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 creditors should be put in control of the board of directors of the Sioux City & Northern Railroad Company, but with this condition Tod [492]& Co. were without authority to comply, and the creditors committee declined to pay. No money was tendered.

that the use of its name was in reality a
matter of form merely, and was so under-
stood; and that the transaction must be con-
sidered as a loan to the syndicate, secured
by a pledge of the collateral, which lien was
superior to that existing in favor of the trust


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 cred-made by the intervener.

The suggestion as to usury was dismissed
on the ground that in any view equity re-
quired the payment of the sums advanced
with interest, and no offer to do this was

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.

From the decree the intervener prosecuted an appeal to une 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.

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 Defendants also appealed from the decree,
that the inquiry at issue was to be deter-assigning as error the failure of the court to
mined 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

sustain objections to certain evidence; the
allowance in the final decree of leave to in-
tervener to file his second amended petition;
and the award of redemption.

The cause was heard in the court of ap-
peals by two circuit judges, and the decree
affirmed by an equal division; but on a peti-
tion 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 re-
demption was cut off by the auction sale un-
der 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.


Even assuming that this clause in the agreement can be construed into a violation of § 5 of the Interstate Commerce Act, this suit would not be maintainable, because it is not authorized by that act, and is precluded by its express provisions.

People v. Fisher, 14 Wend. 9, 28 Am. Dec. | earnings of traffic which this agreement does 501; Hooker v. Vandewater, 4 Denio, 34, not contemplate. 47 Am. Dec. 258; Stanton v. Allen, 5 Denio, 434, 49 Am. Dec. 282; Cleveland, C. C. & I. R. Co. v. Closser, 126 Ind. 348, 9 L. R. A. 754, 3 Inters. Com. Rep. 387; Shrewsbury & B. R. R. Co. v. London & N. W. R. Co. 17 Q. B. 652, 6 H. L. Cas. 113; Hare v. London & N. W. R. Co. 2 Johns. & H. 80; Manchester & L. R. Co. v. Concord R. Corp. 66 N. H. 100, 9 L. R. A. 689, 3 Inters. Com. Rep. 319. Agreements simply designed and operative to restrain ruinous competition are not in any manner objectionable when entered into by persons engaged in ordinary business. They have been repeatedly sustained, and, it is believed, nowhere condemned. But agreements between such parties, when calculated and designed simply to raise prices by suppressing ordinary competition, are equally obnoxious to the law.

Wickens v. Evans, 3 Younge & J. 318; Skrainka v. Scharringhausen, 8 Mo. App. 522; Sayer v. Louisville Union Benev. Asso. 1 Duv. 143, 85 Am. Dec. 613; Collins v. Locke, L. R. 4 App. Cas. 674; Central Shade Roller Co. v. Cushman, 143 Mass. 355; Gloucester Isinglass & G. Co. v. Russia Cement Co. 154 Mass. 92, 12 L. R. A. 563.

The agreement is in no manner in violation of the provisions of § 2 of the act. It creates no monopoly, nor is it an attempt or corspiracy to monopolize.

In the attempt made by the bill to array every possible objection to the agreement, there is an evident purpose to suggest that its 8th article, in connection with other subsidiary provisions, constitutes pooling, and therefore is a violation of § 5 of the Interstate Commerce Act. There is no foundation for such a charge. The agreement in no manner violates any provision of the Interstate Commerce Law.

Davies v. Davies, L. R. 36 Ch. Div. 359. Mr. Edward J. Phelps, for the New York Central & Hudson River Railroad Company, appellee:

Whether the agreement by its terms violates the Federal law depends entirely on the inquiry whether it conflicts with any statute of the United States.

The bill is not based upon any statute, but proceeds apparently upon common-law grounds. No statute is referred to or charged to have been violated.

The United States has no common law. Wheaton v. Peters, 8 Pet. 591, 8 L. ed. 1055; United States v. Hudson, 7 Cranch, 32, 3 L. ed. 259; Bucher v. Cheshire R. Co. 125 U. S. 555, 31 L. ed. 795.

