64 L. ed. 521, 531, 9 A.L.R. 1570, 40, which corporations were subdivided withSup. Ct. Rep. 189, the court of claims declared: out immediate effect upon the personnel of the stockholders, or much difference in "We think the whole transaction is to erties, and the entire capital stock of the the aggregate corporate activities or propbe regarded as merely a financial renew corporations organized pursuant to organization of the business of the com- such plan was distributed pro rata among pany, and that this view is justified by the stockholders of the old corporations, the power and duty of the court to look either directly from the new corporation to through the form of the transaction such stockholders, or first to the old cor[176] to its substance." And further: poration and then by it to its stockholders, "It seems incredible that Congress in- the capital of the old corporations remaintended to tax as income a business trans- not merely in form, a dividend of profits ing unimpaired, is, in substance and effect, action which admittedly produced no by the corporations and individual income gain, no profit, and hence no income. If to the stockholders, taxable as such under any income had accrued to the plaintiff the Act of October 3, 1913, although the by reason of the sale and exchange made, adoption of the new arrangement did not, it would be doubtless be taxable." of itself, produce any increase of wealth to the stockholders. [For other cases, see Internal Revenue, III. b, in Digest Sup. Ct. 1908.] There were perfectly good reasons for the reorganization, and the good faith of the parties is not questioned. I assume that the statute was not intended to put an embargo upon legitimate reorganizations when deemed essential for Argued October 11 and 12, 1921. Decided carrying on important enterprises. Eisner v. Macomber was rightly decided, and the principle which I think it announced seems in conflict with the decision just announced. Mr. Justice Van Devanter concurs in this dissent. [Nos. 535 and 536.] November 21, 1921. WO WRITS of Error to the District Tw Court of the United States for the Southern District of New York to review judgments sustaining assessments of income taxes. Affirmed. See same case below, 274 Fed. 952. The facts are stated in the opinion. Mr. George Welwood Murray argued the cause, and, with Mr. Harrison Tweed, filed a brief for plaintiffs in error: The rules and principles established by this court prohibit a resort to metaphysics to establish the receipt of income in connection with a transaction which, from the point of view of the corporation, was a necessary separation of its two lines of business, and from the point of view of the stockholder was a mere change in the form of his capital investment. Eisner v. Macomber, 252 U. S. 189, 64 L. ed. 521, 9 A.L.R. 1570, 40 Sup. Ct. Rep. 189; Towne v. Eisner, 245 U. S. 418, 62 L. ed. 372, L.R.A.1918D, 254, 38 Sup. Ct. Rep. 158; Southern P. Co. v. Lowe, 247 U. S. 330, 62 L. ed. 1142, 38 Sup. Ct. Rep. 540; Gulf Oil Corp. v. Lewellyn, 248 U. S. 71, 63 L. ed. 133, 39 Sup. Ct. Rep. 35; La Belle Iron Works v. United States, 256 U. S. 377, 65 L. ed. 998, 41 Sup. Ct. Rep. 528; Safe Deposit & T. Co. v. Miles, 273 Fed. 822; United States v. Mellon, U. S. Dist. Ct. Western Dist. Penn. (not yet officially reported but stated in Corporation Trust Co. Income Tax Service, 1921, at page 586). The meaning to be attached to the word "income" is the meaning which it has in common usage and understanding. Bishop v. State, 149 Ind. 230, 39 L.R.A. 278, 63 Am. St. Rep. 279, 48 N. E. 1038; State ex rel. West v. Butler, 70 Fla. 133, 69 So. 771; Lynch v. Turrish, 247 U. S. 221, 224, 62 L. ed. 1087, 1091, 38 Sup. Ct. Rep. 537; Merchants' Loan & T. Co. v. Smietanka, 255 U. S. 509, 65 L. ed. 751, 15 A.L.R. 1305, 41 Sup. Ct. Rep. 389. The stock of the pipe line companies did not constitute income within the meaning of the Income Tax Law of 1913. Towne v. Eisner, 245 U. S. 418, 62 L. ed. 372, L.R.A.1918D, 254, 38 Sup. Ct. Rep. 158; Gibbons v. Mahon, 136 U. S. 549, 34 L. ed. 525, 10 Sup. Ct. Rep. 1057; Wilberding v. Miller, 90 Ohio St. 28, L.R.A.1916A, 718, 106 N. E. 666; Bulkeley v. Worthington Ecclesiastical Soc. 78 Conn. 526, 12 L.R.A.