (People V. Chicago Gas Trust Co., 130 111., 268.)" And when this case went to the Supreme Court, see 186 111., 356, that court said, p. 360: "Corporations organized under the laws of the 80 state cannot become stockholders in other corpora- tions unless power is specifically given by their charters or necessarily implied from them. [Peo- ple V. Chicago Gas Trust Co., 130 111., 268.)" In Martin v. Ohio Stove Company, 78 111. App., 105, where a foreign corporation had attempted to organize an Illinois corporation by nsirig the names of its own directors, the court said (p. 108) : ' ' Moreover, foreign corporations when acting in this state are subject to the same restrictions and duties as domestic corporations. (Bishop v. Amer- ican Preservers Co., 157 111., 313.) A corporation cannot become a stockholder in another corpora- tion, especially when the object to be attained is the control af the latter. In the absence of ex- press statutory authority, it cannot become an in- corporator by subscribing for shares -of a new cor- poration, and it cannot do this indirectly through persons acting as its agents or tools. (People v. Chicago Gas Trust Co., 130 111., 268, and cases there cited.) " Not only have the highest courts of Illinois declared this doctrine, but we have another vigorous exposition of it from one of her governors who was both a lawyer and a soldier. In 1891 the legislature passed the following bill: "An act to authorize corporations organized, or to be organized, for mining or manufacturing purposes and which furnish material used in the construction or operation of railroads, to own and hold shares in the capital stock of railroad companies now or hereafter organized. 81 "Section 1. Be it enacted by the People of the State of Illinois, represented in the General As- sembly, that any corporation organized, or to be organized under and by virtue of any law of this state, for mining or manufacturing purposes and which furnish materials used in the construction or operation of railroads, be, and the same is, here- by authorized and empowered to own and hold shares in the capital stock of any railroad com- pany or companies now or hereafter organized un- der any law of this state." This bill was vetoed by Governor Fifer, in the fol- lowing language: "The above measure made its entire progress through both houses of the General Assembly in the last days of the session when the conditions were unfavorable to that deliberate consideration which a measure of such vast importance requires. Owing to the great press of business and want of time, the merits of the bill were not discussed in either house. The public was not advised through comments of the press or otherwise, of the penden- cy of such a measure; and it may be doubted whether any considerable number of the General Assembly who supported the bill took time to fully realize its radical character, and far-reaching con- sequences. "It would hardly be possible in the same num- ber of words to more completely reverse a long established policy of law than is done in the bill under consideration. "Upon grounds of high public policy, the rea- sons for which are obvious, the courts have uni- 82 formly held that one corporation cannot own and hold the stock of another. No statutory prohibition of such ownership is needed; it is enough that no express statutory power is given; for it has al- ready been held that such a power cannot be im- plied but must expressly appear in the act of cor- poration. "Such is the common law of the land resting upon the broad principle that that which tends to foster combinations and monopolies and thereby prevent legitimate competition is u/nlawful and prohibited. "Under this bill any corporation which mines and furnishes to some railroad ten tons of coal per year, or which furnishes annually ten gallons of oil for the axles, or twenty drinking cups, or lanterns, could 'own and hold' the stock of every railroad in the state. It will be noted that such a corporation would not be confined in its purchase of stock to the railroad company or companies with which it directly deals. No limit is placed on the power to 'own and hold' railroad stock except the corporation seeking to do so shall 'furnish mate- rials u^ed in the construction or operation of rail- roads;' that is to say, any railroad. It would, per- haps, be sufficient if the corporation seeking to exercise the power, should furnish materials of the character named to the general trade without having direct relations with any railroad company whatever. It is further evident, if the corporation seeking to exercise this power were at the par- ticular time of purchasing stock engaged in fur- nishing such materials, it might afterwards cease to do so, without impairing its rights to ' own and hold' the stock the original acquisition of which 83 was lawful. Indeed it is difficult to perceive the purpose of the drawer of this bill in designating the corporations empowered as those 'which fur- nish materials used in the construction or opera- tion of railroads,' unless that purpose was to con- ceal the real purpose and wide scope of the measure. "If such a measure is to go upon the statute books as law, the legislative attempts which have been made by Congress and by this state to sup- press trusts and combinations will appear strange- ly feeble and idle. It serves as a commentary on the ill-consideration which measures of highest moment may sometimes receive when the same legislature which enacts a law against trusts and combinations, provides a direct method by which all the railroads of the state could be combined under a single management, and be operated un- der the shadow of one great parent corporation, and that, too, a corporation organized for a pur- pose different from that of railroading. To do this would only require the purchasing of a bare majority of the stock of the railroad sought to be controlled ; and no safeguards are interposed even for the protection of the innocent holders of the remaining stock. Whether such a thing would actually happen, were I, as the executive, to ap- prove the bill, cannot be known; but there is cer- tainly no doubt but that this measure opens up a clear legal way for such a combination to be made. "I learn the claim was made by the friends of the measure that its provisions, are necessary to enable certain mining and manufacturing com- panies to connect their establishments by rail with railroads passing near them, so they may deliver 84 their products in car lots to such railroads for transportation. Had this been the only object sought, it would have been easy to limit the opera- tion of the statute to the needs of such cases, ex- cluding the wider application which I see in the bill before me. It hardly seems necessary to use a sledge-hammer for the purpose of driving a tack. And besides, the law as it now stands, would be ample to meet the cases supposed; for a mere switch to be used by a company for the transporta- tion of its own products to a neighboring railroad, that is to say, for exclusively private use, would not be a common carrier within the meaning of the law, but would be strictly an adjunct or incident of the business the company was organized to transact; and I see no reason why such a switch could not be built and used by mining and manu- facturing companies under the implied powers of their charters without the additional powers con- ferred by this bill. It is certain, at any rate, that no such sweeping authority as this would be needed to meet cases of the kind supposed. ' ' All political parties have declared against com- binations and trusts, all parties have joined in legislation to prevent them; the voters of all par- ties have been harangued to beware of corporate combinations having in view the controlling of prices by means other than legitimate competition in an open market. The people so far have agreed with these views; and the price of railroad serv- ices to the public is certainly not less important to the people than the price of any kind of manu- factured goods. "With only the greatest reluctance do I venture to interpose my own judgment against the legis- 85 lative wisdom in a matter of state policy. I fully recognize the principle that the source of law is the people; and if this bill had come to me from the people's representatives after full discussion and popular agitation of the question and interests involved, if, in other words, this measure were a true crystallization of public opinion, then, what- ever might be my own individual views as to the soundness of the policy involved, I might feel it my duty to add my approval. But no such sweep- ing extension of corporate power was ever before granted in a single enactment by the G-eneral As- sembly of the state. Combinations are author- ized by this bill compared with which those of the past are of small consequence. The means by which these combinations could be formed should the bill become a law, are so obvious that they need not be further discussed here. Until a measure of such moment shall have been fully considered by the people of the state and shall have had shed upon it the bright sunlight of a full public discus- sion, my notions of executive duty must constrain me to withhold my approval." According to the claim of the defendants in this case, the laws of Illinois permit a foreign corporation to ac- complish the very results which Governor Fifer so clearly pointed out would follow the passage of the law which he vetoed. We do not believe that the courts of Illinois will so hold. We will discuss this proposi- tion later. That the Supreme Court of Illinois was correct in saying that the rule it laid down in the Pullman case 86 is "the prevailing doctrine in America," appears to be fully sustained by the authorities : Hafer v. N. Y., L. E. & W. Ry., 14 Weekly Law Bui., 68. Milhank v. New York, etc., Ry. Co., 64 How. Pr., 20. Parsons v. Tacoma, etc., Ry. Co., 25 Wash., 492. Pearson v. Concord R. R. Co., 62 N. H., 537. Central R. R. v. Collins, 40 Ga., 582. Hazelhurst v. Savannah Ry. Co., 43 Ga., 13. Central R. R. of N. J. v. Pa. R. R., 31 N. J. E., 475. Elkins V. Camden, etc., R. R., 36 N. J. E., 5. Deny Hotel Co. v. Schram, 6 Wash., 134. McGinnis v. Mining Co., 75 Pacific Eep., 89. Railway Co. v. Iron Co., 46 Ohio St., 44. Easen v. Buckeye Brewing Co., 51 Fed., 156. Franklin Bank v. Commercial Bank, 36 Ohio St., 350. Sumner v. Marcy, 3 Woodbury & Minot, 105. N. 0. S. 8. Co. V. Ocean Dry Dock Co., 26 La. An., 175. State V. Newman, 51 La. An., 833. Lester v. Bemis Lumber Co., 74 S. W., 518. McCampbell v. Fountain Head R. R., 77 S. W., 1070. Franklin v. Lewiston Inst., 68 Me., 43. Marhury v. ^«/. Union Land Co., 62 Fed., 335. Marble Co. v. Harvey, 92 Tenn., 115. 87 Be La Vergne Go. v. German Savings Instit., 175 U. S., 40. Gentral Transportation Go. v. Pullman Go., 139 U. S., 24. Galifornia Bank v. Kennedy, 167 U. S., 362. First National Banli v. Converse, 200 U. S., 425. Goler V. Tacoma By. & Power Go., 65 N. J. Eq., p. 351. The learned counsel for the defendants, Messrs. Cromwell, Lovett, and Pollak, on page 89 of their brief admit that it is a general rule of the common law that in the absence of a statute, a corporation has no power to purchase stock in other corporations, but seek to limit the rule to corporations "incorporated for or- dinary mercantile purposes only." We submit that they are mistaken, and that the rule applies to all cor- porations and particularly to railroads, as appears from a mere glance at the above list of cases. The result of these cases is well summed up in Cook on Corporations, 5th Ed., p. 679, where it is said: "It may be stated as a general rule that a cor- poration has no implied power to purchase shares of the capital stock of another corporation. This rule has often been applied to railroad corpora- tions. It has been firmly settled by well-considered cases that one railroad company cannot purchase shares of stock in another railroad company." The same effect is given to the authorities in the notes to Green's Brices Ultra Vires, p. 95, where it is 88 said that it is well settled that a railroad company cannot buy stock in another railroad company. The counsel also argue that the want of power of one corporation to own stock in another is merely for the protection of the stockholders of the purchasing cor- poration to prevent their funds from being used in an enterprise not contemplated in the charter, and that such want of power contains no element of public pol- icy. Some of the cases are based on this single ground, but the trend of the cases is to hold that there is an important public policy contained in the refusal to permit one corporation to own stock in another. The prohibition of stockownership by one corporation in another (or, what is the same thing as a prohibition against such ownership, the failure to expressly grant the power) has a firm foundation in that rule of the common law that all monopolies and all contracts, agreements, or conduct in restraint of trade or trans- portation, or tending to produce monopoly, or restraint of trade or transportation, are void; and such stock ownership tends to restrain trade and transportation and to concentrate power in hands where the state did not contemplate that it should rest. It finds further foundation in public policy in this, that the charter of a corporation is a public grant to individuals to at- tain certain ends through their agency; and the legis- lature never contemplated that other artificial creat- ures, incorporated for other purposes, or if incorpo- rated for the same purpose by working under their own franchises, should thrust themselves into another arti- 89 ficial creature for the purpose of sharing in the exer- cise of its franchise. See Judge Baldwin's article on Voting Trusts, 1 Yale Law Journal, p. 1. Governor Fifer's veto message, above quoted, shows that he interpreted the law of Illinois in this way; and to the same effect is a summary of the law on this subject, made by Hon. Wade H. Ellis, in the address, from which we have already quoted. He said : "These statutes deliberately enacted by sev- eral of the states are the sole source of the power of one corporation to own the stock of another. There is no such power at common law. The courts have held with practical unanimity, from the earliest times to the present day, that in the absence of an express grant of authority so to do, no corporation has any power to buy, sell, hold or deal in either its own stock or in the stock of any other corporation. In other words, the right to own corporate stock is not a natural or implied incident of corporate power. The reason for this time-honored principle of the common law is most obvious. Corporations are organized for certain specific purposes. Their obligation to their stock- holders, and to the public, is to devote the funds entrusted to their care to the prosecution of the business in which they are engaged. If a corpora- tion can deal in its own stock it can not only re- press the value of that stock in order to get it at a good price; it can not only defeat the security of its creditors who rely upon the duty of its stock- holders to discharge their obligations to the cor- poration; but it can destroy the very business in which it was organized to engage. If a corpora- 90 tion can own or deal in tlie stock of other corpora- tions, it can not only divert the funds under its control from the purposes for which they were contributed, but most baleful of all, it can destroy all competition in the industry which the charter of the state empowers it to promote. These are the reasons invariably given by the courts in sup- port of that wholesome public policy which denies to corporations, as an incident of their express powers, the right to go into the stock jobbing busi- We quote this summary because it sets forth the matter more felicitously than we can, and because we think it is as good authority as that of any writer of law books. In every case where the Legislature of Illinois has permitted a departure from this rule, that one corpo- ration cannot own stock in another, it has been care- ful to do so by special statute contined in its operation to the special corporation covered by the statute. Thus in 1854 in chartering the Illinois Southern & Chicago Eailroad (Session Laws of 1854 (Public), p. 193), the company was given power by the 4th Sec- tion of the act "to take and hold stock in, or loan its credit to, any railroad company within the state, whose road may connect directly, or by connecting lines with said Illinois Southern Eailroad." And, again, in the special charter of the Belleville & Southern Illinois Railroad Company, approved Feb- ruary 14, 1857 (Session Laws of 1857 (Private), p. 710), it was provided by Section 9 of the act that the 91 directors were authorized to "take and receive sub- scriptions to its capital stock from any other railroad company or corporation and from any county, city, town or village. ' ' Special laws have been passed authorizing various kinds of insurance corporations to invest their surplus funds in stocks of other corporations. That these laws were necessary appears by the opinion in the Gas Trust case, p. 284, where the court said: "Some corporations like insurance companies, may find it necessary to keep funds on hand for the payment of losses by death or fire, or to meet other necessary demands, but it is questionable whether even these can invest their surplus funds in the stock of other corporations without special legislative authority." Special laws have been passed authorizing trust companies to make investments in stocks of corpora- tions. A special law was passed authorizing mining and manufacturing companies under certain conditions named to own stocks in a limited class of railroads, not in railroads generally. All of these statutes are gathered in the briefs of the defendants, and were all referred to in oral argument. According to the arguments of the learned counsel for defendants, these specific statutes, which it was necessary for the legislature to pass, to enable these specific corporations to own stocks in other corpora- tions, have broken down all the public policy of the 92 state on stockownersMp by one corporation in another, and because of these special statutes the whole system of such stockownersMp is set at large. "We respectfully submit that the existence of these statutes has the op- posite effect, and that they demonstrate conclusively that the state proposes to stick to her policy of not permitting one corporation to own stock in another and to depart from that policy grudgingly and by inches, and only in the specific instances in which she specially acts. The counsel seem to maintain the proposition that in order for a corporation not to be able to hold stock in another, there must be some prohibitory law saying that it shall not so own stock. Prohibitions are ex- pressed as well as implied. Wherever a thing is by its nature something that requires special legislative permission in order that it may be done, then the fail- ure to give the power to act is a prohibition against action. This doctrine has been applied to stock own- ership in one corporation in another. In First National Bank v. National Exchange Bank, 92 U. S., p. 122, the court said (p. 128) : "Dealing in stocks is not expressly prohibited; but such a prohibition is implied from the failure to grant the power." In California Bank v. Kennedy, 167 U. S., p. 362, the court said, at p. 367 : "It is clear however that a national bank does not possess the power to deal in stocks. The pro- 93 Mbition is implied from the failure to grant the power." The language of these cases on this point was re- peated by the court in First National Bank v. Con- verse, 200 U. S., at page 439. See, also, Wood on Rail- roads, Sec. 174, where it is laid down that a prohibi- tion is implied against the power to hold slocks from the fact that it is not conferred. The result of all the authorities is that the power to hold and vote stock in another corporation is not an ordinary but an extraordinary power, one not appro- priate to, or incidental to, corporate powers, and can- not exist in any corporation, whether organized under a general or a special act, except by special legislative grant giving this specific power, or giving some other power from which such right to stockholding flows by necessary implication. This power to hold stock in other corporations be- ing prohibited if not granted belongs to the same class of powers as the power of a corporation to lease its property or to consolidate with other corporations. Want of specific legislative authority to lease makes a lease absolutely void. Thomas v. R. R. Co., 101 U. S., 83. Oregon Ry. v. Oregonian Ry., 130 U. S., 22. Want of specific legislative authority to consolidate with another corporation makes a consolidation abso- lutely void. American Loan & Trust Co. v. M. & N., etc., Co., 157 ni., 641. 94 In the Oregon Railway case, a railroad was or- ganized under a general act, providing for the organi- zation of corporations for any lawful purpose, but in enumerating the powers which such a corporation was to have, the act did not specifically grant the power to lease either its own property or to acquire a lease of the property of other corporations. The incorporators inserted such a power in the articles of association they were required to draw up and file with the Secretary of State. The court held that the insertion of these rights did not give them to the company. It also held that a foreign corporation, having in its charter, the same power to lease and be leased, could not exercise such powers in Oregon because under the statute regu- lating the admission of foreign corporations, it could exercise only the powers of a similar Oregon corpora- tion (p. 24). Second. The law and public policy of Illinois prohibit one EAILROAD company PEOM OWNING STOCK IN ANOTHER COB- POBATION. To THIS BULE THEBE ABE TWO STBICTLY LIMIT- ED EXCEPTIONS. The first general railroad incorporation law passed in Illinois was the Act of November 5, 1849. Section 13 of that act contained the provision that "it shall not he lawful for such company to use any of their fvm,ds in the purchase of any stock in their own or in a/ny other corporation." Such act remained in force, unchanged until it was partially repealed by the Act of 1872, on the same sub- 95 ject, and totally repealed by the act approved March 31, 1874. The prohibition above quoted from the Act of 1849 was repeated verbatim in Section 14 of the Act of 1872, which supplanted the Act of 1849. This prohibition re- mained unchanged until 1891, when it was amended by providing that a railroad of Illinois "which now con- nects, or may hereafter connect at any point with any railroad of any other state, shall have power, acting by itself, or jointly with another company or compa- nies, to own and hold the stock and securities of the corporation owning said connecting road, or any part thereof ; such ownership or holding to comprise at least two-thirds in amount of the stock of such corporation; but in case of the purchase of stock, the comnany or companies so purchasing shall take and pay for all the shares of the company, whose stock is so purchased, that may be offered, and the terms of purqhase of all shares shall be the same to all stockholders." It is clear that the phrase "or any part thereof" is confined in its operation to securities, by the following sentence which compels the ownership in holding of 'Stock to be of "at least two-thirds" of the whole amount of stock. No holding of less than two-thirds of the stock is permitted. Hence an attempt to hold less than the permitted proportion would be void. Even with the bona fide purpose of gradually acquiring the two-thirds, the gradual acquisition of shares of stock would not vest the purchasing corporation or corpora- tions with anything but an inchoate or conditional claim 96 to the stock, and it or they would not be permitted to vote on such stock, otherwise the whole policy of the amendment would be defeated, which was to compel the domestic corporation or corporations, as a condition of its or their right to control the foreign corpora- tion, to base that control on at least two-thirds of the stock. The condition is fundamental and, until it is complied with, the right would not accrue. No device for escape from the condition would be permitted. By the Act of January 1, 1875, railroad corporations were permitted to join in the formation of union depot corporations (Hurd, Ed. 1906, p. 1575). This amendment of 1891 and the Union Depot Act of 1875 are the only departures in the laws of Illinois from the prohibition as to stockholding contained ta the Act of 1849. We have shown above that there were two special statutes passed prior to 1849, one permit- ting a particular railroad company to own stock in con- necting lines, and the other permitting corporations, including railroads, to subscribe to stock in another particular railroad. This prohibition was in force in 1851 when the legis- lature chartered the Illinois Central Railroad Com- pany, and that charter neither expressly nor impliedly gives it the right to -hold stock in another corporation, nor another corporation the right to hold stock in the Illinois Central Railroad Company. Therefore that charter must be interpreted with reference to the gen- eral prohibition, which, except as above modified, re- mains unchanged to this day. 97 The public policy of this state as exhibited by her statutes, except the Act of 1891 above referred to, never at any time permitted the establishment by stock own- ership of any relations between railroads even between connecting lines, whether between two domestic con- necting lines or between a domestic and a foreign con- necting line. From 1854 to 1874 her public policy was to permit the consolidation of domestic and foreign connecting lines. The Act of February 28, 1854, permitting such consolidations, was specially repealed by Specification 237 of the Act of March 31, 1874. See American Trust Co. V. M. & N., etc., Co., 157 111., p. 641. In that case the court decided that there had been no law in Illi- nois permitting such consolidation since 1874. As a consequence of that decision the legislature passed the Eatificatory Act of June 4, 1897 (Hurd, p. 1607). This ratified such consolidations between a domestic and any foreign company or companies as had been made in the interval between July 1, 1874, and July 1, 1883, at which latter date the Limited Purchase Act, to be noted later, was in force. And so by Act approved May 27, 1907 (Acts, 1907, p. 473), consolidations be- tween two or more domestic railroad companies made in the same interval were ratified. This last act, we are informed, was passed in the interest of a particular railroad which discovered that more that two corpo- rations had consolidated in that interval when the law only permitted the consolidation of two companies. By the Act of June 14, 1883 (Acts, 1883, p. "124; 98 Hurd, p. 1572), consolidation between a domestic and a foreign corporation is permitted under limitations so peculiar that the act appears on its face to be drawn to fit a particular case then in existence. In oral ar- gument we demonstrated to the court that all of the special railroad acts in the books had been evidently passed for the benefit of some particular company and were limited to fit some then existing case. Under the Act of 1875 (Hurd, p. 1573) railroad com- panies of Illinois, or of any adjoining state, in posses- sion of or operating connecting roads, under leases in perpetuity , or for a period of not less than 20 years, have power to purchase or to sell the remaining in- terests, property, etc., of the lessor, situated in this state or adjoining states. By the Act of 1885 (Hurd, p. 1606) a domestic rail- road, in possession or and operating in connection with or in extension of its line any railroad in this state or in any other state, or owning and operating a rail- road connecting at the boundary line of the state with a railroad in another state, could buy the corporate rights, franchises and property of the other company. By the Act of 1899 (Hurd, p. 1611) foreign corpo- rations were given the right to buy, and domestic cor- porations to sell, the railroad, or any part thereof, of a domestic corporation, upon the conditions either that the purchaser shall be in possession of, or shall own or control all the capital stock of the selling company. We shall comment on this statute later, as it is the mainstay of the defense. Like the others, it is evi- 99 dently a statute drawn to fit a particular case then actually in existence. The Act of 1855 (Hurd, p. 1573) provided for con- necting railroads of all kinds to lease or run their roads, and to connect with each other. The power to unite or connect refers only to physical connection. L. & N. Ry. V. Ky., 161 U. S., 684. Every one of the above statutes provides for con- tracts between the corporations themselves, made at arm's length, and generally with the consent of two- thirds of the stockholders. If there are any other statutes on the subject of the relations of railroads to each other they have escaped our attention. This review, we submit, justifies our contention that, with the exception of the Act of 1891, which deals only with the strictly limited right of an Illinois railroad to acquire control of a foreign corporation by the acquisi- tion of not less than two-thirds of its stock, the whole public policy of this state has been opposed to the es- i;ablishment of relations between railroad corporations by stock ownership of one in another, and has per- mitted such relations to be established only by con- tracts between the corporations as separate and dis- tinct entities, made under the forms and conditions prescribed in their charters and in the permissive stat- utes themselves. There is a wide difference between the making of 100 such contriacts and the ex parte purchase by one rail- road compamy of the stock of another. If the policy of the state permits to be established between railroads by contract only relations which give one control over the other, then an ex parte purchase of stock by one company in another, whereby control can be had as absolutely as if the permitted contracts had been made, is not permissible. Mackintosh v. Flint & P. M. By. Co., 34 Fed., at 614. Elkins V. Camden & Atlantic Ry., 36 N. J. E., 12. Hafer v. N. Y. L. E., etc., Co., 14 Weekly Law Bui., 66. It is true as counsel contend that the statutes above quoted show a public policy to favor the formation of connecting lines, but this public policy favors the for- mation of such connecting lines only in the particular methods specified and permitted in the statutes, and wnder the formalities therein prescribed. Stock own- ership by one corporation in another, even as a means of establishing a continuous line or connection, not be- ing one of the granted or specified methods, is, by the very fact of not being granted, prohibited. The Union Pacific Railroad cannot consolidate with the Illinois Central Company, because there is no con- solidation statute permitting it, which applies to these two companies. It can lease the Illinois Central Railroad with the consent of its directory and stockholders. 