The Central Law Journal.

ST. LOUIS, JANUARY 3, 1890.

WITH this issue, the JOURNAL starts upon its thirtieth volume. It may not be out of place, at this time, to say a few words on our own account. And in the first place, we desire to thank our subscribers for the repeated evidences of their interest in and appreciation of our efforts. It is gratifying to us to know that a fair proportion of our readers have been with us since the first issue of the JOURNAL, January 1, 1874, sixteen years ago, and though during that period we have undoubtedly made as many mistakes as the remainder of human kind, we are glad to be able to believe that our friends have been equally generous in overlooking our faults and shortcomings.

Though not disposed to exaggerate our value and importance in the legal world, we are bound to believe that, to some extent at least, we have filled the measure of satisfaction established for us, for the fact is that never in our history have we had so large a list of subscribers. It may be of interest to our friends to know that we have the largest circulation of any law journal in this country, and we have reason to believe that there is no law magazine in any country, which in this regard approaches ours.

It was the prediction of many, and it is still the belief of a few, that the system of reporters would crowd out the law journals proper. And though, in most instances, the anticipated result followed, yet the demand, on the part of the bar, for something outside the mere dry report of cases, gave renewed strength to a few of the established legal periodicals. And this has been eminently the case with us. We are free to say that our prosperity has never been so great as since the appearance of the reporter system. And this is as it should be. It is difficult for the most diligent student to keep pace with the ever increasing mass of opinions rendered from time to time, in all the courts, and for the busy practitioner, such a thing is impossible. We conceive that our mission is, in succinct and readable shape, to inform and VOL. 30-No. 1.

enlighten, to call attention to what the courts are doing and saying, and, so far as we are capable, give direction and aim to legal thought and analysis. That we are striving to accomplish these objects, and to make the JOURNAL invaluable to our readers, we beg the latter to believe. Whether we succeed in our aspirations is a question which we are obliged to leave to them to decide.

OUR readers have already been made acquainted with the provisions of the anti-trust legislation, adopted by the State of Missouri. That legislation, in brief, prohibited corporations, partnerships or individuals from entering into any pool, trust or combination intended to fix or limit the price of any article or commodity, and imposed penalties for the violation of the prohibition. The Secretary of State was charged with the duty of enforcing the provisions of the act respecting the revocation of charters where the corporations in response to a request by him neglected or refused to file affidavits declaring their non-connection with pools, trusts or combinations of the kind forbidden by the law. A large number of corporations have failed to file affidavits in response to the call of the secretary, and he has given notice of the revocation of the charters of the domestic corporations, and, in the case of the foreign companies doing business in the State, he has given notice of their failure to comply with the law, the penalty in the latter case being a revocation of the charters after thirty days' notice.

It is already to be seen that the action of the State in declaring the annulment of the charters of these corporations will be vigorously resisted. The law may be attacked upon two grounds, viz: that it violates property rights guaranteed by the constitution, and that it infringes on the domain of congress in attempting to regulate interstate commerce. Even if it should be held that constitutional property rights are not infringed by such legislation, considered by itself, the law may be held void as affecting commerce between the States. To illustrate, one of the foreign corporations to be affected by the enforcement of the law is the Western Union Telegraph Company, which is not a Missouri corporation, and whose business is

largely interstate business, and to that extent, as the Supreme Court of the United States has held, forms a part of interstate commerce. In so far as the business of that corporation is of the latter character, it is beyond the jurisdiction of any State. In such case the essential question would be not as to the nature of the legislation considered by itself, but as to the competence of the State to enact it. If the provisions of the act should be held to be regulations affecting interstate commerce, of course the legislation would fail on that ground.

In this connection, the recent decision of the Supreme Court of Illinois, in People v. Chicago Gas Trust Co., has been construed and heralded as another blow at "trusts," but nothing could be further from the fact. The impression undoubtedly gained currency through the use of the technical term in the name of the corporation affected. As a matter of fact the "Chicago Gas Trust Co." is a corporation, created under the laws of the State of Illinois, for the purpose of acquiring works for the sale and manufacture of gas and electricity, and the decision of the court was that it had no power to purchase and hold the stock of other gas companies as incidental to its main object. The doctrine of this case is not new, nor has it originated with the creation of "trusts." When a corporation diverts its statutory power from the end for which it was granted and employs it to acquire stock in other corporations, or indeed in any direction not fairly authorized by its charter, contrary to the public policy of the State, the latter may undoubtedly in its sovereign capacity revoke the grant.

