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case there was no agreement to fix rates, nor were the corporations engaged in interstate commerce themselves parties to the agreement. The agreement was entered into by their stockholders and was, not to fix rates, but to organize a new corporation—the Northern Securities Company—and then sell to it their stock in sufficient quantities to enable that corporation to elect as directors of the Northern Pacific and Great Northern respectively, men who would manage the two roads in harmony. In each of the preceding cases competition had been directly destroyed by the agreement. In the principal case, on the contrary, the Northern Pacific and Great Northern railways are still independent corporations with independent boards of directors unfettered by any binding contract as to rates or division of traffic, and influenced merely by the moral suasion of the voting power of the Northern Securities Company. It would seem, therefore, that the Supreme Court could consistently with the actual decisions in the preceding cases arising under this Act, hold that there was here no direct restraint of trade.

It remains to be seen, therefore, whether or not the decision of the Circuit Court is justified by the spirit and reasoning of these earlier cases. The court contends that “it will not do to say, that so long as each railroad company has its own board of directors, they operate independently and are not controlled by the owner of the majority of their stock." In Pullman Palace Car Co. v. Missouri Pacific Řailway (1885) 115 U. S. 587, at p. 596, the couit per Waite, C. J., uses the following language: “The two roads are substantially owned by the same persons and operated in the same interest, but that of the St. Louis, Iron Mountain & Southern Company is in no legal sense controlled by the Missouri Pacific;” and again (p. 597) “ The Missouri Pacific has bought the stock of the St. Louis, Iron Mountain & Southern Company, and has effected a satisfactory election of directors, but this is all. It has all the advantages of a control of the road, but that is not in law the control itself. Practically it may control the company, but the company alone controls its road" Nor is the case of Pearsall v. Great Northern (1896) 161 U. S. 646, relied on by the court in the Northern Securities case, when closely examined inconsistent with the Pullman case. It was there held that under a State statute prohibiting any railroad corporation from "purchasing or in any other way becoming the owner of or controlling" any competing railroad corporation or the stock, franchises or rights of property thereof, an arrangement by which stock of the Northern Pacific should be transferred to the stockholders of the Great Northern in consideration of the guaranty by the Great Northern itself of the bonds of the Northern Pacific, was illegal. The decision was put on the express ground that the Great Northern was to be considered beneficial owner of the stock, for otherwise its guaranty of the Northern Pacific bonds would be without benefit to itself and therefore ultra vires (p. 871). Indeed the court declared (pp. 671-2) that “ Doubtless these stock holders could lawfully acquire by individual purchases, a majority or even the whole of the stock of the reorganized company and thus possibly obtain its ultimate control; but the companies would still remain separate corporations with no interests as such in common."

Unless the Supreme Court is ready to restrict the technical but logical doctrine of the Pullman Case, it is hard to see how the decision of the lower court can be sustained. The gist of the wrong prohibited by the Act is the power to destroy competition. If Chief Justice Waite was right, when he said in Pullman Car Co. v. Mo. Pác. that the majority stockholder has no legal control of the corporation, then the Northern Securities Company has not in the legal sense, such control over the Northern Pacific and Great Northern as to give it power to destroy competition. As suggested in that case at p. 597, “the directors might act contrary to the wishes of the" Securities Co. in which case that company would “have no power to prevent it except by the election, at the proper time and in the proper way, of other directors."

The Supreme Court, however, may well adopt the view of the lower court which has already been enunciated by the highest courts of New York, Illinois and other States, Farmers' Loan & Trust Co. v. N. Y. & N. R. Co. (1896) 150 N. Y. 410, 425; Chicago Union Traction Co. v. City of Chicago (ill. 1902) 65 N. E. 470, restrict the Pullman case to the use of the word "control” in a private contract, and declare that where the question is one of the evasion of a public duty or law, the court will recognize that a corporation is, in fact, ultimately controlled by its stockholders. See 3 COLUMBIA LAW REVIEW 203

The Supreme Court has declared in Pearsall v. Great Northern, that “whether the consolidation of competing lines will necessarily result in an increase of rates, or whether such consolidation has generally resulted in a detriment to the public, is beside the question. Whether it has that effect or not, it certainly puts it in the power of the consolidated corporation to give it that effect, in short, puts the public at the mercy of the corporation.” And they may very well say now that whether the action of the Northern Securities Company will necessarily result in an actual restraint of trade or not, it has certainly put it in the power of the corporation to elect subservient directors of the two railroads with the result that competition between them will be at an end. Such a decision would doubtless correspond with the actual facts of the case and where public interests are involved corporate fictions or strictly logical conclusions are not always favored by the courts.