101 If it were in possession under such a lease in per- petuity for more than 20 years, or if it were in pos- session, within the meaning of the Act of 1899 (what- ever the possession referred to in said act may mean), or if it should own or control all the company's cap- ital stock, it could buy the company's property and franchises with the consent of its directory and stock- holders. Further than this it cannot go, and it cannot cir- cumvent the conditions of all these statutes by stock ownership in the company. If it can buy a practical majority it can buy a math- ematical majority and thus absolutely control the com- pany and accomplish every result that a lease or a sale or a consolidation would accomplish, and this without the consent of the other stockholders in the company. We therefore submit that the public policy of the State of Illinois is clear that none of her railroad cor- porations shall be dominated by any other railroad cor- poration, foreign or domestic, by stock ownership. The necessities of their case drive the learned coun- sel for the defendants to contend that in spite of the prohibition in the statute that a railroad company can- not own stock in another corporation, the statutes above considered, giving power to lease, or to buy or to con- solidate with other roads now by implication give power to Illinois railroads to buy stock in connecting roads, foreign and domestic. In support of this prop- osition they quote cases which do not maintain them. 102 In the Marbury case, 62 Fed., 355, the court deduced the power of a land company to buy stock in a rail- road company from the peculiar language of the Icmd company's charter and the peculiar relation of the railroad to the land company. Economy of space and time prevents us from quoting or analyzing cases in full. In Hill V. Neshit, 100 Ind., 341, the court held that as the purchasing company was organized for the special purpose of consolidating with another its pur- chase of stock in that other which was made to facili- tate such consolidation, was not ultra vires. In Dewey v. Railway Co., 91 Mich., 351, there was a statute permitting a road which was v/nahle to com- plete its line to sell its uncompleted work to any other railroad company, with the consent of two-thirds of its stockholders. One stockholder of such a company sold two-thirds of its stock to the Toledo company, who gave a note for the purchase price. The Toledo company took possession of and made the work of the uncompleted railroad part of its own road. It made the purchase of this stock for the purpose of obtaining its right of way. It must have bought the other third of the stock, as it does not appear that the right of way was transferred to it by the corporation whose stock it bought. The court held that the Toledo com- pany could not escape the payment of the note, and that under the circumstances the statute aforesaid author- ized the purchase of the stock. In the Wehrhane case, 4 N. Y. St. Eep., 541, the 103 court, not one of last resort, Jield, that, under the broad language of the Statutes of Tennessee, a railroad com- pany of that state had authority to buy a majority of the stock of another railroad for the purpose of gain- ing control and practical ownership of the latter. In Branch v. Jessup, 106 U. S., 478, the court held arguendo that a legislative power granted to a com- pany "to incorporate its stock with the stock of any other company on such terms as might be mutually agreed on," contemplated not only the possible trans- fer of the railroad and its franchises to another com- pany, but even the extinguishing of the corporation itself. The transaction itself which was approved was an incorporation of its stock in that of another com- pany (p. 479). Third. The Union Pacific Railroad Company, as a foeeign corporation, has no greater rights in illinois to own STOCK IN AN Illinois railroad company than a domes- tic RAILROAD COMPANY OF THAT STATE WOULD HAVE. The Union Pacific Eailroad Company seeks to escape from the prohibition of the Illinois law against one rail- road corporation owning stock in another railroad com- pany, by the application of the rule of comity between the states, which permits a foreign corporation to exer- cise its powers in another state unless the exercise of such powers is against its laws or its public policy. It claims that because Utah railroad corporations can own stock in other railroads, it can own stock in an 104 Illinois corporation. It claims that there is no law or public policy in Illinois against the exercise of its power to own stock in the Illinois Central Company. It claims that such ownership of stock in an Illinois corporation is not doing business in Illinois, and there- fore it is not within the scope of the laws or the pub- lic policy of Illinois. It claims that it bought its stock in New York and holds its certificates in New York, and can transfer them on the books of the company ia New York, and hence it cannot be reached by the laws or public policy of the State of Illinois. Since the decisions of Runyan v. Coster, 14 Peters, 122, and the Bank of Augusta v. Earle, 13 Peters, 519, it has been settled law that a corporation, being the creature of the sovereign who created it, cannot mi- grate or import its powers into the limits of another sovereign except with the consent of the latter, express or implied, that it is admitted into such other state only by comity and that it can do nothing in that other state contrary to its laws or its public policy. In Carroll v. City of East St. Louis, 67 111., the court said: "All persons in the profession, we presume, will admit that a corporation, created in one state, can- not exercise its functions in another state or a dif- ferent sovereignty without permission. This is the doctrine announced in the Bank of Augusta V. Earle, 13 Peters, 589; 0. & M. R. R. v. Wheeler, 1 Black, 297; Ducat v. The City of Chicago, 48 111., 172 ; Paul V. Virginia, 8 Wallace, 168. And if the proposition were not so fully understood, and 105 so firmly established, numerous other cases might be cited as confirming the rule. "The all important question, then, in this case is, to determine whether consent can be inferred from the course of legislation as indicating the general policy of this state. If such consent ex- ists, it can be gathered alone from implication, as there is no direct legislation on the subject. In the case of The Bank of Augusta v. Earle, supra, it was said that the comity between states, so far as it relates to corporations, depends for its exer- cise upon the laws of the sovereignty in which the power is to be exercised, and a corporation can make no valid contract without their sanction, ex- press or implied. The comity thus extended to other nations is no impeachment of sovereignty. It is the voluntary act of the nation by which it is offered, and is inadmissible when contrary to its policy or prejudicial to its interests. It is also said in the same case that, in the absence of any positive law affirming, denying or restraining the operation of a foreign law, courts of justice pre- sume the tacit adoption of them by their own gov- ernment, unless they are repugnant to its policy or prejudicial to its interests." In Haselton Boiler Go. v. Tripod Boiler Co., 142 111., p. 505, the court said: "Such corporations do not come into this state as a matter of legal right, but only by comity and they cannot be permitted to come for the purpose of asserting rights in contravention of our laws and public policy." In Harding v. American Glucose Co., 182 111., 551, the court said: "It is the settled doctrine of this state, estab- lished by many decisions of this court that foreign corporations do not come into this state as a mat- ter of legal right, but only by comity, and that said corporations are subject to the same restric- tions and duties as corporations formed in this state, and have no other or greater powers." This principle of law exists independent of statute and has been made part of the statutory law of the state as to corporations that do business in the state. Sec. 26 of the General Incorporation Act of 1872 (Hurd, p. 501), provides: "Foreign corporations, and the officers and agents thereof, doing business in this state, shall be subject to all the liabilities, restrictions and duties that are or may be imposed upon corpora- tions of like character organized under the general laws of this state, and shall have no other or great- er powers." Speaking of the statute in Stevens v. Pratt, 101 111., 217, the court said: "Foreign corporations, and the officers and agents thereof, doing business in this state, are placed on an equality, to the extent that they shall exercise no greater or different powers, and shall be subject to the same regulations and restrict- ions, and governed by the same rules of law in these respects, with corporations of like character organized or to be organized under the general 1U7 laws of this state. The meaning will, obviously, not be changed, but may be placed in a stronger light by a little transposition of language, thus : 'where the general laws of this state provide for the organization of corporations, foreign corpora- tions of like character doing business in this state shall exercise no greater or different powers, and shall be subject to the same liabilities, restrictions and duties.' The manifest and only purpose was to produce uniformity in the powers, liabilities, du- ties and restrictions of foreign and domestic cor- porations of like character and bring them all under the influence of the same law." This quotation from Stevens v. Pratt has been quoted and approved in the following cases: Barnes v. Suddard, 111 111., 237. Penn Co. v. Bauerle, 143 111., 459. Granite Assoc, v. Lloyd, 145 111., 620. People V. Van Cleave, 187 111., 125. The provisions of this section were incorporated in the subsequent statutes of the state imposing upon foreign corporations the compliance with certain for- malities before they were permitted to do or to trans- act any business in the state, and these statutes finally took the form of the Act of 1905 (Hurd, p. 512). It is provided in that act that no foreign corporation can be admitted "to transact any business, or exercise any of its corporate powers" in Illinois until it com- plies with its conditions; that no foreign corporation can be admitted to do business in the state, "for the transaction of which a corporation cannot be organized 108 under the laws of this state," and that the act shall be construed not as a grant of power, ' ' but as a limitation upon interstate comity." (Sec. 67 E.) We quote these statutes against the Union Pacific Eailroad Company not for the purpose of showing that its owning and voting of stock in the Illinois Central Eailroad Company is a doing of business within the state in the sense that it would have to comply with the provisions of the Act of 1905 as a preliminary to owning and voting such stock, but as indicative of the public policy of the state in respect to foreign corpo- rations, and the rule of comity which must be applied to them. Taking the Act of 1905 and Section 26 together it is manifest that the same rule of public policy which ap- plies to a corporation when it is doing business in the state strictly within the purview of the Act of 1905, will apply to the assertion of any claim to do anything in the state, or to exercise any power or function in the state, which is not a technical doing or transacting of business within the meaning of the act. To hold and vote stock in an Illinois corporation is, we concede, not a doing of business in the state within the meaning of the Act of 1905, so as to require the formalities of that act to be complied with as a condi- tion precedent to the right to own and vote. It is well settled, and the defendants quote a host of authority in support of the proposition, that the doing of a single act by a corporation is not a doing of business within the meaning of similar statutes in another state, and 109 that consequently a foreign corporation does not by such single act make itself liable to service of process, to taxation, or to penalties, but it is nowhere Jield that the single act so done is valid if against the public pol- icy of the state, or that such statutes are not to be re- garded as indicating the public policy of the state. It would be a manifest absurdity to say that if the Union Pacific Railroad Company was doing business in Illinois it could not own and vote stock in the Illi- nois Central Railroad Company, because it was the law of Illinois that foreign corporations could not hold and vote stock in railroad companies of Illinois if a domestic company could not do so, but that if it was not doing business in Illinois it could own and vote stock in that company. The holding and voting of stock in another corporation, domiciled in a state other than that of the holding company must be within the public policy of the state creating the corporation in which the stock is held. The real situs of that incor- poreal right, the share of stock, or proportionate right to participate in the affairs, profits and distribution of the assets of the company, is in the state where the cor- poration is created, and the certificate is the mere evi- dence of title to the shares. Matter of Bronson, 150 N. Y., p. 1. In some cases it has been held that for purposes of attachment the situs is where the certificate is located. Originally there were no certificates of stock, and stock could be transferred only on the books of the corpo- 110 ration. The certificate is a modern device to facili- tate transfers and to give the stockholder some au- thentic evidence of his title. There can be no doubt that the voting situs is at the domicile of the corpora- tion; wherever the law requires the corporate meet- ings to be held at the domicile of the corporation. It is one of the functions of the stockholders which can- not be performed anywhere else. In Southern Electric Securities Company v. State, 4:4: Southern Eep., p. 791, the court said: "This stock can be voted only by the Southern Electric Securities Company, and it can be only voted in a corporate meeting held in this state. Certainly it cannot be said that the Southern Elec- tric Securities Company is not exercisiug its corporate function in voting this stock, nor will it be contended that the stock can be voted anywhere except in the State of Mississippi." Apart from those stockholders who become officers, the voting function is the only one which the stock- holder can perform. It is by the exercise of that func- tion that he fulfills all his powers as a stockholder, i. e., the election of the officers who manage the company. It is a constantly recurring function and the foreign stockholder must come into the state in person or by his agent at least once a year and often many times a year in order to exercise that function. In Female Academy v. Sullivan, 116 111., p. 384, it was held that the taking of real estate by devise and the assertion of ownership over it within the state, was Ill within the purview of Section 26. This holding was quoted with approval in Penn. Co. v. Bauerle, 143 111., p. 459. So the acquisition, or attempted acquisition, of title to the stock in an Illinois corporation, the asser- tion of title to it withiQ this state by voting on it in this state, and the coming into the state recurrently at every corporate meeting to vote on the stock, must be within the purview of Section 26 also. It is claimed in the brief that Section 26 does not apply to railroads or to any foreign corporations ex- cept those that were similar to corporations organized under the general act of which it is a part. This is au error. It has been held applicable to all kinds of cor- porations that could not be organized under that act, and to railroads as well. In Female Academy v. Sullivan, supra, it was ap- plied to an educational institution. In Penn. Co. v. Bauerle, supra, it was applied to a mutual benefit association. In Farmer's Loan & Trust Co. v. Elevated Railroad Company, 173 111., 439, it was applied to a trust com- pany. In People v. Van Cleve, 187 111., 125 and in North American Insurance Company v. Yates, 214 111., 272, it was applied to foreign fire insurance companies. In Franklin Life Insurance Co. v. People, 200 111., 619, it was applied to foreign life insurance companies. In Hannibal & St. J. R. R. Co. v. Crane, 102 111., 249, it was applied to a foreign railroad company. In Granite State Assoc, v. Lloyd, 145 111., 620, it was 112 applied to a homestead company, and tlie court used the following language (p. 623) : "But counsel for appellant contend that said section cannot be applied to this appellant corpo- ration, because they say 'homestead loan associa- tions, in this state are not organized under the general incorporation laws of this state. ' The act entitled: 'An Act to Enable Associations * * *' is certainly a general law of this state. All 'Home- stead Loan Associations ' in this state must be or- ganized under that general law, and can have no legal existence unless they are so organized. Even if it could be maintained that said act is no part of the general incorporation law of this state, which we do not think can be done, still Section 26 would apply. Its language is, ' organized under the gen- eral laws of this state.' We can conceive of no line of reasoning, or argument, which can make it clearer that the above mentioned statute is a gen- eral law of this state, than is apparent from the reading of the act itself." The authority of Mead v. Davies, 84 111. App., 558, the only case quoted by the other side which is per- tinent to the point, is necessarily overruled by the de- cisions quoted from the Supreme Court. Stevens v. Pratt, supra, does not hold any such doctrine. The Union Pacific Railroad Company is a like cor- poration to any other railroad company organized un- der the general railroad law of Illinois. It is itself organized under the general railroad law of Utah. It has more extensive powers than those granted to a rail- road corporation organized under the general laws of 113 Illinois, and hence it cannot exercise under the public policy of the statutes of Illinois, any greater powers than a domestic railroad corporation would he per- mitted to exercise. Certainly power to own stock in another corporation being expressly prohibited to a domestic railroad corporation, it cannot claim any power by comity to own stock in an Illinois corpora- tion. The Statute of 1905 eliminates comity in deal- ing with foreign corporations coming into Illinois. The comity to be extended to them now by the state is limited by the corporation laws of Illinois for Illinois corporations. The authorities quoted all maintain the further doc- trine that no corporation can migrate into a state and exercise there any powers which are contrary to its public policy. We submit we have demonstrated that there is a high public policy involved in the non-permission of stock- holding by one corporation in another, and that a fail- ure to grant the power is to prohibit it. Where the implied prohibition of not granting such a power to a corporation is strengthened by an express prohibi- tion against permitting a railroad company owning stock in any other company, it may be affirmed that the public policy against such prohibited stockholding is too clear to be disregarded, and that no rule of comity will work against such manifest public policy. On this point we submit that the case of Coler v. Tacoma Ry. & Poicer Company is conclusive. In 1901 the Supreme Court of Washington decided 114 the case of Parsons v. Tacoma Smelting & Refining Co., 25 Wash., 492, holding that one domestic corporation could not hold stock in another domestic corporation, that the stockholding company which had inserted such a power in its articles of incorporation, could not exer- cise such power, because the statute under which it was organized did not specifically grant to corpora- tions organized under it the power to own stock in other corporations, and that a prohibition against the exer- cise of the power was implied from the failure to grant it. The following year the Coler case arose in New Jer- sey, wherein the question arose whether a corporation of that state, with power in its charter, given by the New Jersey laws to hold and vote stock in other cor- porations, could hold and vote stock in a Washington corporation. It was claimed that it could do so by comity. The de- cision of the Chancellor, maintaining this theory, is so exactly the whole argument and position of the de- fendants in this case that we are constrained to quote it in full (64 N.J. E., p. 131): "Another question arises out of the late decis- ion of the Supreme Court of Washington in Par- sons V. Tacoma Smelting & Refining Co., 25 Wash., 492 (July, 1901), to which I have called the atten- tion of counsel on both sides since the argument, and upon which I have received briefs. One of the points involved in this case was whether a corpo- ration of the State of Washington (called the new company), which had bought the majority of the 115 stock of another Wasliington company (called the old company), was authorized under the laws of Washington to vote on this stock of the old com- pany so purchased, at a stockholders' meeting of the old company. The stock, although owned by the purchasing or new company and carried on its books as its property, seems to have been carried in the name of one of its officers, as trustee, and as such holder he voted on the stock at a stock- holders ' meeting of the old company called to vote upon the question of ratifying a lease made to the purchasing company by the other company. The charter of the new company seems to have author- ized the purchase of the stock of the old company, but the statutes of Washington did not expressly authorize such purchase. One question involved was whether the new corporation had the right to vote on this stock so purchased. The opinion of the Chief Justice of the Supreme Court, unanimous- ly concurred in by three other judges, declared that the power to own the stock of another corporation must be expressly conferred by statute; that the statutes of Washington did not authorize such own- ership, and that the expression of the power in the articles of incorporation of the new company could not extend the corporate powers beyond those ex- pressed in the statutes. And it was therefore held that the stock of the old company owned by the new company could not be used in voting at stock- holders ' meetings in the old company, and an in- junction against such use was granted. Under this decision the questions fairly arise: (1) whether under the laws of Washington the New Jersey company could hold or vote upon the stock of the 116 Washington company, and (2) if it could not, whether the sale should not be enjoined. "In reference to the first question, it is to be considered that the New Jersey company, by the corporation laws of this state (Corp. Act, 1896, Sec. 51), has power to purchase the securities of corporations of any other state, and that by the terms of its charter such purchase is one -of the ob- jects of its incorporation. The shares of stock of the Washington company are, by the statutes of Washington (1 Hill Stat. & C, Par. 1506), de- clared to be personal estate. A settled rule of American jurisprudence, relating to the contracts and acts of a corporation of one state made or per- formed within another, is that a corporation creat- ed by one state may exercise the powers conferred by its charter within the boundaries of another state, but only by comity and consent of the latter state. This comity is a comity between the different states, not between the icourts of the states, and has been extended to apply to the exer- cise, within a foreign state, of such powers, under its charter, as do not contravene the public policy of the state in which they are sought to be exer- cised. The leading case declaring these general principles is Bank of Augusta v. Earle, 13 Pet., 519, 589, etc. (United States Supreme Court, 1839), and the later cases are collected in the text-books and digests. (6 Thomp. Corp. Off., 7882, 7885; 13 Am. & Eng. Encycl. L. (2nd Ed.), 837, 839; 2 Morawetz Corp., par. 961, etc.) "In these respects each state settles for itself its own public policy, and the policy of any state is to be ascertained from its constitution, statutes 117 and tlie settled adjudications of its courts. That these are the ultimate and the only sources by which the court of one state or jurisdiction can ascertain the public policy of another state or jurisdiction has always been accepted doctrine in American courts. The reason was declared by