THERE has been much complaint made of the Cronin jury, on account of their compromise verdict, and considerable interest has attached to the unofficial reports of their doings while deliberating thereupon. It seems that a good deal of bad blood was engendered by the action of one of the jurymen who stubbornly resisted all attempts to find for conviction, in the face of overwhelming evidence, and who had given evidence of unreasonable bias which should have disqualified him. From all accounts the proceedings of the jury were bellicose in their nature and

to such an extent that the juror mentioned above, was obliged to call upon the bailiff for protection from his fellows. This condition of things was in striking contrast to the jury in a recent Louisiana case State v. Demareste-who, while deliberating as to the guilt of one charged with murder, got drunk in a body, made a great deal of noise and sang as they ascended the stairs to their sleeping room "we are climbing up the golden stairs." It is unnecessary to state that the court very properly reversed the conviction founded upon their verdict.

NOTES OF RECENT DECISIONS.

THE admissibility, in evidence in an action for negligence against a railroad company, of reports of officers of the road to the manager detailing the facts connected with the accident and fixing the responsibility therefor was considered by the Supreme Court of Georgia in Carroll v. East Tenn. V. & G. Ry. Co., 10 S. E. Rep. 163. The court in excluding such testimony says:

By a standing rule of the company, as may be inferred, reports by its officers and employees were to be made to it of the facts and circumstancs attending accidents. This accident occurred on the 8th of February, and on the the 18th of that month the superintendent prepared a report to the general manager on the subject. On the following day, the 19th, a report by the conductor, supported by his affidavit and that of several others, embracing engineer, fireman, flagman, brakeman, and another conductor, the plaintiff himself being one of the affiants, was made, and, as we infer, was transmitted through the superintendent, and along with his report, to the general manager. The report of the conductor cast the whole blame on the engineer, treating all the rest of the crew as faultless. These documents were admitted in evidence on behalf of the plaintiff, over the defendant's objection. Having had their origin many days after the happening of the events to which they related, they were no part of the res gertæ of the cause of action on trial, but were mere narrative touching past occurrences. Consequently they do not fall within the principal of the case cited from 33 N. W. Rep. 867, (Keyser v. Railway Co., decided by the Supreme Court of Michigan in June, 1887). Mechem, Ag. §§ 714, 715; Code § 2206. Nor is Carlton v. Railroad Co., 7S. E. Rep. 623 (October term, 1888), a decision upon the question of their admissibility. As far as that case goes is to suggest that they were not confidential communications, but, really, even that question was not involved so as to render a decision of it necessary. Upon princible, we think it clear that these reports were inadmissible; and several authorities which we deem sound are to that effect. In Langhorn v. Allnutt, 4 Taunt. 511, it was held that letters of an agent to a principal, in which he is rendering nim an ac

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count of the transactions he has performed for him, are not admissible in evidence against the principal. A like ruling was made in Reyner v. Pearson, Id. 662. See, also, Kahl v. Jansen, Id. 565, "An official statement or report received by the corporation or board from one acting as officer, and accepted and adopted by them, is competent evidence against the corporation, and those bound by its acts, without further proof of the appointment of the officer; but a report to a corporation or board is not made admissible in evidence against it by the mere fact that it was received and 'accepted' by it, except for the purpose of charging it with notice of the contents." Abb. Tr. Ev. p. 51, § 62. "An admission by a corporation of a fact or liability, duly and properly made, is, of course, evidence against it; but a municipal corporation, by accepting, that is, by receiving, the report of a committee of inquiry, does not admit the truth of the facts stated therein; and such a report, though accepted by the vote, of the corporation is not admissible in evidence against it." 1 Dill. Mun. Corp. (3d Ed.) § 305, (earlier editions, § 242).

