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concerning some of the instances of absolute liability enumerated ante. As to the three topics just named, our purpose is to indicate, in a very general way, what we regard as the rule established, or likely to be established, by the weight of American authority.
7. As to use of fire. Whatever the English law may be, the American common law is tolerably well settled. One who sets a fire on his own premises, indoors or out-of-doors, for a lawful purpose, is not held to insure his neighbors against damage from the spreading of such fire. He is not regarded as making an extrahazardous use of his property, and hence acting at peril. He is liable only for negligence in setting or watching the fire. If he used reasonable care, under the circumstances, as to the place, time, and manner of setting the fire, and as to his preventing it from spreading, he is not liable.50 By the weight of American authority the above rule of non-liability in the absence of negligence is applied to the use of fire for mechanical or manufacturing purposes, as well as to the use of fire for ordinary domestic or agricultural purposes. 51
8. As to the manufacture and storage of dangerous explosives, it can hardly be said that any definite rule is yet established by a decisive weight of authority.
Some years ago the present writer suggested the following rule as likely to be established:
One who manufactures dangerous explosives, or who stores them in large quantities, in such a locality or under such circumstances as to cause reasonable fear to persons living in the vicinity, is liable, irrespective of negligence in manufacturing or in keeping, for all damages resulting from explosion — unless the factory or the magazine is located "so as to endanger as few persons and as little property as possible, and yet be reasonably accessible as a point of supply and distribution."
9. Does a person maintaining a reservoir act at peril?
If this question must be categorically answered, an English lawyer would probably say “Yes," citing Rylands v. Fletcher,52 while
50 COOLEY, TORTS, 3 ed., 1221-22; BURDICK, TORTS, 2 ed., 451; 2 JAGGARD, TORTS, S42; BISHOP, NON-CONTRACT Law, $ 833. 61 COOLEY, TORTS, 3 ed., 1224.
3 62 L. R. 3 H. L. 330 (1868).
an American lawyer would probably say “No, by the weight of American authority.” But both lawyers would desire further information as to the location, purpose, size, and capacity of the "reservoir.” Even in England it is held that maintaining a cistern on the top floor of a house for the supply of water to the occupants does not involve absolute liability to an adjoining owner if the water escapes without fault.53 The Blake case was decided by a single judge. But in later cases in the higher English courts, where occupants of the house were held barred from recovery, the language of the court clearly indicates that an adjoining owner would also have failed to recover in the absence of negligence.
Where a riparian owner builds a dam across a natural watercourse in order to utilize water for manufacturing purposes, the effect is to collect and maintain in the mill pond a much larger quantity of water than would otherwise be found there. But if the dam is carefully constructed and maintained, it is settled law in the United States that the builder is not liable for harm done by its giving way.55 This, says Professor Bohlen, is “a class of case on the surface prac
'a tically indistinguishable from Rylands v. Fletcher.”
A general rule enunciated by the court in Rylands v. Fletcher will be commented upon later. (To be continued.)
Jeremiah Smith. CAMBRIDGE, MASS.
63 Blake v. Land, etc. Corporation, 3 T. L. R. 667 (1887); McCord Rubber Co. o. St. Joseph Water Co., 181 Mo. 678, 81 S. W. 189 (1904).
64 See Wright, J., in Blake v. Woolf, (1898) 2 Q. B. 426, 428; Lord Moulton, in Rickards v. Lothian, (1913) A. C. 263, 280.
66 See cases collected in 59 U. PA. L. Rev. 315, n. 22, and City Water Power Co. v. City of Fergus Falls, 113 Minn. 33, 128 N. W. 817 (1910).
59 U. PA. L. REV. 315.
VOLUNTARY TRANSFERS OF CORPORATE
A CORPORATION, X, has sufficient liquid assets to meet its
obligations as they mature, and is making large net profits. An offer is made by Y to purchase its assets. The directors, and the holders of a large majority of its stock, vote to accept the offer. Should a court, in a suit by a minority stockholder, enjoin the proposed transfer of assets?
Again. A corporation, X, formed in state R, has sufficient liquid assets to meet its obligations as they mature, and is making large net profits. But its business is being transacted chiefly in state S, and both R and S are collecting large sums in taxes from it. The directors, and the holders of a large majority of its stock, wish to form a corporation, Y, in state S and transfer the assets of X to Y. If a minority stockholder objects, is there any way in which such object may be accomplished?
