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47 Mich. 456, 11 N. W. 271; Rowe v. Rowe, as valid and still existing. In Hawaii v. 28 Mich. 353; Pittsburg, Ft. W. & C. R. Co. Mankichi, 190 U. S. 197, 47 L. ed. 1016, 23 v. Hurd, 17 Ohio St. 144, 146; State ex rel. | Ballew v. Woodson, 161 Mo. 444, 61 S. W. 252. We are also referred to McKnight v. James, 155 U. S. 685, 39 L. ed. 310, 15 Sup. Ct. Rep. 248, in which we held that a writ of error could not go to an order of a judge of a circuit court, made at chambers.

Sup. Ct. Rep. 787, a similar provision in the resolution of annexation was held not to abrogate a system of trials by information and convictions by a non-unanimous jury, as applied to cases prior to the organic act of April 30, 1900.

But we do not think it necessary to go But, conceding the correctness of these further than § 81 itself to find authority for decisions under the constitutions of the sev-a recognition of the laws previously existeral states, and also conceding that the organic act stands in the place of a constitution for the territory of Hawaii, to which its laws must conform, does it follow that the laws respecting proceedings at chambers are in excess of the powers conferred under the organic act?

ing in Hawaii concerning the constitution of its courts and their method of procedure. Whether a petition to a circuit court acting as a court of probate shall be addressed to and passed upon by the judge while sitting in court at chambers is, after all, much more a matter of form than of substance. Bearing in mind that § 81 of the organic Com. v. McLaughlin, 122 Mass. 449. The act is but one of a hundred sections, all of petition for the removal of the guardian which are entitled to equal respect, it is in this case is entitled: "In the Circuit evident that to obtain a comprehensive view Court of the First Judicial Circuit, Terriof the intention of Congress we are bound tory of Hawaii. In Probate. At Chamto consider the whole act so far as it relates bers." It appears to have been heard by the to the disposition of judicial power. To circuit judge without a jury, his decision segregate § 81 from all the other provisions being entitled "Before a Judge of the Cirof the act must necessarily result in giving cuit Court, of the First Circuit, Territory it undue prominence. of Hawaii." It must doubtless be treated as a proceeding at chambers, but, for reasons already given, we think the power to act at chambers was saved by § 81 continuing in force the previous laws of Hawaii concerning the courts and their procedure. It would be too narrow a construction to hold that this did not include the procedure before judges of those courts sitting at chambers.

By 6 "the laws of Hawaii not inconsistent with the Constitution or laws of the United States, or the provisions of this act, shall continue in force, subject to repeal or amendment by the legislature of Hawaii, or the Congress of the United States." By § 7 the Constitution of the Republic of Hawaii and a large number of its laws, specially enumerated, are repealed; but the statutes giving probate and equity jurisdiction to the circuit courts are not mentioned.

By § 10 all actions at law, suits in equity, and other proceedings then pending in the courts of the Republic of Hawaii shall be carried on to final judgment and execution in the corresponding courts of the territory of Hawaii. As petitioner, Carter, was appointed guardian of the minor's estate in 1899 by the then judge of the first circuit, and was still proceeding to wind up the estate, we think the petition for his removal was filed in a pending proceeding within the meaning of this section.

Now, as it appears that the powers of judges at chambers had been fixed since 1892, eight years before the organic act was passed, that by § 6 and the final clause of § 81 the laws of Hawaii theretofore in force concerning the several courts and their jurisdiction and procedure were continued in force, except as therein otherwise provided, it would seem that these provisions were especially intended to apply to cases like the present, where a system of procedure which had previously existed was recognized

The decree dismissing the writ is affirmed.

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2.

The Supreme Court of the United States will, by its direction to the circuit court, finally dispose of a cause brought before it on writ of certiorari to a circuit court of appeals, where the record presented the whole case to that court so that it might properly have been finally disposed of by its decree, although it did nothing more than to reverse the decree of the circuit court granting a preliminary injunction.

holders in the new corporation until nearly a year after the Supreme Court of the United States had adjudged the combination to be illegal, and until the directors of the new corporation resolved upon a ratable distribution of its corporate assets, during which time stock in the new corporation had passed into many hands.

