ment under consideration operates as a re-admit that it is necessary for me by argustraint upon interstate trade and commerce.ment to fortify the positions taken by this The prohibition of the Anti-Trust Act, as court in that case. The anti-trust law as construed by this court, applies to all con- there construed is the law of the land. tracts in restraint of trade or commerce, and is not confined to those in unreasonable restraint.

The wisdom of Congress in prohibiting all agreements in restraint of trade among interstate railway systems is even more manifest now than when the Trans-Missouri case was decided. At the time of the argument of the Trans-Missouri case it was still to some extent a mooted question whether the Interstate Commerce Commission was empowered to determine what are fair and reasonable rates, and to enforce such rates. This question is no longer open.

But as a contract in restraint of commerce, the Trans-Missouri agreement is crude and ineffective when compared with the Joint Traffic agreement. The TransMissouri provides a penalty for competition. The Joint Traffic goes further, and contains provisions designed to deprive companies of the means of competing, while removing the inducement to compete. Control of the soliciting and contracting freight and passenger agencies is placed in the managers, who are authorized to organize joint agencies. This done, the supervision of the sources of securing business being thereby given to the man- It will probably be urged that any illegalagers, they are charged with the duty of ap-ity in the agreement is cured by § 3 of artiportioning the competitive traffic equitably cle 7, which reads; among the members of the association.

Of course the purpose is to remove the inducement to compete. An agreement to apportion traffic operates the same as one to divide earnings. Railroads which pool their earnings have no inducement to compete. All the individual company earns goes into the pool, and it only gets its share after all. So where the traffic business is pooled, if a company by competing gets more than its share, it must yield the excess by permitting a diversion of the traffic from its line to lines which are short. A strict account is kept of the traffic carried by each trunk line. If the traffic of a particular line exceeds its percentage, the line is deemed "over," and must account for the excess to the lines which are "short."

In prohibiting pooling, Congress did not make it a condition that the rates established and maintained under a pooling agreement should be unreasonable. It sufficed they would be arbitrary, uninfluenced by competition. The public would be placed at the mercy of the traffic managers.

Interstate Commerce Commission v. Cincinnati, N. O. & T. P. R. Co. 167 U. S. 479, 42 L. ed. 243; Interstate Commerce Commis sion v. Alabama Midland R. Co. 168 U. S. 144, 42 L. ed. 414.

"Sec. 3. The powers conferred upon the managers shall be so construed and exercised as not to permit violation of the Interstate Commerce Act, or any other law applicable to the premises, or any provision of the charters or the laws applicable to any of the companies parties hereto; and the managers shall co-operate with the Interstate Com merce Commission to secure stability and uniformity in the rates, fares, charges, and the rules established hereunder."

An injunction to construe and exercise powers conferred so as to permit no violation of law is an admission that the powers may be so construed and exercised as to violate law. If the anti-trust law prohibited only those contracts in unreasonable restraint of trade or commerce there might be saving force in this section. But the anti-trust law prohibits all contracts in restraint of trade or commerce. Whether the rates be reasonable or unreasonable, an agreement providing for their establishment and maintenance by an association of interstate railways is prohibited. The managers can exercise none of the So, too, in the case of a contract in re-essential powers conferred by the agreement straint of trade prohibited by the anti-trust without violating the law. In the matter law; it is enough if the agreement interferes with those natural laws which ordinarily determine rates; it is enough if it restricts competition; it is enough if it puts it in the power of the combined railroads arbitrarily to fix rates. We do not have to inquire whether the rates fixed are reasonable or unreasonable. It is the power through combination to fix rates arbitrarily, which is prohibited.

