Ellerman v. Chicago Junction Railways & Union Stock-Yards Co.

Full title: ELLERMAN v. CHICAGO JUNCTION RAILWAYS & UNION STOCK-YARDS CO. et al.

Court: COURT OF CHANCERY OF NEW JERSEY

Date published: Dec 18, 1891

49 N.J. Eq. 217 (Ch. Div. 1891)

49 N.J. Eq. 217

Opinion

12-18-1891

ELLERMAN v. CHICAGO JUNCTION RAILWAYS & UNION STOCK-YARDS CO. et al.

Joseph D. Bed/e, for complainant. Cortlandt Parker, William D. Guthrie, and Clarence A. Seward, for the Junction Co. C. Parker, Jr., and Barker Gummere, for Armour & Co., Nelson Morris & Co., and Swift & Co.

GREEN, V. C.

(Syllabus by the Court.)

Bill by John Reeves Ellerman against the Chicago Junction Railways & Union Stock-Yards Company and others to enjoin them from carrying into effect a certain agreement. Bill dismissed.

The other facts fully appear in the following statement by Green, V. C.:

This bill is filed by the complainant on behalf of himself, a stockholder in the Chicago Junction Railways & Union Stock-Yards Company, and all other stockholders therein who shall come in and contribute to the expenses of this suit, to enjoin the parties thereto from carrying into effect a certain agreement made by the directors of the said company, dated July 27, 1891, with the defendants Armour & Co., Nelson Morris & Co., and Swift & Co. The Junction Railways & Union Stock-Yards Company, hereinafter styled the "Junction Company" was organized on or about the 10th day of July, 1890, under and by virtue of the provisions of the laws of New Jersey. The objects for which the said company was formed, as stated in its certificate, are to purchase, hold, pledge, transfer, sell, or otherwise dispose of, or deal in, the shares of the capital stock of the Union Stock-Yards & Transit Company, a corporation organized under the laws of the state of Illinois; to receive, collect, and dispose of the dividends on any of said shares held by it, and to exercise, in respect of any of said shares held by it, any and all the rights, powers, and privileges of owners of shares of said capital stock; to purchase, hold, and dispose of any bonds, debentures, or other evidences of indebtedness of said the Union Stock-Yards & Transit Company of Chicago, and to do any and all acts and things tending to increase the value of the shares of the capital stock of said company; to issue bonds, and to secure the same by a pledge or deed of trust of or upon any part of such shares, or any other property held or owned by the company, and to sell or pledge such bonds for proper corporate purposes; and in the promotion of its corporate business to purchase, receive, hold, and dispose of any securities of any person or corporation, whether such securities shall be bonds, mortgages, debentures, notes, or shares of capital stock, and in respect of any such securities to exercise any and all the rights and privileges of owners thereof, and to the extent authorizedby law to lease, purchase, bold, sell, assign, mortgage, and convey real and personal property of any name and nature. The Union Stock-Yards & Transit Company of Chicago, hereinafter styled the "Transit Company," is a corporation organized and existing under and in pursuance of an act of the legislature of the state of Illinois, approved February 13, 1865, entitled "An act to incorporate the Union Stock-Yards & Transit Company of Chicago." The Transit Company was formed, among other things, to locate, construct, and maintain, upon land purchased for such purpose, in convenient proximity to the southerly limits of the city of Chicago, all the necessary yards, inclosures, buildings, structures, railway lines, tracks, switches, turn-outs, and aqueducts, for the reception, safekeeping, feeding, and watering, and for the weighing, delivering, and transfer, of cattle and live-stock of every description, and also dead and undressed animals, that may be at or passing through or near the city of Chicago, and for the accommodation of the business of a general union stock-yard for cattle and live-stock, including the erection and establishment of one or more hotel buildings, and the right to use the same, if deemed expedient for the convenience of drovers, dealers, and the public doing business at the said yards, with power to enlarge, relocate, and reconstruct said yards and buildings, as necessary or expedient, subject to the restrictions mentioned as to the location of the same, and to make advances of money upon cattle and live-stock; to make such reasonable charges as may be just and proper for care, subsistence, handling, and advances; and to construct a railway with one or more tracks from the grounds selected for its yards, so as to connect outside of the city of Chicago with the tracks of railroads which terminate in the city of Chicago, the lines of which enter the said city on the south between the lake shore and the south-west corner of said city, and on the west between certain points in the said charter designated, with power to take by grant land and real estate for the purposes aforesaid, and to acquire by condemnation, for the purpose of constructing their railroad tracks, lands for which no agreement could be made with the owners thereof, conferring on the company all the rights, privileges, franchises, and immunities contained in the act of said state entitled "An act to amend the law to condemn the right of way for the purpose of internal improvement, approved June, 1852," and the amendments thereof; and to transport and allow to be transported on their railroad all cattle and live-stock, and persons accompanying the same, to and from their yards; and also to transport and allow to be transported between the railroads centering in said city, and so connected by the road or roads, built by the company, by steam or other power, freight and property of every kind, as well as stock and cattle, and to take and receive toll for such freight and property transported. In section 2 its powers were restricted so as not to authorize the operation of a railroad for the conveyance of passengers or freight in the city of Chicago, and all exclusive contracts for the transportation of cattle, hogs, or other freight over the road are prohibited under a penalty of an absolute forfeiture of the rights and franchises conferred. Its capital was originally fixed at $1,000,000, and the power to issue bonds was limited to $500,000. Its capital was afterwards, but before the 10th day of July, 1890, the date that the Junction Company commenced business, duly increased to $13,200,000, divided into 132,000 shares of $100 each; and at that date all of said shares had been issued, and are now outstanding.

In pursuance of the powers conferred by said charter, the said Transit Company, in or about the year 1865, became established in business in the city of Chicago, and the owner of a large plant and property therein. The said company now owns all of the capital stock of the Chicago & Indiana State Line Railroad Company, and had so owned the same for a long time previous to the 10th day of July, 1890, and the said two companies during all such time owned, and still own, 470 acres of land, and 130 miles of steel-tracked railway, all situate in the city of Chicago. The Transit Company, for a long time previous to the 10th day of July, 1890, and ever since, has owned, and now owns, about one mile of riverfront in the said city of Chicago, accessible to the largest lake vessels, with docks half a mile in extent, all connected with the said railroad tracks, and about one mile of frontage on Halsted street, and three-fourths of a mile on Forty-Seventh street, both of which streets are important thoroughfares. On the greater part of said land are railway sidings, cattle sheds and pens to accommodate 25,000 head of cattle, 12,000 sheep, and 160,000 hogs; brick stabling for 2,000 horses; water-works; 40 miles of water and drainage pipes; 15 miles of macadamized streets; bank buildings; merchants offices; a cattle exchange; an hotel with capacity for 500 guests; an extensive electric light plant, lighting the yards; an hotel exchange; a large warehouse and depots; and the railway aforesaid extends north and south-east so as to connect with every railroad entering the city of Chicago. The profits of the said company are principally derived from a yardage charge or toll upon cattle, calves, hogs, sheep, and horses received at said company's yards, and from the sale of hay, corn, and other feed for the use of said cattle and animals while in said yards. During the year 1889, the said company received at said yards 3,146,249 cattle and calves, 5,998,526 hogs, 1,832.469 sheep, and 79,926 horses. For the year ending the 30th day of June, 1890, the net profits of the said company amounted to more than $1,700,000; and the net profits of said company have materially increased since that date. The total amount of the capital stock of the said the Junction Company authorized by its incorporation is $13,000,000, divided into 130,000 shares of $100 each, one-half of which is preferred, and the other general or common, stock. The said company commenced business as provided in said certificate of incorporation,and on or about the 10th day of July, 1890, issued the whole amount of its capital stock, both preferred and common, except about 5,000 shares. The complainant is the holder and owner of 91 shares of the said preferred stock, and 292 shares of the said general or common stock thereof, and has so held and owned the same for a long time, and previous to the negotiations for and the date of the agreement involved in this suit.

On or about the 10th day of July, 1890, the said Junction Company purchased 129,770 shares of the capital stock of the said Transit Company, for the sum of $22,587,283.90, of which $6,500,000 were paid for by the bonds of the Junction Company, and the balance in cash. The bonds aforesaid were part of a certain issue of negotiable bonds of the Junction Company amounting in the aggregate to $10,000,000, each bond being for $1,000 of principal, and payable on the 1st day of July, 1915, bearing interest at the rate of 5 per cent. per annum, payable semi-annually. The said bonds were secured by 120,000 shares of capital stock of the Transit Company, purchased and acquired by the said Junction Company. The balance of the whole issue of said bonds was disposed of by the Junction Company, together with at least $12,441,900 of its preferred and common capital stock for cash at par, by means of all which the Junction Company was enabled to purchase, and did purchase, the 129,770 shares of the capital stock of the Transit Company, and all of which shares the Junction Company so purchased and owned previous to the negotiations for and the making of the agreement, of the 27th day of July, 1891, and still owns the same.

