that defendant was then ready to deliver | defendant was in default, had the trial been them; that plaintiff refused to accept them; that, because he was required to keep them in close herd, defendant suffered a loss of 225 head of the value of $1,500; that he lost much time and was put to great expense in driving the ewes to Ismay and holding them ready for delivery, whereby he suffered additional damage to the amount of $1,500. He demanded judgment for $3,000. There was issue by reply.

may be relieved therefrom, upon making liquidated damages to be paid for a breach full compensation to the other party, except in case of a grossly negligent, willful or fraudulent breach of duty." By its terms it applies to those cases in which a plaintiff has incurred a forfeiture of payments already made or of the value of some act done in part performance of the contract, by a breach in failing fully to perform and is seeking relief therefrom. It is based upon the principle that he who seeks equity must do, or offer to do, equity; and to obtain relief he must by his allegations and proof bring himself within its purview.

thereof which may occur, save in the exceptional cases mentioned. Under these provisions, the courts, in adjusting the rights of parties after a breach has occurred, may not permit recovery in any case of a greater or less sum than will compensate the injured party for the detriment suffered by him. By way of supplement to them and in recognition of the rule of compensation established by them, the Legislature enacted section 6039, not to abrogate but to modify the rule as stated in the cases cited supra, to the end that a party in default who would otherwise suffer total loss of all advance payments made or of the value of a thing done in part performance of his contract may, in proper cases, recover something notwithstanding he is in default. This must be so, otherwise its presence in the Code cannot be accounted for. Since the language of section 5054 is general, every contract containing

is prima facie void as to the stipulation. Therefore when recovery is sought upon it, the plaintiff's allegations and proof must bring it within the exception provided in section 5055. Deuninck v. West Gallatin I. Co., 28 Mont. 255, 72 Pac. 618; Long Beach City School Dist. v. Dodge, 135 Cal. 401, 67 Pac. 499. The same rule is applicable when relief is sought under section 6039. Prima facie, one who has violated a contract is not entitled to any relief. If he seeks it, he must put himself within the exception created by the statute; that is, within its equity. Any other rule would enable him to make out a prima facie case by a bald allegation that he has partly performed his agreement, that he has determined not to proceed further toward its final conclusion, and that he desires to be relieved from the consequent forfeiture which the law has de

At the common law, one who was guilty of a breach of his contract by stopping short of full performance could not recover payments made prior to the breach, for the obvious reason that it is the policy of the law to compel parties to live up to their agreements and not encourage them in their violation. This rule is recognized by all the courts, so far as we are aware. Perkins v. Allnut, a stipulation such as is denounced therein 47 Mont. - 130 Pac. 1, and cases cited. We cite also the following cases: Neis v. O'Brien, 12 Wash. 358, 41 Pac. 59, 50 Am. St. Rep. 894; Witherow v. Witherow, 16 Ohio, 238; Rayfield v. Van Meter, 120 Cal. 416, 52 Pac. 666; Haynes v. Hart, 42 Barb. (N. Y.) 58: Walter v. Reed, 34 Neb. 544, 52 N. W. 682; Leonard v. Morgan, 6 Gray (Mass.) 412; Jones. v. Marsh, 22 Vt. 144; Stevens v. Brown, 60 Iowa, 403, 14 N. W. 735; Colvin v. Weedman, 50 Ill. 311; Eddy & Bissell L. S. Co. v. Blackburn, 70 Fed. 949, 17 C. C. A. 532; Hapgood v. Shaw, 105 Mass. 276; Hansbrough v. Peck, 5 Wall. 497, 18 L. Ed. 520. In this latter case it was said: "No rule in respect to the contract is better settled than this: That the party who has advanced money, or done an act in part performance of the agreement, and then stops short and refuses to proceed to its ultimate conclusion, the other party be-clared. Adopting the language of the court ing ready and willing to proceed and fulfill all his stipulations according to the contract, will not be permitted to recover back what has thus been advanced or done." In such cases the adverse party was entitled to retain advance payments or the benefit of an act done in part performance, whether the contract, as here, provided for a forfeiture or not. Glock v. Howard & Wilson Colony Co., 123 Cal. 1, 55 Pac. 713, 43 L. R. A. 199, 69 Am. St. Rep. 17; Tiedeman on Sales, § 129. Manifestly, therefore, the purpose of the section is to provide a remedy by which the party in default may have relief if he can allege and prove facts and circumstances upon which, in equity and good conscience, he should have relief from the consequences of his own default, and which also excuse him from the imputation of gross negligence, or willful or fraudulent breach of duty.