(N.S.) 785, 63 Atl. 351; Goldsmith v. Swift, 25 Hun, 201; Mercer v. Buchanan, 132 Fed. 501, 70 C. C. A. 680, 137 Fed. 1019; Eisner v. Macomber, 252 U. S. 189, 64 L. ed. 521, 9 A.L.R. 1570, 40 Sup. Ct. Rep. 189. Solicitor General Beck argued the cause, and, with Messrs. Carl A. Mapes, Newton K. Fox, and Andrew J. Aldridge, filed a brief for defendant in error. [180] Mr. Justice Pitney delivered the opinion of the court: Line Cases (United States v. Ohio Oil These two cases were argued together, turn upon like facts, and may be disposed of in a single opinion. They involve the legality of certain income taxes assessed against the plaintiff in error in the one case, and against the testator of plaintiffs in error, in the other, under the income tax provisions of the Act of October 3, 1913, chap. 16, 38 Stat. at L. 114, 166, 167, Comp. Stat. § 5291, 2 Fed. Stat. Anno. 2d ed. p. 724, by reason of certain distributions of corporate stocks received by the respective taxpayers under the following circumstances: In and prior to the Company. And similarly, the stockholdyear 1914, the Prairie Oil & Gas Com-ers of the Ohio Oil Company caused a pany, a corporation of the state of Kan- corporation to be formed under the laws sas, was engaged in producing, purchas- of that state, by the name of the Illinois ing, and selling crude petroleum, and transporting it through pipe lines owned by the company in the states of Kansas and Oklahoma, and elsewhere. At the same time the Ohio Oil Company, a corporation of the state of Ohio, was engaged in producing and manufacturing petroleum and mineral oil, and trans-rangements were carried out in like manner in both cases, except that, in porting the same through pipe lines the case of the Kansas companies, the owned by it in the states of Ohio, In-stock of the pipe line company was isdiana, Illinois, and Pennsylvania. In sued directly to the stockholders of the the month of June, 1914, it was judi- oil company, whereas, in the case of the cially determined by this court (Pipe Ohio companies, the pipe line company Pipe Line Company, to which all the pipe line property of the Ohio Oil Company was transferred in consideration of the issue to it of the entire capital stock of the new company, which was to be distributed at once by the old company to its stockholders pro rata. These ar issued its stock to the oil company, but, in the same resolution by which the contract was made, an immediate distribution of the new stock among the oil company's stockholders was provided for, and in fact it was carried out. The aggregate valuation of the Prairie pipe lines was $27,000,000, that of the Ohio pine lines, $20,000,000, and the total capitalization of the respective pipe line companies equaled these amounts. Kansas company, where the new stock went directly [183] from the pipe line company to the stockholders of the oil company, as in the case of the Ohio company, where the new stock went from the pipe line company to the oil company, and by it was transferred to its stockholders. Looking to the substance of things the difference is unessential. In each case the consideration moved from the oil company in its corporate capacIn each case, the oil company had a ity, the new company's stock issued in surplus in excess of the stated value of exchange for it was distributed among its pipe lines and of the par value of the oil company's stockholders in their [182] the total stock of the correspond individual capacity, and was a substaning pipe line company; so that the trans- tial fruit of their ownership of stock in fer of the pipe lines and the distribution the oil company; in effect, a dividend of the stock received for them left the out of the accumulated surplus. capital of the respective oil companies The facts are in all essentials indisunimpaired, and required no reduction in their outstanding issues. without immediate effect upon the personnel of the stockholders, or much difference in the aggregate corporate activities or properties. As in the Phellis Case, the adoption of the new arrangement did not, of itself, produce any in tinguishable from those presented in United States v. Phellis, decided this Messrs. Rockefeller and Harkness, re- day (257 U. S. 156, ante, 180, 42 Sup. spectively, were holders of large amounts Ct. Rep. 63]. In these cases as in that, of the stock of both the Prairie and the regarding the general effect of the enObio oil companies, and in the distribu- tire transactions resulting from the comtions each received an amount of stock bined action of the mass of stockholdin each of the pipe line companies pro- ers, there was apparently little but a portionate to his holdings in the oil com- reorganization and financial readjustment panies. This occurred in the year 1915. of the affairs of the companies conNeither Mr. Rockefeller nor Mr. Hark-cerned; here a subdivision of companies, ness, nor the latter's executors, sold any of the stock in the pipe line companies. Income tax assessments for the year 1915 were imposed upon Messrs. Rockefeller and Harkness, based upon the value of the stocks thus received as dividends; and these assessments are increase of wealth to the stockholders, question in the present suits, both of which were brought in the district court of the United States for the southern district of New York; one by the United States against Mr. Rockefeller, the other by the executors of Mr. Harkness against the collector. In each case the facts were specially pleaded so as to present the question whether the