The case of Railroad Co. v. Putnam, 118 U. S. 545, 7 Sup. Ct. Rep. 1, was cited and relied on in behalf of the plaintiff. The opinion was delivered by Mr. Justice Gray, who devotes but a single sentence to the question, merely saying: "The reports made by the superintendent to the borad of directors in the course of his official duty were competent evidence, as against the corporation, of the condition of the road." Looking to the statement of facts prefixed to that opinion, we find it represented that "the plaintiff offered in evidence two printed reports made by the superintendent of the road to the board of directors,— one in 1877, which stated that, in the portion of the road where the heaviest traffic was done, there were about 35 miles of iron that had been run over for more than 25 years, and required the closest attention to prevent accidents; and the other, made in 1880, stated that there were 25 miles of track made of iron 42 years in service, and now almost entirely worn out. The defendant objected to the admission of these reports because they were not sworn to under examination in court; because they had no reference to the place of the accident, but only to the general condition of the rails; because they could not bind the defendant as admissions; and because the information of the superintendent as to the condition of the road was derived, in part from the reports of subordinates. But the court overruled the objections, and admitted the reports in evidence." According to this statement, the reports were printed, and in all probability had been promulgated by the company as official documents adopted by and proceeding from it. If so, this would make them utterances of, and therefore admissions by, the company. Moreover, had they not been printed and promulgated, they would have tended to show that the company had notice of the condition of its road previously to the occurrence of the injury in controversy, and would have been admissible to charge the company with such notice, under the rule as above quoted from Abbott. The reports now in question do not relate to the condition of the road, and have no bearing upon any question, of notice to the company of any fact whatsoever prior to the injury; their contents consisting wholly of historical matter touching past conduct, and its consequences. So far as appears, the truth of the reports was never in any way passed upon, adopted, or affirmed by the corporation; nor were the documents printed, issued, or circulated by it as true. It surely cannot be sound law to hold

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that by collecting information whether, under general rules or special orders, and whether from its own officers, agents, and employees, or others, a corporation acquires and takes such information at the peril of having it treated as its own admissions, should litigation subsequently arise touching the subject-matter. As well might it be considered that any and every suitor who sends out agents to discover witnesses and collect facts touching his rights or duties regarding a pending or prospective lawsuit is to be met at the trial with the communications made by or to such agents as admissions made by himself. Can it be possible that a collector of historical materials is to be held responsible for the truth or accuracy of them, without himself having indorsed or promulgated them as true?

The case of Krogg v. Railroad Co., 77 Ga. 202, was also cited and relied upon. The evidence held competent in that case consisted of declarations made by the general manager, some of them rela ing to the condition of the track, and some to the cause of the accident, which he attributed to too much elevation of the superstructure on one of the curves of the road. It would seem that the admissibility of this evidence was put by the court partly on the ground that the general manager represented the corporation in making the statements, which, by the way, were not made as reports of the company, or any superior officer, but as mere oral declarations, partly upon the ground that they were embraced in the res gestæ, and partly upon the ground that they showed his knowledge, and therefore the knowledge of the corporation, as to the improper construction and condition of the road before the accident. We need not comment upon this case further than to observe that its facts are so different from those of the case in hand that the one cannot be a precedent for the other. An officer so high in power and position, and so comprehensive in his duties, as is the general manager of a railroad, might possibly be competant to affect the company by his admissions or declarations when like admissions or declarations proceeding from subordinate officers or agents, or from mere servants and employees, of the company, would be attended with no such admissible quality. Certainly, this distinction could well be drawn where the declarations of subordinates, etc., were made to the company some time after the transaction to which they relate, and were elicited for the sole purpose of its own information, and for use in guiding its own conduct.

