Central Law Journal.

ST. LOUIS, MO., NOVEMBER 30, 1900.

Mr. E. C. Brandenburg, in charge of bankruptcy matters at Washington, has made a detailed report on the operation of the new bankrupt act during the past year. The wonderful popularity of the act is attested by the fact that over twenty thousand petitions were filed disclosing liabilities amounting to over two hundred and sixty-four million dollars, the assets amounting to over thirtythree million dollars. All classes of people seem to have taken advantage of the act, and its provisions in nearly every particular have sustained successfully the closest investigation of the courts. The only section Mr. Brandenburg states which as construed by the courts is meeting with almost universal disapproval is section 57g. The construction referred to is evidently the case of In re Fixen, 102 Fed. Rep. 295, to the importance of which decision this journal was among the first to call attention, in its issue of November 9th. This case held that payments on account in the ordinary course of business, made within four months preceding bankruptcy, was a preference, and under section 57g must be surrendered before the balance of the claim of the creditor to whom such payment has been made can be proved and allowed. In this connection we desire to call attention to the more recent case of In re Jones, reported in 4 Am. B. R. 563, in which it is held that section 57g compels a surrender of a prefer. ential payment of money, even though received more than four months prior to bank. ruptcy, as a condition precedent to sharing in the assets. The only comment neeessary is that, if the construction announced in the case of In re Fixen will unsettle business, the construction announced in the case of In re Jones will be even more dangerous by disturbing transactions long since past. Our intention is not to criticise these decisions; they are the only logical construction that could be placed on the plain wording of this much disputed section. Judge Lowell's advice, however, in the case of In re Jones is both timely and sensible: "If the construction thus put upon section 57g makes it a

real menace to legitimate business, concern. ing which no opinion is expressed, it is from congress that relief must be sought."

Quite an interesting exception to the doctrine of contributory negligence was set forth very clearly by the Supreme Court of Illinois, in the recent case of West Chicago Street Railway Co. v. Liderman, 58 N. E. Rep. 367. A mother accompanied by her infant child met a friend on the street and stopped a few moments to engage in conversation. During the interview she unconsciously let go of the child's hand, and a moment later saw it upon the street car track and a car approaching at great speed. She immediately ran to the child, and throwing herself in front of the car, was injured in her attempt to rescue it. The question is whether the mother was guilty of contributory negligence in thus throwing herself in front of the car, especially so, when she has carelessly permitted the child to wander upon the track. On the first point the court quotes with approval from Eckert v. Railroad Co., 43 N. Y. 502: "The evidence showed that there was a small child upon the track who, if not rescued, must be inevitably crushed by the rapidly approaching train. This, deceased saw, and he owed a duty of important obligation to this child to rescue it from its extreme peril if he could do so without incurring great danger to himself. The law has so high a regard for human life that it will not impute negligence to an effort to preserve it unless made under such circumstances as to constitute rashness in the judgment of prudent persons." Of course, there is an exception to the rule just stated, to the effect that if the person attempted to be rescued was placed in a position of danger through the fault of the person injured the danger will not excuse the attempt to save him. See Railway Co. v. Leach, 91 Ga. 419. The court recognized this exception but distinguished it from the present case by showing that in all the cases in which this exception is announced there was upon the part of the injured party something more than mere passive negligence, in most cases an affirmative act in taking the person rescued into a place of imminent danger, as where a party wrongfully takes a child upon the trestle work of a railway and was killed while attempting to save it from

injury by an approaching train. In answer to the second point of the question, the court, after stating the rule that it was not negligence per se to permit infants to be upon the streets unattended, proceeded as follows: "Parents are chargeable with the exercise of ordinary care in the protection of their minor children; and whether the conduct of the mother, for which plaintiff is to be held responsible, in permitting the deceased child to be out of her sight for a period of from fifteen to twenty minutes without satisfying herself of its whereabouts was, under all the circumstances, a want of ordinary care, was, we think, a fairly debatable question.

*

Her own evidence shows that she held the child by the hand, and that it slipped away from her only for a moment, and that she immediately pursued it. Can the court say, as a matter of law, that she was bound to hold the child in her arms, or hold it by the hand, or keep her eyes on it constantly while upon the street? The question was, therefore, one of fact, and proper to be submitted to a jury. She had a right reasonably to presume that, if the child for the time escaped from her, and became exposed to danger, others would not negligently injure it; and seeing it suddenly so exposed, she had the right, and it was her duty, not only to the child, but to the defendant itself, to make all reasonable efforts to rescue it from that danger."