distribution of the stocks of the pipe line companies among the stockholders of the oil companies constituted, under the circumstances, dividends within the meaning of the Act of 1913, and income within the meaning of the 16th Amendment. In each case a final judgment was rendered sustaining the assessment, and the judgments are brought here by direct writs of error under § 238, Judicial Code, because of the constitutional question. since whatever was, gained by each in the value of his new pipe line stock was, at the same moment, withdrawn through a corresponding diminution of the value of his oil stock. Nevertheless, the new stock represented assets of the oil companies standing in the place of the pipe line properties that before had constituted portions of their surplus assets, and it was capable of division among Stockholders as the pipe line properties were not. The distribution, whatever its effect upon the aggregate interests of the mass of stockholders, constituted in the case of each individual a gain in the form of actual exchangeable assets transferred to him from the oil company [184] for his separate use, in partial realization of his former indivisible and contingent interest in the corporate surplus. It was in substance and effect, not merely in form, a dividend of profits by the corporation, and individual income to the stockholder. Under the facts as recited we deem it to be too plain for dispute that, in both cases, the new pipe line company shares were, in substance and effect, distrib- The opinion just delivered in United uted by the oil company to its stock-States v. Phellis sufficiently indicates holders; as much so in the case of the the grounds of our conclusion that the judgment in each of the present cases | granted by the Clayton Act of October 15, must be affirmed. Mr. Justice Clarke took no part in the consideration or decision of these cases. Mr. Justice Van Devanter and Mr. Justice McReynolds dissent. tioner, 1914, § 20, in cases "between an employer and employees, or between employers and employees, or between persons employed and persons seeking employment, involving, or growing out of, a dispute concerning terms or conditions of employment," does not apply to such disputes between an employer and persons who are neither employees nor ex-employees, nor seeking employment. AMERICAN STEEL FOUNDRIES, Peti- [For other cases, see Injunction, I. d: Monopoly, II. a, in Digest Sup. Ct. 1903.] Injunction in industrial dispute Clayton Act. V. TRI-CITY CENTRAL TRADES COUNCIL et al. (See S. C. Reporter's ed. 184-213.) Injunction straint of trade - Clayton Act · 4. No new principle was introduced into the equity jurisprudence of the Federal courts by the provisions of the Clayton Act of October 15, 1914, § 20, which forbid an injunction against recommending, advising, or persuading others by peaceful means to cease employment and labor, or against attending at any place where such person or persons may lawfully be for the purpose information, or peacefully persuading any of peacefully obtaining or communicating against conspiracy in reindustrial disputes •pending suits. 1. The right to injunctive relief against a conspiracy to injure the business of an employer by organized picketing must be determined by an appellate court as of the time of the hearing, although the control-person to work or to abstain from working, ling statute, the Clayton Act of October 15, 1914, § 20, was passed after the decree appealed from was entered. [For other cases, see Injunction. I. d; Monopo ly. II. a, in Digest Sup. Ct. 1908.] Injunction in industrial dispute irreparable injury. 2. The irreparable injury to property or to a property right which, under the Clayton Act of October 15, 1914, § 20, affords ground for injunctive relief in cases "between an employer and employees, or between employers and employees, or between persons employed and persons seeking employment, involving, or growing out of, a dispute concerning terms or conditions of employment," includes injury to the business of an employer. 3. The exceptional immunity from the operation of the Federal Anti-trust Laws Note. As to remedy by injunction against illegal trusts under modern antitrust laws-see note to Whitwell v. Continental Tobacco Co. 64 L.R.A. 715. As to lawfulness of a strike, or of a threat so to act as to induce a strike when there is no trade dispute between the strikers and their own employerssee notes to Pickett v. Walsh, 6 L.R.A. (N.S.) 1067, and New England Cement Co. v. McGivern, L.R.A.1916C, 989. For a discussion of picketing-see notes to Jensen v. Cooks & W. Union, 4 L.R.A.(N.S.) 302; Langell v. CollingWood, 50 L.R.A.(N.S.) 412; Auburn Draying Co. v. Wardell, 6 A.L.R. 909; and Parker Paint & Wall Paper Co. v. Local Union, 16 A.L.R. 233. 