The only statutes of the United States that are claimed to be infringed by the terms of the agreement are the Interstate Commerce Act of February 4, 1887, amended by acts of March 2, 1889, February 10, 1891, and February 8, 1895, and the Anti-Trust Act of July 2, 1890.

The agreement violates no provision of the Interstate Commerce Act.

The only provision in that act which is claimed to be infringed is contained in § 5, which prohibits "pooling."

"Pooling" means a division of the money

This court has no power to grant an injunction, either interlocutory or upon final decree, at the suit of the United States gov. ernment, against the commission of a crime, where no other grounds for the injunction exist except that the act sought to be enjoined is an offense, unless such power is specially conferred by the statute.

Nor does it come within the general equity jurisdiction of the court, since an injunction of that character is unknown in equity ju risprudence.

United States v. Debs, 158 U. S. 564, 39 L. ed. 1092.

No power to grant an injunction against a "pooling" contract is conferred upon the court by the Interstate Commerce Act.

The Interstate Commerce Act does not authorize the commencement of any suit until an inquiry and decision of the Commissioners has first taken place, which in this case has not taken place.

The Anti-Trust Act of July 2, 1890, does not apply to the business of railroad transportation.

The case of United States v. Trans-Missouri Freight Asso. 166 U. S. 290, 41 L. ed. 1007, is by no means controlling in this case. The points of difference are clearly pointed out in the brief of Mr. Edmunds, and need not be restated.

We ask of the court a reconsideration of the conclusions reached by the majority of the judges in that decision, which overrules the judgment of six United States circuit and district judges who sat in the different stages of that case and this, and is opposed to the opinion of four members of this tribunal, and also overrules the decision of Mr. Justice Jackson in the case Re Greene, 52 Fed. Rep. 109, which is directly in point.

Its consequences are far-reaching and disastrous. It deprives the citizens of this country of the right, never before questioned in an English or American court, of making a large class of just and reasonable contracts, often absolutely necessary to the use of property, the transaction of business, and the fair compensation of industry.

Many decisions of this court to this effect are cited by Mr. Justice White, to which many more might be added.

Where a special statute fully covers the subject to which it is addressed, and a subsequent general statute contains words that might, if standing alone, receive a construetion broad enough to include the same matter, the general will always give way to the special statute, and will be regarded as not intended to intrude on its province, unless that intention is clearly manifested. And especially will this construction be given where, as in the present case, the statutes. if taken to relate to the same thing, would not only be superfluous, but inconsistent.

Endlich, Stat. §§ 113, 137, 225; Bishop, Written Law, § 126; Brewer v. Blougher, 14 Pet. 178, 10 L. ed. 408; Reiche v. Smythe, 13 Wall. 164, 20 L. ed. 566; Atkins v. Fibre Disintegrating Co. 18 Wall. 272, 21 L. ed. 841; United States v. Saunders, 22 Wall. 492, 22 L. ed. 736; Townsend v. Little, 109 U. S. 504, 27 L. ed. 1012.

Says Chief Justice Marshall in United States v. Wiltberger, 5 Wheat. 95, 5 L. ed. 42: "The rule that penal laws are to be construed strictly is perhaps not much less old than construction itself."

And in United States v. Morris, 14 Pet. 475, 10 L. ed. 548, the court remarked: "It has been long and well settled that such [penal] statutes must be construed strictly."

In Harrison v. Vose, 9 How. 378, 13 L. ed. 181, this court observed: "In the construction of a penal statute, it is well settled also that all reasonable doubts concerning its meaning ought to operate in favor of the respondent.'

In the case of The Enterprise, 1 Paine, 32, Judge Livingston said: "It should be a principle of every criminal code, and certainly belongs to ours, that no person be adjudged guilty of an offense unless it be created and promulgated in terms which leave no reasonable doubt of their meaning." "Statutes creating crimes will not be extended by judicial interpretation to cases not plainly and unmistakably within their terms. If this rule is lost sight of the courts may hold an act to be a crime when the legislature never so intended. If there is fair doubt whether the act charged in the indictment is embraced in the criminal prohibition, that doubt is to be resolved in favor of the accused."