The principal business of the Transit Company consists of the receipt at its stock-yards in Chicago of cattle, calves, hogs, sheep, and horses shipped to it from all points in the Mississippi valley, and points westward thereof, and elsewhere, and for which animals a fixed charge for yardage and charges for feed are made and received, while in said yards; and the principal purchasers of said animals, sent to said yards, are the various owners of slaughtering, packing, and canning establishments at the city of Chicago, which establishments are situate around and about said yards. Among them are the slaughtering, packing, and canning establishments or plants of Armour & Co., Nelson Morris & Co., and Swift & Co., (hereinafter sometimes called the "packers,") the same adjoining the stock-yards of the Transit Company; and the said parties are the largest purchasers of cattle, calves, hogs, and sheep at the stock-yards of the Transit Company.

Nelson Morris & Co. are the owners and holders of all the shares of the capital stock of the Fairbank Canning Company. The Swifts are the owners of a majority of the shares of the capital stock of Swift & Co., both being corporations organized under the laws of Illinois, and, with the establishment of Armour & Co., being the largest and the principal of the slaughtering, packing, and canning plants and establishments in the neighborhood of the stock-yards, the vicinity being a portion of the city of Chicago known as" Packingtown; "the business and purchase of cattle and live-stock of these three parties representing and constituting for several years from 55 to 60 per cent. of the whole revenue and income derived by the Transit Company from yardage and charges. These three parties, Armour & Co., Nelson Morris & Co., and Swift & Co., have recently purchased and now control what are known as the "Central Stock-Yards" in Packingtown, adjacent to the yards of the Transit Company, and have constructed and erected on said premises platforms, sheds, pens, railway sidings, etc., for the purpose of receiving and distributing among themselves any and all cattle and live-stock owned or purchased by them, or directly consigned to them, or either of them, thereby endeavoring to avoid the payment of any yardage or charges to the Transit Company; and had demanded that the Transit Company permit the use of their railroad tracks for the transportation of such cattle and live-stock to the Central Stock-Yards without the payment of yardage fees to the Transit Company; and recently commenced three several suits in equity in the circuit court of Cook county, Ill., against the Transit Company, claiming and demanding as relief that the said court, by order and decree, should compel the Transit Company to afford facilities over its railroad for the transportation and delivery of any and all cattle and live-stock consigned to them, or any of them, or to said Central Stock-Yards, without the payment of the usual yardage and charges thereon theretofore paid by the said parties, and collected by the Transit Company. The said Armour & Co., Nelson Morris & Co., and Swift & Co. have also purchased and are the owners of a tract of land at Tolleston, in Indiana, within 25 miles of Chicago, consisting of about 4,000 acres, which they acquired for the purpose and with the intention, among other things, of locating, establishing, and conducting the business of general stock-yards for cattle and live-stock, with the intention of forthwith removing their entire slaughtering, packing, and canning establishments from Packingtown, in Chicago, to the said premises at Tolleston, and of inducing other slaughtering, packing, and canning establishments to likewise remove their plants to Tolleston, and had made arrangements to that end; and had entered into negotiations with railroad companies to furnish the required facilities for transportation to and from said property of the cattle and live-stock, and organized a corporation under the laws of New Jersey under the name of the Tolleston Stock-Yards Company, with a capital of $1,000,000, for the purpose of conducting, on 1,000 acres of the tract, the business of a general stock-yard for cattle and live-stock its certificate states that it is incorporated for the purpose, among other things, of acquiring, locating, constructing, and maintaining one or more stock-yards for cattle and live-stock, with all the structures, aqueducts, and appliances of every description necessary for the reception,safekeeping, feeding, trading, delivery, and transfer of such stock, and also dead and undressed animals; to erect and establish hotel buildings upon or in proximity to the yards for the convenience of dealers and the public doing business at said yard; and various other purposes incident and convenient to the main purpose of its organization, together with the power to issue bonds, and secure the same by pledge or deed of trust upon the property acquired, held, or owned by the company, and to sell or pledge such bonds for proper corporate purposes, and, to the extent authorized by law, to loan, purchase, hold, sell, assign, mortgage, and convey real and personal property of any name and nature.

The disputes between the Transit Company and the packers led to efforts on the part of the Junction Company to effect some settlement and adjustment of the differences. The packers insisted that, in view of the large contribution they made to the business of the Transit Company, which they could save by carrying out their plans, if they abandoned the same, they should be paid the sum of $3,000,000, to be paid in cash or the stock of the Junction Company. Further negotiations were carried on by which the Junction Company were to obtain certain property and secure valuable business arrangements; and after due consideration the board of directors of the Junction Company, at a meeting thereof, having determined that it was for the best interests of the company so to do, by a resolution of the said board, ordered and directed the officers of the said the Junction Company to make and execute an agreement between the said company, of the first part, and Philip D. Armour, Jonathan O. Armour, Philip D. Armour, Jr., and George H. Webster, individually and as copartners, composing the firm of Armour& Co.; Nelson Morris, Frank E. Vogel, and Edward Morris, individually and as copartners, composing the firm of Nelson Morris & Co.; Gustavus F. Swift, Edwin C. Swift, Louis F. Swift, and Edward F. Swift, ail of the city of Chicago, state of Illinois, and Swift & Co., a corporation of the state of Illinois,—as parties of the second part. In pursuance of the said resolution, the president of the Junction Company executed the agreement in the name of the said the Chicago Junction Railways & Union Stock-Yards Company, and had the same duly attested and delivered in duplicate to or for the benefit of the parties of the second part therein mentioned; but as yet the provisions thereof have not been carried out. The same board which ordered and directed the making and execution of the said agreement is still in power. The members thereof were elected on the 2d day of July, 1891, to serve for a term of one year, and the said board threatens to carry out the provisions of said agreement, and undoubtedly will, unless prevented.

The recitals of the agreement, the truth of which is admitted by the pleadings, contain the statement of the incorporation of the Junction Company and of its capital stock, and the purpose of its or ganization, so far as relates to the purchase, holding, and dealing with the stock of the Transit Company; the incorporation of the Transit Company under the laws of Illinois, with the purposes of its organization; the operations of the Transit Company, and its construction of stock-yards, plant, and railway; that the Junction Company has purchased and acquired and owns 129,770 shares of the stock of the Transit Company; the facts before stated as to the sources and amount of the revenue and income of the Transit Company; that the purchase and acquisition of the shares of the Transit Company were made by the Junction Company with the expectation and belief that the revenue and income of the Transit Company from its business would continue and increase; that the market and demand for cattle and live-stock at the yards of the Transit Company in Chicago arises from and by reason of the presence of many large slaughtering, packing, and canning plants and establishments on premises in the immediate neighborhood, and contiguous to said stock-yards known as "Packingtown," in that city, and that the largest and principal of such plants and establishments are owned and controlled by the parties of the second part to said agreement, whose business at the yards of the Transit Company for several years represented and constituted 55 pet cent. of the revenue and income derived by the Transit Company from the yardage and charges; the recent purchase by the parties of the second part of the Central Stock-Yards for the purpose before stated, and their demand that the Transit Company permit the use of their railway tracks for the transportation and delivery of cattle and live-stock to the General Stock-Yards, and the commencement of the three suits to obtain the order and decree of the court compelling the Transit Company to afford facilities over its railways for the transportation and delivery of any live-stock consigned to either of them, or to the Central Stock-Yards, without the payment of the usual yardage and charges theretofore paid and collected by the Transit Company; the ownership of the tract at Tolleston, in Indiana, and the purpose of acquiring it, as before stated; the organization of the Tolleston Stock-Yards Company with the capital and for the purpose before stated; that the parties of the second part have offered to settle their claims and demands against the Transit Company as alleged in the three suits; also to transfer, surrender, and convey to it the Central Stock-Yards and all its appurtenances, with all covenants or easements; also to continue for 15 years to conduct their several businesses at Chicago, and to purchase cattle and live-stock at the yards of the Transit Company, and pay yardage and charges for cattle and live-stock purchased and owned by or consigned to them; also to transfer to the New Jersey (the Junction) Company all of the shares of the capital stock of the Tolleston Company, and to covenant and agree as set forth in the agreement in the terms and for the consideration therein stated: that the removalfrom the city of Chicago of the said business of the parties of the second part, respectively, would tend to diminish the demand and market for cattle and livestock, and shipment thereof to the yards of the Transit Company, so as to result in a large decrease of its business revenue and income; that, if said litigation referred to should be successful, there would be a further loss of revenue and income to the Transit Company; that the growth of Chicago; or municipal ordinances, or legislation, or other causes may thereafter render it necessary and expedient to permanently remove the said stock-yards to some less populous center; that the parties of the second part, although requested so to do, have declined and refused to withdraw the claims and demands made by them in the said suit, or to continue to pay to the Transit Company the yardage and charges on cattle and live-stock consigned to them, or to abstain from removing their said establishments to Tolleston, save and except upon the terms and covenants in the agreement specified.

