in organization from an unincorporated association to a corporation, and the change in the mode of holding the distillery properties of the various corporations formerly belonging to the trust, by surrendering the stock of the corporations, by means of which the control of those properties was formerly maintained, and having the properties themselves transferred and conveyed directly to the defendant corporation, have purged the combination of its illegality. It must be admitted that these changes, so far as they have any effect upon the rights or interests of the former stockholders in those corporations or of the public, are formal rather than substantial. The same interests are controlled in substantially the same way and by the same agencies as before. The nine trustees of the trust who, as the holders of all the capital stock of the corporations and as a majority of the directors of each, controlled such corporate property, became the subscribers for all the stock of the new corporation, and its board of directors. The conveyance and transfer of the properties of the constituent companies to the new corporation was merely a transfer by the trustees to themselves, though in a slightly different capacity, and the former stockholders in the constituent companies simply exchanged their trust certificates, share for share, for stock in the new corporation. That corporation thus succeeds to the trust, and its operations are to be carried on in the same way, for the same purposes and by the same agencies as before. The trust, then, being repugnant to public policy and illegal, it is impossible to see why the same is not true of the corporation which succeeds to it and takes its place. The control exercised over the distillery business of the country-over production and prices -and the virtual monopoly formerly held by the trust, are in no degree changed or relaxed, but the methods and purposes of the trust are perpetuated and carried out with the same persistence and vigor as before the organization of the corporation. There is no magic in a corporate organization which can purge the trust scheme of its illegality, and it remains as essentially opposed to the principles of sound public policy as when the trust was in existence. It was illegal before and is illegal still, and for the same reasons.

But it is urged that the defendant, by its charter, is authorized to purchase and own distillery property and that there is no limit placed upon the amount of property which it may thus acquire. By its certificate of organization it is authorized to engage in a general distillery business in Illinois and elsewhere, and to own the property necessary for that purpose. It should be remembered that grants of power in corporate charters are to be construed strictly, and that what is not clearly given is, by implication, denied. The defendant is authorized to own such property as is necessary for carrying on its distillery business, and no more. Its power to acquire and hold property is limited to that purpose, and it has no power, by its charter, to enter upon a scheme of getting into its hands and under its control all, or substantially all, the distillery plants and the distillery business of the country, for the purpose of controlling production and prices, of crushing out competition, and of establishing a virtual monopoly in that

business. Such purposes are foreign to the powers granted by the charter. Acquisitions of property to such extent and for such purpose do not come within the authority to own the property necessary for the purpose of carrying on a general distillery business. In acquiring distillery properties in the manner and for the purposes shown. by the information, the defendant has not only misused and abused the powers granted by its charter, but has usurped and exercised powers not conferred by, but which are wholly foreign to, that instrument. It has thus rendered itself liable to prosecution by the state by quo warranto, and we are of the opinion that, upon the facts shown by the information, the judgment of ouster is clearly warranted. will accordingly be affirmed.

Judgment affirmed.

It

Note. See next case, and note to People v. N. R. Sugar Ref. Co., supra, p. 109; also, note to section 278, supra; 1903, State v. Armour Packing Co., 61 L. R. A. 464; 1904, Northern Securities Co. v. U. S., 193 U. S. 197.

Mo.

Sec. 281. Same.

TRENTON POTTERIES COMPANY v. OLIPHANT ET AL.1

1899. IN THE NEW JERSEY COURT OF ERRORS AND APPEALS. 58 N. J. Eq. 507, 78 Am. St. R. 612, 43 Atl. Rep. 723-730, 46 L. R. A. 255.

