is sold and the seller covenants that he will not thereafter carry it on, or where a man takes an apprentice with an agreement that he will not set himself up in opposition to his master in trade, supply familiar examples of

this character.

Inasmuch as such contracts would not be entered into unless it was believed that the law would afford redress in case of a breach of them, the repressive purposes of the law, where they are supposed to be opposed to public policy, are, in general, fully satisfied by declaring them void and denying redress, and this is usually the extent of the notice which the law takes of them. There is no occasion for criminal legislation, both for the reason that there is not present, ordinarily, any criminal purpose, and, if there were, repression is sufficiently accomplished without a resort to it. The doctrine respecting contracts of this character belongs, therefore, to the law of contracts.

But there is another and much smaller description of contracts supposed to be injurious to trade, of quite a different character. They are not, properly speaking, business transactions. They do not involve the sale, leasing, or exchange of property, or the hire of services; nor does a breach of them usually result in distinct and ascertainable pecuniary loss. They are not, indeed, entered into by parties in different interests, as in the case of buyer and seller, one of which expects to gain something from the other, but by parties in the same interest having in view an object for the common good of all; nor do the parties to them generally look to, or rely upon, any legal remedies to secure obedience to them. They spring out of circumstances which impress the parties to them with the belief that they have a common interest, or that it is expedient to create a common interest among them, and seek to control or regulate the conduct of each other in relation to business. Instances of this description of agreement are found where laborers or employers unite, in the form of agreement, to regulate hours of labor or prices, or where merchants or tradesmen combine to transact their business in certain prescribed ways, or to establish uniform prices for their goods, or to suppress or regulate competition among themselves; or where a class of producers or dealers combine together to control a product or a business, with a view of imposing upon others their own terms as to prices, or other incidents of the business.

The marked distinction between these cases and the ordinary business transactions first spoken of is that in the latter there is a difference of interest, sometimes regarded as a hostility of interest, between the parties, each seeking to gain the utmost from the other; whereas in the former the parties are in the same interest, each seeking the same end. The term "contract" does not well express this sort of agreement. It is a uniting together for a common purpose, -a combination, or, when thought to be of an objectionable character, a conspiracy. Such unions always suppose agreement, but it need not be in writing; where it is in writing it is

often called an agreement, or contract; but in giving it this name we should not lose sight of its real character. In reality it is simply an act, and innocent or guilty according as the law may be inclined to regard it. It is manifest that where the law does regard it as mischievous, and to such a degree as to call for repression, it is not enough to simply declare it illegal. The practice may nevertheless be persisted in, and as it does not rely for its efficacy upon legal remedies, the mere withholding of such remedies may be ineffectual. The action, therefore, which the law usually takes in respect to such socalled contracts, is in the form of prohibition and penalty; and the subject belongs, not to the law of contracts, but to the crim inal law, where it is usually dealt with under the head of conspiracy.

We do not mean by the above observations that there may not be instances which partake to a greater or less degree of the quali ties of both the classes above mentioned; but the distinction between them is so constant and pervading that it will be at once recognized."

As a conclusion to what is said we desire to point out that the legal doctrine and policy to which this Anti-Trust Act belongs is manifestly the one last described. The circumstance that contracts are grouped together with combinations and conspiracies, and made the subject of criminal treatment, shows this very plainly.

The inaptitude of some of the language of this legislation is quite apparent. Undoubtedly the object of Congress was to reach that class of supposed mischiefs which flow from combinations. But the great bulk of the cases in which the courts have felt called upon to say anything about contracts in re straint of trade has been the business transactions first alluded to, in which an agree ment has been entered into not to exercise a particular calling,-as, where the keeper of a well-patronized tavern sells out his establishment and goodwill, and covenants not to further carry on the business. Such agreements at the common law have been held valid or void according to the supposed reasonableness of the covenant; but surely even when void, there was nothing about them calling for the intervention of the criminal law. And yet this statute bunches the valid and void all together, and makes them all criminal, when probably there was not the remotest intention to make any of them criminal.