Mr. Justice Story in the Girard will case {Vidal v. Guard's Executors, 2 How., 127, 197, 198 (1844), as follows : ' The question, what is the public pol- icy of a state and what is contrary to it, if inquired into beyond these limits (its constitution and laws and judicial decisions), will be found to be one of great vagueness and uncertainty and to involve dis- cussions which scarcely come within the range of judicial duty and functions, and upon which men may and will eomplexionalh' differ. ' This limita- tion was expressed, it is true, where the question was whether the support of the Christian religion was part of the public policy of a state, but it was based on the fundamental nature of the question of the public policy of a state and its judicial as- certainment by the courts of another state. The rule has therefore been applied to all classes of cases, and especially to cases involving the exer- cise of powers by foreign corporations within an- other state. Bank of Augusta v. Ernie, supra. And in this class of cases the further principle has been declared that the public policy of a state, restricting a foreign corporation from acquiring or holding property or transacting business within its limits must be expressed in some affirmative way, and cannot be inferred from its mere failure or omission to authorize its own corporations to acquire the property or transact the business in question. In Cowell v. Springs Co., 100 IT. S., 55 118 (1879), lands in Colorado territory were conveyed by a patentee to a corporation created under tlie laws of Pennsylvania, with, power to receive, hold and grant real and personal property; explore, lo- cate and improve lands; ti^ansport emigrants and merchandise ; construct houses and buildings ; man- ufacture, trade and traffic; colonize, organize and form settlements, etc. By the laws of congress in force in the then territory of Colorado the legis- lature of the territory was prohibited from grant- ing private charters and was authorized to create, by general law, corporations only for mining, man- ufacturing and other industrial pursuits. It was contended that the limitations of the purposes of corporations by the act of congress were fixed for reasons of public policy, and that the act should be considered as a declaration of public policy, under which powers denied to domestic corpora- tions should not be extended to foreign corpora- tions acting within the territory. Mr. Justice Field, upon this point says (at p. 59) : 'The an- swer to this position is found in the general comity which, in the absence of positive direction to the contrary, obtains through the states and territories of the United States, by which corporations creat- ed in one state or territory are permitted to carry on any lawful business in another state or terri- tory, and to acquire, hold and transfer property there equally as individuals. If the policy of the state or territory does not permit the business of the foreign corporation in its limits or allow the corporation to acquire or hold real property it must be expressed in some affirmative way ; it can- not be inferred from the fact that its legislature has made no provision for the formation of similar corporations, or allows corporations to be formed only by general law. Telegraph companies did business in several states before their legislature had created or authorized the creation of similar corporations; and numerous corporations exist- ing by special charter in one state are now en- gaged, without question, in business in states where the creation of corporations by special enactment is forbidden.' This is the leading case and author- ity upon the point that the public policy of a state, in reference to the exercise of powers by a foreign corporation within its limits, must appear from express affirmative legislation or decisions, and that the mere failure or omission to confer the powers in question upon its own corporations is not sufficient, and it has been followed without question. In Christian Union v. Yount, 101 U. S., 352 (1879), the language of Mr. Justice Field is approved and it is further said by Mr. Justice Harlan (at p. 356) : 'In harmony with the general law of comity obtaining among the states compos- ing the Union, the presumption should be indulged that a corporation of one state, not forbidden by the law of its being, may exercise within any other state the general powers conferred by its own charter, unless it is prohibited from so doing either in the direct enactments of the latter sta|:e or by its public policy to be deduced from the general course of legislation 6r from the settled adjudica- tion.' In cases involving questions of this inter- state character, the opinions of the higjiest fed- eral court have been treated as of controlling weight, and the rules declared in these two lead- ing cases appear to have been followed in the courts of all tlie states. The only conflict, or ap- parent conflict, between the decisions of the courts of different states seems to be in the application of the rules, and on the question as to the character of the constitutional or legislative provisions which are to be construed as affirmative prohibitions against the acts or transactions of foreign cor- porations. ' ' Neither in the constitution, statutes or judicial decisions of Washington are there any express dec- larations prohibiting a foreign corporation from owning stocks of a Washington corporation. These stocks are by its statutes personal prop- erty, which therefore are transferable in other states to the same extent as other personal prop- erty, or to the extent allowed by the laws of foreign states, and if their acquisition by persons and corporations of other states is against the pub- lic policy of the State of Washington, such dec- laration of its public policy, restricting the gen- eral rules of comity, as to the ownership of per- sonal property, should appear by some authorita- tive declaration. The decision in the Parsons case cannot be considered as having this effect. The case on this point was decided solely on the ques- tion of the construction of the statute of Washing- ton as giving or not giving to a domestic corpora- tion exercising its powers within the state the power to purchase stock of another domestic cor- poration, and upon this question of power it was held that inasmuch as the power was not expressly given by the statute, the statute must be construed as not giving the power to hold stock, or the power to vote on it if held. It would be giving the de- cision altogether too broad a scope to consider it 121 as an adjudication by the highest courts of Wash- ington upon the question of the public policy of that state as to the rights of a foreign corpora- tion to own stock, and to consider it as deciding that the general rule of comity that corporations, as well as individuals of other states, maj' own stocks of their corporations has been held by the courts of Washington to contravene the public pol- icy of the state. That question of public policy and the application of the rules of national and state comity was not involved in the case and was not considered. It is claimed that the logical result of the decision in the Parsons case is to decide this question of public policy adversely to the defend- ant, but whether it has such result is a question for the decision of the Washington courts alone, and in the absence of any express affirmative dec- laration either by the constitution, statutes or courts of Washington settling its public policy, in reference to a transaction of the present character, adversely to the defendant, this court should not assume to declare or ascertain its public policy. This policy is something which the State of Wash- ington has the sole right to determine itself. {Bank of Augusta v. Earle, supra (at p. 594).) Counsel have cited cases and authorities as holding or de- claring that the rule of comity does not extend so far as to permit foreign corporations to exercise within the state powers which a domestic corpo- ration of the same kind is not permitted to exercise under its constitution and policy. These are cases in which the courts of the state (not the state of the foreign corporation) are expressly and directly deciding the question of their own public policy, in reference to the act which is challenged in their 1^2 jurisdiction, and the proceeding upon that direct adjudication. They are, therefore, so far as they decide the question of public policy, affirmative dec- larations which the courts of other jurisdictions must accept as settling what the public policy of the particular state is when that question is in- volved. They do not support the complainant's claim in this case, which is that this court (a court of foreign jurisdiction), in advance of any adjudi- cation of the Washington courts, should decide what is the public policy of Washington, in ref- erence to the matter now in question. And in ref- erence to the decisions in these cases, it should also be added that in determining the question of public policy of their respective states the cases generally rest upon the express provisions of their respective constitutions and statutes prohibiting the acts in question to domestic corporations, and not upon the mere omission or failure to give them the power to do or perform the acts. In Clarke v. Central Railroad Co., 50 Fed. Eep., 338, there was a constitutional prohibition of purchases to defeat competition or encourage monopoly. (See pp. 339, 344.) In Empire Mills v. Allston Grocery Co., 4 Tex. App. Civ. Cas., 346, it was held that the re- peal of an act authorizing the formation of mer- cantile companies in the state superseded the rule of comity as to foreign corporations. The cases cited in 2 Morawetz Corp., 965, note 4, are, with one exception, all eases where the courts of the state (or of the United States within the state) pass directly and authoritatively upon the question of their own public policy. The exception is the leading case of Banh of Augusta v. Earle, supra (at p. 592), where, on a writ of error from the 123 Supreme Court of the United States to the United States Circuit Court for Alabama, one of the ques- tions involved was whether the purchase of certain bills of exchange by a foreign corporation in the State of Alabama was contrary to the policy of the constitution and laws of the State of Alabama. The Supreme Court held (at p. 594) that the state had not, by its constitution and laws or judicial decisions, made known its policy upon the point in question, and declined to decide the questions of public policy raised, holding that this was a mat- ter to be determined by the state itself. And fol- lowing the same principle, the court also held (at p. 596) that the decisions of the courts of the two other states — New York and Virginia — upon like questions of the public policy of their respective states, were not to be considered as justifying the inference that the State of Alabama would adopt the same rule of public policy. "I conclude, therefore, that as the case now stands, the New Jersey company would, under the rules of comity, be allowed to hold the stock of the Washington company, and having the right to hold, it follows, necessarily, in my judgment, that it would have the right to vote on the stock, in the absence of any declaration in the constitution, statutes or judicial decisions of the State of Wash- ington that it could not vote on stock it was entitled to hold." Appeal was taken from this decision and the eleven justices of the Court of Errors and Appeals of New Jersey unanimously reversed the Chancellor in Goler V. Tacoma Ry. & Power Co., 65 N. J. E., 347, saying on this point, p. 351 : 124 "The courts of Washington have decided that one corporation cannot subscribe for, purchase, hold or vote upon the shares of stock Of another corporation without legislative sanction, and that the legislature of the state has never sanctioned such acts. {Denny Hotel Co. v. Schram, 6 Wash., 134; Parsons v. Taconia Snielting and Refining Co., 65 Pac. Rep., 765.) This doctrine rests alto- gether on considerations of public policy. But it is said that the policy, as declared, extends only to domestic corporations, and whether it should em- brace foreign corporations is a matter to be de- cided by the courts of that state alone. I do not un- derstand that the policy is so restricted. One of its objects is to prevent one corporation from inter- fering with the control of another. This was the purpose to be subserved by the decision in Parsons V. Tacoma Smelting & Refining Co., j'ust cited, where, although the title of the stockholding com- pany was not assailed, its right to vote upon the stock was denied. It is true that the stockholding company was a domestic corporation, but the de- nial of its right to vote could not be based on that circumstance. The doctrine that it was impolitic to allow a corporation, whose chartered powers were subject to modification at the will of the state, to exercise control over a domestic corporation, would seem, necessarily, to imply that it was deemed equally impolitic to permit such control by a corporation whose chartered powers were gen- erally independent of the state. The application of the restriction to a foreign corporation is a mere interpretation, not an extension, of the doc- trine. "But if it be an extension, the extension is made 125 by the Constitution of Washington, which pro- vides (Article 12, paragraph 7) that 'no corpora- tion organized outside the limits of this state shall be allowed to transact business within the state on more favorable conditions than are prescribed by law to similar corporations organized under the laws of this state.' "The decisions already cited are clearly to this effect — that if a Washington corporation owned property immovably fixed in that state, it could not lawfully bargam to exchange that property for stock in another Washington corporation, and, after completion of the exchange, exercise in the other corporation all the rights and privileges of a private stockholder. If this New Jersey corpo- ration can legally do what is thus prohibited to a AVashington corporation, then the foreign corpo- ration is allowed to transact business in Washing- ton on conditions more favorable than those pre- scribed for its domestic corporations. The con- stitution forbids this." The statutes of the State of Illinois are as broad and as comprehensive as the clause of the Constitution of Washington and must have the same effect. But in answer to this case the counsel return to their position that the Union Pacific Railroad is not trans- acting or doing business in Illinois by its stockholdings in an Illinois corporation, and therefore the statutes in question do not apply, and cannot reach such stock- holdings or the exercise of the function of coming into the State of Illinois and voting recurrently on their stock. If this position were true, then the State of Eli- 126 nois is powerless to enforce her own public policy as to the control and management of her own creatures. But want of power to own stock in an Illinois corpora- tion under the laws of the state, is necessarily want of power to exercise the function of voting on such stock, and as such function can only be performed in the State of Illinois by the coming into the state of the stock- holder in person or by agent — a function contrary to her laws and her public policy — it cannot be maintained that the state's laws cannot be applied, administered and enforced in such a manner as to prevent her laws and public policy from being violated. The position of the foreign stockholding corporation is not the least bettered because its attempts to become a stockholder were made by purchasing certificates of stock outside of the state, transferring them on the books of the com- pany outside of the state, and keeping the certificates given it in return for those surrendered outside of the state. All these doings are mere preliminaries and con- ditions to the exercise of the voting function which can only be performed in the state creating the corpora- tion, and by entering that state for that purpose. The state will not permit such entrance for such purpose. It will be noted that in the Coler case the Chancellor quoted and relied on Christian Union v. Yount, and Coivell V. Springs Co., just as the defendants do in this case. Stevens v. Pratt, 101 III, 206, does nothing more than quote and follow these two cases, and all three cases hold nothing more than that the mere failure of 127 a state to pass a law allowing corporations of a par- ticular class to be organized cannot be considered as showing a public policy that foreign corporations of that class shall not come into that state, and that a public polic}^ which would exclude a foreign corporation must be indicated in some affirmative way. What more emphatic affirmative way of declaring the policy of the state as to foreign corporations than the provisions of Section 26, and the provisions of the Act of 1905? The one declares the policy of the state in respect to foreign corporations of a like character with those organizable under the general laws of the state, the other declares that policy in respect to all foreign corporations whatsoever. Counsel say there is no statute prohibiting a foreign railroad company, or any foreign corporation from owniag stock in a domestic corporation. There is no statute containing an express prohibition directed against foreign corporations, but there is a statute pro- hibiting domestic railroads from so owning stock in any sort of a corporation except in two specified in- stances, and there are statutes prohibiting foreign cor- porations from exercising any powers in the state greater than those granted to domestic corporations. These two prohibitions operate together and are the exact equivalent of a prohibition specially directed against stockholdings by foreign corporations in domes- tic corporations. Hence if we should apply to the case of the Union Pacific Eailroad Company the most extreme theory 128 that could, by desperate emphasis on single words, be extracted from the Stevens, Christian Union and Cow- ell cases that company can claim no power to own and vote stock in an Illinois railroad company under the doctrine of comity. The defendants, however, appeal to the Act of 1899 (Hurd, p. 1611), fixing the conditions on which a foreign corporation may buy the property and fran- chises of an Illinois railroad company, and while ad- mitting, as they are compelled to do, that such act is not a grant of authority to a foreign railroad com- pany to own and vote stock in an Illinois railroad com- pany, they claim that it is a recognition under the rule of comity of the right of a foreign corporation to buy stock in an Illinois railroad company, if such foreign company had such power under its charter. They ask how could a foreign corporation ever com- ply with the condition imposed upon the exercise of the right to buy if it could not acquire the stock of the domestic railroad by degrees ? In other words, the defendants claim that this act, which evidently on its face belongs to that class of special acts, drawn and passed to fit a particular case then actually in existence, must be construed as doing by indirection what admittedly it does not do by di- rection ; that it must be sustained as repealing the pub- lic policy of the state as declared in Section 26, that no foreign corporation of like character with an Illi- nois corporation could exercise in the state any other or greater power than a similar Illinois corporation; 129 that it must be construed as repealing that public pol- icy even where the foreign corporation never had any intention of buying the Illinois railroad corporation in which it should acquire stock; that it must, be construed as repealing that public policy of the state which does not permit one railroad company to control another by stock ownership. We submit that the claim of the defendants cannot be maintained, and that if the act ever could be so in- terpreted, it was to that extent repealed by the Foreign Corporation Act of 1905, which expressly lim- its the operation of the rule of comity and declares that no foreign corporation shall come into the state to perform any corporate function unless a like corpora- tion, with like powers, could be organized under the laws of Illinois. We are not dealing with a case where a foreign rail- road company is seeking to qualify itself to buy an Illinois railroad company. It is not for a moment pre- tended that the Union Pacific Company acquired its large block of stock in the Illinois Central Railroad Company with the purpose and intent of acquiring all the stock in order to qualify itself to buy the Illinois Central Railroad Company's property and franchises. It is therefore not necessary to inquire whether in such a case the statute could be appealed to to validate the acquisition of all the stock in the Illinois Central Com- pany by one contract, or by several connected con- tracts, or by several separate contracts, made with the sole object and purpose of qualifying the Union Pacific 130 Company to buy the property and franchises of the Illi- nois Central Company. Nor is it necessary to inquire what kind of title, if any, the Union Pacific Company would have to stock bought in blocks with the purpose of ultimately buying it all to qualify itself to exercise the right to buy. We will say, however, that it is mani- fest that it would not be permitted to exercise any functions as a stockholder until it had acquired all the stock, otherwise as soon as it got either a mathematical or a practical majority of the stock, it could control the company absolutely, and thus accomplish a result not contemplated by the statute. Defendants say we are asking this court to create a public policy to fit this case. We repel the statement. This court has no power to create a public policy, but it can examine the legislation of the state and declare what public policy is set forth in that legislation. In Carroll v. City of East St. Louis, 67 111., p. 571, the Supreme Court of Illinois said: "If, then, as there is no direct legislation on the subject, this purchase by the Connecticut Land Company is repugnant to the policy of the state, or it is prejudicial to its interests, the sale we have seen would be void. In tbis investiga- tion it must be determined that the law-making power of the state where the authority is pro- posed to be exercised is alone invested with the authority and must determine its public policy. With this power the courts have not been in- trusted. It is for them to ascertain and apply the law and the legislative policy, and not to inau- 131 gurate it. The public policy of the state may be ascertained by reference to the general course of legislation, either by prohibition or enabling acts, or by its general course of legislation on a given subject." In that case the court laid great stress on the veto message of the Governor of the state, sustained by the legislature, who declared that the vetoed bill was against the public policy of the state (p. 578), and re- pelled the suggestion, that special acts, departing from the general course of legislation, could be con- sidered as tending to determine the general policy of the state on the subject, saying (p. 577): "Like all other exceptions, they tend to estab- lish, rather than impair the force of the general rule. It is to the general laws of the state to which all persons refer to ascertain its general policy, etc." The rights of a foreign corporation were at issue in that case. Under its charter it had full power to "re- ceive, grant, convey and dispose of, and transfer real estate," and it claimed the right to exercise these powers in Illinois by comity. Its exercise of those powers in Illinois was declared void, because after an examination of the general legislation of the state the court concluded that the policy indicated by that general legislation (departed from, it is true, in particular cases) was to limit cor- porations in the amount of real estate they could hold. 132 that perpetuities were not permitted, and that the corporation's charter powers tended to a perpetuity. On the comity question the court said (p. 578) : "We should not expect that foreign corpora- tions, who can perform no binding act in our state without our consent, would demand more rights and privileges than are conferred on our own, created by general law. If the general assembly, for any reason, confers special powers upon a few corporations that have been persistently and almost uniformly denied to all other corporations of our state, it gives foreign bodies, who only act here by mere sufferance, no right to demand the same privileges. They should surely not com- plain if permitted to exercise their powers here to the extent, and only to the same extent, that simi- lar bodies of our own are allowed under our gen- eral laws." In Female Academy v. Sullivan, 116 111., p. 382, the court said: "The public policy of the state is made mani- fest by its legislation." In People v. Chicago Gas. Trust, 130 111., p. 294, the court said: "We are reminded by counsel that the applica- tion by the courts of public policy to the law is a usurpation of legislative functions. And un- doubtedly some courts have gone so far as to de- serve the charge of such usurpation. But it is the duty of the judiciary to refuse to sustain that 'which is against the public policy of the state 133 when such public policy is manifested hy the legis- lation, or fundamental law of the state." In Harding v. American Glucose Co., 182 111., p. 616, the court said: "The public policy of a state is to be found in its statutes, and when they have not directly spoken, then in the decisions of its courts, and in the constant practice of its government officials. When the legislature speaks on a subject, upon which it has the constitutional power to legislate, public policy is what the statute passed by it in- dicates." This last quoted statement was quoted with ap- proval in North Am. Ins. Co. v. Yates, 214 111., p. 277. We believe that we have not in our argument asked this court to go beyond the principles above quoted, laid down by the Supreme Court of Illinois. We have referred to the whole course of general legislation as indicating the public policy of the state, and appealed to exceptions to that general legislation as tending to confirm and not to overthrow the rule generally fol- lowed. We have referred to a veto message of the governor, issued long before either of the defendants in this case had any existence. We have quoted the de- cisions of the highest court in the state. If the public policies we contend for do not result from these sources, then there are no such policies in the State of Illinois. It having been held in the Harding case, supra, that where the statutes had not directly spoken, then the "constant practice" of the government officials could 134 be looked to to determine public policy, the learned counsel refer to the failure of the executive officers of the state to take steps to prevent foreign corporations, from holding stock in domestic corporations, as a "con- stant practice," tending to show that there is no pub- lic policy in Illinois against such holding. Mere failure to act may be due to ignorance, or indifference, or care- lessness, negligence, or incapacity, hence mere failure to enforce a law is no proof that the law does not exist or that it ought not to be enforced, or that it does not mean what it says. .It is the legislature that deter- mines primarily what the public policy is. We go to that first. ' If that indicates a policy the courts must ex- ecute it. .In the absence of legislation, we may then turn to decisions and to the "constant practice" {i. e., a long series of affirmative acts) of the executive of- ficers of the state. As stated in the preface to this brief, the evil of control of one corporation over another is of compara- tively recent growth. The attention