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About The commoner. (Lincoln, Neb.) 1901-1923 | View Entire Issue (Dec. 13, 1912)
"mi.yfM'"jW"" r s DECEMBER 13, 1912 The Commoner. Limited Judgments in Quo Warranto By John S. Dawson, Attorney General of Kansas When Colonel Roosevelt was campaigning in Kansas this fall he spoke in the highest terms of the Kansas way of dealing with corporations. This distinguished politician had in mind the Kansas law which provides for limited judg ments in quo warranto. I shall not assume that this kind of judg ment is peculiar to Kansas, hut I am sure that we did not knowingly borrow from the juris-' prudence of other states when we wrought out this form of judgment. Chance and circum stance, business sagacity and newspaper criti cism, legal and judicial philosophy, all con tributed to the net result. Some thirty years ago there was organized in our state the Kansas Mutual Life Insurance company, a corporation. It was largely the work of some enterprising young county officers in the northeastern part of the state. This in stitution had a remarkable growth and per formed a useful function for a long stretch of years. Financially the company was sound and profitable. In time an effort was made on the part of the managing officers to re-form this company into a stock company, and certain corporate abuses and usurpations were charged against the corporation and its management. To correct these alleged abuses the company was taken into court, receivers appointed, and the company was wound up and dissolved. Its assets were sold to the Illinois Life Insurance company which also took over the insurance risks of the Kansas company to protect the in terests of the policyholders. The able and learned jurist in whose court these proceedings were had came in for a good deal of criticism. That is one of the penalties which a man pays for being a judge. I was a very young lawyer at the time these transactions occurred, but I knew that (the necessary facts being estab lished) the learned judge had only pronounced judgment according to law. He pronounced judgment as the law always had been and as it was in Kansas at that time. I knew more about Blackstone ten years ago than I do now, and I read therein: "A corporation may be dissolved by forfeiture of its charter through abuse of its franchises; in which case the law judges that the body politic has broken the condition upon which it was incorporated, and thereupon the incorporation is void. And the regular course is to bring an information in the nature of a writ of quo warranto, to inquire by what war rant the members now exercise their corporate power, having forfeited it by such and such proceedings." (1 Blackstone, 485.) Such was tho law one hundred and fifty years ago, and the Kansas statute of ten years ago read as follows: "Any corporation which is insolvent or which perverts or abuses its corporate privileges may be dissolved by order of the district court hav ing jurisdiction, on petition of the attorney general, supported by positive affidavit; and if the court finds that tbe petition is true it may grant a receiver to wind up the affairs of the corporation and decree its dissolution; pro vided, that the court may, at its discretion, appoint a receiver at the time of the filing of the petition by the attorney general." This statute was a mere repetition of the common law for corporate delinquencies "capital punishment," as it was quaintly called by Lord Coke the one cure for all corporate shortcomings. About the same time that the Kansas Mutual Life Insurance company's troubles were being aired in the courts and discussed in the news papers, a conspiracy in restraint of trade in Kansas was charged against the Santa Fe Rail way company and the Standard Oil company whereby the Santa Fe increased its rates for the transportation of oil from Chanute to Kansas City from about thirty dollars per car to one hundred and twelve dollars per car, the object being to make the freight rates so high as to he prohibitive and to give a monopoly of the transportation of oil to the new pipe lines of the Standard Oil company, and a suit waa brought in the name of the state of Kansas to forfeit the charter of tho railway corporation on account or its part in this unlawful combination. Such a proposal diverted public criticism and newspaper comment into sarcastic channels about what the state of Kaas&s wtM I! perchance it should win thai HvmlL. Wotld it run the Santa Fe railroad ia its owa behalf; or would it tear up tie tracks aad sell them (r d1 Junk- Would it sell tie deists for city halls and the freight statioas for cattle barns? Would it tear up the Standard Oil pipe lines and fling them over the moon? In what manner would tbe affairs of the Santa Fe rail road be wound up in compliance with the statute? Still delving into my Blackstoae I found that the attorney general of England in the reign of Charles Second did not hesitate to pursue the legal remedies afforded him by the same sort of law, and he actually did forfeit the charter of the City of London in 1665; and it could not be denied that the corporation of London town at that time was relatively as important to the kingdom of England as the Santa Fe railroad was in our time to the commonwealth of Kansas. In my own humble cogitations on this sub ject I gradually arrived at a point where I be gan to see why corporate abuses and usurpa tions had been tolerated so long. It was be cause the cure prescribed for corporate mis deeds was worse than the disease. Prudent prosecutors hesitated to invoke remedies so drastic that the public conscience would bo shocked at their application. Yet the public in sisted that corporate abuses should be corrected. I was only a youngster in the state's law depart ment at that time, but I was deeply interested in this whole subject. Our attorney general brought another suit to oust the International Harvester company from Kansas for violation of the anti-trust law, and still another suit of the same sort against the Standard Oil com pany of Indiana, the Standard Oil company of Kansas, and the Prairie Oil and Gas company, for violating the anti-trust law. The Harvester company bad a monopoly of the harvesting machinery used by the Kansas farmers. The company had great warehouses in Salina, Hutch inson, Wichita, Topeka, and Kansas City, and employed large numbers of men. The Kansas subsidiary companies of the Standard Oil trust above-mentioned were also Kansas industries of the first rank and importance and employed thousands of men. These suits were all pend ing and progressing through