It has been stated that, at the common law, a corporation could not be dissolved without the unanimous consent of its members. In attempting to decide the cases, put above, it is wise to inquire at once whether such statement is correct.
Two questions present themselves. First, did a corporation at common law have the capacity or power to dissolve itself by its voluntary action? It did not. But it did have, at common law, the capacity or power to surrender its corporate franchise, and when this surrender was accepted by the Crown (and duly enrolled) the corporation was dissolved.
Second, by what human beings was the corporate power to surrender its franchise to be exercised? The powers of a corporation
See BLACKSTONE, COMMENTARIES, Book I, c. XVIII. It was indeed questioned by counsel in Quo Warranto v. City of London (p. 92, Pollexfen arguendo) whether a corporation had such capacity; but there seems to be no doubt of the accuracy of Blackstone's statement. See 2 KYD, CORPORATIONS, 465; GRANT, CORPORATIONS, 306; LINDLEY, COMPANIES, 6 ed., 138.
are, at common law, vested in its members, and the decision of the majority of the members binds the minority and is the decision of the corporation. To be sure, different arrangements may be made in the charter or by-laws, or by statute, - on the one hand, it may be provided that certain corporate acts shall be done only when two thirds, or three fourths, or all the members agree; on the other hand, it may be provided that many or all the powers may be exercised by a committee of management. But we are speaking of the common law.
Thus Blackstone said that the incorporators are considered as one person in law, and “as one person, they have one will, which is collected from the sense of the majority of the individuals." 2
"In aggregate corporations also, the act of the major part is esteemed the act of the whole. By the civil law this major part must have consisted of two-thirds of the whole. . . . But, with us, any majority is sufficient to determine the act of the whole body. And whereas, notwithstanding the law stood thus, some founders of corporations have made statutes in derogation of the common law, making very frequently the unanimous assent of the society to be necessary to any corporate act (which King Henry VIII found to be a great obstruction to his projected scheme of obtaining a surrender of the lands of ecclesiastical corporations), it was therefore enacted by Statute 33 Hen. VIII, C. 27, that all private statutes shall be utterly void whereby any grant or election, made by the head, with the concurrence of the major part of the body, is liable to be obstructed by any one or more, being the minority."
Kyd, in his “Treatise on the Law of Corporations,” published in 1793, considered what would happen if “the acting part of the corporation" put the common seal to a deed of surrender, laid all the charters at the King's feet, and procured the surrender to be enrolled. He was of opinion that thereby the corporate existence would have been destroyed. And he makes this comment (italics ours):
2 COMMENTARIES, Book I, c. XVIII.
3 COMMENTARIES, Book I, c. XVIII. For further authorities in support of the text, see GRANT, CORPORATIONS, 68 and cases cited; LINDLEY, COMPANIES, 6 ed., 435, 436 and cases cited.
"It would no doubt be a breach of trust in the acting part of the corporation to make such a surrender without the authority of the major part of all the individual members." 4
It did not occur to Kyd to doubt the propriety of a surrender, authorized by the major part of the members.
Grant, in his “Treatise on the Law of Corporations,” published in 1850, said that incorporated persons can rid themselves of corporate character by surrendering their charter into the hands of the Crown, if such surrender be accepted, and there be due enrollment. He adds in a note: "The surrender must be the act of the majority of the whole corporation, not merely of the governing body."
Adler, in his “Summary of the Law Relating to Corporations, published in 1903, said: 6
“All corporations, with the exception of municipal corporations, may surrender their charters, and (though doubt has been expressed upon the point) the best opinion seems to be that a surrender needs only a resolution of the majority like any other corporate act.”
The doubt on the point is traceable to the case of Ward v. Society of Attornies.? A society had been chartered, and the corporation had, for value received, issued shares, upon which dividends were expected to be declared. A majority of the members came to believe that it was more fitting that no profit should accrue to the members and voted (a) that the charter be surrendered, and (6) that, prior to the delivery of the deed of surrender, all the property of the corporation should be conveyed to trustees who should ultimately convey it to a new corporation so organized that the members would “not any longer possess any individual right of property in its capital or possessions, nor be entitled to derive any individual pecuniary advantages” from the revenues. A minority stockholder obtained a preliminary injunction against such transfer and surrender.
The majority were proposing to give away the assets of the corporation, thus making valueless the shares of the minority. It is plain that such an act could not be sanctioned.
The surrender of the charter was only to take place after the con
4 Vol. 2, p. 466
6 Page 306.
6 Page 134
i Collyer 370 (1844).