Central Law Journal. ST. LOUIS, MO., JULY 5, 1901. Mr. E. C. Brandenburg, in charge of bankruptcy matters at Washington, in his report of November, 1900, to which we gave extended editorial mention in our issue of November 30, 1900, stated that the only section of the Bankrupt Act of 1898 that as construed by the courts was meeting with almost universal disapproval was section 57g referring to the construction put upon that section by the decision in the case of In re Fixen, 51 Cent. L. J. 359, in which it was held that a payment made on account by an insolvent debtor, in the ordinary course of business, within four months prior to his adjudication in bankruptcy, constitutes a preference under the bankrupt act, and must be surrendered by the creditor in order to entitle him to participate in the assets of the bankrupt estate. This decision aroused widespread criticism among certain business interests, but we asserted our belief at the time the decision was rendered that any criticism of the construction thus put upon this section was quite unwarranted, it being clearly the only logical construction that could be placed on the plain wording of that much disputed section. Naturally we have awaited with much interest the opinion of the supreme court on this most important question which was handed down May 27, 1901, in the case of Carson, Pirie, Scott & Co. v. Chicago Title & Trust Company. The court expressly sustained the decision of Justice Morrow in the case of In re Fixen, and held that a payment of a debt in money is a transfer of property within the purview of Bankruptcy Act 1898, sec. 60a, providing that a debtor shall be deemed to have given a preference, if, being insolvent, he has made a transfer of any of his prop. erty, and the effect of the enforcement of such transfer will be to enable one of his creditors to obtain a greater percentage of his debt than other creditors of the same class. The court further held that under section 57g, providing that the claims of creditors of a bankrupt who have received preferences shall not be allowed unless they surrender their preferences, a creditor who has actually received a preference, by a partial payment of his debt, within four months before the bankruptcy of the debtor, cannot have his claims allowed against the estate of the bankrupt without surrendering the pref. erence; and this notwithstanding the fact that he received the payment innocently, and that he had no knowledge or cause to believe that the debtor was insolvent or that a pref. was intended. Although four justices dissented. we fail to see on what ground objection can be made to this construction erence of these sections, unless it be the oft-asserted ground of expediency, that it will harass and embarrass the business of the country." While we believe the fear thus expressed to be more imaginary than real, still, even if otherwise, congress alone has power to grant relief. It is only in cases of the most apparent absurdity that a judicial tribunal is permitted to disregard the ordinary meaning of the plain terms of the instrument under consideration. This rule was expressed in no uncertain terms in the case of Sturgis v. 4 Wheat. 202: Crowninshield, "If in any case, the plain meaning of a provision, contradicted by any other provision in the same instrument, is to be disregarded, because we believe the framers of that instrument could not intend what they say, it must be one in which the absurdity and injustice of applying the provision to the case would be so monstrous that all mankind would, without hesitation, unite in rejecting the application." not The rule relating to preferences may be therefore succinctly stated as follows: preference is any transfer of property, including payment in money made by the debtor while insolvent, and which has the effect of giving one creditor a greater percentage of his debt than any other creditor of the same class. If a preference is given within four months preceding bankruptcy, and the creditor has cause to believe that a preference was intended, such preference is void and recoverable by the trustee. If the creditor is not aware of his debtor's insolv ency, and receives a payment on account in the ordinary course of business without knowledge that a preference was intended, such payment is, nevertheless, a preference, but the law favors the innocence of the creditor in such case by giving him the option of retaining the preference and not participating in the estate, or of surrendering the preference and sharing equally with other creditors in the distribution of the assets. Thus, if the payment constituting the preference gives him a larger percentage than other creditors, that is his advantage and he may keep it; if the percentage gained by the preference is smaller than that he would obtain by participating in the bankrupt estate, he may surrender, his pref erence and prove up his claim along with other creditors. One question is yet undecided. Is the time limit of four months provided for in section 60b in regard to preferences which may be recovered by the trustee applicable also to sections 60s and 57g in regard to preferences which must be surrendered to entitle the creditor to participate in the estate of the bankrupt? In section 60a no limit is set to when a payment may be a preference, except the insolvency of the debtor. It would therefore seem that the decision in the case of In re Jones, reported in 4 Am. B. R. 563, and holding that section 57g compels a surrender of a preferential payment of money, even though received more than four months prior to bankruptcy, as a condition precedent to sharing in the assets, is the only logical deduction to be drawn from