What is the significance of the northern securities company

So long as Congress keeps within the limits of its authority as defined by the Constitution, infringing no rights recognized or secured by that instrument, its regulations of interstate and international commerce, whether founded in wisdom or not, must be submitted to by all.

Harm and only harm can come from the failure of the courts to recognize this fundamental principle of constitutional construction. To depart from it because of the circumstances of special cases, or because the rule, in its operation, may possibly affect the interests of business, is to endanger the safety and integrity of our institutions and make the Constitution mean not what it says, but what interested parties wish it to mean at a particular time and under particular circumstances.

The supremacy of the law is the foundation rock upon which our institutions rest. The law, this court said in United States v. Lee, U. And no higher duty rests upon this court than to enforce, by its decrees, the will of the legislative department of the Government, as expressed in a statute, unless such statute be plainly and unmistakably in violation of the Constitution. If the statute is beyond the constitutional power of Congress, the court would fail in the performance of a solemn duty if it.

But if nothing more can be said than that Congress has erred -- and the court must not be understood as saying that it has or has not erred -- the remedy for the error and the attendant mischief is the selection of new Senators and Representatives, who, by legislation, will make such changes in existing statutes, or adopt such new statutes, as may be demanded by their constituents and be consistent with law.

Many suggestions were made in argument based upon the thought that the Anti-Trust Act would, in the end, prove to be mischievous in its consequences.

Disaster to business and wide-spread financial ruin, it has been intimated, will follow the execution of its provisions. Such predictions were made in all the cases heretofore arising under that act. But they have not been verified. It is the history of monopolies in this country and in England that predictions of ruin are habitually made by them when it is attempted, by legislation, to restrain their operations and to protect the public against their exactions.

In this as in former cases, they seek shelter behind the reserved rights of the States and even behind the constitutional guarantee of liberty of contract. But this court has heretofore adjudged that the act of Congress did not touch the rights of the States, and that liberty of contract did not involve a right to deprive the public of the advantages of free competition in trade and commerce.

Liberty of contract does not imply liberty in a corporation or individuals to defy the national will, when legally expressed. Nor does the enforcement of a legal enactment of Congress infringe, in any proper sense, the general inherent right of everyone to acquire and hold property.

That right, like all other rights, must be exercised in subordination to the law. But even if the court shared the gloomy forebodings in which the defendants indulge, it could not refuse to respect the action of the legislative branch of the Government if what it has done is within the limits of its constitutional power.

The suggestions of disaster to business have, we apprehend, their origin. These, plainly, are questions as to the policy of legislation which belong to another department, and this court has no function to supervise such legislation from the standpoint of wisdom or policy. We need only say that Congress has authority to declare, and, by the language of its act, as interpreted in prior cases, has, in effect declared, that the freedom of interstate and international commerce shall not be obstructed or disturbed by any combination, conspiracy or monopoly that will restrain such commerce, by preventing the free operation of competition among interstate carriers engaged in the transportation of passengers and freight.

This court cannot disregard that declaration unless Congress, in passing the statute in question, be held to have transgressed the limits prescribed for its action by the Constitution.

But, as already indicated, it cannot be so held consistently with the provisions of that instrument. The combination here in question may have been for the pecuniary benefit of those who formed or caused it to be formed. But the interests of private persons and corporations cannot be made paramount to the interests of the general public. Under the Articles of Confederation, commerce among the original States was subject to vexatious and local regulations that took no account of the general welfare.

But it was for the protection of the general interests, as involved in interstate and international commerce, that Congress, representing the whole country, was given by the Constitution full power to regulate commerce among the States and with foreign.

In Brown v. It may be doubted whether any of the evils proceeding from the feebleness of the Federal Government contributed more to that great revolution which introduced the present system than the deep and general conviction that commerce ought to be regulated by Congress. Railroad companies, we said in the Trans-Missouri Freight Association case, "are instruments of commerce, and their business is commerce itself.

