State ex rel. Knox, Atty. Gen. v. Edward Hines Lumber Co.

• Decision Date: 13 February 1928
• Docket Number: 25076
• Citation: 150 Miss. 1,115 So. 598
• Court: Mississippi Supreme Court
• Parties: STATE ex rel. KNOX, ATTY. GEN., v. EDWARD HINES LUMBER CO. et al. [*]

115 So. 598

150 Miss. 1

STATE ex rel. KNOX, ATTY. GEN., v. EDWARD HINES LUMBER CO. et al. ^[*]

No. 25076

Supreme Court of Mississippi

February 13, 1928

Division A

1 CONTRACTS. Contract does not violate public policy, unless prohibited by statute or condemned by decision of courts.

A contract will not be held invalid on ground that it violates public policy, unless it is prohibited by statute or Constitution or condemned by decisions of courts construing subject-matter.

2 TRUSTS. Provision that liability for debts in operation of property was limited to trust property, if invalid, did not invalidate entire trust agreement.

Provision of declaration of trust placing control of property in trustees for purpose of disposing of property for benefit of certificate holders, that trustees and beneficiaries were relieved of personal liability for debts and other obligations incurred in operation of property, and that liability for such debts and obligations was limited to trust property, if invalid, did not invalidate entire trust agreement.

3 MONOPOLIES. Contract in restraint of trade is not invalid unless inimical to public welfare (Hemingway's Code 1917, section 3281, subds. [g], [h]).

Contract in restraint of trade is not invalid, under Code 1906, section 5002, subds. (g), (h) (Hemingway's Code 1917, section 3281, subds. [g], [h]), unless it is inimical to the public welfare.

4. MONOPOLIES. Nonresident beneficiaries in turning over funds to trustee for investment and trustee in purchasing land in state did not violate anti-trust statutes (Hemingway's Code 1917, sections 3281-3285).

Where nonresident stockholders of foreign corporation voted to turn over surplus from earnings of company to trustee to be invested by trustee for benefit of stockholders, such nonresident beneficiaries did not violate anti-trust statutes (Code 1906, sections 5002, 5003 [Hemingway's Code 1917, sections 3281-3285]) in turning over such fund to trustee for investment and trustee did not violate such statutes by purchasing land and timber in state.

5. MONOPOLIES. Declaration of trust giving trustees control of lands previously held by corporations as trustees and earnings there-from for purpose of disposition of property for benefit of certificate holders held not to violate public policy or anti-trust statutes, where not inimical to public welfare (Hemingway's Code 1927, sections 2438, 3330, 3331, 5650--5691; Hemingway's Code 1917, section 3281, subds. [g], [h] and section 3285; Estate Tax Act 1924; Laws 1924, chapter 185).

Declaration of trust placing control of large bodies of land, timber, and timber rights in state, previously held by separate corporations as trustees and products and earnings thereof, in trustees for purpose of disposing of or converting property into money for benefit of certificate holders of trust estate either by sale or other disposition, or by manufacturing or other utilization of trust estate, held not to violate anti-trust statutes (Code 1906, section 5002, subds. [g], [h], and section 5003 [Hemingway's Code 1917, section 3281, subds. (g), (h), and section 3285]), where there was no unreasonable or undue restraint of trade or hindrance of fair and free competition, and it was not inimical to public welfare and trust agreement did not violate public policy, in view of Code 1906, sections 2779, 4780, 4781 (Hemingway's Code 1927, sections 2438, 3330, 3331), relating to trusts, Estate Tax Act 1924 (Hemingway's Code 1927, sections 5727-5762), recognizing existence of trust estates, Laws 1924, chapter 132 (Hemingway's Code 1927, sections 5650-5691), and chapter 185, recognizing trust estates.

6. TRUSTS. That trustees owned and operated intrastate railroad did not render trust agreement illegal, even if Constitution prohibited it (Const. 1890, section 197; Hemingway's Code 1917, sections 3281-3285).

If Constitution 1890, section 197, prohibits right of individual or unincorporated association of persons to own or operate an intrastate railroad, fact that trustees controlling property under trust agreement owned and operated intrastate railroad did not render trust agreement illegal and violative of anti-trust statute (Code 1906, sections 5002, 5003 [Hemingway's Code 1917, sections 3281-3285]).

