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stituting D for B by novation, A's sale can be set against his purchase, on simply paying the difference in price. The circuit court of appeals for the eighth circuit took the defendant's view of these facts, and ordered the bill to be dismissed. 61 C. C. A. 11, 125 Fed. 161. The circuit court of appeals for the seventh circuit declined to follow this decision, and granted an injunction, as prayed. 64 C. C. A. 669, 130 Fed. 507. Thereupon writs of certiorari were granted by this court, and both cases are here.

all receive the quotations under a contract | amount to C, and C to D, and D to A. Subnot to furnish them to any bucket shop or place where they are used as a basis for bets or illegal contracts. To that end they agree to submit applications to the board of trade for investigation, and to require the applicant, if satisfactory, to make a contract with the telegraph company and the board of trade, which, if observed, confines the information within a circle of persons all contracting with the board of trade. The principal defendants get and publish these quotations in some way not disclosed. It is said not to be proved that they get them wrongfully, even if the plaintiff has the rights which it claims. But as the defendants do not get them from the telegraph companies authorized to distribute them, have declined to sign the above-mentioned contracts, and deny the plaintiff's rights altogether, it is a reasonable conclusion that they get, and intend to get, their knowledge in a way which is wrongful unless their contention is maintained.

As has appeared, the plaintiff's chamber of commerce is, in the first place, a great market, where, through its eighteen hundred members, is transacted a large part of the grain and provision business of the world. Of course, in a modern market, contracts are not confined to sales for immediate delivery. People will endeavor to forecast the future, and to make agreements according to their prophecy. Speculation of this kind by competent men is the self-adjustment of society to the probable. Its value is well

It is alleged in the bills that the principal defendants keep bucket shops, and the plain-known as a means of avoiding or mitigating tiff's proof on that point fails, except so far as their refusal to sign the usual contracts may lead to an inference, but, if the plaintiff has the rights which it alleges, the failure is immaterial. The main defense is this: It is said that the plaintiff itself keeps the greatest of bucket shops, in the sense of an Illinois statute of June 6, 1887, that is, places wherein is permitted the pretended buying and selling of grain, etc., without any intention of receiving and paying for the property so bought, or of delivering the property so sold. On this ground it is contended that if, under other circumstances, there could be property in the quotations, which hardly is admitted, the subject-matter is so infected with the plaintiff's own illegal conduct that it is caput lupinum, and may be carried off by any one at will.

It appears that in not less than three quarters of the transactions in the grain pit there is no physical handing over of any grain, but that there is a settlement, either by the direct method, so called, or by what is known as ringing up. The direct method consists simply in setting off contracts to buy wheat of a certain amount at a certain time, against contracts to sell a like amount at the same time, and paying the difference of price in cash, at the end of the business day. The ring settlement is reached by a comparison of books among the clerks of the members buying and selling in the pit, and picking out a series of transactions which begins and ends with dealings which can be set against each other by eliminating those between-as, if A has sold to B 5,000 bushels of May wheat, and B has sold the same

catastrophes, equalizing prices, and providing for periods of want. It is true that the success of the strong induces imitation by the weak, and that incompetent persons bring themselves to ruin by undertaking to speculate in their turn. But legislatures and courts generally have recognized that the natural evolutions of a complex society are to be touched only with a very cautious hand, and that such coarse attempts at a remedy for the waste incident to every social function as a simple prohibition and laws to stop its being are harmful and vain. This court has upheld sales of stock for future delivery and the substitution of parties, provided for by the rules of the Chicago stock exchange. Clews v. Jamieson, 182 U. S. 461, 45 L. ed. 1183, 21 Sup. Ct. Rep. 845.

When the Chicago board of trade was incorporated, we cannot doubt that it was expected to afford a market for future as well as present sales, with the necessary incidents of such a market, and while the state of Illinois allows that charter to stand, we cannot believe that the pits, merely as places where future sales are made, are forbidden by the law. But again, the contracts made in the pits are contracts between the members. We must suppose that from the beginning, as now, if a member had a contract with another member to buy a certain amount of wheat at a certain time, and another to sell the same amount at the same time, it would be deemed unnecessary to exchange warehouse receipts. We must suppose that then as now, a settlement would be made by the payment of differences, aft

er the analogy of a clearing house. This naturally would take place no less that the contracts were made in good faith, for actual delivery, since the result of actual delivery would be to leave the parties just where they were before. Set-off has all the effects of delivery. The ring settlement is simply a more complex case of the same kind. These settlements would be frequent, as the number of persons buying and selling was comparatively small.