The Trans-Missouri case was elaborately argued and carefully considered. A petition for a rehearing was presented and denied. The decision has been accepted and acted upon by the departments of the government, and by the courts, both state and Federal, as definitively settling the meaning and scope of the Anti-Trust Act when applied to traffic associations among competing interstate railway systems. The decision was not only a just, but an eminently salutary one. I shall not concede that the principles it laid down remain questionable. I shall not

of the essential powers it is not a question of method or degree; the powers cannot be exercised because they are in themselves illegal. The association is itself illegal It is formed for the purpose of controlling certain competitive traffic. The central anthority, the managers, is given the power to establish and maintain rates on that traffic Take away from the association the power to establish and maintain rates, and it immedi ately falls to pieces. It ceases to have a raison d'etre.

It will be observed that the managers are not instructed to co-operate in securing rea sonable rates. The latter part of this se tion is inserted to support, not the real, but ostensible purpose of the association, namely of aiding the Interstate Commerce Com mission to enforce the law. Assuming the Commission powerless to enforce the law, the railroads ignored both the Commission and the law, and proceeded to form an associa tion outside of the law and in violation of

the law, to aid in enforcing the law. The railroads shatter the law, and then combine to support the fragments.

It was contended below that the bill was multifarious. There is but one cause of action in the bill,-namely, the agreement. Upon that the bill is based. It seeks to enjoin the execution of an illegal contract. The averments of intent in the bill are unnecessary and immaterial. At the most they are conclusions of law. The court will examine the agreement and determine the question of law with respect to its meaning and effect; will determine whether the agreement restrains trade or commerce in any way so as to violate the law. If the agreement is prohibited by the anti-trust law the court will enjoin its execution; and the court will do this irrespective of whether the agreement does or does not also violate the Interstate Commerce Act, or those general principles of law which prevent any interference with interstate commerce.

It is not necessary for the government to insist that the agreement violates more than one law. It is clearly illegal as a contract in restraint of trade or commerce under the anti-trust law. The fact that it also violates some other law, if it does, assuredly will not cure its illegality under this law, or prevent the court from enjoining its execution. A thing which is doubly bad does not, therefore, become good. The rule of double negatives does not apply. Nor is the government deprived of the power to restrain the execution of a contract in restraint of trade or commerce under the anti-trust law because the contract contains a provision under which individuals have committed, or may commit, offenses punishable under the Interstate Commerce Act. If a man threatens my life I am not to be deprived of the right to put him under bond to keep the peace be cause he has also stolen my property.

The authority of the government to maintain this suit is sustained in United States v. Trans-Missouri Freight Asso. 166 U. S. 290, 343, 41 L. ed. 1007, 1028; citing Re Debs, 158 U. S. 564, 39 L. ed. 1092; Cincinnati, N. O. & T. P. R. Co. v. Interstate Commerce Commission, 162 U. S. 184, 40 L. ed. 935, 5 Inters. Com. Rep. 391; Texas & P. R. Co. v. Interstate Commerce Commission, 162 U. S. 197, 40 L. ed. 940, 5 Inters. Com. Rep. 405.

Messrs. James C. Carter and Lewis Cass Ledyard, for the Joint Traffic Association, appellee:

The object of the bill is to procure an adjudication that a certain agreement entered into between a large number of railroad companies forming most, but not all, of the lines or systems engaged in the business of railroad transportation between Chicago and the Atlantic coast, for the purpose of forming an association for the better regulation of a certain part of the traffic of those lines and systems, is illegal and void, and enjoining its


Congress in 1887 enacted the Interstate Commerce Law, the main design of which was to abolish discrimination in rates and secure a greater degree of uniformity, and to

that end it required all railroads engaged in interstate transportation to file with the Commission and publish schedules of their respective rates, and forbade the carriage of goods for any greater or less compensation than that specified in the published rates.

Even before the passage of the law the rtval lines engaged in an effort to agree upon the schedules which each should file, and had reached such agreement in time to file and publish them in compliance with the provi sions of the law.

The agreement in question was believed to promise great benefits and to make it in the interest of all to comply with the Interstate Commerce Act, and to detect, expose, and punish any who, from a mistaken view of interest, should violate it.

It made no effort to prevent competition: but sought to devise a scheme which would compel any competition to be fair, lawful, and open, and enable any rival to meet it without violating any law.