These observations, of course, fully admit that the particular agreement or combination against which this action is aimed would be, assuming that the act covers the contracts between railroad companies, obnoxious to the penalty imposed by the act, provided it were in fact in restraint of trade or commerce between the states. That it is in fact in restraint of trade or commerce must be shown before this action can be maintained, and this is the proper subject for discussion in this action. This question is broadly open and unaffected by any decision of this court, and we expect to show that the agreement is, not only not in restraint of

the Pacific Short Line from Sioux City west- | the obligations of the improvement company
ward to O'Neill," they would raise $350,000, and the Nebraska & Western bonds, he caused
$250,000 to be loaned the improvement com- the bonds to be sold on May 27, 1891, and
pany on the security of $500,000 first-mort-
gage bonds of the Nebraska & Western Rail-
way Co., held by the Manhattan Trust Com-
pany, and $100,000 certificates of the im-
provement company to be assigned to the
syndicate by the original subscribers.

June 24, 1891, pursuant to a demand made
on the Manhattan Trust Company as trustee
and to notice given, and at the sale purchased
all the bonds of the Nebraska & Western
Railway Company.

In June, 1891, Tod & Co. loaned Garretson
$75,000 on $200,000 Nebraska & Western
bonds as collateral.

III. October 1, 1891, Garretson entered in to a contract with Tod & Co. to borrow one

The Manhattan Trust Company held $2,-
100,000 of the Nebraska & Western bonds to
secure the $1,050,000 loan and, subsequently,
$483,000 more to secure other loans.
About November 1, 1890, it became neces-million dollars, which recited that Garretson
sary to provide for the payment of the loan
by Belmont & Co.

On that date Garretson borrowed through the Manhattan Trust Company $500,000 on his individual notes secured by $750,000 Sioux City & Northern bonds, and took up the Belmont loan of $500,000. He at the same time negotiated with the officers of the Manhattan Trust Company touching other loans to the improvement company under the underwriter's agreement to the effect that the Manhattan Trust Company should cause said loans to be renewed or placed elsewhere and that the Nebraska & Western bonds in possession of the Manhattan Trust Company should be used as collateral.

And January 28, 1891, Garretson entered into a written agreement with the Manhattan Trust Company for the taking up of the then outstanding notes and receiving the collateral held as security therefor.

Among the transactions, Garretson borrowed in February, $190,000 secured by 170 Sioux City & Northern bonds, and the equity in the 750 bonds held to secure the $500,000 loan. These loans were paid out of the proceeds of the sale of the whole issue of the Sioux City & Northern bonds, as before stated.

was the holder of $2,500,000, or thereabouts, of Nebraska & Western bonds; of 25,000 shares of the stock of the Nebraska & Western Railway Company, and of 7,200 shares of the stock of the Sioux City & Northern Railroad Company; that proceedings were pending for the foreclosure and sale of the Nebraska & Western Railway; and that Garretson desired to borrow money, purchase the road, form a new corporation, and obtain a new issue of bonds and stock; *and Tod[485] & Co. agreed to make or procure him a loan on these terms: Garretson to deliver to Tod & Co. his two hundred promissory notes of $5,000 each, dated October 1, 1891, and payable on demand, and to deposit as security for the equal and common benefit of all who should become holders thereof the Nebraska & Western bonds, the shares of Nebraska & Western stock, and the shares of Sioux City & Northern stock; Tod & Co. to procure the sale of the notes at par, and to advance thereon at once $200,000, if required in obtaining title, the collateral to be held by Tod & Co. for the equal benefit of the holders of the notes; on the reorganization of the Nebraska & Western Railway Company under the foreclosure, a new mortgage to be executed to the Manhattan Trust Company The testimony of Garretson was relied on to secure a new issue of bonds at the rate [484] to sustain the charge that the Manhattan of $18,000 per mile, and the whole amount of Trust Company perpetrated a fraud on him such issue, $2,340,000 and one half of the at the time he entered into negotiations to capital stock of the new company to be de assume or take up the obligations of the im-livered to Tod & Co. in the place of the Neprovement company, in the acquisition of the Nebraska & Western road, in that it misrepresented the amount of that company's indebtedness. The officers of the Manhattan Trust Company positively denied any such misrepresentation; and the eighth paragraph of Garretson's contract with the Manhattan Trust Company of January 28, 1891, declared: "This agreement and the settlement herein made is in full adjustment and settlement of all questions heretofore arising be cured by all the stock of the Pacific Bridge tween the parties hereto, in reference to the Company except such part not exceeding fifty shares as should be necessary to qualify said improvement company or the construc- directors. The note holders were also given tion of the Nebraska & Western Railway, and certain options, and Tod & Co. were to rethe first party agrees that his note for $500,-ceive one per cent commission for their serv000 heretofore given on taking up certain | ices.

