Central Law Journal.

ST. LOUIS, MO., DECEMBER 22, 1916.

JURISDICTION OF COURT OF EQUITY TO APPOINT RECEIVER FOR A FOREIGN CORPORATION.

In Love v. R. P. K. Pressed Metal Co., 99 Atl. 1, decided by Connecticut Supreme Court of Errors, appears an interesting discussion about domiciliary and ancillary receivers of a corporation and the nature of the jurisdiction exercised by a court of equity in the appointment of the latter kind. of receivers.

The real jurisdiction that is exercised in the appointing of ancillary receivers is shadowed forth by what is asserted as to the right of a court to act where no steps have been taken in the home state of a corporation in the appointment of a receiver. Thus it is said: "It would be an intolerable proposition to assert that any local business was beyond the original equity jurisdiction of our courts merely because it was conducted by a foreign corporation. corporation. The principle that courts will not interfere in what are usually called the internal affairs of a foreign corporation must yield to the larger and more important principle that all who choose to engage in business within the state, whether under a corporate franchise or not, necessarily subject such business to the jurisdiction of the courts as fully as if it were conducted by our own citizens or corporations."

Then the court proceeds to consider the contention that the court of another jurisdiction than that of the corporation's domicile "has power to appoint an ancillary receiver, but not an original receiver for that purpose, or in other words, that it had no jurisdiction to appoint any receiver at all for the purpose of winding up the local business of a foreign corporation, until the courts *** had first appointed a general receiver in winding up proceedings at the domicile of the corporation." It declares

this contention to be "manifestly inconsistent with the independent sovereignty of the state of Connecticut."

The contention was urged that the faith and credit clause gave to proceedings at the domicile a compulsory force in appointment of ancillary receivers, but it was said this clause could not be applied in this way because "all of the powers of any court must be derived from the state which created it," and "therefore the jurisdiction of our superior court to wind up the local business of foreign corporations in ancillary receivership proceedings is an exercise of powers derived exclusively from the state of Connecticut, and in the absence of statute, it is an exercise of the inherent powers of the superior court as a court of general chancery jurisdiction."

It seems clear that were a statute specifically to provide that courts might pro ceed to wind up the local business of a foreign corporation just as it might wind up that of a domestic corporation, then foreign corporations would be advised that, when they conducted local business they submitted themselves to such a consequence. Is it not true that they must take notice of the inherent jurisdiction of courts in states where they operate? This question seems to answer itself.

But it cannot be denied that it has been the practice of courts other than of the domicile of a corporation to appoint receivers only after the courts of the home state have acted. As said in Sands v. Greeley, 88 Fed. 1. c. 132, 31 C. C. A. 426, "the practice has become common of applying for auxiliary or ancillary appointments. *** The decree in the court of the domicile of the corporation is evidence in every other state that the corporation is insolvent, and that a proper case exists in that state for the appointment of a receiver, and it is to be respected accordingly, in obedience to the constitutional provision whereby "full faith and credit is to be given in each state to the records and judicial proceedings of every other state in the union,"

It seems to us, however, that logic from the conclusion that such a decree is thus protected has its limitations. If there is If there is inherent right in courts where local business is carried on to administer that business, the decree of the courts of the home state ought not to be construed as meaning any more than that the corporation is insolvent so far as the business done in the home state is concerned. And, if this is not strictly true then there is a disputable presumption as to whether a corporation. carrying on business at home and elsewhere is insolvent as to all of its business. The decree is disputable on the score of faith and credit in the same way that a judgment fair on its face may be disputed elsewhere by averment and proof that there was no jurisdiction, as for want of service on defendant, to render the judg

ment.

Viewing the matter in this way, may it not be thought that a sort of comity in recognition of decrees in the home state of a corporation has grown more out of convenience than principle? It would seem to be true that a corporation's affairs, both foreign and domestic, should be treated as a unit so far as creditors and stockholders are concerned, but, when we do this, we put aside the exigency of local law declaring that foreign corporations are subject to the same rules as are domestic corporations.

