Frederic Jesup Stimson

“ When a number of shareholders combine to constitute themselves a majority, in order to control the corporation as they see fit, they become for all practical purposes the corporation itself, and assume the trust relation occupied by the corporation toward its shareholders. ”

“ It cannot be denied that minority shareholders are bound hand and foot to the majority in all matters of legitimate business . . . but the corporate powers can only be exercised to accomplish the objects for which they were called into existence, and the majority cannot control these powers to pervert or destroy the original purpose of the corporations. ”

“ The managers may sell, incumber, add worthless properties, consolidate with others, lease, leave idle, or apply the lands to the growing of cucumbers, the machinery to the extraction of sunshine from them, and the live-stock to the menagerie trade, if they so choose; unless, of course, the trust-deed restricts them, which is not usually the case; and if they cannot sell and convey under the trust, then neither can the stockholders, and, as there is no provision for deeding back, the property is tied up indefinitely. ”

“ If the trust sought to merge the corporations themselves, or their franchises, it would be illegal beyond all question. If the trust provides for the assignment of all the corporate assets only, it is undoubtedly illegal, as ultra vires. And, even if the corporation merely relinquishes its power of management through and by its own stockholders, it is possibly ultra vires still.
But the usual way in which the corporate trust is affected is by assignment of stock, by all or a majority of the stockholders, to the managers of the trust. ”

“ I.⁠Every organization, association, combination, or trust of persons or corporations, which seeks to control, combine, pool, or consolidate the business or property of any persons or corporations engaged in any trade, business, or manufacture, or which seeks to consolidate several such properties, or unite several businesses, or place the property of individuals or corporations, or the capital stock thereof, in the hands of individuals for control or management, shall be deemed a corporation, and subject to all the regulations of the laws as such. ”

“ Like an exuberant vine, first twining for support upon the rocks of practice and precedent, it then separates, overthrows, and, lastly, scatters them into new heaps whose equilibrium is more stably adjusted to the needs of a growing democracy. ”

“ Now, generally, it will be impossible to define, with any degree of accuracy, what the objects of the trust are to be; and it is always impossible to define the duties of the trustees and the methods to be employed by them in managing their business. ”

“ If the individual is satisfied with the trustees, and sees nothing to object to in the proposed system of management, and if the prospect of increased profits is sufficiently great to make him willing to part with his inalienable right of doing what he will with his own, such a trust may justify itself to his judgment. ”

“ No argument, however specious, should lead the individual to dispense with this provision in the deed of trust, in the first kind, or management trust, at least; for, if at the end of the term of years the trust has proved a success, a majority can be relied on to continue it; if not, it is best for all but the weakest that it should be dissolved. In the property trust, however, it is more difficult to make this provision; for in this case the individuals have finally parted with their individual property ”

“ The profits of the Philadelphia company remain the same, but its only two remaining rivals are ruined.
Now, before turning to the law, let us take an example of the other and even more dangerous trusts,—corporate trusts. They are usually created for controlling the stock or management of the corporation in whose shares they consist; thus creating a sort of a machine upon a machine, one fictitious person within another. ”

“ The stockholders have parted with their property, and have nothing to show for it but the trust-certificate—a mere receipt, but upon which, if sealed or expressed to be for valuable consideration, it is doubtful if the law will imply any trust at all. The trust must, therefore, be declared by the trust-deed, assented to by the trustees or managers. ”

“ It is, however, to be carefully considered, that a deed of property to certain persons in trust for a period beyond twenty-one years, or for an indefinite period, with limitation thereafter to the original owners, may possibly be attended with the danger of putting the absolute property in these managers, so that the subsequent limitation would be void, and the original owners or other persons could never recover it back. ”

“ No other person has ever seen it, and all the public can know about it is to judge it by its fruits; for since that trust was drawn, the Standard Oil has grown to be a more powerful—corporation, shall we call it? ”

“ It may probably be said that such a trust is generally most beneficial to those who have made a failure in their individual business; and, therefore, those who have a concern already profitable should scrutinize it with great care. And in connection with this point there should certainly be, in all these trusts, a provision to enable the individual to withdraw his property from the trust upon giving reasonable notice, if he does not like the way things are going; nor should any such trust be created, save for a definite term of years,—ten years at the most. ”

“ It seems that the pages of this Review are a happy ground where those who are battling in fields of practice may meet others still clear-minded with the quiet wisdom of theory; nor should the law-student hear without interest those questions which newly vex the active bar, though it may be years ere they are cut short by statute, or come to authoritative decision, and thence broaden down to text-books, and become an orthodox part of the science of the law. ”

“ This is, that they practically do away with the whole law regulating corporations, with all the safeguards regulating their corporate management, the control of their stock, and the exercise of their franchises, besides evading all the laws regulating their capitalization and consolidations. ”

“ PRACTISING lawyers in so progressive a country as America are continually met with new devices, with new legal situations, with want of remedies, for which neither the text-books nor their legal education afford them precedent or direct advice ”

“ We may take the Standard Oil as the type and consummation of the simple business trust. Ectypes are springing up in all directions with portentous rapidity. Philadelphia, in particular, is the home of trusts, for a Philadelphia lawyer is said to have invented them. ”

“ The objection that such trusts tend to create a monopoly applies equally to both classes,—the simple and the corporate trust. But this, until the legislatures have made enactments to that effect, and except, perhaps, in those States which have constitutional provisions forbidding monopolies, must be deemed a merely sentimental objection. The following States and one territory, as I have noted in my book on American Statute Law, section 404, have such a constitutional provision: Maryland, North Carolina, Tennessee, Arkansas, Texas, New Mexico. ”

“ That the American Cotton-oil Trust acquired the majority of stock in said corporations, organized under the laws of this State, by exchanging certificates of its stock for certificates of stock in said corporations at a premium and advance thereon, and have elected directors and are controlling and operating said cotton-mi1ls, the property of said corporations, solely for the interest and benefit of said illegal association. ”

“ But here, almost immediately, those advantages which may be called absolutely legitimate end; it is questionable whether under older ideas even the “regulation”—i.e., repression—of production is so. One of the great advantages of some trusts is the power they possess of destroying private enterprise. ”