NOTES OF RECENT DECISIONS.

UNITED STATES SUPREME COURT-JURISDICTION - FEDERAL QUESTION -RECEIVER. -In McNulta v. Lockridge, the Supreme Court of the United States hold that whether a receiver appointed by a federal court can be sued for the act of his predecessor in office without leave of court, by virtue of Act Congress, March 3, 1887, § 3 (24 St. 552), which provides that a receiver may be sued in respect of any act of his" in carrying on the business without previous leave of the court appointing him, is a question of general law; and the decision of a State supreme court that such a suit may be maintained will not entitle the receiver to a review of the ruling by the United States Supreme Court. A claim by a receiver appointed by a federal court that he is not subject to suit for the act of his predecessor in the office, without previous leave of such court, is the claim of an immunity under an "authority exercised under the United States," within the meaning of Rev. St. U. S. § 709, giving the right to a review by the United States Supreme Court when such authority is denied by a decision of a State supreme court. Act Congress, March 3, 1887, § 3 (24 St. 552), providing that every receiver appointed by a federal court may be sued "in respect of any act or transaction of his in carrying on the business" without leave of the court appointing him, applies to such a receiver in respect of an act of his predecessor in the office.

TESTAMENTARY COVENANT-VALIDITY. - In Krell v. Codman, the Supreme Court of Massachusetts hold that a voluntary covenant in writing, that the covenantor's executors shall, after her death, pay the covenantee a certain sum, is not contrary to the policy of the laws of Massachusetts. Holmes, J., says:

This is an action on a voluntary covenant executed by the defendant's testatrix, in England, that her executors within six months after her death should pay to the plaintiffs upon certain trusts the sum of £2,500, with interest at 4 per cent. from the day of her death. It is agreed that by the law of England such a covenant constitutes a debt of the covenantor legally chargeable upon his or her estate, ranking after debts for value, but before legacies; but it is contended by the defendant that a similar instrument executed here would be void. The testatrix died domiciled in Massachusetts, and the only question is whether the covenant can be enforced here. If a similar covenant

made here would be enforced in our courts, the plaintiffs are entitled to recover; and, in the view which we take on that question, it is needless to examine with nicety how far the case is to be gov. erned by the English law as to domestic covenants, and how far by that of Massachusetts.

In our opinion, such a covenant as the present is not contrary to the policy of our laws, and could be enforced here if made in this State. If it were a contract upon valuable consideration, there is no doubt it would be binding. Parker v. Coburn, 10 Allen, 82. We presume that, in the absence of fraud, oppression, or unconscionableness, the courts would not inquire into the amount of such consideration. Parish v. Stone, 14 Pick. 198, 207. This being so, consideration is as much a form as a seal. It would be anomalous to say that a covenant, in all other respects unquestionably valid and binding-Comstock v. Son (Mass.), 28 N. E. Rep. 296; Mather v. Corliss, 103 Mass. 568, 571-was void as contravening the policy of our statute of wills, but that a parol contract to do the same thing in consideration of a bushel of wheat was good. So, again, until lately an oral contract founded on a sufficient consideration to make a certain provision by wil for a particular person was valid. Wellington v. Apthorp, 145 Mass. 69, 13 N. E. Rep. 10. Now, by statute, no agreement of that sort shall be binding unless such agreement is in writing, signed by the party whose executor is sought to be charged, or by an authorized agent. St. 1888, ch. 372. Again, it would be going a good way to say, by construction, that a covenant did not satisfy this statute.

The truth is that the policy of the law requiring three witnesses to a will has little application to a contract. A will is an ambulatory instrument, the contents of which are not necessarily communicated to any one before the testator's death. It is this fact which makes witnesses peculiarly necessary to establish that the document offered for probate was executed by the testator as a final disposition of his property. But a contract which is put into the hands of the adverse party, and from which the contractor cannot withdraw, stands differently. See Perry v. Cross, 132 Mass. 454, 456, 457. The moment it is admitted that some contracts which are to be performed after the testator's death are valid without three witnesses, a distinction based on the presence or absence of a valuable consideration becomes impossible, with reference to the objection which we are considering. A formal instrument like the present, drawn up by lawyers, and executed in the most solemn form known to the law, is less likely to be a vehicle for fraud than a parol contract based on a technical detriment to the promise. Of course, we are not speaking of the rank of such contracts inter se. Stone v. Gerrish, 1 Allen, 175, cited by the defendant, contains some ambiguous expressions, but was decided on the ground that the instrument declared on did not purport to be, and was not, a contract. Cover v. Stem, 67 Md. 449, 10 Atl. Rep. 231, was to like effect. The present instrument indisputably is a contract. It was drawn in English form by English lawyers, and must be construed by English law. So construed, it created a debt on a contingency from the covenantor herself, which, if she had gone into bankruptcy, would have been provable against her. Ex parte Tindal, 8 Bing. 402; 1 Deac. & C. 291; Mont. Bankr. L. 375, 462; Robs. Bank. (5th Ed.) 274. The cases of Parish v. Stone, 14 Pick. 198, and Warren v. Durfee, 126 Mass. 338, were actions on promissory notes, and were decided on the grounds of a total or partial want of consideration.

There is no question here of any attempt to evade or defeat rights of third persons which would have been paramount had the covenant or left the sum in question as a legacy by will. There is no ground for suggesting an intent to evade the provisions of our law regulating the execution of last wills, if such intent could be material when an otherwise binding contract was made. See Stone v. Hackett, 12 Gray, 227, 232, 233. There was simply an intent to make a more binding and irrevocable provision than a legacy could be, and we see no reason why it should not succeed.

BUILDING ASSOCIATION-BY-LAWS-IMPAIRING VESTED RIGHTS.-In Holyoke Building & Loan Association v. Lewis, decided by the Supreme Court of Colorado, plaintiff became a member of defendant building association at a time when a by-law thereof provided that "all non-borrowing stockholders wishing to withdraw shall be privileged so to do upon giving notice to the directors of his or her intention, and shall be entitled to receive the amount of installments actually paid in, without interest." It was held that plaintiff's right of withdrawal was a vested right, of which defendant could not deprive him, without his consent, by a subsequent repeal of the by-law. Richmond, P. J., says:

This was an action on a money demand, and was originally tried upon an agreed state of facts which, in substance, are that Jerome Lewis, the defendant in error, paid into the Holyoke Building & Loan Association, plaintiff in error, the sum of $75, thereby becoming a member of the association. At the time of payment there was an article of the by-laws which read, as follows: "All non-borrowing stockholders wishing to withdraw shall be privileged so to do, upon giving notice to the directors of his or her intention, and shall be entitled to receive the amount of installments actually paid in, without interest." Defendant in error gave the notice, the association declined to return the money, insisting that since the payment by Lewis the directors of the asociation had repealed the article of the by-laws referred to, and therefore defendant in error was not entitled to withdraw the money from the association. Judgment was rendered in favor of defendant in error for the amount of his demand. To reverse this judgment this error is prosecuted.

alter has the same limit, so that no alteration or repeal could be made which would infringe a right already given and secured by contract with the corporation. No private corporation can repeal a by-law so as to impair rights which have been given and become vested by virtue of a by-law afterwards repealed. All by-laws must be reasonable and consistent with the general principles of the laws of the land, which is to be determined by the court when a case is properly before them. But a by-law that will disturb a vested right is not such. Kent v. Mining Co., 78 N. Y. 159. "By-laws are the corporation's charter, and are subject to the constitution and general laws of the State. They fix the right of stockholders, and are in the nature of a fundamentrl contract in form between the corporators, and in practical effect between the association and its stockholders-a contract which, as in all other cases, neither party is at liberty to violate. Any attempt on the part of the corporation, by by-laws or otherwise, to deprive a member of a right secured to him by the corporate articles, is in excess of its authority." Bergman v. Association, 29 Minn. 275, 13 N. W. Rep. 120. The fact that Lewis was a non-borrowing stock. holder is not denied. That he gave the notice under the article of the by-laws referred to, and that he had paid in the amount of money which he sought to recover, is admitted. His right, therefore, of withdrawal, was a vested right, which the corporation, without his assent, could not deprive him of.

The rule of law is that a corporation has not the right to repeal a by-law so as to impair rights which have been given and become vested by virtue of the by-laws, although the power to alter, amend or repeal its by-laws is granted by charter. End. Build. Ass'ns, § 278; Insurance Co. v. Connor, 17 Pa. St. 136; Revere v. Copper Co., 15 Pick. 351; Ang. & A. Corp. § 342. When that by-law was adopted it was as much the law of the corporation as if its provisions had been part of the charter. But it is insisted that the corporation could alter, amend, add to or repeal bylaws before made, and that by virtue of this authority Lewis is precluded or estopped from asserting his rights under the article mentioned. The power to make by-laws is to make such as are not inconsistent with the constitution and the law, and the power to

SITUS OF TAXATION OF CORPORATIONS AND OF CORPORATE SHARES.

II.

What, then, are the restrictions imposed by the national constitution upon the otherwise absolute power of the States to tax? They are believed to be: 1, the State may not tax the instrumentalities of the general government; and 2, the State may not tax in such a manner so as to regulate interstate or foreign commerce. As to the first restriction, it is more properly a prohibition, for in no place nor manner may the State tax the agencies of the general government. And a State has no power to tax the operations of a corporation, which corporation is engaged as an instrumentality of the general government, as the power to tax involves the power to destroy, and if a State possessed this power, it could destroy, if it wished, any agency of the general government, and cripple or destroy even the nation itself. But in McCullough v. Maryland, it was intimated that the State might tax the real and personal property of such a corporation; and in the

1 McCullough v. Maryland, 4 Wheat. 431; also Osborn v. Bank, 9 Wheat. 738.

case of the Railroad v. Peniston,2 it was held that the State of Nebraska could tax the real and personal property of the Union Pacific Railroad Company, which company was organized under laws of the United States, the distinction being that a tax upon the property of a corporation is not necessarily an impediment to the proper exercise of the corporate functions, while a tax upon the operations of a corporation is a direct and positive restriction of the functions of the corporation.

The commerce clause of the national constitution has given rise to an almost endless number of decisions, and it must be confessed that the decisions are not at all harmonious. It would be a waste of time to examine all the cases, and a few only will be noticed, wherein States have attempted to exercise the sovereign power of taxation, and the attempt has been held to be in either a regulation of interstate or foreign commerce, or was a legitimate exercise of the reserved powers of the State. It is not considered a regulation of interstate commerce to impose a tax in the shape of a license, under the proper exercise of the police power of the State. Thus, when the city of Mobile imposed a license of fifty dollars upon every express and railroad company, operating entirely within the city; one hundred dollars on those operating within the city and State, but not beyond the State; and five hundred dollars upon those doing business which extended beyond the limits of the State, it was held that the license fees were not repugnant to the clause in the national constitution giving congress sole power to regulate commerce between the States. While a license of fifty dollars imposed by the State of Tennessee upon each sleeping car, not owned by the railroad, was held to be repugnant to the above clause.1

It would seem that a foreign corporation that is not an agency of the national government, and that is not engaged in interstate or foreign commerce, and not being a citizen "entitled to all privileges and immunities of citizens in the several States," might be driven by taxation from the State in which it was attempting to do business. An insurance company is such a corporation.

2 18 Wall. 5.

3 Osborn v. Mobile, 16 Wall. 479.

4 Pullman Co. v. Nolan, 22 Fed. Rep. 276.

Mr.

6

Justice Fields says: "Issuing a policy of insurance is not a transaction of commerce. These contracts are not articles of commerce in any proper sense of the word. They are not commodities to be shipped or forwarded from one State to another, and then put up for sale."5 A tax laid on freight carried from within the State to places without and from places without to places within is a direct regulation of interstate commerce, and therefore unconstitutional, while a tax on the gross receipts received for such freight was held to be valid. The distinction between the two cases is that the first is a tax on commerce, while the latter is a tax on the fruits of commerce, which fruits have become the personal property of the corporation. It has been intimated that if the latter case were to come up again it would be overruled, as the distinction above made is technical rather than substantial. In fact it may be questioned whether the principle enunciated in State Tax on Railway Gross Receipts has not been repudiated in two cases, one arising in Ohio, and the other in Alabama. Where these States attempted to tax the gross receipts of the Western Union Telegraph Company, the receipts being derived in part from messages sent to and received from places without the State, it was held in each case that the tax was unconstitutional. It is true that in the latter case the question is amplicated by the fact that the Western Union Telegraph Company is organized under the laws of congress, and carries messages for the United States government at rates fixed by the postmastergeneral, and to some extent is an agency of the government, and for that reason cannot be taxed. The State of Texas passed a law that "every chartered telegraph company doing business in the State is required to pay a tax of one cent for every full rate meзsage, and one-half cent for every message less than full rate." The Supreme Court of the United States held the tax void on the following grounds: 1. The telegraph is an instrument of commerce, and telegraph companies come within the province of that section of the United States constitution,

5 Paul v. Virginia, 8 Wall. 168.

6 Case of State Freight Tax, 15 Wall. 232.

7 State Tax on Railway Gross Receipts, 15 Wall. 284. 8 Tel. Co. v. Ratterman, 127 U. S. 411; Tel. Co. v Alabama, 132 U. S. 472.

regulating commerce between the States, and when a State imposes a tax upon the messages sent without the State, irrespective of the distance carried or price charged, it is regulating commerce, and hence comes within the inhibition of the United States constitution against a State regulating interstate commerce. 2. The particular company in the case had received a charter from congress, and as part of its agreement, it was to carry messages of the United States government at rates fixed by the postmaster-general, and it thereby became an agency of the national government, and for that reason it could not be taxed.9

In Maryland it was held that palace cars, leased by a foreign corporation to a resident railway company, are not taxable within that State. 10 The leased rolling stock of a Virginia railroad was held not to be taxable by that State, on the ground that the State had not fixed the situs of such property within the State, seemingly not good reasoning." In the case of the Pullman Car Co. v. Twombly, 12 where a tax was imposed on the rolling stock of a foreign corporation, Mr. Justice Brewer in an elaborate opinion which, however, was not directly called for by the issues of the case, held that as the tax in question was on the value of the cars, and assessed as other property was assessed, it was a valid tax. The learned justice thought it an astounding doctrine that a foreign corporation could keep its cars in the State of Iowa, claiming and enjoying the protection of the laws of that State for the property of the company, and then on the plea that such a tax was "regulating commerce between the States" refuse to share the burdens of taxation in return for the benefits received. And he further held that where such property is used continuously within the State, it acquires a situs therein, irrespective of place of ownership. He denied that any case could be found which held that a property tax was void, merely because the property upon which the tax was levied was employed in interstate commerce. The propositions of Mr. Justice Brewer as above stated found direct affirmance in a case where the State of

9 Tel. Co. v. Texas, 105 U. S. 460.

10 Baltimore v. Pullman Co., 50 Md. 452. 11 R. R. Co. v. Allen, 22 Fed. Rep. 376. 12 29 Fed. Rep. 658.

Pennsylvania imposed a tax on such a proportion of the whole capital stock of a foreign sleeping-car company as the number of miles over which its cars are operated within the State bears to the whole number of miles over which its cars are operated. The above tax was held valid and constitutional, though such cars run into, through, and out of the State and were thereby employed in interstate commerce.13 At the same term the same court decided, where the board of railway assessors of Kansas had assessed the sleeping-cars, dining-cars, and parlor-cars owned by a foreign corporation and leased by it to various railroad corporations in Kansas, and apportioned the tax among the counties according to the mileage of the railroads in each county, that a bill in equity to restrain the treasurers of the various counties from collecting the tax was demurrable.14 At the same term it was also decided that Massachusetts could tax such proportion of the whole value of the capital stock of a foreign telegraph company as the length of its line in the State bears to the whole length of its line everywhere, after deducting the value of any property owned by it subject to local taxation in the cities and towns of the State. 15 In all these cases the objection was that the tax was unconstitutional because it interfered with or regulated interstate commerce, and it was urged that such property was taxable at the legal residence only of its owner. But as Justice Gray observed in Palace Car Company v. Pennsylvania, supra: "It is equally well settled that there is nothing in the constitution or laws of the United States which prevents a State from taxing personal property employed in interstate or foreign commerce like other personal property within its jurisdiction."

But the rule against the right of the State to regulate interstate or foreign commerce is drawn with greater strictness in respect to the power of the State to tax vehicles used in commerce upon water then those employed in commerce upon land,. "maritime transportation requires no artificial road-way. Nat

13 Pullman's Palace Car Co. v. Pennsylvania, 11 Sup. Ct. Rep. 876.

14 Pullman's Palace Car Co. v. Hayard, 11 Sup. Ct. Rep. 883.

15 Att'y Gen. of Mass. v. W. U. Tel. Co., 11 Sup. Ct. Rep. 889, following Telegraph Co. v. Mass., 125 U. S. 530.

ure has prepared to hand that portion of the instrumentality employed. The navigable waters of the earth are recognized public | highways of trade and intercourse, no franchise is needed to enable the navigator to use them. Again, the vehicles of commerce by water being instruments of intercommunication with other nations, the regulation of them is assumed by the national legislature. So that State interference with transportation by water, and especially by sea, is at once clearly marked and distinctly discernible. But it is different with transportation by land. ''16 A ferry company organized under the laws of Illinois, and engaged in transporting freight and passengers across the Mississippi river at St. Louis, and having its principal office in that city, and there holding its business meetings, is not taxable on its ferry-boats in St. Louis. A ferry company organized under the laws of New Jersey, had its offices and real estate in that State, and owning nothing in Pennsylvania except the lease of a wharf, where it received and discharged freight and passengers. The latter State taxed the corporation on its capital stock, on the ground that the company was doing "business" within the State, 18 but the Supreme Court of the United States held the tax invalid on the ground that it was a regulation of interstate commerce, and reversed the decision. 19 A vessel registered in Port Townsend, and owned in part in California, but touching only occasionally at California ports, is not taxable in the latter State.20 Vessels plying between San Francisco and other ports without the State and owned and registered in New York are not taxable in California.21 The fact that a vessel is engaged exclusively in navigating the waters of a State does not authorize the imposition of a townage tax by that State.22 A State tax upon the gross receipts of a steamship company, incorporated under the laws of the State imposing the tax, which receipts are derived from transporting passengers and freight by sea to and from other States and

16 Railroad Co. v. Maryland, 21 Wall. 456.

17 St. Louis v. Ferry Co., 11 Wall. 423.

18 Commonwealth v. Gloucester Ferry Co., 98 Pa. St. 105.

19 Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196.

20 San Francisco v. Talbot, 63 Cal. 485.

21 Hays v. Pac. M. St. Co., 17 How. 596.

22 State Townage Tax Cases, 12 Wall. 204.

foreign countries, is a regulation of interstate and foreign commerce, and is therefore void.23 The situs of taxation of shipping is the place of registration.24 If unregistered, it is taxable where the corporation or owner resides." Where a vessel may be taxed in several districts, taxation in one of them is exclusive of the others.26

It may lead to a clearer view to consider the taxation of the capital stock of a corporation and the shares of capital stock together, as much on account of the unlikeness as the likeness between them, for the capital stock belongs to the corporation, while the shares of capital stock belong to the individual owner, the two being distinct legal entities.27 The capital stock of a corporation is the money or property put into the corporate fund by the subscribers for said stock, which fund becomes the property of the corporation. 28 The shareholders because of ownership of stock have no legal claim upon the capital stock on any other property of the corporation, but only to the profits of the corporation during its continuance, and also after the affairs of the company are wound up and the debts paid, to the residuum.29 At common law the capital stock was considered to be real estate. 30 Now, in many States the statute makes it personalty, and many courts in absence of a statute have so considered it; and being personalty it is taxable at the residence of the corporation.32 In Indiana it was held that the capital stock of a foreign corporation could not be taxed in that State. 3 But if such a corporation is doing a portion of its business within a State, it may be taxed within on such proportion of its whole capital stock as the business done within the State is a part of the whole business done.34

33

23 Steamship Co. v. Pennsylvania, 122 U. S. 326. Compare with State Tax on Railway Gross Receipts, 15 Wall. 284.

24 Hays v. Steamship Co. 17 How. 596.

25 Pelton v. Transportation Co., 37 Ohio St. 450.

26 Halstead v. Adams, 108 Ill. 609.

27 1 Desty on Taxation, § 73.

28 Burrall v. Railroad Co., 75 N. Y. 211.

29 Wood v. Dummer, 3 Mason, 308.

30 Price v. Heirs, 6 Dana, 107; Copeland v. Copeland,

7 Bush. 349.

31 Bridge Co. v. Adams County, 88 Ill. 615.

32 Starch Co. v. Dalloway, 21 N. Y. 449.

33 Riley v. Telegraph Co., 47 Ind. 511.

34 Pullman, etc. Co. v. Pennsylvania, 11 Sup. Ct. Rep. 876; Att'y Gen. of Mass. v. Telegraph Co., 11 Sup. Ct. Rep. 889.