WATERS-PIERCE OIL CO. v. STATE OF TEXAS(1909)
[212 U.S. 86, 87] Messrs. Moorfield Storey, E. B. Perkins, H. S. Priest, J. L. Thorndike, and J. D. Johnson for plaintiff in error.
[212 U.S. 86, 93] Messrs. G. W. Allen, R. L. Batts, Robert Vance Davidson, Jewel P. Light-foot, John W. Brady, T. W. Gregory, and Messrs. Allen & Hart for defendant in error.
Mr. Justice Day delivered the opinion of the court:
This case was begun in the state district court of Travis county, Texas, to forfeit the permit of the plaintiff in error, the Waters-Pierce Oil Company, a corporation of the state of Missouri, to conduct business in the state of Texas, and to assess penalties against it for violation of the anti-trust laws of that state. The prosecution was under two laws of the state,-one of 1899 and one of March 31, 1903. The proceeding was brought by the attorney general of Texas and the county attorney of Travis county, to recover penalties, under the act of [May 25] 1899, from the 31st day of May, 1900, until the 31st day of March, 1903, at the rate of $ 5,000 per day, and under the act of 1903, from the 31st of March, 1903, till the 29th of April, 1907, at the rate of $50 per day, and to cancel the permit of the defendant to do business, other than interstate, in Texas.
The jury returned a verdict against the defendant, and as- [212 U.S. 86, 97] sessed penalties, under the act of 1899, from May 31, 1900, to March 31, 1903,-1,033 days. Such penalties were assessed at the rate of $1,500 a day during that period, being the total sum of $1,549,500. The jury also found against the defendant under the act of 1903, and assessed the penalties for each day between April 1, 1903, and April 29, 1907,-1,480 days,-at the rate of $50 per day, making a total of $74,000. The jury further found that the permit of the defendant to do business in the state of Texas should be canceled. Thereupon the court rendered a judgment for the state of Texas for the sum of the penalties assessed, $1,623,500, and ordered a cancelation of the defendant's permit to do business in the state except as to its interstate commerce business. This judgment was affirmed upon appeal to the court of civil appeals of Texas (106 S. W. 918), and, upon application to the supreme court of Texas, that court refused to grant a writ of error, and the case was brought here.
The case was submitted upon oral arguments and elaborate briefs and a voluminous pecord. It was argued, in many aspects, as though this were a proceeding in error to review the weight of the evidence adduced in the state courts, to re-examine the rulings of the court upon the admissibility of testimony, and to determine the effect of the statute of limitations in the state.
The jurisdiction of this court to review the proceedings of the state courts, as we have had frequent occasion to declare, is not that of a general reviewing court in error, but is limited to the specific instances of denials of Federal rights, whether those pertaining to the constitutionality of Federal or state statutes, or to certain rights, immunities, and privileges of Federal origin, specially set up in the state court, and denied by the rulings and judgment of that court. U. S. Rev. Stat. 709, U. S. Comp. Stat. 1901, p. 575. Nor does this court sit to review the finding of facts made in the state court, but accepts the findings of the court of the state upon matters of fact as conclusive, and is confined to a review of questions of Federal law within the jurisdiction conferred upon this court. Quinby v. Boyd, 128 U.S. 489 , 32 L. ed. 503, 9 Sup. Ct. Rep. 147; Egan v. Hart, 165 U.S. 188 , 41 L. ed. 680, 17 Sup. Ct. Rep. 300; Downer v. Richards, 151 U.S. 658 , 38 L. ed. 305, 14 Sup. Ct. Rep. 452; Thayer v. Spratt, 189 [212 U.S. 86, 98] U. S. 346, 47 L. ed. 845, 23 Sup. Ct. Rep. 576. We shall not, therefore, undertake to follow counsel in the consideration of all the questions argued, but shall limit our review to questions of a Federal nature which we deem to be properly made in this record and essential to the decision of the case.
Epitomizing the Texas anti-trust statutes for the purposes of his charge, the learned judge who presided in the district court, speaking first of the act of 1899, stated them as follows:
The penalties denounced by the act of 1899 were not less than $200 nor more than $5,000 for each day the defendant might be found to have violated the law; under the act of 1903 the penalty was fixed at $50 for each day, and a forfeiture of the right to do business within the state of Texas was declared.