Kansas Railway Co. Pullman Car Co. Brimson, U. Ames, U. Ohio, U. When such carriers, in the exercise of public franchises, engage in the transportation of passengers and freight among the States, they become -- even if they be state corporations -- subject to such rules as Congress may lawfully establish for the conduct of interstate commerce. It was said in argument that the circumstances under which the Northern Securities Company obtained the stock of the constituent companies imported simply an investment in the stock of other corporations, a purchase of that stock, which investment or purchase, it is contended, was not forbidden by the charter of the company and could not be made illegal by any act of Congress.

This view is wholly fallacious, and does not comport with the actual transaction. There was no actual investment, in any substantial sense, by the Northern Securities Company in the stock of the two constituent companies. If it was, in form, such a transaction, it was not, in fact, one of that kind.

However that company may have acquired for itself any stock in the Great Northern and Northern Pacific Railway companies, no matter how it obtained the means to do so, all the stock it held or acquired in the constituent companies was acquired and held to be used in suppressing competition between those companies.

It came into existence only for that purpose. If anyone had full knowledge of what was designed to be accomplished, and as to what was actually accomplished, by the combination in question, it was the defendant Morgan. In his testimony, he was asked, "Why put the stocks of both these [constituent companies] into one holding company?

Joint Traffic Association "smothering" competition between the lines of two railway carriers. We will now inquire as to the nature and extent of the relief granted to the Government by the decree below. By the decree in the Circuit Court, it was found and adjudged that the defendants had entered into a combination or conspiracy in restraint of trade or commerce among the several States such as the act of Congress denounced as illegal, and that all of the stocks of the Northern Pacific Railway Company and all the stock of the Great Northern Railway Company, claimed to be owned and held by the Northern Securities Company, was acquired, and is by it held, in virtue of such combination.

It was therefore decreed as follows:. But nothing herein contained shall be construed as prohibiting the Northern Securities Company from returning and transferring to the Northern Pacific Railway Company and the Great Northern Railway Company, respectively, any and all shares of stock in either of said railway companies which said, The Northern Securities Company, may have heretofore received from such stockholders.

Subsequently, and before the appeal to this court was perfected, an order was made in the Circuit Court to this effect:. All other portions of the decree and of the injunction it contains remain in force and are unaffected by this order.

No valid objection can be made to the decree below, in form or in substance. If there was a combination or conspiracy in violation of the act of Congress, between the stockholders of the Great Northern and the Northern Pacific Railway companies, whereby the Northern Securities Company was formed as a holding corporation, and whereby interstate commerce over the lines of the constituent companies was restrained, it must follow that the court, in execution of that act, and to defeat the efforts to evade it, could prohibit the parties to the combination from doing the specific things which, being done, would affect the result denounced by the act.

To say that the court could not go so far is to say that it is powerless to enforce the act or to suppress the illegal combination, and powerless. It is here suggested that the alleged combination had accomplished its object before the commencement of this suit, in that the Securities Company had then organized, and had actually received a majority of the stock of the two constituent companies; therefore, it is argued, no effective relief can now be granted to the Government.

This same view was pressed upon the Circuit Court, and was rejected. It was completely answered by that court when it said:. Obviously the act, when fairly interpreted, will bear no such construction.

Congress aimed to destroy the power to place any direct restraint on interstate trade or commerce when, by any combination or conspiracy, formed by either natural or artificial persons, such a power had been acquired, and the Government may intervene and demand relief as well after the combination is fully organized as while it is in process of formation. In this instance, as we have already said, the Securities Company made itself a party to a combination in restraint of interstate commerce that antedated its organization, as soon as it came into existence, doing so, of course, under the direction of the very individuals who promoted it.

The Circuit Court has done only what the actual situation demanded. Its decree has done nothing more than to meet the requirements of the statute.