This is a question with which federal law has little or no concern, whether a corporation be engaged in interstate business or not. It is conceivable, however, that for desirable unity and the prevention of clashes in a race of creditors and the doing away of threats of impairment of at useful agency in interstate traffic, there might be ground for congress bringing their winding up under national law.

If bankruptcy may take hold of an insolvent corporation's assets without regard to state lines, so far as ordinary corporations are concerned, may it not be true, that exclusive jurisdiction of an insolvent corpo

ration of an interstate character, could be vested in federal courts? Bankruptcy law stands, of course, on a specific constitutional provision, and we are not reasoning from analogy. But we are making a suggestion as to the reach of the commerce clause.

NOTES OF IMPORTANT DECISIONS.

PUBLIC UTILITY-RIGHT OF COMMISSION TO FIX SALARY OF OFFICERS.-As there has been some discussion of the right of a public service commission, in addition to its right to regulate rates which a public utility should pay, also to fix wages a railroad should pay, an allusion to the subject of salaries in a decision by the Supreme Court of Idaho would seem not altogether devoid of interest. Coeur D'Alene v. Public Utilities Com., 160 Pac. 751.

In this case the city complained to the commission about poor service and excessive rates. It was found that there was reasonable present excuse for the inadequate service and justification for the rates, but in closing its opinion, the court spoke as follows: "The city com

plains that certain officials of the telephone company, and in particular the president, are paid an exorbitant salary. The fact that the telephone company saw fit to pay its officers exorbitant salaries out of the rates it was authorized to charge and only pay a very small per cent as dividends on the value of its plant per annum, is a question in which the city is not interested so long as the salaries and the rate per cent on dividend on the value of the plant do not exceed the rate authorized by the commission to be collected. It appears that the president of the company is the owner of about 90 per cent of the capital stock. That being true, if he desires to pay himself a large salary and take it out of the interest which the company was authorized to collect on the value of its plant, certainly the city could not complain."

The city as having the right to represent the inhabitants in its complaint was entitled to more consideration than if it were merely complaining of rates it was paying for services rendered to it in its commercial capacity. It was interested, not only in the utility being run on a paying basis, as was its constitutional right to earn, but also that a majority

control of stockholders should not run it for their purposes just as if the company were not affected with a public interest. Neither ought the city to be put on constant watch to ascertain in what proportions the stock is held.

The reasoning the court indulges in seems not flattering to its presumed sense of the relations between owners of a public utility and the public. It would have given a more conclusive answer by saying that this objection presumptively was taken into account by the commission and its discretion would not be overruled. But there seems here an admission that, under some circumstances, salaries and wages could be supervised and regulated by a commission.

INFANTS-NEGLIGENT INJURY TO UNBORN CHILD.-The Supreme Court of Wisconsin holds that, whatever may be deemed the better rule as to negligent injury to a viable child en ventre sa mere, no right of action accrues to any one for negligent injury to a five months fetus, because at that time it is incapable of being born viable. Lipps v. Milwaukee Elec. Ry. & Light Co., 159 N. W. 916.

The court in an interesting opinion says that research reveals only six cases involving the question of negligent injuries to unborn children, all viable at the time and some of them actually born alive. In one of these cases the child was born alive but lived only a few moments after birth. Dietrich v. Northampton, 138 Mass. 14, 52 Am. Rep. 242. The ruling there was that a child between the fourth and fifth months of pregnancy was still a part of the mother and without independent existence. A tort therefore was to the, mother.

An Illinois case held that by the civil law an unborn child was in esse for some purposes where its benefit is involved, but says this rule has never been recognized by the common law. Allaire v. St. Luke's Hospital, 184 Ill. 359, 56 N. E. 638, 48 L. R. A. 225, 75 Am. St. Rep. 176. There was dissent in this case. An English case denies recovery in favor of the unborn child of a woman passenger on a railroad on the ground that there was no contract relation with it. Walker v. Great Northern Ry. Co., 28 L. R. (Jr.) 69. As following this rule see Nugent v. Brooklyn Heights R. Co., 139 N. Y. Sup. 367, 154 App. Div. 667.

In Rhode Island and Missouri it was held that there was no cause of action, the latter state holding that absence of contract relation was not decisive, but the common law recognized no such right. Gorman v. Budlong, 23 R. I. 169, 49 Atl. 704, 55 L. R. A. 118, 91 Am. St. Rep. 629; Buel v. U. R. Co., 248 Mo. 126,

154 S. W. 71, 45 L. R. A. (N. S.) 625, Ann. Cas. 1914c, 613.

In the instant case the court says: "We go no further than the facts of this case require, and hold that no cause of action accrues to an infant en ventre sa mere for injuries received before it could be born viable. Very cogent reasons may be urged for a contrary rule where the infant is viable and especially so in cases where the defendant, being a doctor or midwife, has negligently injured an unborn child. As to such cases we express no opinion."

It seems to us that there ought to be some difference arising out of the circumstances of a pregnant mother voluntarily placing herself in a situation where injury results to her unborn child, whether at the time it be viable or not. But, if a tort is committed willfully or wantonly or where the mother is in her home or elsewhere not in a contractual relation the unborn child whether viable or not ought to have a right of action or its legal representative. This also should be the case where injury is committed by physician or nurse apprized of the mother's condition. This seems to us the untechnical, but practical, way of regarding the matter.

While all of this may be true, is the principle applicable to a purchase of supplies by one of the promoters for future use by the corporation? One of the promoters "negotiated for a site for the new bank, set about the erection of a bank building and ordered furniture and equipment for the bank, including the bill for stationery, which is the subject of this action.” But "the whole project was abandoned" and the promoters were sued as partners.

The court said: "John R. Gunn, a partner in their enterprise to found a bank, contracted this debt in the proposed bank's behalf, and consequently in defendants' behalf. The stationery and supplies were necessary and pertinent to the proposed corporate business and in furtherance of their common purpose. They are therefore liable to the plaintiff."

To us there never more distinctly appeared a non sequitur than in this excerpt. It is familiar that the contracts of promoters do not bind a corporation unless it ratifies them. They therefore are not in furtherance of the

purpose of the promoters. They are made not at all in furtherance of a corporation, but they are tentative only upon ratification by the corporation. They are not legally necessary in promotion of a corporation, nor necessary as matter of fact. Some expense or outlay in furthering promotion might be thought contemplated by joint adventurers, but hardly may it be supposed would be expense for supplies which only may be used by the artificial entity that is being promoted. Any one dealing with a promoter ought to be required to take reasonable notice of what intended use is to be made of what he supplies.

DEGREE OF CARE REQUIRED OF RAILROADS FOR SAFETY OF PASSENGERS WITH REFERENCE TO DANGERS ARISING FROM OBJECTS FALLING FROM BAGGAGE RACKS.

BILLS AND NOTES-ESTOPPEL TO URGE

Thus it appears that a maker in Minneapolis gave a post dated check payable to the order of a resident of St. Paul, the check not being delivered to the payee, but to another for him. This other party having forged the payee's name offered it to another resident of Minneapolis.

The court said: "It is now insisted by defendant that plaintiff cannot recover, because Eckstein forged the name of the payee. But we think defendant is estopped from making this defense. The payee's name was that of a Catholic priest in St. Paul. Within half an hour after defendant gave the check to Eckstein in Minneapolis there came the call on the telephone asking if it was all right. Defendant must have known that this inquiry

was not from the payee, and that the check

had been presented to somebody in Minneapolis

by Eckstein and yet he assures the inquirer

that it will be paid when due. He can hardly be heard to say now, after plaintiff has parted with his money in reliance upon his assurance that the man he intrusted the check to had no right to negotiate it."