Unfortunately, large corporations viewed with a jealousy which does not confine itself at all times within the bounds of reason, and this sentiment creates hostilities to which it is but natural, at least, that public officials should yield. Transactions which, in the absence of political prejudice and passion, would pass unnoticed by those not immediately affected by them, are subject to hostile scrutiny; and it was not unnatural that such an agreement should raise a clamor that it was designed to raise rates. There never was a pretense, however, that under the agreement there was the slightest exaction of unreasonable charges. On the contrary the schedules of rates agreed upon and filed with the Interstate Commerce Commission had never been objected to by that body, and were notoriously lower than those imposed for similar services in any other part of the world.

The answer denies every allegation of unlawful act or of unlawful intent, unless the making of the agreement itself was an unlawful act.

It may seem at first that we are aiming to persuade the court to reconsider its reasoning and determinations in the recent case of United States v. Trans-Missouri Freight Association.

It may be that one of the questions now sought to be presented might have been made in that case and a decision of it obtained; but it is quite certain that the question was not raised.

The precise question which was considered and determined in the case above referred to was this: Assuming that the agreement was one in restraint of trade, would the circumstance that the restraint actually imposed by it was reasonable relieve it from the condemnation of the statute? Or, in other words, does the statute by a true construction condemn all agreements in restraint of interstate trade and commerce, or such only as were at common law unlawful?

Prior to, and at the time of, the passage of this law there were, as there still are, certain tendencies in the industrial world which drew widespread attention and excited in

1831 (6 Stat. at L. 464, chap. 102), was
held not to be assets in their hands for
the payment of his creditors, the act, in its
title, was expressed to be "for the relief of
the heirs of William Emerson, deceased;"
and it granted the money as a reward for
services, meritorious indeed, but voluntarily
rendered by Emerson, not under any law or
contract, and imposing no obligation, legal
or equitable, upon the government to com-
pensate him therefor; and the money was
therefore held to have been received by his
heirs as a gift or pure donation.

purpose is not to confer a bounty or gratuity upon anyone; but to provide for the ascertainment and payment of a debt due from the United States to a loyal citizen for property of his, taken by the United States, and to enable his executor to recover, as part of his estate, proceeds received by the United States from the sale of that property. "The 474] act is "for the relief of the estate" of Charles M. Briggs, and the only matter referred to the court of claims is the claim of his "legal representatives." The executor was the proper person to represent the estate of In the provision of the appropriation act Briggs, and was his legal representative; and of March 3, 1891, chap. 540, concerning the as such he brought suit in the court of French Spoliation Claims, the words "per-claims, and recovered the fund now in quessonal representative" and "legal representa- tion, and consequently held it as assets of the tive" were used to designate the executor or estate, and subject to the debts and liabili administrator of the original sufferer; and ties of his testator to the defendants in er. money awarded by the court of claims to ror. such a representative was held by this court to belong to the next of kin, to the exclusion of assignees in bankruptcy, upon the ground that the act expressly so provided. 26 Stat. at L. 897, 908; Blagge v. Balch, 162 U. S. 439 [40: 1032].

The words "legal representatives" or "per[473]sonal representatives" *have also been used as designating executors or administrators, and not next of kin, in acts of Congress giving actions for wrongs or injuries, causing death. Act of April 20,1871 (17 L.15,chap.22, § 6); Rev. Stat. § 1981; Act of February 17, 1885 (23 Stat. at L. 307, chap. 126); Stewart v. Baltimore & Ohio Railroad Co. 168 U. 8. 445, 449 [42: 537, 539].


Judgment affirmed.

H. HUBBARD, Assignee of the Union
Loan & Trust Company, Petitioner,



(See S. C. Reporter's ed. 474-504.) Rights of pledgees-when pledge is discharged acts of an officer of a corporation -secret equity-usurious agreementholder in good faith.





Failure of pledgees to sustain their alleged rights as purchasers at a sale set up as a defense will not affect their rights as pledgees, when they stand on all their rights and have not been put to an election.