It could not have done less without declaring its impotency in dealing with those who have violated the law. The decree, if executed, will destroy not the property interests of the original stockholders of the constituent companies, but. The exercise of that power being restrained, the object of Congress will be accomplished; left undisturbed, the act in question will be valueless for any practical purpose.

It is said that this statute contains criminal provisions, and must therefore be strictly construed. The rule upon that subject is a very ancient and salutary one. It means only that we must not bring cases within the provisions of such a statute that are not clearly embraced by it, nor, by narrow, technical or forced construction of words, exclude cases from it that are obviously within its provisions.

What must be sought for always is the intention of the legislature, and the duty of the court is to give effect to that intention as disclosed by the words used. As early as the case of King v. Inhabitants of Hodnett, 1 T. Justice Buller said: "It is not true that the courts, in the exposition of penal statutes, are to narrow the construction.

Wiltberger , 5 Wheat. The maxim is not to be so applied as to narrow the words of the statute to the exclusion of cases which those words, in their ordinary acceptation, or in that sense in which the legislature has obviously used them, would comprehend. The intention of the legislature is to be collected from the words they employ.

Where there is no ambiguity in the words, there is no room for construction. Morris , 14 Pet. Yet the evident intention of the legislature ought not to be defeated by a forced and overstrict construction.

On the other hand, we are bound to interpret them according to the manifest import of the words, and to hold all cases which are within the words and the mischiefs to be within the remedial influence of the statute.

In short, it appears to me that the proper course in all these cases is to search out and follow the true intent of the legislature, and to adopt that sense of the words which harmonizes the best with the context, and promotes in the fullest manner the apparent policy and objects of the legislature. Winn, 3 Sumner , 11, In People v. Bartow, 6 Cowen , the highest court of New York said:. Among other things, it is well settled that a statute which is made for the good of the public ought, although it be penal, to receive an equitable construction.

So, in Commonwealth v. Martin, 17 Massachusetts , , the highest court of Massachusetts said:. If such were the privilege of a court, it would be easy to obstruct the public will in almost every statute enacted; for it rarely happens that one is so precise and exact in its terms, as to. Guided by these long-established rules of construction, it is manifest that, if the Anti-Trust Act is held not to embrace a case such as is now before us, the plain intention of the legislative branch of the Government will be defeated.

If Congress has not, by the words used in the act, described this and like cases, it would, we apprehend, be impossible to find words that would describe them. The defendants have no just cause to complain of the decree, in matter of law, and it should be affirmed. The judgment of the court is that the decree below be and hereby is affirmed, with liberty to the Circuit Court to proceed in the execution of its decree as the circumstances may require.

I cannot assent to all that is said in the opinion just announced, and believe that the importance of the case and the questions involved justify a brief statement of my views. First, let me say that, while I was with the majority of the court in the decision in United States v. Freight Association, U. I think that, in some respects, the reasons given for the judgments cannot be sustained. Instead of holding that the Anti-Trust Act included all contracts, reasonable or unreasonable, in restraint of interstate trade, the ruling should have been that the contracts there presented were unreasonable restraints of interstate trade, and as such within the scope of the act.

That act, as appears from its title, was leveled at only "unlawful restraints and monopolies. The purpose, rather, was to place a statutory prohibition with prescribed penalties and remedies upon those contracts which were in direct restraint of trade, unreasonable and against public policy. Whenever a departure from common law rules and definitions is claimed, the purpose to make the departure should be clearly shown. Such a purpose does not appear, and such a departure was not intended.

Further, the general language of the act is also limited by the power which each individual has to manage his own property and determine the place and manner of its investment.

If, applying this thought to the present case, it appeared that Mr. Hill was the owner of a majority of the stock in the Great Northern Railway Company, he could not, by any act of Congress, be deprived of the right of investing his surplus means in the purchase of stock of the Northern Pacific Railway Company, although such purchase might tend to vest in him through that ownership a control over both companies.

