line of road between two points should attempt under its charter to conduct a stage line or a line of steamers and collect fares for services connected with the same, the latter, though not unlawful in itself, would be the usurpation of a franchise from which it could be ousted in an action of quo warranto.

If the same company were authorized to exercise the right of eminent domain to the extent of condemning right of way for its road, and should exercise it for the purpose of acquiring land not to be used for the purpose designated in the charter but for speculative purposes, it would not be an usurpation of a franchise but the abuse of it. It would be a matter of public concern, because the power is only given from considerations of public interest transcending that of individuals, and the abuse or misuse of such power would be a public grievance.1

It is proper cause for quo warranto against a foreign corporation that it is carrying on business in the state without compliance with conditions imposed by statute.2

§ 971. Entering into a "trust" as partners.-Where corporations form a trust amounting in legal effect to a copartnership, their acts in entering into it are clearly contrary to public policy and ultra vires, and their charters are liable to forfeiture to the state in quo warranto proceedings.3

The writ will be

1 The public must in theory at least have some interest. refused when it appears that the franchise assumed is of a merely private nature. People v. Ridgley, 21 Ill. 65; Atty.-Gen. v. Utica Ins. Co., 2 Johns. (N. Y.) Ch. 371; Rex v. Ogden, 10 B. & C. 230. The court will judge from all the circumstances who are the real prosecutors. Rex v. Cudlipp, 6 Tr. 503; and under circumstances tending to throw suspicion on the motives of the relator the court will not grant the application where the consequence will be to dissolve a corporation. Rex v. Trevenen, 2 B. & A. 479.

2 State v. Fidelity & Cas. Ins. Co., 39 Minn., 538; 41 N. W. Rep. 108. Infra.

3 Supra, § 121.

In England it is provided by statute that railway companies may "enter into any contract for the division or apportionment of the tolls to be taken upon their respective railways."

While this statute does not expressly authorize the formation of partnerships between railway companies, it gives ample opportunity for the making of net earnings the basis of calculating the share of each in the joint enterprise.2

In the absence of statutory authority an agreement providing for the division of profits arising from the whole existing traffic of a given territory entered into between two or more corporations, whether the result is a partnership or not, would be illegal and void; not only because against public policy, but for the further reason that it is an unauthorized delegation of the powers of the corporation.

But it is sometimes difficult to decide whether an agreement for a division of tolls profits and earnings is objectionable on the one or the other or both these grounds. These difficulties were exemplified in the case of the Shrewsbury Railway Company's Cases where the agreement which had been entered into by the respective corporations gave rise to an enormous amount of litigation.3

Although the adjudications in this country have been affected somewhat by the question whether the corporations only or third parties were affected by the agreement under consideration, yet the general rule is well established that corporations are incapable of forming copartnerships either among themselves or with indi

1 8 and 9 Vict. Ch. 20, sec. 87.

2 Godefroi & Short, 396.

32 Mac. & G. 331; 20 L. J. Ch. 90. See Sussex R. Co. v. Morris & Essex R. R. Co., 4 C. E. Green, 13; Gould v. Head, 38 Fed. Rep. 886.

viduals. Such power is not among those which they possess at common law where the same objection would lie against their forming a copartnership as against their consolidating.1

Where the rights of third parties are involved, the validity of the agreement when made an ultra vires question is determined upon the general principles applicable to the subject and turns upon the question of good faith, the peculiar equities of the case and other circumstances. Consequently there is apparent conflict of authority, but it is thought there is no real conflict on the general proposition.2

1 Parsons on Partnership, p. 79; Story on Part., p. 29 n.; Pearce v. Mad. & S. R. R. Co., 21 Howe, 441; Marine Bank v. Ogden, 29 Ill. 248; Mallory v. Hannauer Oil Works, 2 Pick. (Tenn.) 598; 8 S. W. 396.

2 In a case where it was considered that the circumstances warranted it in sustaining the objection to the validity of the agreement as unauthorized, the court said: "The second section of ch. 38 of the Revised Statutes provides that the business of every manufacturing corporation shall be managed and conducted by the president and directors thereof and such other officers, agents, and factors as the company shall think proper to authorize for that purpose.

It is plain that the provisions of this section cannot be carried into effect where a partnership exists. The partner may manage and conduct the business of the corporation and bind it by his acts. In so doing he does not act as an officer or agent of the corporation by authority received from it, but as a principal in a society in which all are equals and each capable of binding the society by the act of its individual will. . . The power to form a partnership is not only not among the powers granted expressly or by reasonable implication, but is wholly inconsistent with the scope and tenor of the powers expressly conferred, and the duties directly imposed upon a manufacturing corporation under the legislation of the commonwealth." Whittenton Mills v. Upton, 10 Gray (Mass.), 582.

