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A far more interesting and difficult problem is presented by that provision of the Uniform Demurrage Code imposing a charge on privately owned cars held overtime on privately owned tracks so long as they are under lading. It is contended in objection that after such cars have been removed from the interchange tracks and placed upon private tracks, they are no longer in "railroad service," but are private property in the possession of the owner, to be used as he sees fit; that the railroads have no interest in the tracks upon which the cars then stand; that they have ceased to pay rental or mileage for the use of the cars; that they are in no way responsible for the cars, and can have no interest in them until they are again placed on the interchange tracks and tendered for shipment; that they cannot require the owner to place his cars again in the railroads' service; and that if the owner so elects he may unload the car, notify the carrier, and then reload the car and use it for storage purposes as long as he sees fit, and that no possible benefit comes to either the carrier or the public through this unnecessary labor.10
As to the first objection, it accomplishes nothing to prove that the cars are not within "railroad service” as we ordinarily employ that term. It is used in the Code merely as a convenient phrase to describe a certain situation. Whatever the phrase used, the question still remains: Can the railroad charge demurrage against private cars in this situation?
The other arguments against the charge present two propositions: First, that a private owner of private property while on his own land may do with it what he pleases. To this need be made no further answer. Second, that the charge is arbitrary, not in return for any service rendered, and useless alike to the carrier and the public. If sound, this objection must be fatal.
It is true that the railroad cannot charge for use and occupation of its tracks, nor justify the charge on the ground that it will keep terminal facilities open to the public. But it is submitted that the charge may be upheld, first, because it tends to prevent an unjust advantage from accruing to those who own their own cars over those who do not; "1 and second, because the railroads impose the charge as a condition to accepting privately owned cars. 12
There are two substantial possibilities wherein owners of private cars may receive an advantage over other shippers. First, in unloading, they may team directly from the car as the product is sold, while another shipper must either unload the entire car first, and re-handle it in delivery lots later, or pay demurrage. A demurrage charge on the private car owner puts them on the same basis. Either may let the car stand and pay demurrage charges, or may unload at once. Second, in receiving carriers' equipment, one owning private cars may use his cars, fill them and set them on his own siding, treat them as storage cars and not cars in commerce, and demand his share of railroad-owned cars, to the prejudice of other shippers. This is another aspect of the very evil the car-distribution cases sought to correct. The argument taken that the demurrage charge would not prevent this discrimination because the shipper could unload the cars, notify the carrier, and then re-load, and use them for storage purposes as long as he cared to, and call for his share of the carriers' equipment, excluding his own from consideration, is not fatal.13 A regulation need not fail because it is not a perfect panacea for the evil it seeks to correct. It is sufficient that it in fact tends toward a substantial improvement — places some substantial obstacle against this evil. The very fact that the shipper must go through this “useless labor” is a practical answer to the objection. By imposing the charge the shipper, as a practical matter, is very likely to return the cars promptly to railroad service.
10 These are the principal objections urged by the complainant in Proctor & Gamble Co. v. Cincinnati, etc. Ry. Co., 19 Int. Com. Rep. 556, 557.
11 See Proctor & Gamble Co. v. Cincinnati, etc. Ry. Co., 19 Int. Com. Rep. 556. 12 This right of the railroad has been repeatedly
asserted in the cases. See Cudahy Packing Co. v. Chicago, etc. Ry. Co., supra; Re Demurrage Charges on Tank Cars, supra; Proctor & Gamble Co. o. Cincinnati, etc. Ry. Co., supra; Proctor & Gamble Co. v. Cincinnati, etc. Ry. Co., 188 Fed. 221.
Further, there seems no sufficient answer to the proposition that the carrier, since he is under no common-law or statutory duty to receive private cars when tendered, may impose upon his acceptance the condition that the shipper pay this demurrage charge. This condition may properly be implied from the fact that the railroad in its tariff published with the Interstate Commerce Commission regarding the use of privately owned cars includes both the rental they will pay the owner, and the charge they will impose as demurrage. The shipper cannot accept a part and reject the remainder. Nor is this an unreasonable condition. It enables the railroad to count with a degree of certainty upon the continued use of privately owned cars, and to regulate its own equipment upon this basis, for the better service to the general shipping public.
