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Missouri1 it has never been conferred except to a limited extent in the case of certain classes of corporations.

I have already called attention to one of the frequent uses of the holding company in the recapitalization of industrial corporations having outstanding preferred stock with large arrears of dividends, as in the case of the Central Leather Company and the American Malt Corporation. It is frequently resorted to where the unanimous action of stockholders cannot be procured at the outset and as a means of accomplishing the ultimate direct recapitalization of one or more underlying enterprises. An interesting illustration of this is furnished by the history of the Metropolitan Traction Company, which was a holding company, pure and simple, organized to acquire the capital of, and ultimately consolidate, various street railway corporations operating street surface railroads in New York City. Gradually the entire capital stock of all of the important underlying companies was acquired and by means of consolidations and mergers they were welded into one railroad corporation, called the Metropolitan Street Railway Company, all of the capital stock of which was owned by the Metropolitan Traction Company as the holding company. The latter then went into voluntary liquidation and distributed the stock of the Metropolitan Street Railway Company among its stockholders. The holding company having thus accomplished its mission was dissolved. The Brooklyn Rapid Transit Company was organized for a similar purpose and is still a holding company, pure and simple.

In the last few years the organization of holding companies has become less fashionable than formerly, both because of restrictive Federal and State legislation and because of their unpopularity, due partly to the misfortunes of certain ill-conceived holding companies and the extent to which they were organized in carrying through consolidations which, although

1 Rev. Stat. (1909), §§ 3316, 3329, 3443.

deemed lawful at the time of their organization, were subsequently held to have been organized in violation of the Federal Anti-trust Laws. The enactment of the so-called "Seven Sisters" by the Legislature of New Jersey in 19131 has practically put an end to the organization of holding companies in New Jersey except within very narrow limits, and Section 7 of the Clayton Act 2 enacted by Congress in 1914 provides that

"No corporation shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of two or more corporations engaged in commerce where the effect of such acquisition, or the use of such stock by the voting or granting of proxies or otherwise, may be to substantially lessen competition between such corporations, or any of them, whose stock or other share capital is so acquired, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce."

No discussion of the practical aspects of voluntary recapitalization would be complete without a reference to the strange form of organization commonly known as a "Massachusetts Trust," which seems to have found its origin in the fact that the Massachusetts statutes did not permit the organization of a corporation to hold land. In Massachusetts the rule against perpetuities apparently is satisfied if all rights vest during any number of lives in being, which may be those of complete strangers to the trust. Although in Windsor v. Mills3 there is a dictum to the effect that the permissible period of restraint on alienations should be assimilated to that of the rule against perpetuities, no limitation upon restrictions on alienation of equitable estates has yet been made. The practical result of this is that if it is so stipulated in a deed of trust, there will not, as in New York and elsewhere, be a merger of the legal and equitable estates, even though the entire present equitable

1 Laws 1913, Chaps. 13, 14, 15, 16, 17, 18 and 19.

U. S. Stat. 1914, Chap. 321.

3157 Mass. 362; 1892.

• Southard v. Southard, 210 Mass. 347; 1911.

estate and the entire future legal estate are vested in the same person.1 In Massachusetts there is also another rule, not generally current, that a provision in a partnership agreement that partnership interests may be freely sold without terminating the partnership, is valid and effective.2

Under these favoring laws the custom has grown up in Massachusetts of depositing shares of one or more corporations with trustees under declarations of trust, which provide for the use of a name like that of a corporation, the issue of freely vendable certificates of interest or shares, with or without par value, the election of directors, and many other attributes of a corporation. These organizations fall roughly into two classes, those which are strict trusts and those which I may call partnership trusts. In the strict trust the certificate holders are not personally liable for the organization's debts, but they apparently have no right of control over the business unless it be that certain things may not be done without their consent. In the partnership trust the estate is usually handled by the trustees under the direction of the certificate holders or of a committee appointed by them, which may or may not include the trustees, and in this case the partners may, depending on the particular form of the transaction, be held liable for the organization's debts.3

While these trusts are sometimes created to operate enterprises, they are more frequently used to accomplish the same purpose as holding companies in cases where for some reason it is not wise to organize a holding company.

There are a considerable number of organizations of this character which are doubtless generally assumed to be cor

1 Broadway National Bank v. Adams, 133 Mass. 170; 1882; and subsequent cases citing it.

Phillips v. Blatchford, 137 Mass. 510; 1884; Williams v. Milton, 215 Mass. 1; 1913.

3 Mayo v. Moritz, 151 Mass. 481; 1890; Hussey v. Arnold, 185 Mass. 202; 1904; Williams v. Milton, 215 Mass. 1; 1913; Frost v. Thompson, 219 Mass. 360; 1914; Howe v. Morse, 174 Mass. 491; 1899.

porations. The Mackay Companies, the Massachusetts Gas Companies, and the Chicago Elevated Railways, Unincorporated, are conspicuous examples.1

1 The Massachusetts statues relating to these trusts are Chapter 441 of 1909, as amended by Chapter 454 of 1913 and Chapter 471 of 1914, and Chapters 509 and 596 of 1913.

Chapter 596 of 1913 provides for annual publication by the Massachusetts State commissioner of corporations of the trust agreements on file in his office. Copies of this publication are easily to be had and contain a variety of precedents. S. R. Wrightington's Unincorporated Associations, Boston, 1916, in addition to much valuable information on the subject generally, has an appendix which contains a number of precedents, some of which have been passed upon by the Massachusetts courts.

Other books and articles on the subject are: J. H. Sears's Trust Estates as Business Companies, St. Louis, 1912; A. D. Chandler's Express Trusts under the Common Law, Boston, 1912, and an article by Mr. Wrightington in the Yale Law Journal for February, 1912.

THE SHERMAN ANTI-TRUST LAW

A Lecture Delivered before the Association of the Bar of the City of New York by George W. Wickersham, March 15, 1916

SENATOR GEORGE F. HOAR, of Massachusetts, in a eulogy of John Sherman, delivered in the Unites States Senate after the death of the latter, said:1

"It is a little singular that the two great measures that are called by his name are measures, one of which he disapproved, and with the other of which he had nothing to do. I mean the bill for the purchase of silver, known as the Sherman Law, and the bill in regard to trusts, known as the Sherman Antitrust Law. The former was adopted against his protest by a committee of conference, although he gave it a reluctant and disgusted support at the end. . . . The other, known as the Sherman Antitrust Bill, I suppose he introduced by request. I doubt very much whether he read it. If he did, I do not think he ever understood it. It was totally reconstructed in the Judiciary Committee."

This statement was probably the origin of the impression, widely disseminated in the community at a later date when the true meaning and effect of the Sherman Law began to be understood and felt, that the bill had been framed in haste and passed in ignorance of its meaning, with a confused idea of its effect. Nothing could be more remote from the actual facts, and Senator Hoar's statement furnishes another example of the effect of time upon the memory of even acute-minded and able

men.

Senator Sherman's original bill was introduced in the Senate on August 14, 1888. It was entitled, "A bill to declare unlawful trusts and combinations in restraint of trade and production." It provided that "all arrangements, contracts, agree

1 Autobiography of Seventy Years, Vol. II, p. 22.

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