A pledge is discharged by the voluntary parting with the possession of the property. The mere fact that a person who negotiates securities is an officer of a corporation does not call for an inference that he is acting as such in that transaction.

A secret equity in securities pledged by a person who has been empowered to do so by a corporation cannot be set up by it as against the pledgee.

The act of June 4, 1888, chap. 348, now before the court, is entitled "An Act for the Relief of the Estate of C. M. Briggs, Deceased," and confers upon the court of claims "jurisdiction to hear and determine the claim of the legal representatives of C. M. Briggs, deceased," for the proceeds, in the treasury of the United States, of cotton owned by him. The only conditions which the act imposes upon the right of recovery are that the petition shall be filed in the court of claims within two years; that that court shall find that Briggs was in fact loyal to the United States, and that Morehead's assignment of the cotton to Briggs was made in good faith; and that if it shal' find that the assignment "was intended only as security to said Briggs for indebtedness, and against contingent liabilities assumed by him for said Morehead, judgment shall be rendered for such portion of the proceeds of said cotton as will satisfy the debts and claims of said Briggs to secure which said assignment was given." The "debts and claims," in this last clause, manifestly include both classes of debts previously mentioned, namely, the direct "indebtedness" of Argued April 22, 25, 1898. Decided October

Morehead to Briggs; and the "contingent liabilities assumed by him for said Morehead," including the claims of the defendants in error, specified in the written agreement executed by Briggs contemporaneously with the assignment, and the amount of each of which has been ascertained by the court below.

The act of Congress nowhere mentions heirs at law, or next of kin. Its manifest



One seeking the affirmative aid of equity for relief against an alleged usurlous agreement must himself do equity by tendering or offering payment of what is justly due.

Usury between the parties to a contract, or defect of power of a corporation engaged in the transaction, will not prevent the purchaser of securities from being a holder in good faith as against another corporation which attempts to set up a secret equity.

[No. 24.]

17, 1898.

'States Circuit Court of Appeals for the Eighth Circuit to review a decree of that Court affirming the decree of the Circuit Court of the United States for the Northern District of Iowa in an action brought by the Manhattan Trust Company of New York against the Sioux City & Northern Railroad


cline or fail to observe the rates, etc., estab- | prevent competition among the railroads lished under it, and the interests of parties named, in respect to all their interstate com-[509] injuriously affected by such action of the merce, entered into the agreement referred managers were to be accorded reasonable to above, and it charged that the agreement protection in so far as the managers could was an unlawful one, and a combination and reasonably do so. When in the judgment of conspiracy, and that it was entered into in the managers it was necessary to the pur- order to terminate all competition among the poses of the agreement, they might deter-parties to it for freight and passenger traffic, mine the divisions of rates and fares between and that the agreement unlawfully reconnecting companies who were parties to strained trade and commerce among the sev the agreement and connections not parties erai states and territories of the United thereto, keeping in view uniformity and the States, and unlawfully attempted to monopoequities involved. lize a part of such interstate trade and comJoint freight and passenger agencies merce. The bill ended with the allegation might be organized by the managers, and, if that the companies were preparing to put established, were to be so arranged as to into full operation all the provisions of the give proper representation to each company agreement, and the relief sought was a judg party to the agreement. Soliciting or con- ment declaring the agreement void and entracting passenger or freight agencies were joining the parties from operating their not to be maintained by the companies, ex- roads under the same. The defendant, the 08]cept *with the approval of the managers, and Joint Traffic Association, filed an answer no one that the managers decided to be ob- (the other defendants substantially adopting jectionable was to be employed or continued it), which admitted the making of the conin an agency. The officials and employees tract, but denied its invalidity or that it is of any of the companies could be examined, or was intended to be an unlawful contract, and an investigation made when, in the judg-combination, or conspiracy to restrain trade ment of the managers, their information or or commerce, or that it was an attempt to any complaint might so warrant. Any vio-monopolize the same, or that it was intended lation of the agreement was to be followed to restrain or prevent legitimate competlby a forfeiture of the offending company in tion among the railroads which were parties a sum to be determined by the managers, to the agreement. The answer, in brief, denied which should not exceed five thousand dol- all allegations of unlawful acts or of an unlars, or if the gross receipts of the transac- lawful intent, unless the making of the agreetion which violated the agreement should ment itself was an unlawful act. The anexceed five thousand dollars, the offending swer then set forth in quite lengthy terms party should, in the discretion of the mana- a general history of the condition of the railgers, forfeit a sum not exceeding such gross road traffic among the various railroads receipts. The sums thus collected were to go which were parties to the agreement at the to the payment of the expenses of the asso- time it was entered into, and alleged the nociation, except the offending company should cessity of some such agreement in order to not participate in the application of its own the harmonious operation of the different forfeiture. roads, and that it was necessary as well to the public as to the railroads themselves.

