US v. Milwaukee Refrigerator Transit, et.
al FACTS:
Chapters 3-4, Villanueva | Dec. 28, 1905 | US Circuit Court of Wisconsin
Nature of Case: Suit in Equity
Digest Maker: Carolino
SUMMARY: A transit company is alleged to have been created and
controlled by a brewing company in order to continue practicing rebates
which have been outlawed by the Elkins Act. The Court ruled that there is
sufficient reason and to believe that the transit company is indeed
controlled and used by the brewing company for unlawful reasons.
DOCTRINE: If any general rule can be laid down, in the present state of
authority, it is that a corporation will be looked upon as a legal entity as a
general rule, and until sufficient reason to the contrary appears; but, when
the notion of legal entity is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, the law will regard the corporation as an
association of persons.
CAST (Defendants)
● Transit company: organized in 1903 to operate refrigerator
cars on defendants’ lines. Allegedly, the company operates as
a device to conceal receiving of rebates
o Incorporated by the procurement of the lawyers of the
brewing company (more details below)
● Brewing company: a Wisconsin corporation operating a large
brewery, selling, and shipping beer in different places in the
US and around the world. It has a capital of $10M or 10,000
shares.
o Majority of the shares are owned by the Pabst family
(specifically brothers Fred & Gustav owning 2,000
shares). They effectively have control over the
company as president, vice president general
manager, and elected the board)
● Other shipping companies are also part of defendants (not
specified in the case)
1
Common carriers, and the officers of such as are corporations, receivers, agents,
etc., of such corporations, are prohibited from giving rebates, preferences, and
advantages, and making unjust discriminations, and are punishable by fine and
● US filed a suit in equity against Milwaukee Refrigerator Transit
Co. et al In violation of the Elkins Act1 and the Defendants filed
a Demurrer
● Before the Elkins Act was passed, the brewing company
secured rebates from its carriers
● Upon passage of the Elkins Act, officers of the brewing
company (the Pabsts and traffic manager Howe) caused the
formation of the transit company in order to evade the liabilities
of the said Act.
● Of the 1,500 total shares of the transit company, 1,340 were
issued to Fred & Gustav, 35 to Fred’s wife, and the rest to
dummy directors to give color that the stock was not owned by
the brewing company
● After investigation of the matter, Gustav transferred his shares
in the transit company to Fred. He also had another person be
elected as director in his place.
o The Court notes that Gustav still owned a large interest
in the transit company and had considerable control
over it.
● Immediately after the creation of the transit company, the
Pabsts, as controlling officers of the brewing company,
contracted with themselves as the officers of the transit
company for the latter’s exclusive control over the shipment of
all freight of the brewing company in interstate and foreign
commerce
o This contract was made to ensure that the freight will
pass by lines that allow rebates and avoid lines that
disallow such rebates
▪ The rebates can amount up to eighths or tenths
of the full amount of the carriage plus ¾ of a
cent to a cent per mile
▪ The rebates amount to thousands of dollars, the
exact amount not ascertained
● Defendant carriers knew that the transit company was created
for the sole interest of the brewing company
● Transit company claims that the repayments were made and
accepted as compensation or commissions for its services.
imprisonment. Under this section only the agents of corporate carriers, and not the
carriers themselves, were punishable.
ISSUE/S & RATIO:
1. Whether the payments are lawful commissions or unlawful rebates?
UNLAWFUL REBATES.
 Note: The Court basically thinks through whether or not
the brewing company controls the transit company and
justifies a reason to do so (this is one of the earlier cases
of the Piercing doctrine)
 It is argued that the averments show that the transit
company is merely the alter ego of the brewing
corporation; both being substantially identical in interest
and control, and the brewing company the ultimate
beneficiary.
 A corporation is an artificial person, a mere legal entity,
invisible and intangible. It was not reasonable that those
who deal with corporate affairs or agents should be
deprived of the valuable privilege of litigating in the
federal courts by a syllogism, or rather sophism, which
deals subtly with words and names, without regard to the
things or persons they are used to represent.
o For certain purposes, the law will recognize
the corporation as an entity distinct from the
individual stockholders; but that fiction is only
resorted to for the purpose of working out the
lawful objects of the corporation. It is never
resorted to when it would work an injury to
anyone, or allow the corporation to perpetrate a
fraud upon anybody. In other words, when the
notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud, or
defend crime, the law will regard the
corporation as an association of persons.
 APPLIED IN THIS CASE:
o Sufficient facts have been alleged to show that the
transit company is controlled by the brewing
company
o There is sufficient identity of interests from the
shareholders of both companies
o The procurement of the shipment through the
contract is mere soliciting rebates in areas where
they are allowed
o The transit company, owning a large number of
cars, simply gives the freight to shippers who can
give best terms, especially since the business is
really large
 In other words, the transit company is used
to evade legally mandated payments
o The device adopted is “neither new, nor deserving
of new success”
Other points made by the court:
o Only when there is reason to believe that injustice
is being made through the corporate medium will
the court look at the corporation as an association
of persons and not as a legal entity which is not a
citizen of the state
o The persons forming the corporation are
conclusively presumed to be citizens of the state
forming it
o THUS, it is not reasonable for persons who deal
with corporations to be deprived of the valuable
privilege of litigation
o Justice Grier: “For all purposes of acting,
contracting, and judicial remedy, they speak, act,
and plead only through their representatives or
curators”
Ruling/Dispositive Portion:
Demurrers are overruled, motion to strike out is denied.