People ex rel. McIlhany v. Chicago Live Stock Exchange

Mr. Chief Justice Phillips delivered the opinion of the court: This corporation, organized as stated in its certificate of organization, was formed “to establish and maintain a commercial exchange; to promote uniformity in the customs and usages of merchants; to provide for the speedy adjustment of all business disputes between its members; to facilitate the receiving and distributing of live stock as well as to provide for and maintain a rigid inspection thereof, thereby guarding against the sale or use of unsound or unhealthy meats; and generally to secure to its members the benefits of co-operation in the furtherance of their legitimate pursuits.” The purpose of this corporation, as expressed in this certificate of incorporation, is undoubtedly, if carried out to the fullest extent, in the interest of the people. The common law refused to recognize restrictions upon trade and business among the citizens of a common country. Under this rule of the common law the right of the laborer to dispose of his skill and industry, and to contract in reference to the same with whom he pleased and at such contract rates as might be agreed on, was recognized and not allowed to be trammeled with restrictions which interfered with individual action and liberty. Combinations and associations of men have no right to place restrictions upon the right of an individual to contract and engage in business, employing such means and agencies as are not prohibited by law. The natural flow of trade and commerce must be unrestricted, and men engaged therein may accelerate its current by all means not unlawful. To this end men engaged in trade and commerce may advertise, employ men to solicit business and offer rewards and inducements to secure trade without violating the law of the land, and in so doing are exercising a right which is in the interest of the public, because competition cannot be hostile to public interests. Efforts to prevent competition and to restrict individual efforts and freedom of action in trade and commerce are restrictions hostile to the public welfare, not consonant with the spirit of our institutions and in violation of law. We said in Frorer v. People, 141 Ill. 171 (on p. 181): “The privilege of contracting is both a liberty and a property right, and if A is denied the right to contract and acquire property in a manner which he has hitherto enjoyed under the law, and which B, G and D are still allowed by the law to enjoy, it is clear that he is deprived of both liberty and property to the extent that he is thus denied the right to contract. Our constitution guarantees that no person shall be deprived of life, liberty or property without dne process of law. (Art. 2, sec. 2.) And says Cooley: ‘The man or the class forbidden the acquisition or enjoyment of property in the manner permitted the community at large would be deprived of liberty in particulars of primary importance to his or their pursuit of happiness. ’ ” In More v. Bennett, 140 Ill. 69, we said (p. 76): “Whatever may be the professed objects of the association, it clearly appears, both from its constitution and by-laws and from the averments of the declaration, that- one of its objects, if not its leading object, is to control the prices to be charged by its members for stenographic work by restraining all competition between them. Power is given to the association to fix a schedule of prices which shall be binding upon all its members, and not only do the members, by .assenting to the constitution and by-laws, agree to be bound by the schedule thus fixed, but their competition with each other, either by taking or offering to take a less price, is punishable by the imposition of fines, as well as by such other disciplinary measures as associations of this character may adopt for the enforcement of their rules. The rule of public policy here involved is closely analogous to that which declares illegal and void contracts in general restraint of trade, if it is not, indeed, a subordinate application of the same rule. As said by Mr. Tiedeman: ‘Following the reason of the rule which prohibits contracts in restraint of trade, we find that it is made to prohibit all contracts which in any way restrain the freedom of trade or diminish competition or regulate the prices of commodities or services.’” In Braceville Coal Co. v. People, 147 Ill. 66, it was said (p. 71): “Property, in its broader sense, is not the physical thing which maybe the subject of ownership, but it is the right of dominion, possession and power of disposition which may be acquired over it; and the right of property preserved by the constitution is the right not only to possess and enjoy it, but also to acquire it in any lawful mode or by following any lawful industrial pursuit which the citizen, in the exercise of the liberty guaranteed, may choose to adopt. Labor is the primary foundation of all wealth. The property which each one has in his own labor is the common heritage, and, as an incident to the right to acquire other property, the liberty to enter into contracts by which labor may be employed in such way as the laborer shall deem most beneficial and of others to employ such labor, is necessarily included in the constitutional guaranty.” In other jurisdictions the rulé is the same. In Rex v. Wardens of the Coopers’ Co. 7 T. R. 540, it was held that a bylaw limiting the number of apprentices which any member of the company might take was void. In the case of Tailors of Ipswich, 11 Coke, 53, a corporation known as the Tailors'of Ipswich enacted a by-law to prohibit any tailor from exercising- his trade until he had presented himself before the corporation and