9149 substance of it from the beginning.' Among the earliest efforts was a search for a special charter granted by the territory of Minnesota prior to the adoption of the constitution of 1858. "A large number of special charters that were passed when Minnesota was a territory have been very much sought after and extensively used by railroads that have since been built, by financial institutions of various kinds and business corporations."50 The old enactments were glanced through with a view of seeing if there was anything that would meet the desires and purposes of the contemplated organization, because "under our constitution all charters ante-dating the admission of the state into the union became fixed legislative contracts."51 Such a special, territorial charter could, however, not be found; nor could a later charter suitable for the occasion be discovered. Hence, recourse was had to the general incorporation laws of Minnesota, New York, New Jersey, and probably also of West Virginia.52 The Minnesota statutes were regarded as too "new in that class of corporations. There are no large business corporations incorporated under the laws of the State of Minnesota; she never has had any. There has been no occasion to put powers that are given by her general statutes to such organizations under judicial question."53 Furthermore, her own citizens, it was asserted, go to other states for the incorporation of enterprises of any magnitude.54 Whether West Virginia was any more than mentioned in this connection does not appear. As between the statutes of New York and New Jersey, the choice fell upon the latter because they had been in force a good many years and were regarded as "thoroughly well settled." Those of New York, on the other hand, while they were quite similar to those of New Jersey, and "had evidently been passed with a view of enlarging her legislation to put it on a parity with New Jersey," were of very recent origin, and had not been construed by the courts.55 In this connection, reference may 49 Clough, Testimony, 14: 828. 50 Clough, Testimony, 14: 817-818. be made to a pamphlet entitled "Advantages of the General Corporation Act of New Jersey," published without reference to the Securities Company, in which the author of it points out that since 1846 the policy of New Jersey towards capital has been that of "liberality." The changes introduced in the law since then have made it "simpler, more liberal and less burdensome. Since 1896, when the law was again revised and codified, its salient features have been simplicity of organization and management, freedom from undue publicity in the private affairs of the company, and facility of dissolution."57 The charter, which was finally taken out in the state of New Jersey, is in many respects similar to the charters of other great corporations. It has many points in common with the charters of the United States Steel Corporation, and the Standard Oil Company, except that the Northern Securities charter does not grant the omnibus powers conferred by the others. The Standard Oil Company and the United States Steel Corporation can engage in practically every conceivable kind of enterprise, while the Northern Securities charter limits the company to the acquisition of valuable paper held by domestic and foreign corporations, exercising the rights of property over the same, aiding corporations whose paper is thus held, and acquiring and holding the necessary real and personal property. The amount of the capital stock with which the corporation began business was thirty thousand dollars, while the total authorized capital stock of the corporation is four hundred million dollars. The customary officers and committees are provided for and the usual powers conferred upon them.58 A board of fifteen directors was elected, six of whom represented Northern Pacific interests; four, the Great Northern, not counting the president; three, the Union 56 Published by the Corporation Trust Company. 57 Leading references on the search for a charter: Brief for Defendants, 1: 19; Beck, Argument, 2: 42-60; Brief of Complainant, 10:18, 45; Young, Brief, 11:57; Clough, Testimony, 14: 820-844; 16: 238, 253, 318; 58 The by-laws are printed in 17: 804-814. 59 Pacific; and two, unclassified. The composition of the board on the community of interest plan was one of the points of attack subsequently pursued by the state and federal authorities. Such an arrangement had numerous precedents, however. Chauncey M. Depew is an officer or director of fifty-six transportation companies; W. K. Vanderbilt of fifty-one; Geo. J. Gould of thirty-five; E. V. Rossiter of thirty-one; E. H. Harriman of twenty-eight; Charles F. Cox of twenty-seven; D. S. Lamont of twenty-four; J. P. Morgan of twenty-three, and so on through a list of more than a hundred names.60 61 Much testimony was elicited with respect to the capitalization and the ratio at which the Northern Pacific and Great Northern shares were exchanged for Northern Securities stock. It seems that the capitalization of $400,000,000 was fixed at that figure in order to cover approximately the combined capital stock of the Northern Pacific and Great Northern at an agreed price apparently based upon earning capacity. The par value of the outstanding capital stock of the Great Great Northern was $123,880,400.00 and that of the Northern Pacific amounted to $155,000,000.00. The Northern Securities Company purchased about seventy-six per cent of the former and ninety-six per cent of the latter, on the basis of $115.00 per share of $100 of Northern Pacific and $180.00 per share of $100 of the Great Northern. The purchase of the stock of the two railway companies by means of the shares of the Securities Company was effected by and through the stockholders as such. An offer to make the purchase was conveyed to the Great Northern stockholders in a circular letter.62 This circular called forth numerous inquiries, in response to which President Hill sent out a letter® setting forth the purposes of the company and suggesting that "the offer of the Securities Company is one that Great Northern shareholders can accept with profit and advantage to themselves." It was the expressed wish of the leading stockholders of the Great Northern that all of them should be dealt 59 See table, 2:59; 17: 814; 24: 136-138. 60 Compiled from the Directory of Directors for New York, 1902. 63 61 Leading references upon this point: 10:4-6; 14: 789, 910-20; 16: 79, 119-144, 168-183, 324-350, 416; 17: 532–554, 575; 24:58-64; 25: 78. 62 Printed, 14: 918 63 Printed, 14: 920. with on a basis of absolute equality, irrespective of the amount of their holdings. This appears to have been done. In case of the Northern Pacific no circular letter appears to have been sent out to stockholders; .64 nor were the same rules of equality applied to them, for the Union Pacific interests received a cash premium of $8,915,629.00 in the exchange of their Northern Pacific holdings on the agreed basis for $82,492,871.00 par value of the Northern Securities stock. It also seems that the promoters of the Northern Securities Company had an understanding with the holders of at least a majority of the common stock of the Northern Pacific Railway Company that they would exchange that stock for the stock of the Northern Securities Company as soon as organized; and also an agreement that the preferred stock of the Northern Pacific should be retired on the first day of January following.65 64 Such a letter is, however, implied in Volume of Pleadings, 12: 35. " Complainant's Brief, 10: 41. CHAPTER IV. ACTION OF THE STATE AUTHORITIES. One week after the Northern Securities charter had been granted, the following statement was issued from the office of Governor Van Sant of Minnesota:66 "Owing to the great interest of the people of the states west of us and of the great desire to see the attempt to consolidate the Great Northern and Northern Pacific Railway lines resisted, Governor Van Sant has concluded to invite the Governors of the states having anti-consolidation laws similar to those of Minnesota to join in an effort to fight the great railway trust. It is understood that a conference of the governors is to be planned to consider the best methods of fighting the Northern Securities Company's propositions in the courts and by new legislation, if necessary." The replies of the governors addressed varied. The governor of North Dakota stated that his state had very little law bearing upon the question. In the constitution the consolidation of parallel and competing lines is specifically prohibited, and there are some general enactments prohibiting the formation of trusts and pools for the purpose of hampering trade and commerce. The governor of South Dakota thought that the railways in the merger had so little mileage in his state that any action there would be of no moment.. The absence of constitutional provision or law in Idaho caused the governor of that state to regret that he could consequently render no material aid in the contest, but he thought that the matter would be made the subject of action by the next legislature. When Oregon repealed her commission law in 1898, practically all railway legislation was wiped out with it. The governor of Oregon wrote Governor Van Sant that the people Quoted, Com. & Fin. Chron., Vol. 73, p. 1112. |