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fendant's transportation affairs were in the charge of an expert traffic official of at least ordinary intelligence and many years railroad traffic experience, and who was a frequent visitor at the general freight office of the railway company; where the unlawful rate was shown only by a paper appearing on its face to be a special billing order, and which directed that settlement for services rendered at the rate which it authorized should be made through the railway company's auditor's office instead of at the railway station or freight office, as is done by the general shipping public; and where the defendant when brought to trial persistently maintains that the Constitution of the United States guarantees to it the right to make a private contract for a railroad rate—this court is obliged to confess that he is unable to indulge the presumption that in this case the defendant was convicted of its virgin offense.
It is the defendant's position that its offense was wholly technical; that nobody has been injured, because there was no other shipper of oil; and that, therefore, the punishment, if any, should be a modest fine. This impresses the court as a peculiar argument. It is novel indeed for a convicted defendant to urge the complete triumph of a dishonest course as a reason why such course should go unpunished. Of course, there was no other shipper of oil, nor could there be so long as by a secret arrangement the property of the Standard Oil Company was hauled by railway common carriers for one-third of what anybody else would have to pay. It requires no very great wisdom to understand that if other men of capital, genius, and integrity should embark in the oil business, and possess themselves of all the facilities known to the trade, the methods unveiled in this proceeding would force them out. The only way for them to stay in the oil business would be for them to adopt the practice of this defendant, and procure the great public power of railway companies to be secretly perverted in their interest. Under no other possible theory could they hope to survive. Nor is this the only injury. To the extent that the Standard Oil Company has not paid what the law required it should pay, the shippers of other kinds of property have had to bear the burden. To the rate which it would be fair for the railway company to charge for the transportation of products of the farm and factory has been added what the Standard Oil Company did not pay for the transportation of its property. And herein lies not the least vicious element of such a system. In addition to this is the question of common honesty among men, which ought not to be altogether ignored in business even in this day. The conception and execution of such a commercial policy necessarily involves the contamination of subordinate officers or employés, even looking to the time when testimony will be required for the protection of the revenues of the offender from the exactions of the law for its violation. We might as well look at this situation squarely. The men who thus deliberately violate this law wound society more deeply than does he who counterfeits the coin or steals letters from the mail.
The nominal defendant is the Standard Oil Company of Indiana, a million dollar corporation. The Standard Oil Company of New Jersey, whose capital is $100,000,000, is the real defendant. This is so for the reason that if a body of men organized a large corporation under the laws of one state for the purpose of carrying on business throughout the United States, and for the accomplishment of that purpose absorb the stock of other corporations, such corporations so absorbed have thenceforward but a nominal existence. They cannot initiate or execute any independent business policy, their elimination in this respect being a prime consideration for their absorption. So, when after this process has taken place a crime is committed in the name of such smaller corporation, in fixing punishment the law will consider that the larger corporation is the real offender. And where the only possible motive of the crime is the enhancement of dividends, and the only punishment authorized is a fine, great caution must be exercised by the court lest the fixing of a small amount encourage the defendant to future violations by esteeming the penalty to be in the nature of a license. The defendant argues that to hold it for 1,462 offenses would be a violation of the constitutional prohibition against the imposition of excessive fines, and it is urged that Congress could never have intended to confer upon the court such power. It is the view of the court that for the law to take from one of its corporate creatures as a penalty for the commission of a dividend producing crime less than one-third of its net revenues accrued during the period of violation falls far short of the imposition of an excessive fine, and surely to do this would not be the exercise of as much real power as is employed when a sentence is imposed taking from a human being one day of his liberty. In this connection, it may be observed that the figures exhibiting the net earning of the Standard Oil Company of New Jersey during the period covered by this indictment are exceedingly instructive because of the peculiarly intimate relation between the character of the crime and the revenues of the offender.
The law prohibiting preferential railroad rates was passed 20 years ago. Its adoption was preceded by vigorous opposition interposed by those who had been the beneficiaries of the vicious practices its enactment was designed to abolish. Immediately thereafter, these persons set about to devise means for its evasion. The records of the courts and of the Interstate Commerce Commission show the employment of a large variety of schemes to accomplish this result. During the period since 1887 Congress has repeatedly endeavored to effectively amend the law with a view to the accomplishment of its great object. Finally, in 1903 the Elkins' law was passed. The court recalls that at that time the earnest hope was very generally entertained that at last a means had been devised that would put an end to preferential railroad rates, and yet beginning a few months thereafter the Standard Oil Company procured 1,900 car loads of property to be shipped at an unlawful secret rate. And for this offense the Elkins' law authorizes punishment only by fine, an obvious defect, remedied, however, by the present law which prescribes imprisonment in the penitentiary for the like offense. However, it is the business of a judge to administer the law as he finds it rather than to expatiate upon the inadequacy of punishment authorized for its infraction.
It is the judgment and sentence of the court that the defendant, Standard Oil Company, pay a fine of $29,240,000.