braska & Western bonds and stock. If the
Nebraska & Western bonds were required to
be deposited in court, the road was to be
purchased in the name of trustees, and un-
til the new corporation was formed and new
bonds. and stock delivered, no more than
$600,000 was to be paid over to Garretson,
the balance to remain to his credit with the
banking company.

The new bonds were also to be further se

loans shall be paid at or before maturity." The notes representing this million-dollar
The evidence did not show that if there had loan were not executed October 1, 1891, but
been any misrepresentation, Tod & Co. had
any knowledge in fact thereof, though at one
time a member of the firm, now deceased,
was a director of that trust company, and
its counsel was also Tod & Co.'s.

After Garretson had become the holder of

were thereafter prepared and sent to Garret-
son at Sioux City, were there executed by
him, and were received by Tod & Co. October
26, Garretson being credited with the prin-
cipal and twenty-five days' interest.

One million of the Nebraska & Western

der the law of Nebraska to contract so large an indebtedness in excess of its outstanding bonds, and thereupon it was suggested that Garretson should sell the securities to the Pacifie Short Line Bridge Company and receive back the notes of that company for $1,500,000, to be secured by a pledge of said securities, and that Tod & Co. should negotiate a sale of these notes on the strength of the securities thus pledged.

bonds were delivered to Tod & Co. October the railway company was not authorized un19, 1891, $800,000 by the Manhattan Trust Company and $200,000 by Tod & Co.'s cashier, which had been pledged to them to secure the loan of $75,000, and these bonds [486]*were sent that day to Wickersham, Tod & Co.'s attorney and agent at Omaha, to be used in the purchase under the foreclosure. One hundred and fifty thousand dollars of the bonds had been delivered to the St. Charles Car Company, and were received by Tod & Co. October 27, and forwarded to Wickersham that day.

The Pacific Short Line Bridge Company
was a corporation of Iowa, organized for the
Of the remainder of the bonds, 500 were purpose of constructing a bridge across the
held by the Manhattan Trust Company as Missouri River at Sioux City, as a part of
collateral to the $250,000 subscribed by Gar- the Nebraska and Western enterprise. Its
retson and Hedges to the underwriter's stock was divided into 20,000 shares of $100
agreement, and had been shipped to the each, which were issued November 13, 1891,
Union Loan & Trust Company by the Man-in four certificates of 5,000 shares each, in
hattan Trust Company by direction of Gar-
retson, December 2, 1890.

the name of "A. S. Garretson, trustee," and
these certificates were delivered by Garret-
And $933,000, which had been lodged in son, November 19, 1891, to Tod & Co., who,
Tod & Co.'s custody by Garretson, had been on December 14, delivered them to the Man-
sent to the company in August, 1891, on his hattan Trust Company as trustee under the
instructions, which contained nothing to in- mortgage of the Sioux City, O'Neill, & West-
dicate that the Union Loan & Trust Com-ern Railway Company, pursuant to the mil-
pany had any claim of lien thereon, or right | lion-dollar-loan agreement of October 1,
thereto, while Tod & Co. testified that they 1891. The bridge company had executed a
supposed they were transmitted as a mere
matter of safety deposit.

These bonds for $1,433,000 were sent to
Garretson at Omaha by the Union Loan &
Trust Company, and delivered by him to

mortgage to secure $1,500,000 of bonds, but
of these only $500,000 had been certified by
the trustee, and it did not affirmatively ap-
pear that any had been negotiated. Garret
son testified that the purpose of the $1,500,-
000 loan was to take up the million-dollar
The railroad was sold under the foreclos-loan and to get "additional funds with which
ure decree October 23, 1891, and bought in
by Garretson and Wickersham as trustees
for the holders of the first-mortgage bonds
of the Nebraska & Western Railway Com-
pany, and on October 30 the entire issue,
$2,583,000, was deposited by Wickersham
with the clerk of the court, and the sale
thereupon confirmed.