The complaint in the case is voluminous, and its averments contain the history of the so-called conspiracy between the Waters-Pierce Oil Company and a number of persons composing the Standard Oil Company, beginning in January, 1870, for the purpose of monopolizing and controlling the business of refining and transporting and selling petroleum and similar products throughout the United States and in the state of Texas. It charges that the Waters-Pierce Oil Company, incorporated in 1878, and the predecessor of the defendant company, was a party to that conspiracy, and, for the purpose of carrying out the same, had entered into contracts with corporations and individuals engaged in the business of selling petroleum and similar products within the state, and suppressed competition therein. It charges that the Waters-Pierce Oil Company had entered into an agreement with the Standard Oil Company of New Jer- [212 U.S. 86, 101] sey for the purpose of monopolizing the trade in petroleum and for the purpose of carrying out certain contracts and conspiracies, entered into for the purposes aforesaid, and permitted the Standard Oil Company to acquire a majority of the shares of stock of the Waters-Pierce Company.
The original Waters-Pierce Oil Company, it states, had been dissolved, and the new company, the present defendant, organized on May 29, 1900, had assumed all the contracts and agreements of its predecessor, and it was averred that the dissolving of the old Waters-Pierce Company and the forming of the new company, the defendant in this case, was in further pursuance of the conspiracy for the purpose of continuing the monopoly and control which had been acquired by the old company, and for the purpose of rendering ineffective the judgments of the state court and of this court ( 177 U.S. 28 , 44 L. ed. 657, Sup. Ct. Rep. 518), wherein the right of the Waters-Pierce Company to do business in Texas was forfeited.
It was further averred that the new corporation was of the same name as the old one, with the same amount of stock, which was distributed to the holders of stock in the new corporation in the same proportion among the shareholders as it was in the old corporation. It is charged that a major part of the capital stock, although in fact owned by the Standard Oil Company of New Jersey, stood for a time in the name of H. C. Pierce, but was in fact owned by the Standard Oil Company. That the conduct of the business in the new corporation was not changed, and that it was controlled by the Standard Oil Company of New Jersey in the same manner as the old company had been; that the old contract, whereby there was a division of territory and the limitation of the operations of the Waters- Pierce Oil Company to the state of Texas and some other territory, was maintained and enforced. That other concerns had been acquired in the carrying out of the scheme charged; that said companies had been put out of business or were used in controlling and monopolizing the trade and business aforesaid; that the defendant, the new corporation, was a party to these arrange- [212 U.S. 86, 102] ments, participated in them, and was engaged in carrying them out.
The things charged were alleged to have the effect to control the defendant and a large number of other companies by the same corporation and persons, with the acquiescence and consent of the defendant; that all competition in Texas between companies was destroyed; that certain sections and parts of the United States were assigned to the various companies; that the defendant was permitted to do business in Texas, and that, with its knowledge and consent, upon its instance and demands, all other companies had been excluded from doing business in the state of Texas; that, by the agreement, the defendant was obliged to secure all the oil sold by certain named refiners at prices determined by the Standard Oil Company and those interested in it, with the effect of monopolizing and controlling the business in oil and the production of petroleum in Texas by fixing the prices of such products in that state.
The plaintiff summarizes the unlawful results accomplished as follows:
The defendant answered and filed a large number of special pleas and exceptions, taking issue upon the charges made in the [212 U.S. 86, 103] petition, and alleging the unconstitutionality of the acts of 1899 and 1903, and alleging that, if the petition of the state of Texas be granted, it would be denied the equal protection of the laws, be subjected to ex post facto laws, deprived of its property without due process of law, and have the obligations of its contracts impaired, contrary to the provisions of the Constitution of the United States.
At the trial at the May term of the district court of Travis county a verdict was rendered in favor of the state, and penalties were assessed, and the judgment rendered, as herein before stated. In the court of civil appeals of the state of Texas that court found the facts to be as found by the verdict in the trial court, and, in concluding its opinion upon the question of fact, said:
The court left the case to the jury upon a charge which permitted them to find whether the defendant company, acting through its duly authorized agents, had entered into or had become a party to an agreement or understanding with the Standard Oil Company of New Jersey on June 1, 1900, to fix or regulate the price of oil in Texas, and whether the company remained or continued to be a party to such agreement, and carried out the same in Texas on dates subsequent to June 1, 1900, and prior to March 31, 1903, and whether the oil, in reference to which such agreement was made and carried out was the subject of local, as distinguished from interstate, commerce.