NOTES OF IMPORTANT DECISIONS.

CORPORATIONS-FOREIGN CORPORATIONSSTATE REGULATION-VALIDITY OF CONTRACTS -COMMERCE.-In Diamond Glue Co. v. United States Glue Co., decided by the U. S. Circuit Court, E. D. Wisconsin, it was held that a statutory enactment within the power of a State, which prohibits the transaction of business therein by foreign corporations except upon compliance with certain conditions, invalidates any contract entered into in violation of the statute so that the contract cannot be enforced by any court administering the law in such State; and where the prohibition is plain, this rule governs equally, with or without express terms, in the statutes declaring the invalidity.

It appeared that a State statute prohibited any foreign corporation from transacting any business in the State without first complying with its requirements as to the filing a copy of its charter, etc., and further provided that any contract made by such a corporation affecting its personal liabil

ity or relating to property in the State before compliance should be wholly void on its behalf, but enforceable against it. After the enactment of such statute, but before it went into effect by its terms, a foreign corporation entered into an executory contract to be performed within the State. It was held that the statute, on taking effect, became applicable to anything done or to be done under the contract by such corporation thereafter, and constituted a defense to an action by the corporation for a breach of the contract by the other party by refusing to continue operations under it, such corporation having failed to comply with the requirements of the statute.

It was further held that a contract to operate a factory and market the product on joint account is not one relating to interstate commerce in a constitutional sense, so as to exempt it from the operation of State laws, merely because the article manufactured is largely sold in other States.

art. 4, § 1, declares that full faith and credit shall be given in each State to the records and judicial proceedings of every other State. Gen. St. p. 1974, § 8, provides that no action on a contract without specialty shall be brought after six years from the accrual of such cause of action. It was held by the Supreme Court of New Jersey, in Little v. McVey, that where an action was brought on judgments rendered in the State of New York more than six years prior to the action, there being no statute of limitations relative to the judgments of sister States, the action was not barred, since, under Const. U. S. art. 4, § 1, a judgment of a sister State cannot be regarded as a contract debt. The court says:

This is an action upon two judgments recovered in 1888 in the Supreme Court of the State of New York. Several pleas were filed to the declaration on the judgments, but the only one called in question on this motion is the last, which states that the several alleged causes of action in the declaration mentioned did not, nor did any or either of them, accrue to the plaintiff at any time within six years next before the commencement of this suit.' This sets up as a defense to the action on the judgments sued on our statute of limitations applicable to debts founded on simple contracts. That suits upon judgments of a sister State are governed by the lex fori, and not by the lex loci contractus, in so far as proceedings touching the remedy to recover on such judgments are concerned, is without question. Scudder v. Bank, 91 U. S. 406, 23 L. Ed. 245; Amy v. Dubuque, 98 U. S. 470, 25 L. Ed. 228. This whole subject is discussed in the case of McElmoyle v. Cohen, 13 Pet. 312, 10 L. Ed. 177, and the cases above cited follow it. There the court construes the provision of the constitution of the United States which relates to the faith and credit to be given by one State to the judgments of the courts of another State, and says:

'What is the nature of a plea of the statute of limitations? Is it a plea that settles the right of a party on a contract or judgment, or one that bars the remedy? Whatever diversity of opinion there may be among jurists upon this point, we think it well settled to be a plea to the remedy. Consequently the lex fori must prevail.' In this State there is no statute of limitations which specifically provides for the length of time within which suit must be brought upon a judgment of a sister State, and unless the eighth section of our statute of limitations can be pleaded to a suit upon such a judgment, and is applicable to such suits, this plea is bad. Gen. St. p. 1974, § S. There are a number of States which have statutes of limitation as to suits upon such judgments, and where such statutes exist the Supreme Court of the United States has sustained them, and held that it was within the power of one State to provide that a suit upon a judgment of a sister State must be brought within a certain period of years. The statute of Georgia was, as construed in McElmoyle v. Cohen, above cited, as follows: That actions of debt on judgments obtained in courts, other than the courts of this State, must be brought in five years after the judgment is obtained.' And the court upheld that statute, as within the legislative authority of a State, and not interdicted by the faith and credit clause of the federal constitution. To the same effect is Bank v. Dalton, 9 How. 522, 13 L. Ed. 242, and Bacon v. Howard, 20 How. 22, 15 L. Ed. 811. In our own State it has been held that in a suit upon a foreign judgment (that is, a judgment recovered in the dominion of Canada, where the constitutional provision which relates to the faith and credit to be given to the judgments of a sister State does not apply), a plea of our statute of limitations is good, because such foreign judgment possesses no higher character than a simple contract debt, and hence is barred by the same period of limitations as contract debts. Bank v. Ramsey, 55 N. J. Law, 383, 26 Atl. Rep. 837. The judgment of a sister State is not a foreign judgment. It will have the same faith and credit here as in the State where it may have been rendered, and will be deemed conclusive evidence of the debt merged in it. The judgment of a sister State excludes all controversy in this State as to the merits of the debt and contract upon which the judgment is founded. A judgment of a sister State cannot be treated here as a simple contract debt, but must be considered as a debt of record and a verity. Such a judgment is not the mere. prima facie evidence of a debt. It must be deemed conclusive evidence of the debt.

"One of the leading cases in this country on this question is Andrews v. Montgomery, 19 Johns. 162. In this State our supreme court, as long ago as 1832, in passing upon a plea of the statute of limitations interposed to a suit upon a judgment obtained in the court of common pleas of the county of Northampton, in the State of Pennsylvania, said, by Ewing, C. J.: 'Our stat

ute for the limitation of actions upon contracts cannot be brought to bear upon the present demand. Nor have we any statute which in express terms prescribes a period within which actions upon the judgments of other States must be commenced. We have a statute comprehending judgments, but it is confined in terms to judgments of this State.' Gulick v. Loder, 13 N. J. Law, 68. The statute construed by the court in this last case, and which was pleaded by the second plea demurred to, was that which limits the right to bring an action to twenty years. The effect of the decision in Gulick v. Loder is that there is no statute of limitations at all in this State which can be pleaded in bar of a suit upon a judgment of a sister State. The court says in Gulick v. Loder, however, that in such suits it is possible, under a plea of payment, to give evidence that the judgment of the sister State has existed for more than twenty years, and that a presumption arises, from such length of time alone, of payment, but not by virtue of the statute; the principle evidently being that, upon proof that no demand or attempt to enforce the judgment of a sister State has been made within twenty years, that in itself is evidence that the judgment has been paid, and casts the burden upon the plaintiff to establish the contrary before a recovery can be had. In the absence of a statute of limitations applicable to suits upon judgments of a sister State, the courts of this State are required to give to such judgments the same faith and credit, and rights of action thereon, to the same extent as are given to our own judgments; and the language of our statute with reference to our own judgments is: 'A judgment in any court of record in this State may be revived by scire facias, or an action of debt may be brought thereon within twenty years next after the date of such judgment, and not after.'

"The plea in this case, in my judgment, is witbout substance in law, and raises purely and solely a legal question, in view of the admission in the declaration that the judgments sued on were recovered more than six years before the action was instituted, and the motion to strike out should be granted. An order will be made aecordingly."