THE effect of a sale, by an insolvent corporation, of its property to one of its directors, in satisfaction of a pre-existing debt was considered by the Supreme Court of Illinois in Beach v. Miller, 22 N. E. Rep. 464, and it was held that such a sale, though voidable in equity, does not render the property subject to levy at the suit of the corporation's creditors, and that, though made without an order of the board of directors, it is ratified by the company's receiving and canceling the notes in payment of which it was made. The court says:

But appellants rely upon another ground to defeat the sale that it was void for the reason that Miller was at the time a director of the corporation, and

could not contract with it. This proposition is discussed in the argument under several distinct heads, and various authorities have been cited in its support. There is a conflict of authority on this question; but, on the general proposition whether a director may deal with the corporation, we think the weight of authority is that he may. This court so held in Merrick v. Coal Co., 61 Ill. 479, and in Harts v. Brown, 77 Ill. 226. The Supreme Court of the United States hold the same doctrine. In Oil Co. v. Marbury, 91 U. S. 587, it is said: "It is very true that, as a stockholder, in making a contract of any kind with the corporation of which he is a member, is in some sense dealing with a creature of which he is a part, and holds a common interest with the other stockholders, who, with him, constitute the whole of that artificial entity, he is properly held to a larger measure of candor and good faith than if he were not a stockholder. So, when the lender is a director charged, with others, with the control and management of the affairs of the corporation, representing in this regard the aggregated interest of all the stockholders, his obligation, if he becomes a party to a contract with the company, to candor and fair dealing, is increased in the precise degree that his representative character has given him power and control derived from the confidence reposed in him by the stockholders who appointed him their agent." See, also, the following authorities, where the same doctrine is announced: Ang. & A. Corp. § 233; Whitwell v. Warner, 20 Vt. 425; Smith v. Lansing, 22 N. Y. 526; City of St. Louis v. Alexander, 23 Mo. 483. While a corporation remains solvent, we perceive no reason why a director, with the knowledge of the stockholders, may not deal with the corporation, loan it money, take security, or buy property of it, in like manner as a stranger; but whether a director in an insolvent corporation may purchase the assets in payment of a debt, and thus secure a preference over other creditors, presents a different question. So long as a corporation remains solvent, its directors are agents or trustees for the shareholders. They owe no duty or obligations to others. But the moment a corporation becomes insolvent its directors occupy a different relation. The assets of the corporation must then be regarded as a trust fund for the payment of all its creditors, and the directors occupy the position of trustees, and, a fiduciary relation then existing, they may with propriety be prohibited from purchasing the trust property.

The relation that directors occupy to the property of a corporation is well stated in Odgen v. Murray, 39 N. Y. 202, *Drury v. Cross, 7 Wall. 299.

* Curran v. State, 15 How. 307; Richard v. Insurance Co., 23 N. H. 263; Morawetz on Corporations, § 579; Haywood v. Lumber Co., 64 Wis. 639. The language used in Merrick v. Coal Co., supra, is broad enough to authorize a director of an insolvent corporation to deal with the corporation. But the power of a director to purchase property of or deal with an insolvent corporation did not arise in that case, and what was said was mere obiter dictum. There the Peru Coal Company, a corporation executed certain notes payable to the Michigan Car Company, and also drew certain drafts in favor of the company. These notes and drafts were purchased by Merrick, who was an officer of the corporation, with his own funds, and he brought an action on the notes and drafts, and the only question was whether he was entitled to recover, and the court properly held he might recover upon the notes and drafts. Harts v. Brown, 77 Ill. 226, is another case where expressions may be found similar to those used in the Merrick Case, which were not

justified by the questions presented for decision. That was a bill brought by stockholders to vacate a sale under a trust-deed given by the company to secure the payment of certain bonds issued by the company, and sold to one of the directors. The question arose whether the company had the power to execute a trust-deed, and whether it could loan money of a director. It was held that the charter conferred power to borrow money, and secure it by mortgage or deed of trust, and that the board of directors might borrow money of one of its members. The question before the court was properly decided, but the expression that a director may trade with, borrow from, or loan money to, the company of which he is a member, on the same terms, and in like manner, as other persons, was not authorized by the case made by the record. After a careful examination of the authorities, we are inclined to the opinion that, if this corpoporation was insolvent at the time of the sale, Miller, who was a director, could not lawfully purchase the property in satisfaction of his own debt, to the exclusion of other creditors, but he took the property charged with the trust in favor of other creditors, which may be enforced in an appropriate action. Miller, being a creditor, would doubtless be entitled to share with the other creditors in the property, but he could not appropriate the entire amount to the payment of his own debt. This, however, conferred no right upon appellants to seize the property and sell it in satisfaction of the debt of Blatchford & Co., as creditors of the corporation. They occupied no better position than Miller. It may be, and no doubt is, true, that if Blatchford & Co. had levied on the property while in the hands of the corporation, before the sale to Miller, they would, under such circumstances, have been entitled to hold it; but after the sale and delivery to Miller they had no such right. The property had passed beyond the reach of their execution. It had passed into Miller's hands, charged with a trust which a court of equity might enforce in favor of all the creditors of the corporation, or such as might invoke the aid of that court.