To the objection that the charge is contrary to the Act to Regulate Commerce, it may be answered that “surely any arrangement for the use of private cars which causes, or results in, undue preference or unjust discrimination is repugnant to the underlying principle, as well as in conflict with the terms, of the act.” 14 It may be suggested, further, that Swift & Co., by placing their cars in railroad service, have entered, with the carrier, into the joint business of supplying interstate railway facilities, and, as such, have come definitely within the scope of the Act.
RECENT CASES BILLS AND NOTES - DISCHARGE OF INDORSERS - EXTENSION AGREEMENT WITH THIRD PARTY. The holder of a note indorsed for accommodation deposited the note after maturity as collateral for an unmatured obligation owed to a third person. Section 120 of the Negotiable Instruments Law provides for the discharge of an indorser "by any agreement binding on the holder to extend the time of payment or to postpone the holder's right to enforce the instrument. The holder later sues an accommodation indorser. Held, that he may recover. Brosemer v. Brosemer, 162 N. Y. Supp. 1067 (Sup. Ct., Oswego Cty.). At common law a binding agreement between the holder and the maker of a note for an extension of time discharged the indorsers. Siebeneck v. Anchor Savings Bank, 111 Pa. St. 187, 2 Atl. 485. The basis of the rule was that the rights of the indorsers were prejudiced, in that they could not by payment of the note acquire the right to proceed immediately against the maker. For they were subrogated to the rights of, and so subject to the same defenses as, the holder. But this reason does not apply when the agreement is between the holder and a third party; hence the indorsers were not discharged. Wright v. Independence Nat. Bank, 96 Va. 728, 32 S. E. 459. See 2 DANIELS, NEGOTIABLE INSTRUMENTS, 5 ed., & 1324. Probably, the provision of the Negotiable Instruments Law was intended to enact the common-law rule; for there seems to be no more reason for the discharge of the indorsers where the agreement is with a third party than where there is merely delay by the holder in bringing an action against the maker. Wh there is reasonable basis for doubt, a statute, whose language purports to change the common law, should be strictly construed; and especially is this true where the statute is part of a uniform law, in general declaratory of the common law. 2 LEWIS' SUTHERLAND STATUTORY CONSTRUCTION, 2 ed., 860 et seq. But here the words of the statute seem too plain to be construed as enacting the common-law rule. The principal case seems to limit the express words of the statute.
13 This objection prevailed in Proctor & Gamble Co. v. Cincinnati, etc. Ry. Co., 188 Fed. 221; but the court upheld the charge on the second ground indicated above.
14 Quoted from the opinion of the Commission in Proctor & Gamble Co. v. Cincinnati, etc. Ry. Co., 19 Int. Com. Rep. 556, 558.
- BILLS OF LADING LIABILITY OF CONSIGNOR FOR FREIGHT. — A railroad carried fruit consigned to a purchaser who contracted with the vendor to pay freight. Title passed to the purchaser on shipment. The railroad issued its bill of lading in the usual form providing for delivery to consignee, he paying freight. The carrier delivered the goods, through error collecting from the consignee only part of the freight due. It sought further payment from the consignee; but it never sued him, although he was solvent. The railroad now sues the shipper for the balance due. Held, that it may not recover. Yazov & M. V. R. Co. v. Zemurray, 238 Fed. 789 (C. C. A., 5th Circ.).
In general, the consignor, under a contract of shipment, is liable for the freight, irrespective of an attempt by the carrier to collect from the consignee. Shepard v. De Barnales, 13 East 565; Wooster v. Tarr, 90 Mass. 270; Grant v. Wood, 21 N. J. L. 292; Gilson v. Madden, i Lans. (N. Y.) 172; Collins v. Union Transportation Co., 10 Watts (Pa.) 384; Spencer v. White, 23 N. C. 236; ABBOTT, SHIPPING, 683. Most these cases proceed on ground that the consignor is the true owner and so ultimately liable. See Grant v. Wood, supra; Spencer v. White, supra; Barker v. Havens, 17 Johns. (N. Y.) 234, 237. But cf. Wooster v. Tarr, supra. Normally the owner is ultimately liable. But he is not necessarily so. Ultimate liability must depend on the agreement between the consignor and consignee. Whether the carrier may hold the consignor for freight should depend upon the agreement between the consignor and the carrier. This often involves the question whether the usual clause in the bill of lading, "consignee paying freight,” is intended to benefit the consignor or not. See Spencer v. White, supra, 238. The intent must be gathered from all the circumstances; and where the consignee is known to be ultimately liable, the construction should be like that in the principal case, that the utmost effort be made to collect from the consignee before the consignor can be held. See Barker v. Havens, supra. This result is commendable in that it casts the burden on the right party in the first instance without circuity of action, and secures protection to consignor and carrier alike. Cf. Thomas v. Snyder, 39 Pa. St. 317.