nois act.
nois act. Such a view seems to us hardly
consistent with the admitted fact that the
quotations of prices from the market are
of the utmost importance to the business
world, and not least to the farmers; so
important, indeed, that it is argued here and
has been held in Illinois that the quotations
are clothed with a public use. It seems to
us hardly consistent with the obvious pur-
poses of the plaintiff's charter, or indeed
with the words of the statute invoked. The
sales in the pits art not pretended, but, as
we have said, are meant and supposed to be
binding. A set-off is, in legal effect, a de-
livery. We speak only of the contracts made
in the pits, because in them the members are
principals. The subsidiary rights of their
employers where the members buy as brok-
ers we think it unnecessary to discuss.

The fact that contracts are satisfied in this way by set-off and the payment of differences detracts in no degree from the good faith of the parties, and if the parties know when they make such contracts that they are very likely to have a chance to satisfy them in that way, and intend to make use of it, that fact is perfectly consistent with a serious business purpose, and an intent that In the view which we take, the proportion the contract shall mean what it says. of the dealings in the pit which are settled There is no doubt, from the rules of the in this way throws no light on the question board of trade or the evidence, that the con- of the proportion of serious dealings for tracts made between the members are in- legitimate business purposes to those which tended and supposed to be binding in man- fairly can be classed as wagers, or pretendner and form as they are made. There is ed contracts. No more does the fact that no doubt that a large part of those contracts the contracts thus disposed of call for many is made for serious business purposes. Hedg-times the total receipts of grain in Chicago. ing, for instance, as it is called, is a means The fact that they can be and are set off by which collectors and exporters of grain or other products, and manufacturers who make contracts in advance for the sale of their goods, secure themselves against the fluctuations of the market by counter contracts for the purchase or sale, as the case may be, of an equal quantity of the product, or of the material of manufacture. It is none the less a serious business contract for a legitimate and useful purpose that it may be offset before the time of delivery in case delivery should not be needed or desired.

Purchases made with the understanding that the contract will be settled by paying the difference between the contract and the market price at a certain time (Embrey v. Jemison, 131 U. S. 336, 33 L. ed. 172, 9 Sup. Ct. Rep. 776; Weare Commission Co. v. People, 209 Ill. 528, 70 N. E. 1076), stand on different ground from purchases made merely with the expectation that they will be satisfied by set-off. If the latter might fall within the statute of Illinois, we would not be the first to decide that they did when the object was self-protection in business, and not merely a speculation entered into for its own sake. It seems to us an extraordinary and unlikely proposition that the dealings which give its character to the great market for future sales in this country are to be regarded as mere wagers or as "pretended" buying or selling, without any intention of receiving and paying for the property bought, or of delivering the property sold, within the meaning of the Illi

sufficiently explains the possibility, which is no more wonderful than the enormous disproportion between the currency of the country and contracts for the payment of money, many of which in like manner are set off in clearing houses without any one dreaming that they are not paid, and for the rest of which the same money suffices in succession, the less being needed the more rapid the circulation is.

But suppose that the board of trade does keep a place where pretended and unlawful buying and selling are permitted, which, as yet, the supreme court of Illinois, we believe, has been careful not to intimate, it does not follow that it should not be protected in this suit. The question whether it should be involves several elements which we shall take up in turn.

In the first place, apart from special objections, the plaintiff's collection of quotations is entitled to the protection of the law. It stands like a trade secret. The plaintiff has the right to keep the work which it has done, or paid for doing, to itself. The fact that others might do similar work, if they might, does not authorize them to steal the plaintiff's. Compare Bleistein v. Donaldson Lithographing Co. 188 U. S. 239, 249, 250, 47 L. ed. 460, 462, 23 Sup. Ct. Rep. 298. The plaintiff does not lose its rights by communicating the result to persons, even if many, in confidential relations to itself, under a contract not to make it public, and strangers to the trust will be restrained

from getting at the knowledge by inducing | submission to reasonable rules or an offer a breach of trust, and using knowledge ob- of payment. It is a claim of independent tained by such a breach. Exchange Teleg. rights and a denial that the plaintiff has Co. v. Gregory [1896] 1 Q. B. 147; F. W. any right at all. The supreme court of Dodge Co. v. Construction Information Co. Illinois gave no sanction to such a claim as 183 Mass. 62, 60 L. R. A. 810, 97 Am. St. that. Rep. 412, 66 N. E. 204; Board of Trade v. C. B. Thomson Commission Co. 103 Fed. 902; Board of Trade v. Haddon-Krull Co. 109 Fed. 705; National Teleg. News Co. v. Western Union Teleg. Co. 60 L. R. A. 805, 56 C. C. A. 198, 119 Fed. 294; Illinois Commission Co. v. Cleveland Teleg. Co. 56 C. C. A. 205, 119 Fed. 301.