5. If, in their attempts at persuasion or communication with those whom they would enlist with them, those of the labor side in an industrial dispute adopt methods which, however lawful in their announced purpose, inevitably lead to intimidation and obstruction, then it is the court's duty, unmodified by the terms of the Clayton Act of October 15, 1914, § 20, which forbid an injunction against recommending, advising, or persuading others by peaceful means to cease employment and labor, or against attending at any place where such person or persons may awfully be for the purpose of peacefully obcaining or communicating information, or As to right, in aid of strike, to employ peaceable persuasion to induce persons not under contract to quit or not accept employment-see note to George Jonas Glass Co. v. Glass Bottle Blowers' Asso. 41 L.R.A.(N.S.) 445. As to right of labor union to notify persons not to deal with a certain individual-see notes to Hey v. Wilson, 16 L.R.A. (N.S.) 85; Lindsay & Co. v. Montana Federation of Labor, 18 L.R.A. Labor v. Buck's Stove & Range Co. 32 (N.S.) 707; American Federation of L.R.A. (N.S.) 748, and Harvey v. ChapL.R.A.(N.S.) man, L.R.A.1917E, 391. And see note to this case as reported in issued its stock to the oil company, but, in the same resolution by which the contract was made, an immediate distribution of the new stock among the oil company's stockholders was provided for, and in fact it was carried out. The aggregate valuation of the Prairie pipe lines was $27,000,000, that of the Ohio pine lines, $20,000,000, and the total capitalization of the respective pipe line companies equaled these amounts. Kansas company, where the new stock went directly [183] from the pipe line company to the stockholders of the oil company, as in the case of the Ohio company, where the new stock went from the pipe line company to the oil company, and by it was transferred to its stockholders. Looking to the substance of things the difference is unessential. In each case the consideration moved from the oil company in its corporate capacity, the new company's stock issued in exchange for it was distributed among the oil company's stockholders in their individual capacity, and was a substantial fruit of their ownership of stock in the oil company; in effect, a dividend out of the accumulated surplus. In each case, the oil company had a surplus in excess of the stated value of its pipe lines and of the par value of [182] the total stock of the correspond ing pipe line company; so that the transfer of the pipe lines and the distribution of the stock received for them left the capital of the respective oil companies) The facts are in all essentials indisunimpaired, and required no reduction in their outstanding issues. tinguishable from those presented in United States v. Phellis, decided this Messrs. Rockefeller and Harkness, re- day (257 U. S. 156, ante, 180, 42 Sup. spectively, were holders of large amounts Ct. Rep. 63]. In these cases as in that, of the stock of both the Prairie and the regarding the general effect of the enOhio oil companies, and in the distribu- tire transactions resulting from the comtions each received an amount of stock bined action of the mass of stockholdin each of the pipe line companies pro- ers, there was apparently little but a portionate to his holdings in the oil com- reorganization and financial readjustment panies. This occurred in the year 1915. of the affairs of the companies conNeither Mr. Rockefeller nor Mr. Hark-cerned; here a subdivision of companies, ness, nor the latter's executors, sold any of the stock in the pipe line companies. Income tax assessments for the year 1915 were imposed upon Messrs. Rockefeller and Harkness, based upon the value of the stocks thus received as dividends; and these assessments are in question in the present suits, both of which were brought in the district court of the United States for the southern district of New York; one by the United States against Mr. Rockefeller, the other by the executors of Mr. Harkness against the collector. In each case the facts were specially pleaded so as to present the question whether the distribution of the stocks of the pipe line companies among the stockholders of the oil companies constituted, under the circumstances, dividends within the meaning of the Act of 1913, and income within the meaning of the 16th Amendment. In each case a final judgment was rendered sustaining the assessment, and the judgments are brought here by direct writs of error under § 238, Judicial Code, because of the constitutional question. without immediate effect upon the per- Under the facts as recited we deem it to be too plain for dispute that, in both cases, the new pipe line company shares were, in substance and effect, distrib- The opinion just delivered in United uted by the oil company to its stock-States v. Phellis sufficiently indicates holders; as much so in the case of the the grounds of our conclusion that the |