In other words, the right, which all other citizens had, of purchasing Northern Pacific stock could not be denied to him by Congress because of his ownership of stock in the Great Northern Company. Such was the ruling in Pearsall v. But no such investment by a single individual of his means is here presented. There was a combination by several individuals separately owning stock in two competing railroad companies to place the control of both in a single corporation.

The purpose to combine, and by combination destroy competition, existed before the organization of the corporation, the Securities Company. The organizers might just as well have made the nominal stock a thousand millions as four hundred, and the corporation would have been no richer or poorer. A corporation, while by fiction of law recognized for some purposes as a person and for purposes of jurisdiction as a citizen, is not endowed with the inalienable rights of a natural person. It is an artificial person, created and existing only for the convenient transaction of business.

In this case, it was a mere instrumentality by which separate railroad properties were combined under one control. That combination is as direct a restraint of trade by destroying competition as the appointment of a committee to regulate rates.

The prohibition of such a combination is not at all inconsistent with the right of an individual to purchase stock. The transfer of stock to the Securities Company was a mere incident, the manner in which the combination to destroy competition and thus unlawfully restrain trade was carried out. If the parties interested in these two railroad companies can, through the instrumentality of a holding corporation, place both under one control, then in like manner, as was conceded on the argument by one of the counsel for the appellants, could.

Nor need this arrangement for control stop with what has already been done. I cannot believe that to be a reasonable or lawful restraint of trade. Again, there is by this suit no interference with state control. It is a recognition, rather than a disregard, of its action.

This merging of control and destruction of competition was not authorized, but specifically prohibited, by the State which created one of the railroad companies, and within whose boundaries the lines of both were largely located and much of their business transacted.

The purpose and policy of the State are therefore enforced by the decree. So far as the work of the two railroad companies was interstate commerce, it was subject to the control of Congress, and its purpose and policy were expressed in the act under which this suit was brought. It must also be remembered that, under present conditions, a single railroad is, if not a legal, largely a practical, monopoly, and the arrangement by which the control of these two competing roads was merged in a single corporation broadens and extends such monopoly.

I cannot look upon it as other than in unreasonable combination in restraint of interstate commerce -- one in conflict with state law and within the letter and spirit of the statute and the power of Congress. Therefore I concur in the judgment of affirmance. I have felt constrained to make these observations for fear that the broad and sweeping language of the opinion of the court might tend to unsettle legitimate business enterprises, stifle or retard wholesome business activities, encourage improper disregard of reasonable contracts and invite unnecessary litigation.

Whilst, in the argument at bar, the Government referred to the subject, nevertheless it expressly disclaimed predicating any claim for relief upon the fact that the predecessor in title of the Northern Pacific Railway Company was a corporation created by act of Congress.

That fact, therefore, may be eliminated. The facts essential to be borne in mind to understand my point of view, without going into details, are as follows: the lines of the Northern Pacific and the Great Northern Railway companies are both transcontinental, that is, trunk lines to the Pacific Ocean, and in some aspects are conceded to be competing.

Morgan and Mr. Hill and a few persons immediately associated with them separately acquired and owned capital stock of the Northern Pacific Railway Company, aggregating a majority thereof.

Hill and others associated with him owned, in the same manner, about one-third of the capital stock of the Great Northern Railway Company, the balance of the stock being distributed among about eighteen hundred stockholders. Although Mr. Hill and his immediate associates owned only one-third of the stock, the confidence reposed in Mr. Hill was such that, through proxies, his influence was dominant in the affairs of that company. Under these circumstances, Mr.

The purpose was that the company should become the holder of the stock of the two railroads. This was to be effected by having the Northern Securities Company give its stock in exchange for that of the two railroad companies. Whilst the purpose of the promoters was mainly to exchange the stock held by them in the two railroads for the Northern Securities Company stock, nevertheless the right of stockholders generally in the two railroads to make a similar exchange or to sell their stock to the Securities Company was provided for.

