I'BDJDBAL' lUCPOBtJilB;
vol. 60.
fendants were required by the laws of South Dakota to answer or plead M:!tli'e cotnplaint. 1.JhE!yw£!retoo late. ' The motions to remand. g:ranted.
UNIT1lJD STATESv. E., O. KNIGHT CO.et aL ,(Cltrerilt<iurt, E. D. 80, 1894.) '.' ' Act Congo July 2, 1890, declares "everY contract,' combination In the form of 01' otherwise, 01' conspiracy, In restraint of trade or commerce among the several states or with 'foreign mittons" illegal; prohibits any pers6u/from a.tiemptingto monopolize,or combining or, conspIring with anyoijJer, perllou allY, part, of the u:age 01' commerce the states. pI' witll foreign natlons;8ll,d lUvests the circuit cou,rts With jurisdiction to restrain violations of the act. Held, that a eombil1litlonwhose object Is to enable a single company to monopolize and control the business of selling suglj.r, by. bu:ving up all competing concerns In the United Statell, 1$ not, in violation. of thi$ statute; for It constitutE'S no restriction upon, or monopoly of, commerce between the states, but, at most, only makes it possible for the promoters oftlW combifiatiouto restriet,or monopoUze such commerce;. should they So desire. '
Ellery P.,Inghatn, U. S. Atty., and Robert Ralston, Asst. U. S. Atty. John G-. Johnson and R. O. McMurtrie, for defendants. 'BUTLER, 'DiStrict Judgei' The bill charges, in substance, as follows: E. C. Knight Company; Spreckels' Sugar Refining Company, Frank· lin: Sugar'Refining Company and the .DelawareSiIgar House, were, until on or about March 4, 1892, independently engaged in the manufacture and sale of refined sugar.' That they were competitors with the American Sugar ;Refining Company and with 'one another; that they wel'eengaiediri trade with the several states and with:foreignnations. That the American Sugar Refining Company had,prior to Mai'ch 4, 1892, obtained the controlofi aU the sugar vefineries in the United with the exception. of the Revere, of BostOn, I1Ild the refinel'ies of the said four defendants. That the Revere produced annually about 2 per cent., and the said four defendantsabout33 per cent. of the total amount of ;sugar refined in the United Stites. That in order that the American Sugar Refining Company might obtain, complete, control of' the production and price of, refined'sugarin the United States, it and John' E. Searles, Jr., acting forit,entered into an unlawful and fraudulent, scheme to the stock, etc., of the said four defendants by, which they attempted to obtain control of all the sugar refineries, in this dis· trict:for the purpose of restraining the trade thei'eof among the other states. That' in" pursuance of this scheme, on or i about March 4, 1$92, JohnE; Searles,Jr.,'entered moo: a contract with.' the defend.ant Knigbt CGmpany and, individual stookholdersnafued for the purchase of all the:stock of the said company, and subsequently delivered to the1tlaid defendants in' exetumge therefor shares of the American 'Sugar" 'Refining Company. That on or' about" the same
UNITED STATES
v.
E. C. KNIGHT CO.
307
time the said Searles entered into a similar contract with the Spreckels Company and individual stockholders and made a similar contract with the Franklin Company and stockholders and "lith the Delaware Sugar House and stockholders. The bill further avers that the American Sugar Refining Company monopolizes the manufacture and sale of refined sugar in the United States and controls the price of sugar. That in making the said contracts the said Searles and the American Sugar Refining Company combined and conspired with the other defendants named to restrain trade and commerce in refined sugar among the several states and foreign nations. That the said contracts were made with intent to enable the said American Sugar Refining Company to monopolize the manufacture and sale of refined sugar among the several states. The materiaJ facts proved are that the American Sugar Refining Co' l one of the defendants, is incorporated under the laws of New Jersey and has authority to purchase, refine, and sell sugar; that the Franklin Sugar Refinery, the E. C. Knight Company, the Spreckels Sugar Refinery, and the Delaware Sugar House, were incorporated under the laws of Pennsylvania, and authorized to purchase, refine and sell sugar; that the four latter Pennsylvania companies were located in Philadelphia l and prior to March l 1892, produced about 33 per cent. of the total amount of sugar refined in the United States, and were in active competition with the American Sugar Refining Company and with each otherl selling their product whereever demand was found for it throughout the United States; that prior to March, 1892, the American Sugar Refining Company had obtained control of all refineries in the United States, excepting the four located in Philadelphia, and that of the Revere Company in Boston, the latter producing about 2 per cent. of the amount refined in this country; that in Marchl 1892, the American Sugar Refining Company entered into contracts (on different dates) with the stockholders of each of the Philadelphia corporations named, whereby it purchased their stock, paying therefor by transfers of stock in its company; that the American Sugar Refining 'Oompany thus obtained possession of the Philadelphia refineries and their business; that each of the purchases was made subject to the American Sugar Refining Company obtaining authority to increase its stock $25,000" 000;. that this assent was subsequently obtained and the increase made; that there was no understanding or concert of action between the stockholders of the several Philadelphia companies respecting the sales, but that those of each company acted independently of those of the others, and in ignorance of what was being done by such others; that the stockholders of each company acted in concert with each other, understanding and intending that all the stock and property of the company should be sold; that the contract of sale in each instance left the sellers free to establish other refineries and continue the business if they should see fit to do so, and contained no provision respeoting trade or commerce in sugar, and that no arrangement or provision on this subject has been made since; that since the purchase, the Delaware Sugar House Refinery , ,
308
"
BEPoRTER,vol. 60.