This view of the provision is consonant with the theory of compensation embodied in sections 6038, 6040, 6041, 6048, and 6068, and also 5054 and 5055, which prohibit par

in Witherow v. Witherow, supra: "The establishment of such a principle would have a tendency to encourage the violation of contracts-to diminish in the minds of contracting parties a sense of the obligation which rests upon them to perform their agreements. Any principle which would have such an effect ought not to be recognized as sound law. It is the duty of courts to enforce the performance of contracts, not to encourage their violation." The case of Rayfield v. Van Meter, supra, is on principle directly in point in support of our view, the section of the statute of California, cited (Cal. Civ. Code, § 3275) as authority for the conclusion stated, being identical with section 6039 supra.

The statute has no application to a case where, as in this case, the plaintiff seeks to recover damages for a breach by the defendant. While he is seeking to recover his advance payments as a part of the compensation due him, the plaintiff assumes to stand strictly upon his legal rights—risking his

[3] Counsel for plaintiff argue that, even so, the defendant was not prejudiced because the jury found that he failed to tender delivery of ewes of the character stipulated for

Under the provisions of section 15, art. 11, of the state Constitution, the franchise of a corporation and property held thereunder are still liable for the payment of any liability incurred by the grantor or lessor or grantee or lessee of such corporation prior to any lease, pre-existing liability incurred in the operation, sale, or alienation of the franchise, and any

in the contract. Instruction 15, however, in effect withdrew from the jury entirely the question whether the plaintiff or defendant was in default. It assumed that defendant was and left it to the jury to determine only the amount of damages plaintiff should re-use, or enjoyment of such franchise becomes a cover, if any, in addition to the amount of the advance payments; whereas the evidence as to who was in default was conflicting. It was the province of the jury to find on this question and to return a verdict for the defendant if it found that he had made tender of delivery in conformity with the terms of the contract.

preferred claim against the franchise and property transferred and is superior to any subsethereon by the purchaser or transferee of such quent bonds, mortgages, or incumbrances placed property.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 1890-1892; Dec. Dig. § 483.*]

3. CORPORATIONS (8 483*) · ALIENATION OF FRANCHISE AND PROPERTY LIABILITIES INCURRED IN OPERATION - WHAT CONSTI

TUTE.

[4] Nor is plaintiff in any better position because, after he peremptorily refused to accept delivery, defendant sold the ewes at A judgment obtained for personal injuries the contract price to Hammond. Defendant inflicted by a corporation in operating its street was not bound to hold them indefinitely. The cars is a liability contracted or incurred in plaintiff refused to accept them and re-chise of such corporation within the meaning the operation, use, or enjoyment of the frannounced the contract. He could not there- of section 15, art. 11, of the state Constitution, after claim that defendant was bound to keep and becomes a claim against the franchise and them for his benefit at the peril of incurring property of such corporation in the hands of the obligation to refund the advance pay- property held thereunder. a purchaser or grantee of the franchise and ments. If this were so, the result would be that plaintiff by his own wrong could compel the defendant to retain the property which his necessities might require him to sell. This would be unreasonable and cannot be justified on any principle of law. Ketchum v. Everton, 13 Johns. (N. Y.) 359, 7 Am. Dec. 384; Rayfield v. Van Meter, supra; Neis v. O'Brien, supra; McKinney v. Harvie, 38 Minn. 18, 35 N. W. 668, 8 Am. St. Rep. 640.

4. The correctness of several rulings made by the court in the admission and exclusion of evidence is drawn in question. We do not find material error in any of them.

The judgment and order are reversed, and the cause is remanded for a new trial. Reversed and remanded.

HOLLOWAY, J., concurs. SANNER, J., being disqualified, did not hear the argument and takes no part in the foregoing decision.

(24 Idaho, 7)

SEYMOUR v. BOISE R. CO., Limited. (Supreme Court of Idaho. May 10, 1913.) 1. CORPORATIONS ($ 483*) ALIENATION OF FRANCHISE AND PROPERTY-EFFECT ON LIABILITIES.

Under the provisions of section 15, art. 11, of the state Constitution, a corporation is prohibited from leasing or alienating its franchise and property "so as to release or relieve the franchise or property held thereunder from any of the liabilities of the lessor or grantor, or les

[Ed. Note.-For other cases, see Corporations. Cent. Dig. 88 1890-1892; Dec. Dig. § 483.*]

4. CORPORATIONS (§§ 573, 579*)—ReorganIZATION-WHAT CONSTITUTES LIABILITY FOR JUDGMENT.

stockholders and directors of an existing corWhere a new corporation is formed by poration, and the directors of the new corporation are the same persons who were a majority of the directors of the old corporation, and 98 per cent. of the issued stock of the new corporation is held by the same persons who were stockholders in the old corporation, and the new corporation purchases all the franchises and property of the old corporation and pays therefor in shares of the capital stock of the new corporation and in cash to the amount of 87% per cent. of the par value of $150,000 worth of first mortgage bonds of the new corporation, held, that the transaction amounts in fact and law to a reorganization of the old corporation, and that the new corporation is liable for a judgment against the old corporation which was rendered for damages on count of personal injuries inflicted by the old corporation.