And the court further charged that if, within the time above stated, the defendant had brought about or permitted any combination or union of its capital with that of the Standard Oil Company of New Jersey, whereby the price of such oil in Texas was found to be controlled or limited, fixed or regulated, or whereby such price would be reasonably calculated to be fixed or regulated, or whereby the trade in such oil in Texas was sought to be controlled or limited, they might return a verdict for the state.
And the court charged that if they should find that the defendant, through its duly authorized agents, had entered into a combination of its capital with the capital of the Standard Oil Company of New Jersey for the purpose of creating in Texas, or which tended to create in Texas, or carry out in Texas, restrictions in the free pursuit of selling oil, or having the effect of increasing the price of such oil in Texas, or to prevent or lessen competition in selling the same in said state; and that the defendant remained or was a party to and acted under such combination, if such there was, on March 31, 1903, and thereafter prior to April 29, 1907, they might return a verdict of guilty.
The jury was further instructed that, if they found from the evidence that the direction of the affairs of the Standard Oil Company of New Jersey and those of the defendant company [212 U.S. 86, 105] were under the same management or control after March 31, 1903, and prior to April 29, 1907, and that they were placed under such common management or control by their respectively authorized officers, and if such management or control created or tended to create or to carry out restrictions in the sale of oil in Texas, as above stated, or to fix, maintain, or increase the prices of such oil in said state, or to prevent or lessen competition in the sale of such oil, they might return a verdict for the state. The jury found each of the issues submitted against the defendant. The court of civil appeals affirmed this finding of fact, and we must accept the same as established for the purposes of this proceeding in error.
Numerous exceptions were taken to the charge at the trial and are the subjects of assignments of error in the state court and in this court. We are concerned with such as relate to the Federal questions involved in this proceeding.
In the eleventh paragraph of the charge the court instructed the jury as follows:
The judges of the court of civil appeals differed in their views as to the correctnee of this charge, the learned justice who wrote the opinion holding the view that it was calculated to mislead the jury to the belief that they might convict upon this issue regardless of whether the defendant had any knowledge of, participated in, or aided the Standard Oil Company in acquiring the stock of the defendant for the purposes stated.
But the court agreed that, if wrong, this part of the charge afforded no ground for reversal, because the jury found that the appellant had violated other provisions of the act, and assessed but one penalty for each day's violation, and therefore the judgment would have been the same, and the error, if any, was harmless.
In thus deciding, the court of civil appeals did not determine a Federal question, nor necessarily decide one adversely to the plaintiff in error, controlling in character, if it appears upon this record that the verdict and judgment can stand upon other grounds free from objection, so far as Federal rights are concerned.
Much of the argument for plaintiff in error is predicated upon the contention that the acquiring of the stock of the Waters-Pierce Company by the Standard Oil Company and the making of the agreement charged were not shown to have been acts done in Texas. It is contended that such acquiring of stock, and agreement, if any, were acts beyond the jurisdiction of the state. But an inspection of the record discloses that the court charged that no agreement made by the defendant outside of the state of Texas could be made the basis of forfeiting its permit to do business in the state, unless such agreement was executed, or attempted to be executed, in the state, by the duly authorized agents of the defendant. And, in the findings which we have above quoted as to the evidence, the state court has [212 U.S. 86, 107] found that the defendant has been, since May 31, 1900, a party to an agreement with the Standard Oil Company of New Jersey, to create a monopoly and to control prices and prevent competition in Texas, and that, to a large extent, the object has been accomplished. These findings of facts are conclusive upon us, and show that the conviction was had for acts and transactions committed and carried out within the state of Texas.