8. Parties to a transaction adjudged to vio-
late the anti-trust act of July 2, 1890 (26
Stat. at L. 209, chap, 647, U. S. Comp. Stat.
1901, p. 3200), are not exempt from the
doctrine in pari delicto on the theory that
they acted in good faith and without intent
to violate the law, where, with knowledge
of the facts and of the statute, they acted
under the mistaken supposition that the
statute would not be held applicable to the
facts.

8. The question whether a corporation organ-
ized pursuant to a combination of stock-
holders in two competing interstate railway
companies to acquire a controlling interest
in their capital stock holds the same as ab-
solute owner, or as trustee or bailee, was not
determined by a decree adjudging the combi-
nation to be illegal, enjoining the new cor-
poration from acquiring any further stock,
from voting such stock as it then held or
might subsequently acquire, and from ex-
ercising any control over the railway compa-
nies by virtue of its holdings, and restrain- Argued March 1, 2, 1905.
ing the railway companies from permitting or
suffering any such action on the part of the
new corporation, and from paying any divi-

4.

5.

6.

[No. 512.]

6, 1905.

Decided March

dends on account of the stock held by it,ON WRIT of certiorari to the United

and providing that nothing therein shall be construed as prohibiting the new corporation from returning the railway shares to the original stockholders, or to the holders and

owners of its own stock issued in exchange for these shares.

General expressions in an opinion which are not essential to the disposition of the case cannot control the judgment in subsequent

suits.

A clear preponderance of proof is essential to establish that the parties to a transaction by which a corporation, formed for the purpose, acquired, in exchange for its own capital stock, a controlling interest in the capital stock of two competing interstate railway companies, pursuant to a combination of the stockholders in those companies, agreed

that the new corporation should hold such

stock as trustee or bailee for the railway stockholders, where the transaction on its face was one of purchase and sale.

The rule that property delivered under an Illegal contract cannot be recovered back by parties in pari delicto prevents the original stockholders in two competing interstate rail

way companies from reclaiming the specific

shares of stock which they delivered to a stockholding corporation in exchange for its capital stock, pursuant to a combination subsequently adjudged illegal, under which the corporation was to acquire a controlling interest in the capital stock of each of such

railway companies; and they must be content with the ratable distribution of the corporate assets resolved upon by the stockholding corporation.

7. Laches and acquiescence would themselves defeat any right of the original stockhold

States Circuit Court of Appeals for the Third Circuit to review a judgment which reversed an order of the Circuit Court for the District of New York enjoining the Northern Securities Company from making the ratable distribution of its corporate assets resolved upon by its upon by its directors. Affirmed, and the cause remanded to the Circuit Court with directions to dismiss the bill.

See same case below, 134 Fed. 331.

Statement by Mr. Chief Justice Fuller: Edward H. Harriman, Winslow S. Pierce, Oregon Short Line Railroad Company, and the Equitable Trust Company of New York exhibited their bill against the Northern Securities Company in the circuit court of the United States for the district of New Jersey April 20, 1904, on which, with accompanying affidavits and exhibits, a restraining order was issued, pending an application for an injunction as prayed in

the bill.

April 26 an amended bill was filed, and the application for a preliminary injunction was heard May 20, 21, and 23 by Bradford, J., holding the circuit court.

On the 4th day of June a second amended bill was filed, and on July 15, 1904, Judge Bradford delivered an opinion sustaining the application. 132 Fed. 464.

The order for injunction was entered August 18, 1904, and an appeal therefrom was prosecuted to the circuit court of appeals for the third circuit, which, on January 3, 1905, reversed the order. 134 Fed. 331.

ers in two competing interstate railway companies to rescind the contract under which they had delivered their stock to a corporation formed in pursuance of a combination Thereupon complainants applied to this under which such corporation was to ac- court for the writ of certiorari, which was quire a controlling interest in the capital stock of the railway companies in exchange granted January 30, and the matter adfor its own capital stock, where such stock-vanced for hearing, and heard March 1 and holders stood upon their rights as share-2. The affirmance of the decree of the cir

cuit court of appeals was announced March | gon Railway & Navigation Company. The 6, it being added that an opinion would be interests in control of the Union Pacific filed afterwards.