The agreement also provided for assess
ments upon the companies in order to pay The case came on for hearing on bill and
the expenses of the association, and also for answer, and the circuit court, after a hear-
the appointment of commissioners and arbi-ing, dismissed the bill, and upon appeal its
trators who were to decide matters coming
before them. No one retiring from the
agreement before the time fixed for its final
completion, except by the unanimous consent
of the parties, should be entiled to any re-
fund from the residue of the deposits remain-
ing at the close of the agreement.

decree was affirmed by the circuit court of ap-
peals for the second circuit, and the govern-
ment has appealed here.

It was to take effect January 1, 1896, and to continue in existence five years, after which any company could retire upon giving ninety days' written notice of its desire to do


Mr. John K. Richards, Solicitor Gener

al, for the appellant, the United States:

The agreement violates the anti-trust law
because it creates an association of compet-
ing trunk-line systems, to which is given ju-
risdiction over competitive interstate traf-
fic, with power, through a central authority,
aided by a skilful scheme of restrictions, reg-
maintain rates and fares on such traffic and
ulations, and penalties, to establish and
prevent competition, thus constituting a con-
tract in restraint of trade or commerce
court in United States v. Trans-Missouri
the several states, as defined by this
Freight Asso. 166 U. S. 290, 41 L. ed. 1007.

The bill filed by the government contained
allegations showing that all the defendant
railroad companies were common carriers
duly incorporated by the several states
through which they passed, and that they
were engaged as such carriers in the trans-
portation of freight and passengers, separ- In the Trans-Missouri case this court held
ately or in connection with each other, in (1) that the anti-trust law applies to com-
trade and commerce continuously carried on
mon carriers by railroad; (2) that it prohib-
among the several states of the Union and its and renders illegal all agreements in re-
between the several states and territor-straint of interstate trade and commerce,
ies thereof. The bill also charged that the whether the restraint be reasonable or un-
defendants, unlawfully intending to restrain reasonable.
commerce among the several states, and to The question, then, is whether the agree-

ful representations as to the amount of the indebtedness of the Nebraska & Western Railway Company, induced Garretson to purchase said loans; that Garretson thereupon deposited $750,000 of the Sioux City & Northern bonds with the Manhattan Trust Company as security for relief of the maturing obligations to Belmont & Co.; and that about the same time Tod & Co. began to make advances to Garretson on the security of the Nebraska & Western bonds; that Garretson was obliged to sell all the Sioux City & Northern bonds at a sacrifice price of seventy-five per cent, and to pledge all the Nebraska & Western bonds and half of the Sioux City & Northern stock substantially for the value of the purchase price of the Nebraska & Western bonds.

held by them under the loan agreement of
December 31, 1892; the surrender of the cer-
tificates to the petitioner upon an account-
ing, and the *ascertainment of what sums, if [479]
any, constituted a lien thereon; and the ap-
pointment of a receiver pendente lite.