Following these recitals is the agreement, containing the following covenants: First. That the parties of the second part cause to be conveyed to the Transit Company the premises known as the "Central Stock-Yards," including all of its appurtenances, rights, privileges, and easements, in fee-simple, free and clear of all liens and incumbrances; the Transit Company to pay therefor the sum of $250,000 in cash, or, at its option, a mortgage on the property, payable at any time within 10 years, with interest at 5 per cent. Second. That said parties of the second part will within the time specified cause each and all of the said suits to be discontinued and abandoned, or dispose of them in such manner as the Junction Company may reasonably require, and that they will not during the continuance of the agreement set up against the Transit Company the claim and demand alleged in said suit, nor during that period bring or cause to be brought any similar suits at law or in equity on any similar claim or demand. Third. That the parties of the second part, within the time therein named, transfer to the Junction Company certificates for all the shares of the capital stock of the Tolleston Company, fully paid and non-assessable, with the covenant that the Tolleston Company shall then own in fee-simple 1,000 acres of the land at Tolleston, free from nil incumbrances except the mortgage securing the issue of the $2,000,000 of 5 per cent. bonds of the Tolleston Stock-Yards Company. Fourth. That the parties of the second part during the period of 15 years, unless the Transit Company yards are previously removed from Chicago,—they and the Fairbank Canning Company,—will continue their several businesses at Packingtown, and that all cattle and live-stock slaughtered by them or the Fairbank Canning Company on their premises, or within 200 miles of Chicago, during the said period, shall pass through and use said yards, and pay the usual yardage and charges. Fifth. The parties of the second part guaranty that the Transit Company shall receive and collect from its yardage and charges on cattle and live-stock owned or consigned to the parties of the second part or the Fairbank Canning Company at said yards the aggregate sum of at least $2,000,000 within 6 years; and, if it does not, they covenant that they will pay whatever amount may be necessary to make up that sum. Sixth. The parties of the second part covenant that during the 15 years they will not permit any portion of the remaining 3,000 acres at Tolleston to be used for the purposes of stock-yards, or for slaughtering, canning, or packinghouse purposes; that no portion shall be sold without having such a restriction inserted in the deed; that they will grant to the Tolleston Company all reasonable easements and connections over the said 3,000 acres, in order to enable the 1,000 acres to be connected with the neighboring railways, canals, or highways; the Tolleston Company, as the owner of the 1,000 acres, on its part, to grant to the parties of the second part such easements or connections over the 1,000 acres as may be reasonably necessary to connect any part of the 3,000 acres with the 1,000 acres over the neighboring railways, canals, and highways. Seventh. That the parties of the second part, as long as the Transit Company shall conduct the business of a general stock-yards on its premises aforesaid, will not, within the present limits of Chicago, engage in or carry on, or suffer or permit their names to be used in carrying on, the business of stock-yards for the general use of the public. Eighth. That the said parties of the second part, during the term of 15 years, will not, in Chicago, or any place within 200 miles thereof, engage in or carry on, or permit their flames to be used in carrying on, the business of public or private stock-yards. Ninth. That the Junction Company, on its part, agrees to pay, at the time therein named, to the parties of the second part, the sum of $750,000 in cash, or in shares of its present capital stock, or partly in cash and partly in shares, at its option,—such shares to be held by the parties of the second part for five years; also to guaranty the payment of principal and interest of the $2,000,000 in bonds of the Tolleston Company,—the form and provisions of which bond, and the mortgage to secure the same, being particularly specified in said ninth and tenth covenants. Eleventh. That the 1,000 acres at Tolleston shall be in one block, with certain provisions with reference to the designation of easements and settlements of dispute. Twelfth. Is for the execution of further assurance and other incidental matters.

The parties of the second part to said agreement have given to the Junction Company the option, if it so desires, to have the 1,000 acres of land at Tolleston referred to in said agreement, with its appurtenances and easements, conveyed to the Junction Company directly, and of issuing and delivering to the parties of the second part to the said contract $2,000,000 of 5 per cent. 15-year bonds of the Junction Company secured by a purchase-money mortgage on said 1,000 acres, insteadof having said 1,000 acres conveyed to the Tolleston Company, and of guarantying the bonds of such latter company, as provided in the said original contract,—which option is still in force. The bill charges that the said agreement "is not within the powers and franchises of the Junction Company to make, and that such agreement is ultra vires the corporation, and that the carrying out of the same would be a perversion of the franchises and privileges of the said corporation, and the creation of debts and liabilities on the part of said corporation, and the payment of moneys, contrary to the rights of the stockholders, and to law and equity." Answers were filed by the Junction Company and by Armour & Co., Nelson Morris & Co., and Swiit & Co.; and the hearing was on bill and answers.

Joseph D. Bed/e, for complainant. Cortlandt Parker, William D. Guthrie, and Clarence A. Seward, for the Junction Co.

C. Parker, Jr., and Barker Gummere, for Armour & Co., Nelson Morris & Co., and Swift & Co.

GREEN, V. C., (after stating the facts.) The bill is filed by a stockholder in behalf of himself and any other applying stockholders against the corporation to prevent its carrying a contract made by the directors into execution, on the ground that the same is not legally within the powers conferred by its charter. No question is raised as to the validity of the organization, or the legality of the purposes stated in the certificate of incorporation as not contemplated by the corporation act, if indeed such questions could be raised by a private person in this court. National Docks Co. v. Central R. Co., 32 N. J. Eq. 755; Gas-Light Co. v. Green, 46 N. J. Eq. 118, 18 Atl. Rep. 844. He appeals not through or by the attorney general, but bases his claim for relief solely upon his ownership of certain shares of the stock of the Junction Company. The theory of the suit is that the agreement will be an injury, primarily to the company, and incidentally to him as a stockholder; that appeal to the present directors to protect the company and stockholders will be futile, as they have decided otherwise, and therefore he asks to be permitted to act for himself and others in like position. The only damages with which complainant as a stockholder can be threatened are to the security of his investment, and to the dividends he expects to receive. Whether the latter is imminent depends mainly upon the probable results of the arrangement challenged, as a business operation. As a holder of preferred stock, his fixed yearly dividend is secured by the articles of incorporation, while the dividend on his common stock must depend on the success of the business and the action of the directors, for such dividends may be lawfully diminished if the diversion of the same be for a purpose which is within the corporate powers, unless the non-declaration of them be in fraud of the rights of the stockholders. Beach, Corp. p. 601. Nor is his right to challenge action which he may deem dangerous to his investment absolute. Individual stock holders cannot question in judicial proceedings the corporate acts of directors, if the same are within the powers of the corporation and in furtherance of its purposes, are not unlawful or against good morals, and are done in good faith and in the exercise of an honest judgment. Questions of policy of management, of expediency of contracts or action, of adequacy of consideration not grossly disproportionate, of lawful appropriation of corporate funds to advance corporate interests, are left solely to the honest decision of the directors, if their powers are without limitation and free from restraint. To hold otherwise would be to substitute the judgment and discretion of others in the place of those determined on by the scheme of incorporation. Park v. Locomotive Works, 40 N. J. Eq. 114,3 Atl. Rep. 162, affirmed 45 N. J. Eq. 244, 19 Atl. Rep. 621; Elkins v. Railway Co., 36 N. J. Eq. 241; Rutland, etc., Co. v. Proctor, 29 Vt. 93; Mor. Priv. Corp. § 243; Beach, Corp. p. 388. By the corporation act, (section 1, par. 6, Revision, p. 177,) power is given to corporations to make by-laws for the regulation and government of its affairs. By the by-laws of the Junction Company, (article 2, § 1,) it is provided that the business of the company shall be managed and conducted by a board of 10 directors. The bill alleges that the board of directors of the Junction Company did, by a resolution, order and direct the execution of the contract in question; and the answer of the company states that each and every director of the company has voted in favor of the agreement as being for the best interests of the company. The agreement, then, has the unanimous sanction of the board of directors, to whose judgment and determination the management and control of the affairs of the company has been intrusted without restriction.