CHOSES IN ACTION GIFT - PAROL EXTINGUISHMENT OF A DEBT. – The deceased had advanced money to the defendant who executed and delivered to him a promissory note. Before his death deceased refused to accept payment and told defendant to keep the money for himself. The executrix now
seeks to enforce the claim. Held, that she may recover. Sullivan v. Shea, 162 Pac. 925 (Cal.)
In most jurisdictions a creditor may extinguish his claim, without consideration, only by a release under seal, or in the case of a specialty by the surrender or destruction of the instrument itself. Weber v. Couch, 134 Mass. 26. Even under the somewhat anomalous New York rule a written, though gratuitous, receipt for payment is the only other alternative. Gray v. Barton, 55 N. Y. 68. Accordingly, the court in the principal case held that there had been no extinguishment. A declaration of trust of a chose in action in favor of a stranger is, however, binding, though oral and without consideration. Ex parte Pye, 18 Ves. Jr. 140. No reason suggests itself why the trust may not as readily be declared in favor of the obligor of the chose. The claim would then be virtually extinguished since the cestui-obligor would be protected in order to prevent circuity of action. But in the principal case the deceased's intention was to extinguish an obligation; not to create a trust. Formerly courts were inclined to treat an imperfect gift of a chattel as a perfect declaration of trust. Morgan v. Malleson, L. R. 10 Eq. 475. To do so imposes a duty upon the donor which he never intended to assume. Modern decisions have abandoned the doctrine. Richards v. Delbridge, L. R. 18 Eq. II. However in the case of land an imperfect conveyance will be supported whenever possible as a bargain and sale, or covenant to stand seised. Roe v. Tranmer, 2 Wils. 75. For by virtue of the Statute of Uses the final result is precisely the one intended. A case like the principal case, where there is a gift of a chose to an obligor, occupies an intermediary position. Cf. Flower v. Marten, 2 Myl. & C. 459. By distorting the intended extinguishment into a trust no additional burden would in fact be imposed upon the deceased's estate. Yet the result would differ from, however closely it might resemble, that which deceased had attempted to effect. It is submitted, therefore, that the somewhat anomalous rule of Ex parte Pye need not, and consequently should not, be extended to upset a longsettled doctrine of the common law; and that the principal case is sound.
CONFLICT OF LAWS — JURISDICTION OF COURTS: PERSONAL JURISDICTION SERVICE: SERVICE BY PUBLICATION AS A DENIAL OF DUE PROCESS. The defendant was domiciled in Texas, but had left the state, not intending to return. A judgment on a note was rendered in Texas against him after service by publication. He seeks to have the judgment reversed for want of due process of law. Held, that the judgment is reversed. McDonald v. Mabee, U. S. Sup. Ct., Oct. Term, 1916, No. 135.
A state cannot in general extend the effect of its process outside its borders so as to acquire jurisdiction. Ralston's Appeal, 93 Pa. St. 133. Thus, service by publication does not give jurisdiction for a personal judgment against a non-resident. Pennoyer v. Neff, 95 U. S. 714; Rand v. Hanson, 154 Mass. 87, 28 N. E. 6. But service by publication will give a state court jurisdiction of a person domiciled within the state. Becquet v. MacCarthy, 2 B. & Ad. 951; Henderson v. Staniford, 105 Mass. 504. Due process of law, however, requires not merely jurisdiction of the defendant but reasonable notice to him. Roller v. Holly, 176 U. S. 398. Service by publication of a resident of a state who is not within the state has been considered sufficient. Henderson v. Staniford, supra; Fernandez v. Casey, 77 Tex. 452, 14 S. W. 149. And apparently in these cases it was not considered material whether or not the defendant intended to return to the state. But where there is no such intention to return, the chances are that publication will not actually notify the defendant. Consequently the rule of the principal case that such publication is not reasonable notice seems justifiable.