[Bill by the Potteries Company, a New Jersey corporation, against the defendants, the owners of the Delaware Potteries, to enjoin them from engaging directly or indirectly in the business of manufacturing pottery within any state of the United States (except Arizona and Nevada) for fifty years. In 1890, there were nine pottery factories engaged in manufacturing of sanitary pottery in the United States,seven in Trenton, N. J., one in Baltimore, Md., and one at Tiffin, O. The eight eastern potteries had formed the American Sanitary Potteries Association, for the purpose of securing uniform prices of their wares, to be fixed by the vote of a majority (each having one vote), and by which all were bound to sell. About this time a New York promoter "undertook" to organize them into a corporation to control the manufacture of sanitary pottery. He sought and obtained options from five of the Trenton potteries, including the defendant, whereby each of them agreed to sell all of its property and processes of every kind to the promoter or his assignee, and covenanted that it would. not, for the period of fifty years, either directly or indirectly, engage in the pottery business, within any state of the United States (except Arizona and Nevada). These five options were those of the potteries manufacturing about seventy-five per cent. of the product, and by their vote they were able to control the fixing of prices by the association. After these options were obtained, they were assigned by the promoter to the Trenton Potteries Company, organized in New Jersey with a capital of $1,750,000 common, and $1,250,000, preferred 1 Statement greatly abridged, and only that part of the opinion as to the validity of the corporate existence and ownership is given.

stock, "to manufacture, sell, and trade in pottery and earthenware, ánd other like products, and in all materials commonly or conveniently used, manufactured, bought and sold in connection therewith, or necessary, or convenient in and about the transaction of the said business." This company was formed after the options were secured, and in pursuance thereof the property of these potteries was conveyed to it, together with the covenants not to engage in business, and payment therefor was made partly in cash and partly in stock in the new company. After coming into possession of the five potteries, this new company continued to operate them as separate concerns, and kept its right to five votes in the American Sanitary Potteries Association, thereby controlling it for several years, although at the time this suit was brought, the association had broken up.

The defendants herein-the partnership owning the Delaware potteries afterward organized a corporation to be located in New Jersey, and to engage in the manufacture and sale of sanitary pottery, in active competition with the complainants. The defense made was that the contract "not to engage in business was in unlawful restraint of trade, that the complainant company was formed for the purpose of obtaining a monopoly of the manufacture and sale of sanitary ware, a necessity of life, and that the contracts not to engage in business were in aid of this unlawful purpose, and therefore void." ViceChancellor Grey so held, and dismissed the bill (39 Atl. Rep. 923). From this decision an appeal was taken.]

*

*

MAGIE, C. J., [after holding that, though a contract in general restraint of trade was void, the words "within any state of the United States except Arizona and Nevada," were a short way of enumerating the states, and the contract was valid in those states where reasonably necessary to protect the purchaser, though it might be void elsewhere; that the Sanitary Potteries Association, with its power of fixing prices was unlawful as against public policy] pro

ceeds: * **

It is further urged that the simultaneous contracts procured by appellant create or tend to create a monopoly, because they stipulate for the removal of many competitors in the business of manufacturing sanitary pottery ware. The owners of five of the eight potteries in Trenton manufacturing that kind of ware (and there were but few, if more than one, elsewhere) thereby agreed not to engage in that business for a long period of time, and over a great extent of country. The engagement of respondents in that respect has been found not to be an improper restraint of trade, nor inimical to public policy on that ground, but a contract partially enforceable upon respondents, if not otherwise objectionable. The engagements of the other vendors who sold their properties and business to appellant are similar in terms to that entered into by respondents, and furnish a reasonable protection to appellant of the business and good will purchased by it of each of them. Each sale and each incidental contract against competition are, for reason before given, unobjectionable. Are they rendered objectionable by the fact that, being simultaneously made,

they excluded from engaging in the business of manufacturing sanitary pottery ware so large a proportion of those previously engaged in that manufacture? It is to be observed that the contracts of respondents and the other vendors, to appellant, restricted them from engaging in the business of manufacturing, not sanitary pottery ware alone, but all pottery ware. The proofs show that a large number of persons are engaged in manufacturing pottery ware in various parts of the country, and that the contracts in question would exclude from competition a very small proportion of them. But as the proofs also show that the main purpose of appellant was to engage in the manufacture of sanitary pottery ware, I have stated the proposition in a more restricted form. Whether sanitary pottery ware has become a necessity of life, is open to question. It is certain that many persons manage to exist without using it. But if its use is of importance to health and comfort, and a considerable and increasing number of persons desire to acquire and use it, the public may have such an interest in its manufacture and sale that public policy will justify judicial interference and refusal to enforce illegal combinations to enhance its price. The elimination of competition may produce that result. The contracts in question were not intended to withdraw, and do not appear to have withdrawn, from work a single workman in that industry. They restrain a comparatively small number of capitalists, who had previously employed their capital in such manufacture, from continuing so to do. The entire capital of the country except theirs is free to be employed in the manufacture.

case.

