master or servant shall terminate the contract. The English courts have not, however, held that the appointment of a receiver was so analogous to death, that contracts of employment terminated pursuant to an implied condition, upon the appointment of a receiver for either party. If a contract of employment is terminated by receivership, the English courts allow damages, as in the case of other executory contracts.1o

But American courts have almost universally held that the appointment of a receiver for the master's property is an act of the law preventing performance by either party, terminating the contract pursuant to an implied condition, and therefore not giving rise to a claim for damages for its breach. They distinguish contracts for service from other contracts by reference to the old rule as to termination of such contracts by death."1

While the result arrived at by the American decisions, i. e., that damages should not be allowed, is correct, it does not seem that the reasons for differentiating contracts of service from other contracts are satisfactory.

First, the original rule as to contracts of service was based on the presumption that both parties relied on the personality of the other party to the contract. When the personality of either ceased to exist the contract terminated. It did not terminate merely because one of the parties became unable to fulfill it because of insolvency. The employer, corporate or individual, still exists as a separate legal entity or personality, notwithstanding a receivership. This legal entity remains personally liable for the breach of the contract.* 42

Second, the rule was equally applicable to master and servant. Would anyone contend, however, that the appointment of a

41

"Reid v. Explosives Co., L. R. 19 Q. B. D. 264; 24 Laws of Eng. 429. DuPont v. Standard Arms Co., 81 Atl. (Del.) 1089 (gen'l manager, Receivership); Lenoir v. Linville Improvement Co., 126 N. C. 922, 51 L. R. A. 146 (officer-Receivership); Eddy v. Co-operative Dress Ass'n, 3 N. Y. Civ. Pro. 442 (Receivership-gen'l manager); Williamson County Banking & Trust Co. v. Roberts Buford Co., 9 L. R. A. (N. S.) 644 (Receivership on account of insolvency-officer); Laws v. Waldron, 230 Pa. St. 458 (Receivership-gen'l agent); Referee v. Globe Ins. Co., 91 N. Y. 174 (Involuntary dissolution-officer); Contra: Spader v. Mural Co., 47 N. J. Eq. 18; Rosenbaum v. Credit System Co., 61 N. J. L. 544, 548.

The N. J. cases, however, were laying down a rule of construction of a statute applicable to dissolution of solvent, as well as insolvent, corporations.

"Potts v. Rose Valley Metals Co., 167 Pa. 310.

receiver of the assets of an individual, who was under contract to perform certain personal services, could be treated by his employer as a breach of contract?

Third, the reason for the old rule as to contracts between master and servant does not apply where the employer is a corporation. The personality of every individual interested in a corporate employer may change by a transfer of the stock, but the entity, which is in law the employer, remains unchanged, and the employe remains bound by his contract.

Fourth, the fact that the appointment of a receiver of the assets of a corporation is an act of the law, which prevents further payment of the employe out of the assets of the corporation as effectually as death prevents further payment of wages out of the assets of the decedent, is undoubtedly the underlying reason why courts have seized upon this analogy. But if the receivership is treated as an act of the law, which, therefore terminates contracts of employment without liability for breach, it must logically be given the same effect in respect to other executory contracts.

CONCLUSION

From the above review of the decisions, it appears that the distinctions attempted to be drawn between the effect of receivership upon leases, employment contracts and other contracts, do not rest on a satisfactory basis.

There is a satisfactory and logical basis for a distinction between claims for breach by an act of the party, accruing prior to the time when assets are sequestered by the appointment of a receiver, and claims for damages for breaches subsequent to that date.

In accordance with settled principles, equity follows the law in estimating the damages for breaches by act of the party, occurring prior to the receivership, and such measure of damages frequently includes such items as future profits. But a court of equity is not constrained to hold that its own act in appointing a receiver for the benefit of existing creditors is equivalent to an immediate breach of contract by the party over whose assets the receiver is appointed. Nor is it'constrained to hold that persons whose claims arise subsequent to its "equitable execution" have an absolute right to share in the property sequestered thereby. If any party has sustained actual damages in preparation for per

formance of an executory contract, giving rise to a claim which, "upon the principles of equity and conscience, which underly receivership proceedings," ought to be allowed, the chancellor may allow such claim, but the measure of damages would not be governed by legal rules as to damage for breach of contract, and would probably never include future profits.*

