The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-04-04
NOR. SECURITIES DECISION.
THE MANDATE STAYED UNTIL
APRIL II. e.
The Court Holds That 10 EnJoin the Pro
Rata Distribution OF the Northern
Pacific stock Would COntrayene the
object OF sherman Antitrust Law.

Court to-day handed down its opinion in the
suit instituted by Edward II. Hartman and
others to restrain the Northern Securities
Company from distributing on a pro rata
basis the shares OF Northern Pacific and
Great Northern Railroad stock held by IT,
The courts decree. Affirming the judgment
# the United States Court Of Appeals which
reversed the action Of the United States
Circuit Court Of the District Of New Jersey
in granting a restraining order, was an
rounced on March o, Chief Justice Fuller
then saying that the opinion Of the court
would be filed later.
In the meantime counsel for the Securities
Company fled a motion for the immediate
sending down Of the mandate, 80 that the
distribution Of tho assets OF the company
could be proceeded with In accordance
with the courts decree In the Government
suit declaring It an illegal combination
IN restraint Of trade and competition. This
motion was to-day denied, but the court
Fixed April II as the time when the mandate
should issue, and amended its decree by
remanding the cause to the Circuit Court
ofthe District OF New jersey, with directions
to dismiss the bill applying for an injunction
One Of the chief points In the decision
Is that the de livery to the Hartman interests
Of a majority Of the Northern Pacific stock,
which they claim under the bill, would
destroy competition between that road
and the Union Pacific system. The opinion
says -
In the present case complainants seek
the return Of property delivered 10 the Sc
curities company pursuant TO an executed
1t aola ha - -.
legality Of that contract but the record
discloees no special considerations Of equity,
Justice or public policy which would justify
the courts in relaxing the rigor Of the rule
which bans a recovery.
The Circuit Court DEGREES and the action
OF the Attorney General Of the United
States put at rest any question that the
Fatable distribution resolved upon was
in violation Of public policy.
And il Is clear enough that the delivery
60 complainants Of a majority Of the total
Northern Pacific stock and a ratable distri-
button Of the remaining assets TO the other
Securities stockholders would not only
be in itself inequitable. but would directly
contravene the object Of the Sherman law
or the purposes Of the Government suit.
The Northern Pacific system, taken in
connection with the Burlington system, is
competitive with the Union Pacific system,
and il seems obvious TO us, the entire record
considered, that the DEGREES sought by oom-
plainants would tend 10 smother that COM
petition, while the superior equities, as
against complainants present claim,
Of the many holders Of Securities shares
Who purchased in reliance on the belief
that they thereby acquired a reliable in
terest in all Of the assets Of the Securities
company, are too plain to be ignored.
The illegal contract could not be
made legal by estoppel, but the
ownership Of the assets, unaffected by a
special interest in complainants, could
DO placed beyond dispute on their part by
their conduct in holding the Securities
company out to the world as unconditional
owner.
And, without repeating in detail what
has been already set out. it is plain that
right Of rescission Of the executed contract
Of Nov. IS. 1901, even il rescission could
have otherwise been sustained had been
lost by acquiescence and laChas at the time
this bill was filed.
Since the transfer Of that date Securities
stock had passed into the hands Of more
than 2, 500 holders many OF them in Great
Britain, France and other parts OF Europe:
nearly year after the filing Of the Govern
ment bill 5000 shares were sold for cash.
complainant Hartman concurTing; some
months after, Hartman and Pierce and
the Oregon Short Line Company
pledged their $4,000 shares 70 the
Equitable Trust Company; notwithstanding
the decree Of April Q, 1908, they stood upon
their rights as shareholders, and It was not
NtraNt l1Nf Mr. NmNm 4
board Of directors resolved upon ratable
distribution, that compliments undertook
10 change an election already so pronounced
as TO be irrevocable in itself in view Of the
rights Of others,
plainants are exempt from the doctrine in
pah delicto because the parties acted in
good faith and without intention 10 violate !
the law az without merit.
with knowledge Of the facts and Of the |
statute. the parties turned out to he mis- |
taken in suppostng that the statute would |
not be held applicable to the facts. Neither |
can plead ignorance OF the law as against |
Ii a other, and defendant secured no unfair |
advantage in retaining the consideration |
voluntarily delivered for the price greed
Perhaps IL should be noticed that the |
bill sought the return OF two parcels Of |
Northern Pacific common stock-the $40. $50 |
shares delivered TO the Securities company |
on Nov IS. 1901, and the S47, 900 shares re- |
oaived Dec. ~. 1901, from the Northern /
Pacific Company on the retirement Of pre- |
ferred stock
Early in 1901 the Hill-Morgan party held |
o majority Of the common stock and had |
asserted the intention TO retire the preferred |
stock without a. Mr.. Hartman testified. |
'affording the holders Of the preferred |
n ock the right to participate in any new
securities that might be issued
with full knowledge Of that intention |
the proceedings Of the two companies |
followed in November, 1901, and the ALSO |
lutte and unconditional sale and purchase,
as we hold the transaction 10 have been.
we find no evidence Of any. express
agreement that compliments should be /
entitled TO the new common stock, and Il 1
was certainly not the natural increase |
~ the old stock, but the result Of the exer-
cire Of the night Of subscription.
The purchase by the Securities company /
was on its own account and not in trust, |
and cannot lie disturbed because OF illegal |
purpose at the clamor Of parties In pari |
delicto, And there II here no offer Of the |
restoration Of the status quo, II that we're
practicable.
Doubtless Il became the duty OF the |
Securities company 10 end a situation that |
had been RdiudKed unlawful, and this
could be effected by sale and distribution |
In cash. OF by distribution in kind. and the |
latter method was adopted, and wisely |
adopted as We think, for the forced sale Of |
several hundred millions Of stock would have |
manifestly involved disastrous results
In hne. the title 10 theae stocks having ]