after, Harriman and Pierce and the Oregon Short Line Company pledged their 824,000 shares to the Equitable Trust Company; notwithstanding the decree of April 9, 1903, they stood upon their rights as shareholders; and it was not until after March 22, 1904, when defendant's board of directors resolved upon a ratable distribution that complainants undertook to change an election already so pronounced as to be irrevocable in itself in view of the rights of others.

"We regard the contention that complainants are exempt from the doctrine in pari delicto, because the parties acted in good faith and without intention to violate the law, as without merit. With knowledge of the facts and of the statute, the parties turned out to be mistaken by supposing that the statute would not be held applicable to the facts. Neither can plead ignorance of the law as against the other, and defendant secured no unfair advantage in retaining the consideration voluntarily delivered for the price agreed.

"Perhaps it should be noticed that the bill sought the return of two parcels of Northern Pacific common stock, the 370,230 shares delivered to the Securities Company, November 18, 1901, and the 347,090 shares received December 27, 1901, from the Northern Pacific Company on the retirement of preferred stock.

"Early in 1901 the Hill-Morgan party held a majority of the common stock, and had asserted the intention to retire the preferred stock, 'without', as Mr. Harriman testified, ‘affording the holders of the preferred stock 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 absolute and unconditional sale and purchase, as we hold the transaction to have been.

"We find no evidence of any express agreement that complainants should be entitled to the new common stock, and it was certainly not the natural increase of the old stock, but the result of the exercise of the right of subscription. The purchase of the Securities Company was on its own account and not in trust, and cannot be disturbed because of illegal purpose at the clamor of parties in pari delicto. And there is

here no offer of the restoration of the status quo, if that were practicable.

"Doubtless it became the duty of the Securities Company to end a situation that had been adjudged unlawful, and this could be effected by sale and distribution in cash, or 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 fine, the title to those stocks having intentionally been passed, the former owners or part of them cannot reclaim the specific shares and must be content with their ratable proportion of the corporate assets."

CHAPTER X.

CONCLUSIONS.

Whatever conclusions this study may suggest have been indicated in the text, and do not require a re-statement in this brief final chapter. There are a few ideas connected with this study, however, which, as they appear to me to be somewhat fundamental, deserve to be expressed in the closing paragraphs, even at the risk of repetition.

The chief interest of the Northern Securities case lies in the magnitude of the interests involved and in the variety of the economic and legal problems which were incidentally drawn into the controversy. From the point of view of railway organization, the case presents little of consequence, except that railway corporate organization, in the process of metamorphosis or evolution, must avoid the technicality of the particular type of a holding company which the Northern Securities Company represented. From the point of view of railway regulation and the relations between the general public interests and private railway management, the case has no significance whatsoever, in spite of the fact that action against the Securities Company arose out of alleged injurious consequences to the public. It was assumed that competition had been stifled without first asking the question whether competition had actually existed; and whether, if competition could be perpetuated, the public would profit by it. Opposition to the Securities Company rested chiefly upon the same ground that opposition to agreements among railway companies, pools, and all co-operative movements among carriers has generally rested. This undiscriminating opposition to all forms of open concerted action on the part of the railways is in my mind the greatest single blunder in our public policy toward railways. I say "open" concerted action, for every

one who knows what is going on is aware of the fact that agreements which rest upon "what each was saying as he looked at his neighbor" have never ceased to exist, and that this form of agreement is the only guarantee against progressive anarchy in railway matters where the law forbids every other form. It is also a fact of common knowledge that such tacit agreements are generally as effective as those which have at times been made known to the public as illegal contracts. I also wish to repeat, what I have expressed heretofore, that I regard the application to railways of the Sherman anti-trust law of 1890 as one of the gravest errors in our legislative history. It is demonstrable that if railway companies had been permitted to co-operate with one another under the supervision of competent public authority, and the Trans-Missouri and Joint Traffic cases had never been decided, the railway situation in the United States would today be appreciably better than it is. However, this is speculation. Nevertheless, even today some legislation which will enable companies to act together under the law, as they now do quietly among themselves outside of the law, is imperative. The American public seems to be unwilling to admit that agreements will and must exist, and that it has a choice between regulated legal agreements and unregulated extralegal agreements. We should have cast away more than fifty years ago the impossible doctrine of protection of the public by railway competition. We still need a campaign of education on the limitations of competition among public carriers and adequate legislation for the protection of all interests where competition fails.

In expressing these views, I by no means question the motives of the officers of the law who prosecuted the case. Laws should be enforced. The supreme court has said that the Northern Securities Company violated the law, and that should end the matter. But what about the law? Then, too, the prosecution of the Securities case had an undoubted wholesome influence on all great corporations. It was a moral

tonic.

From the point of view of railway management, some diversity of opinion existed then and still exists. Able and experi

enced railway men have expressed the opinion that the Securities Company form of organization is autocratic and narrowing in its effect upon the rank and file; that it restricts the field for honest ambition, and tends to develop excessive dependence upon a very small number of individuals in control. This might not be true in this particular case, they argued, but the system was there which is capable of developing what they objected to. On the other hand, the Securities Company represented greater unity in management and stability in policy. The question arises as to what extent this unity should be developed. The late president of the Southern Pacific believed in one gigantic organization for the whole United States. Few will venture to this length. Two heads working independently of each other are more likely to invent something new or improve the old than one. There can be no question that the preservation of the autonomy of management of a considerable number of companies will ultimately bring about more efficient organization and management on the part of all of them. In this respect, competition can, and should always, endure. However, this is a question for professional railway men rather than for students of the economics of transportation.

A discussion of the results of the case from the purely legal point of view I must leave to the lawyers.