system might properly be called the Harriman interests. Shortly thereafter, at the instance of the Union Pacific Railway Company and with money furnished by that company, the Oregon Short Line company purchased Northern Pacific preferred stock to the amount of $41,085,000, and common stock to the amount of $37,023,000, aggregating $78,100,000 of stock, being a majority of the $155,000,000, total capital stock of the Northern Pacific company as then outstanding. But the preferred stock was subject to retirement at par at the option of the company, and the 370,230 shares of common stock was less than a majority of the total common stock, which majority was held by the Morgan-Hill party.

The Northern Pacific Railway Company was the successor, through reorganization, of the Northern Pacific Railroad Company, and by its charter it was provided that its capital stock might be increased from time to time by a vote of a majority of the stockholders, and that the company might, by a like vote, classify its stock into common and preferred, and might "make such preferred stock convertible into common stock upon such terms and conditions as may be fixed by the board of directors." On July 1, 1896, by the unanimous vote of its then stockholders, the capital stock was increased to $155,000,000, divided into $80,000,000 of common stock and $75,000,000 of preferred stock, and it was resolved "that such pre- In October, 1901, complainant Harriman ferred stock shall be issued upon the condi- was elected a member of the board of dition that, at its option, the company may rectors of the Northern Pacific Railway retire the same, in whole or in part, at par, Company and James Stillman was refrom time to time, on any 1st day of Janu-elected. They were also directors of the ary prior to 1917." The plan of reorganiza-Union Pacific Railway Company. They both tion which was adopted provided that, as attended a meeting of the Northern Pacific to the new company, which it was contem- board on November 13, 1901, and Harriman plated should acquire the properties and was chosen a member of the executive comfranchises of the Northern Pacific Railroad mittee. At this meeting resolutions were Company, and the issue of preferred stock adopted providing for and resulting in the by it, "the right will be reserved by the new retirement of the preferred stock on Janucompany to retire this stock, in whole or in ary 1, 1902, by the payment of $100 cash part, at par, from time to time, upon any for each and every share to each and every 1st day of January during the next twenty holder of record on that day. years." All the certificates of stock, whether company thereby determined to exercise its mon or preferred, at that time or subsequently issued, contained this clause: "The company shall have the right, at its option, and in such manner as it shall determine, to retire the preferred stock, in whole or in part, at par, from time to time, upon any 1st day of January prior to 1917."

The reorganization had been managed by J. P. Morgan & Company, and the directory of the Northern Pacific Railway Company were friendly to that firm. During the same period the president of the Great Northern Railway Company was James J. Hill, and its directors were friendly to him.

The two companies were friendly to each other, and in April, 1901, acquired the shares of the Chicago, Burlington, & Quincy Railroad Company.

These resolutions declared that the com

right to retire the preferred stock; provided that, for the purpose of raising the funds necessary to do so, the company should issue its negotiable bonds for $75,000,000, convertible at par into shares of the common stock of the company at par; authorized the making of a contract for the sale of all of such bonds at par and accrued interest, the contract to contain a provision giving to the holder of every share of the common stock the opportunity to receive from the contract purchaser, at par and interest, such bonds to an amount equal to seventy-five eightieths of the par amount of said common stock at such time owned by such holder, and arranged for the retirement from and after December 31, 1901, of the $75,000,000 preferred stock, by the payment to each and every holder of record thereof on January 1, 1902, of $100 cash for each and every share.

At this time the Union Pacific Railway system included the Union Pacific Railway, the railroad of the Oregon Short Line Railroad Company, and the railroad of the Oregon Railroad and Navigation Company. The Union Pacific Company was practically the owner of the entire capital stock of the Oregon Short Line Railroad Company, and the latter company was the owner of practically the entire capital stock of the Ore-resolutions.

On November 15, the executive committee of the Northern Pacific company authorized the execution of a contract with the Standard Trust Company of New York for the sale and delivery of the convertible certifi cates for $75,000,000 provided for in the

was

The preferred stock was subsequently | Great Northern, and two members of J. P. taken up in accordance with the plan re- Morgan & Company, were elected directors solved upon. of the Northern Securities Company. Complainant Harriman took his seat at the board, and an executive committee of five was elected, of which he was one.

The Northern Securities Company was incorporated under the laws of New Jersey in November, 1901, its articles of association having been filed at Trenton on the 13th day of that month, with a capital stock of $400,000,000, divided into 4,000,000 shares of the par value of $100 each, and its objects being certified to be:

November 15 resolutions were passed authorizing the purchase of the Northern Pacific stock held by Harriman and Pierce, as follows:

"The president stated that he now had an "(1.) To acquire by purchase, subscrip- opportunity of acquiring $37,023,000 par tion, or otherwise, and to hold as invest-value of the common stock, and $41,085,000 ment, any bonds or other securities or evi- par value of the preferred stock, of the dences of indebtedness, or any shares of Northern Pacific Railway Company, at an capital stock created or issued by any other aggregate price of $91,407,500, payable, as corporation or corporations, association, or to $82,491,871, in the fully paid-up and nonassociations, of the state of New Jersey, or assessable shares of this company at par, of any other state, territory, or country. and, as to the remaining $8,915,629, in cash. "On motion, and by affirmative vote of all the directors present, it was—

"(2.) To purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of, any bonds or other securities or evidences of indebtedness created or issued by any other corporation or corporations, association or associations, of the state of New Jersey, or of any other state, territory, or country, and, while owner thereof, to exercise all the rights, powers, and privileges of ownership.

"(3.) To purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of, shares of the capital stock of any other corporation or corporations, association or associations, of the state of New Jersey, or of any other state, territory, or country; and, while owner of such stock, to exercise all the rights, powers, and privileges of ownership, including the right to

vote thereon.

“(4.) To aid in any manner any corporation or association of which any bonds or other securities or evidences of indebtedness or stock are held by the corporation; and to do any acts or things designed to protect, preserve, improve, or enhance the value of any such bonds or other securities or evidences of indebtedness or stock.

"(5.) To acquire, own, and hold such real and personal property as may be necessary or convenient for the transaction of its busi

ness.

"The business or purpose of the corporation is from time to time to do any one or more of the acts and things herein set forth. "The corporation shall have power to conduct its business in other states and in foreign countries, and to have one or more offices out of this state and to hold, purchase, mortgage, and convey real and personal property out of this state."

On the 14th day of November, 1901, fifteen gentlemen, including complainant Harriman and two other directors of the Union Pacific, James J. Hill, president of the

"Resolved, That the president be, and hereby he is, authorized, in behalf of this company, to purchase said stock-namely, $37,023,000 par value of the common stock, and $41,085,000 par value of the preferred stock of the Northern Pacific Railway Company-at an aggregate price of $91,407,500, payable, as to $82,491,871 thereof, in the fully paid-up and non-assessable shares of the capital stock of this company at par, and, as to $8,915,629, in cash; and that the officers of this company be, and hereby they are, authorized to issue fully paid-up and non-assessable shares of stock of this company to the amount of $82,491,871, and to pay $8,915,629 in cash, in consideration of such $37,023,000 of the common stock and $41,085,000 of the preferred stock of the Northern Pacific Railway Company.

"Resolved, That the president be, and hereby he is, authorized at any time to retire at par, for cash, any and all preferred stock of the Northern Pacific Railway Company that may be acquired by this company, and in case such retirement shall be effected prior to January 1, 1902, to allow interest up to January 1, 1902, at the rate of 4 per cent per annum on the sum receivable for such preferred stock.

"Resolved, That the president be, and hereby he is, authorized in behalf of this. company to purchase at their par value an amount of the convertible certificates of the Northern Pacific Railway Company, to be issued pursuant to the resolutions of the board of directors of the Northern Pacific Railway Company, passed November 13, 1901, equal to seventy-five eightieths of the par amount of any and all common stock of the Northern Pacific Railway Company that shall have been acquired by this company.

"Resolved, That the president be, and

hereby he is, authorized, in case of the purchase by this company of any of the convertible certificates of the Northern Pacific Railway Company, to convert the same into common stock of the Northern Pacific Railway Company whenever such conversion may be effected.

"Resolved, That the president be, and hereby he is, authorized to borrow, on such terms as he may arrange, any moneys required for the purpose of carrying out the foregoing resolutions, and to make all financial arrangements, and to do all acts and things, which he may deem needful in the premises."

From the organization of the Securities company until the affirmance of the decree in the government suit, hereafter mentioned, complainants continued to exercise the right of holders of 824,000 shares of stock in the Securities company; received their share of dividends, and gave their proxy to vote at the annual meetings of 1902 and 1903.

July 17, 1902, Harriman and Pierce and the Oregon Short Line Company pledged the 824,000 shares of Northern Securities Company stock to the Equitable Trust Company, the Short Line Company executing a trust indenture, which contained this clause: "The deposit and pledge hereunder of said shares of stock, or of any other securities which shall become subject to this indenture, shall not prevent the consolidation, union, or merger with any other corpora

Complainant Harriman and his codirectors of the Union Pacific were not present at this meeting, but were present at the next meeting of the board on November 19, at which the minutes of the meeting of Novem-tion of the Securities company, or of any ber 15 were read and on motion were approved.

At a subsequent meeting of the executive committee, in which Mr. Harriman participated, the form of the company's permanent stock certificate, being the usual form, was unanimously approved.

In the meantime, and on November 18, Harriman and Pierce had delivered their Northern Pacific stock to the Northern Securities Company, and that company had delivered to them the 824,000 shares of its stock and $8,915,629 in cash.

The Northern Pacific stock certificates received from Harriman and Pierce were surrendered by the Securities company to the Northern Pacific Railway Company. The certificates for the 370,230 shares of common stock were exchanged for 370,230 shares of common stock issued in the name of the Northern Securities Company. The certificates for the 410,580 shares of preferred stock were surrendered to the Northern Pacific Railway Company for retirement, and paid for and retired as provided, the transaction resulting in the receipt by the Northern Securities Company of certificates for 347,090 shares of new common stock. This made 717,320 shares, and the Securities company also acquired 820,270 shares, from a large number of separate individual owners. And from a large number of stockholders of the Great Northern 1,181,242 shares of the stock of the latter company.

other corporation by which said securities shall have been issued, or the sale of its property or the distribution of its assets. In any such case the trustee shall receive such amounts of stock, bonds, or other securities, or money, or of either or all of them, as the holders of the pledged shares of stock of the Securities company, or other pledged securities, as the case may be, shall be entitled to receive, and, upon receipt thereof, shall surrender the deposited stock certificates or other securities,"

March 10, 1902, a bill was exhibited in the circuit court of the United States for the district of Minnesota by the United States against the Northern Securities Company, the Northern Pacific Railway Company, the Great Northern Railway Company, James J. Hill, William P. Clough, D. Willis James, John S. Kennedy, J. Pierpont Morgan, Robert Bacon, George F. Baker, and Daniel S. Lamont, to restrain the violation of the act of Congress of July 2, 1890, 26 Stat. at L. 209, chap. 647 (U. S. Comp. Stat. 1901, p. 3200), entitled "An Act to Protect Trade and Commerce against Unlawful Restraints and Monopolies," which resulted April 9, 1903, in a decision in favor of complainants (120 Fed. 721), and a decree as follows:

"That the defendants above named have heretofore entered into a combination or conspiracy in restraint of trade and commerce among the several states, such as an act of Congress, approved July 2, 1890, enAt a meeting of the board of directors titled 'An Act to Protect Trade and Comof the Northern Securities Company on Jan-merce against Unlawful Restraints and uary 22, 1903, at which complainant Harri- Monopolies,' denounces as illegal; that all man was present, the sale by the company of the stock of the Northern Pacific Railof 75,000 shares of its own stock for cash was approved. The second amended bill says $7,522,000 "was issued for cash used for the purchase of other property, and for corporate purposes.'

25 S. C.-32.

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way Company and all the stock of the Great Northern Railway Company, now claimed to be held and owned by the defendant, the Northern Securities Company, was acquired and is now held by it in virtue of such com

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