Per Dillon, Justice, in United States v. Whittier, 5 Dill. 219. See also United States v. Sheldon, 2 Wheat. 119, 4 L. ed. 199; United States v. Hartwell, 6 Wall. 395, 18 L. ed. 832; United States v. Shackford, 5 Mason, 445; United States r. Clayton, 2 Dill. 219; United States v. Garretson, 42 Fed. Rep. 22; Dwarris, Stat. 641; Hubbard v. Johnstone, 3 Taunt. 177.

But if any doubt could still exist on this point, it is completely set at rest by reference to the proceedings of Congress in both Houses, on the passage of the Anti-Trust


[blocks in formation]

The Supreme Court of the United States held in the case of Blake v. National Banks, 23 Wall. 307, 23 L. ed. 119, that reference to the Congressional Journals may be had, on a question as to the meaning of the language of a statute.

Gardner v. The Collector, 6 Wall. 511, 18 J. ed. 894; Church of the Holy Trinity v. United States, 143 U. S. 465, 36 L. ed. 230. Views of individual cannot be taken into consideration.

Aldridge v. Williams, 3 How. 24, 11 L. ed. 476; United States v. Union P. R. Co. 91 U. S. 79, 23 L. ed. 224; District of Columbia

v. Washington Market Co. 108 U. S. 250, 27 L. ed. 717.

Assuming for the purposes of argument that the Anti-Trust Art does apply to railway traffic contracts, no provision of that law is violated by the agreement now under consideration.

The prohibitions of the act are two: (1) Against contracts, combinations, or conspiracies in restraint of trade or commerce; (2) the monopoly of, or the attempt or combination to monopolize, any part of the trade or commerce of the states or with foreign nations.

The agreement in this case is not "in restraint of trade or commerce."

The theory of the bill seems to be that the agreement comes within this description because it tends to restrict competition, and because any agreement which restrains competition is "in restraint of trade." Both these assumptions are erroneous; the one in fact, the other in law.

The agreement does not restrain competition to any such appreciable extent as would justify an injunction, except that competition which is unlawful because it is secret.

Assuming, again, against the fact, that a certain restriction of competition is the necessary result of this agreement if it is allowed to proceed, it plainly appears by its terms to be only such restraint of competition as is necessary to secure "just and reasonable rates."

By the Interstate Commerce Act all rates are required to be "reasonable and just." Every unjust and unreasonable charge is made unlawful. Schedules of rates are required to be published and kept open to the public inspection, and to be filed with the Commissioners, and not to be changed without due notice to the public and the Commissioners. Ample remedies, criminal and civil, are provided for the violation of these requirements, the enforcement of which is made the duty of the Commissioners. And the companies are also made subject to the state laws regulating rates.

The precise question, therefore, under this clause of the Anti-Trust Act, is whether a contract that produces a result which the Interstate Commerce Act in terms authorizes and provides for, and helps to repress a practice which that act forbids, is for that reason a contract for the unlawful restraint of trade. Or, in other words, whether it can be made unlawful by a forced construction of the general provisions of one statute of the United States, for a carrier company to provide by a traffic contract for the maintenance of those "just and reasonable rates" which another statute of the United States not only authorizes, but creates elaborate means for making permanent, and for preventing the secret changes of rates which the Interstate Commerce Act prohibits.

It is the statutes themselves that have prescribed a definition of this clause of the Anti-Trust Act, so far as it applies to railway traffic contracts, if it is held to apply to them at all, whatever its meaning as to other contracts may bc.

That the just and reasonable rates of

[494] *Mr. Chief Justice Fuller delivered the opinion of the court:

the securities did not absolutely cut off the claim of the company or its assignee, that would be an error of which petitioner could not, of course, complain.

It is provided by the judiciary act of March 3, 1891, that any case in which the judgments or decrees of the circuit court of Petitioner contends that his alleged lien or appeals are thereby made final, may be re- right was entitled to priority, because the quired, by certiorari or otherwise, to be cer- securities "were wrongfully and fraudulenttified to this court "for its review and deter-ly abstracted and diverted from said trust mination, with the same power and authority in the case as if it had been carried by appeal or writ of error to the supreme court."

company in subsequent rehypothecation with respondents;" and respondents did not hold them as received in good faith, in due course of business, for value and without notice, but acquired possession through transactions ap-known to be *fictitious, usurious, ultra vires,[496] fraudulent and void, and with notice.