If the prudence of the contract were open to question by the complainant, a moment's consideration of the condition of affairs would demonstrate, not only its advantages to both parties, but that it was well-nigh vital to the interests of the Transit Company and of the Junction Company, its principal stockholder. The directors were confronted with the fact that the extensive and remunerative business of the Transit Company, at its stock-yards, was threatened with the loss of the custom of its principal patrons; that these parties, whose business had contributed from 50 to 60 per cent. of the earnings of the Transit Company, representing annually over $850,000 of profits, were not only about to withdraw their trade to their own yards, limited in capacity, but were engaged in preparations to establish a general plant on an extensive scale at Tolleston, only 25 miles distant. They must have known that this was a move which was dictated not only by business motives, but from well-founded apprehension that sooner or later interference by state or municipal legislation with the continuance of stock-yard business in the limits of the city of Chicago was to be expected, which action of course threatened the business of the packers and of the Transit Company at their respectivestock-yards alike, and which would result not only in incalculable injury to the plant, but would be ruinous to the business, if prudent foresight did not prearrange for its continuance elsewhere. Whether such adverse legislation was passed or not, the packers by their suits sought to enforce the performance of alleged duties which it was claimed the Transit Company as a carrier owed to the public. We cannot say that a decision adverse to the company in these cases might not be reasonably apprehended by the directors; a result by which they would have been forced to contribute the use of their facilities of transportation to the carrying on of a rival establishment. The development of such conditions could mean nothing but damage to the property and business of the company, and of course loss to the stockholders. On the other hand, the prosecution of the plan by the packers would have made it necessary for them to have expended a vast amount of money to carry it to a successful conclusion, and have added the management of another line of business to their already comprehensive enterprise. This situation of affairs led to negotiations between the parties, to arrive, if possible, at an harmonious and reasonable settlement of the matters in dispute; and after such negotiations the directors, being of opinion that it was for the best interests of the company that the adjustment should be made on the basis of the agreement, directed its execution. Stated concisely, the provisions of the contract and the covenants are: First, the Central Stock-Yards are purchased for $250,000; second, the suits involving the railroad connections and facilities are settled; third, the Junction Company buys all the stock of the Tolleston Company; fourth, Armour & Co., Morris & Co., and Swift & Co. agree that all their business for 15 years shall pass through the yards of the Transit Company, unless they are previously removed; fifth, the same parties covenant that their business in yardage and charges at said yards shall produce at least $2,000,000 during the next six years; sixth, they agree that for 15 years the land they bought at Tolleston, and did not sell to the Tolleston Company, shall not be used for stock-yard purposes; seventh, they agree that, so long as the Transit Company shall conduct its business on its premises in Chicago, they will not directly or indirectly carry on there the business of stock-yards for the general use of the public; eighth, that for 15 years they will not directly or indirectly engage in or carry on the business of public or private stock-yards in Chicago, or within 200 miles thereof. The Junction Company contracts for the conveyance to the Transit Company of the Central Stock-Yards, and the payment therefor by the Transit Company of $250,000 in cash or by a consideration mortgage; second, that the Junction Company will buy the stock of the Tolleston Company at par, that company to possess 1,000 acres of land selected from the 4,000 acres, with easements and connections over the remaining 3,000 acres; third, that as a price of the whole thing, and compensation for all which they get other than the Central Stock-Yards, they will pay $750,000 in cash or stock, and will guaranty the bonds of the Tolleston Company, whose stock they buy, to the amount of $2,000,000, the same being secured by the mortgage of that company, or, at its option, take the title to the 1,000 acres, and issue its own bonds for $2,000,000 to the parties of the second part. The present payment by the Junction Company proper, it will be observed, is limited to $750,000; the payment for the Central Stock-Yards being provided for by the Transit Company, to which said yards are to be conveyed.

The consideration of the contract is not to be arrived at by a disintegration and appraisement of its separate parts. It is essentially an entirety. It is agreed to as a whole. It recites that the parties of the second part had declined and refused to enter into the covenants imposed upon them, except on the terms and conditions specified in the agreement. The answer of the company says the consideration moving the defendant, and to be received by it for its execution of the agreement, was, in the unanimous opinion of the directors of the defendant, equal to at least the sum of $3,000,000, without regard to the value of the shares of the capital stock of the Tolleston Company, or to the great benefit and advantage which might result if the said stockyards were ultimately compelled to remove from the said city of Chicago; and said directors believed that the covenants to continue in business, to deal exclusively at said stock-yards, and to abandon all the claims in said suits, were of themselves ample and sufficient consideration for said sum of $3,000,000, and that such consideration therefor was, under the facts and circumstances therein stated, just and equitable, and was proportion ate to the consideration agreed to be paid by it for the transfer of the property, and the covenants therein specified and contained. The answer of Armour & Co., Morris & Co., and Swift & Co., while admitting that the value of the Central Stock-Yards does not exceed $250,000, and that the value of the 1,000 acres of land at Tolleston does not exceed $1,000,000, aver that in their judgment said properties, taken in connection with the privileges, easements, and covenants recited in said agreement, are fully worth to them what is agreed to be paid therefor, and would, in their opinion, realize to them large profits, if they did not sell the same, and continued their proposed enterprise.

But the question of adequacy of the consideration received by the company for what it agreed to pay is one which is not open to the plaintiff. So long as the consideration was valuable, and not so inadequate as to impute fraud, the amount to be paid was in the discretion of the board of directors, and will not be inquired into by the court. All of these considerations moving to the company are what the law denominates" valuable. "The lands and the easements were valuable. The compromise of the suits was valuable. The agreement to secure the $2,000,000 in business was valuable. The agreement not to commence a rival businesawithin a restricted territory, and for a given terra, was also valuable. All these considerations moving from the parties of the second part were in law a unity, and for such unity they were to be paid the amount agreed on. The law will not, because it cannot, apportion that amount to and among the realty, compromise, and covenants. It cannot apply the consideration distributively to the several obligations of the parties of the second part. The consideration to the company for its promises was the obligations generally of tire parties of the second part.

The terms of the contract and the consideration having, then, been settled by the directors, on what ground is it attacked? There is no intimation of fraud. No improvidence is alleged; no extravagance; no absence of occasion moving such a contract; no allegation of haste or of mistake of facts. Nothing is alleged but error in law on the part of the directors, who unanimously approved the agreement.

The legal presumption is in favor of the validity of the agreement. "If it is not on its face necessarily beyond the scope of the power of the corporation by which it was made, it will, in the absence of proof to the contrary, be presumed to be valid. Corporations are presumed to contract within their powers." Railway Co. v. McCarthy, 96 U. S. 267. The la w will not presume an agreement to be invalid which is capable of a construction which will make it valid. Curtis v. Gokey, 68 N. Y. 300, 304; Ormes v. Dauchy, 82 N. Y.443,448. The burden is upon the complainant to demonstrate that the agreement was beyond the corporate powers, and to show how and where the legal restraint, arises or was imposed which rendered the contract ultra vires. The rule is thus stated in Wood's Railway Law, p. 526: "All contracts of a corporation which are not contrary to the express provisions of their charter or the general law are presumed to be within their powers, and the burden is upon those who seek to invalidate them to show the elements which render them ultra vires." In Shrewsbury, etc., R. Co. v. Northwestern R. Co., 6 H. L. Cas. 113,125, Lord Cranworth said: "Prima facie, a corporation may contract under seal. You must show that the particular contract is one which the corporation has no power to enter into. It must be shown on the face of it to be a breach of duty,— something foreign to the object for which the company was established." In Scottish Co. v. Stewart, 3 Macq. 382, Lord Wensleydale said: "There can be no doubt that a corporation is fully capable of binding itself by any contract under its common seal, except when the statute by which it is created or regulated, expressly or by necessary implication, prohibits such contract between the parties. Prima facie, all its contracts are valid, and it lies on those who impeach any contract to make out that it is void." In Elkins v. Camden, 36 N. J. Eq. 241, 242, Van Fleet, V. C, says: "The courts will, as a general rule, presume that contracts made by a railway corporation which appear to be designed to promote its legitimate and profitable operation, are within the limits of its powers, and if their validity be assailed will require the assailant to assume the burden of demonstrating that fact."