471, held that a body corporate is not answerable for an erroneous exercise of a discretion, though the consequences be injurious,' and that 'inadequacy of price, unless so great as, of itself, to be evidence of fraud, is not a sufficient ground for impeaching' a contract for the sale of property belonging to a city. In Wells v. Mayor, etc., 43 Ga. 67, it was decided that, where a municipal corporation is acting within the scope of its powers, a court will not 'interfere to restrain or control its action on the ground that the same is unwise or extravagant,' and that, 'to sustain such interference, it must appear either that the act is ultra vires, or fraudulent, or corrupt.' Again, in Danielly v. Cabaniss, 52 Ga. 212, it was ruled that 'when a town council is authorized by law to do a particular act at its discretion, the courts will not control this discretion, and inquire into the propriety, economy, and general wisdom of the undertaking, or into the details of the manner adopted to carry the project into execution.' The case of Mayor, etc., v. Eldridge, 64 Ga. 524, is on the same line, and there are many others in which this court has made decisions of similar import. The doctrine of all these cases, viz., that, as a general rule, there should be no judicial interference with the exercise by municipal bodies of the discretion with which they are by law invested, is sound and well recognized; but this rule is not absolutely without exception. The whole subject was given thorough consideration in the case of City of Atlanta v. Holliday, 96 Ga. 546, 23 S. E. Rep. 509, in which, after stating that under the charter of the city of Atlanta the discretion of its municipal authorities, within the sphere of their powers, is very broad, and this discretion is to be exercised according to the judgment of the corporate authorities as to the necessity or expediency of any given measure,' it was held that: "Where these authorities are acting within the scope of their duties, and exercising a discretionary power, the courts are not warranted in interfering, unless fraud or corruption is shown, or the power or discretion is being manifestly abused to the oppression of the citizen. In a case where it clearly appears that a threatened act on the part of the municipal authorities will result in such oppression, a court of equity may interfere to prevent the wrong.' The vice of the ordinance now under consideration is that it cuts off the power to fully and freely exercise that very discretion which the public good requires the mayor and general council to exercise in making contracts. It effectually ties their hands, and prevents their availing themselves of opportunities to make advantageous agreements in behalf of the city which it is idle to say would not be presented were this ordinance out of the way. We cannot, therefore, escape the conclusion that in adopting this ordinance the mayor and general council exceeded their authority. In 1 Spell. Extr. Relief, § 718, it is said: "Where no conditions or restrictions are imposed upon municipal officers in the matter of letting contracts,

they are not obliged to let the work to the lowest bidder, and cannot be enjoined for a refusal to do so, unless guilty of fraud. They may exercise an unlimited discretion so long as they are not guilty of gross abuse of discretion, and do not pervert their powers to such an extent as to amount to a fraudulent misappropriation of the public funds.' It is interesting, in this connection, to notice the case of Avery v. Job, 25 Oreg. 512, 36 Pac. Rep. 293, in which it was ruled that: 'Although the purchase or erection of certain public improvements may have been by the municipal charter confided to the judgment and discretion of the city council, yet equity will, at the suit of taxpayers, restrain the council from proceeding in the matter when it is not exercising its discretion, but is arbitrarily wasting the public funds, since such conduct is a gross and manifest abuse of power amounting to a legal fraud on the taxpayers.' Here, then, we have most respectable authority for the proposition that a municipal act which amounts to a refusal to exercise discretion, and which must result in an arbitrary waste of the public funds, 'is a gross and manifest abuse of power amounting to a legal fraud on the taxpayers.' Is not such waste sure to occur when, out of nineteen printing concerns in Atlanta, only four are allowed to compete for the city's work, and would not a combination of these four (which could most probably be effected without much difficulty) certainly create a monopoly? If the four should combine, there would be no competition what

ever.

It was urged in the argument that, if such a thing should occur, the ordinance could and would be speedily repealed. To this we reply that the combination might be made without the knowledge of the municipal authorities; but, aside from this, they ought at all times to be in a position to meet such an emergency without being compelled to resort to further legislation; and, further, whether such a combination is to be anticipated or not, they have no more right to restrict competition than to defeat it altogether.

"The case of Adams v. Brenan, 177 Ill. 194, 52 N. E. Rep. 314, 42 L. R. A. 718, is in many respects similar to the one in hand. It was there held that a board of education has no power to agree with the representatives of labor organizations to insert in all its contracts for work upon school buildings a provision that none but union men should be employed in such work, or placed upon its pay rolls.' We make two pertinent extracts from the opinion of Mr. Justice Cartwright: It is plain that the rule adopted by the board and included in this contract is a discrimination between different classes of citizens, and of such a nature as to restrict competition, and to increase the cost of work. It is unquestionable that, if the legislature should enact a statute containing the same provision as this contract in regard to any work to be done for boards of education, or if they should, by a statute, undertake to require this board, as the agency of the State in the management of school affairs in the city of Chicago,