THE validity of a mortgage upon ungrown crops was exhaustively considered by the Supreme Court of Dakota, in Grand Forks National Bank v. Minneapolis & N. Elevator Co., 43 N. W. Rep. 806. It was there held that, under the well settled rule of equity, as adopted by Comp. Laws Dak. § 4328, which provides that an agreement may be made to create a lien on property not yet in existence, in which case the lien attaches when the party agreeing to give it acquires an interest in the property, a mortgage on crops not yet planted is valid. Such a mortgage is valid against a bona fide purchaser for value if recorded when given, and need not be again filed for record after the crops come into existence. The court says:

It is conceded by the parties that the crop of wheat sought to be mortgaged had not been sown at the time of the making or the filing of the chattel mortgage in question; and it is further conceded that the defendant had no other or further notice of plaintiff's claim

to the property than that conveyed by the filing of the mortgage on March 5, 1887; so that the simple question presented to the court is, was this mortgage upon crops to be grown upon the land of the mortgagor, made and filed prior to the planting thereof, but remaining on file thereafter, valid, as against this defendant, without actual notice to him of the existence of said mortgage?

The proposition is susceptible of division into two parts: First, was such a mortgage valid between the parties? Second, was it valid as against this defendant, or, in other words, did the record of such a mortgage impart notice to him? At common law the mortgage conveyed the title; and, as a mere expectancy or property not in esse could not be conveyed, it could not be mortgaged, and the mortgage of goods not then owned by the mortgagor was held not to cover such property, though subsequently acquired by him. Jones v. Richardson, 10 Metc. 481; Otis v. Sill, 8 Barb. 102. This rule of the common law, which is still adhered to, became subject to many exceptions, and, on the theory of potential existence, the chattel mortgage became extended to a large class of cases in which the property had no actual or certain future existence-such as the wool to be grown from certain sheep, the butter to be manufactured from the milk of certain cows, the grain to be harvested from growing crops, and even, in some cases, the crops to be sown and harvested on certain described lands. Van Hoozer v. Cory, 34 Barb. 9, 12; Conderman v. Smith, 41 Barb. 404; Arques v. Wasson, 51 Cal. 620; Robinson v. Ezzell, 72 N. C. 231; McCaffrey v. Woodin, 65 N. Y. 459. These cases proceeded upon the theory that a person having a present ownership of the means of producing was the owner of the future product. Much skill and learning is displayed in the decisions of the courts in determining whether the facts of the given case bring it within the rule. Many other exceptions grew up in which the strictness of the common law rule became much modified; and, as the chattel mortgage came more and more into use in the commercial world by force of statutes and modern decisions of the courts, the harshness of the rule has greatly disappeared. The maxim of Lord Bacon, that "although a disposition of after-acquired property is altogether inoperative, yet such disposition may be considered as a declaration precedent, which derives its effect from some new act of the party after the property is acquired," ," has been applied by the courts in its fullest effect to mortgages at law. Courts of law have been disposed to treat such mortgages as declarations in regard to future interests, and valid as such between the parties. The earlier cases required some affirmative act on the part of the person to be affected thereby after the happening of the event upon which the contract was based, and generally such new act to ratify the original contract must have been in furtherance of it, and with an apparent intention that the original agreement should be treated as then in force. Jones v. Richardson, 10 Metc. 481; Head v. Goodwin, 37 Me. 181. Later, the courts were inclined to allow that the declaration of the mortgage, permitting the mortgagee to take possession of the property upon condition broken, could be enforced without any assent of the mortgagor after default, and that upon possession so taken by the mortgagee the lien of the mortgage attached, and the contract became valid as one of pledge, This doctrine proceeded upon the theory that the agreement contained in the mortgage was a continuing one until it was canceled or revoked by the mortgagor, and that the mortgagee, acting lawfully under such license, obtained a valid lien as