The charge of the complainant is that "the said contract is not within the power and franchise of the Junction Company to make, and that such agreement is ultra vires the corporation, and that the carrying out of the same would be a perversion of the franchises and privileges of the corporation, and the creation of debts and liabilities on the part of the said corporation, and the payment of moneys, contrary to the rights of the stockholders, and to law and equity." The prayer is that the said agreement may be decreed as not within the powers and franchises of the Junction Company, and null and void. The powers of the company involved in this controversy, as ascertained from the third paragraph of certificate, are (1) to purchase, hold, pledge, transfer, sell, or otherwise dispose of or deal in shares of the capital stock of the Transit Company; (3) to exercise in respect to said shares any and all the rights, powers, and privileges of owners of shares of said capital stock; (5) to do any and all acts and things tending to increase the value of the shares of the capital stock of said company; (7) and in the promotion of its corporate business to purchase, receive, hold, and dispose of any securities of any person or corporation, whether such securities shall be bonds, mortgages, debentures, notes, or shares of capital stock, and in respect of any such securities to exercise all and any of the rights and privileges of owners thereof, and, to the extent authorized by law, to lease, purchase, hold, sell, assign, mortgage, and convey real and personal property of any name and nature. As I understand, the learned counsel of the complainant in his argument insists that the agreement does not come fairly within any part of paragraph 3 of the certificate which can be considered as a statement of objects within the contemplation of the law. The argument is that the clauses, "to exercise in respect to said shares the rights, powers, and privileges of owners of the stock," and "to do any acts and things tending to increase the value of the shares," read in connection with that authorizing the company to deal in said stock, confine the operations of the company to transactions in the shares of stock, as such; that, asowner of the stock, it has the power to exercise with respect thereto the rights of owners without any such declaration; and that the clauses relating to the doing of any act tending to increase the value of the stock, if not limited to the handling and operation of shares in dealing therein, is too indefinite to be considered as the proper statement of an object of the corporation. This contention limits the objects of the Junction Company, practically, to the buying and selling of the stock of the Transit Company. This, it seems to me, is too narrow a construction. If such were alone the object of the promoters of the company, there would be no occasion to incorporate for such purpose, or, if theydid so, to have done more than use the first subdivision of paragraph 3. The general object of the corporation is to be gathered, not from any one of the specifications, but from the whole of the paragraph. It is not simply to deal in the Transit Company's stock, but to own and hold it, and to increase its value, not by operations in the market, but by the exercise of auxiliary corporate acts which possibly it was not within the power of the Transit Company to exercise. It is said that a statement, to do any and all acts tending to increase the value of the stock, is too indefinite to be considered as the statement of an object of incorporation, as required by the statute; that there must be something specific stated; and it is asked, can such recital really confer any corporate power? And, if so, what is the limit of its exercise? If it was a declaration of power to do any and all acts tending to increase the value of its own stock, it would certainly be without effect. In re Crown Bank, 44 Ch. Div. 634. It would be either surplusage, or else too indefinite to be considered as a statement of a purpose as required by law, because — First, so far as any authorized acts are concerned, the company would possess the right to do them without such statement; and, second, it could confer no other powers, because the law requiring the objects to be named must mean they should at least be indicated; but here the stock to be benefited, referred to, is not the stock of the Junction Company, but the stock of another, namely, the Transit Company. It is that the Junction Company shall have the power to do acts tending to increase the value of the stock, not its own, but that of the Transit Company; and it seems to me that such clause may be fairly construed to authorize such acts, tending to increase the value of that stock, as fall within recognized lawful corporate powers; those not against the policy of the law, which are germane to the general purposes of the corporation, and are specially enumerated in the certificate, or are incident thereto. The recital in the certificate anticipates and answers the question and objection asked and urged by the complainant, how can the funds of the Junction Company be used for the direct benefit of the stock of another, namely, the Transit Company, and only indirectly to the benefit of the Junction Company as a stockholder of the company directly benefited? for such recital expressly confers such power.

What limitation is, then, to be applied to the powers sought to be secured by subdivisions 3 and 5 of paragraph 3; and can the agreement be brought within the provisions of the general corporation act, or the specifications of the certificate? The general act gives to all corporations general corporate powers, and all others necessary to their exercise. If these were not sufficient to effect the objects of the corporation, recourse was formerly had to the legislature for a specific grant of power. The constitution providing that "the legislature shall pass general laws under which corporations may be organized, and corporate powers of every nature obtained," and the general corporation act being, as it now stands, passed in obedience to the mandate of the constitution, the certificate required by that act becomes the charter of the company, and the equivalent of the former special act of the legislature. Ashbury Co. v. Riche, L. R. 7 H. L. 653; Guinness v. Land Corp., 22 Ch. Div. 349, 357. As amended, the corporation act permits incorporations not only for objects specified therein, but for "any lawful business or purpose whatsoever;" which general clause is not, however, to be construed as embracing powers to do those things which would deprive the corporation of its ability to carry out the objects for which it was formed, or discharge any duties which it might under its charter owe to the public, or which are contrary to the policy of the law. Oregon Ry. & Nav. Co. v. Oregonian Ry. Co., 130 U. S. 1, 9 Sup. Ct. Rep. 409. By the statement, therefore, in the certificate of incorporation, of the desired powers, under the head of objects of the corporation, the special powers are obtained, and, as incident thereto, such others as may be necessary for their exercise. So that the general corporation act confers on the company certain powers, the certificate contemplates others, and incidental powers follow, not only with respect to the general, but also to the special, powers.

The learned counsel strongly presses the provisions of section 3 of the corporation act, as follows: "In addition to the powers enumerated in the first section of this act, and to those expressly given in its charter or certificate under which it is or shall be incorporated, no corporation shall possess or exercise any corporate powers except such as shall be necessary to the exercise of the powers so enumerated and given." The construction to be given to the words "necessary to the exercise" is settled in this state. Beasley, C. J., delivering the opinion of the court of errors and appeals in State v. Hancock, 35 N. J. Law, 537, says, (page 545:) "Power necessary to a corporation does not mean simply power which is indispensable." "A power which is obviously appropriate and convenient to carry into effect the franchise granted, has always been deemed a necessary one." Page 547. "In short the term comprises a grant of the right to use all the means suitable and proper to accomplish the end which the legislature had in view at the time of the enactment of the charter." McCulloch v. Maryland, 4 Wheat. 316, 414; Olmsted v. Morris Aqueduct, 47 N. J. Law, 311; Crawford v. Longstreet, 43 N. J. Law, 325; Morris Canal v. Love, 37 N. J. Law, 63. While it is true that, when the state challenges the action of one of its corporate creations, it may insist on a clear warrant for its action, (Chicago, R. I. & P. Ry. Co. v. Union Pac. Ry. Co., 47 Fed. Bep. 15,) the application of the doctrine of ultra vires to the acts of a corporation in suits by individuals is not by an inflexible rule. It yields not only to necessity, but to transactions incidental to prescribed powers. Lord Justice James, in Attorney General v. Railway Co., 11 Ch. Div. 449, 479, held thatthe arrangement attacked was "a reasonable and proper, and therefore legitimate, Incident of the proper business" of the company. In same case on appeal, (L. R. 5 App, Cas,) Selborne, Ld. Ch., said: "I agree with Lord Justice James that this doctrine [ultra vires] ought to be reasonably, and not unreasonably, understood and applied; and that whatever may be fairly regarded as incidental to and consequential upon these things which the legislature has authorized, ought not, unless expressly prohibited, to be held by judicial construction to be ultra vires. "J Lord St. Leonards, in Railway Co. v. Hawkes, 5 H. L. Cas. 331, at 380, says: "I trust that this decision and the decisions of this house during the present session * * * will place the powers and liabilities of directors and their companies in making contracts, and in dealing with third parties, upon a safe and rational footing. They do not authorize directors to bind their companies by contracts foreign to the purpose for which they were established, but they do hold companies bound toy contracts duly entered into by their directors for purposes which they have treated as within the objects of their acts, and which cannot clearly be shown not to fall within them." 1 Mor. Priv. Corp. § 362, says: "It is a well-established general rule that a corporation may carry on the business for which it was chartered in the manner in which a business of that particular kind is usually carried on. What the usual manner of carrying on a business is, cannot be determined by the application of purely legal principles. It is a question of fact, and not a question of law. Evidently, therefore, it is impossible to decide abstractly that acts of a particular description are within or without the chartered powers of a corporation. The right of a corporation to perform an act depends in every case upon all the surrounding circumstances. No act is authorized under all circumstances, and facts can be conceived which would render almost any act justifiable. Thus a railroad company may usually buy coal and material for constructing its road, but it would have no authority to buy coal or anything else as a speculation, with the intention of selling it again. On the other hand, it would clearly be unauthorized, under any ordinary state of facts, to use the funds of a railroad company for building a church or a theater; yet this use of the corporate funds might be entirely justifiable if a church or a theater were required for the use of the company's workmen in a part of the world where no church or suitable place of recreation was accessible."