.ili,conjunction'.wh. the Sprec:els Refinery,.·and Refinery in connectio,n with the this. combination being 'made apparently reasons of economy in conducting,t.h,e l)'J:!.!liness; that the amount of sugar refined in Philadelphia has})eep. increased since the purchases; .that the price has been slightly;, since that event, but !s than it had been fOfsome years before, and up to wlthm a feWnionths of the sales; that about 10 per cent. ()f the sugar refined and sold in the United States is refined in other refineries than those controlled by the Amefioan. Refining Company; that some additional sugar in Louisiana and some is brought from Europe, but the is amount is not large in either instance. The object in purchasing the Philadelphia refineries was to obtain a influence or more perfect control over the business of selling in thIs. country. Are acts, as prohibited by the statute of to tradeand}lQmmerce? The provisions involved,l:lJ.'f;:t's·follows: . . . ' · .' . Sectiop'l; Every contrae1:,combInatlon lp."the f011ll"of trust or otherwIse, or conspIracY, In restraint of trade or commerce among the several states, or 1V,IthforeIgnnatIons, Is hereby declared to be Illegal. 'Every person who snaIl mate,ll.Dy such contract or engage In any such combination or conspiraCY"shaU'l>edeemed guilty of a misdemeanor, and, on conviction thereof, shall. be. Pllnfshed by a fine not exceeding five thousand dollars, or by imprisonmeiifnot'exceeding one year, or by both said punishments, In the discretIon of the court. Sec. 2, Every person who shall monopolize, or attempt to monopolize, or combine 01' conspire with. any other person or persons, to monopolize any part of the trade or commerce among the several states, or with foreign nations, shall be deemed guilty of a misdemelWor, and on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or, by imprisonment not exceeding one year, or by both sll.1d punIshments, in the discretion of the court. are hereby Invested Sec. 4.. The several cIrcuit courts of the United wIth jurIsdiction to prevent and restraln violation of this act; and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the, dIrection of the attorney general, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of. petition setting forth the case and praying that such violations shall be enjQined or otherwise prohibited. When the parties complained of shall have be;en duly notified of such petition the court shall proceed, as soon as may be, to the hearing and determInation of the case; and pending such petition and before final decree, the court may at llny time make such temporary restraining order or prohibition as shall be deemed just In the premises.
·.
The principal questions raised are: . '.. ' First, do the facts show a contract, combination or conspiracy to restrain trade or commerce, or a monopoly within the legal significationof these terms? Second, do they show. such contract, combination Or conspiracy to restrain or monopolize trade or commerce "among the several states or with foreign Third, can the relief be had in this proceeding? In the view I entertain the first and third need not be considered. The second must receive a negative answer, and this will dispose . of the controversy.
UNITED STATES V.E. C. KNIGHT CO.