the plain wording of these sections and the construction put upon them by the supreme court. The question of expediency under such construction becomes even more vital than before, but it is one for congress and not the judiciary to determine. NOTES OF IMPORTANT DECISIONS CORPORATIONS-ISSUE OF STOCK FOR PROP ERTY. One of the most important provisions of the Revised Corporation Act of New Jersey has just been construed by the Court of Chancery of that State in the case of Donaldo v. American Smelting and Refining Co., 48 Atl. Rep. 786, which illustrates the liberal policy which characterizes not only the legislative department, but likewise the judiciary of that State in their attitude toward corporations. The Revision of the New Jersey Statutes of 1896 provides that any corporation formed under the act may purchase property and issue stock to the amount of the value of the property, and in the absence of actual fraud, the judgment of the directors as to the value of the property purchased shall be conclusive. A corporation, capitalized for $65,000,000, proposed to issue $45,000,000 additienal stock for property of a competing company. There was evidence that the property was not worth $10,000,000, but the business of the company sought to be amalgamated was prosperous, and the company possessed a world-wide and valuable reputation. Held, that the consolidation would not be enjoined at the suit of a stockholder, since the evidence did not show that the directors were knowingly about to purchase the plants at an excessive valuation. The court said: "The fraud referred to in the forty-ninth section is fraud upon the law; and in the words of Allen, J., in Douglas v. Ireland, supra, no other fraudulent intent must be proved 'than that which is evidenced by the act of knowingly issuing stock for property in excess of its value." It must be remembered, however, that a wide discretion in the matter of valuation, as in other matters, is confided to directors. As long as they act in good faith, with honest motives, for honest ends,' the exercise of their discretion will not be interfered with. Given bona fides, and the court will not put its opinion as to values against theirs. The test will be conscious overvaluation, and not ill-advised action." -- RIGHT DEPOSIT OF SHARE CERTIFICATES OF FORECLOSURE. - Full as the books are of cases on the remedies of mortgagees, the subject is frequently raising new points for judicial decision. In the recent case of Harrold v. Plenty (Times, 23d ult.). reported in the latest issue of the Solicitor's Journal, Cozens-Hardy, J., has held that a deposit of a share certificate by way of security without writing gives to the depositee a right of foreclosure as well as a right of realizing the security by sale. That the right of sale is incident to such a security there is no doubt, and, as appears from the recent case of Deverges v. Sandeman, Clark & Co., 49 W. R. 167, there is no necessity to go to the court to enforce it. The depositee of shares of a fluctuating nature is entitled, after due notice to the depositor, to sell them even though no express power of sale has been conferred upon him. But to obtain a right to foreclosure there must be a deposit under such circumstances as to raise an inference of an agreement to execute a legal mortgage. Strictly speaking, foreclosure supposes that there has been a transfer of the legal estate, and the effect of foreclosure is simply to extinguish the right of redemption which equity allows to the mortgagor. "The principle upon which the court acts," said Jessel. M. R., in Carter v. Wake, 4 Ch. D. p. 606, "is that in a regular legal mortgage there has been an actual conveyance of the legal ownership. and then the court has interfered to prevent that from having its full effect. and when the ground of interference is gone by the nonn-payment of the debt, the court simply removes the stop it has itself put on.' And it is the same where there is an express or implied agreement to execute a legal mortgage. The agreement must be performed, and foreclosure then follows as an incident of the legal ownership. The remedy by foreclosure applies therefore to a deposit of title deeds, since this is treated as an agreement to execute a legal mortgage, though, as was held in Carter v. Wake, no such agreement is implied upon a pledge of chattels, and the only remedy is by sale. In that case railway bonds were treated as chattels, and an order for foreclosure was refused. In the present case of Harrold v. Plenty, Cozens-Hardy, J., has placed share certificates upon a different footing, and has held that the deposit of such certificates by way of security implies an agreement to execute a transfer by way of mortgage, and there is consequently the right of foreclosure. It may be noticed that the nature of the right of foreclosure was discussed also in Sadler v. Worley, 42 W. R. 476 (1894), 2 Ch. 170, where it was held to be incident to a charge on land created in favor of debenture-holders, though it is not incident to a charge created by will. Re Owen, 43 W. R. 55 (1894), 3 Ch. 320. CONSITUTIONAL LAW-PHYSICIAN'S LICENSEREVOCATION BY STATE BOARD.