Applying these principles, we proceed to examine the contract in detail with reference to the question whether it is within the charter powers of the corporation. The action of the directors is their determination that the ends obtained will tend to increase the value of the Transit sto".k. It should be borne in mind that the Junction Company is a trading corporation, not engaged in any public business, or owing any public duty, or exercising any franchise of eminent domain. Its operations under its charter might be entirely suspended without detriment to a single public interest; and it would seem that in the making of this agreement all that was involved was the partnership relation between the shareholders of a company.

Central Stock-Yards. We have first the purchase of the Central Stock Yards, which are to be conveyed to the Transit Company, for which $250,000 is to be paid, either in cash, or secured partly or wholly by a mortgage. It can scarcely be pretended that the purchase of the Central Stock-Yards is ultra vires either of the Transit Company, which takes the title, or of the Junction Company, which owns the stock of the Transit Company, and which contracts in this regard as a stockholder. The agreement to purchase the Central Stock-Yards for the Transit Company bad a direct tendency to increase the value of its shares; for it added a new asset, of the value of $250,000, to the previous assets of that company. The purchase of adjoining property devoted to like use is but an extension of the domain and the business of the Transit Company. By section 2 of the charter of the Transit Company, power is conferred on that corporation to purchase lands for the purposes of its stock-yard business within prescribed limits. The covenant in question is for the purchase of just such land, and for just such a purpose, and within those limits. It is therefore within the powers of the Transit Company. There is no pretense that the purchase of the stock-yards property is for the purpose of holding the same for speculation or sale, or for any purpose or use whatever inconsistent with the corporate business and powers of the corporation, or that any use of the same is contemplated inconsistent with either of their corporate powers or duties. The Junction Company, though under no obligation to do so, might lawfully pay the purchase money; for through its stock it would receive an immediate equivalent therefor in the increase of the assets of the Transit Company. It is argued, however, that, as the Junction Company is the owner of only 129,770 shares of the 132,000 shares of the Transit Company, the expenditure of the funds of the Junction Company will enhance the value of the remaining 2,230 shares of the Transit Company, without the owner thereof contributing anything to such increased value. If the expenditure was to be made for a benefit which would accrue only to the holders of the other shares, there would be force in the suggestion; but the argument itself is based on the assumption that by the transaction the value of the stock is to be increased by carrying the contract into effect. By the same ratio will the holdings of the company be increased. In Sutro Tunnel Co. v. Segregated B. Min. Co., (Nev.) 7 Pac. Rep. 271, a mining company agreed to pay to the tunnel company so much per foot of the tunnel constructed. The work would facilitate the draining of the mining company's mine. This would be an appropriation of the company's funds to the construction of the worksof another. Held not ultra vires, as the company received the benefit of the expenditure. It is immaterial if the benefit is directly or indirectly received. In Chicago, R. I. & P. Ry. Co. v. Union Pac. Ry. Co., 47 Fed. Rep. 15, it was objected on behalf of the Omaha Railroad that the contract provided that the Rock Island should pay to the Union Pacific the rental for the use of the Omaha's line. Brewer, J., says: "The Union Pacific owns substantially all the stock of the Omaha, and a contract by a company that the rental for the partial use of its property shall be paid directly to the stockholders, instead of to the company, surely cannot be declared beyond the power of the corporation. "

Purchase of the Tolleston Stock. The Junction Company has express power by its articles of organization, (paragraph 3, subd. 7.) in the promotion of its corporate business,"to buy, hold, and dispose of any securities of any person or corporation, whether such securities shall be bonds * * * or shares of stock, and, in respect to any such securities, to exercise any and all the rights and privileges of owners thereof." The corporate business of the Junction Company being to deal in stock of the Transit Company, and to do anything authorized by its charter to increase its value, and being, as above, authorized to buy the stock of any corporation, the buying of the stock of an intended rival, with the probable intent to use the purchase for the extension of the Transit Company's business, and with the certain effect of preventing the depreciation of that company's stock, is certainly within the powers contemplated by the certificate of the Junction Company. The tendency and intent of the contract is to raise or preserve—which is the same thing—the value of the capital stock of the Transit Company, the capital in trade of the Junction Company. Buying this stock is within the charter powers, because it tends to preserve the value of the Transit Company's stock, and to afford the Transit Company an opportunity for the enlargement of business, and because the Junction Company has the right under the charier, in its corporate business, to buy the stock of any other company. Again: By the purchase of the capital stock of the Tolleston Company the Junction Company becomes practically the owner in fee-simple of 1,000 acres of laud in Tolleston, with valuable easements over the adjoining lands, free from all lien and incumbrances except a mortgage lien to secure $2,000,000 of 5 per cent. first mortgage bonds of that corporation. This covenant is in substance and effect a covenant on the part of the Junction Company to purchase 1,000 acres of land and easements, together with all the corporate privileges of the Tolleston Company, for the purpose of using the same as a general stock-yards for yarding, etc., cattle and live-stock. The Junction Company has, however, the option to have the 1,000 acres conveyed directly to it, which is within the express terms of the certificate.

Guaranty of the Tolleston Bonds. The obligation to guaranty the payment of $2,000,000 of the Tolleston Company's bonds is, in view of the existing option to issue the Junction Company's bonds direct, instead of making such guaranty, of less moment than it would have been if such option did not exist. Was it, however, a lawful undertaking? The Junction Company was authorized by its charter to issue its own bonds, and by it and by section 1, subd. 4, of the corporation act to mortgage its real estate. It was also authorized by its charter to receive and dispose of any securities of any corporation, whether bonds or otherwise, and in respect thereto to exercise all of the rights and privileges of the individual owners thereof. Having such powers, it could lawfully do what the individual owners thereof might do. The parties of the second part were the owners of the 1,000 acres of land which are to be conveyed to the Tolleston Company. They were also the owners of all the stock of the Tolleston Company, and the owners of all the bonds issued by such company. The parties had a right to estimate the value of the 1,000 acres, as between themselves, and their stock, at such value as they pleased, and to secure the payment of such value by such lawful means as they chose to adopt. Lorillard v. Clyde, 80 N. Y. 387. The amount of the bouds to be guarantied represents so much of the consideration to be given by the Junction Company for all it is to receive under the contract. As stated, it could, under its charter, pay the amount by the issue of its own bonds. If, as part of its purchase, it received the bonds of the Tolleston Company, it could pay them to the parties of the second part as payment pro tanto of the consideration,—its own debt. In doing this it would be authorized, under the authorities, to guaranty the payment of the bonds. Railroad Co. v. Howard, 7 Wall. 392; Rogers L. & M. Works v. Southern R Ass'n, 34 Fed. Rep. 278; Low v. Railroad Co., 52 Cal. 53; Opdyke v. Railroad Co., 3 Dill. 55; Arnot v. Railroad Co., 5 Hun, 608; Madison v. Society, 24 Ind. 457. By guarantying the bonds, and the packers taking the guaranty as part payment of the consideration, the same result is reached without circumlocution; and, so far as its legality is concerned, mere routine of action cannot be material. By this means, instead of paying the money itself, which might have been required, it gains a credit for all the years during which these bonds have to run. Instead of pledging its own credit directly, as by issuing its own bonds or debentures or notes, it lets the Tolleston Company remain the principal debtor, while it assumes the formal position of surety. If it received no consideration, and was only guarantying for the accommodation of the Tolleston Company, in which it had no interest, the contract would be ultra vires and void,—It would be a fraud on the stockholders; but, given as part of the consideration, the transaction amounts simply to this: The packers did not exact money, nor even the bonds of the Junction Company for the money. They agreed to accept the direct promise of the Tolleston Company, secured by its mortgage, and a conditionalagreement of the Junction Company that the promise should be kept. It is just as lawful for the corporation to give a conditional contract to its creditor to pay him money as it is to give him a contract to pay directly and without provision. It is the business of the creditor to determine whether he will take one or the other. Both are equally binding if there is consideration for them The form of the contract is nothing. The whole question turns on the consideration. Again, the substance and effect of the covenants are that the Junction Company buys of the packers 1,000 acres of land at Tolleston for stock-yards, subject to a mortgage securing the payment of $2,000,000 of bonds, together with the easements, for the benefit of said land, over 3,000 acres of land immediately adjoining, owned by the packers, and guaranties therefor the payment of the $2,000,000 of bonds; and in equity such guaranty is nothing more than an assumption of a mortgage debt existing upon the land, which the Junction Company, in the exercise of power clearly specified in its charter, has purchased for use as a stock-yard.