309
The federal government possesses rio jurisdiction over the contracts, business or property of individuals within the states-except to collect revenu,e for its support. Its powers are derived exclusively from the constitution. It has none other than such as are directly or impliedly conferred by that instrument; and the latter contains no suggestion of authority to intermeddle with such property rights. By the eighth section of article first, congress is empowered "to regulate commerce with foreign nations and among the several states, and with the Indian tribes." In pursuance of this power the statute of 1890 was enacted; and as the terms employed show, congress was duly careful to keep within the limits of its authority. It is "trade and commerce among the several states and with foreign nations" that the statutes seek to guard against restraint or monopoly. The contracts and acfil of the defendants relate exclusively to the acquisition of sugar refineries and the business of sugar refining, in Pennsylvania. They have no reference and bear no relation to commerce between the states or with foreign nations. Granting therefore that a monopoly exists in the ownership of such refineries and business, (with which the laws and courts of the state may deal,) it does not constitute a restriction or monopoly of interstate or international commerce. The latter is untouched, unrestrained and open to all who choose to engage in it. The plaintiff contends, however, that such monopoly in refineries and refining incidentally secures a monopoly of commerce among the states. This position, however, is unsound; the deduction is unwarranted. The alleged control of refining does not of itself secure such commercial monopoly; and at present none exists. The most that can be said is that it tends to such a result; that it might possibly enable the defendants to secure it, should they desire to do so. Whether it would or not depends on their ability with this advantage to control such commerce. They have not tested this ability by attempting to control it, nor shown a disposition to do so. They sell their product, and purchasers may use it in such commerce, or otherwise as they choose. At present the defendants neither have, nor have attempted to secure, such commercial monopoly. As before stated, if they have a monopoly it is in refineries. and refining, alone--over which the plaintiff has no juris.diction. If they should retire from business, close their refineries or devote them to other purposes, the plaintiff could not object. This migat and doubtless would indirectly produce some disturb· ance of or interference with such commerce, but it would not bring the defendants. or their pro{5erty within the jurisdiction of congress. Nmnerous instances might be cited, where contracts, business arrangements and combinations indirectly affect interstate and international commerce without bringing the parties to them or their property within this jurisdiction. It is the stream of commerce flowing across the states., and between them and foreign nations, that congress is authorized to regulate. To prevent direct inter· ference with or disturbance of this. flow alone, was the power granted to the federal government. Congress has therefore no authority .over articles of merehandise or their owners, or contracts or combi·
810
FEDERAL aEPOBTER,
vol. 60·.
natioJ.UtreliJpecting have not entered into this stream, or have-passed out. It may prohibit and punish aU .R4t$·;whichare intended and directed to restrain or otherwise interfere with or disturb: Buch commerce, but it can go no further; To mend. itsauthoritytocbnsiness transactions which have no direct relationl!to :this commerce,' but which may incidentally affect it, and tOQ:Wnel'ship andrights:inproperty not involved in such com· merce,because it may pO$sibly become so involved, would be·unwar· ranted b1.J!the terms of the constitutional provisionj or the statute,draw _ within the jurisdiction of' congress most of the business transactions and property of individuals within the states, and would oust the jurisdiction of the states accordingly. A large pro· contracts which men enter into, and of the changes which they make in their business and business relations, may and affect such commerce. The dhninution or increase of in agriculture ol'imanufactures, changes from one branch of· busineSliLor trade to another, all incidentally tend ,to' this result. State legislation prohibiting or restraining the manufacture or sale of certain .a.rtlcles of merchandise, or increasing their cost by exact· ing license fees, have the same indirect tendency.. Such legislative restraiat of the manufacture -or sale of poisons and alcoholic liquors, and, eYen the increase in; the cost or price of property by taxation, could 'only be sustained by favor of the federal government, in a differentYiewof its power. ' The discussion need not be extended; the question is Dot new. It was fully considered in A case which arose under the statute-In reGreene,52Fed. 104-and the opinion of Jackson, J., (now of the supreme court,) is so clear and satisfactory that I am restrained from quoting what he says only by the desire to be brief. Veazie v. Moor, 14 Howl: 568, 514;, Coev. Errol, 116 U. S. 517 [6Snp. Ct. 475J; Kidd v. U. S. 1 [9 Sup. Ct. 6l,"-are to the same effect. The cases ofR, S. v.Greenhut,50 Fed. 469, and In re Corning, 51 Fed. 213, cited by the plaintUf,'are in affirmance of this view, rather than against it. Every elem.ent of combination and monopoly shown het"e was averred in the indictments under consideration there. It was held, however, that no offense against the statute was set out, no. interference with interstate or international commerce being charged. The cases did riot fail through matter of form or technicallv. but because the facts averred did not constitute an offense against the United States. In the cases of U. S. v.Jellico Mountain Coal & Coke Co., 46 Fed. 432; Manufacturing Co. v. Klotz, 44 Fed. 721; Dueber Watch Case Manuf'g Co. v.E. Howard Watch &Clock Co., 55 Fed. 851, cited by the- plaintiff, this question· was not considered or raised. People v.· American Sugar Refining Co., 7 Rey & Corp. (Cal.) 83, a,ndPeople v. North River Sugar Refining Co., 16 N. Y. Civ. Proc. 1 & 6, [3 N. Y;Supp. 401]; Id., 54 Hun, 354 [7 N. Y. Supp. 406J,-were suits in state C01}.l't8 lind! 'involved questions of state law, only. The bill must be dislfi.i:ssed) with costs. i
BANDE.RSlI. DEVEREUX.