to adopt such a rule, or insert such a clause in its contracts, or should undertake to authorize it to do so, the provision would be absolutely null and void, as in conflict with the constitution of the State. If such a restriction were sought to be enforced by any law of the State, it would constitute an infringement upon the constitutional rights of citizens, so that the State in its sovereign capacity, through its legislature, could not enact such a provision.' Pages 199, 200, 177 Ill., page 316, 52 N. E. Rep., and page 720, 42 L. R. A. There is another ground upon which complainant has an undoubted right to maintain the bill, and that is that the contract tends to create a monopoly, and to restrict competition in bidding for work. The board of education may stipulate for the quality of material to be furnished and the degree of skill required in workmanship, but a provision that the work shall only be done by certain persons or classes of persons, members of certain societies, necessarily creates a monopoly in their favor. The effect of the provision is to lessen competition by preventing contractors from employing any except certain persons, and by excluding therefrom all others engaged in the same work; and such a provision is illegal and void. A taxpayer may resist an attempted appropriation of his money in execution of such a contract.' Pages 201, 202, 177 Ill., page 316, 52 N. E. Rep., and page 721, 42 L. R. A. In Holden v. City of Alton, 179 Ill. 318, 53 N. E. Rep. 556, which was

a case of identically the same kind as ours, except

that there the city charter required the contracts to be let to the lowest bidders, it was decided that an ordinance like the one now under review was 'illegal, as tending to create a monopoly, and impose an additional burden on taxpayers.' While, of course, the provision as to letting contracts to the lowest bidders was a matter of consequences, an examination of the opinion, which was delivered by the same justice from whom we quoted above, will leave little room for doubting that the decision would and ought to have been the same, even in the absence of such a provision. "There are, besides the foregoing, numerous other authorities which support our conclusion in the present case. We cite, as more or less in point, the following: Beach, Monop. § 125; 2 Beach, Inj. § 1299; City of Chicago v. Rumpff, 45 Ill. 90; Littler v. Jayne, 124 Ill. 123, 16 N. E. Rep. 374; Association v. Topeka, 20 Wall. 655, 22 L. Ed. 455; Railroad Co. v. Smith, 29 Ohio St. 292; Van Reipen v. City of Jersey City, 58 N. J. Law, 262, 33 Atl. Rep. 740; Oakley v. City of Atlantic City (N. J. Sup.), 44 Atl. Rep. 651; Winkler v. Summers (Sup.), 5 N. Y. Supp. 723. Most of the authorities cited in this opinion are also pertinent upon the proposition that in a case like the present the taxpayer has the right to invoke an injunction. Our case of Peeples v. Byrd, 98 Ga. 688, 25 S. E. Rep. 677, relied on by counsel for the plaintiffs in error, is in entire accord with what we now decide. There the supreme court reporter was in fact exercising a discretion.

To the former article1 should. be added other decisions since found, which follow,2 and do not follow," the Norwood case.*

Sec. 1. The assessments involved in the California and New York recent decisions noted were for street pavement. These courts, like the courts of Michigan and Missouri, accept the view of the public contractors, that the decision in the Norwood case does not apply, because the assessment involved in the Norwood case was made to pay for a street opening and not for a street pavement. It is through this hole, which is not a hole, they each escape or rather attempt to escape. They overlook or else will not see, that it was distinctly and only because of the unconstitutionality of the provision in the Ohio statute, authorizing the assessment in question, that the Supreme Court of the United States in the Norwood case declared the assessment void. No special rule was invoked or proclaimed in the Norwood case, because of the facts therein. As before shown the case was decided upon the general principle that a statute which authorizes the assessment of adjacent land to pay the cost of a public improvement, according to the frontage or area of such land, without any reference to the special benefit thereto, was unconstitutional." The dissenting State decisions cite Spencer v. Merchant and Parsons v. District of Co

151 Cent. L. J. 243.

2 Dexter v. Boston (Mass.), 57 N. E. Rep. 379; Parker v. City of Detroit, 103 Fed. Rep. 357; Bidwell v. Huff, Id. 363.

3 Conde v. City of Schenectady (N. Y.), 58 N. E. Rep. 130; Hadley v. Dague (Cal.), 62 Pac. Rep. 501; Barber Asphalt Paving Co. v. Ess, decided Nov. 13, 1900, Mo. Sup. Ct.

4 Norwood v. Baker, 172 U. S. 269.
5 51 Cent. L. J. 244.
6 125 U. S. 355.