Under the arrangement, the Northern Securities Company came to be the registered holder of a majority of the stock of both the railroads. It is not denied that the charter, and the acts done under it, of the Northern Securities Company, were authorized by the laws of New Jersey, and, therefore, insofar as those laws were competent to sanction the transaction, the corporation held the stock in the two railroads secured by the law of the State of its domicil.

The government, by its bill, challenges the right of the Northern Securities Company to hold and own the stock in the two railroads. The grounds upon which the relief sought was based were, generally speaking, as follows: that, as the two railroads were competing lines engaged in part in interstate commerce, the creation of the Northern Securities Company and the acquisition by it of a majority of the stock of both roads was contrary to the act of Congress known as the Anti-Trust Act.

The clauses of the act which it was charged were violated were the first section, declaring illegal. The court below sustained the contentions of the government. It therefore enjoined the two railroad companies from allowing the Northern Securities Company to vote the stock standing in its name or to pay to that company any dividends upon the stock by it held.

On the giving, however, of a bond fixed by the court below, the decree relating to the payment of dividends was suspended pending the appeal to this court. The court recognized, however, the right of the Northern Securities Company to retransfer the stock in both railroads to the persons from whom it had been acquired.

The correctness of the decree below is the question presented for decision. Two questions arise. Does the Anti-Trust Act, when rightly interpreted, apply to the acquisition and ownership by the Northern Securities Company of the stock in the two railroads, and, second, if it does, had Congress the power to regulate or control such acquisition and ownership?

As the question of power lies at the root of the case, I come at once to consider that subject. Before doing so, however, in order to avoid being misled by false or irrelevant issues, it is essential to briefly consider two questions of fact. It is said, first, that the mere exchange by the Northern Securities Company of its stock for stock in the railroads did not make the Northern Securities Company the real owner of the stock in the railroads, since the effect of the transaction was to cause the Securities Company to become merely the custodian or trustee of the stock in the railroads; second, that as the two railroads were both overcapitalized, stock in them furnished no sufficient consideration for the issue of the stock of the Northern Securities Company.

It would suffice to point out, a, that the proof shows that nearly nine million dollars were paid by the Securities Company for a portion of the stock acquired by it, and that, moreover, nearly thirty-five million dollars were expended by the Securities Company in the purchase of bonds of the Northern Pacific Company, which have been converted by the Securities Company into the stock of that railroad,. Be this as it may, it is manifest that these considerations can have no possible influence on the question of the power of Congress in the premises, and therefore the suggestions can serve only to obscure the controversy.

If the power was in Congress to legislate on the subject, it becomes wholly immaterial what was the nature of the consideration paid by the company for the stock by it acquired and held if such acquisition and ownership, even if real, violated the act of Congress. If on the contrary the authority of Congress could not embrace the right of the Northern Securities Company to acquire and own the stock, the question of what consideration the Northern Securities Company paid for the stock or the method by which it was transferred must necessarily be beyond the scope of the act of Congress.

In testing the power of Congress, I shall proceed upon the assumption that the act of Congress forbids the acquisition of a majority of the stock of two competing railroads engaged in part in interstate commerce by a corporation or any combination of persons. The authority of Congress, it is conceded by all, must rest upon the power delegated by the eighth section of the first article of the Constitution, "to regulate Commerce with foreign Nations, and among the several States and with the Indian tribes.

At the outset, the absolute correctness is admitted of the declaration of Mr. Chief Justice Marshall in Gibbons v. Ogden that the power of Congress to regulate commerce among the. The plenary authority of Congress over interstate commerce, its right to regulate it to the fullest extent, to fix the rates to be charged for the movement of interstate commerce, to legislate concerning the ways and vehicles actually engaged in such traffic, and to exert any and every other power over such commerce which flows from the authority conferred by the Constitution, is thus conceded.