-The constitutionality of laws establishing State boards of health, having power to issue and revoke licenses for the practice of medicine, are upheld in a strong opinion by the Supreme Court of Rhode Island, in the case of State Board of Health v. Roy, 48 Atl. Rep. 802. In this case the board of health revoked the license of a practicing physician for what it deemed grossly unprofessional conduct. The defendant contested the revocation of his license on the ground, first, that the said board had no jurisdiction to try defendant on said charge. The court said: "We do not think the defendant's motion should be granted upon this ground. In Dent v. West Virginia, 129 U. S. 114, 122, 9 Sup. Ct. Rep.231, 32 L. Ed. 623, the court says: The power of the State to provide for the general welfare of its people authorizes it to prescribe all such regulations as, in its judgment, will secure or tend to secure them against the consequences of ignorance and incapacity, as well as of deception and fraud. As one means to this end, it has been the practice of different States from time immemorial to exact in many pursuits a certain degree of skill and learning upon which the community may confidently rely, their possession being generally ascertained upon an examination of parties by competent persons, or inferred from a certificate to them in the form of a diploma or license from an institution established for instruction on the subject, scientific or otherwise, with which such pursuits have to do. Few profes sions require more careful preparation by one who seeks to enter it than that of medicine. *** The physician must be able to detect readily the presence of disease, and prescribe appropriate remedies for its removal. Every one may have occasion to consult him, but comparatively few can judge of the qualifications of learning and skill which he possesses. Reliance must be placed upon the assurance given by his license, issued by an authority competent to judge in that respect, that he possesses the requisite qualifications.' If the defendant in the case at bar obtained his certificate to practice medicine by misrepresentation and fraud in palming off upon the State board of health a diploma issued by Laval University to another as one that was issued to himself, he is guilty of conduct likely to deceive and defraud the public by inducing the public to believe that he is lawfully entitled to practice medicine by reason of the possession of qualifications that would honestly entitle him to the certificate. That such conduct would be grossly unprofessional seems to us too plain to require argument. The contention that the gross unprofessional conduct must occur after the granting of the certificate to practice has no application here, for the deception and fraud that was initiated at the granting of the certificate was kept up and continued every time he practiced medicine in this State, under the pretended authority of a fraudulently obtained certificate. "The third ground for the motion to quash is because § 5, ch. 105, Gen. Laws R.I., is unconstitutional, in that it conflicts with § 1, art. 10, of the constitution of the State. That section provides that the judicial power of this State shall be vested in one supreme court and in such inferior courts as the general assembly may, from time to time, ordain and establish; the contention being that the State board of health is not a court, and that the powers granted to it in Gen. Laws R. I. ch. 165, § 5, are judicial powers. While, perhaps, there may be force in the contention that the State board of health is not strictly a judicial body, yet we do not deem it necessary to decide that question here; for, even if it is not a judicial body, it does not follow, in our opinion, that the act is unconstitutional. Statutes similar to the one under consideration, restricting the practice of medicine to persons who are able to demonstrate their qualifications, have been held constitutional, as a proper exercise of the police power of the State, in very many States of the Union, as well as in the Supreme Court of the United States. See State v. Webster, 150 Ind. 607, 616, 50 N. E. Rep. 750, 41 L. R. A. 212, where the cases have been collected. In this last named case the Supreme Court of Indiana, in referring to the State board of medical registration and examination of that State, said (page 621, 150 Ind., page 755, 50 N. E. Rep. and page 218, 41 L. R. A.): While in some respects quasi judicial, the action of the board is not judicial, any more than is the action of a county surveyor in fixing a boundary line, or of a county superintendent in giving or refusing a teacher's certificate, or the action of numberless other officers or boards in making investigations or decisions in matters committed to them. Neither is the circumstance that an appeal is al lowed from a decision of the board an indication that its action is judicial. "The right of appeal from the action of boards in their administrative character," it was said by this court in Board v. Heaston, 144 Ind. 583, 41 N. E. Rep. 457, 43 N. E. Rep. 651, 55 Am. St. Rep. 192, "is frequently conferred by statute. The appeal in such cases is not permitted because the action of the board is considered judicial, but it is granted as a method of getting the matter involved before a court that it may be determined judicially." Even if the State board of health is only an administrative board, and not a court, we see nothing objectionable, on constitutional grounds, to the method provided in said chapter 165, for getting the matter involved before a court that it may be determined judicially. The way provided to determine, in the first instance, whether a trial before the appellate division of the supreme court is desired, is speedy and inexpensive. He whose application for a license has been refused, or whose license is proposed to be revoked, can have a judicial trial without terms or condition, by taking an appeal, which is practically for the asking, and then his case is tried in full before the highest court in the State. If the State board of health decides in his favor he gets all he asks, with little trouble and expense. If the decision is not in his favor he gets for the asking a trial before