ac

against the appellant, the Boise Railroad | the members of the board of directors of the Company, alleging that it is engaged in defendant corporation until about the 6th the business of a common carrier of pas- day of August, 1909. That on about the sengers in and over the public streets and 12th day of June, 1906, and while the Boise alleys of Boise City under and by virtue of Traction Company was the owner of street franchises granted by the proper municipal railway lines operated in Boise City over authorities. the streets, alleys, and public places designated in the complaint, the plaintiff through the negligence and wrongful act of the Boise Traction Company was injured and damaged, and thereafter prosecuted his action against the Boise Traction Company for his damages, and subsequently obtained a judgment against such company for the sum of $1,000 damages and $86.40 interest, which judgment and decree was entered against the Boise Traction Company on the day of December, 1909.

The first count of the complaint on which the judgment was entered, among other things, alleges the following facts: That the Boise Railroad Company has an authorized capital of 9,000 shares of the par value of $100 each, of which the sum of 1,500 shares is preferred stock and 7,500 shares is common stock. That the corporation was organized on or about the 27th day of November, 1906, by John J. Blake, Charles A. Hutchinson, and A. R. Cruzen, each of whom subscribed one share of the stock of the "That on or about the 1st day of Septemcorporation. That thereafter and on the ber, 1906, the annual meeting of the stocksame day the secretary of the corporation holders of the Boise Traction Company, Limfiled his certificate in the office of the Secre-ited, was held in Boise, Idaho, there being tary of State, certifying that 2,002 shares present at said meeting C. A. Hutchinson, of the capital stock of the corporation of the representing one share, was present in perpar value of $200,200 had been subscribed. son, and that A. R. Cruzen, representing one That the articles of incorporation provided share, was present in person, and said C. A. for a board of directors, consisting of five Hutchinson represented 1,270 shares of stock members; and that, among other things, the by proxy, the balance of said shares, to wit, articles provided that the company was in- 228 shares, not being represented either in corporated for the purpose of acquiring by person or by proxy. That at said meeting purchase or otherwise street railway rights Isaac W. Anderson, J. Renwick Hogg, W. W. and privileges and franchises from cities and Keen, T. W. Synnett, W. M. O'Boyle, C. A. municipalities, or from private corporations Hutchinson, A. R. Cruzen, S. D. Sinkler, and or persons, and to do all things in connection | Howard Butcher, Jr., each received 1,272 with acquiring and maintaining and operat- stock votes, being all of the stock representing street railways and particularly to ac- ed at said meeting, and were declared to be quire, maintain, and operate a street rail- duly elected as the board of directors for way in Boise City on certain streets therein the ensuing year. That thereafter, at a enumerated of the estimated length of about directors' meeting held January 12, 1907, T. eight and a half miles. That, at the time W. Synnett and Howard Butcher, Jr., resignof making and filing these articles of incor- ed as directors of the Boise Traction Comporation by the Boise Railroad Company. pany, Limited, and on the same day imthe Boise Traction Company, Limited, was mediately thereafter John J. Blake and Aland had been since about the 29th day of bert S. Mack were appointed to fill the vaMarch, 1904, a public service corporation cancies on said board of directors, and that duly organized under the laws of the state the board of directors was so constituted of Idaho, having its principal place of busi- as above stated during all of the times hereness at Boise City, and that it was at such inafter stated. That thereafter on the same time the owner of and operating lines of day at a directors' meeting, there being presstreet railway upon all of the streets and ent and concurring therein the following dialleys of Boise City, described in the articles rectors, to wit, I. W. Anderson, S. D. Sinkof incorporation of the defendant, the Boise ler, A. R. Cruzen, John J. Blake, and AlRailroad Company, as the streets upon bert S. Mack, being a majority of said board, which the latter company proposed to op- the board of directors of said Boise Traction erate its lines of street railway, and that Company, Limited, adopted the following at such time the Boise Traction Company resolution by the unanimous vote of the had the exclusive right and privilege, by aforesaid directors, to wit: 'Resolution. It virtue of a franchise duly granted to it by is resolved by the directors of the Boise the ordinances of Boise City, to maintain Traction Company, Limited, that it is for and operate street railway lines upon the the best interests of said company to sell streets designated in the articles of incorpo- and convey its entire assets, including its ration of the Boise Railroad Company. That franchises, to the Boise Railroad Company, the first board of directors of the defendant, Limited, upon the issuance and delivery by Boise Railroad Company, was composed of the said Boise Railroad Company, Limited John J. Blake, A. R. Cruzen, Charles A. of 1,500 shares of its common capital stock Hutchinson, I. W. Anderson, and S. D. Sink- and 1,500 shares of its preferred stock, full