But the concessions thus made do not concern the question in this case, which is not the scope of the power of Congress to regulate commerce, but whether the power extends to regulate the ownership of stock in railroads, which is not commerce at all. The confusion which results from failing to observe this distinction will appear from an accurate analysis of Gibbons v. Ogden, for, in that case, the great Chief Justice was careful to define the commerce, the power to regulate which was conferred upon Congress, and, in the passages which I have previously quoted, simply pointed out the rule by which it was to be determined in any case whether Congress, in acting upon the subject, had gone beyond the limits of the power to regulate commerce as it was defined in the opinion.

Accepting the test announced in Gibbons v. Ogden for determining whether a given exercise of the power to regulate commerce has, in effect, transcended the limits of regulation, it is essential to accept also the luminous definition of commerce announced in that case and approved so many times since, and hence to test the question for decision by that definition.

The definition is this:. It describes the commercial intercourse between nations and parts of nations in all its branches, and is regulated. Does the delegation of authority to Congress to regulate commerce among the States embrace the power to regulate the ownership of stock in state corporations because such corporations may be in part engaged in interstate commerce?

Certainly not, if such question is to be governed by the definition of commerce just quoted from Gibbons v. Let me analyze the definition. I think the ownership of stock in a state corporation cannot be said to be in any sense traffic between the States or intercourse between them.

The definition continues: "It describes the commercial intercourse between nations and parts of nations. But if the question be looked at with reference to the powers of the Federal and state governments, the general nature of the one and the local character of the other, which it was the purpose of the Constitution to create and perpetuate, it seems to me evident that the contention that the authority of the National Government under the commerce clause gives the right to Congress to regulate the ownership of stock in railroads chartered by state authority is absolutely destructive of the Tenth Amendment to the Constitution, which provides that.

This must follow since the authority of Congress to regulate on the subject can, in reason, alone rest upon the proposition that its power over commerce embraces the right to control the ownership of railroads doing in part an interstate commerce business.

But power to control the ownership of all such railroads would necessarily embrace their organization. Hence, it would result that it would be in the power of Congress to abrogate every such railroad charter granted by the States from the beginning if Congress deemed that the rights conferred by such state charters tended to restrain commerce between the States or to create a monopoly concerning the same. Besides, if the principle be acceded to, it must in reason be held to embrace every consolidation of state railroads which may do in part an interstate commerce business, even although such consolidation may have been expressly authorized by the laws of the States creating the corporations.

It would likewise overthrow every state law forbidding such consolidations, for if the ownership of stock in state corporations be within the regulating power of Congress under the commerce clause and can be prohibited by Congress, it would be within the power of that body to permit that which it had the right to prohibit. But the principle that the ownership of property is embraced within the power of Congress to regulate commerce, whenever that body deems that a particular character of ownership, if allowed to continue, may restrain commerce between the States or create a monopoly thereof, is, in my opinion, in conflict with the most elementary conceptions of rights of property.

For it would follow if Congress deemed that the acquisition by one or more individuals engaged in interstate commerce of more than a certain amount of property would be prejudicial to interstate commerce, the amount of property held or the amount which could be employed in interstate commerce could be regulated.

One, J. Morgan was by this time Wall Street's most powerful investment banker. The second, James J. Hill, was the St. Paul based "empire builder" whose Great Northern Railroad crossed the same states as the Northern Pacific lines. Neither Hill nor Morgan figured on Theodore Roosevelt and the power he was bringing to the presidency.

In , the Supreme Court agreed with the administration's position, and ordered the Northern Securities company dissolved. The Northern Securities case led to two other important results. United States decision,the Court ruled that that the Sherman Act could not be used to regulate commerce. This ruling proved that the Sherman Act was ineffective against regulating monopolies. However, The Northern Securities Company vs.

United States decision was ruled to dissolve monopolies therefore giving more power to the Sherman Antitrust Act. This case represented a change in how the Court interpreted the meaning of the Commerce Clause. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment.