State v. Nebraska Distilling Company

• Decision Date: 28 May 1890
• Citation: 46 N.W. 155,29 Neb. 700
• Parties: STATE v. NEBRASKA DISTILLING COMPANY
• Court: Nebraska Supreme Court

46 N.W. 155

29 Neb. 700

STATE v. NEBRASKA DISTILLING COMPANY

Supreme Court of Nebraska

May 28, 1890

ORIGINAL information in nature of quo warranto.

William Leese, Attorney General, John C. Watson, and Geo. D Scofield, for the state, cited: People v. Sugar Refining Co., 54 Hun [N. Y.], 354; Gibbs v. Gas Co., 9 S.Ct Rep., 553; People v. Chicago Gas Co., 130 Ill 268 [7 Ry. & Corp., L. J., 23]; Cook, Trusts, p. 28; Morawetz, Priv. Corp., 376, 421, 656; Neustadt v. Hall, 58 Ill. 172; Craft v. McConoughy, 79 Ill. 346; Messenger v. R. Co., 36 N.J.L. 413; Angell & Ames, Corp., 227; Taylor, Corp., 305, 419, 421; Green's Brice's Ultra Vires, 416; Chicago L. Ins. Co. v. Needles, 113 U.S. 574 ; People v. Dispensary, 7 Lans. [N. Y.], 306; People v. R. Co., 27 Barb. [N. Y.], 445; Hutchins v. Masterson, 46 Tex. 554; Richardson v. Buhl, 43 N.W. [Mich.], 1102; Franklin Co. v. Lewiston Sav. Inst., 68 Me. 43; Franklin Bk. v. Bank, 36 Ohio St. 350; Sumner v. Marcy, 3 Woodb. & M. [U. S.], 105; Mutual, etc., Ass'n v. Agency Co., 24 Conn. 159; Cent. R. Co. v. Collins, 40 Ga. 582; Berry v. Yates, 24 Barb. [N. Y.], 199.

Lake & Hamilton, and Ambrose & Duffie, for defendant Distilling Company, cited: Cooley, Const. Lim., 393*; 4 Political Science Quarterly, 316; "Facts About Trusts," (Beach), Forum, Sept., 1889; "Railway Federation," etc., Ry. & Corp. Law Journal, July, 1889; 10 Andover Review, 109; 5 Forum, 384; "Trusts" (Carnegie), N. Am. Review, Feb., 1889, p. 141.

Edwin F. Warren, for George L. Woolsey, intervenor.

OPINION

MAXWELL, J.

This is an action of quo warranto brought in this court to obtain a forfeiture of the defendant's corporate franchise. One Woolsey was permitted to intervene in the case. An answer was filed by the defendants and the cause referred to Judge Pound to take the testimony and find the issues of facts, and who made a report as follows:

"First--That the defendant, said Distilling Company, at and prior to the commencement of this suit, was a corporation duly organized under the laws of the state of Nebraska for the purpose of the manufacture and sale of alcohol, spirits, and other liquors, and the transaction of all business pertaining thereto.

"Second--That the certificate of incorporation of said company was filed in the office of the secretary of state of the state of Nebraska on or about the 25th day of March, 1886, and was filed for record in the county clerk's office of said county of Otoe on the 26th day of March, 1886, and recorded in book 26 of Miscellaneous Records of said office on page 267. That the corporate name of said company was 'The Nebraska Distilling Company,' and the place for transacting its business at Nebraska City, Nebraska; that by the terms of the articles of incorporation the corporation was to commence on the 26th day of March, 1886, and continue for the term of twenty years and terminate on the 26th day of March, 1906, unless renewed or sooner dissolved by a vote of two-thirds of the capital stock; that the stockholders of said corporation were to elect five of their members directors, who should constitute the board of directors of said corporation, and the directors were to elect one of their number president, one of their number vice-president, one of their number secretary, one of their number treasurer of said corporation, and the business of said company was to be transacted by the president, secretary, and treasurer, subject to the general control and management of the affairs of the corporation by the board of directors; that the amount of capital stock to be subscribed was $ 100,000, divided into 1,000 shares of $ 100 each.