But there can be no question that under the power contained in the third clause of its charter, "to purchase, mortgage, and convey the said real property, easements, and appurtenances," the Junction Company may exercise its option, and take the conveyance for the said 1,000 acres of land at Tolleston, with its appurtenances and easements, by direct conveyance to itself, and issue and deliver to the packers the $2,000,000 5 per cent. 15-year bonds of said corporation, secured by a purchase-money mortgage on the said 1,000 acres, with its appurtenances and easements.

It is said that the value of the land is so disproportionate to the amount to be paid and the liability incurred as to dispel any idea of purchase. The error of this argument lies in the fact that it ignores the entirety of the contract, and loses sight of the covenants for business guarantied to produce $2,000,000 in six years, the agreements not to enter into competitive business for 15 years, and the other benefits secured; and as to the adequacy of the consideration of which covenants the court will not inquire. Curtis v. Gokey, 68 N. Y. 300; Hitchcock v. Coker, 6 Adol. & E. 438; Archer v. Marsh, Id. 959; Leighton v. Wales, 3 Mees. & W. 545; Pilkington v. Scott, 15 Mees. & W. 657; Sainter v. Ferguson, 7 C. B. 716; Gravely v. Barnard, L. B. 18 Eq. 521; and cases cited in 92 Amer. Dec. 754.

The foregoing embrace the covenants of the Junction Company, except the payment of the $750,000. Question is made as to the corporate right to expend the money of the company for the purposes covered by the contract. It is asked, can this money be used "to virtually swallow up another corporation?" "Did the stockholders of the Junction Company subscribe to or take their stock under any possible thought that the Junction Company was in fact to operate the Transit Company, and pay out its money and create its liabilities for the benefit of the Transit Company as such?" The contract does not contemplate that the Junction Company is to operate the Transit Company. There is no amalgamation or consolidation of the companies. Each preserves its organization, and manages its own affairs by its own officers. Neither of them parts with any element of their powers, or deprive themselves of their ability to discharge their corporate duties and exercise their franchises. The Junction Company is a stockholder, and contracts as a stockholder, and must carry out its contract as such. That it can be such stockholder, without limitation as to amount, is provided for by the certificate, and is the fundamental purpose of its being. The stockholders are presumed to have taken their shares with full notice that the funds of the company might be expended for any object contemplated by its certificate of incorporation, and it expressly contemplates the doing of those things which tend to increase the value of the stock of the Transit Company.

The covenants considered seem to be covered by the provisions of the certificate, or fairly incidental thereto. There remain two other elements of the contract which form part of the consideration for the expenditure of the money of the company, both of which are apparently for the benefit of the stock of the Transit Company, viz., the provisions for the compromise of the suits, and for non-competition. Neither of these objects is referable to any specification in the certificate, but they are powers incident to corporate management and business. The Junction Company may lawfully compromise the suits against the Transit Company, and use the company's funds for this purpose. Brice's Ultra Vires, (2d Eng. Ed.) p. 609, says: "Lastly, there is a compromise of dispute. This may come into play in connection with two distinct classes of matters,—ordinary disputes as to the construction, etc., of contracts, and as to the rights and liabilities in respect thereof, and of other matters; and disputes as to the position of shareholders, and as to their rights and liabilities. As to the former class of matters, probably, it may be laid down without qualification that the capacity to settle these must be incident to every form of general agency, for corporations, and that therefore governing bodies not positively restricted therefrom may compromise all such disputes." Mor. Priv. Corp. § 424, says: "There can be no doubt that any corporation may enter into a compromise; and the payment of a claim by the agents of a corporation in good faith, for the purpose of avoiding litigation, will not be held unauthorized merely because the claim was not a just one." In First Nat. Bank v. National Exchange Bank, 92 U. S. 122, at 127, the court says: "Compromises to avoid or reduce losses are oftentimes the necessary results of this condition of things. These compromises come within the general scope of the powers committed to the board of directors and the officers and agents of the bank, and are submitted to their judgment and discretion, except to the extent that they are restrained by the charter or by-laws. Banks may do inthis behalf whatever natural persons could do under like circumstances. * * * [Page 128:] In the honest exercise of the power to compromise a doubtful debt owing to a bank, it can hardly be doubted that stocks may be accepted in payment and satisfaction, with the view to their subsequent sale or conversion into money so as to make good an anticipated loss. * * * It is difficult to see how a debt due from, or a contested obligation resting upon, a bank, occupies any different position in respect to this power of adjustment and compromise from that of a debt owing to it. The object in both cases is to get rid of or reduce an apprehended loss growing out of legitimate business; and it would seem that whatever might be done in the one case ought not to be excluded from the other, under the same circumstances." In New Albany v. Burke, 11 Wall. 96, the city subscribed for stock of a railroad company, and issued bonds. The validity of the bonds was denied by the tax-payers, who filed bills against them. The company had pledged the bonds to creditors. The company applied to the city to pay the sums due, take back the bonds pledged, and be discharged from the issue of the balance of the bonds not issued; and this was effected. The purchaser of a judgment against the company, on execution returned unsatisfied, filed a bill against the city, alleging that the compromise was illegal. It was held that the transaction was not invalid. The court said (page 105) that the complainants could "have no standing in court unless the arrangement was absolutely null for want of power in the parties to make it, or unless it was fraudulent as against them, and therefore voidable at their suit," and "that the common council were free to exercise their own discretion." It is even held that if the result be the promotion of the welfare of the company the directors may lawfully secure such result by a gratuitous disbursement of the company's funds and property. Hampson v. Candle Co., 45 Law J. Ch. 437; Taunton v. Insurance Co., 33 Law J. Ch. 406, 2 Hem. & M. 135; Whetstone v. University, 13 Kan. 320; Vandall v. Dock Co., 40 Cal. 84; Sherman Center Town Co. v. Russell, (Kan.) 26 Pac. Rep. 715.