CORPORATIONS - CORPORATIONS DE FACTO CHARTER AMENDMENT EFFECTED AFTER ATTEMPT AT UNAUTHORIZED CONSOLIDATION. - An insurance
company attempted to consolidate with a non-insurance company. Later the insurance company abandoned insurance by an amendment of its charter. The statute allows consolidation except between an insurance company and a company not engaged in insurance. ALABAMA CODE, 8 3481. A stockholder of the sometime insurance company seeks to dissolve the consolidation. Held, that it be not dissolved. Alabama Fidelity, etc. Co. v. Dubberly, 73 So. 911 (Ala.).
A de facto corporation can be formed as well by the consolidation of two or more corporations as by original creation. See George Lumber Co. v. Dougherty, 214 Fed. 958; Leavenworth v. Chicago, etc. Ry. Co., 134 U. S. 688. One of the requisites of a de facto consolidation is the legal possibility of a de jure one. American Trust Co. v. Minnesota, etc. R. Co., 157 I11. 641, 42 N. E. 153; Kasanagh v. Omaha Life Ass'n, 84 Fed. 295. But the fact that a company is prohibited from consolidating because it is an insurance company does not make its consolidation legally impossible. See Continental Trust Co. v. Toledo, etc. R. Co., 82 Fed. 642, 650. Cf. Blackburn v. State, 3 Head (Tenn.) 690. Rather, the change of one of the consolidating corporations into an insurance company or, as was done in the principal case, the change of the insurance company into something else, was only a condition precedent to de jure consolidation, and does not prevent a de facto consolidation. Particularly is this true when the condition precedent was subsequently performed and the only defect was the inversion in time of the legal steps. Cf. Toledo, etc. R. Co. v. Continental Trust Co., 95 Fed. 497, 506.ff. Therefore, if the other requisites for a de facto consolidation are present in the principal case, the court seems right in declaring that there is such a consolidation.
CORPORATIONS DISTINCTION BETWEEN CORPORATION AND ITS MEMBERS
DISREGARDING THE CORPORATE FICTION — GARNISHMENT OF DEBT OWED CORPORATION IN ACTION AGAINST STOCKHOLDER. - The defendant formed a corporation in which he took forty-eight of the fifty shares. He was sole manager of its business and used its income for his own household expenses, rendering no accounts whatever. In garnishment proceedings against the defendant, the plaintiff sought to attach a debt owed to the corporation, on the ground that the corporation was merely a cloak to cover the incorporator's transactions. Held, that the attachment will be allowed. McIlhenny v. Lampton, 45 Wash. L. Rep. 22.
Courts are not inclined to read into incorporation statutes any requirement of good faith on the part of incorporators. See Attorney-General v. American Tobacco Co., 55 N. J. Eq. 352, 369, 36 Atl. 971, 978; Windsor Co. v. Carnegie Co., 204 Pa. St. 459, 464, 54 Atl. 329, 331. Cf. Brundred v. Rice, 49 Oh. St. 640, 32 N. E. 169. See 20 Harv. L. REV. 222. Hence any fraudulent motive on the part of the defendant in forming the corporation would seem not to prevent its valid formation. Nor could the defendant's conveyance of property to the corporation be considered a fraudulent conveyance, for exchange of an incorporator's assets for shares of stock is a sale for a consideration. See Foster & Sons v. Commissioners of Inland Revenue, (1894) 1 Q. B. 516. It may be suggested that the “corporate fiction” should be disregarded. But a corporation and its shareholders are distinct legal entities. Parker v. Bethel Hotel Co., 06 Tenn. 252, 34 S. W. 209; Gallagher v. Germania Brewing Co., 53 Minn. 214, 54 N. W. 1915; Salomon v. Salomon & Co., (1897) A. C. 22; Hall's Safe Co. v. Herring-Hall Marvin Safe Co., 146 Fed. 37. See 20 HARV. L. REV. 223; supra, 83. The property of the corporation cannot normally be attached to recover a debt against a shareholder. Williamson v. Smoot, 7 Martin (La.) 31. There is.
7 however, a growing tendency to disregard the “fiction" of corporate entity, whenever in the opinion of the court greater justice can be secured thereby. U.S. v. Milwaukee Refrigerator Transit Co., 142 Fed. 247; Bank v. Trebein, 59