One thing remains. It must not be assumed that in this jurisdiction these laws may be ignored. If they are not obeyed, they will be enforced. The plain demands of justice require that the facts disclosed in this proceeding be submitted to a grand jury with a view to consideration of the conduct of the other party to these transactions. Let an order be entered for a panel of 60 men returnable at 10 o'clock on the morning of August 14th. The United States District Attorney is directed to proceed accordingly.
OANTON ROLL & MACHINE CO. V. ROLLING MILL CO. OF AMERICA
STURGISS et al. V. SAME.
No. 654. 1. FRAUDULENT CONVEYANCES-JURISDICTION OF FEDERAL COURTS-CONDI
Section 8 of the judiciary act of March 3, 1875 (18 Stat. 472, c. 137 [U. S. Comp. St. 1901, p. 513], relating to local suits to enforce liens, etc., does not enlarge the right of an individual to sue, and confers no right upon a simple contract creditor to maintain a creditors' suit in a federal court to set aside an alleged fraudulent conveyance of property by the debtor, nor does the fact that complainant has an alleged mechanic's lien upon the property afford basis for such a general creditors' suit, since such lien, if valid, may be enforced in rem against the property, regardless of conveyances, whether prior or subsequent.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 24, Fraudulent Con
veyances, § 697.] 2. MECHANICS' LIENS-SUIT TO ENFORCE-SUFFICIENCY OF BILL.
A bill in equity to enforce a mechanic's lien must allege every fact essential to the right to such lien with accuracy and clearness, so that issue may be taken thereon; and a mere allegation that complainant has filed and is entitled to such a lien is insufficient.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 34, Mechanics' Liens,
$ 494.] B. FRAUDULENT CONVEYANCES-ACTION TO SET ASIDE-CREDITORS' SUIT-RIGHT
A creditors' suit to set aside an alleged fraudulent conveyance of property from one corporation to another and alleged fraudulent issues of bonds by the latter, creating apparent liens upon the property, cannot be maintained after the complainant has sold or assigned its claim to one who advised and was instrumental in bringing about such transfers and participated therein as a stockholder of the purchasing corporation, and
is therefore estopped to deny their validity or good faith. 4. MECHANICS' LIENS-SUIT TO ENFORCE-SUFFICIENCY OF EVIDENCE.
Mere allegation and proof that machinery sold by complainant was to be placed or used in a mill are not sufficient to sustain a suit to enforce a mechanic's lien therefor under the statute of West Virginia giving a lien for the price of "machinery for constructing, altering or repairing a house, mill
or other structure,” without further proof that such machinery was intended to be and was so used as to become a part of the realty.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 34, Mechanics' Liens, $ 51.]
5. SAME-FILING OF CLAIM-ESTOPPEL.
Under a statute requiring a claim for a mechanic's lien to be filed within a stated time after the claimant "ceases to labor or to furnish material or machinery," where a claimant has filed a sworn statement as required, fixing the date when he ceased, he is estopped thereby, and cannot, by a subsequent statement fixing a later date, extend the time for claiming a lien.
[Ed. Note.--For cases in point, see Cent. Dig. vol. 34, Mechanics' Liens,
275, 276.] 6. SAME_VALIDITY-TIME FOR FILING.
A complainant contracted to sell to a corporation certain machinery of a tin plate mill, including a number of rolls to be delivered absolutely and a further number to be delivered, if required by the purchaser. The purchaser transferred its property to another corporation, and was dissolved, and its successor, after completing the mill, was adjudged bankrupt. In the meantime complainant delivered the first number of rolls to the succeeding corporation, and filed a claim for a mechanic's lien therefor, but dismissed a suit to foreclose the same because it was found to have been filed too late under the statute. Thereupon, with knowledge of the dissolution of one corporation and the bankruptcy of the other and without orders, it shipped the additional number of rolls, and filed another claim for a lien, including the entire amount, although the rolls last shipped were not received nor placed in the building. Held, that its claim was invalid, not only because the machinery was not so used. and could not therefore be the basis for a lien, but also because its shipment was unauthorized, and could not operate to extend the time for
filing a lien for that previously furnished. 7. ESTOPPEL-PERSONS AFFECTED—PERSON ACTING AS ATTORNEY.
One who was attorney for a corporation and its stockholders in suits brought against them to set aside an alleged fraudulent sale of bonds and prepared the answers denying the fraud cannot himself, after the suits have been dismissed and he has become the owner of the claims sued
on, attack the validity of the same transaction in another similar suit. 8. SAME-GROUNDS-POSITION IN JUDICIAL PROCEEDINGS.
A trustee in bankruptcy of a corporation who intervened in suits against the company, and by sworn answers affirmed the validity and good faith of certain of its transactions, is estopped to shift his ground in a subsequent suit, begun after the dismissal of the prior ones, and attack the validity of the same transaction.