of the public has not been directed to it. Now that it is, it is possible that the executive officers may get busy to help the people to remedy the evil. But their neglect in the past is no ground of argument in favor of the beneficiaries of their neglect. The Anti-trust Act stood on the stat- ute books forvmore than eleven years before any steps were taken to enforce it. Counsel in the Northern Se- curities case made the same argument (193 U. S., p. 279) against its enforcement that is made here, but the court looked to the statute to determine what it 135 meant, and gave no weight to eleven years' negligence of government officials. B. IT IS AGAINST THE PUBLIC POIjICY OF THE STATE OF ILLINOIS FOK ONE RAILROAD COMPANY TO HOLD STOCK AT THE SAME TIME IN PARALLEL AND COMPETING LINES WITHIN HER LIMITS, AND HENCE UNDER THE CONCEDED FACTS OF THIS CASE THE ATTEMPT OF THE UNION PACIFIC COMPANY TO ACQUIRE STOCK IN THE ILLINOIS CENTRAL COMPANY WAS ULTRA VIRES AND VOID BY THE LAW OF ILLINOIS. . For the purposes of this argument, we may leave out of consideration the ownership of the stock of the Chi- cago, Milwaukee & St. Paul and of the Chicago & Northwestern by the Oregon Short Line, a subordi- nate company of the Union Pacific Company. We have enough in the fact of the ownership by the Union Pa- cific Company direct of 103,431 shares of the Chicago & Alton Company without making any use at all of the facts as to the first mentioned companies, and they may be referred to as simply aggravating and accentuat- ing the situation. It appears on the record that the Union Pacific Com- pany in the year 1904 acquired about 25 per cent of all the stock of the Chicago & Alton Railroad, and that such company is a parallel and competing line with the Illinois Central Railroad, both being Illinois corpora- tions. It appears that in the year 1904 a pooling agreement was made by the Union Pacific Company with the 136 holder of 191,000 shares of Chicago & Alton stock, and that under that agreement the parties were in al- ternate years to be given control of the Chicago & Al- ton. It appears that at the very time the Union Pacific Company attempted to acquire all its stockholdings in the Illinois Central Company, both by direct purchases and by the control of practically all the stock of the Railroad Securities Company, it was then in actual con- trol of the Chicago & Alton under this joint control scheme. It appears that this joint control plan was not dis- solved until June, 1907, and it is manifest that its dis- covery and exposure by the Interstate Commerce Com- mission was the cause of the dissolution of this joint control plan. It also appears that the Rock Island Company, the real other party to the joint control plan, who also owned a line parallel and competing with the Chicago & Alton, has disposed of its stockholding in that com- pany and that a majority of the stock of the Chicago & Alton is now held by a corporation called the Toledo, St. Louis Si Western Railroad Company. The Union Pacific has retained and now holds its 103,431 shares, or 25 per cent of the stock, of the Chi- cago & Alton Company. On these conceded facts the proposition we contend for is that, even if the Union Pacific Company has the power to own stock in an Illinois Railroad Company, it has not power to own stock at the same time in two 137 parallel and competing lines of railroad in the State of Illinois, and that, being a stockholder in the Chicago & Alton Railroad Company, at the time it attempted to become a stockholder in the Illinois Central Railroad Company, its pretended acquisitions of stock in the lat- ter company are absolutely null and void and will not be tolerated for any purpose in the State of Illinois by an Illinois court. This proposition must be true if it is against the public policy of Illinois that a railroad corporation can- not hold stock .in two parallel and competing lines at the same time. Under the operation of such principle, the power of the Union Pacific Company to hold stock in the Illinois Central Company, and in all other Illinois railroad companies parallel and comj^eting with the Al- ton, was barred and precluded by its acquisition of stock in the Chicago & Alton. Competition between railroads is an elementary re- quirement of the public policy of Illinois, of the United States, and of every state in the union. The public wel- fare depends on such competition. Competition in trade and transportation is a fundamental in the com- mon law, which is part of the law of Illinois. All com- binations, or trusts, or monopolies are prohibited by her laws and the decisions of her highest courts. Hurd's Statutes, Ch. 38, Sec. 269. Harding v. Am. Glucose Co., 182 111., 551. People V. Chicago Gas Trust Co., 130 111., 268. Martin v. OMo Stove Co., 78 111. App., 105. 138 In order to preserve this competition between rail- roads, all purchases, or consolidations, or leases of parallel and competing lines are specially prohibited. Constitution, Art. XI, Sec. 11. Hurd's Statutes, Sec. 57, Ch. 32, p. 509; Sec. 23, Ch. 114, p. 1569; Sec. 39, Ch. 114, p. 1572; Sees. 42 and 47, Ch., 114, p. 1573; Sees. 196 and 197, Ch. 114, ])p. 16-06-7 ; Sec. 218, Ch. 314, pp. 1611-12. There is no express prohibition, the defendants say, in her statutes against the owning by a railroad com- pany of stock in parallel and competing lines. That is true. But it is also true that such prohibition is im- pliedly contained in her laws. Of what avail would be all the express prohibitions against the consolidation, leasing or buying of parallel and competing lines of one railroad by another, intended to enforce the policy of competition, and of what avail would be all the express prohibitions against combinations, trusts and monopolies, if all these prohibitions could be evaded by a third railroad corporation buying stock in two or more railroads, not parallel and competing with it, but parallel and competing with each other ? The Northern Securities Company was a scheme of Harriman and his associates to control two parallel and competing lines by that company holding the majority of the stock in the Northern Pacific and the Great Northern Rail- roads. The Supreme Court of the United States broke up the scheme and held that it was in violation of the anti-trust laws of the United States. 139 'Northern Securities Co. v. U. 8., 193 U. S., 197. If such stockholding in two parallel and competing lines is in violation of the anti-trust laws of the United States, it must be in violation of the anti-trust laws of Illinois as well as in violation of her pul^lic policy to establish and maintain competition between railroads. We called attention in oral argument to the statute of the State of Utah, passed in 1907, we say evidently with the purpose of giving its railroad companies all the powers of holding companies like the Northern Securi- ties Company. That statute, amending Section 5 of Chapter 26 of the laws of 1901, is as follows: "To purchase or otherwise lawfully acquire, and to own, hold, pledge, or otherwise dispose of the capital stock, or any part of the capital stock, bonds or other obligations of any cor- poration, organized under the laws of this state, or of the United States, which may own or operate by lease or otherwise, any line or lines of steam, street, or interurban railroad, any union depot or station, any railroad terminals, wharves, docks, or other shipping facilities; any steamships, steam- boats, or other water craft, or which may carry oh refrigerating business, or furnish cars or other facilities for refrigeration storage of freight, or which may carry on an express or other transpor- tation business, or which may manufacture, sell, lease or otherwise provide railroad equipnient; and upon the pledge or sale of such bonds or other obligations aforesaid, said railroad company shall have power, in the discretion of its Board of Di- 140 rectors, to guarantee the sarae ; provided, however, that nothing in this section contained shall be con- strued to authorize the purchase, or acquisition otherwise, of any stock, bond, or other obligation of any corporation owning or operating a compet- ing line of railroad within this state." We repeat here the comment made on this statute in oral argument: "We venture the assertion that no such statute exists on the books of any state in the Union. It so exactly comports with the limitless ambition of Mr. Harriman that it impresses one with the con- viction that it was made to his hand, and most likely fashioned by his hand. Under such a statute this Utah corporation has the lawful power, so far as the Sovereign State of Utah can give it, to pur- chase and control the stock of all transportation corporations in the United States by land, river, lake or sea, even down to the smallest tramway in a country village; of all terminals, wharves, docks, or other shipping facilities; of all refrigerator lines ; of all express companies ; of all corporations that manufacture and sell locomotives, cars and whatever else falls under the term 'railroad equip- ment.' The only limitation of these extensive grants is that no such company shall own any stock, bond or other obligation of any corporation owning or operating a competing line of railroad within the State of Utah. As to the ownership and control of stock in parallel and competing lines of railroad in other states, the State of Utah is in- different. It creates these Mormon railroad com- panies with license to commit railroad bigamy, or 141 polygamy in every state of the Union, except with- in its own borders." But the defendants say that as the Union Pacific Company does not hold the mathematical majority of the stock in the Illinois Central Railroad Company, and the Chicago & Alton Company, and hence has not the absolute power of control of both companies, the court will not interfere until they not only get such majority in both companies, but also until they have actually used such majority of stock in both companies to oper- ate them in unison and to prevent competition between them. This was one of the arguments in the Northern Securities case. The counsel said (p. 275) : ' ' The Securities Company is neither alleged nor proved to have done or omitted anything which can be construed as a violation of the Anti-trust Act. If it has power to suppress or diminish competi- tion, it has not used it, and if the act has been violated at all it must be due to the mere existence of the Securities Company, to its powers as applic- able to railway companies, or to something illegal in its origin." The court took no notice of the argument, and laid down this proposition as one resulting from its prev- ious decisions (p. 332) : "That to vitiate a combination, such as the Act of Congress condemns, it need not be shown that the combination in fact results or will result in a total suppression of trade, or in a complete monop- oly, but it is only essential to show, that by its 142 necessary operation it tends to restrain interstate or international trade or commerce, or tends io create a monopoly in such trade or comimerce, and to deprive the public of the advantages that flow from free competition." This same principle is maintained in the following- cases : People V. Chicago Gas Trust Co., 130 111., 268. Chicago, etc.. Goal Go. v. People, 114 111. App., 75. Dunbar v. Am. Tel. & Tel. Co., 224 111., 9. Bigelow v. Calumet & Hecla Co., 155 Fed. E., 869. Central Ohio Salt Go. v. Guthrie, 35 Ohio S., 672. The law strikes at the initial step in any transaction of this sort, and condemns the first step as well as the last. It is well settled that the purchase of stock by a rail- road in a parallel and competing line is contrary to public policy. Louisville & Nashville R. R. Co. v. Kentucky, 161 U. S., 698: In such a case the courts would not make the stock- holders in the competing line wait until a majority of the stock in their corporation had been acquired; nor would they make them wait until acts had been done to suppress competition between the lines. The inevitable tendency of ownership by one railroad 143 company of stock in two parallel and competing lines is to suppress competition between them, because the owning company will certainly use its stock-voting power to vote to bring about between the two roads what Mr. Harriman euphuistically describes as "com- munity of interest" and "harmony of management." In the case of Interstate Commerce Commission v. Harriman et als., decided January 15th, 1908, by Judge Hough, speaking of this very situation the court says : "That the ownership by one such company of very large blocks of the capital stock of other com- panies, creates a relation between the corporations involved, and also a community of interest in quite a peculiar sense, is not open to doubt." But in the present case the Union Pacific Company was in actual control of the Chicago & Alton when it made its deal with Harriman and associates for the purchase and control of 29.6 per cent of the stock of the Illinois Central Railroad Company, an amount suf- ficient to give practical control of the Illinois Central Railroad Company. Even if the power of practical control has never been used, the fact that it exists is sufficient even from the point of view of the defend- ants' claims, to make the attempted purchase of the Illinois Central stock a nullity. The power of the Union Pacific to -obtain practical control over the Chicago & Alton has already been ex- hibited. The same exigencies that arose to give that power to 25 per cent of the stock may arise again, or 144 may be created by the acts of the stockholders of the Chicago & Alton. The good behavior of the Union Pacific now as to the Chicago & Alton, since the exposure of the joint con- trol agreenjent between the Union Pacific and the Rock Island, resulting in the cancellation of that agreement and the departure of the Rock Island, at least appar- ently, from its stock ownership in the Chicago & Alton, is no legal or moral guarantee that it cannot and will not resume control of the Chicago & Alton whenever it gets an opportunity. The desire among such stockholders for ' ' community of interest" and "harmony of management" with the Illinois Central, the parallel and competing line with tl^e Chicago & Alton, would undoubtedly make a deal between those stockholders and the Union Pacific's 25 per cent of stock extremely desirable, especially if the Union Pacific holds a dominating percentage of stock in the Illinois Central. It is to the interest of those two lines to have com- petition between them suppressed, contrary to the pub- lic policy of the state. If ." community of interest" and "harmony of management" can be established be- tween them through the holding of a large proportion of their stock by another railroad company, then the public policy of Illinois is violated. The Union Pacific claims that at the last election of the Alton it did not elect a single director. Why? Be- cause it did not deem it wise to exercise its right of cumulative voting given under the laws of Illinois. With 145 25 per cent of stock in its control it could always elect a proportion of the directors of that company. Whether cumulative voting can be exercised in the Illinois Central Company has never been settled and we confess is doubtful. For these reasons, we submit that it is clearly against the public policy of the State of Illinois to permit a third railroad company to own stock in two parallel and competing Illinois railroad companies. If the stock in two such companies can be so held then the stock in all the parallel and competing lines in the state can be vested in such a company as the Union Pacific Com- pany, with the extensive powers granted to it under the laws of Utah. It would, we submit, be a "most lame and impotent conclusion" for a court of the State of Illinois to hold that in spite of the state 's prohibition against one rail- road holding stock in another, in spite of her prohibi- tions against the buying, leasing or consolidation of parallel and competing lines, and in spite of her denun- ciations of all devices to monopolize and control trans- portation, a foreign railroad company with the power of a vicious holding corporation, as great as the North- ern Securities Company had, could acquire, hold and vote stock in parallel and competing lines of railroad within her borders, operated by corporations created by herself, and thus have a power which actually did stifle or which "by its very operation" inevitably tended to stifle competition between such railroads. Messrs. Cromwell and Lovett in their brief, page 146 135, attempt to extract from a comparison of the two decisions of the Supreme Court of the United States in the Northern Securities cases, the doctrine that the Supreme Court of the United States held in those cases that the awnership of a minority of stock in competing roads was valid and not against public policy, and not regarded as tending to suppress competition. In the first case the Securities Company was enjoined from voting br receiving dividends on the stock it owned in two parallel and competing roads. Beiag state corpora- tions and organized under state statutes, the United' States Grovernment could not dissolve the corporation, but it put it out of business by the injunction. The corporation then had to get rid of the stocks it held and which it could not vote or receive dividends on. It concluded to declare them in certain proportions as a dividend to its stockholders. Harriman sued to re- cover the stocks he had surrendered ia exchange for Securities Company's stock, and to enjoin the declar- ing of the dividend, which would have given him stocks other than those which he surrendered, and in different proportions. The Supreme Court held that Harriman had sold and not exchanged his stocks, and hence had no title to any particular stocks, and could not attack the discretion of the directory ,in the distribution. No such proposition as that suggested by counsel was be- fore the court and the court was not called on to ap- prove the public policy involved in the method of dis- tribution of the stocks of the two parallel and compet- ing lines. It simply said that it was wiser to divide 147 them than to sell them, a.s the §ale of such large amounts of stock would be disastrous. They further quote the Clark case, 62 Fed., 328, as holding that if there were such a rule it would apply, to individuals as well as to corporations. Nothing was decided in that case except that the constitution of Georgia, which provided as follows: "The general assembly shall have no power to authorize any corporation to buy shares of stock in any corporation in the state or elsewhere," did not have "the self-acting afftmative force/' to re- quire a court of chancery to enjoin the exercise of the voting power of the stock in the Georgia Company claimed by a foreign corporation which also held stock in a foreign railroad, which as to interstate traffic, was in some respects competitive with the Georgia Company. The court, in stating the propositions in- volved, which it does not decide, says that the "logic of the contention" applies as well to individuals as to corporations. It is too elementary to quote authority to support the statement, that what the law has not prohibited to the individual, out of respect for individual liberty, cannot be appealed to by a corporation as a justification for its acts. Individuals are short lived and their policies vary from time to time. Corporations are perpetual and their policies are permanent. Individuals have limited means. Corporations are powerful combina- tions, that the law fears (see 130 111., p. 303). The prop- erty of the individual in a generation becomes scattered 148 That of the corporation remains intact. In fact, the reasons why there is no analogy between public policy as to an individual, and public policy as to a corpora- tion are obvious and conclusive. C. THE UNION PACIFIC EAILBOAD COMPANY HAS NO EIGHT TO HOLD AND OWN STOCK OF THE ILLINOIS CENTRAL RAHj- ROAD COMPANY AS PART OF AN UNLAWFUL SCHEME TO SUPPRESS COMPETITION IN VIOLATION OF THE ANTI-TRUST LAWS OF THE UNITED STATES. The facts found by the Interstate Commerce Com- mission, which are the sworn averments of the bill, un- traversed by the answers and declared immaterial and impertinent, untraversed by the affidavits except a gen- eral denial of the purpose and object charged against the defendants as the purpose and object actuating the doing of the acts charged, show beyond question the ac- quisition by the Union Pacific Railroad Company of control over parallel and competing lines of interstate transportation, and tlie actual suppression of competi- tion between them, particularly between its own lines and the Southern Pacific lines. They further show that the Illinois Central lines in conjunction with the Union Pacific lines are competing with the Southern Pacific lines for an enormous traffic. They further show that the strategic position of the Ilinois Central lines was the declared object of the acquisition of a practical controlling interest in the stock of the Illinois Central Railroad Company. If the Union Pacific Railroad. 149 Company can use its stock in the Illinois Central Bail- road to dominate that company, then it has accom- plished an additional suppression of competition be- tween itself and the Southern Pacific Co. As long as the Illinois Central is free and independent, it can force the Union Pacific as a connecting line to accept its traffic, and through that connection it can conduct its competition with the Southern Pacific for all the busi- ness originating at New Orleans and intended for all points in the west, served by both the lines of the South- ern Pacific and the Union Pacific. Shippers in the west served by both of those lines can ship by the Union Pacific and the Illinois Central and thus have the ad- vantage of competition with the Southern Pacific. Con- trol of Illinois Central by the Union Pacific would ab- solutely destroy this competition. They further show that business originating on the lines of the Illinois Central between New Orleans and Chicago intended for the points in the west served by both the Union Pacific and the Southern Pacific com- panies can be routed either via New Orleans and the Southern Pacific, or via Omaha and the Union Pacific ; that prior to the control of the Southern Pacific by the Union Pacific, both these companies were active com- petitors for this business, and that this competition had ceased after such control had begun. Maintaining its independence, the Illinois Central can still choose what route its traffic shall go by, ac- cording to its own individual interests. Falling under the control' of the Union Pacific, that company can 150 choose the route according to its own interests to the detriment and injury of the Illinois Central. Judge Lovett said in argument: "You must attribute to corporations, as well as individuals, a purpose to serve their own interests when they have the opportunity." Actions speak louder than words. The object for which an act is done is presumed by law to be that which is the natural result and consequence of the act. The purchase of a dominating interest in the stock of the Illinois Central gives control of that company. The control of that company, gives the Union Pacific Railroad Company power to suppress competition which it is its interest to do. Its policy in suppressing competition has been executed in the cases where it ob- tained control of other companies. Therefore, it is a necessary legal presumption that the purpose of ob- taining control was to do what is the natural result of control and what is its own individual interest. For these reasons the round general denial in the answer and the aflSdavits that the purposes and objects of the Union Pacific in doing the acts set forth were not as charged, do not avail that company in the least. If it had a legitimate and proper object in acquiring the stock interests and control set up in the bill, why was that object not set forth in order clearly to repel the charge? The suggestion that all these stocks were ac- quired for mere investment purposes is repelled by the fact that the Union Pacific Company and its creat- 151 ure, the Oregon Short Line, went into debt $181,000,- 000 in order to provide funds to buy these stocks. The scheme charged is manifest. Its results are ob- vious. Its purpose is disclosed by the acts themselves. To these facts there is an automatic application of the maxim Res ipsa loquitur. The transactions themselves talk, and they speak but one language. If the purpose of the Union Pacific Company in at- tempting to acquire this stock in the Illinois Central Company was, as is charged, part of an unlawful scheme to supi^ress competition, then we have a case directly within what the defendants claim was the only foundation of the decision in the Gas Trust case and the Dunbar case, elsewhere cited in this brief. The pur- pose to create monopoly deprived the company of the power to acquire, and incapacitated it to become a stockholder. This purpose is as much in violation of the laws of Illinois as it is of the laws of the United States. The laws of Illinois against trusts and monop- olies are as severe as those of the United States, and have a foundation in the common law as well as in her own statutes. Part of this scheme of the defendants is operative in this state, and violates her laws as well as those of the United States. The defendants urge that we cannot set up the anti- trust statute of the United States in this cause. If this were a bill in equity brought for the purpose of breaking up and enjoining the operation of a con- spiracy against transportation in all of its parts, like 152 the bill filed in the Northerrii Securities case, then it would be a suit which, possibly only the United States could bring. But that is not the object of the bill. The complainants are seeking the protection of their pri- vate rights in a court of equity of general jurisdic- tion. The laws of the United States make a monopoly of transportation illegal. This court has jurisdiction to enforce those laws in order to protect the rights of individuals. It is its duty to enforce them as the su- preme laws of the land. The wrong wrought by the defendant, the Union Pacific Eailroad Company, its directory and officers, in violation of the federal law* operates immediately and directly on the private rights of the complainants. The defendants' wide-spread scheme includes the complainant's rights in its net. Can- not they cut themselves out of that net, irrespective of how many others it may cover ? Have they no right of escape except through the destruction by the govern- ment of the whole net? We are convinced that they can, and we are fully supported in this position by the opinion of Judge KJnappen in the case of Bigelow v. Calumet & Hecla, etc., Co., 155 Fed., 869. That case, the last in the books, takes up and dis- cusses all the cases cited by the defendants in support of their position, thus rendering it unnecessary for us to re-discuss them here. But if we cannot invoke the laws of the United States we can invoke the laws of Illinois, because the scheme of the defendants operates partly in this state. It appears, as aforesaid, that as part of the plan of 153 the Union Pacific it has acquired not only a dominat- ing interest in the Illinois Central stock, but a large proportion of the stock in the Chicago & Alton, the Chicago, Milwaukee & St. Paul, and the Chicago & Northwestern, all parallel and competing lines with the Illinois Central lines. It appears that the Union Pa- cific was operating the Alton under a joint control agreement at the very moment it bought the stock in the Illinois Central, and that when the existence of this agreement was uncovered it was cancelled. It may be true, that at this time, the Union Pacific Company is on good behavior and is lying quiescent in regard to its stockholdings in these parallel and competing lines, but still the object and purpose of the