The argument to the effect that the rulings of the court as to the admission of testimony, and upon questions of general law, deprived the defendant of its property and rights without due process of law, requires us to notice the limitations upon the authority of this court when dealing with legislative acts and proceedings to enforce the same in the state courts. That state legislatures have the right to deal with the subject- matter and to prevent unlawful combinations to prevent competition and in restraint of trade, and to prohibit and punish monopolies, is not open to question. National Cotton Oil Co. v. Texas, 197 U.S. 115 , 49 L. ed. 689, 25 Sup. Ct. Rep. 379; Smiley v. Kansas, 196 U.S. 447 , 49 L. ed. 546, 25 Sup. Ct. Rep. 289. Having the power to pass laws of this character, of course the state may provide for proceedings to enforce the same. The state, keeping within constitutional limitations, may provide its own method of procedure and determine the methods and means by which such laws may be made effectual. 'The limit of the full control which the state has in the proceedings of its courts, both in civil and criminal cases, is subject only to the qualification that such procedure must not work a denial of fundamental rights or conflict with specific and applicable provisions of the Federal Constitution.' West v. Louisiana, 194 U.S. 258, 263 , 48 S. L. ed. 965, 969, 24 Sup. Ct. Rep. 650; and see Davis v. Texas, 139 U.S. 651 , 35 L. ed. 300, 11 Sup. Ct. Rep. 675; Brown v. New Jersey, 175 U.S. 172, 175 , 44 S. L. ed. 119, 120, 20 Sup. Ct. Rep. 77; Allen v. Georgia, 166 U.S. 138, 140 , 41 S. L. ed. 949, 950, 17 Sup. Ct. Rep. 525; Re Converse, 137 U.S. 624, 632 , 34 S. L. ed. 796, 799, 11 Sup. Ct. Rep. 191; and Twining v. New Jersey, 211 U.S. 78 , 53 L. ed. --, 29 Sup. Ct. Rep. 14, decided at this term of court, where the subject is fully discussed, and previous cases in this court cited.
It is contended that the acts in this case were given a retroactive effect, in violation of the Federal Constitution. Art. 1, 10. This argument is predicated largely upon the contention [212 U.S. 86, 108] that the conviction in this case was because of the old agreement of the former Waters-Pierce Oil Company, made long before the passage of the present statute, at a time when it was legal, and before the creation of the defendant company. But, in view of the facts found in the state court, to which we have already referred, there was ground for conviction, not because of the making of the old agreement for the division of the territory and the suppression of competition while the old company was in existence, but because the new company was found to have carried out the old agreement and made itself a party thereto, and, by continuing the old arrangement after the passage of the law, had brought itself within its terms. Of a similar contention this court said in United States v. Trans- Missouri Freight Asso. 166 U.S. 290 , 41 L. ed. 1007, 17 Sup. Ct. Rep. 540:
It is further insisted that the acts in question are so vague, indefinite, and uncertain as to deprive them of their constitutionality, in that they punish by forfeiture of the right to do business, and the imposition of penalties, under provisions of an act which do not advise a citizen or corporation prosecuted under them, of the nature and character of the acts constituting [212 U.S. 86, 109] a violation of the law. These objections are found in the words of the act of 1899, denouncing contracts and arrangements 'reasonably calculated' to fix and regulate the price of commodities, etc. And, in the act of 1903, acts are prohibited which 'tend' to accomplish the prohibited results. It is insisted that these laws are so indefinite that no one can tell what acts are embraced within their provisions. In support of this contention it is argued that laws of this nature ought to be so explicit that all persons subject to their penalties may know what they can do, and what it is their duty to avoid. And reference is made to decisions which have held that criminal statutes should be so definite as to enable those included in its terms to know in advance whether an act is criminal or not. Among others, Tozer v. United States, 4 Inters. Com. Rep. 245, 52 Fed. 917, is cited, in which the opinion was by Mr. Justice Brewer, then judge of the circuit court, in which it was held that the criminality of an act cannot depend upon whether a jury may think it reasonable or unreasonable. To the same effect is Chicago & N. W. R. Co. v. Dey, 1 L.R.A. 744, 2 Inters. Com. Rep. 325, 35 Fed. 866, also decided by Judge Brewer at circuit. And also the case of Louisville & N. R. Co. v. Com. 99 Ky. 132, 33 L.R.A. 209, 59 Am. St. Rep. 457, 35 S. W. 129, is relied upon, in which a railroad was indicted for charging more than a just and reasonable rate, in which it was held that the law was unconstitutional, for, under such an act, it rests with the jury to say whether a rate is reasonable, and makes guilt depend not upon standards fixed by law, but upon what a jury might think as to the reasonableness of the rate in controversy. But the Texas statutes in question do not give the broad power to a court or jury to determine the criminal character of the act in accordance with their belief as to whether it is reasonable or unreasonable, as do the statutes condemned in the cases cited.