proved that he had served seven years as an apprentice. This by-law was held void, as being- in restraint of trade. See, also, Gunmakers’ Society v. Fell, Willes, 384. Sustaining the same propositions are Stanton v. Allen, 5 Denio, 434; People v. Fischer, 14 Wend. 9; Morris Run Coal Co. v. Barclay Coal Co. 68 Pa. St. 173; People ex rel. v. Medical Society of Erie, 24 Barb. 570. A case similar to that now under consideration was before the Court of Appeals of Kentucky in Huston v. Reutlinger, 15 S. W. Rep. 857. There the Louisville Board of Underwriters passed a by-law which, among other things, prohibited local companies from employing more than one solicitor, and regulated the manner in which the salary of such solicitor was to be paid. For a violation of this by-law the offending member of the board would forfeit all rights as a member of the association. A local company which had employed more than one solicitor sought to enjoin the enforcement of the forfeiture on the ground that the association had no authority to control the members in the employment of solicitors, etc. A decree was entered in accordance with the prayer of the bill, which, on appeal, was affirmed, the court saying: “The majority of the members, under the guise of producing harmony in this business association, have taken from their individual members the right to determine how many men they shall employ in their private business, and then only such as the association may think fit for the position. Nor .can they employ a solicitor for a less period than six months, or offer a solicitor employment within twelve months after the solicitor has severed his connection with any member; are compelled to discharge those in their employ if they have more than one; and, if these by-laws are enforced, have placed their business under the control of the majority vote of the association,—a power the exercise of which was not given by the fundamental law of the order, and doubtless not contemplated when the association was formed. * " * The common law rule, recognized and adopted when business relations were not so multiplied and extensive as now and when less necessity existed for enforcing it, condemned all such restrictions upon trade and business intercourse with men as is found to exist in this case. The right of one to control his own property as he pleases, and to employ those necessary to aid him in his business upon such terms as may be agreed upon, when not in violation of the law of the land, is the rule of the common law, and the right of the laborer to dispose of his skill and industry to whom he pleases and for the price agreed on is embraced within the same rule. In all classes of business the employer and employee should be allowed to contract with each other unrestrained by others who may demand that the one shall give more or the other receive less, and, as a general rule, when restrictions are placed upon their rig'hts by combinations or associations of men, they will be regarded as in violation of law, and void.” When a corporation is created there goes with it the power to enact by-laws for its government and guidance as well as for the guidance and government of its members. This power is necessary to enable a corporation to accomplish the purpose of its creation. But by-laws must be reasonable and for a corporate purpose, and always within charter limits. They must always be strictly subordinate to the constitution and the general law of the land. They must not infringe the policy of the State nor be hostile to public welfare. The by-law in this case is a restriction on freedom of trade and business. It trammels competition and prohibits an individual from contracting" and engaging in business, and from using" such agencies and means he may desire not hostile to general law. It is not required for corporate purposes, nor is it included within the purposes declared in the certificate of incorporation. It is therefore unlawful, as this corporation had no right to exercise this power of enacting it under its franchise. It is not every misconduct on the part of a corporation, or act not consonant with the purpose of its creation, that will destroy its life. An act to thus result must be one which tends to produce injury to the public by affecting the welfare of the people. Where this results there is an abuse of corporate franchise. (People v. North River Sugar Refining Co. 121 N. Y. 582.) Attempts to place restrictions on trade and commerce and to fetter individual liberty of action by preventing competition are hostile to public welfare and affect the interests of the people. Such attempts by a corporation are an abuse of its corporate franchise. Public policy requires that corporations, in the exercise of powers, must be confined strictly within their charter limits, and not be permitted to exercise powers beyond those expressly conferred. The State provides for the creation of corporations. The is its creature, and must always conform to its policy. This duty on the part of corporations to do no acts hostile to the policy of the State grows out of the fact that the legislature is presumed to have had in view the public interest when a charter was granted to the and no departure from its charter purposes will be allowed which would be hurtful to the public. Where such act is done by a corporation the State may proceed to claim a forfeiture of its charter by an information in the nature of quo warranto. The petition for leave to file an information in the of quo warranto should have been granted. The of the circuit court was therefore erroneous and is reversed, and the cause is remanded with directions to grant leave to file the information. Reversed and remanded.