the courts when W. R. Stubbs became governor in 1909, and he took the position that there ought to be some way to make corporations behave themselves without putting them out of business. Accord ingly in his first message to the legislature he said: "The present corporation law seems to pro vide that when a corporation abuses its power a receiver shall be appointed for the purpose of winding up its affairs and disposing of the cor porate property. This is often too drastic. The law should be amended so as to provide for receivers to correct corporate abuses, and when corrected to hand back the corporate property, without dissolving the corporation, into the hands of its owners and managers, subject to the supervision of the court. This amendment should be supplementary to the present law, so that either judgment may be pronounced at the discretion of the court." Armed with the prestige of this recommenda tion of the governor, I undertook the task of preparing and putting through the legislature the present Kansas law on this subject, which IS "Any corporation which is insolvent or which nerverts or abuses its corporate privileges may be dissolved by order of the district court hav ing jurisdiction, on petition of the attorney Lenefal, supported by positive affidavit; and if the court finds that the petition is true it may annolnt a receiver to wind up the affairs of he Srowatlon and decree its dissolution; provided ?w toe court may, at its discretion appoint a receiver at the time of the filing of the petition Vifnt irnev general; provided also, that if the dLoVutiofo? any such corporation Is not SJfSS I bv the court to be either necessary 'fadvi able and that the corpora abuses can Erected without dissolution, receivers may be corrected y the corporate property be appo toted tmfSUpervIsion of the court and bus ness under we v we corporate until fully co rrect 8Il be returned to management and propo rty , cQurt owners and aSg ceer responsible for the mffiaiSSKnt o'f the corporate j.-orty ia feastat&s, and mxy oder tbe call tas aa etecttoa of tie soekhoWors to fill eh vaeiftde." (Chapter . Sasfea L&wt of 1589.) Th aw I- -s arattahU by the time tha agaiast tat Harvester company was brought to a eoaclasioa, aad la the syllabus of that ct, writtea by the court, is the foltow lag: 'Where corporation ha by its coaduet be come liable to a complete ouster tbe court may in iu discretion make a limited or qualified order of ouster prohibltiag eertala specific acta, aad reuia Jurtadtetioa aad control of the par ties for the purpose of making furthar orders ia tbe premises should jus and propar causo rl therefor la the fata re." la the body of the opinion the court saW: "As to the first count the court fiads that under the evidence a complete forfeiture of tho defendant's charter and right to transact busi ness within the state of Kansas would be Justi fiable, but it does not deem such an order necessary or expedient at this time. It finds that the volume of business in harvesting machinery transacted in this state by the defendant is sufficiently large to make it a matter of public concern and a proper subject for regulation. It is therefore ordered that the defendant be, and it is, prohibited from using exclusive contracts with its agents and dealers in this state re straining or restricting them from handling or selling goods or implements of the nature sold by tbe defendant in this state other than thoso obtained from the defendant; and It is re strained and prohibited from making any un fair discrimination in the sale of its goods in this state against any section, community or city or between persons for the purpose of destroying competition. No finding Is mado as to the reasonableness or unreasonableness of the prices at which the defendant sells its goods in this state, nor as to the propriety of re stricting local agents to tho sale of a single line of harvesting machines. The right Is re served to make any further order In the pre mises hereafter which upon complaint and ade quate showing may appear to be juat and proper." State v. Harvester Company, SI. Kan. 615. When the Standard Oil cases wero brought to a conclusion in our state, after five years' litigation, the judgment was drawn along tho same general lines, but descended into details, stating specifically and with exactness the par ticular practices which these corporations should refrain from doing. The decree reads more Hko a book of rules promulgated by a general manager of a railroad for the Instruction and guidance of conductors, engineers and brake men than it does like an old-fashioned Judg ment. But it does the work. Scarcely any complaint, and not a single one of any conse quence, has come to my oflko concerning the Harvester trust, the Standard Oil company of Indiana, the Standard Oil company of Kansas, or the Prairie Oil and Gas company since these judgments wero entered. You will noto that they are all doing business in Kansas under the supervision of tho supreme court, and there is a suggestion in the learned opinion of the court in the Harvester case that In a proper case it might make an order concerning the prices at which goods may be sold In Kansas when once tho fact is established that the goods aro the property of a corporation which has obtained a complete monopoly of the particular article of trade or commerce. For myself I would say that the fixing of a price on goods produced by a corporation which has obtained a complete monopoly of their production and distribution is more clearly a legislative function than a judi cial one, but certainly tho court would have a right to order that the corporation managers or receivers should treat the public fairly in the matter of prices, and that would virtually amount to a fixing of prices. I apprehend that limited judgments of ouster can bo worked out In almost any state in tho union. The original jurisdiction of the Kansas supreme court, like that of most state supremo courts, is limited to the threo old common-law proceedings, quo warranto,, mandamus and habeas corpus; but this limited judgment in quo warranto is not In any sense an extension of tha original jurisdiction of our supreme court. That point Is clear. Neither is It judicial legisla tion. We have not amended the constitution by statutory enactment. It Is a mere logical working out of the remedies 'furnished by quo warranto. If capital punishment, according to Lord Coko and Blackstone and the Kansas statute, Is the full legal remedy to which th state Is entitled in quo warranto for corporate I 1 r i 4 V i Mil 1. d fe A i 1 ", .1 Mi 1 vj 4 1 ji X '. ,' '1 f t e