The answers of Tod & Co. traversed the al-
legations of the petition and amended peti-
tion on which petitioner based his claim to
the securities, and particularly denied all
charges of fraud, want of good faith or no-
tice; and set forth at length the transactions
in respect of said securities on which they
claimed the title thereto or right to hold the
same. After much of the testimony had
been taken petitioner moved for leave to fur-
ther amend his petition, which motion was
held over to the hearing.

The case was heard on the merits, and, in the final decree, leave to further amend was granted. This second amended petition made the Manhattan Trust Company a party, and averred, among other things, that the loan of one million dollars, and the loan of one million and a half, were usurious, and prayed that each be declared void, and that the securities be surrendered to petitioner free and clear of any claim, right, înterest, or lien of Kennedy Tod & Co.

The evidence may be sufficiently summar

That the mortgage covering said bonds was foreclosed, and the property conveyed to a new corporation called the Sioux City, O'Neill, & Western Railway Company in exchange for the issue of $2,340,000 of firstmortgage bonds, and 36,000 shares of stock; and that in the latter part of 1892, or early (478]*in 1893, Garretson, without any apparent record or other authority from the Union Loan & Trust Company, caused all of the bmds of the Sioux City, O'Neill, & Western Railway Company, and substantially all of the stock of the Sioux City & Northern Rail-ized as follows: road Company, to be vested in the Pacific Short Line Bridge Company, and the notes of the latter company, to the amount of $1,500,000, to be given to himself, and the payment hereof to be secured by the pledge of all said bonds and stock, and transferred the notes and securities to J. Kennedy Tod & Co., who, acting as trustees, but chargeable with notice, negotiated or bought the greater part of the said notes for different holders or purchasers thereof, $500,000 being taken by the Great Northern Railway, which desired to acquire the Sioux City & Northern Railroad, and with which Tod & Co. were ailied. That after the failure of the Union Loan & Trust Company, a committee of its creditors, Tod & Co. having advertised the sale of the collateral pursuant to the terms of the $1,500,000 loan, there having been default in payment of interest for thirty days, offered to pay the overdue interest on certain conditions, which were refused, and the collateral was sold and bought in by Tod & Co. for $1,000,000.

The petition and amended petition contained an averment that petitioner, "as assignee of said Union Loan & Trust Company, is entitled to the immediate surrender of all and singular of said securities by said J. Kennedy Tod & Co. to your petitioner without any payment of principal or interest upon said alleged loan, or any other consid

eration whatsoever."

The prayer of the amended petition was: That Tod & Co. surrender to petitioner. without any terms or conditions, the collateral held by them as aforesaid, and that they be enjoined from selling or disposing of the same; for an accounting of sums advanced by Tod & Co. in good faith and without notice on account of the securities, and the disposition made by them of any other collateral

I. The Union Loan & Trust Company was organized in 1885 with a capital stock of $100,000, which was afterwards increased to $1,000,000. The purposes of its incorporation, as stated in its certificate of organization, were the loaning of money on real and personal security; the purchase and sale of securities; the negotiation of loans; and the execution of trusts; but the company was not to "purchase, nor loan its funds on the securities of any railroad company." It had a board of five directors, a president, vice president, and secretary, and by its by-laws a committee of three members on applications for loans was provided for.

November 2, 1885, George L. Joy was elected president, A. S. Garretson, vice president, and E. R. Smith, secretary, subsequently also made treasurer, and these three persons were appointed the committee on loans. They continued to hold these offices and to constitute that committee up to and until April 24, 1893, when the company made an assignment to E. H. Hubbard.

The practical management_of_the_company's affairs was left to E. R. Smith, sec-[480] retary and treasurer, and he accepted, indorsed and discounted notes as if he were solely in charge of the business.

When individual members of the syndicate presented notes to the company, Smith accepted the notes without collateral, but claimed that this was on the understanding that securities were to be or would be thereafter deposited; and when securities, whether bonds or stock, did come to the hands of Smith as secretary and treasurer, he parted with them to Garretson, or transmitted them as requested by Garretson, constantly recognizing Garretson's right to sell or rehypothecate the same. Garretson testified to the right of the syndicate to sell or pledge the

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