페이지 이미지

tracts exempting themselves from liability for negligence, in any degree, whether in the carriage of goods or of passengers. It is true that a majority of our courts support the right of common carriers to limit their liability to parties riding on free passes, either absolutely or except for gross negligence; but there is some opposition to this doctrine, in either view, manifesting itself in Alabama, Iowa, Minnesota, Missouri, Pennsylvania, and Texas, sometimes on common law grounds, sometimes in statutory enactments, and the free pass cases anyway can be differentiated, made an exception, and upheld on the ground that public policy would discourage the issuance of such passes.?

The reasons given for the majority holding are, in the carriage of goods, (1) the inequality in the position of the contracting parties. The carrier enjoys a quasi monopoly, and though the shipper can always insist upon the common law liability or avoid an unfair contract if procured through duress or fraud, yet his remedy is so vexatious and tedious that in the long run the carrier would gain the advantage and be able to set the public at defiance. (2) These companies are in the nature of quasi-public institutions, discharging some of the sovereign functions which appropriately belong to the state, and therefore they owe a duty to the public which they cannot avoid by private contract any more than other public officials. In the carriage of passengers the reason for the rule of the majority is the interest which the state, as parens patria, has in the life and health of its citizens.

We have admitted that if it were a purely private matter between the shipper or passenger and carrier, as the New York courts maintain, absolute freedom of contract would be the best rule. Granting the public interest, it may be urged in favor of freedom

i Railroad v. Lockwood, 84 U. S. 357 ; N. J. Steam. Co. v. Mer. Bank, 6 How. (U. S.) 344; York Co. v. Central Railroad, 3 Wall. (U. S.) 107; Baltimore v. McLaughlin, 73 Fed. Rep. 519; The South, etc., Co. v. Henlein et al., 52 Ala. 606; California, etc., Co. v. Railroad, etc., Co., 113 Cal. 329; Camp v. The Hartford, etc., Co., 43 Conn. 333; Rose v. The Des Moines, etc., Co., 39 la. 246; Kallam v. U. S. Express, 3 Kan. 198 ; McCoy v. Erie, 42 Md. 498; Illinois, etc., Co. v. Crudup, 63 Miss. 291 ; Hull v. Railroad, 41 Minn. 510; Graham & Co. v. Davis & Co., 4 Oh. St. 362 ; Piedmont, etc., Co. v. Railroad, 19 S. C. 353; Franham v. The Camden, etc., Co., 55 Pa. St. 53 ; Railroad v. Gilbert et al., 88 Tenn. 430; So. Kan., etc., Co. v. Burgess, 90 S. W. Rep. 189; Virginia, etc., Co. v. Sayers, 26 Gratt. (Va.) 328.

2 Mobile v. Hopkins, 41 Ala. 486; Rose v. Des Moines, etc., Co., 39 Ia. 246; Jacobus v. St. Paul, etc., Co., 20 Minn. 125; Starr v. Great Northern, etc., Co., 67 Minn. 18; Bryan 71. Missouri, etc., Co., 32 Mo. Ap. 228 ; Camden v. Bausch, 7 Atl. Rep. 731 ; Gulf v. McGowan, 65 Tex. 640.

of contract to relax and modify the strict rule of responsibility that it would enable carriers to reduce their rates of compensation (surely a public benefit), and if this did not lead to the introduction of new evils, against which it is the policy of the law to guard, it is of course an end to be sought. But the danger of leading in other serious evils is very great, wellnigh inevitable. The condition of our carrier service is bad enough under existing conditions ; a relaxation of liability which would tend to make it more careless, more unobliging, more dangerous, would be intolerable. Again, it may be claimed, a common carrier ought not to be made an insurer without the rights of an insurer; that the only resemblance his business bears to the insurance business is his liability; and that it seems especially harsh and unjustifiable to hold the common carrier liable for the frauds perpetrated on the consignor by third parties. The answer to this objection is that, if it is necessary to protect the interests of the public, the public, without other reason, has a right to impose even such a liability as a condition to the exercise of the carrier's franchise.

In view of all these considerations and of the methods by which at the present time common carriers must carry on their business, it seems to me it is against public policy to allow a common carrier to contract away its liability for negligence either in the carriage of goods or of passengers; but that public policy would not prohibit such contracts, clearly, in the case of the simple bailments not affected with a public interest, nor even in the case of innkeepers and other bailees affected with a public interest. The cases and legislation supporting these propositions have the better reasoning. However, in the instance of common carriers, it must be admitted, as should be expected, the tendency of the law seems to be slowly the other way, towards the allowance of special contracts. Express messengers and persons riding on free passes may now make such contracts, a great many courts allow still further latitude, and in the future progress of the law the doctrine may encroach into the territory of passengers for hire and the territory of goods and live stock. But it does not seem as though the time were yet ripe for such changes, and haste in this direction should be made slowly. Before the clamor of private convenience is listened to it should be certainly and definitely decided that the interests of the public are

[blocks in formation]

safeguarded. The effect of letting the bars of public policy down and the freedom of contract in, where that policy has been tried, has not proven an unquestioned and indisputable success. The legislation in England registers the protest of the English people against the interpretations of the courts. Dissatisfaction is felt in New York. It is not alone the fact that common carriers are pursuing a public employment that should prevent their making contracts limiting their liability for negligence, - there are other public employments perfectly compatible with absolute limitations of such liability ; - it is more because of the magnitude of the business, its monopolistic character, and the conditions and dangers surrounding its management.

The bridge, which we saw stretching ahead of us at the beginning, we have now crossed, and I think I have indicated where, with the widening of the gulf, it is destined, or at least ought, to be extended.


Published monthly, during the Academic Year, by Harvard Law Students.



Editorial Board. HUGH SATTERLEE, President.












John H. Watson, JR.

The article by Professor Smith, begun in this number, is the first of a series on various topics to be contributed this spring by members of the faculty of the School in tribute to the memory of Professor Langdell. These articles, together with the appreciations in the November issue, may later be published in the form of a memorial volume.


STATE INHERITANCE TAX ON STOCK OF SIMULTANEOUSLY INCORPORATED Two-STATE CORPORATIONS. Confusion has arisen in the application to choses in action of the provision of the New York transfer tax imposing an inheritance tax on "property within the state " belonging to a non-resident decedent. Adopting the sound view that as to choses in action without physical situs and not peculiarly the creature of a particular sovereignty only the state of the creditor's domicile has jurisdiction to regulate succession at his death, New York courts first applied this provision only to negotiable or quasi-negotiable instruments actually deposited within the state, to shares in domestic corporations, to New York judgments, and, anomalously but excusably, to money deposited in New York banks. More recently, following revolutionary dicta of the United States Supreme Court, they have extended its application to all choses in action running from New York citizens except those deemed inseparable from the paper evidencing them. The hardship of double taxation in another state has not deterred them. Policies of domestic life insurance companies alone seem exempt, but the court of last resort has yet to pass upon this anomaly.

1 N. Y. L.

37, c. 713. 2 Matter of Morgan, 150 N. Y. 35. 3 Matter of Bronson, 150 N. Y. 1. 4 Matter of Smith, 14 N. Y. Misc. 169. 5 Matter of Houdayer, 150 N. Y. 37.

6 See Blackstone v. Miller, 188 V. S. 189, where Holmes, J., extends to taxation the doctrine that jurisdiction over the debtor is sufficient for garnishment. See Chicago, etc., Ry. v. Sturm, 174 U. S. 710. The court finds justification for this in the aid given by the debtor's state in collecting the claim. But cannot the creditor sue elsewhere? May he not have collateral security? See 15 Harv. L. Rev. 680.

Matter of Clinch, 180 N. Y. 300; Matter of Hewitt, 181 N. Y. 547 ; Matter of Daly, 100 N. Y. App. Div. 373, affirmed 182 N. Y. 524.

8 Matter of Gordon, 114 N. Y. App. Div. 202.

On top of these decisions, including as“ property within the state” almost everything up to successively defined constitutional limits, comes a holding by the Court of Appeals in the other direction. Matter of Cooley, 186 N. Y. 220. A Connecticut decedent left shares in a railroad which had been simultaneously incorporated in New York and Massachusetts, and which owned approximately five-sixths of its property in the latter state. New York tax officials, arguing from the well-established doctrine that for purposes of federal jurisdiction for diversity of citizenship such a simultaneously incorporated two-state corporation may be regarded as a citizen of either state,' disregarded the Massachusetts incorporation and assessed the shares at their full market value. When it is considered that a corporation is not a “citizen" at all,10 that to circumvent this difficulty a bald fiction has been invented of conclusively presuming all stockholders citizens of the state of incorporation," that this fiction leads to the absurdity of conclusively presuming stockholders of simultaneously incorporated two-state corporations citizens of two states, that it will not be applied to subsequent incorporation in a second state, and finally that the purpose of the fiction was to achieve what seemed a beneficent end, the doctrine seems a weak legal basis for deducing an inequitable result. Some unfortunate results of such an assessment were recently well pointed out.12 For example, should a Californian die leaving Lake Shore stock to a collateral relative, the bequest would be subject to a tax of 15 per cent in California besides similar taxes in six other states and possibly before long to a federal tax. The Court of Appeals believed that the New York legislature intended no such legacy-grabbing, and therefore directed that the shares be valued according to such proportion of the entire property as lay within the taxing state. It is quite competent for courts to construe non-mandatory tax acts in an equitable way, and wise for them to refuse to follow the drift of former interpretation when confronted with inequitable results of alarming difference in degree. Specific authority for such equitable construction is found in the cases of a capitalstock property tax 18and of an organization tax 14 on simultaneously incorporated two-state corporations. The court takes pains to distinguish the case of a one-state corporation owning property as a foreign corporation in another state, 15 and to exclude from the operation of its rule cases of incorporation in bad faith. As the first authoritative determination of a question of great and increasing importance, it establishes an enlightened precedent which other states are likely to follow.

The unconsidered problem of the constitutionality of the discarded rule is important. A property tax on such lines would certainly be unconstitutional because of the lack of corresponding governmental protection and as therefore a taking without due process of law.16 But for a privilege conferred a state may exact what it please. The right of succession is not a natural right, but a privilege which the law may altogether withhold or grant

[ocr errors]

• Mo. Pac. Ry. v. Meeh, 69 Fed. Rep. 753 ; Wasley v. Chicago, etc., Ry., 147 Fed. Rep. 608.

10 Paul v. Virginia, 8 Wall. (U. S.) 168; Beale, Foreign Corp., $ 79.
11 St. Louis, etc., Ry. v. James, 161 U. S. 545.
12 “ The Inheritance Tax Colossus,” Boston Transcript, December 8, 1906.
18 State v. Metz, 32 N. J. L. 199.
14 People v. N. Y., C., & St. L. Ry., 129 N. Y. 474.
16 Matter of Palmer, 183 N. Y. 238.

16 D. L. & W. Ry. v. Pa., 198 U. S. 341; Union Transit Co. v. Ky., 199 U. S

« 이전계속 »