This case belongs to the class of cases in which the decree of the circuit court of peals is made final by the statute, and having been brought up by certiorari on the application of petitioner below, is pending before us as if on his appeal.

And as respondents did not apply for certiorari, we shall confine our consideration of the case to the examination of errors assigned by petitioner.

These errors as assigned in the brief of counsel are, in short, that the circuit court erred, (1) in not establishing the priority of petitioner's lien or right in and to the securities; (2) in subordinating that lien or right, and decreeing foreclosure unless payment was made as prescribed; (3) in not entering a decree giving priority to petitioner because respondents set up absolute title by purchase, which was not sustained by the court; (4) in not restraining respondents by injunction and not ordering the surrender of the securities to petitioner. [195] *The supposed errors in decreeing foreclosure, and that respondents were entitled to hold as pledgees notwithstanding their title by purchase was so far defective as to let in redemption, may readily be disposed of.

The circuit court and the circuit court of appeals agreed that respondents' right to the securities was superior to that asserted by petitioner, and we entirely concur in that conclusion.

So far from the securities being wrongfully abstracted from the trust company, we think that, whatever the agreement between the trust company and the syndicate, the trust company must be held to have parted with such of the securities as were ever in its custody, with full knowledge that they were to be hypothecated by Garretson; that, indeed, the evidence fairly shows that those which at any time came into the possession of the trust company were either deposited there by Garretson or by his order and direction, with the understanding on his part that he was authorized to withdraw them for the purpose of sale, pledge, or otherwise, and that he always acted on that theory, with the consent and participation of Smith, as secretary and treasurer; and that in any view Smith's acts in the company's behalf must be held to have been performed with the actual or implied authority of the directors.

This was not a proceeding by Tod & Co. to obtain foreclosure. It was petitioner who Smith, as secretary and treasurer, was the sought the aid of the court, and this by an person who was actively engaged in the manapplication which was, in effect, a bill to re-agement of the affairs of the Union Loan & claim the securities absolutely and free from encumbrance. The circuit court treated the pleading as if framed in the alternative, and allowed redemption on conditions stated, the right thus accorded being necessarily declared to be extinguished if the conditions were not complied with as prescribed. And no error is assigned to the particular terms imposed.

Nor is there any tenable basis for the proposition that respondents' failure to sustain their purchase at the sale as a defense affected their rights as pledgees. Respondents stood on all their rights, and were not put to an election. If the purchase were valid the equity of redemption was wiped out. If invalid, the original lien remained. If superior, its superiority was not displaced by the claim of absolute title derived through the pledge as set forth in the pleadings.

Assuming that, as between the Union Loan & Trust Company and the syndicate, the company or its assignee had a lien on the securities in question, did the circuit court err in holding that the rights of respondents in respect thereof were paramount to those asserted by the intervening petitioner?

If not, then although the circuit court may have erred in holding that the sale of

Trust Company, and held out to the public as having unlimited authority to manage its business and dispose of any of its securities. He indorsed in the company's name every note it put out, signed every letter that it wrote, and was, as respected the public, the trust company itself. Throughout all the transactions his conduct conceded that Garretson was the lawful holder of the stock

and bonds tendered by him as collateral to the loans he negotiated. As such officer, he directly transmitted the securities of the Sioux City & Northern Railroad Company to New York, and likewise the $1,433,000 of Nebraska & Western bonds to Garretson at Omaha, to be delivered to the agent of Tod & Co., under the contract for the million-dollar loan, and to be turned into court in carrying out the reorganization scheme in ac-[497] cordance with which the Sioux City, O'Neill, & Western bonds were to be issued.

It appears to us indisputable on the face of this record that Garretson was intrusted, according to the understanding of all parties, with the right to sell the Sioux City & Northern bonds; that the Union Loan & Trust Company received the proceeds of a million dollars of those bonds, thus ratifying the transaction; and that the proceeds of

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