proceeds of 150 first mortgage bonds of said | of $1,000 each, which said bonds are to be Boise Railroad Company, Limited, of the sold to Rhodes, Sinkler & Butcher of Philpar value of $1,000 each, which said bonds adelphia, Pa., at 872 per cent. of their par are to be sold to Rhodes, Sinkler & Butch-value and accrued interest, be and the same er, Bankers, of Philadelphia, Pa., at 871⁄2 is hereby accepted. That it is for the best per cent. of their par value, together with interests of this company to sell and conaccrued interest; and the president, or in vey all its assets upon such terms; and the his absence the vice president, and the sec- board of directors of this company are hereretary of this company, are hereby author- by authorized and empowered and instructized and directed to make, execute and de- ed to accept said proposition and to cause a liver for and in behalf of the said Boise conveyance of the entire assets, including Traction Company, Limited, and as its act the franchises of this company, to be made and deed, a conveyance of the entire assets to the said Boise Railroad Company, Limited, of this company, including its franchises, upon the said Boise Railroad Company, Limitand to affix to the said conveyance the cor-ed, issuing and delivering to the stockholdporation name and seal of the said corpo- ers of this company 1,500 shares of the comration.'

mon capital stock and 1,500 shares of the preferred stock, full-paid and nonassessable, of said company, together with the proceeds of 150 first mortgage bonds of the said Boise Railroad Company, Limited, of the par value of $1,000, each, aggregating $150,000, which said bonds are to be sold to Rhodes, Sinkler & Butcher, Bankers, of Philadelphia, Pa., at 872 per cent. of their par value, together with accrued interest.'"

"That thereafter and on the same day, to wit, January 12, 1907, immediately after the adjournment of the above-mentioned directors' meeting, a special stockholders' meeting of the Boise Traction Company, Limited, was convened and held, at which were present in person I. W. Anderson, Charles A. Hutchinson, A. R. Cruzen, and S. D. Sinkler, they together representing in person 320 shares, and also 1,180 shares were represented by I. W, Anderson as proxy for the owners, and said shares so represented in person and by proxy, to wit, 1,500 shares, being all of the shares of the capital stock of the Boise Traction Company, Limited, and thereupon the following resolution was adopted by the unanimous vote of all the stockholders of the Boise Traction Company, Limited, viz.: 'Whereas, a proposition has been received from the Boise Railroad Company, Limited, offering to purchase the entire assets of this company, including its franchises, by delivering to the stockholders of this company 1,500 shares of the common capital stock and 1,500 shares of the preferred stock, full-paid and nonassessable, of the said Boise Railroad Company, Limited, and the proceeds of 150 first mortgage bonds of the said Boise Railroad Company, Limited, which said bonds are to be sold to Rhodes, Butcher & Sinkler, Bankers, of Philadelphia, Pa., at 872 per cent. of their par value, and accrued interest; and whereas, all of the stockholders of this company are in favor of accepting said offer and selling the entire assets of this company, including its franchises, upon the delivery of the amount of stock above referred to and the proceeds of said mortgage bonds to be sold as aforesaid: Now, therefore, be it resolved: That said proposition of the Boise Railroad Company, for the purchase of all of the assets of this company, including its franchises, by delivering to the stockholders of this company 1,500 shares of the common capital stock and 1,500 shares of the preferred stock, full-paid and nonasses- Company, and was the person who, on besable, of the said Boise Railroad Company, Limited, and the delivery of the proceeds of 150 first mortgage bonds of the said Boise

That thereafter and on the 28th day of January, 1907, the Boise Traction Company executed and delivered to the defendant, Boise Railroad Company, its deed of conveyance for the consideration named in the foregoing resolutions and in accordance therewith, and that the property conveyed by the deeds from the Boise Traction Company to the Boise Railroad Company comprised all of the property of any kind whatsoever, claimed and owned by the Boise Traction Company, and that "as the sole and only consideration thereof the defendant paid to the Boise Traction Company, Limited, the proceeds of $165,000 worth of its first mortgage bonds, sold to Rhodes, Sinkler & Butcher, on the basis of 872 per cent. and $150,000 par value, being all of the preferred stock of the defendant, and $165,000, par value, of the common stock of defendant." That the persons who on the 12th day of January, 1906, were the owners of the capital stock of the Boise Traction Company, Limited, were also the owners of more than 98 per cent. of the issued and outstanding stock of the Boise Railroad Company, and that the persons who were then the members of the board of directors of the Boise Railroad Company were also a majority of the board of directors of the Boise Traction Company, and that Isaac W. Anderson was then and at all times theretofore the vice president and also a member of the board of directors of the Boise Traction Company and also the vice president and a member of the board of directors of the Boise Railroad

half of the owners of more than five-sixths of the capital stock of the Boise Traction Company, represented the owners in these