acquisition be- ing unlawful, and having a tendency to permit the execution of the unlawful purpose, we are not com- pelled to wait until the purpose is actually accom- plished, and the consequent injury actually inflicted. We have quoted the authorities on this proposition in the preceding clause of this brief. III. THE RAILROAD SECTJRTTIES COMPANY HAS NO POWER TO OWN OR VOTE STOCK IN THE ILLINOIS CENTRAL RAIL- ROAD COMPANY. This question is now purely academic. If the Union Pacific Company has not the right to vote its claimed atockholdings in the rilinois Central Comijany, for reasons based on the public policy of the State of 154 Illinois, then as sliown in paragraph I of this brief, it cannot be permitted to vote stock in that company by using a corporation in which it owns or controls all of the stock, a corporation which has no asset except Illinois Central stock, and a corporation whose stock it acquired for the purpose of controlling its only asset. If it has become a mere shell, or phantom corpora- tion, whose rights need no separate discussion or treat- ment, and the Union Pacific Company has the right to own and vote stock in the Illinois Central Compajiy, then the logic of the rule which we invoke would possi- bly work in favor of the Union Pacific Company. It is only in the event that the court should conclude that there is in the Railroad Securities Company materi- ality enough remaining to require it to be treated sep- arately from the Union Pacific Company, and that it would have the right to vote even if the Union Pacific Company could not vote, that any discussion of this question is necessary. This discussion will be short, as we have already, in discussing the rights of the Union Pacific Company, gone over much of the ground and considered many questions involved here. We submit that in that discussion, contained in par- agraph II of this brief, we have demonstrated the following propositions : First, That the general common law rule which pre- vails in the United States that one corporation cannot own stock in another without express legislative au- 1&5 thority or by necessary implication from a legislative grant, prevails in Illinois. Second, That such rule is based on public policy. Third, That the whole course of the legislation of the State of Illinois on the subject of corporations, shows that it is contrary to her public policy that one corporation should own stock in another corporation, and that the exceptions to this rule, ])ermitted in spe- cific instances by express statutes, confirm instead of weakening the rule. Fourth, That the laws and decisions of Illinois pro- hibit monopolies, trusts, and restraints of trade and transportation, and everything that tends to those ends. Fifth, That no foreign corporation can exercise its powers in another state when such powers are con- trary to the law or the public policy of the state. Sixth, That under the laws and decisions of the Su- preme Court no foreign corporation can exercise in Illinois any other or greater powers than can be ex- ercised by Illinois corporations organized under sim- ilar statutes. The Securities Company, as we shall term it, for brevity sake, was organized under a general statute of New Jersey, which in its terms is almost identical with the general incorporation law of Illinois. It pro- vides that a corporation can be organized "for any lawful purpose except a banking company, a savings bank, or a corporation intended to derive profit from the loan and use of money." The Illinois law pro- 156 vides that a corporation can be organized "for any lawful purpose, except banking, insurance, real estate brokerage, the operation of railroads and the business of loaning money." Horse and dummy railroads, cemetery companies, and railroad bridge companies are declared by provisos to be within the act. The only difference between the statutes is that the New Jersey statute provides that corporations or- ganized under it shall have power "to hold and vote stocks in other corporations." It is this last special grant of power which has begotten the holding com- pany and made New Jersey the nesting place of com- bination and monopoly. It was because of this special clause in the act of New Jersey that the legality of holding corporations was maintained in that state. Dittman v. Distilling Co., 64 N. J, E., 537. This question, however, has never been carried to the highest court of New Jersey and rests upon the decision of a nisi prius judge. Under its charter, the Securities Company is a mere holding company. It has no other business or purpose of existence but to own and vote stocks in public serv- ice corporations and their adjunct corporations. On its face it is apt for all the "treasons, stratagems and spoils" of monopoly. The purpose of its charter is manifest. It must be presumed that it was organized to do what it has poiver to do, and that it intends to exercise its powers. The learned counsel for the defendants claim that 157 this corporation can exercise its powers and functions in Illinois under the rule of comity. Their argument is, first, that if a corporation like the Securities Company cannot be organized under the laws of Illinois, then the mere fact that no such cor- poration can be so organized does not show any public policy against the admission of the Securities Com- pany into the State of Illinois. Second, That a cor- poration like the Securities Company could be or- ganized under the general incorporation act, and could under that act have power to own and vote stock in other corporations. They also repeat all the claims made by them in be- half of the Union Pacific Railroad Company, that owning and voting stock is not a doing of business in Illinois ; that the Securities Company bought, trans- ferred and holds its stock outside of the State of Illi- nois, and hence it cannot be reached by the laws and public policy of the state. We have answered these claims in paragraph II from the point of view of the Union Pacific Railroad Company, which has the power to own stock in corporations as an additional grant to its powers as a railroad company, and shall not repeat the argument. Of much stronger force is that argu- ment as against a corporation ivhose sole and only business and corporate object is to own amd vote stock in other companies. Indeed, on reflection, since the oral argument, we have come to the conclusion, and now urge it, that the owning and voting of stock in this state by a corporation whose only business is to own 158 and vote stock, is a doing of business in the State of Illinois in the most technical sense of that phrase. We have shown above that this corporate purpose of voting stock can only be performed in the state of the domicile of the corporation in which the stock is owned, and that the exercise of the purpose requires con- stantly repeated entries of the corporation into the state of the corporation whose stock is voted. Where does such a corporation as the Securities Company do business! Only in the state of its domicile! Only in the state where it acquires title to stock! Or at its domicile and both in the state where it acquires title to stock, and in the state where it votes? We submit that it cannot hide at its domicile in its corporate carapace, like a hermit crab, and exercise its functions of owning and voting stock all over the United States, necessarily performing those corporate functions, by sending out its officers or agents with constant iteration into the other states. If the doctrine we contend for is adopted it will per- mit the states to control the corporations organized by the pirate states to create combinations and mo- nopoly in their sister states. The doctrine is sound. It does not conflict with the decisions that a corporation which is doing a business like a railroad, incidentally granted power to own stock in other railroads, to promote the making of a con- necting line, or a manufacturing company, incidentally granted power to own stock in subsidiary corporations, cannot be said to be doing business in a state by such 159 stock ownership in the technical sense of compelling it to comply as a condition precedent of its right to enter the state with the statutes prescribing those con- ditions precedent. In such a case the law regards the main purpose of the corporation as its business within the meaning of the statute, and not the mere incident to that main purpose. Therefore, where the main and only pur- pose of a corporation is to own and vote stock, then when it owns and votes stock it is doing the only thing it ever can do. If this proposition is correct, then the Railroad Se- curities Company never did have any right to own and vote stock in the State of Illinois because it never has complied with the acts imposing conditions on for- eign corporations, which were passed before it was or- ganized. All attempts to do business in the State of Illinois, without compliance with such acts, are void. First. The learned counsel 's first proposition, that if a cor- poration like the Securities Company cannot be organ- ized under the laws of Illinois, then the mere fact that no such corporation can be so organized does not show any public policy against the admission of the Secur- ities Company into Illinois under the rule of comity as laid down in Stevens v. Pratt, supra, is propounded on the suppositions that the public policy of the state, as indicated in the act of 1905, above discussed, does not apply to that company, and that we must consider 160 only Section 26 of tlie general incorporation act as in force. It is based on the further assumption that such a corporation could not be formed under the gen- eral laws of the state. We admit that no public policy to exclude can be inferred from the mere fact that the corporation laws do not permit the organization of a similar corporation to the Securities Company. But such a public policy can be deduced from the general legislation of the state on the subject of corporations, which would make the ■ objects and purposes of the corporation claiming to enter the state by comity, against the public policy of the state. A conspicuous instance of this is the case of Carroll V. East St. Louis, supra. The case at bar is, we sub- mit, an equally conspicuous case. We believe that we have demonstrated in paragraph. II. above that the holding of stock in one corporation by another is against the public policy of Illinois, as shown by all of her general legislation, that the uniform failure to grant such powers to corporations, except in specified instances, is, from the nature of the power itself, an implied prohibition against the exercise of the power, and that this implied prohibition is an affirmative dec- laration of such policy. If these propositions are true, then it necessarily follows that a foreign corporation which has no other object or function than to own and vote stock in other corporations can not exercise those powers and func- tions in any way whatever within the state, particu- larly when such a corporation can by the mere lawful 161 exercise of its powers suppre^b competition, and create monopoly, all of whicli are prohibited. The state does not wait until a corporation with a chartered capacity for wrong doing comes in and does the wrong. She will assume that the purposes of the corporation will be executed, and exclude it. The admission into the state of corporations like the Securities Company would permit the establish- ment of Mr. Harriman's "community of interest" and "harmony of management" between competitive cor- porations of every kind and even between corporations of the most diverse character. Banks and railroads, and manufacturing interests, and coal mines, could be welded into powerful combinations injurious to the public welfare. In such cases it would not be neces- sary to obtain a majority of the stock in each one of such corporations. A large block of stock in each one would accomplish the result. The modern monopolist and trust maker has discovered that he can accomplish his results without acquiring a mathematical majority of the stock of a corporation. Such being the natural and inevitable consequences of the admission of holding companies into the State of Illinois, and all of such consequences being pro- hibited, and being accomplished by stock ownership by one corporation in another, which the law of Illinois emphatically prohibits, we submit, that holding com- panies, like the Securities Company, are and always have been excluded from the state by the public policy of the state. 162 We believK that these views are fully maintained by the Gas Trust case, supra. In that case the court said, p. 293 : "Whatever tends to prevent competition be- tween those engaged in a public employment or business impressed with a public character is op- posed to public policy and therefore unlawful. Whatever tends to create a monopoly is unlawful as being contrary to public policy." And again on page 295 : "If contracts and grants, whose tendency is to create monopoly are void at common law, then where a corporation is organized under a general statute, a provision in the declaration of its cor- porate purposes, the necessary effect of which is the creation of a monopoly, will also be void." That this is the meaning of the Gas Trust case is shown by the analysis made of it in the case of Distil- ling Co. V. People, 156 111., at page 489. The decision in the Gas Trust case is not pitched upon the motive actuating the incorporators in form- ing the corporation, nor upon what it actually did in the exercise of its powers, but upon the proposition that the purpose of the corporation as expressed nak- edly in its charter was contrary to the public policy of the state and void. If it had been a foreign corporation organized in New Jersey claiming the right to come into Illinois by comity and exercise its granted functions as a holding company, the same rule of public policy would have been applicable to it. 163 Second.. The foregoing considerations drive the learned coun- sel to their second proposition that a corporation like the Railroad Securities Company can 'be organized under the general incorporation act of Illinois, with power to hold and vote stock in other corporations, and therefore it can come into the state under the law of comity and exercise in Illinois the same powers exer- cised by her domestic corporations. We believe that it will be news to the people of Illinois to know that she also is a pirate state, and that the Northern Securities Company, the Standard Oil Company, the U. S. Steel Corporation, the Whiskey Trust, or any of the great monopolistic corporations whose gigantic proportions tower over the people and the government, could as well have been organized in Illinois as in New Jersey. The argument by which this conclusion is reached is as follows. To hold stock in corporations is a law- ful business. To vote on stock is a mere incident of the right to own it. Therefore, a corporation can be formed under the Illinois law to hold and vote stock in other corporations, first, because stock is per- sonal property, and the statute gives corporations or- ganized under it power to hold and sell so much per- sonal estate as may be necessary to their business ; sec- ond, because the act gives power ' * to have and exer- cise all the powers necessary and requisite to carry into effect the objects for which they have been formed." This last grant would exist if it were not express, be- 164 cause it is nothing but the formulation of the maxim that when a power is granted all powers necessary and proper to the exercise of the express grant are also given. Quando lex aliqvid concedit, conc^ditur et id sine quo res ipsa esse non potest. This argument ignores two important principles : First, That all corporate grants, particularly those made in general statutes of this sort, are to be most strictly construed against the corporation, and are to be confined to those mentioned in the act. People v. Gas Trust, supra, at p. 238 ; Central Trans. Co. v. Pull- man Co., 139 U. S., at p. 49. Second, The principle laid down in Oregon Ry. Co. V. Oregonian Ry. Co., 130 U. S., quoted with approval in the Gas Trust cAse, at p. 295, as follows : "We have to consider, when such articles be- come the subject of construction, that they are in a sense ex parte; their formation and execution — what shall be put into them as well as what shall be left out — do not take place under the super- vision of any official authority whatever. They are the production of private citizens, gotten up in the interest of parties who propose to become corporators, and stimulated by their zeal for the personal advantage of the parties concerned rather than the general good. * * * These ar- ticles, which necessarily assume by the sole ac- tion of the incorporators enormous powers, many of which have been heretofore considered of a public character, sometimes affecting the interest of the public verj^ largely and very seriously, do not commend themselves to the judicial mind as 165 a class of instruments reciuiring or justifying any very liberal construction. Where the question is whether they conform to the authority given by statute in regard to corporate organization, it is always to be determined upon just construction of the powers granted therein ivith a due regard for all the other laws of the state upon that sub- ject. * * * ^/jg manner in which these pow- ers shall he exercised, and their subjection to the restraint of the general lairs of the state and its general principles of public policy, are not in any sense enlarged by inserting in the articles of asso- ciation the authority to depart therefrom." If, as we have shown, the owning of stock in one cor- poration by another is against the public policy of Illi- nois, then the question of what is a lawful purpose must be construed with reference to that public policy, and private persons could not organize a corporation for that purpose and insert in their charter the power to hold and vote stock. The point made by complainants was ruled against them in the case of Parsons v. Tacoma Smelting Co., 25 Wash., 492. It was also ruled in the Gas Trust case (p. 286) heretofore quoted in paragraph II. The burden is on the counsel for defendants to es- tablish clearly the existence of the power they claim. Every presumption is against the existence of such a power, and every doubt must be resolved against the supposed corporation they evoke. N. 0. & Carrollton R. R. v. City, 34 La. An., 441. 166 As was said by the Supreme Court of the tlnited States in Fertilising Co. v. Hyde Park, 97 U. S., p. 666 : "The rule of construction in this class of cases is that it shall be most strongly against the cor- poration. Every reasonable doubt is to be re- solved adversely. Nothing is to be taken as con- ceded but what is given in unmistakable terms, or by an implication equally clear. The affirmative must be shown. Silence is negation, and doubt is fatal to the claim. This doctrine is vital to the public welfare. It is axiomatic in the jurispru- dence of this court." None of the cases quoted by the defendants in their brief turn on the question of the power of a corpora- tion organized under a statute like that of Illinois to own stock in another corporation, except perhaps the case of Market St. Ry. v. Hellman, 109 Cal., 589, and State V. Minn. Threshing Co., 40 Minn., 213. Assuming that the law of Illinois and California means the same thing, yet there is nothing in the opin- ion in the California case to suggest the proposition that the ownership of stock in one corporation by an- other was against the public policy of California. On the contrary, the court seems to think that the question of whether such stock ownership is ultra vires or not depends on the purpose for which the acquisition is made. That is not the law of Illinois. The same criti- cism is true of the Minnesota case. The quotation from Cook on Corporations (5th Ed.), Sec. 316, to the broad effect that "where the statutes of a state authorize incorporation for any legal pur- 167 pose incorporation can be had for buying and selling shares of stock in other corporations" is not main- tained by a single authority quoted in support of it. See the case of Dittman v. Distilling Co., 64 N. J. E., 537, where the EUerman and Willoughhy cases cited by Cook as authority are considered, and where it is shown that the parties conceded in the EUerman case that the corporation had the power to buy stock in an- other company, and that in the Willoughhy case the court declined to decide the proposition. IV. THERE IS NO ESTOPPEL, LACHES OE ACQUIESCENCE, AGAINST COMPLAINANTS IN FAVOE OF THE RAILROAD SBCXJEITIES COMPANY. If, for the reasons stated in paragraph I of this brief, the court shall deem it unnecessary to consider the right of the Railroad Securities Company to hold and vote stock in the Illinois Central Company, then it will be equally unnecessary to consider the proposi- tion discussed in this paragraph. The estoppel, laches and acquiescence, claimed against Mr. Fish are : 1st, That years ago he sold some of his Illinois Cen- tral stock to the Securities Company; 2nd, That he was for some years a director in the Securities Company. 3rd, That for six years he appeared at the meetings of the Illinois Central Company and acted as the 168 proxy of the Securities Company, and voted at the same time his own stock. The claim against Edmunds and Kasson is that they gave their proxies for several years to Mr. Fish, who voted them at the corporate meetings of the Illinois Central. The claim against Emrich is that possibly his five shares were held by persons who also gave their prox- ies to Mr. Fish. The only four cases in the books which are exactly in point hold with the complainants on the proposi- tion of estoppel, laches and acquiescence. In George et al. v. Central R. R., 101 Ala., 607, which was a suit by minority stockholders to enjoin the Cen- tral Eailroad Company from voting stock in their own corporation on the ground that the acquisition of such stock was ultra vires of the other company, the Cen- tral Company was shown in the bill to have owned and voted the stock for six years. The Chancellor below sustained a demurrer, one of the grounds of which was (p. 619) that "complainants have not sued within a reasonable time, hut after full knowledge of all the grounds of complfiint now complained of, or full op- portunity to acquire such knowledge, acquiesced in such acts for more than six years, and have been guilty of laches. ' ' On this point the Supreme Court said : "It is our opinion so far as it relates to that cause of complaint, that the contention of appel- lees cannot be supported. Let it be assumed that 169 complainants were fully aware of the ownership of the stock, from the time it was acquired, and of that company's use of it in the past, and ac- quiesced in such ownership and use, this fact fur- nishes no reason why they should be obliged to submit to further improper uses of the stock. The abuses committed in the past are the very grounds and causes of their present interposition, to the end that future similar abuses may be prevented. The use of the stock is continuing, and we can conceive of no just reason why a party interested, and otherwise entitled to interfere, may not in- terfere, at any period of such use, and object to its continuance. As well might it be said that a person who has for a long time suffered, without objection, continued trespasses upon his property, is obliged, by reason of his silence, to submit to all future trespasses which the wrong-doer may be disposed to commit. We hold that the right to restrain the use of the stock is not barred by ac- quiescence. ' ' In State ex rel. v. Newman, 51 La. Ann., 833, it ap- peared that for sixteen years the New Orleans Gas Light Company had owned and voted without objec- tion stock in the Jefferson City Gas Light Company. Finally this right to own and vote stock was challenged on the ground that it had no power to own and vote such stock. An estoppel was set up against this ob- jection. The court said: "We have given consideration to the contention of relators that because the N. 0. Gas Light Co. has been permitted to vote the stock held by it 170 in past years, the other stockholders of the Jef- ferson City Gas Light Co. are estopped from now denying its right to vote. But we cannot give our assent to this doctrine as thus broadly insisted on. "It is public policy crystallized into law which denies it the right to vote, and what is against the law cannot, ili such a case as this, be legalized by acquiescence. Estoppels are not favored. Be- sides, there may have been no particular reason in the past for the minority stockholders to object to the vote, whereas at the recent election, when the expiration of the charter of the Jefferson City Gas Light Co. drew near and a liquidation of its affairs, perhaps, necessary, there may have been the best of reasons for objecting to the N. 0. Gas Light Co. electing a board of directors of its own choosing, especially so in view of the fact that it claims the right of succession to make and vend gas in that part of the city, and was likely to be- come a bidder for the property and effects of the outgoing company. ' ' In State v. Port Royal By., 45 S. C, 470, a bill was brought by stockholders of the Port Royal E. E. Co. for the purpose, among other things, to restrain the Central Eailroad of Georgia from voting its stock in the Port Eoyal road on the ground that its holdings of such stock were ultra vires and void (pp. 47S-9). The Georgia Company acquired this stock in 1881 (p. 475) and had controlled the company ever since. The bill in question was filed Jan. 27th, 1893, twel>ve years after this control began. It was claimed that the right of the stockholders to bring the bill was barred by 171 silence and lacbes. The Chancellor overruled this plea and the Supreme Court adopted his opinion on this point (p. 483). The Chancellor's opinion (p. 472) is as follows : "It is urged that the silence of tJie siockholders for a number of years, precludes their bringing this action. This objection does not seem to be well founded. Admitting that the control of the Port Royal Railway Company by the Central Rail- road Company, is, as alleged, ultra vires, no lapse of time will make it right. If it ivas ever illegal and wrong it will always continue so; and such illegal u.