Finally it is urged that the contracts with the telegraph companies violate the act of July 2, 1890, chap. 647 (26 Stat. at L. 209, U. S. Comp. Stat. 1901, p. 3200). The short answer is that the contracts are not relied on as a cause of action. They are stated simply to show that the only communication of its collected facts by the plaintiff is a confidential communication, and does not destroy the plaintiff's rights. But so far as these contracts limit the communication of what the plaintiff might have refrained from communicating to anyone, there is no monopoly or attempt at monopoly, and

The publications insisted on in some of the arguments were publications in breach of contract, and do not affect the plaintiff's rights. Time is of the essence in matters like this, and it fairly may be said that, if the contracts with the plaintiff are kept, the information will not become public prop-no contract in restraint of trade, either unerty until the plaintiff has gained its reward. A priority of a few minutes probably is enough.

der the statute or at common law. E. Bement & Sons v. National Harrow Co. 186 U. S. 70, 46 L. ed. 1058, 22 Sup. Ct. Rep. If, then, the plaintiff's collection of in- 747; Fowle v. Park, 131 U. S. 88, 33 L. ed. formation is otherwise entitled to protection, 67, 9 Sup. Ct. Rep. 658; Elliman v. Carit does not cease to be so, even if it is in-rington [1901] 2 Ch. 275. It is argued that formation concerning illegal acts. The sta- the true purpose is to exclude all persons tistics of crime are property to the same ex-who do not deal through members of the tent as any other statistics, even if collected by a criminal who furnishes some of the data. The supreme court of Illinois has recognized, in the fullest terms, the value and necessity of the knowledge which the plaintiffs control. It must have known, even if it did not have the evidence before it, as to which we cannot tell from the report, what was the course of dealing on the exchange. Yet it was so far from suggesting that the plaintiff's work was unmeritorious that it held it clothed with a public use. New York & C. Grain & Stock Exch. v. Board of Trade, 127 Ill. 153, 2 L. R. A. 411, 19 N. E. 855.


board of trade. Whether there is anything
in the law to hinder these regulations being
made with that intent we shall not consider,
as we do not regard such a general scheme
as shown by the contracts or proved.
scheme to exclude bucket shops is shown and
proclaimed, no doubt, and the defendants,
with their contention as to the plaintiff, call
this an attempt at a monopoly in bucket
shops. But it is simply a restraint on the
acquisition for illegal purposes of the fruits
of the plaintiff's work. Central Stock &
Grain Exch. v. Board of Trade, 196 Ill. 396,
63 N. E. 740. We are of opinion that the
plaintiff is entitled to an injunction, as

Decree in No. 224 reversed.
Decree in No. 280 affirmed.

Mr. Justice Harlan, Mr. Justice Brewer, and Mr. Justice Day dissent.

The defendants lay hold of the declaration in the case last cited, and say, with doubtful consistency, that this information is of such importance that it is clothed with a public use, and that, therefore, they are entitled to get and use it. In the case referred to it was held that the plaintiff, which had been receiving the continuous quotations, was entitled still to receive them on paying for them, and submitting to all reasonable requirements in relation to the same. Perhaps the right of the plaintiff would have GASTONIA COTTON MANUFACTURING been more obvious if it had demanded an opportunity, on reasonable conditions, of col

(198 U. S. 177) W. L. WELLS COMPANY, Petitioner.



lecting the information for itself, especially Corporations—creation-citizenship for the

if the legislature had seen fit to provide by law for its doing so. But it is not necessary to consider whether we are bound by that decision, or, if not, should follow it, since in these cases the claim is not qualified by

purpose of Federal jurisdiction.