43

Of such a rule it may undoubtedly be said that, in effect, it leaves to the discretion of the chancellor, in each particular case, the decision whether or not a claim for damages, arising out of failure to perform an executory contract, should be allowed. The answer is that justice is better subserved by giving the chancellor such discretion than by the arbitrary rule that a receivership operates as a breach, giving persons, who have contributed nothing to the receivership fund, rights in it equal with those whose contributions have created it. If the person having such a claim does not wish to trust to the discretion of the chancellor, he may retain his personal claim for full damages against the company or individual whose property is in the hands of the receiver.

CHARLES P. HINE.

Cleveland, OHIO.

"Wells v. Hartford Manilla Co., 76 Conn. 27; Coy v. Title, Guaranty & Trust Co., 198 Fed. 275, 283-4.

HAS A TRIAL JUDGE OF A UNITED STATES COURT THE RIGHT TO DIRECT A

VERDICT

It is the purpose of this article to enquire into the origin of a practice that since about 1850 has obtained in trial courts of the United States, whereby the judge, when he deems it proper, directs the jury as to the verdict they shall render. We would ascertain whether this be a correct practice. Is it not open to the objection, that it conflicts with the requirements of the Seventh Amendment of the Constitution? The question is of immediate importance to a practitioner in the Federal Courts. Moreover, it cannot fail to interest a student of the Constitution, all the more so, since this particular amendment has seldom been brought before the courts for construction.

Let us begin with observing that the practice of directing a verdict is of modern development. It was not known to the common law. Indeed, it had never been heard of at the date when the Seventh Amendment to the Constitution was adopted.

Directing a verdict came into being as the result of experience in the trial of jury cases in State courts. Those courts discarded the demurrer to evidence as not suited to a speedy disposition of cases. In its place they adopted the directing of a verdict, which was considered as practically amounting to the same thing. It seems that courts of the United States have followed this action of the State courts without paying attention to the question whether they were free so to do. Indeed, nobody appears to have raised an objection until recently, that directing a verdict is a proceeding in violation of the Constitution.1

The language of the seventh amendment is familiar to the reader. It is as follows:

"In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved; and no fact tried by a jury shall be otherwise re-examined in any court of the United States, than according to the rules of the common law."

'The point was taken before the Supreme Court of the United States in an application for a writ of certiorari at the October Term, 1913. The question was not presented, however, in such form as to obtain a ruling and an opinion of the Court thereon. Allegar v. American Car Foundry Company, 231 U. S. 747.

The amendment, it will be recalled, was adopted (1789-91) as the result of political considerations of the highest importance. While the circumstances attending its origin are familiar history, we may with profit resort to them in order to view in a true light the amendment itself. Mr. Justice Story, in his treatise upon the Constitution, narrates these circumstances with fullness.

Speaking of the alarm that the people felt on reading the clause that the Supreme Court shall have appellate jurisdiction both as to law and fact, he quotes at length the argument set forth in the Federalist, No. 81, and says:

"These views, however reasonable they may seem to considerate minds, did not wholly satisfy the popular opinion; and as the objection has a vast influence upon public opinion, and amendments were proposed by various State conventions on this subject, Congress at its first session, under the guidance of the friends of the Constitution, proposed an amendment [the seventh] which was ratified by the people, and is now incorporated into the Constitution. . . . It weakened the opposition by taking away one of the strongest points of attack upon the Constitution."2

Patrick Henry, in an unsparing attack made in the Virginia convention upon the proposed Constitution, exclaimed:

"This will in its operation destroy the trial by jury. The verdict of an impartial jury will be reversed by judges unacquainted with the circumstances."

In the North Carolina convention, Spencer denounced, in a like strain, the omission of a jury clause for civil cases. He declared that "our rights and liberties" are "endangered.”

One objection, of no little force, was urged, that the judges would sit at a distance from the locality where the jury had acted. Lack of ready communication in those times operated to intensify that undefined dread which a party to a suit experiences at the thought that a bench of judges, in some far off place, may fail to recognize his rights. The tone and tenor of the movement to secure a declaration by amendment of the right to a trial by jury, was manifested in a determined opposition to any interference on the part of the appellate judges with the result reached