If there is anything to show here that the inquirer was about to give value received for a check already indorsed, or that the St. Paul priest had himself not indorsed it, or was not in Minneapolis as known to the maker at the time, we fail to perceive what it is. It does not even appear that the maker was aware of the fact that he was not talking to the payee over the telephone. If apprehension of the commission of a felony goes thus far to put one on notice of its commission as this shows, we may be permitted to observe, that presumptions of innocence may not be considered of very robust value.

extend to the avoidance of those dangers arising from the presence of articles of baggage or other objects brought in the car by passengers and placed in racks or receptacles provided for that purpose by the company?

In Simon v. Richmond, Fredericksburg & Potomac Railroad Company (tried June 1, 1916, in Hustings Court, Part II, of Richmond, Va.), the writer defended a claim for personal injuries received by the plaintiff from the fall of a handbag placed in a baggage rack by another passenger. Plaintiff did not see the bag before it fell, but a fellow-passenger testified that it had been "pushed in" the rack on top of an overcoat and projected diagonally out over the edge several inches. Brakemen had standing orders from the conductor to go through the train after its departure from the station where the plaintiff got on, to see that all baggage placed in the racks by passengers was secure. This the brakeman testified he did, both he and the conductor having passed through the coach in question. after plaintiff came aboard, but neither observed anything unusual either in the size or position of the articles in the rack. It affirmatively appeared that there was no unusual motion in the movement of the train and that the coach was all-steel construction, equipped with standard size baggage racks. Upon these facts, the following instruction as to its duty to the plaintiff with reference to the avoidance of dangers likely

to arise from the fall of objects so situated, was asked for by the defendant and given by the court:

"The court instructs the jury that though they may believe from the evidence that the plaintiff was a passenger for hire upon the defendant company's train, the defendant company was not an insurer of his safety from injuries received from the falling of the hand-bag in question and therefore the said defendant is not bound to satisfactorily account for the cause of its falling; and if the jury believe from the evidence that the defendant company exercised the highest degree of practical care in the provision of a passenger coach and suitable baggage racks therein, the defendant's agents, servants and employes were thereafter only required to exercise ordinary care in ascertaining whether the hand-bag in question, by reason of its size or position in the rack, was likely to fall upon the plaintiff; and if the jury believe from the evidence that the agents, servants and employes of the defendant company neither knew, nor by the exercise of ordinary care should have known from the size of the hand-bag or its position in the rack that it was likely to fall the upon plaintiff, then the defendant is not responsible for the accident in which the plaintiff received the injury complained of and the jury should find for the defendant."

The differentiation pointed out between the degree of care required of the railway with reference to the discharge of its previsionary duties and its obligation to observe and avoid dangers arising from agencies over which it is not in absolute control, is well founded both in reason and authority, though the number of the latter are comparatively few.

In Morris v. New York Central & Hudson River Railroad Company1 (the first and leading case upon this question), the plaintiff was injured while a passenger upon the defendant's train in consequence of the falling upon him of a clothes wringer placed in the baggage rack over his head by another passenger. In reversing the action of the lower court with reference to the degree of

(1) 106 N. Y. 678.

care required of the railway to avoid injuries so received, the court said:

"In looking out for dangers arising from causes such as this, we do not think that carriers of passengers are to be held to the exercise of the highest care which human viligance can give. That measure of care has been spoken of as due from them in the actual transportation of the passenger, and, in regard to the results naturally. to be apprehended from a failure to furnish safe roadbeds, proper machinery, perfect cars or coaches, and things of that nature. But, in regard to a danger of this kind, a carrier of passengers is, we think, held to a less strict measure of vigilance. Reasonable care (to be measured by the circumstances surrounding each case) to prevent accidents of this nature is all that is demanded, and we do not think there was evidence in this case of any such lack of care on the part of the officers of the train."

In Adams v. Louisville & Nashville Railroad Company, the plaintiff, clothed in a heavy veil, was directed to a seat by defendant's brakeman and, after riding about 12 miles, was injured by the fall of a suit case which had been placed in the rack overhead before she got upon the train. While reversing the action of the lower court in peremptorily instructing for the defendant, for the reason that upon all the facts it could not be said as a matter of law that the railway company had not been negligent, the Supreme Court pointed out the degree of care required in such cases and stated that whether the defendant had dis