Such a decision by the Supreme Court would, however, be a distinct step in advance, and its results would be far reaching. If a corporation cannot, in pursuance of an agreement, legally acquire a majority of the stock of two competing corporations engaged in interstate commerce, it must follow that the right of a natural individual to buy stuck is likewise restricted. The indeterminate life of the holding company and the fact that the owner of fifty-one per cent. of its stock can thereby control the competing roads with but half the capital necessary if he were to purchase the stock direct, are arguments to be considered by Congress if a different rule for corporation and natural individual is demanded. As the law now stands, however, the courts can make no such distinction, for competition would be destroyed in the one case as effectively as in the other.

The further question then presents itself whether the stock must be acquired in pursuance of an agreement. If A owning a majority

of the stock of the X railroad and a minority of the stock in the competing Y railroad, of his own initiative, buys enough more stock in the Y road to give him control of that; or if he acquires by operation of law enough more shares to give him such control, is he guilty of an illegal restraint of trade? Competition is just as effectively destroyed. These and other questions, presented more fully in Mr. Randolph's article, 3 COLUMBIA Law Review 168, 221, 298, will have to be determined if the decision in the Securities case is affirmed by the Supreme Court.

LIABILITY OF A MEMBER OF AN UNINCORPORATED CLUB.-Courts of law, voicing the common understanding of men, have always recognized the essential difference between the legal relations of men voluntarily organized for social purposes into a society or club and those associated for pecuniary profit. It is in this particular among others that a club differs so materially from a partnership. Lindley on Partnership 6th Ed. p. 13. It is clear that a member of a club does not by the act of joining constitute the trustee or the committee of the club his agents for the purpose of contracting debts. Todd v. Emly (1841) 8 M. & W. 505. By the payment of his initiation fee and dues he acquires a privilege, the right to enjoy the club premises. His dues with those of all the members constitute a fund from which within their authorized powers the trustees or committee managing the club may draw for the purpose of defraying expenses. If this fund will not be sufficient for a contemplated outlay it is their duty, suggests Lord Abinger C. B. in Flemyng v. Hector (1836) 2 M. & W. 172, to call on the members for further subscriptions. In the case cited an action was brought by Flemyng, a wine merchant against Hector a member of the defunct Westminster Reform Club. The defendant had never dealt with the plaintiff but it was in evidence that he had frequently been heard to call for Flemyng's wine. It was held, after full consideration by the whole court that there was no agency either by prior authorization or subsequent ratification, that the fact of membership carried with it no idea of principal and agent, and that if the plaintiff relied on such agency he must prove it as he would any other fact.

The interest of a member in the property of the club seems to be at most an inchoate right to a proportionate share of the assets on dissolution and even this he loses when he ceases to be a member. In Matter of St. James Club (1852) 2 D. M. & G. 382. His interest seems to be little more than a license revocable for cause, Hopkinson Marquis of Exeter (1867) L. R. 5 Eq. 63, neither assignable, transmissible nor descendible. In brief, the nature of a member's interest, the character of a club and the common acceptation of a member's obligation by the world at large, all tend to negative any liability beyond that for the stated dues and assessments provided for by the rules of the Club.

This conception of a club member's freedom from liability founded as it is, on the tacit understanding of all men has been found sufficient to govern the application of an established rule of law in the recent case of Wise v. Perpetual Trustee Co. (1903) 72 L. J. P. C. 31. In that case the plaintiff as administrator of the estate of one of the trustees of the New South Wales Club, sought from the defendant,

among others, indemnity from certain liabilities resulting from the position of trustee. While the defendant was a member of the club, at a regular meeting, a committee of which the plaintiff's testator was one, was authorized to lease certain premises for the occupation of the club and to become trustees thereof. This was done, the trustees executing the lease, with various onerous covenants for the payment of rent on which they became liable, and for indemnity from this liability the suit was brought. No agency was established and the broad question was whether, as the relation of trustee and cestuis que trustent existed, the cestuis were bound to indemnify the trustee against all losses sustained by reason of his ownership of the trust res. The case was treated by the court as one of novel impression, the conclusion reached being that the defendant was not liable.

Lord Lindley who delivered the opinion had only two years before, Hardoon v. Belilios (1901) 70 L. J. P. C. 9, declared in emphatic terms that the right of a trustee to indemnity from the cestui, where acting within the terms of his trust, was a right springing inevitably out of the trust relation. This right of the trustee, based apparently on the equitable principle that he who has the benefits shall also bear the burdens of ownership seems well established in the Eng. lish law. Hardoon v. Belilios, supra; Castellan v. Hobson (1870) L. R. 10 Eq. 47. Conceding, however, under the facts in the principal case that the relation of trustee and cestuis que trustent existed and admitting the equitable principle that the beneficial owner should bear the burdens of ownership, the decision is sound since the evidence of club usage established the terms of the trust. The case is analogous where the trust deed expressly provides for indemnity, and where the cestui que trust is not liable beyond the sum so stipulated.