Incorporators under a charter which declares that they "are hereby created a body politic and corporate" become a corporation under

the laws of Mississippi for the purpose of suing and being sued in the Federal courts as

a citizen of that state upon the approval of such charter by the governor, and the certification of such approval by the secretary of state, under the great seal of the state, although there has been no compliance with the subsequent provision of the charter conferring the power to commence business when a certain proportion of the capital stock shall be subscribed and paid for.

[No. 237.]

Argued April 28, 1905. 1905.


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There was another action in the same court brought by the W. L. Wells Company against the Avon mills on account of transactions like those involved in the other case.

By consent of the parties, and pursuant to an order of court, the two cases were consolidated and tried together. In answer to questions propounded by the court the jury found that the W. L. Wells Company was, Decided May 8, as alleged in the complaint, a corporation and a citizen and resident of Mississippi, and entitled to recover the sum of $39,313.88. A judgment was rendered for amount against the Gastonia Cotton Manufacturing Company; the circuit court holding, upon a review of the evidence in connec


N WRIT of Certiorari to the United States Circuit Court of Appeals for the Fourth Circuit to review a judgment which reversed the judgment of the Circuit Court for the Western District of North Carolination with the findings of the jury, that the on the ground that the incorporation of the plaintiff under the laws of Mississippi was not established so as to entitle it to sue in its alleged corporate name, and remanded the cause, with liberty to amend by inserting the individual names of those constituting the company in whose name the action was brought. Reversed and remanded for further proceedings.

W. L. Wells Company was a corporation of Mississippi, and as such entitled to invoke the jurisdiction of that court as against the defendant corporation of North Carolina. 118 Fed. 190.

The case was then carried to the circuit

court of appeals, which adjudged that the plaintiff had failed to establish the allegations of the complaint as to its corporate

See same case below, 63 C. C. A. 111, 128 capacity, and, therefore, was not entitled to Fed. 369.

The facts are stated in the opinion. Messrs. Joseph Hirsh, Charles W. Tillett, Murray F. Smith, and H. C. Jones for petitioner.

Messrs. Augustus H. Price, Charles Price, Armistead Burwell, and Edwin Cansler for respondent.

sue in the circuit court in its alleged corporate name. Without considering the merits of the case, that court reversed the judgment for want of jurisdiction in the circuit court, and the cause was remanded, with liberty to the plaintiffs, if it was so advised, to amend the complaint by inserting the individual names of those constituting the company in whose name the action was brought,

Mr. Justice Harlan delivered the opinion which being done a new trial should be of the court:

The plaintiff, the W. L. Wells Company, seeks in this action to recover a balance alleged to be due from the defendant, the Gastonia Cotton Manufacturing Company, on account of certain sales of cotton in the years 1899 and 1900.

The complaint averred that the plaintiff and defendant were, respectively, created and duly organized as corporations,—the former, under the laws of Mississippi; the latter, under the laws of North Carolina.

granted; and if the plaintiff declined to amend, then the case was to be dismissed without prejudice. 63 C. C. A. 111, 128 Fed. 369. Subsequently, the present writ of certiorari was granted.

As the plaintiff was not entitled to maintain its action in the circuit court unless it was a corporation of Mississippi (Great Southern Fire Proof Hotel Co. v. Jones, 177 U. S. 449, 454, 456, 44 L. ed. 842, 844, 845, 20 Sup. Ct. Rep. 690, and the authorities there cited), the denial in the answer of The defendant admitted that it was a cor- knowledge or information sufficient to form poration, duly organized under the laws of a belief on that point put in issue the plainNorth Carolina, and a citizen and resident tiff's corporate character, within the meanof that state, but averred that it had "no ing of the rule, no longer to be questioned, knowledge or information sufficient to form that for purposes of suing and of being sued a belief as to the truth of the allegation con- in the courts of the United States the memtained in the 1st section of the complaint, to bers of a corporation are to be deemed citiwit, that the plaintiff is a corporation or- zens of the state by whose laws it was creganized under the laws of the state of Mis- ated; and as the jurisdiction of the courts sissippi, and a citizen and resident of that of the United States must always appear af state, and, therefore, it denies the said alle- firmatively, of record, it became necessary, gation." The other paragraphs of the an-under existing statutes, and under the rules