^tirpation and acts are not cured by lapse of time. (See Thomas v. R. R. Co., 101 U. S., 71, 86, 87; Central Transportation Co. v. P. P. & C. Co., 139 JJ. S., 49.) Nor does the objection that the complainants are barred by their la'ches appear to be well taken. It is not alleged that there has been any change in the position of affairs as existing when the present complainants pur- chased their stock, made either by the Central or the Port Royal railroads, based upon the non- action of the stockholders, and there seems no rea- son why, in equity, they should not be allowed now to bring the present action. "In Gallagher v. Caldwell, 145 U. S., 373, the . Supreme Court of the United States says : 'Laches ifc not like limitation, a mere matter of time, but principally a question of the inequity of permit- ting a claim to be enforced ; and in equity founded upon some change in the condition or relations of the property or the parties.' But, aside from and in addition to all this, the complaint brings to the attention of the court an entirely new phase, in reference to the affairs of the defendant, from that which has existed before. "It alleges that the State of South Carolina, because of this illegal misuse of the franchise of the Port Royal Railway Company, has instituted proper proceedings and is seeking therein to for- feit the charter of that corporation, and will do so now unless such illegal misuse is abated and such illegal control is stopped. This is an entirely new matter, and in reference thereto the plaintiffs have certainly acted with all possible promptness. It presents to the stockholders of the Port Royal Railway Company a very serious condition of things, and would appear to give the highest justi- fication to this present action, brought by the com- plainants as minority stockholders seeking to save the corporate life of their corporation, and pre- vent the forfeiture of its charter; they invoke the aid of this court, and ask that it will afford that relief by preventing the continuance of the evils complained of, and thereby prevent the forfeiture. The necessity seems to be pressing, and affords a reason for immediate action which never existed before. Aside, therefore, from the other reasons given, this would seem to entirely answer the ob- jections as to laches." Durkee v. People, 53 App., 396, was in the nature of a quo warranto on the relation of one candidate for a directorship in the Peoria & Western Railway Com- pany to oust one returned elected by bondholders who .claimed the right to vote on bonds issued by the com- pany under an ultra vires contract. The company was organiized in 1887, under the gen- 173 eral railroad law of Illinois with a capital stock of $4,500,000. At that time Moran and Denny owned a railroad which answered the description of the pro- posed railroad, and they offered to sell their road to the new company for 44,991 shares of its capital stock, and for four and a half millions of its bonds. This offer was accepted, the incorporators of the company having prior to the acceptance adopted by-laws by which holders of its bonds were to have voting power. A bond issue of $5,000,000 was authorized, with the provision, among others, that the holder of each bond could have the right to vote thereon at all meetings of the stockholders. The bonds issued, of which Moran & Denny received four and a half millions, contained a provision that the holders might vote, and the stock certijScates contained a provision to the effect that they were issued, received and held subject to the bonds and to the right given in each of said bonds to the holder thereof to vote. At a stockholders' meeting in 1893 Durkee and relator were candidates and votes were cast for each by holders of the stock and of bonds. If the holders of bonds were entitled to vote, Durkee was elected; but if the agreement and by-law that they might vote was invalid, the relator was elected, as he received a majority of the stock votes. It was held that the by-law giving bondholders the right to vote was void, ' ' being in conflict with the con- stitution and statutes, and against the public policy of the state," the statute and constitution providing that directors were to be elected by a majority in value of 174 the stock upon a cumulative system of voting and not otherwise. "Nor has such agreement become binding by subsequent ratification, acquiescence or estoppel. Whether bondholders have ever exercised the sup- posed right to participate in the management of the affairs of the corporation does not appear; but assuming that such is the fact, and that they have been permitted to do so without objection, the agreement would not thereby become operative. A contract which the corporation could not make, it could not ratify or make valid by any subsequent act. If there was no power to make, there would be equally a lack of power to confirm it. {Board of Commissioners, etc., et al. v. L. M. & B, R. R. Co. et al, 50 Ind., 85.) "In the transa:ction Moran and Denny sub- scribed for 44,991 shares of stock, which consti- tuted the entire capital stock except nine shares, and the holders of those nine shares assented to the arrangement. All the stock, therefore, came either through Moran and Denny, or through the holders of the remaining nine shares, all of whom participated in the transaction. The condition that bondholders might vote was printed in the cer- tificates, so that all holders had notice of the pro- vision. But neither notice nor assent to an illegal transaction, nor acquiescence, merely, on the part of a stockholder in acts in execution of such trans- action, will prevent him from withholding further assent and preventing further execution of it, un- less an estoppel cam he invoked under some recog- nised rule of law. The mere fact of participation on the part of the corporation or stockholders in 175 an agreement in violation of the charter cunld not produce that result, which would be, in effect, abrogating the charter. {Penn. v. Bornman, 102 111., 523.) "There is no question of fraud or bad faith in this case. No one was deceived or misled as to any fact. It is to be observed that the right of bond- holders to vote at stockholders' meetings was not made a condition in the proposition of Moran and Denny to the corporation. It was not a condition imposed by them, but appears to have been rather a matter of grace or favor to them. But if it were to be regarded as a condition of the contract of sale, its illegality arose from the fact that it was a violation of the statutes of the state, and a con- tract void as against a statute cannot become operative and valid through an estoppel. There is no estoppel against showing that a contract is in- valid, as in violation of a statute or against public policy. {Brightman v. Hicks, 108 Mass., 246; Lan- gan v. Sanhey, 55 Iowa, 52; Tibbie v. Anderson, 63 Ga., 41.)" ' The judgment in this, case was affirmed, and the opinion of the Appellate Court was approved in 155 HI., p. 354. In the Jackson case and in the Port Royal case the court laid some stress upon the springing up of a rea- son why the stockholders should act to attack the vot- ing power of stock held ultra vires. So in this case. The acquisition of all the stock of the Securities Com- pany and the entire domination of that company by the Union Pacific Company, thus giving the Union Pacific 176 Company practically a dominating interest in the Illi- nois Central Company, was such a substantial and menacing change in the previous condition as to arouse the stockholders to action, and to examine into the right of this company to vote its stock. The defendants do not quote or discuss these cases in their briefs on this point on which we now quote them. They do quote a mass of eases, every single one of which is a suit brought by a stockholder against his own corporation to set aside an executed contract of that corporation. In none of these cases was there a suit by a stockholder to enjoin the tdtra vires voting of stock in his own corporation held by another corpora- tion. The nearest approach to the case at bar is Kimbell V. Chicago Hydraulic Co., 119 Fed., 102, where the prayer for an injunction against voting the stock was a mere incident to the main object of the bill to set aside an issue of stock made eleven years before and to recover for the company all dividends paid on it. Counsel argue that the Illinois Central Eailroad Company is estopped because it permitted the Securi- ties Company to subscribe to its stock and received payment for it. The evidence shows that all of such subscribed stock was sold at a large profit, and that the Securities Company now has the 80,000 shares of stock it originally bought, before it ever was permitted to subscribe. As to that 80,000 shares, the Illinois Central Railroad Company never had any relations with the Securities Company except to permit it to 177 vote. As shown above it had no interest in whether its stock was OAvned or voted by A or B. Both parties to such voting knew the act was illegal and there was no element of estoppel, or laches, or acquiescence in the matter, because the voting was simply a series of re- current illegal acts, the repetition of which many times would not cut off a right to stop the series. If the Illi- nois Central Company were to bring this suit it would not be attacking any ultra vires contract that it made as to the 80,000 shares, and therefore, if the right of the complainant to bring the suit is derivative and not original in them, the company would not be estopped. As TO Fish. (a) When Fish sold his 26,000 shares of stock to the Securities Company he did not warrant or cove- nant that the purchaser had the right to vote on the stock which he transferred. He had at that time no relations with the Securities Company. It was a stran- ger to him and he to it. He did not deceive the com- pany. It knew its own powers and was charged with notice that it had no right to vote on the stock it bought. In no event, howcA^er, could Ee be estopped on this ground except as to the number of shares which he sold. (b) Fish Avas elected a director and vice-president long after the Securities Company bought its 80,000 shares. And as such director and vice-president he was simply the agent of the company. There is no rule of estoppel which prevents one who has been an agent 178 of a corporation to deny its powers in respect of his own personal rights after his agency has ceased. The voting by the corporation on the stock during such agency did not cause the corporation to change its po- sition to its detriment. It knew all the time that it could not vote. It was not misled to its injury. There was no fraud or intent to defraud in the matter. As a matter of fact Fish acted in good faith because he actu- ally believed that the company had a right to vote its stock. In People v. Brown, 67 111., 435, the court said: "The doctrine on this subject we understand to be, that, when a person, by his words or conduct, voluntarily causes another to believe in the exist- ence of a certain state of things, and induces him to act upon that belief, so as to change his pre- vious position, he will be estopped to aver against the latter a diif erent state of things. Text writers denominate this estoppel by conduct, in order to which all of the following elements must be pres- ent: 1. There must have been a representation concerning material facts. 2. The representation must have been made with knowledge of the facts. 3. The party to whom it was made must have been ignorant of the truth of the matter. 4. It must have been made with the intention it should be acted upon. 5. It must have been acted upon. In this connection, it is said, the representation here spoken of is one external to, and not necessarily implied in, the transaction itself, and fraud, or something tantamount thereto, is now the distinc- 179 tive character of this kind of estoppel. (Bigelow on Estoppel, Introduction, p. 60.)" In Holcomb v. Boynton, 151 111., 275, the court said : "Before it (the doctrine of estoppel in pais) can be invoked to the aid of a litigant, it must appear that the person against whom it is invoked has, by his words or conduct, caused him to believe in the existence of a certain state of things and in- duced him to act upon that belief. If both parties are equally cognizant of the facts, and one has acted under a mistaken idea of the law, the other party can not say he has been deceived thereby, and is entitled to an application of the rule, but will be considered as having acted upon his own judgment solely. The essential elements are: mis- representation or concealment of material facts, ignorance of the truth of the matter by the party to whom the representations were made, and re- liance upon his part in acting upon the representa- tions. (2 Story Equity Jurisprudence, 1543; Da- vidson V. Yotmg, 38 111., 152; First Nat. Bk. of Quincy v. Richer, 71 id., 439; Dinert v. Eilert, 13 Brad., 99; Herman on Estoppel, 969.)" See, also, Campbell v. Goodall, 54 111. App., at page 26, and other Illinois cases there cited. See, also. Brant v. Virginia Coal & Iron Co., 93 U. S., 335. As TO Edmunds and Kasson. Unless there is some such thing as estoppel by con- tagion, then the giving by Edmunds and Kasson of their proxies to Fish could not have any greater effect 180 than if tliey had themselves attended the stockholders' meeting and voted their stock in person, knowing that the Securities Company was also voting its stock at the same time. But as we understand the argument the plea against them is laches and acquiescence and not estoppel. On this point we refer to the three cases first above quoted by us. As TO Embich. Defendants say that either his predecessors in title to the stock are in the position of Edmunds and Kas- son or he only owns five shares and ought not to be permitted to maintain the bill because of his motives. "We are not trying this case on a demurrer, but on answer and affidavits and motion to dissolve. The de- fendants have pleaded an estoppel. It is elementary that such a plea is not favored and must be made out clearly. It is not shown that Emrich's five shares come from any person who is in the position of Ed- munds and Kasson. If this were true the defendants in possession of the books of the company and, as shown by the affidavits, in control of its officers, could have shown this clearly. They have left it to conjec- ture. Counsel are mistaken in saying that it is shown that Hutton & Company voted their stock in 1906. They held stock and voted in 1903. In 1904 and 1905 they held no stock. In 1906 they became stockholders, but did not vote. It is not shown that the stock they acquired in 1906 was ever voted. We have as much right to say that Emrich's stock was part of this stock as the defendants have the right to say that it is part of the stock of M. and H. Clarkson, or of Wilfred Wylie. Even if it was Wylie's stock it is not shown that that stock was ever voted but once and that in 1906. Surely that single voting could not give rise to laches, acquiescence or estoppel. To the argument that, if Emrich is not estopped and there is no acquiescence or laches, he ought not to be permitted to maintain this bill on five shares of stock, because he is a friend of Mr. Fish's, we answer that if his rights are clear he has as much right to main- tain the bill on that number of shares as if he owned ten thousand, and as we have shown below in para- graph VI of this Brief, his motives and reasons for exercising his rights are beyond consideration. The case of Hyde Park Gas Company v. Kerber, 5 111. App., 132, is quoted in such a way that it might mislead. Four widely separated paragraphs in the opinion are put together as if they were joined. The aver- ment of the bill was (p. 138) : "That your orator, John F. Temple, is the prin- cipal stockholder of said Hyde Park Gas Company in respect to all stock that has any footing; that your orator, Henry Kefber, is the equitable oivner of 36 shares of the stock of said company, to be taken out of the number of shares which has here- tofore belonged to your orator, John F. Temple." The court then says : "This blind statement is all there is in the bill relating to the interest of Kerber, and we cannot but regard him as a mere adjunct to Temple, who is the real and substantial, the sole plaintiff in the suit." After demonstrating that Temple participated in the transactions attacked in the bill, the court says (p. 140): "This bill was filed in several aspects, the first of which was for the court to make an equitable partition between Temple and Woolley of 241 shares of the Hyde Park Gas Co.'s stock, as to which Kerber had nothing to do, and the corpora- tion was but a formal party. Secondly, for re- dress to the corporation for the various breaches of trust on the part of Woolley, as respected the un- authorized issuance and fraudulent transfer of the 14 second mortgage bonds and misapplication of corporate funds. As to that part of the case, the corporation is theoretically the plaintiff, and any decree would be in its favor and not in that of the stockholders. Then the third aspect is that of using these breaches of trust in issuing and trans- ferring the bonds, misappropriation of the funds, etc., against the corporation, and asking for a dis- solution of the corporation, or, at all events, a re- ceiver. In that aspect Temple is the real plaint- iff and the rule of equity that a suitor must come into its court with clean hands applies. The facts show that he should have been made defendant by some other actual stockholder, if any there be, who has not participated in these breaches of trust. 183 Joining Kerber as a complainant cannot relieve the court from looking at Temple's relation to, and participation in, the matters in question." We submit that it appears from the opinion that Temple was the legal owner of the stock in which Ker- ber claimed an equitable ownership as to 36 shares, without disclosing what that equitable ownership was. There is no analogy between that case and this. There is no claim here that Emrich is not an indepen- dent stockholder, or that he stands in any relation to Mr. Fish except that of acting with him. But there is another aspect in which these pleas of the defendant, the Securities Company, must be re- garded. The defendant is invading the rights of the complain- ants. The complainants have a right to repel that invasion. To justify its invasion the defendant is making an affirmative weapon of ultra vires contracts made with others. This affirmative use of such con- tracts with third persons against these complainants puts these contracts into the category of executory contracts, and puts the defendant in the position of a party to such contracts attempting to enforce them. Under these circumstances there can be no estoppel against the complainants. They are seeking to pre- vent defendant from such execution. That being so, no estoppel can arise against the complainants, be- cause the claimed rights of the defendant are ultra vires in the true sense. 184 National Home Building Assoc, v. Home Sav- ings Banh, 181 111., 35. California Bank v. Kennedy, 167 U. S., 362, 367. De La Vergne Co. v. Germ,an Savings Bank, 175 U. S., 59. First National Bank v. Converse, 200 U. S., 425. Merchants Nat. Bank v. Wehrman, 202 U. S., 295. Thomas v. B,. R. Co., 101 U. S., 83. In answer to this argument defendants refer to St. Louis & Terre Haute R. R. Co. v. Terre Haute, etc., Co., 145 IT. S., 393. That and all similar cases are where relief is de- nied to a party to an executed ultra vires contract who seeks to set it aside. In such cases, the court will deny relief to either party and leave them where they placed themselves. We are not parties to the defendants' ultra vires con- tracts seeking to set them aside. We are third persons to such contracts which are set up against us as a ground or pretense on which to base an invasion of our rights, and we are in as good a position as if the defendants were attempting to enforce its ultra vires contracts against the other parties thereto. Suppose the defendant were denied the right by the Illinois Central Railroad Company to vote its stock, would it not be compelled to set up its contracts out of which its claim of right arises? Would there be any 1B5 estoppel in that case against the Illinois Central to plead want of right in the defendant to be a stock- holder? Because the compan}- and its officers are friendly to the defendant and compel the individual stockholders to protect tlieir individual rights by af- firmative action against the defendant, we submit, the defendant cannot plead estoppel against them, or put them in the position of a party to an executed contract seeking to avoid the contract. V. THE COMPLAINANTS HAVE THE RIGHT TO MAINTAIN THIS BILL. Where a foreign corporation attempts to acquire stock ownership in a domestic corporation, its act may be ultra vires from the point of view of the law of the state which created the foreign corporation or from the point of view of the law of the state which created the domestic corporation. In order to make such a transaction valid the laws of the two states must concur. Where such a transaction is ultra vires by the law of the state creating the foreign corporation, it may be attacked either by the creating sovereign or by the corporation's own stockholders. The right of attack in such case is concurrent in the creating state and in the stockholders of the corpora- tion. The state has the right to keep her creatures within the limits of the powers granted to them, and 186 even to forfeit their charters if they exceed those limits. The stockholders have the right to prevent the association of which they are members from using the corporate powers for any other purpose than those granted by the charter, which is not only a contact be- tween them and the state, but also a contract between the corporators themselves. Any stockholder may bring such a suit, and if the transaction is one ultra vires in its true sense, i. e., one which is beyond the corporate powers and hence not capable of ratification by all the stockholders, the law presumes juris et de jure that the stockholder is injured by the transaction itself and no special injury has to be shown either to himself or to the corporation. These principles are elementary. Where such a transaction is ultra vires by the law of the state creating the domestic corporation, by whom may the transaction be attacked! By the state creat- ing the domestic corporation, by that corporation it- self, or by the stockholders of the domestic corpora- tion? As the public policy of the state creating the domes- tic corporation is infringed, there can be no doubt that it may sue to oust the foreign corporation from its attempted stockholding in a domestic corporation. Its remedy grows out of the right to vindicate its own pub- lic policy and to prevent foreign corporations from violating that public policy. As the domestic corpora- tion is its creature, with whose corporators it has contracted and to whom it has granted certain powers, 187 it has the right to thrust out from among those cor- porators an artificial person whom it never intended to vest with any such powers or to permit to partici- pate in the exercise of the powers granted by it. But because it can sue for such purpose it does not follow that such right to sue is exclusive in it. Any other person whose rights are injuriously af- fected by the transaction, must also have a right of action to vindicate those rights. Who are those persons? Certainly not the domes- tic corporation as an entity, separate from its stock- holders. As such entity, it has no interest in deter- mining the personnel or qualifications of its stockhold- ers. The right to be a stockholder does not depend on its consent or dissent. The qualifications of its stock- holders are fixed by the state. Neither is it a guard- ian, much less the sole guardian of the capacity of its stockholders. It stands in no parental relation to its stockholders. It is not like the father of a family who is interested in knowing who the members of his fam- ily are, with power to kick out the intruder from his household. But it is clear that the right to thrust out the in- truder does reside in the stockholders of the domestic company. The relations between them inter se, and between them as incorporators and the state, is one of contract. They are the real parties to the contract, and the ideal being through which they perform their functions as a legal fiction. If it is a part of their contract that only natural persons with individual 1H« wills, consciences and judgments, shall be members of the society of incorporators — persons with whom they can consult, and on whose knowledge and judgments they have the right to rely in the conduct and man- agement of the corporate affairs (and such is nec- essarily part of their contract when a corporation can- not become a stockholder) — then they must have the right to see that such contract is enforced, and to de- mand that an artificial person without soul or judg- ment or knowledge or conscience, shall be excluded or driven out of the body of stockholders. Such arti- ficial person is a total stranger to the stockholders. Its presence is unauthorized. Its attempted usurpation of title to shares of stock, excludes i^ro tnnto from the stockholding body many material persons. Therefore, any intrusion, or attempted intrusion, in- to the body of stockholders by such total stranger, such unauthorized artificial person, is an invasion of the individual right of every stockholder, and not an invasion of any right of the corporation itself, con- sidered as an entity separate from the stockholders, in which vests title to the corporate property, in whose name the corporate contracts with third persons are made, in whose names the corporate functions are per- formed, and to which accrues all actions affecting its property, contracts or functions. Such intrusion, or attempted intrusion, is per se an injury to every stockholder. Being such it is not nec- essary for a stockholder to show any other or further injury either to himself or to the corporate entity of 189 which he is a member. His own right is invaded. The wrong is done him by such invasion, and he has a standing in a court of equity to protect the right and to prevent the accomplishment of the wrong. The attempted holdings of stock by one corporation, without power so to do, in another corporation, may be divided into three categories : 1st, it may hold an actual mathematical majority of the stock and hence have the power of control; 2nd, it may hold such a large proportion of the stock as to give it a dominant position in the affairs of the corporation equivalent to giving it control; 3rd, it may hold a small fraction of the stock. Do the rights of the individual stockholders change as the facts of each case fit one or the other of these categories? On the principle above stated, and from the point of view above given, the numbers of shares of stock held by the intruding corporation do not af- fect the rights of the individual stockholder. It mat- ters not whether the intrusion is large or small. The principle is the same, the wrong is the same, the dif- ference is one of extent only. The first two categories named would undoubtedly give rise to another and different equitable right in the stockholders, that of preventing control of their corporation by another corporation having no right to own its stock. The same situation of affairs as presented by the first two categories, even on the supposition that the stockholding corporation had the right to own and 190 vote stock, would give rise to still another and dif- ferent equitable right in the stockholders, if the stock- holding corporation was using its control to injure the corporation by diminishing its assets, by suppressing competition with it, by non-user of its corporate func- tions, or by any other means. With the last named proposition we have no con- cern in this case. Our bill is not pitched upon any such grounds. If such were our case, it would, without doubt, be necessary to show either an actual or a cer- tain impending injury to the corporation itself and to show that we had made demand on the corporation to bring the suit, or that such demand would be an idle ceremony, because in such case the action would be that of the corporation, and we would be permitted by a court of equity to bring it only because the corporation would not bring it or could not be trusted to prosecute it in good faith. The right of a stockholder to bring such an action is what we called in oral argument "a derivative right," i. e. one not originally in the stockholder, but equitably derived by him under the circumstances from the corporation in which he is a stockholder. For these reasons all the arguments made and all the authorities quoted by counsel on such a theory of the case are irrelevant here. But our bill is pitched on the two independent grounds first above named, to-wit: 1st. That we have, as stockholders, the orj^nal and individual right to thrust out of the body of our asso- ciates an artificial person who cannot under the terms 191 of our contract among ourselves, and with the state, be one of our associates, irrespective of the extent to which that artificial person claims to share in the rights, powers, and duties that pertain to lawful asso- ciation with us. 2nd. That the extent of the power claimed by the unlaAvful intruders is such as to give it practical con- trol of the corporation, and that practical control is the same in equity as the ownership of the mathemati- cal