"Third--That the intervenor, George L. Woolsey, was the president of said company from March, 1886, to the 19th day of December, 1887, and from the last named date to the 15th of January, 1890, he was the secretary and treasurer of said company. That on and prior to this 19th day of December, 1887, the stock of said company was owned as follows: D. T. Mills & Co. owned 745 shares, George L. Woolsey owned 250 shares, Harry D. Wilson, H. P. Stearns, Dexter T. Mills, W. W. Coolidge, and Erastus C. Gaffield owned one share each. That said company owned and operated a distillery at Nebraska City and certain lands on which the same was situated, and carried on the business of the manufacture and sale of alcohol, spirits, and other liquors, and transacted all business pertaining thereto from about the time of its organization until on or about said 19th day of December, 1887, and during that time the company employed from fifty to sixty hands in operating the distillery, which consumes about 600 bushels of corn and produced about 2,700 gallons of alcohol, spirits, and liquors per day, and yielded a large profit to the company.

"Fourth--That in the year 1887, and prior to the month of December, Joseph B. Greenhut, Adolph Woolner, Alfred Bevis, W. H. Corning, Lewis H. Green, Wm. N. Hobart, George K. Duckworth, John H. Francis, and P. J. Hennessy, each of whom owned or had an interest in one or more distilleries located north and west of the Ohio river, in the United States, formed an unincorporated association known as and called 'The Distillers' and Cattle Feeders' Trust,' with its headquarters at Peoria, in the state of Illinois, the object and purpose of which association or trust were to control and restrict the production of high wines alcohol, spirits, and other liquors, and to regulate and fix the prices of such productions in the markets of the United States, and to prevent competition in the manufacture and sale of such wines, alcohol, spirits, and liquors.

"Fifth--The object and purpose of the trust are accomplished by its getting the control and management of as many distilleries as possible, and the mode of procedure is as follows: An arrangement or agreement is made by which the company is to transfer its capital stock to the trustees of the Distillers' and Cattle Feeders' Trust, for which said trustees are to issue certificates of the trust. The real estate upon which the distillery plant is situated is deeded to some one member of the company as trustee for the stockholders, and the trustee then leases said real estate to the company for the term of twenty-five years. The capital stock of the company is canceled and new stock issued to said nine trustees of the trust, for which the trustees give the agreed amount of certificates of the trust. The board of directors of the company resign and a new board elected, a majority of whom are taken from the nine trustees of the trust.

"Sixth--That prior to the formation of said trust, various distillers had formed what is called pools, the object of which was to prevent an over-production of alcohol, spirits, and liquors. In the absence of such a combination there was a tendency to over-production and to furnish a supply beyond the demands, the consequence of which was to lower the price of the production and make the business unprofitable. Owing to an inherent infirmity in the pooling system, it failed to accomplish its full purpose, and as a substitute therefor said trust was formed. The trustees of the trust have almost unlimited power and control over all distilleries that enter it. They can limit their production or suspend their operation altogether. From ninety to one hundred and ten distilleries are located north and west of the Ohio river, of which number about seventy-five or eighty have entered the trust, and of the number under the control of the trust about fourteen are kept running. The trustees confine the production of the distilleries under their control to the large houses situated in favorable localities, which can be run at less expense than small houses located in unfavorable places; of the distillery plants in actual operation, about six are located in Peoria, the headquarters of the trust. That the corporate stock assigned and transferred to said trustees is owned and held by them in common and they acquire thereby the rights and powers of shareholders and exercise full control and direction of the action, management, and business of the companies whose stock has been so assigned and transferred to them as afore said, and they are enabled thereby to regulate, and do to a great extent regulate, at will the production and price of alcohol, spirits, and other liquors in the state of Nebraska, and in the United States. The said trustees can, and do, at will restrict and limit the production and supply of alcohol, spirits, and other liquors and thereby enhance their value.

"Seventh--That in the month of December, 1887, said Joseph B. Greenhut Adolph Woolner, and Alfred Bevis, as the officers and representatives of said Distillers' and Cattle Feeders' Trust, came to Nebraska City in pursuance of some prior negotiation, understanding, or arrangement with the defendant, or some of its officers or representatives, and after said three trustees had examined the distillery plant, the building and machinery belonging thereto, a schedule of its property, including material on hand, being of the value of about $ 20,000, and the books of the company showing the amount of business it had done and was doing, and after they had appraised all of said property, including the good will of the business, exclusive of the lands on which the buildings were situated, all of which property, exclusive of said lands, they estimated to be of the value of $ 100,000, it was agreed by and between said three trustees so acting for said trust and said Distilling Company that said company should assign and transfer its capital stock or new stock in lieu thereof to said nine trustees, and that said trustees should issue and deliver to the stockholders of the Distilling Company certificates of the...