25 S. C.-41.

of practice and pleading in North Carolina, | of the Annotated Code of 1892 necessary and for the plaintiff to prove that it was a cor- requisite to carry out the purpose of said poration of Mississippi. Roberts v. Lewis, corporation. § 4. The board of directors of 144 U. S. 653, 656, 36 L. ed. 579, 582, 12 said corporation shall consist of three perSup. Ct. Rep. 781; act of June 1st, 1872 (17 sons, whose numbers may be increased at Stat. at L. 197, chap. 255, Rev. Stat. § 914, any time by a majority vote of the stockU. S. Comp. Stat. 1901, p. 684); act of holders, and said directors shall have power March, 1875 (18 Stat. at L. 470, chap. 137, to elect all necessary officers, and prescribe U. S. Comp. Stat. 1901, p. 508); N. C. Code the duties, salaries, and tenure of such offiCiv.. Proc. §§ 133, 243, 260, 276; Southern P. cers." Co. v. Denton, 146 U. S. 202, 36 L. ed. 943, 13 Sup. Ct. Rep. 44. It was so held, and correctly, by the circuit court of appeals. 63 C. C. A. 111, 128 Fed. 369.

The attorney general having certified that the proposed charter of incorporation was not repugnant to the Constitution or laws of the state, it was approved by the governor, and such approval was attested by the secretary of state, the great seal of the state being thereto affixed. The secretary thereupon. certified under the great seal that the charter "incorporating the W. L. Wells Company was, pursuant to the provisions of chapter 25 of the Annotated Code, 1892, recorded in the book of incorporations in this office." It was also recorded in the office of the clerk of the proper chancery court.

The contention of the defendants in the court below was-and their contention here

Was the plaintiff a corporation of Mississippi within the meaning of the above rule? In that state individuals may become incorporated for certain purposes under general laws. The first step there towards incorporation is to apply to the governor for a charter, stating the purposes for which the corporation is to be created. That officer then takes the advice of the attorney general as to the constitutionality and legality of the provisions of the proposed charter. If the governor approves the charter, and causes the great seal of the state to be affixed there-is-that the subscription of $10,000 to the to by the secretary of state, it would seem that the process of incorporation then becomes complete. Charters of incorporation in that state are required to be recorded in the office of the secretary of state and in the office of the clerk of the chancery court of the county in which the corporation does business. Miss. Anno. Code 1892, chap. 25. It appeared in evidence that W. L. Wells, John T. Wells, and George Butterworth submitted to the governor of Mississippi, to be referred to the attorney general of the state, the following form of charter:

capital stock of the W. L. Wells Company, and the payment thereof, was a condition precedent to the company's becoming a corporation; that is, it could not become a corporation de jure until such subscription and payment. And this view was sustained by the circuit court of appeals, which said in its opinion: "It is very clear from this that having a charter like this, conditioned upon the payment of $10,000 in subscriptions, then these men undertook to exercise powers in the charter without fulfilling or attempting to fulfil the conditions precedent in the "§ 1. Be it known and remembered that charter; that even when they had made W. L. Wells, John T. Wells, and George But- money in the business they ignored the corterworth, their associates and assigns, are poration altogether, and drew the money out hereby created a body politic and corporate, of the business as if it belonged to them, and under the name and style of W. L. Wells not to the corporation. The charter never Company, and by that name shall have suc- went into operation, and the corporation cession for fifty years, shall have power to never became a legal entity. More than sue and be sued, contract and be contracted this, these assumed corporators went on in with, may have a corporate seal, and break business, and contracted obligations in the and alter the same at pleasure. § 2. The name of the so-called corporation which did capital stock of said corporation shall be not possess a dollar of property, or have any $50,000, divided into shares of $500 each, mode of meeting a debt, thus seeking to and as soon as $10,000 of said stock is sub- cloak their transactions under an assumed scribed and paid for, said corporation shall corporate name, and avoid in this way all have power to commence business. § 3. personal responsibility. At the same time Said corporation is formed for the purpose two of them were, in a business sense, irreof conducting a general cotton business, and sponsible. It would seem that this transacmay buy and sell cotton, and may transact tion was an abuse of, and in fraud of, the a cotton factorage business, may advance law, and that the Wells Company had never money or supplies for the purpose of control- and could not have any legal existence. ling shipments of cotton, may take and re- When a corporation is formed under an enaceive mortgages or deeds of trust upon prop-bling act, all the mandatory provisions of erty to secure said advances, and generally the statute must be complied with." 63 C. may have all powers conferred by chapter 25 C. A. 111, 114, 128 Fed. 369, 372.

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