majority of the stock. PiBST. The law of Illinois fully maintains the first proposi- tion. In Perry County v. Stebhms, 66 111. App., 427, a stockholder in a railroad company brought a suit to oust a county from its stockholding in the company and to cancel its stock on the ground that its subscrip- tion to the stock was ultra vires and void. The Appel- late Court held that such an action was one which could only be brought by the railroad corporation and re- versed the judgment of the chancellor. On appeal in the Supreme Court, Stehbins v. Perry County, 167 111., p. 567, that court reversed the Court of Appeals and held that, the corporation had no in- terest in having the stock cancelled, and that it was not proper for a bill of this kind to be filed by the corpora- tion. Attempt is made to distinguish this case because it is said it was a suit to cancel stock, subscribed for 192 ultra vires. There is no logical differeuce between a suit to cancel stock and thus eject an illegal person from the body of the stockholders, and a suit to eject such a person who attempts ultra vires to hold stock in a corporation and to act as a stockholder by voting on it; and such we submit is the effect of the decision in Dunbar v. American Telephone Co., 224 111., p. 9. The bill in that case was by minority stockholders who, among other things, sought to restrain a corpora- tion which had no power to own stock in the corpora- tion of the complainants, from voting such stock. The court said (page 26) : "The remaining important question to be con- sidered is whether the complainants below, minor- ity stockholders in the Kellogg Company, can maintain this bill. If we are correct in the view that the object of the American company was il- legal and that its attempt to acquire ownership of the stock in the Kellogg Company was abso- lutely null and void, as being in excess of its chartered powers, then it would seem to follow that each and every stockholder in the latter com- pany would have the right to say that the Ameri- can Company, assuming to own stock which it did not and could not legally own and vote at any meet- ing of the Kellogg Company in the management and control of its business, should be restrained. In other words, every lawful owner of stock in a corporation has the right to say that others assum- ing to vote shares of stock which they do not have the legal right to vote, shall be restrained. This, we assume, must be admitted, and such is the logi- 193 cal effect of the decision of tiiis court in Sfebhins V. Perry County, 167 Til, 567." The counsel also attacked this case. They say that the court laid down the rule too broadly, that the opin- ion of the court must be confined to the exact case be- fore it, and that such exact case was based on the pur- pose for which the stock was acquired. The case was based solely on the ground that the attempted acquisi- tion of the stock was ultra vires and void. The purpose of acquiring the stock was a mere inducement tending to emphasise the want of power in the corporation to buy. Judge Knappen in Bigelow v. Calumet & Heda Co., 155 Fed., at p. 879, quoted the Dunbar case as holding the doctrine we contend for. The learned counsel for the Union Pacific Eailroad Company, Messrs. Cromwell and Lovett, at pages 5 and 153 of their brief, admit the principle that a stock- holder can maintain a suit to restrain other stock- holders from voting where such stockholders have ab- solutely no title to the stock standing in their names, and are entire strangers to the corporation, but at- tempt to argue that we admit that some sort of title vested in the Union Pacific Railroad, and Eailroad Se- curities Company, that therefore an individual stock- holder is without right to sue, and such right of suit vests only in the state. We have shown in the pref- ace to this brief that we do not admit any sort of title in the companies to the stock claimed by them, and ad- mit nothing but an equitable right to receive the avails 194 of the stock as a rule of equity to prevent injustice. As shown above we have never admitted and do not admit that under the Act of 1899 any power was given to a foreign company to acquire stock in an Illinois railroad company, or that any semblance of such power results to them hj any statute said to promote relations be- tween connecting lines. The inference which the counsel draw from the Dun- bar case that it holds that if there was any, sort or kind of title in the stock whose voting was enjoined, the state alone could bring such action, is strained. The court did not discuss in that case any such claimed exclusive right to bring the suit. It referred to the Barnes case arguendo. By the analysis which we have made above as to who had the right to bring this ac- tion against these foreign corporations, we believe we have demonstrated that either the state or the stock- holder might bring it ; and it is manifest that the state could have brought the Dunbar case as well as the mi- nority stockholders. While Messrs. Cromwell and Lovett hold that no one but the state could bring this action. Judge Dickinson, the distinguished lawyer who represents the Illinois Central Railroad Company, contends that the right to bring this action was one resident in the Illinois Cen- tral Railroad Company. We believe that our analysis above given disposes of this argument, and that it is further disposed of by the Stebbins case. Judge Dickinson's views are un- doubtedly supported by the Alabama cases quoted on 195 the briefs, but this court, with itie Stebbins and Dunbar cases before it, we submit, will not follow the Alabama cases, which stand alone on this proposition. "We shall discuss below the proposition that if this suit is one where the right of action lies in the corporation, we have brought ourselves witliin the rule excusing us from making a previous demand on the corporation to bring it. We further quote the following cases as contrary to Judge Dickinson's later views in this case, and as sup- porting our own contention and his first opinion of the position of the Ililinois Central Company, that it is not a necessary party to this bill, and has no interest, in its capacity as a corporate entity, to a controversy involving the right to vote its stock. Taylor v. Southern Pacific Co., 122 Fed., 147. Lucas V. Milliken, 339 Fed., at 866. Biggins v. Baltimore & Ohio R. R., 99 Fed., 641. The Taylor case was a bill by minority stockholders to enjoin the Union Pacific Railroad Company from voting stock in the Southern Pacific Company. The case turned on the fact that the Union Pacific Railroad Company was not a party to the suit by service, and the court refused to issue the injunction without serv- ice. As regards the interests of the Southern Pacific Company, the corporation in which the stock voting was enjoined, the court said: "Of what interest is it to the corporation con- 196 sidered as an entity or as a body of stockholders, whether particnkir shares are owned or voted by A rather than B, or whether C is capable of holding or voting shares at all ? It is a question which may indirectly affect other shareholders, but it is clear- ly not a question which concerns the corporation, as such, or any of its functions." In both the Lucas and the Tliggms cases, which were injunctions to restrain the voting of stock in corpora- tions, it became necessary to determine the jurisdiction of the courts by the test as to whether the corporations, in whom the stock-voting was enjoined, were necessary or mere formal parties to the cause, and in both cases it was held that they were mere formal parties. As a further argument against Judge Dickinson's claim, and as disagreeing with the Alabama cases we ask the court, in e:?amining the following cases quoted on other propositions in all the briefs, to note that, al- though they were cases of injunction by stockholders against stock-voting by other stockholders without au- thority so to vote, there is no suggestion even that the right to bring such a suit was resident in the corpora- tion whose stock was attempted to be voted in viola- tion of law, and did not reside in the individual stock- holders : Milbmk v. N. Y., L. E. & W. R., 64 How. Pr., 20. Hafer v. N. Y., L. E. & W., 14 Weekly Law Bui., 68. Parson v. Tacoma Ry. Co., 25 Wash., 492. 197 Hilles V. Parish, 14 N. J. E., 380. Campbell v. PoiiUney, 6 Gill. & J., 94. The statement on page 169 of Mr. Cromwell's brief that the Milhank case is overruled by the case of Oel- berman v. B. R. Co., 77 Hun, 332, is an error. When the Milbank case was decided, the law of New York did not permit stock ownership of one railroad in an- other and on this disability the whole case was based. In the Oelberman case, the railroad company had legis- lative authority to own and vote stock, and the attack was made upon it that it was using its lawful power to injure the corporation in which it owned stock. Messrs. Herrick and Shaw, in their brief, from pages 153 to 171 attack complainants' right to prevent the defendants from acting as stockholders of the Illi- nois Central Railroad Company under their claim of ownership of stock, by attempting to make it appear that we are seeking to attack the executed contracts between these corporations and the sellers of the stock to them. They say that we are neither parties nor privies to such contracts, that their clients having ac- quired the stock, they are authorized to exercise the incident of their ownership, the voting power on the stock, and that we as third persons to such contracts of acquisition have still less power to attack these ex- ecuted contracts than either parties or privies. In sup- port of this claim they quote a mass of authorities, not one single one of which is the ease of a stockholder seeking to exclude from membership in his own corpor- ation another corporation which had no power 198 to own or vote stock in such corporation. The cases quoted mostly proceed upon the the- ory, that the corporation which has made the ultra, vires contract, owes no duty in respect thereof to the complaining party, or that such complaining party's rights have not been invaded hy such ultra vires contract, or that he has no interest in attacking the contract or the incidents that proceed therefrom. These cases and the principles involved in them have no relevancy to the issues in this case, because, as demonstrated above, the attempt to use an ultra vires contract with a third person as a basis on which to enter the body of the stockholders of a corporation, is an invasion of the right of every stockholder of such corporation, as well as a violation of the public policy of the state. The very fact that no such doctrine was ever appealed to in any of the cases where the stock- holdings of one corporation in another have been de- clared illegal at the suit of stockholders, is a demon- stration of the correctness of our position. The argu- ment of the learned counsel is ingenious and plausible but, we submit, it is unsound. Suppose the law pro- hibited a woman from being a stockholder in a corpora- tion, would the fact that she had bought stock from a third person and paid that person for the stock en- able her to say, as against the stockholders of the cor- poration in which she had bought the stock, that her contract with that third person was executed, that her right to vote was an incident of her ownership of the stock as between herself and that third person, and 199 therefore she was a stockholder as against the other stockholders in the corporation, and they had no right to question her right to vote on the stock as an inci- dent of her ownership as between herself and the per- son who had sold her the stock? Most certainly, No. No such theory presented itself to the minds of the general counsel of the Union Pacific Railroad Com- pany, Messrs. Cromwell and Lovett. It is evidently the conception of one of the great lawyers of this state and country, Mr. Herrick. We congratulate him but we cannot agree with him. Second. The authorities above quoted, Milbanh v. N. Y., L. E. & W. R. R.; Hafer v. A^. Y., L. E. & W. R. R., and Parsons v. Tacoma Ry. Co., maintain the proposition that where a corporation ultra vires has acquired a majority of the stock in a corporation, any stockholder has the equitable right to maintain a bill in his own right to restrain the voting of such stock. In the oral argument, we discussed fully the propo- sition that practical control of a corporation by hold- ing a dominating proportion of its stock, was in sub- stance, which equity always regards, equivalent to the ownership of a mathematical majority. It is control and the power which control gives that is the basis of the equitable right of the stockholder to prevent the control. Mathematical majority makes the power of control so clear that the presumption of control fol- lows from such majority ownership. But if it appears 200 that the circumstances are such, that less than a math- ematical majority of stock amounts to a control, then such control is as obnoxious as that given by a math- ematical majority. Those circumstances exist in this case. In the statement of the case we called attention to the fact that the important averment in the bill to the effect that the Illinois Central Railroad was so situated that the holding of 29.6 per cent of its stock by the Union Pacific Railroad Company was sufficient to dominate the corporation, is not denied in the an- swers of any of the defendants, except the Illinois Central Company, which has no interest in this suit, and which is here only because it is a technical party to this bill, and is not denied or traversed in any of the affidavits in support of the answers. That this averment is true is found as a fact in the Interstate Commerce Commission's report. The affidavits of Fritch show that, usually at annual meetings of the company, such a small proportion of the capital stock of the company is voted, that an addi- tion of 5 to 71/2 per cent of stock to the 281,231 shares, is sufficient to control such meetings. The affidavit of Harahan shows that, although this stock is less than 1/3 of the stock of the company, it is impossible to get a two-thirds vote without this stock. The management of the company, now in control of its affairs, is friendly at least to the Union Pacific Company, which has its president and two of its di- rectors on the company's board. The De Forest in- cident, in spite of all the attempted explanations and 201 subterfuges of the defendant directors, shows a fixed and settled determination on their part to put Mr. Harriman's nominee on the board, and to accept no substitute for him. It must be apparent to the court that the voting or not of the Union Pacific stock, is going to determine the coming election of directors, and every other subsequent election of the company. The fierce struggle now on between the parties, is a demonstration of the voting power of such stock. Mr. Fish swears that he represents the large majority of the stock excluding these Union Pacific shares. None of the affidavits traverse this statement except one filed by Harahan on behalf of the Illinois Central Rail- road's answer (which does not deny the claim), he say- ing that nobody can tell, until the votes are counted, who has the majority of proxies. It would be absurd for this contest to go on over the preliminary injunc- tion if Mr. Fish's claim is not true. If it were not true, the defendants would have accepted our offer, made in open court, to enter an order that the elec- tion should go on, the votes be tabulated, and the dec- laration of result await the judgment of the court, if the election should turn on the counting of votes cast by this stock. They knew they could not win without voting this enjoined stock. Thied. If the right to exclude a corporation acting ultra vires from entering the body of stockholders is one exclusively vested in the corporation, we have brought 202 ourselves within the rule which relieves us from mak- ing a demand for the bringing of the suit if it shall appear that such a demand would have produced no results. The rule laid down by the Supreme Court of Illinois in Harding v. American Glucose Co., 182 111., 629, is that the stockholder can bring the suit — "Where the corporation itself, either refuses to do so, or where the facts show that the wrong- doing defendants constitute a majority of the man- aging body, or where it is reasonably certain that a demand made on the officers of the corporation to bring the action would be unavailing." Judge Dickinson criticises the last clause in the opin- ion, which we have italicized, as too broad, and yet it is a mere repetition of the same statement of the same doctrine in two previous cases, Green v. Hedenberg, 159 111., 489, and Bruschke v. Nord Chicago Scheutzen Verein, 143 111., 433. We are not now trying this case on a demurrer. We are trying it on bill, answer and affidavits. None of the defendants, except the Illinois Central Eailroad Company, a purely technical defendant, raises the point that it ought to have brought the suit, and that the complainants ought to be put out of court, because its directors, nine of whom are defendants and none of whom raises such an issue, ought to have been request- ed to bring the suit. A mere comparison of the aver- ments of Paragraph 19A of the bill and the answer and affidavits, show that these answers and affidavits •^u3 do not properly respond to the averments made and do not show or imply in any way that the demand would have been complied with. The shifting posi- tions taken by the company in this case, the earnest argument originally made by Judge Dickinson, the legal advisor of the directory, in behalf of the two other defendant corporations, the fact that three of the di- rectors, Harriman, Peabody and Groelet, are directors of the Union Pacific Railroad, Company, one of them its president and chairman of its Executive Commit- tee, and all participating in all the transactions where- by that company spent $41,000,000 in attempting to become a stockholder of the Illinois Central Company, and the fact that five other directors had actually filed a plea of estoppel in this case in behalf of the Rail- road Securities Company, before the Illinois Central Company, none of whose rights are attacked, had set up the defense we are discussing, are conclusive that any demand to bring this suit would have met with a refusal. We have sufficient on the record to leave out of view all the charges of Mr. Fish that these directors are intellectually dominated by Mr. Harriman and all the facts set forth in his affidavit, tending to show Mr. Harriman 's control over them. 204 VI. THE MOTIVES ACTUATING COMPLAINANTS TO BEING THE BILI; ARE IMMATERIAL, IF THEY HAVE THE RIGHT TO BRING IT. It is charged in the answers and affidavits that Fish is a candidate for director and president, that the other three complainants are supporting him and that this bill is brought in aid of Fish's campaign. There is a further charge that Fish is a director in a parallel and competing line, and that he is trying to be elected director and president and get control of the Illinois Central Company, while he is such director. There is no sworn charge that he proposes to control the Illinois Central Company in the interest of the parallel and competing line. The fibre of the con- sciences of the affidavit makers in this case was not tough enough to induce them to swear to such a prop- osition. Possibly they were restrained from so do- ing by the absurdity of the charge that a man who had spent thirty years of his life in building up a great corporation and who owned stock in that corporation worth a million and a half of dollars, would sacrifice it in the interests of another corporation with which he had become lately connected and in which he had an interest worth about twenty-eight thousand dollars. The law is settled beyond controversy that where one has a right to sue, his motives in exercising that right are not and cannot be considered by the courts in determining whether he shall have relief. In Stone v. Kellogg, 62 111. App., 444, affirmed in 165 111., 192, the action was for a mandamus directing the 205 officers of a corporation to permit the petitioner, a stockholder and director of the company, to inspect the books and papers of the corporation. The defendant pleaded, inter alia, and it was admitted by demurrer, that the petitioner sought the inspection for his own private advantage. The court held that the petitioner, having the legal right to inspect the books and papers of his corporation, his motive in exercising that right was immaterial. Mexican Co. v. Mexican Co., 61 111. App., 354. Missotiri Ey. Co. v. Flannagan, 47 111. App., 322. In Elkins v. Camden R. R., 36 N. J. E., 5, already cited, the court said : "It is also urged * * * that he (the com- plainant) acquired his stock * * * f^j. ^he very purpose of defeating the project. * * * It appears that the complainant is a stockholder. If, in fact, he acquired his stock * * * ^itb the design alleged in the answer, that would not affect his right to the relief which he seeks." In Toler v. East Tenn. R. R., 67 Fed., 168, the bill was filed to foreclose a mortgage given by the defend- ant company and, the motives of the complainants be- ing attacked and alleged as a defense, the court said (p. 177) : "Whether complainants are conducting this suit from good or bad motives, for their own benefit or for the benefit of others, is immaterial. 'It is no defense to a legal demand instituted in the mode 206 and according to the practice of tlas court that the plaintiff is actuated by persona] or improper motives.' {McMullen v. Ritchie, 64 Fed., 253; Forest v. Railroad Co., 4 De Grex., F. & J., 131; Bering v. Earl of Winchelsea, 1 Cox Ch., 319.) The motive of a suitor cannot be inquired into. {Ex parte Wilhran, 5 Madd., 2; Thornton v. Thornton, 63 N. C, 212.) Were it otherwise, near- ly every suit would degenerate into a wrangle over motives and feelings. {Macey v. Childress, 2 Coop. Ch., 442.)" In Ramsey v. Gould, 57 Barb. (N. Y.), 398, the action was brought by a director and stockholder of the Erie Railroad Company to compel certain officers thereof to account for their management of the company's funds: A motion to dismiss the complaint or to perpetually stay the proceedings was made by the defendants and was based in part on the ground "that the suit is not brought in good faith for the purposes avowed in the complaint, but is an attempt to pervert and abuse the process of the court to purposes of retaliation and revenge * * * > > Concerning this the court said (page 402) : "If the plaintiff stands, in relation to the de- fendants, * * * authorizing him to bring this suit, then I apprehend, on a question whether the suit can be maintained or not, the court has no right to look into the plaintiff's motive in bring- ing it; and although, in moving it, his malice is justified, or his independent litigations incidental- 207 ly subserved, still, unless the court can pUinly see that he has no meritorious cause of actioc, or that he is estopped from prosecuting it, his prosecu- tion of it will not be deemed a perversion or abuse of the process of the court. This is eqwdly true in a court of equity as in a court of law. The in- quiry in each must be with reference to the plaint- iff 's right of action, and whether in it are involved interests entitled to the protection of the court, and not to his ulterior motives and purposes in bringing the suit." In Cook on Corporations, 4th Edition, pp. 1893-1894, the writer states the result of numerous cases, which he cites, to be that "the law has nothing to do with the motive of a legal act," and in Morawetz, Private Corporations, 2nd Edition, Section 260, it is stated that "the motive of a plaintiff in bringing suit is im- material," and (Section 266) that "courts cannot in- vestigate the secret intentions of parties, or refuse to protect their apparent and substantial rights by reason of some ulterior improper design." We may go further and say that Mr. Fish has a right to be a candidate for any office in the Illinois Central he chooses to fill. Every stockholder in a cor- poration has a legal and a moral right to aspire to the honors and emoluments of the offices created by that corporation, just as every citizen has a right to aspire to the honors and emoluments of the offices created by the state of which he is a citizen. He has a right to conduct a campaign to solicit the votes of those 208 who have power to elect him, and he has the right to challenge the voting power of every hostile voter. Every other stockholder in the company has a right to vote as he pleases for its officers. He has a right to take part in a candidate's campaign and to aid the person whose candidacy he favors. Both candidate and supporter have the right to use every legal weapon in their possession to accomplish the results which they desire, and which they have the right to accomplish. VII. THE BILL DOES SHOW AN IMPENDING INJURY TO THE COM- PLAINANTS, IT IS NOT PREMATURE, AND MAKES A CASE FOE AN INJUNCTION BOTH PRELIMINARY AND FINAL. We group under this one heading two of the points made by Judge Dickinson and one made by the other, learned counsel, because they are cognate to each other. Judge Dickinson's two objections, that the bill does not show an impending injury and that the suit is pre- mature, would be good if this bill were based on the theory that the defendants Jiad the right to vote stock in the Illinois Central Railroad Company, but had used that right in the past and were about to use it in the future to elect a directory who would do acts that would injure the corporation. But, as shown above in Paragraph V, this bill is not pitched upon any such grounds. Its sole object is to thrust out of the corporation ar- tificial persons who have no power to participate in 209 the corporate rights given the incorporators of the Illi- nois Central Railroad Company by the State of Illi- nois, and to prevent them from exercising any rights that pertain by such grant to such incorporators. We claim that for the reasons given, the law and public policy of the State of Illinois, and of the United States in one respect, will not permit the defendants to hold and vote stock in the Illinois Central Railroad Com- pany; and that the attempt on their part to act as stockholders, when they have no power so to act, is an invasion of our individual rights as stockholders. If Judge Dickinson means that, conceding that the defendants have no right to vote, the complainants can- not stop them from voting until they are able to aver that the directory to be elected by illegal votes is be- tttg elected for the purpose of injuring the corpora- tion by some contract, or some course of management, then we submit the proposition is absolutely untenable. It is simply to say that an illegal act which is of itself an invasion of a right must take on another and fur- ther illegality, i. e., a purpose to accomplish another and further injury, before the person whose right is in- vaded can complain. One might as well say that a trespass cannot be complained of unless its purpose is to commit robbery or murder. We submit that these considerations in conjunction with our argument and authorities in Paragraph V dispose of Judge Dickin- son's positions and authorities. There can be no doubt that, if the complainants have any rights they can only be set up in a court of equity. 