The non-competition was but an incident subsequent to the affirmative agreement to remain the customers and patrons of the Transit Company; but, if the purpose of the agreement had been the prevention of competition, such a purpose would have been lawful. In Railway v. Hawkes, 5 H. L. Cas. 331, Lord St. Leonaeds (page 371) said: "Where directors are acting in the obvious line of duty, as in this case, buying off an opposition, and acquiring property necessary or useful for the corporation, and the party contracting with such directors is not aware of any intended misapplication on their part, I am of opinion that the contract is binding, although it can afterwards be shown that the property really was not required for the railway. The safety of men in their daily contracts requires that this doctrine of ultra vires should be confined within narrow bounds." Page 373: "Directors cannot act in opposition to the purpose for which their company was incorporated; but, short of that, they may bind the body just as corporations in general may do." In Leslie v. Lorillard, 110 N. Y. 519, 18 N. E. Rep. 363, plaintiff was a stockholder of the Old Dominion Steam-Ship Company of Delaware, successor of the Old Dominion Steam-Ship Company of New York. The Lorillard Steam-Ship Company was a New York corporation, and was engaged in a competing business with the Old Dominion (New York) Company. An agreement was entered into between the two companies by which the Old Dominion Company agreed to pay a certain sum monthly to the Lorillard Company if it would discontinue the running of its vessels, or of any other, between the ports mentioned, and that it would not charter or sell the vessels to any other company or person on that route, and would not become interested in the running of steamships between those places. The plaintiff, the new company, being subjected to the liabilities and contracts of the former, sought to enjoin the payment to the Lorillard Company, and demanded an injunction, and the cancellation of the contract and repayment by the Lorillard Company. There was a demurrer, which was sustained. The court says, (page 535,110 N. Y., and page 367, 18 N. E. Rep :) "The contracts were within the power of the corporation to make; and if they were free from the taint of fraud, and were not procured to be made by some collusion or conspiracy, then they are binding upon the company, and constitute an obligation which the officers must discharge." Page 536, 110 N. Y., and 367, 18 N. E. Rep.: "We think, as these contracts were not ultra vires, or assailable on grounds of public policy, that they were such as came within the discretionary powers of the board of management to make in the interests of the corporation. Within the limits of the chartered authority, the officers of a corporation have the fullest power to regulate its concerns according to their best judgment." Page 537, 110 N. Y., and 367, 18 N. E. Rep.: "These contracts were such as the corporation could legitimately make, and consequently came within the scope of the ordinary powers of corporate management." Referring to the then recent case of Match Co. v. Roeber, 106 N. Y. 473, 13 N. E. Rep. 419, the court says, (page 534, 110 N. Y., and 366, 18 N. E. Rep.:) "Under the authority of that case, it may be said that no contracts are void as being in general restraint of trade where they operate simply to prevent a party from engaging or competing in the same business. It is there said, (page 483, 106 N. Y., and page 422, 13 N. E. Rep.:) 'To the extent that the contract prevents the vendor from carrying on the particular trade, it deprives the community of any benefit it might derive from his entering into competition. But the business is open to all others, and there is little danger that the public will suffer harm from lack of persons to engage in a profitable industry. Such contracts do not create monopolies. They confer no special or exelusiveprivileges.' Under the doctrine of that case, it is difficult to see how the contracts which are complained of here are open to the objection suggested by counsel. Regarded only in the light of what they intended to effect, these agreements removed a dangerous rival, whose competition may have been deemed dangerous to the success or maintenance of the business of the Old Dominion Company. They could not, of course, exclude all competition in the business, but would in that particular case." In Association v. Levy, 54 N. Y. Super. Ct. 32, an agreement, by a corporation whose business was that of buying and selling sheep and lambs, and buying and selling sheep and lambs on commission, and a corporation whose business was that of selling sheep and lambs on commission, that the stockholders of the first corporation, who engaged in the business of butchering sheep and lambs for the New York market, should for a period of three years buy their sheep and lambs from the members of the second corporation, and that the members of the second corporation should during the same period sell sheep and lambs for the New York market to the members of the first corporation only, was held not to be against public policy. In Roller Co. v. Cushman, 143 Mass. 353,9 N. E. Rep. 629, the manufacturers of a certain kind of curtain fixtures, desiring to avoid competition, formed a corporation in which they were the only stockholders, and an agreement was executed by the corporation, on the one part, and the three manufacturers, of the other, by the terms of which the manufacturers gave the corporation the sole right to sell said curtain fixtures for three years; the corporation agreeing to buy, at a specified price, all that the manufacturers might make, and the manufacturers acting as the agents of the corporation, receiving a commission on goods sold by them. The agreement provided that during its term the manufacturers should not dispose of their patents except upon such terms that the transferee should he bound by the agreement, and that they should not dispose of their stock in the corporation without the written assent of the majority of the stockholders. It was held that the agreement was not void as against public policy; and that the court would restrain by injunction one of the manufacturers from selling goods on his own account in violation of the agreement. In Gloucester Isinglass & Glue Co. v. Russia Cement Co., (Mass.) 27 N. E. Rep. 1005, an agreement between two manufacturers of glue, the object of which was to avoid competition between themselves, and secure to each a reasonable profit, was held not to be against public policy.

A doubt was suggested by the learned counsel for the complainant in his argument whether or not the covenants of the packers in covenants 7 and 8 of the contract are not void as in illegal restraint of trade. There is no direct attack on the contract made by the bill on these grounds. It may, however, be said that it is raised collaterally on the question of ultra vires, on the ground that directors would have no power to use the funds of a corporation in performing an agreement which could not be enforced against the other parties, or it may be proper to consider it under the allegation of the bill that it is a payment of moneys contrary to the rights of the stockholders, and to law and equity. The question has already been partially reviewed in considering whether a corporation can legally make an agreement for non-competition. It will be observed that no exclusive privileges are granted by any of the covenants of the contract. So far as the Transit Company, the quasi public corporation involved, is concerned, no restriction of privilege or accommodation to any person or the public is contemplated. The covenants are those of the packers, and relate to their own business. The seventh and eighth covenants, referred to, are as follows: The seventh covenant is that the parties of the second part will not, as long as the Transit Company conduct their stock-yard business within the present limits of Chicago, engage in or carry on directly or indirectly, or be engaged or concerned or interested, or permit or suffer their names to be used or employed in carrying on, there, the business of stock-yards for the general use of the public; and by the eighth that they will not during the term of 15 years, in the city of Chicago, or at any place within 200 miles thereof, engage in the business of public or private stock-yards in any manner or form whatsoever. The rule as formulated by Mr. Freeman in his notes to Angier v. Webber, 92 Amer. Dec. 748, at 751, is: "Contracts which impose an unreasonable restraint upon the exercise of a business, trade, or profession are void, but contracts in reasonable restraint are valid;" referring to 2 Add. Cont. (Abbott's Ed.) 1150; Bish. Cont. §§ 515, 516; Mete. Cont. 232; 2 Pars. Cont. 748; Whart. Cont. §§ 430, 431; Benj. Sales, § 520 et seq.; 2 Pom. Eq. Jur. § 934; 1 Smith, Lead. Cas. 694, notes to Mitchel v. Reynolds,—and a vast number of cases. The validity of the restrictions is to be governed by their reasonableness at the time of making the contract. 92 Amer. Dec. 753. See consideration of the point in cases 4 Harv. Law Rev. "On Contracts in Restraint of Trade." "The test to be applied in determining whether a restraint is reasonable or not is to consider whether the restraint is only such as is necessary to afford a fair protection to the interest of the party in whose favor it is given, and not so large as to interfere with the interest of the public." Van Fleet, V. C, in the syllabus of Mandeville v. Harman, 42 N. J. Eq. 185,7 Atl. Rep. 37; Brewer v. Marshall, 19 N. J. Eq. 537. See reference to other cases to same effect in 92 Amer. Dec. 752. For cases illustrating the rule, see 92 Amer. Dec. 756-758.

As to the seventh covenant, the packers have sold out their Central Stock-Yards, practically, to the Junction Company; and a great inducement for that corporation to buy the Central Stock-Yards was this covenant of the packers not to carry on such business in the present limits of the city of Chicago so long as the Transit Company should carry on that businessin that city. This covenant seems to be eminently reasonable. The packers sold the Central Stock-Yards, and the good-will of their business therein. Their business was established, large, and valuable. They sold both The yards in which the business is carried on, and the business itself, to their covenantees. It is reasonable in this: It is for a definite time, to-wit, a continuance of the Transit Company in the stock-yard business in Chicago; and the restraint is limited to a particular locality, to-wit, the city of Chicago. So far forth as this covenant is concerned, the packers may carry on the business of general stock-yards any where and everywhere else in the world. Haying sold their stock-yards for their own price, if not a fraud, it would be most unjust for them, so long as the facilities furnished by the covenantees were ample for their business, to open new yards in competition. The stock-yard accommodations furnished by the company are on an extensive scale, and it is apparent that its business would not be fairly protected if the packers were to engage in such competitive business. So far as the interests of the public are concerned, the quotation from Match Co. v. Roeber, 106 N. Y. 473, 13 N. E. Kep, 419, made in Leslie v. Lorillard, 110 N. Y. 519, 18 N E. Rep. 363, would seem to be entirely appropriate and conclusive. These considerations, of course, also apply to the eighth covenant, which is also partial as to time, as it endures but for 15 years, and partial as to locality, in that it is limited to the part of the country within 200 miles of the city of Chicago. Considering the nature of the business, I cannot say that this limitation of 200 miles is unreasonable. The compass to which the business is extended, and in which it has necessarily been carried on in its material parts, reaches out to the most distant territories of the Union; and the contracts under which the business of the stockyards is carried on extend to the most distant plains of the far western and southwestern states. The thousands of cattle and live-stock that are herded and pastured upon these plains are the subject-matter of the business. Stockyards for the collection and merchanting of this stock may be located at many central points of railroad junctions. Omaha, St. Louis, Cincinnati, Cairo, Terre Haute, and other places are points at which the stock-yards business may be carried on advantageously. In any or all of these points, anywhere beyond 200 miles from Chicago, the packers may continue to carry on that business; and in any or all of them the stock-yards business of the Junction Company may be to a considerable extent interfered with. At any place within 200 miles of Chicago the stock-yards businesa, if carried on by the packers, would directly or positively interfere with the business of the Junction Company. Outside of the limit of 200 miles the interference would be indirect. It is obvious that with reference to a business of such an extent as that of the stock-yards, covering as it does the transaction of business, by correspondence and contracts, over the extended territory indicated, a covenant. not to exercise the business within a certain place, or within 200 miles thereof, is reasonable. Several reported cases have held restrictions of 150 and 200 miles reasonable where it was not so apparent as in this. 92 Amer. Dec. 756 et seq.

In my opinion the covenants entered into by the company in this contract are referable to the objects stated in their certificate of incorporation, or to powers incident to the corporation, and are authorized by its charter, and that covenants 7 and 8, entered into by the packers, are not in illegal restraint of trade, and I advise that the bill be dismissed, with costs.