On June 20, 1904, the Canton Roll & Machine Company, a Pennsylvania corporation, filed its bill in its own behalf and in behalf of all other creditors of the Rolling Mill Company of America who might join therein in this court against the Rolling Mill Company of America, a New Jersey corporation, the Morgantown Tin Plate Company, a West Virginia corporation, Hector M. Hitchings, Melvin J. Palliser, W. J. Logan, Jacob Meurer, Dick S. Ramsey, Andrew Meurer, August Kuhnla, Charles Merrill, W. H. Wells, J. L. Prescott, Wendell J. Wright, and C. H. Young, citizens of New York, in which it alleges: That the Rolling Mill Company of America acquired in the month of May, 1902, a tract of land near Morgantown, W. Va., of about 16 acres, conveyed to it by George C. Sturgiss and wife, by deed dated December 9, 1902. That, after obtaining title, it proceeded to erect a tin plate plant thereon, entering into various contracts for construction and machinery, and incurring large indebtedness. That, among others, it entered into a written contract with plaintiff on December 5, 1901, for the purchase of six hot tin mills complete, six stands of cold mills complete, and other machinery at an agreed price of $35,000. That plaintiff has fully performed said contract furnished the machinery, and has been paid thereon all of the contract price except $14,889.98, which, with interest from March 23, 1904, remains due and unpaid, and for which repeated demand for payment has been made. That said
Rolling Mill Company of America is indebted to others for labor and machinery, and that, being so indebted, it sought and undertook to strip itself of all its property and assets by selling and conveying said property to the Morgantown Tin Plate Company, and fraudulently to distribute the proceeds of sale among its stockholders without paying its said debts. That, pursuant to such fraudulent scheme, it on or about December 19, 1904, did convey and transfer its real estate and plant to said Morgantown Tin Plate Company in consideration of $150,000 of stock of the latter company fully paid, issued direct to the stockholders of the Rolling Mill Company of America, without first paying the indebtedness; that the individual defendants named were at the time of such transfer stockholders of the Rolling Mill Company of America, and Hitchings, Logan, and Wright were directors thereof. That all of said stockholders conspired to commit said fraud, participated therein, and received the benefits thereof. That the stockholders of the Morgantown Tin Plate Company were the same as those of the Rolling Mill Company; that subsequently the Morgantown Tin Plate Company executed a deed of trust to the Federal Savings & Trust Company, as trustee, to secure $150,000 of its bonds, bearing date January 1, 1903, which deed of trust was duly recorded. That the execution of this deed of trust was a further step' in the scheme to defraud plaintiff and other creditors, and place the property of the Rolling Mill Company beyond reach of its creditors. That of said bonds, $100,000 in value, were never sold, but were pledged for an alleged indebtedness of the Morgantown Tin Plate Company, amounting to a little over $20,000, and the creditor holding the same as collateral about October, 1903, sold or pretended to sell them at auction in New York City for $22,500. That plaintiff is not informed as to who was the purchaser of these bonds, but he believes such purchaser to be one of the individual defendants or some one holding for their benefit, and it is charged that all of the bonds for $150,000, not held by bona fide holders for value, without knowledge of the ille gality, are void. That plaintiff is entitled to and has filed a mechanic's lien against the real estate and plant for its debt and claims a lien thereon by virtue thereof; that each and every creditor of the Rolling Mill Company has an equitable lien upon said property prior to the lien of the trust deed and bonds, except in so far as said bonds are in the hands of bona fide holders for value and without notice of the fraud charged. The prayer of the bill is that plaintiff may be decreed a lien against the land and plant for its debt prior to the mortgage or deed of trust and to all other liens; that bonds secured by said deed of trust be decreed null and void as to creditors of the Rolling Mill Company, excepting only in so far as held by bona fide purchasers for value without notice of the illegality thereof; that liens and claims be ascertained and fixed according to priorities, and be enforced by sale of the land and plant and a distribution of the proceeds; that the individual defendants be decreed liable for and to pay the plaintiff's and other debts of the Rolling Mill Company; that a receiver be appointed, and for general relief.
On November 4, 1904, the defendants, the Rolling Mill Company of America, Jacob Meurer, Hector M. Hitchings, Melvin G. Palliser, Dick S. Ramsey, Wendell J. Wright, C. H. Young, W. J. Logan, and Andrew Meurer, filed their joint and separate answer to this bill, in which they in substance aver: That the Rolling Mill Company was organized under the laws of New Jersey for the purpose of building and operating a plant at Connellsville, Pa., and had commenced the construction of its plant there and expended $17,000 in cash and had in its treasury $100,000 less the $17,000 so expended, when George C. Sturgiss made it a proposition that if a new company should be organized, known as the Morgantown Tin Plate Company, and the plant located at Morgantown, he would procure certain coal lands, gas rights, railroad contracts for cheaper rates and a more favorable charter. These grants and privileges it was estimated would be of $20,000 value, and, in addition, he proposed to pay a bonus of $20,000 to pay for amount expended at Connellsville, and take $50,000 in bonds of the new company. That this proposition was accepted. The new company known as the Morgantown Tin Plate Com. pany was organized. Sturgiss turned over $20,000 in cash and land estimated to be worth $20,000 to $25,000, and the freight and gas contracts and the coal