210 There is no doubt that the only remedy they can in- voke to prevent the defendants from acting as stock- holders in the Illinois Central Railroad Company is the writ of injunction. There are two separate and dis- tinct species of relief asked in the bill, an injunction, preliminary and perpetual, to prevent the voting of the stock, and a decree that defendants, within a time fixed by the court, shall dispose of the stock claimed by them. The relief by injunction is not asked as merely incidental or auxiliary to the second ground of relief, and this is demonstrated by the fact that we could now dismiss the bill as to the second ground of relief without in any way affecting the relief asked by injunction. The court granted the preliminary injunction and motion is now made to set that preliminary injunction aside. This motion is submitted to the sound discretion of the court, to be exercised not according to technical rules but on the principle of equity. Fleischman v. Young et al., 9 N. J. E., 620. The facts on which the complainants attack the right of the Union Pacific Railroad to hold and vote stock are conceded as to two of the grounds of such attack, i. e., that it has no right per se to own and vote such stock, and tb.at it has no right to own and vote such stock because of its simultaneous ownership of stock in roads owning parallel and competing lines with the Illinois Central lines. The sworn averments of the bill not traversed in the answers or the affidavits, as to 211 the third ground of attack will be taken for true on the trial of the motion. In Young v. Grundy, 10 U. S. (6 Cranch.), 51, Chief Justice Marshall said: ' ' If the answer neither admits nor denies the al- legations of the bill, they must be proved upon the final hearing. Upon a question of dissolution of an injunction they are to be taken to be true." The facts as to the relations between the Union Pacific Railroad Company and the Railroad Securities Company are established, to-wit, that they have the same president and that the Union Pacific Railroad Company absolutely owns 54,188 shares out of 54,231- 2/10 shares, leaving outstanding only enough shares to qualify the nine directors. The only issue of fact in this regard would be as to ownership or control of these 44 shares, and that issue is immaterial to deter- mine the law. The facts as to the Railroad Securities Company's ownership of stock are conceded. The facts as to the charters of these two companies are conceded. Nothing remains in the case but ques- tions of law. These have been argued and threshed out before the court to the fullest extent. Nothing more could be done, in that regard, on final hearing than has been done now. The parties have had the fullest opportunity to be heard. And yet the distinguished counsel for defendants ask the court in the present situation of the case to 212 set aside the preliminary injunction even if the court should find those questions of law in favor of the com- plainants. The learned counsel for defendants claim that the only function of a preliminary injunction is not to de- termine finally the rights of the parties, but only to preserve the status of the subject matter of the litiga- tion and the respective rights of the parties, until those rights are determined by a final decree. That is the function of the preliminary injunction when used as accessory or auxiliary to other principal relief and its use is necessary to preserve an existing status, a change of which would injure or defeat the ultimate right of recovery, as where a bill is filed to recover property and an injunction is taken to prevent its be- ing removed from the jurisdiction of the court during the pending of the suit. But suppose A enjoins B from trespassing on his property. A preliminary injunction issues. Answer and affidavits are filed, motion to dissolve is made, and it appears on that motion that, the facts being con- ceded, the defendant is entirely without the right to enter upon complainant's property. Would the court dissolve such a preliminary injunction on the grounds suggested by counsel? We think not. And, so in this case. The defendants' attempt to enter the body of the stockholders of the Illinois Central Eailroad Company and vote at corporate meetings is in the nature of a trespass upon the rights of every stockholder, and if on the motion, the facts being conceded, it appears 2T3 tliat the defendants, as a question of law, have no right so to act, and the court on full argument finds that question of law in favor of the complainants, the court will not dissolve a preliminary injunction already is- sued. So to act would be to hear and decide all the issues in the case in favor of the complainants and yet to de- fer giving them the only relief asked until a final hear- ing, and to permit the defendants in the meantime to continue to do what the court is of opinion they have no right to do. There is no doubt about the fact that defendants are going to vote at the election now pending, and at sub- sequent corporate meetings. They declare such pur- pose. There is no doubt they are going to vote against Fish's lawful and proper candidacy for a directorship. They so declare. True, he has no property right in the office of director, but he has a contract right with all the incorporators of the Illinois Central Company and with the state that no artificial person shall come in and vote for directors. He has a large stock in- terest in the corporation which gives him the lawful right to become a director, and the illegal voting of the defendants' stock against him, which will certainly de- feat him, makes his equity all the stronger why the injunction should be maintained. The counsel say the complainants' rights to prevent the voting of this stock are not clear. The answer to this is that if the court in the present situation of the case finds the only existing issue between the parties. 214 the questions of law, in favor of the complainants, will not their right be clear? What will there be left to cloud their rights'? In this case, as above stated, the injunction is the sole purpose of the bill and not auxiliary to other re- lief. If the court finds upon the propositions of law involved, that it is ultra vires for the Union Pacific Railroad Company and the Railroad Securities Com- pany to own, hold and vote stock in the Illinois Central Railroad Company, and moreover, that such holding is against the public policy of the State of Illinois, then a permanent injunction will be entered upon the bill in this cause, upon the final hearing. The covirt will therefore retain the preliminary injunction issued in this cause, until the final hearing, notwithstanding the answers filed on this motion. The answers do not deny ALL the equity of the bill, and furthermore, are not specific enough in such de- nials as they contain. If the answers specifically de- nied all the equity of the bill, the court will, neverthe- less, retain the injunction until the final hearing. The authorities abundantly sustain such action on the part of the court. The court has exercised its dis- cretion and has granted the preliminary injunction in this cause, and the motion is now made to dissolve the injunction. Many of the cases cited in the defendants' briefs are cases where the application was made to the court, to grant an injunction, and ivhere the court has not acted 215 upon the bill as in this case. Such cases, therefore, stand upon a different footing from the case at bar. The general proposition applicable to all cases where an application is made to the court to grant a pre- liminary injunction, as well as where the injunction having been previously granted, a motion is made to dissolve the same, is that such applications are ad- dressed to the sound discretion of the court, and the court has the greatest latitude in sustaining or dissolv- ing the injunction, as the peculiar circumstances and the equities in each case may require. As a result of the search of the authorities, it is disclosed that each ease establishes a precedent by itself. The old equity rule, contended for in some of the cases, that upon the coming-in of the answer denying fully and fairly all the equities of the bill, upon a mo- tion then being made to dissolve the injunction, such motion shall prevail, has been more often honored by the breach than by the observance, and the exceptions to the rule are so numerous that the existence of any such rule at the present time, in this country at least, is open to serious question. The same criticism also applies as fully to the other rule, that in considering the motion the court will be governed by the relative harm that its continuance or dissolution will work to the respective parties. Beach on Injunctions, Sees. 286-287-290-307 and 308, and cases cited in note. Fleishma^i v. Young, 9 N. J. Eq., 630. 216 In the case of Boston FrankUnite Co. v. New Jersey Zinc Co., 13 N. J. Eq., 215, the court held that— "Where the dispute is not ahout facts, but is essentially a question for legal consideration, the matters in controversy are not of such a nature that they can be made and denied by the answer so as to entitle the defendant to a dissolution as a matter of course." In the case of Lowe v. Bs. of Comrs. of Davidson Co., 70 N. C, 532 (1874), the court said: "MHiere the dissolution of an injunction would be equivalent to a dismissal of the action, if- a reasonable doubt exists in the mind of the court, whether the equity of the complaint be sufficiently negatived by the answer, the court will not dis- solve the injunction, but will continue it to the hearing." And cites : Jones V. Lemley, 2 Iredell (N. C.) Eq., 278. Miller v. Washhurne, 3 Iredell (N. C), cited and approved. In Murray v. Elston, 23 N. J. Eq., 127 (1872), the motion to dissolve the injunction was not granted, though the equities of the bill were denied by the an- swer, the circumstances of the case being such as to withdraw it from the operation of the general rule. Marshall v. Comrs., etc., 89 N. C, 103 (1883), is a leading case in support of the principles laid down in Lowe V, Comrs., etc., 70 N. C, 532. In the opinion in 217 the case by Merriman, Justice, the following appears, viz.: * * * "The injunctive relief sought in this action is not merely auxiliary to the principal re- lief demanded, but it is the relief itself, and a per- petual injunction is demanded. To dissolve the injunction therefore, would be practically to deny the relief sought, and terminate the action. This the court will never do, where it may be possible the plaintiff is entitled to the relief demanded. In such cases it will not determine the matter upon the preliminary hearing upon the pleadings and ex parte affidavits, but it will preserve the matter intact until the action can be regularly heard upon its merits. Any other course would defeat the end to be attained by the action. ' ' Cites : Troy V. Normant, 2 Jones Eq. (N. C), 318. Lowe V. Comrs., 70 N. C, 532. See, also, on same point: Hatch V. Tel. Co., 93 N. ¥., 640. Hudson River Co. v. Watervelt T. & R. Co., 121 N. Y., 397. Young v. Roundout Gas Co., 129 N. Y., 57. Chetwood v. Brittan, 1 Green Ch. E., 439. Bigelow v. Calumet & Hecla M. Co., 155 Fed. K, 881. Jones V. LewJy, 2 Iredell's Eq. (N. C), 278. Miller v. Washburn, 3 Iredells (N. C). Atty. Genl. v. Pres. Direc, etc., Oakland Co. Bk., Walker's Chy. (Mich.), 90. 218 The iireliminary injunction should not be dissolved where it appears that irreparable injury will be done the complainant, if the court does not continue the in- junction if already issued, or grant one on proper ap- plication. Troy V. Norinant, 2 Jones Eq., 318 (55 N. C, 318) (1856). McBrayer y. Hardin, 7 Iredell's Eq. Purhell V. Daniel, 8 Iredell's Eq., 8. Marshall v. Comrs., etc., 89 N. C, 103. Lowe V. Coiurs., etc., 70 N. C, 532. Lloyd V. Heath et al., Busbee's Eq. (N. C), 39. Commomvealth v. Pittsburg & C. R. R. Co., 24 Penn. St., 159. Sacramento v. So. Pac. R. R. Co., 155 Fed. Eep., 1022. If a complainant is entitled to an injunction to pro- tect his property rights, injury and damage will be inferred, in support of the injunction. 125 Ills. App., 631. Irreparable injury, authorizing the intervention of a court of equity by injunction, is declared to be "not always such injury as is beyond the possibility of re- pair and beyond possible compensation in damages, * * -^ 1,-at it is a species of injury, great or small, that ought not to be submitted to on one hand, or in- flicted on the other. * * *" Stroup V. Chalcroft, 52 111. App., 608. 219 See, also: Carlson v. Koerner, 226 111., 15. Lloyd V. Catlin Coal Co., 210 III., 460. Wahle V. R,emhach, 76 111., 332. Irreparable injury, as used in the law of injunctions, does not mean that the injury is beyond the possibility of compensation in damages, nor that it must be very great. The fact that no actual damages can be proved, so that in an action of law, the jury could award nomi- nal damages only, often furnishes the very best reason why a court of equity should interfere in a case where the nuisance is a continuous one (p. 116). Newell V. Sass, 142 111., 104. Field V. BartUng, 149 111., 556. Where the grounds for equitable relief depend upon questions of law, constitutional questions, or delicate •and novel questions of law, not thoroughly settled, or where the dissolution of an injunction granted, would lead to a multiplicity of suits, the preliminary injunc- tion will be continued until the final hearing. Snyder v. Seemcm et al., 41 N. J. Eq., 405 (1886). Camden & A. R. Co. v. Atlantic City P. R. Co., 26 N. J. Eq., 69. Blindell v. Hagen (C. C), M Fed., 40. Harriman v. Northern Securities Co., 113 Fed. Eep., 464. McBrayer v. Hardin et al, 7 Iredell's Eq., 1. Sullivan v. Jones Co., 208 Pa. St., 540 (1903). 220 Eimt V. Steese, 75 Cal., 620. Owen V. Brien, 2 Tenn. Ch., 295. New Jersey Co. v. Trotter, 38 N. J. Eq., 3. In the case at bar, the complainants as stockholders have a prima facie right in law to object to the right of others pretending to be stockholders, to vote such stock at corporate elections. They have a right to protest against one who is not a stockholder in law, from thrusting itself or himself into the body corporate for any purpose. The complainants' rights in this case turn primarily upon tlie question of public policy of the State of Illinois, in controlling the question of stock ownership in Illinois corporations by other corpora- tions, except when expressly authorized by statute in' certain specific instances. Prima facie, under the public policy of this State, as expressed by the decisions of its courts and otherwise, the complainants in this case have a right to an injunc- tion restraining the voting of the stock in question. This court has recognized this prima facie right, by granting its preliminary injunction in accordance with such right. Upon a motion to dissolve, the burden of demonstrating the error of this court in granting such injunction, is upon the parties mo^'ing to dissolve it. The decisions in appellate tribunals, where appeals have been taken from orders granting preliminary in- junctions, are in point as authorities. It is therefore submitted that upon the motions to dissolve, the respec- tive defendants have failed to demonstrate by the pre- 221 ponderance of facts and law, that the injunction was improperly granted. Should the court, on this motion, decide that the hold- ing by the Union Pacific Railroad Company directly, or through its creature, the Railroad Securities Com- pany, is valid and not contrary to the public policy of the State of Illinois, the defendants will be able to ac- complish the same purpose by this motion, which could be accomplished after a full hearing on the merits of the case. The cases quoted by the defendants do not maintain the position taken by them, and the character of the cases and the reasons given apply as well to a final in- junction as to a preliminary injunction. If these cases are quoted to show that we have no right to relief in equity at all, and that the complain- ants have no right to stop illegal voting by a bill in equity by injunction, then we refer to our argument in Paragraph V of this brief. If such ultra vires voting invades our rights as stockholders, we have a remedy to vindicate these rights. Ubi jus ibi remedium. That remedy cannot be at law. It is only in equity and only by injunction. The question now at issue is that, al- though we may be entitled to an injunction on final hearing, we are not entitled to a preliminary injunc- tion. The quotation from Cook on Corporations, Sec. 616, does not apply to cases where the person who seeks to vote is absolutely without power or right to vote at 222 all, as the balance of the section and the authorities quoted in support of it show. In Reed v. Jones, 6th Wisconsin, 655, there was an attack on Jones' title to stock acquired under a con- tract with the company, and it was claimed that he got more stock than he ought to have gotten and was go- ing to vote on the excess. Before stating what the counsel quotes the court said: "But it does not appear from the complaint that the company has taken any steps whatever to de- clare this excess of stock void and cancel it. It would be premature at this stage of the cause, be- fore coming in of answer and proof, to enter upon a full examination of the rights and liabilities of the parties to the memorandum of agreement, * -* "^ set out in the complaint. ' ' "With the right of Jones to his stock in this situa- tion no injunction ought to have been granted against his voting it unless some peculiar injury to the com- pany or to the individual was shown. In Lucas v. MilUken, 139 Fed., 816, there was a suit for a specific performance of an illegal contract to sell stock. The contract was denied. The stock had never been transferred. Its ownership was claimed by the defendant. As auxiliary to this suit, an injunction was sought to restrain the then holder from voting on it. It is clear that no preliminary injunction ought to have issued in such a case, or if issued ought to be dissolved. Such an injunction would have practically 223 transferred the disputed ownership of the stocli from the defendant to the complainant. In Dady v. Georgia & A. Ry. Co., 112 Fed., 838, the preliminary injunction was denied a stockholder seek- ing to prevent a consolidation, because his rights were not clear. In McHenry v. Jewett, 90 N. Y., 58, there was a con- troversy between a pledgor and pledgee of stock as to who had the right to vote it, and the court held that the complainant had no right to final relief by injunc- tion. The court said: "Neither injury to the plaintiff's property, in- adequacy of the legal remedy, or any pressing or serious emergency, or danger of loss, or other special ground of jurisdiction, is shown by the com- plaint. The complaint, therefore, does not show that the plaintiff is entitled to final relief by in- junction." In this case the injury is the invasion of the rights of the complainants as stockholders by the defendants ' attempt to thrust themselves where the law prohibits them from entering. We have averred want of rem- edy except in a court of equity. We have averred ir- reparable injury. We have demonstrated that the acts of the defendants we seek to enjoin are an invasion of our contract rights, and that the invasion is about to be made and repeated again and again. Irreparable injury in an injunction case to prevent a right from in- vasion does not refer to the size or a/inou/nt of the in- 224 jury, but to tlie character of the injury, as one which cannot be properly redressed in a court of law. Commonwealth v. Pittsburgh & Connellsville R. R. Co., 24 Penn. St., 159. "It was objected that the complainants could not maintain the bill unless they alleged and proved that they would sustain substantial and special injury. There was evidence that the property would be specially damaged, but such damages were of a character that it was not practical to estimate the amount. Irreparable injury, in the sense used in the Imp of injunctions, does not mean injury beyond the possibility of compensation in damages nor that it must be very great. The fact that no actual damages can be proved, so that in an action at law the jury could award nominal damages only, often furnishes the best reason why a court of equity should interfere, (p. 570.) * * * Appellees were entitled to an injunction to prevent the threatened injury. We think the de- cree (granting a permanent injunction) was the proper one and it is affirmed." (p. 574.) Field V. Barling, 149 111., 556. "By irreparable injury is not meant such in- jury as is beyond the possibility of repair or be- yond the possibility of compensation in damages or necessarily great injury or great damage, but that species of injury, whether great or small, that ought not to be submitted to on the one hand or in- flicted on the other; because it is so large on the one hand or so small on the other, is of such fre- quent and constant recurrence that no fair or rea- sonable redress can be had therefor in a court of 225 law." (p. 326.) "* -^ '■ We are of the opinion that the ease is one in which there is no adequate remedy at law and where the injury is irrepara- ble." (p. 327.) Wahle V. Reinbach, 76 111., 322. See, also: Stroup V. Chalcraft, 52 111. App., 608. NeweM v. Sass, 142 III, 104. If we were now before the court on an application for a preliminary injunction, and the case were re- duced to an important and doubtful question of law, the court, in its discretion, might decline to decide the doubtful question as a condition precedent of granting the preliminary injunction. But that prelimiriary in- junction has issued and the case is now being heard under circumstances which make the hearing almost equivalent to a final hearing, and in its discretion the court can decide the law questions, and we submit wiU decide them, on this motion to dissolve, as there is no reason to adjourn them to final heariag. Under these circumstances, there is little room iu this case for the application of the doctrine of balanc- ing of conveniences and inconveniences, but if there is to be such a balancing, then every argument of the de- fendants as to what would be the effect as against them of the preliminary injunction in case it should be de- termined on final hearing that they had the right to vote their stock, operates in favor of the complaiaants if the injunction should be refused now and granted on final hearing. 226 The defendants will elect their directors by illegal votes. Once elected they cannot be ousted. They can keep on using their power to vote to elect the other directors to be elected in October, 1908, seven months from now. They can certainly prolong the trial of this case beyond that date. They have the same right to test the election of directors by quo warranto which they suggest that we have. If, therefore, they have no right to vote and are yet permitted to vote the con- sequences of the wrong are as great to complainants' rights, as the consequences of wrong would be to them if they have the right to vote and the right is denied them. If it must be assumed that the directors they elect will properly manage the affairs of the corporation during their encumbency, then it must equally be as- sumed that the directors that may be elected without the votes of the defendants will do the same. The presumption is no greater in favor of the one than of the other. Mr. Fish has selected all the directors the company has ever had since 1882, and the presumption is that his selection will be in the iaterest of the Com- pany. His interest in the Company is so great that this presumption is overwhelming. Counsel speak of our disfranchising their stock by an injunction, as if their inability to vote their stock was the act of the complainants. The law, which the defendants have violated, disfranchises their stock in the hands of the defendants. The injunction simply enforces the law. But this doctrine of balancing conveniences and in- conveniences is not, we believe, of much weight in cases where the right of the complainants is clear, and the court is of opinion that on final hearing the com- plainants will prevail. For these reasons we respectfully submit that the motion to dissolve the injunction should be denied. EespectfuUy submitted. Henky W. Leman, Solicitor for Complainants. Edgae H. Fakrab, Frank H. Ctjlvee, Of Goimsel. Note No. 1. In support of the proposition that a stockholder has the right to maintain a bill to enjoin stock from being illegally voted we quote additionally : Wehh v. Ridgely, 38 Md., 364. This case quotes with approval the case of Gamphell v. PouUney, 6 Gr. & J., criticized by the de- fendants because the court stated its conclusions with- out giving long reasons therefor. Note No. 2. Since the first paragraph of this bill was sent to the printer, six affidavits have been filed by six of the nine directors of the Railroad Securities Company, all in identically the same language, saying that each of them owns five shares of stock in the Eailroad Secur- ities Company, each in his own right, acquired at an unstated date before the bill in this case was filed, and that the Union Pacific Eailroad Company does not control such stock. One of these affidavit makers is W. V. S. Thorne, who is shown on this record, in the 228 Union Pacific Eailroad report, to be a director in the Oregon Short Line and the director of purchases of the Oregon Eailroad & Navigation Company, of the Union Pacific Railroad Company and of the Oregon Short Line Eailroad Company. Two other of the affidavit makers, the two Harri- mans, also appear on this record by the bill and the answer of the Union Pacific Eailroad Company as mem- bers of the firm of Harriman' & Co., the brokers in whose names the Union Pacific Eailroad Company is carrying its Illinois Central stock. The relations of these persons to the Union Pacific Railroad Company and the situation are too significant for any credence to be given to their statements. The other three affidavit makers are not located in the record, and we have no opportunity now of locat- ing them. The three other directors, including Mr. Harriman, the president, evidently could not face the affidavit desk. That the Union Pacific Eailroad Company controls all the stock is patent. If it did not, it would not leave the management of this property in the hands of nine persons, six of whom it has no control over. Long ago it would have put stock into the names of its dummies and had them elected directors. The situation points unerringly to the truth of the charge that these direct- ors, in spite of the protest of six of them, are all dummies now. In any event, it now appears that the Union Pacific absolutely owns niaety-nine and ninety-four one-hun- dredths per cent (99.94%) of all the stock of this com- pany, or 54,201-2/10 shares out of 54,231-2/10 shares, a percentage so great that a court of equity will dis- regard the six one-hundredths of one per cent in the hands of these persons, three of whom are shown to be so closely connected with the Union Pacific Eailroad Company. 229 Note No. 3. Since the above note was printed we have received the affidavit of Mr. Roy Mason, which we shall ask leave of the court to file, showing that Rodewald, one of the affidavit making directors of the Securities Com- pany, is a member of a New York firm of brokers and bankers, for many years employed by Mr. Harriman in his personal transactions ; that Van Brunt, another of such directors, is president of the St. Joe & Grand Island Railroad Co., which is shown in the Interstate Commerce report to belong to the Union Pacific Com- pany, and that his office opens into the office of the Union Pacific Railroad Company at 120 Broadway, New York, and is in the same room with Tegethoff, Mr. Harriman 's private secretary (who also appears in this record as secretary of the Securities Company), and which is also the office of two corporations owned and controlled by Mr. Harriman; and that Sherman Day is a lawyer in the office of Krauthoff, a former member of the directory of the Securities Co. Note No. 4. On the proposition discussed in Paragraph I. of this brief, we quote the following additional cases : Buie v. Chicago, etc., R. R. Co., 55 L. R. A., 861 ; Union Trac- tion Co. V. City of Chicago, 199 111., at p. 629, et seq. In the latter case several of the authorities cited by us on this point are cited and quoted from with ap- proval. f. "J^-' -%. '^ "^ fE^^; i m '^': kt^' ^J?^ ^^ 5;^: ^.?«). YtPk mm SV: i^^^^i" iw^^i fSV-^-t.' '•*„%- A'/ %:i^«iJ '^?vWW/=^< ^A ^ ^ :?!:^K^ '>: <^. ;>d :^-'-/ s:u.^j iffi^