Gillan v. Morrison (1847) i De Gex & Sm. 421, Selwyn v. Harrison (1862) 2 J. & H. 334.

To reach a result contrary to the principal case would be to impose a liability inconsistent with the terms on which the defendant became a member of the club.

LIABILITY OF SHAREHOLDERS IN A “De FactO" CORPORATION, Are stockholders in an association, acting as a corporation, partners inter sese, where a bona fide attempt to comply with the requisites of incorporation has failed? This question was answered in the negative by the Supreme Court of Maryland in a suit for an accounting on a partnership basis by the plaintiff, a minority stockholder, against the defendant, the majority stockholder, in a corporation which had failed to comply strictly with the statute. Cannon v. Brush Electric Co., et al. (1903, Md.) 54 Atl. 121. Conceding that the company had no legal existence as a corporate body, the court went on the ground that the parties intended to be bound by their charter; and that such intent would be given effect as between themselves, whatever might be their relation to third parties Did the parties intend to define their relation in the event of their failure to become a corporation, when their charter was only to take effect upon corporate existence being accomplished? They intended to become stockholders in a corporation, doubtless, but this they failed to do. They did not provide for what has happened, and the law, therefore, must predicate their relation from their acts. Under such circumstances, the authorities are at

variance as to the relation of the shareholders, when acting inter sese or where third parties are concerned. In a number of jurisdictions, the view that they are co-partners, merely, is taken. The reasons for the doctrine are set forth in Parsons (James) on Partnership, (1899) $ 44, and the authorities are collected in a note to Rutherford v. Hill (1892) 17 L. R. A. 549; Hurt v. Salisbury (1874) 55 Mo. 310; Whipple v. Parker (1874) 29 Mich. 369. The reasoning, in brief, is that the parties have carried on and controlled the business through their agents, and shared the profits, and thus, having made themselves principals in the undertaking, their liability as partners follows, unless they have received from the State a right to interpose between themselves and liability a corporate existence. Pooley v. Driver (1876) L. R. 5 Ch. D. 458. In Farnum v. Patch (1880) 60 N. H. 294 a “shareholder in an unincorporated business was allowed to recover against a “co-shareholder" on a partnership basis, irrespective of the mutual intent of the parties to become shareholders in a corporation. “They were principals in the business *

* and must be partners.”

On the other hand, in perhaps the majority of jurisdictions, it is held that where members of an intended corporation attempt in good faith to comply with the conditions of the law and thereafter act as if there was a valid corporation, they will be treated as a corporation de facto, if they have failed to become one de jure, and will enjoy the rights of the latter. Morawetz on Private Corporations (2d Ed.) II $ 748, and cases cited. In such cases, neither third parties dealing with the shareholders, Coxe v. State (1895) 144 N. Y. 396 (except the attorney-general in quo warranto) nor the shareholders dealing with third parties, Eaton v. Aspinwal (1859) 19 N. Y. 119; Cooper v. Shaver (1862) 41 Barb. 151, can impeach its corporate capacity. But this is only where there is a bona fide attempt to incorporate. The authorities are uniform in deciding that the parties are liable as partners where they have not "colorably 'complied with the law, Hess v. Werts (Pa. 1818) 4 S. & R. 356; Dewill v. Hastings (1876) 40 Sup. Ct. R. 463, aff'd 69 N. Y. 518; Montgomery v. Forbes (1889) 148 Mass. 249; Bigelow v. Gregory (1834) 73 III. 197, although the intent is the same here as where they have done enough to give "color" to the transaction. Hess v. Werts, supra; Eaton v. Walker (1889) 76 Mich. 579. This theory of the de facto corporation is put on various grounds. Some jurisdictions find an estoppel: that the parties having dealt with the association as a corporation are estopped to deny its corporate existence. See Heaston v. R. R. Co. (1861) 16 Ind. 275. It is difficult to justify this view on strict legal theory, for it is often tacitly admitted that the elements of a common law estoppel are lacking. Again, it is said that the corporation exists in fact, though illegally formed. Morawetz on Private Corporations II § 745. But here also the question arises: if they have not come within the terms of the grant from the State, why are they more than a business association? Or still another view is that the agent of the illegal corporation is not the agent of the “shareholders” as he does not act for them but for the supposed corporation. Ward v. Brigham (1879) 127 Mass. 24. The true justification seems to lie in the view taken by Society Perun v.

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