The road was reorganized under the name of the Sioux City, O'Neill, & Western Railway Company, and Wickersham and Garretson as trustees conveyed the property to the new company in exchange for the issue of the bonds and stock.

Pending the issue of the engraved bonds of the Sioux City, O'Neill, & Western Railway Company, a temporary bond was issued and delivered to Tod & Co., and afterwards exchanged for the engraved bonds.

All the bonds of the company were thus pledged to secure the $1,000,000 loan with [487] the full knowledge and participation of Garretson, and of Smith, secretary and treasurer of the Union Loan & Trust Company.

Some of the notes issued under this loan were sold to various parties and some retained by Tod & Co.

It having been intimated that payment of the one million-dollar loan would be required, Garretson applied to Tod & Co. for the negotiation of a loan of $1,500,000. It was contemplated that the notes of the Sioux City, O'Neill, & Western Railway Company for that amount should be given, to be secured by the bonds of that company and the stock of the Sioux City & Northern Company, then in pledge with Tod & Co. But Tod & Co. were advised by their counsel that

to carry on the construction of the bridge
to a point where we could get money from [488]
the bonds of the bridge to complete it."

December 26, 1892, the Pacific Short Line
Bridge Company, at a meeting of its board
of directors, passed a series of resolutions
by which it agreed to purchase the bonds of
the Sioux City, O'Neill, & Western Railway
Company, and 10,200 shares of the capital
stock of the Sioux City & Northern Com-
pany, and to give therefor its promissory
notes in the sum of $1,500,000 to the order
of Garretson, dated December 30, 1892, and
to pledge said bonds and stock to Garretson
as security. Accordingly on December 31,
1892, a contract was entered into between
Garretson, Hedges, Hornick, and Haakinson
(the remaining member of the syndicate,
Booge, having failed and dropped out), and
the Pacific Short Line Bridge Company, by
which the bridge company purchased the se-
curities and agreed to give its notes there-
for, payable to Garretson's order, February
1, March 1, and April 1, 1894, bearing date
December 30, 1892, to be forwarded to Tod
& Co. to be delivered to Garretson or his
order, or held by Tod & Co. as trustees to
The notes
secure the payment of said notes.
were to provide, and when issued did pro-
vide, that on thirty days' default in payment
of interest, the principal was to become due
and payable at the option of Tod & Co., on
behalf of the holders, to be exercised on the
written request of a majority.

Tod & Co. negotiated a sale of the notes
through the Union Debenture Company, a
corporation of the state of New Jersey, which
was evidenced by a contract under date of

sold mainly in England, Scotland, and Hol-
land. Tod & Co. owned one third of the
capital stock, and the business of the com-
pany was transacted through Tod & Co. as
brokers. The notes in question, except
about $40,000 retained by the debenture com-
pany, were sold by them as brokers to various
persons, including $590,000 to parties abroad
and $500,000 to the Great Northern Railway
Company, but Tod & Co. took no part of the

December 30, 1892, between Garretson and The Union Debenture Company was a cor that company, which recited that the notes poration of New Jersey, with a capital stock were to be secured by the 2,340 Sioux City, of $300,000 and over $800,000 of assets, and O'Neill, & Western bonds and 14,206 shares of had issued and had outstanding $500.000 of the Sioux City & Northern stock, by an in-twenty-year debenture bonds, which had been denture of trust with Tod & Co. December 31, Garretson entered into this indenture of trust whereby he pledged the said bonds and stock to Tod & Co. as trustees for the equal and pro rata benefit and security of all the holders of the notes, it being provided that if default should be made in the payment of the principal or interest of any of the notes, the trustee, on request, might declare the [489]* principal and interest due and sell the bonds and stock at public auction, and that the holders might appoint a purchasing trustee, in whom, if he bought at the sale, the right and title to the bonds and stock [should vest] in trust for all the note holders in proportion to the amounts due them respectively.

The note holders were given certain tions, and Garretson agreed to pay the debenture company three and a half per cent commission.


The commission of three and one-half per cent, $52,500, was paid to the debenture company by Tod & Co.

