State ex rel. Attorney Gen. v. Standard Oil Co.

• Citation: 49 Ohio St. 137,30 N.E. 279
• Court: United States State Supreme Court of Ohio
• Decision Date: 02 March 1892
• Parties: STATE ex rel. ATTORNEY GENERAL v. STANDARD OIL CO.

49 Ohio St. 137
30 N.E. 279

STATE ex rel. ATTORNEY GENERAL
v.
STANDARD OIL CO.

Supreme Court of Ohio.

March 2, 1892.

Application by the state of Ohio ex rel. David K. Watson, the attorney general, for a writ of quo warranto against the Standard Oil Company.

The other facts fully appear in the following statement by MINSHALL, J.:

The state, by its attorney general, commenced this action to oust the defendant of the right to be a corporation, on the ground that it has abused its corporate franchises, by becoming a party to an agreement that is against public policy. The questions are presented by the pleadings,-the amended petition, the answer thereto, and the demurrer of the state to the answer,-and are as follows:

‘AMENDED PETITION.

‘Now comes David K. Watson, the duly elected, qualified, and acting attorney general of the state of Ohio, and gives the court to understand and be informed that on or about the 10th day of January, A. D. 1870, the defendant, the Standard Oil Company, was formed and organized as a corporation under and according to the laws of the state of Ohio. That the only purpose of said defendant, as set forth in its articles of incorporation, is ‘the manufacture of petroleum and to deal in petroleum and its products.’ That at the time of the defendant's incorporation its capital stock was fixed at $1,000,000. That subsequently, to-wit, on or about the 12th day of February, A. D. 1872, the defendant's capital stock was increased to the sum of $2,500,000. That afterwards, towit, on or about the 13th day March, A. D. 1875, said capital stock was increased to the sum of $3,500,000; and that, after its organization, as aforesaid, said defendant entered upon and continued generally in the pursuit of its corporate objects, with its principal place of business in the city of Cleveland, in this state, until on or about the date of the trust agreements hereinafter complained of and set forth.

‘Plaintiff further avers that, in violation of law and in abuse of its corporate powers, and in the exercise of privileges, rights, and franchises not conferred upon it, defendant, on or about the 2d day of January, A. D. 1882, and again on or about the 4th day of said month and year, entered into and became a party to certain trust agreements, and ever since then has, in the manner and to the extent below stated, observed, performed, and carried out said agreements, copies of which are hereinafter set out. That said defendant so entered into and became a party to and carried out and observed and performed the same as follows, to-wit: All of the owners and holders of its capital stock, including all the officers and directors said defendant company, signed said agreements, without attaching the corporate name and seal of said defendant company thereto, and the official designations of its officers. That, prior to the dates of the trust agreements aforesaid, defendant's capital stock consisted of 35,000 shares of $100 each, and upon the signing of said agreements in the manner aforesaid 34,993 shares of said stock, belonging to the persons who signed the agreements in manner above set forth, (in what proportions, however, plaintiff is unable to state,) were transferred, by defendant's transferring officers, upon defendant's stock-books, to the certain nine trustees who were appointed and named in the first one of said trust agreements, upon the request of the respective owners of said shares and in pursuance of the provisions of said trust agreements; the remaining seven of said shares of stock being retained by or transferred to the directors of defendant company. That, at the time said transfer of stock was made, there were seven directors of defendant company, and each one of the seven held one share of the stock aforesaid; but the number of said directors was thereafter reduced to five, who still hold and vote said seven shares of stock and no more. That in lieu of the transfer of said 34,993 shares, as aforesaid, to the nine trustees above mentioned, an equal amount in par value of certificates of the Standard Oil Trust, which were provided for and described in said trust agreements, were issued and delivered by said nine trustees to the persons aforesaid, from whom said nine trustees had received said 34,993 shares of stock in defendant company. That the capital stock of said defendant company is still $3,500,000, and the nine trustees before mentioned still hold and control the 34,993 shares thereof which were transferred to them as above stated. That by virtue of so holding and controlling said shares said nine trustees have been ever since the signing of said agreements, and still are, able to choose and have chosen, annually, such boards of directors of defendant company as they (said nine trustees) have seen fit, and are able to, and do, control the action of the defendant in the conduct and management of its business. That some of the directors of defendant company, including its president, have been, since the date of said agreements, and still are, members of the board of nine trustees provided for in said trust agreements as aforesaid; the president of defendant company having been, and being now, the president of said board of nine trustees. That defendant has never taken any corporate action, or made any complaint against its said stockholders or its directors and officers signing said trust agreements, or either of them, nor against its said stockholders or officers surrendering their stock in the defendant company to said nine trustees, nor against its stockholders or officers or directors receiving the Standard Oil Trust certificates which were issued and delivered to them as aforesaid by said nine trustees in exchange for the 34,993 shares of defendant's stock, nor against any of the acts herein recited; and that none of the officers, directors, or stockholders of defendant company have at any time objected or made complaint against such surrender and exchange of stock or against any of said recited acts, and, on the contrary, defendant, in its corporate capacity, and through its officers and stockholders, has ever since the acts in question acquiesced in such transfer and exchange, and in the annual election by said nine trustees of the directors for defendant, as well as in all said recited acts. That the directors of defendant company who are chosen in manner aforesaid, either directly or through their employes, manage the business of that company so as not to conflict with the policy fixed from time to time by the nine trustees aforesaid. That the net earnings of defendant company have been, ever since the signing of said agreements, and still are from time to time, declared and paid out as dividends upon its capital stock. That the nine trustees appointed under said trust agreements as aforesaid have received the proportions of such dividends which were properly distributable and payable upon the stock held by said nine trustees in defendant company. That there are a large number of other corporations (plaintiff being unable to ascertain or state the exact number) in the United States, whose organizations were made, stock is held, and directors elected, and whose affairs and business and dividends are conducted and paid under and pursuant to the provisions of the trust agreements hereinafter set forth, in a manner and to an extent similar to that herein described in respect to defendant, and from the dividends so accumulated in the hands of said nine trustees dividends are, from time to time, as the interests of the trust justify, declared and paid out by said nine trustees to the holders of the Standard Oil Trust certificates which have been issued by them; so that the holders of the 34,993 shares of said Standard Oil Trust certificates which were received in lieu of a like number of shares of defendant's stock, transferred in manner aforesaid upon the books of defendant company to said nine trustees, do not receive the dividends which are payable from the earnings of defendant company, but receive dividends only from the accumulated earnings aforesaid, which are derived from the various similar companies aforesaid, and held and distributed as aforesaid by said nine trustees.