Take the act of 1903, which denounces acts which 'tend' to bring about the prohibited results. It is not uncommon in criminal law to punish not only a completed act, but also acts which attempt to bring about the prohibited result. In United States v. E. C. Knight Co. 156 U.S. 1 , 39 L. ed. 325, 15 Sup. Ct. Rep. 249, this court said: 'Again, all the au- [212 U.S. 86, 110] thorities agree that, in order to vitiate a contract or combination, it is not essential that its result should be a complete monopoly; it is sufficient if it really tends to that end, and to deprive the public of the advantages which flow from free competition.' This language was quoted with approval in Addyston Pipe & Steel Co. v. United States, 175 U.S. 237 , 44 L. ed. 146, 20 Sup. Ct. Rep. 96. And in Northern Securities Co. v. United States, 193 U.S. 197 , 48 L. ed. 679, 24 Sup. Ct. Rep. 436, while the Sherman act directly condemned conspiracies and combinations in restraint of trade or monopolizing or attempting to monopolize the same, this court said (page 332):
As to the phrase, 'reasonably calculated,' what does it include less than acts which, when fairly considered, tend to accomplish the prohibited thing, or which make it highly probable that the given result will be accomplished? Again, speaking of the Sherman act, this court said in Swift & Co. v. United States, 196 U.S. 375 , 49 L. ed. 518, 25 Sup. Ct. Rep. 276.
It is true that the decisions quoted are in civil cases involving contracts and arrangements held invalid when attacked in proceedings in equity, and did not involve penalties such as were imposed in the case now under consideration.
And it is to be remembered that we are dealing with an act of the legislature, sustained in courts of the state, with reference to its validity in view of the prohibitions of the Federal Constitution against deprivation by state action of liberty or property without due process of law. In this case the defendant has had a trial in a court of justice duly established under the laws of the state; the question of its liability has been submitted to a jury. The judgment has been reviewed in an appellate court, and the correctness of the findings of fact and rulings of law in the lower court affirmed. We are not prepared to say that there was a deprivation of due process of law because the statute permitted, and the court charged, that there might be a conviction not only for acts which accomplished the prohibited result, but also for those which tend or are reasonably calculated to bring about the things forbidden.
Again, it is contended that the fines imposed are so excessive as to constitute a taking of the defendant's property without due process of law. It is not contended in this connection that the prohibition of the 8th Amendment to the Federal Constitution against excessive fines operates to control the legislation of the states. The fixing of punishment for crime or penalties for unlawful acts against its laws is within the police power of the state. We can only interfere with such legislation and judicial action of the states enforcing it if the fines imposed are so grossly excessive as to amount to a deprivation of property without due process of law. Coffey v. Harlan County, 204 U.S. 659 , 51 L. ed. 666, 27 Sup. Ct. Rep. 305.
The business carried on by the defendant corporation in Texas was very extensive and highly profitable, as the record discloses. The property of the defendant amounted to more [212 U.S. 86, 112] than forty millions of dollars, as testified by its president. It dividends had been as high as 700 per cent per annum. It was the theory of the state, sustained by the verdict and judgment, that the former course of business was continued, notwithstanding the judgment of ouster in the former case. Within the bounds of the statute the penalties were left to the discretion of the jury trying the case. While the penalties imposed are large, they are within the terms of the statute. Under the act of 1899 the jury imposed a penalty at the rate of $1,500 a day; under the act of 1903 at the rate of $50 per day. Assuming for this purpose that the defendant was guilty of a violation of the laws over a period of years, and in transacting business upon so large a scale, as shown in this case, we are not prepared to say, after confirmation of the verdict and judgment in courts of the state, that there was want of due process of law in the penalties assessed.
Remembering, as we have had frequent occasion to say, that our province in this case is limited to an examination of objections arising under the Federal Constitution, we are unable to find in this record any ground for reversing the judgment of the state court.