The remainder of the proceeds of the $1,-
500,000 loan, after the discharge of the mil-
op-lion-dollar loan, the payment of the commis-
sions, and of a temporary loan of $39.000 to
Garretson, was paid over on Garretson's
drafts, to the Union Loan & Trust Company,
to be applied to the payment of bridge esti-
mates and to the credit of Hornick, trustee.
About $200,000 was applied on bridge ac-

As already set forth, Tod & Co. then held
the 2,340 bonds and 7,200 shares of Sioux
City & Northern stock. Of the remaining
7,000 shares of this stock to be pledged un-count.
der the agreement, 6,190 shares were deliv- All the members of the syndicate were par-
ered to Tod & Co. by Garretson in December, ties to the agreement by which the bonds
1892, in New York, and certificates for 1,000 and stock in controversy were sold to the
shares were sent to Tod & Co. by Smith, sec- bridge company, and knew of the use Gar-
retary, January 16, 1893. All these shares retson proposed to make of the notes and se-
were transferred by members of the syndi-curities. They did not repudiate the trans-
In March, 1893, Tod & Co., as author-action. and never made any complaint or
ized by the indenture of trust, at the request gave any notice to Tod & Co. that Garretson
of Garretson, released and delivered to the was wrongfully pledging the collateral. Tod
treasurer of the Great Northern Railroad & Co. rendered full accounts of the two loans
Company 3,600 shares, which Garretson had to Garretson, which were sent by him to
sold to that company for $350,000 in cash, Smith as they were received.
all of which was received by Garretson. W.
S. Tod testified that his firm supposed the
proceeds of this sale were to be applied
towards the construction of the bridge, and
the evidence tended to show that the money
was paid over to the Union Loan & Trust
Company to be applied in payment of notes
of the syndicate.

Garretson was a prominent man in banking, financial, and railroad circles when he began his dealings with Tod & Co., and continued to be so until 1893. He had been, or was, an officer of many business corporations or companies; and one of the chief promot-[491] ers and builders of the Sioux City & Northern Railway, and organizers of the Union Loan The notes for the $1,500,000 were executed & Trust Company. He was highly recomand indorsed by Garretson, and the transac-mended to Tod & Co. by the president of the tion closed, January 30, 1893, and on that Great Northern Railway Company, of which date the Union Debenture Company turned J. Kennedy Tod was a director. Mr. Tod over to Tod & Co. $1,507,500, being principal stated that they believed during the negotiawith accrued interest, and thereupon Tod & tions between their firm and Garretson that Co. paid off the million-dollar loan with ac- he was a man of large wealth. crued interest. $1,004,833.33. They thus released the $2.340.000 Sioux City, O'Neill, & Western bonds, the 18,000 shares of Sioux City & Western stock, and 7,200 shares of Sioux City & Northern stock, and delivered to themselves as trustees under the indenture of trust the bonds, 10,200 shares of Sioux City & Northern stock and also 4,000 of the latter stock; and certified and delivered the bridge notes to the debenture company. [490] *These notes contained the provision that they might be declared due on default in payment of interest or principal, and that they were secured by the indenture of trust of December 31, 1892, and the deposit of the bonds and stock as collateral.

The Tods testified that they knew nothing of the dealings between the Manhattan Trust Company and the improvement company, or of the loan transactions of the improvement company, and had no connection therewith; that they had no knowledge or notice of any claims of the Union Loan & Trust Company to these securities at or before the time they were pledged to secure either the loan for $1,000,000. or the loan for $1,500,000, and the first information they had of any such claim was after default had been made in the payment of interest on the latter loan.

The interest on the notes was payable July 1, 1893, and January 1, 1894, and the interest due July 1, 1893, not having been paid,

and the default having continued for thirty
days, Tod & Co., on a request of a majority of
the note holders, declared the principal due,
and advertised the securities for sale on
September 19, in accordance with the inden-
ture of trust, due notice being given, which
sale was adjourned to September 26, at the
instance of the creditors of the Union Loan
& Trust Company, when the sale took place,
and Tod & Co. bought the securities as pur-
chasing trustees, thereto duly appointed, and
held the same for the benefit of the holders
of the notes. Certificates were issued by
Tod & Co. as such purchasing trustees that
they so held the securities and that each of
the note holders was entitled to a three-hun-
dredth part interest for every $5,000 note de-

to repledge the same as security for further
advances." That "the fair inference from
the entire evidence is that the trust company
consented to the repledging of these securi-
ties, in order that further funds might be
procured for carrying on the work in ques-
tion, but by so doing it did not abandon its
lien upon or equity in the securities, but [493]
only subordinated its rights to those created
by the repledging of the securities."