7. QUO WARRANTO. If trustees could not operate railroad, state's remedy was by quo warranto not anti-trust law proceedings (Const. 1890, section 197; Hemingway's Code 1917, sections 1361, 3012, par. 3, sections 3021, 3281--3285, 7677).

If trustees in control of property under declaration of trust could not own and operate intrastate railroad under Constitution 1890, section 197, and Code 1906, sections 1594, 4891 (Hemingway's Code 1917, sections 1361, 7677); state's remedy was not by proceeding under anti-trust statutes (Code 1906, sections 5002, 5003 [Hemingway's Code 1917, sections 3281-3285]), but would seem to be by quo warranto, under Code 1906, section 4017, par. 3 (Hemingway's Code 1917, section 3012, par. 3), seeking judgment barring and excluding trustees from using right and franchise to do so, as provided by section 4026 (Hemingway's Code 1917, section 3021).

HON. V. J. STRICKER, Chancellor.

APPEAL from chancery court of Hinds county, First district. HON. V. J. STRICKER, Chancellor.

Bill by the state, on the relation of R. H. Knox, attorney-general, against the Edward Hines Lumber Company and others, praying that trust formed by defendants be declared to be in violation of the anti-trust laws and for imposition of a penalty, appointment of receiver, and other relief. From a decree dismissing the bill, relator appeals. Affirmed.

Decree affirmed.

F. H. Lotterhos and James W. Cassedy, for appellant.

The declaration of trust and the evidence relative to the operations of the trustees thereunder show that the control of the business and the products, and the earnings thereof is placed in the power of trustees. The court in its opinion says: "Indeed, a literal construction of the contract would bring it eo nomine within the inhibition of section 5002 of the state Code. For certainly, and by its terms business has to some extent, and to a large extent, been placed in the hands of trustees, and by that name so called." The defendants by their amendment to their answer say: "These defendants further admit that they are in fact and have continuously and constantly daily been engaged in carrying on and controlling and managing and operating the trust estate and the business intrusted to them by the said cestuis que trustent by virtue of the under power as trustees." So we find it admitted that the trustees in fact and constantly have been engaged in carrying on and controlling and managing and operating the business entrusted to them. From this it seems conclusive by the fact of the trust agreement, by the finding of fact by the trial court, by the admission in the pleading by the defendants, that section 5002, Code of 1906, has been violated. But the defendants attempt to show that the condemnation of the statute does not fall upon them because they say their purposes were to handle and liquidate the large properties which they had accumulated in Mississippi in the most satisfactory and profitable manner to themselves, and the trial court found in favor of the defendants upon the idea that their operations were not inimical to the public welfare.

It is respectfully submitted by the state that on the admissions and finding of fact placing the trust agreement and the operations thereunder squarely in conflict with section 5002 aforesaid, the defendants cannot be heard to say in justification or excuse that what they have done and are doing is not inimical to the public welfare. In support of this several facts which negative the defendants' contention are herein set forth, the first being as follows:

The trust agreement gives to the holders of the certificates of beneficial interest and the trustees and officers all of the benefits and advantages given to and possessed by a corporation, such as nonliability to corporate or trust creditors on the part of holders of certificates of beneficial interest or stockholders; non-liability on the part of trustees or directors and the limitation of the enforcement of obligations to the property of the trustees or corporation alone. So that we find a structure for business operation with all of the facilities of operation and the limitation of liability of those engaged in the business found in any corporation without subjection to the many restrictions and prohibitions of statutes applying to corporations deemed necessary by the legislature and definitely fixed as part of the public policy of the state of Mississippi. It must be manifest that the legislature was not concerned about the mere name corporation, but was determined to protect against certain supposed dangers and evils incident to the operation of business by aggregates of individual investors carrying on without personal liability. Here we have such an aggregate admittedly within the terms of the condemnatory statutes seeking to justify by saying that its operations are not inimical to the public welfare. That this is not a possible defense in the light of the spirit of the legislative enactment is maintained by the state to be conclusive when consideration is given to the various Code sections regulating corporations.

The Constitution of Mississippi declares a public policy regulating the activities of corporations which will be futile if declarations of trust placing business in the hands of trustees carrying all the immunities and advantages of corporations are to be permitted to operate free from the restrictions imposed by the Constitution, which are as follows: Sections 88, 178, 179, 182, 190 and 197 o...