In a New York case the plea of ultra vires was not allowed to prevail against the partnership liability of a corporation. The court said: "Strictly perhaps corporations should be and are restricted from contracting partnerships with individuals or corporations, and as between the parties to the contract acting upon equal knowledge a question of validity might be raised; but a corporation may contract with an individual in furtherance of the object of its creation the effect of which contract may be to impose upon the company as respects the community the liabilities of a partner. I cannot think a corporation may shape its contracts relating to the business for which it was incorporated as to share jointly with an individual in the profits of such business; subtract its interest in the profits from the fund on which the creditors of the concern had a right to rely for the payment of the debts due to them; and when called upon by such

A distinction should be taken between a contract of partnership and one whereby a corporation in a single transaction or in a series of transactions becomes jointly interested or liable with others. Such relation a corporation has common law power to hold in the transaction of its legitimate business, and may be joint plaintiff or defendant in actions arising therefrom.1

Courts have evinced an indisposition to construe agreements between corporations as partnerships, especially where no public injury was likely to result from the making and carrying them out.2

§ 972. Employment of the writ to protect the state from monopolies. There is substantial harmony between the English and American definitions of monopoly, the decisions of the two countries agreeing that contracts in restraint of trade are illegal. When corporations have entered into a combination or "trust," as that shown in People v. North River Refinery Co.,3 there are two grounds upon which the corporations themselves are open to attack at suit of the state in quo warranto: 1. That they have attempted to grant away franchises conferred upon them in trust, the transfer being a breach of the implied condition that the particular grantees shall retain and execute the trust. 2. That in making the contract the result of which is the creation of a monopoly they are guilty of an abuse of their fran

creditors be permitted to escape liability altogether on the ground that the profits were realized as the partner of an individual, which relation the corporation could not legally occupy." Catskill Bank v. Gray, 14 Barb. 471.

1 N. Y. & Sharon Canal Co. v. Fulton Bank, 7 Wend. 412; Olcott v. Tioga R. R. Co., 27 N. Y. 546; Maine Bank v. Ogden, 29 Ill. 248; Peckham v. North Parish of Haverhill, 16 Pick. 287; Stanley v. C. & C. R. R. Co., 18 Ohio St.

552.

2 See Holmes v. Old Colony R. R. Co., 99 Mass. 220; Mohawk & Hudson R. R. Co. v. Niles, 3 Hill, 162.

8 121 N. Y. 696; 5 Ry. & Corp. L. J. 56.

chises in having employed them in the doing of an illegal act.

On the first ground the question of the extent of public interest in the exercise of the franchise transferred is important in this country but not in England; while on the second the same principles would apply in determining the question of legality. These suggestions will be found useful in making a proper application of the decisions.

66

An important rule, well established, is that in a proceeding against a corporation by quo warranto for having formed with others a monopoly in the shape of a trust" no actual public injury need be proven but will be presumed when an agreement is shown which if carried out will obviously result to the public detriment.

An attempt by several combining corporations to suppress competition may well be viewed in the light of an unlawful conspiracy in the name of the corporation which is itself an illegal act warranting the state in resuming its charter aside from any contemplated injury to economic interests.1

No reliable rules for determining to what extent competition may be suppressed or bought off without contravening public policy against monopolies can be laid down. Virtually the same state of facts have in different courts led to opposite decisions.

1 See Ward v. Farwell, 97 Ill. 593; Ins. Co. v. Needles, 113 U. S. 574; People v. Dispensary, 7 Lansing, 306; People v. Bristol, 23 Wend. 235; People v. Fishkill, 27 Barb. 445; State v. Railroad Co., 45 Wis. 590; Ches. & Ohio v. Balt. & Ohio, 4 Gill. & J. 1. The view taken in the text was thus stated in an English case: "I do not think that any averment is necessary as to what has been done under it or as to any mischief which it has actually produced. We are to consider what may be done under it and what mischief may thus arise." Hilton v. Eckersley, 6 El. & Bl. 47, 65 per Lord CAMPBELL, C. J. See also Claney v. Salt Co., 62 Barb. 406; Atcheson v. Milton, 43 N. Y. 149; Hooker v. Vanderwater, 4 Denio, 352; Stanton v. Allen, 5 Denio, 440; Matter of Jacobs, 98 N. Y. 110; Mugler v. Kansas, 123 U. S. 661.