311
SANDERS v. DEVEREUX et Ill. (ClrcuUl Court of Appeals, Eighth Oircuit. February 12, 1894.) No. 831-
1.
PARTITION-POSSEssION_JURISDICTION.
The circuit court of the United States cannot entertain a bill to partition lands where the complainant has been disseised, and the lands are held adversely by the defendants, and the purpose is to recover possession of the premises in dispute as well as to partition them. even though such a pr.oc.eeding may be maintained in the courts of the state. Where a bill for partition does not state that the complainant Is seised or possesseu of the land, and shows that the land Is within a city, and has been subdivided into numerous lots, claimed by different persons,lt will be construed, on demurrer, as showing that the complainant has been disseised. :A dismissal of a suit In equity on the ground' that there is an adequat:fl remedy at law should be without prejudice to the right to sue at laW.
2.
SAMIjl-BILL-DEMURRER.
3.
EQUITY ,PRACTICE-DISMISSAL WITHOUT PREJUDICE.
Appeal from the Circuit Court of the United States for the District of Kansas. Suit by Antoinette C. Sanders against Thomas Devereux and others for partition. The suit was dismissed on demurrer. Complain· ant appeals. This was a blll filed by the appellant, a citizen of the state of Illinois, against more than 100 defendants named In the complaint, who were, for the most part, citizens of the state of Kansas, to obtain a partition of the N. W. 14 of the S. W. 14 of section 23. in township 27, range 1 E., In Sedgwick county, Kan., which tract of land appears to be within the corporate limits of the city of Wichita. The bill contained the following averments, In sub· stance: That on December 11, 1873, Lindley Lee and wife conveyed the property In question to George A. Banders, the husband of the appelL'lnt, as trustee for their three minor children, to wit, Walter L.· Alice B., and Fannie A. Sanders. That such deed had the effect, under the statutes of Kansas, of conveylng'directly to the three children aforesaid an e$tate In fee simple In said lands" which they held as joint tenants, and not as tenants in common. That Alice B. Sanders died on February 19, 1876; that Fannie A. Sanders died on February 22, 1876; and that the title to said property thereupon became vested in Walter L. Banders, the surviving joint tenant. That Walter L. Sanders subsequently died, Intestate, on July 20, 1888, leaving no wife or children, and that by virtue of his death his mother, the present appellant. became entitled to an undivided one-half of the above-described property. under and. by virtue of the laws of descent of the state of Kansas. The bill of complaint further disclosed that on the 3d day of March, 1883, subsequent to the death of her two children, Alice B. and Fannie A. Sanders, the appellant, Antoinette C. Banders, had joined with her husband, George A. Sanders, in a deed to Thomas Devereux, which on Its face purported to convey the whole property above described, and the entire title thereto, to saId Devereux, with full covenants of warranty, It was further disclosed by the bill that on March 7, 1883, George A. sanders had executed a frn1:her conveyance of the same property to said Devereux, which was signed by the grantor as trustee .for his children, Walter L., Alice B., and Fannie A. Sanders, two of whom were then dead. The appellant averred that she joined her husband in executing the deed of March 3, 1883, In the belief that her husband was thereby conveying some Interest which he then had In the property, and that her signature was necessary to relinquish her Inchoate right, under the laws of Kansas, In and to the real of her said husband, which he was then conveying. She further averred that she did not intend to join, and did not in tact join, In the covenant ot general warranty which that deed contained.