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Attorney-General v. American Tobacco Co.

ground for equitable interference, and so would confer upon a court of equity a right to inquire incidentally concerning the legality of the existence of the corporation which, by force alone of its corporate franchise, could claim the power to build its road across the land of the Central Railroad Company.

So, in Elizabeth Gaslight Co. v. Green, 1 Dick. Ch. Rep. 118; S. C., 4 Dick. Ch. Rep. 329, the complainant was injured in a manner which admittedly entitled it to an injunction against the defendant, if the latter had exceeded its corporate power; but it having acted within the powers conferred upon it, the court would not permit the legality of the corporation existing under the forms of law to be impugned.

Nor can I regard as tenable the suggestion that in the case of National Docks Railway Co. v. Central Railroad Co., supra, the doctrine in regard to the immunity of corporations from attack in a court of equity was limited to suits between private parties, and so contained an implication that, as to suits by the attorneygeneral, as the representative of the public, a different rule might be recognized.

In the opinion of the learned justice in the last-named case, the case of Attorney-General v. Stevens, supra, was cited as an apposite precedent, and attention was called to the fact that in the cited case the attorney-general was the informant, as well as to the fact that the information was to restrain the erection of a bridge over South river, in Middlesex county. In that case, it is perceived, the design of the defendants was to create what, if done without corporative authority, would be a public nuisance, and yet the question of the corporate existence of the defendants, Chancellor Vroom refused to entertain upon grounds which seem to have met the entire approval of the court of errors in National Docks Railway Co. v. Central Railroad Co., supra.

I am constrained to the conclusion, therefore, that by the law entirely settled in this state, a court of equity does not possess authority to enjoin an act done by a corporation organized under the forms of law, within the scope of the powers conferred upon it by its charter or certificate of incorporation, merely because of

Attorney-General v. American Tobacco Co.

defects in the method of organization of the company, or because it was organized with a design of exercising its powers illegally. Nor have I found, in the exhaustive briefs of the learned counsel for the complainants, any satisfactory authority in the judgment of the courts of other jurisdictions in support of the equitable power now claimed by the complainants, for this court, in this action. The class of cases in which the right of the attorney-general to come into a court of equity to restrain, as ultra vires, acts of quasi-public corporations, or to restrain acts which have created or threatened to create public nuisances, have been already mentioned. Those cases, as already observed, have no pertinency to the facts of this case.

Then there is a class of cases involving actions brought for violation of contracts, suits to specifically enforce contracts, suits brought to annul contracts, where the contracts were agreements between two or more persons or two or more corporations, or between persons and corporations to fix prices, regulate the output of manufactories, create monopolies and destroy competition. Of the numerous cases of this class cited, the following are the most important: Hooker & Woodward v. Vandewater, 4 Den. 349; Central Ohio Salt Co. v. Guthrie, 35 Ohio St. 666; Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St. 173; Craft v. McConoughy, 79 Ill. 346; Emery v. Ohio Candle Co, 47 Ohio St. 320 (May 6th, 1890); Texas and Pacific Railroad Co. v. Southern Pacific Railroad Co., 41 La. Ann. 970; Judd v. Harrington, 19 N. Y. Supp. 406; Nester v. Continental Brewery Co., 161 Pa. St. 473; Chicago Gaslight Co. v. People's Gaslight Co., 121 IU. 530.

These cases would be pertinent if this suit had been an action for a breach of the agreement entered into for the incorporation of the American Tobacco Company, or if it were a suit to enforce such agreement, or a suit attacking an agreement entered into by this corporation with some other person or corporation to fix prices and defeat competition. But as this court, for the reasons already stated, is bound to assume the legality of the corporation, and as there has since its organization been no illegal agreement made by it to combine with any other corporation or

Attorney-General v. American Tobacco Co.

person to fix prices or establish a monopoly, there is no ground for equitable interference with its corporate acts.

vant.

Then there are cases in which independent parties have been held indictable for conspiracy for entering into combinations to fix prices and creating monopolies by killing competition. For reasons similar to those just mentioned, these cases are irreleFor admitting that the agreements for organization were not only void, but were also criminal, either at common law or under the Sherman Anti-trust act, such an assumption could not affect the existence of this corporation when attacked in a collateral proceeding. While the corporation stands as a legal body, its acts must be regarded in the light of its charter rights. So long as its acts are within the purpose of its corporation, it would be absurd to say that, at common law, its officers or its agents are indictable for conspiring to do that which the corporation as a single entity is entitled to do. Whatever may have been said by the courts of other states concerning indictments under local statutes can be of no service here, for the question in hand is whether the defendants have done something under the law of this state to inflict wrong upon a private citizen or upon the body of citizens of this state, which wrong is remediable by injunction. In regard to the attitude of this company toward the federal anti-trust statute, it cannot be pretended that, since its organization, the company has violated the provision of that statute.

The last class of cases cited upon the argument to which I shall allude are those in which the existence of corporations has been directly attacked by informations in the nature of quo warranto, brought to annul charters on the ground that a corporation was organized for the purpose, or was using its franchises for the purpose, of establishing a monopoly and stifling competition. The important modern cases in which these questions have arisen in this way are the following: People v. North River Refining Co., 54 Hun 354; S. C., 121 N. Y. 582; People v. Milk Exchange, 145 N. Y. 267; State v. Standard Oil Co., 49 Ohio St. 137; People v. Chicago Gas Trust Co., 130 Ill. 268; People v. Distilling and Cattle Feeding Co., 156 Ill. 448; State v. Nebraska Distillery Co., 29 Neb. 700.

Attorney-General v. American Tobacco Co.

In each of these cases, by the form of the proceeding, the corporate organization of the defendant was on trial. It was a proceeding at law brought to directly test the right of the corporation to further employ its franchises. In each of those cases the court extended its inquiry into the circumstances surrounding the inception, the growth and the consummation of the scheme for incorporation, as well as into the manner in which the corporation had used or abused its charter privileges after incorporation. These cases, it is perceived, are also entirely irrelevant to the point involved in the present suit. These were the cases employed by the counsel of complainants in laboring to establish the very important proposition that this court would look behind the American Tobacco Company and see several corporations or firms really operating behind the corporate mask; that the court would strip off disguises and regard the substance of things, and that the court would impute to the corporation the acts of the incorporators. The authorities advanced in support of the proposed line of judicial conduct consisted, with one exception, of the language used by judges in cases where the court was trying the right of corporate existence under quo warranto proceedings. In quo warranto proceedings, the power of the court to adopt this line of conduct would be entirely clear; therefore, the language of the judge used in that class of cases proved nothing respecting the power of this court in a proceeding for injunction. The exceptional case to which I have just alluded is that of Stockton v. Central Railroad Co., supra, and the language cited was that of the learned chancellor in delivering his opinion in that important case.

But the question under consideration in that case was whether the Central Railroad Company had violated the terms of the statute which forbade the execution of a lease by it to any foreign corporation except under certain unperformed conditions. The company had executed a lease in form to a domestic corporation, and the chancellor was speaking of the circumstances which disclosed to him the fact that while the lease was in this form, yet the domestic corporation was a mere agent of another corporation, and that the real undisclosed principal in the transaction.

Attorney-General v. American Tobacco Co.

was the Philadelphia and Reading Railroad Company, a foreign corporation. Now, the propriety of disregarding the form of the lease in that case is perfectly obvious, for it is not only always competent for anyone concerned in a contract except the party agent himself to show that a party who, although appearing as a principal, is in fact an agent, with a real principal behind him, but it is always competent to show that a statute which prohibits such a transaction is being violated by an illusory arrangement. It was in respect to this point that the chancellor spoke of the power of the court to strip off disguises and look at the substance rather than the form of the transaction. The inquiry involved no attack on the corporate existence of either of the three corporations concerned in the affair. Regarding each as a distinct entity, having the contractual ability and liability of individuals, the court was quite as competent to hold that one corporation was acting as the agent for the other as it would be to hold that one individual was the agent of another. If there had been a statute prohibiting any two or more persons or corporations from combining to lease joint property to one lessee, and a question had arisen whether a lease made by the corporation was to be regarded as a lease made by two or more of the incorporators, it would have presented a proposition analogous to that involved in the present suit. In a suit in chancery to annul such a lease it seems to me but one answer could have been made, namely, that the lease having been made by a corporation organized under the forms of law, with a power to make the lease, must be regarded as an instrument of the corporation alone.

I am constrained to the conclusion that the questions discussed in this case cannot receive judicial consideration in this proceeding, and that the only method by which they can be raised and decided is by an information in the nature of a quo warranto instituted in a court of law. While I have in my discussion alluded to the case as exhibited by the attorney-general, it is perceived that the same defective jurisdiction which exists in respect to his bill exists also in respect to the bill of the relators. This is entirely apparent from the fact that the

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