That the sale of the securities by Tod & Co. under the provisions of the trust agreement of December 31, 1892, did not devest the trust company, or its assignee, of the junior lien on the securities, and that its right to redeem remained because the $1,500,000 of notes were not purchased in the ordinary course of business, nor in fact issued by the After the interest had defaulted Tod & bridge company in connection with its busiCo. were interviewed on behalf of some of the ness, but made at the dictation of the syndicreditors of the Union Loan & Trust Com-cate on the suggestion of Tod & Co., and pany, and an offer to pay the defaulted inter-operated as a fraud on the bridge company; est was made on condition that such credit- that the use of its name was in reality a ors should be put in control of the board of matter of form merely, and was so underdirectors of the Sioux City & Northern Rail-stood; and that the transaction must be conroad Company, but with this condition Tod sidered as a loan to the syndicate, secured [492]& Co. were without *authority to comply, and by a pledge of the collateral, which lien was the creditors committee declined to pay. superior to that existing in favor of the trust money was tendered.


According to the evidence of the Tods it was then, for the first time, that Tod & Co. received any intimation that their right to hold the securities was questioned by the Union Loan & Trust Company or its creditors.

The circuit court entered a final decree authorizing the redemption of the securities by the intervener on payment to Tod & Co., as trustees, of the sum of $1,500,000, with interest thereon from December 30, 1892, computed with semiannual rests, to the date of payment.

The opinion is reported 65 Fed. Rep. 559, and it appears therefrom that District Judge Shiras, by whom the cause was heard, held that the transactions prior to the million and a half loan could not be passed on, but that the inquiry at issue was to be determined by considering the contracts under which Tod & Co. obtained possession of and claimed title to the 10,600 shares of Sioux City & Northern stock, and the $2,340,000 of Sioux City, O'Neill, & Western bonds held by them.

After a brief review of the formation of the syndicate and its dealings with the Union Loan & Trust Company, the conclusion was drawn "that the trust company, as against the members of the syndicate, is entitled to the benefit of the securities which were placed in its possession, and upon the faith of which it may be assumed it indorsed the syndicate paper," but that it was fairly deducible from the evidence that "the trust company parted with the possession of the securities, knowing that it was intended to rehypothecate them," and that "it is not now open to the trust company to repudiate the acts of its secretary and treasurer in regard to these securities, by whose action in placing the same in the possession and under the control of Garretson the latter was enabled


The suggestion as to usury was dismissed on the ground that in any view equity required the payment of the sums advanced with interest, and no offer to do this was made by the intervener.

From the decree the intervener prosecuted an appeal to the circuit court of appeals for the eighth circuit, assigning as error, in substance, that the circuit court erred in not finding that intervener had a prior lien; that the securities were wrongfully taken from the Union Loan & Trust Company, and that defendants were not bona fide holders and took with notice; that the loans were usurious and void, and defendants, therefore, unable to hold the securities as against the intervener.

Defendants also appealed from the decree, assigning as error the failure of the court to sustain objections to certain evidence; the allowance in the final decree of leave to intervener to file his second amended petition; and the award of redemption.

The cause was heard in the court of appeals by two circuit judges, and the decree affirmed by an equal division; but on a petition for rehearing by the intervener an opinion was filed from which it appeared that both judges were agreed that appellees' lien [494] on the securities was paramount to any claim of intervener, but that they were divided on the question whether or not the right of redemption was cut off by the auction sale under the loan agreement.

The intervener then applied to this court for a writ of certiorari, which was granted.

Messrs. John C. Coombs, Henry J. Taylor, and William Faxon, Jr., for appellant:

An equitable lien may be created by agreement of the parties.

Walker v. Brown, 165 U. S. 654, 664 41 L.

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