There seems no ground for the claim that we should refuse to enforce respondents' contracts by injunction, when the proofs furnish no reason for the belief that the public will suffer if they are held to their bargains. The contemporaneous contracts were all made as incidental to the sale and purchase of competing concerns engaged in the manufacture of sanitary pottery ware. They were, as we have seen, reasonably appropriate to the protection of the purchaser in each While contracts to restrain or limit competition in the production of that ware may be repugnant to the public interest, such a restraint or limit may result from contracts which the courts are bound to enforce. A person engaged in any manufacture or trade, having the right to acquire and possess property, and to do with it what he chooses, may lawfully buy the business of any of his competitors. His first purchase would at once diminish competition. If he continued to purchase, each succeeding transaction would remove another competitor. If his capital was large enough to enable him to buy the business of all competitors, the last purchase would completely exclude competition, at least for a time. But in the absence of legislative restrictions, if such could be imposed, upon the acquisition of such property, and its use when so acquired, courts could impose no limitation. They would be obliged to enforce such contracts, notwithstanding the effect was to diminish, or even to exclude, competition. But appellant is a corporation, and not an individual. Corporations, however, may lawfully do any acts within the corporate powers

conferred on them by legislative grant. Under our liberal corporation laws, corporate authority may be acquired by aggregation of individuals, organized as prescribed, to engage in and carry on almost every conceivable manufacture or trade. Such corporations are empowered to purchase, hold, and use property appropriate to their business. They may also purchase and hold the stock of other corporations. Under such powers it is obvious that a corporation may purchase the plant and business of competing individuals and concerns. The legislature might have withheld such powers, or imposed limitations upon their use. In the absence of prohibition or limitations on their powers in this respect, it is impossible for the courts to pronounce acts done under legislative grant to be inimical to public policy. The grant of the legislature authorizing and permitting such acts must fix for the courts the character and limit of public policy in that regard. It follows that a corporation empowered to carry on a particular business may lawfully purchase the plant and business of competitors, although such purchases may diminish or for a time, at least, destroy competition. Contracts for such purchases can not be refused enforcement. Since contracts by individuals, and by corpora tions having legislative authority, for the purchase of competing plants and business, may be made, and are enforcible, although, as a result thereof, competition is diminished or temporarily destroyed, it further follows that contracts reasonably required to make such purchases effective by protecting the purchaser in the use and enjoyment of the thing purchased can not be declared by the courts to be repugnant to public policy. The interference with competition resulting from such purchases under legislative permission being found not to invalidate contracts for such purchases, the like interference by contracts reasonably required for the protection of the purchaser can not be held to invalidate them.

Decree modified. Lippincott and Hendrickson, JJ., dissent. Note. See, preceding case, and cases cited in note to People v. N. R. Sugar Ref. Co., supra, p. 109.

Sec. 282. (7)

Consolidation.

(a) Power to consolidate.

CLEARWATER v. MEREDITH ET AL.1

1863. IN THE UNITED STATES SUPREME COURT. I Wallace's (68 U. S.) Rep. 25-43.

[Clearwater, in 1853, sold a tract of land to Meredith and others for $10,000, taking in pay therefor 200 shares in the S. L. R. Co., which Meredith and his associates guaranteed would be worth $50 per share (i. e., the par value), in Cincinnati, O., on Oct. 1, 1855. In 1854, the S. L. R. Co., by authority of law, and with the consent 1 Statement of facts abridged. Arguments and part of opinion omitted.