‘The following are correct copies of the two trust agreements hereinbefore mentioned and referred to.

‘'This agreement, made and entered upon this second day of January, A. D. 1882, by and between all the persons who shall now or may hereafter execute the same as parties thereto, witnesseth:

‘'I. It is intended that the parties to this agreement shall embrace three classes, to-wit:

‘'(1) All the stockholders and members of the following corporations and limited partnerships, to-wit: Acme Oil Company, (New York;) Acme Oil Company, (Pennsylvania;) Atlantic Refining Company of Philadelphia; Bush & Co., Limited; Camden Consolidated Oil Company; Elizabethport Acid Works; Imperial Refining Company, Limited; Chas. Pratt & Co.; Paine, Ablett & Co., Limited; Standard Oil Company. (Ohio;) Standard Oil Company, (Pittsburgh;) Smith's Ferry Oil Trans. Company; Solar Oil Company, Limited; Sone & Fleming Manufacturing Company, Limited. Also all the stockholders and members of such other corporations and limited partnerships as may hereafter join in this agreement at the request of the trustees herein provided for.

‘'(2) The following individuals, to-wit: W. C. Andrews; Jno. D. Archbold; Lide K. Arter; J. A. Bostwick; Benj. Brewster; D. Bushnell; Thos. C. Bushnell; J. N. Camden; Henry L. Davis; H. M. Flagler; Mrs. H. M. Flagler; H. M. Harma; Geo. W. Chapin; D. M. Harkness; D. H. Harkness, trustee; S. V. Harkness; John Huntington; H. A. Hutchins; Chas. F. G. Heye; O. B. Jennings; Chas. Lockhart; A. M. McGregor; Wm. H. Macy; Wm. H. Macy, Jr.; estate of Josiah Macy, Jr.; Wm. H. Macy, Jr., executor; O. H. Payne; O. H. Payne, trustee; Chas. Pratt; Horace A. Pratt; C. M. Pratt; A. J. Pouch; John D. Rockefeller; Wm. Rockefeller; Henry H...