pledgee as soon as he reduced the property to possession; and some of the cases have gone so far as to intimate that such power may be irrevocable. Wood v. Leadbitter, 13 Mees. & W. 838; Wood v. Manley, 11 Adol. & E. 34; McCaffrey v. Woodin, 65 N. Y. 459.

In equity, however, a different rule has always obtained from the one at law. The title to the mortgaged property never passed to the mortgagee, but the interest of the mortgagee was considered as a mere lien-an equitable interest-which would prevail over creditors and subsequent claimants, although the mortgagee had done no act to reduce the property to possession, and though he had done no new act to perfect the lien after the property had been acquired or came into existence; the theory of this doctrine being that the mortgage upon future property is a continuing agreement, while attaches to the property immediately upon its coming into existence, and adheres to it for the benefit of the mortgagee, in accordance with the familiar principle that "equity considers that done which ought to be done." This equitable doctrine as to mortgages comes to us from the civil law, which declares: "Not only goods in present possession, but even goods in reversion, are comprehended under a general pawn or hypotheque-as grain in the ground, a ship to be built, with the timber pledgedif there be a clause inserted to comprehend it. An hypotheque may be an assurance of a thing to be delivered hereafter." Dom. Civil Law, bk. 3, tit. 1, § 1; Ayl. Pand. bk. 4, tit. 18. The doctrine was early adopted by our American courts. In Mitchell v. Winslow, 2 Story, 644, Judge Story says: "It seems to me a clear result of all the authorities that wherever the parties, by their contract, intend to create a positive lien or charge, either upon real or upon personal property, whether then owned by the assignor or contractor or not, or, if personal property, whether it is then in esse or not, it attaches in equity as a lien or charge upon the particular property as soon as the assignor or contractor acquires a title thereto against the latter, and all persons asserting a claim thereto under him, either voluntarily or with notice, or in bankruptcy." In that case a mortgage of all the tools and machinery in a cutler's shop, together with all that might be manufactured or purchased within four years, was held to be a good, equitable lien, and protected as such under the bankrupt act; and while this case has been criticised by the Supreme Court of Massachusetts (Moody v. Wright, 13 Metc. 17, 30), and some others of the States have declined to follow it (Barnard v. Eaton, 2 Cush. 294; Hunter v. Bosworth, 43 Wis. 583; Chynoweth v. Tenney, 10 Wis. 397), yet it may be said to be at the present time the generally established American doctrine (Beall v. White, 94 U. S. 382; Butt v. Ellett, 19 Wall. 544; Pennock v. Coe, 23 How. 117; Brett v. Carter, 2 Low. 458; Apperson v. Moore, 30 Ark. 56; Schuelenburg v. Martin, 2 Fed. Rep. 747; Robinson v. Mauldin, 11 Ala. 977; Floyd v. Morrow, 26 Ala. 353; Gregg v. Sanford, 24 Ill. 17; Scharfenburg v. Bishop, 35 Iowa, 60; Phelps v. Murray, 2 Tenn. Ch. 746; Cook v. Corthell, 11 R. I. 482; Ellett v. Butt, 1 Woods, 214.)

This doctrine, announced by Judge Story in Mitchell v. Winslow, supra, was reviewed and affirmed in the leading case of Holroyd v. Marshall, 10 H. L. Cas. 191, which arose upon a mortgage of certain machinery and implements described in the schedule, and all other machinery and implements which should, during the continuance of the security, be placed on the premises described in the mortgage in addition to, or in substitution for, those enumerated in the schedule. The proceeding was in equity, against a judgment