the highest tribunal in the commonwealth. It is difficult to see how his rights could be better protected." COM LIABILITY OF TELEGRAPH PANIES FOR ERROR OR DELAY IN TRANSMISSION OR DELIVERY. It may be laid down as a general rule that the highest degree of care is not required of a telegraph company in the transmission and delivery of telegraphic messages. It is, however, essential that ordinary care be exercised by its agents, operators and employees.1 The engagement of a telegraph company with its customers is that each message shall be transmitted and delivered with reasonable care and dispatch under the existing circumstances of the particular case; and unless a special contract securing insurance is secured, those using the telegraph must accept losses sustained by reason of error, delay, or even total failure of transmission and delivery arising from such accidents or obstructions as telegraph lines may be subjected to. So a prima facie case of negligence may be rebutted by proof that the delay or failure of the telegraph company to perform its con 1 White v. W. U. Tel. Co., 14 Fed. Rep. 710. tract was due to unforseen accidents to the company's lines, or to a rule requiring messages to be transmitted in the order of their receipt.3 Where, however, the dispatch upon its face indicates that it is a commercial message, that serious loss may result through failure of prompt transmission, and the company is so informed, it is liable for any damage that may result by reason of negligent delay in sending the message. But the sender must furnish such information to the telegraph company, it is not sufficient that it be furnished by the addressee. Where the face of the message does not indicate that delay may result in loss to the sender, and such information is not furnished to the telegraph company by the sender, only nominal damages may be recovered for failure of prompt transmission.5 Where no pecuniary loss results from the failure of the telegraph company to fully and properly perform its contract, but the injury sustained is purely mental, quite another question is presented, and the cases evidence two distinct lines of decision. Shearman and Redfield in the work upon Negligence lay down the following. rule: "In case of delay or total failure of delivery of messages relating to matters not connected with business, such as personal or domestic matters, we do not think that the company at fault ought to escape with mere nominal damages on account of the want of strict commercial value in such messages. Delay in the announcement of a death, an arrival, the straying or recovery of a child, and the like, may often be productive of an injury to the feelings which cannot be easily estimated in money, but for which a jury should be at liberty to award fair damages. Yet in such cases the damages ought not to be enhanced by evidence of circumstances which could not reasonably have been anticipated as probable from the language of the message." Out of this statement grew the Texas rule as to the liability of telegraph companies in damages for mental pain occasioned by failure or delay in the transmission and delivery of telegraphic messages. Briefly stated, the 3 Dorgan v. Tel. Co., 1 Am. L. T. (N. S.) 406. 4 Dorgan v. Tel. Co., supra. 5 Belun v. W. U. Tel. Co., supra. 6 Shearman & Redfield, Neg. sec. 605. 7 Chapman v. W. U. Tel. Co. (Tex.), 13 S. W. Rep. 880. rule may be said to be as follows: Mental anguish or pain may constitute an element of actual damage, in an action against a telegraph company for failure to deliver a message, for which compensation may be recovered upon breach of contract, where such anguish is the direct and natural result of such breach, and provided the defendant was put upon inquiry as to the likelihood of such mental anguish resulting from failure or delay in the performance of the contract.8 But such damages are to be strictly compensatory, and exemplary damages will lie only in cases where the breach of contract complained of is willful, wanton or malicious.9 So following this rule it has been held that where the dispatch delivered for transmission sets the telegraph company upon inquiry as to the near relationship of the persons to whom it referred, and to whom it was addressed, it is sufficient to apprise the company that mental suffering is likely to result from a failure to transmit the message with diligence, and the telegraph company will be liable in damages for mental pain and anguish resultant upon its failure to promptly perform its contract.10 While some cases may be found permitting the addressee in such cases to recover damages against the telegraph company for mental suffering in an action in tort independent of the right of the sender to sue in contract," a more conservative reading of this line of decisions would seem to indicate that upon this point some doubt exists. It is questionable whether the tort is not merged into the breach of contract or at least so closely resultant upon it that it forms a part thereof. Certainly there can be no privity of contract between the telegraph company and the addressee, and it would seem that, apart from the duty it owes the general public in its character of quasi-public servant, it is under no obligation to the addressee to properly and promptly transmit and deliver the dispatch, hence is no way liable in damages to the sendee for mental pain consequent upon its failure to do so. It Loper v. Tel. Co., 70 Tex. 689; Tel. Co. v. Simpson, 73 Tex. 422. Relle v. Tel. Co., 55 Tex. 308; Tel. Co. v. Cooper, 71 Tex. 507; Tel. Co. v. Broesche, 72 Tex. 422. 10 Tel. Co. v. Moore, 76 Tex. 66; Tel. Co. v. Adams, 75 Tex. 531; Tel. Co. v. Feegles, 75 Tex. 537; Tel. Co. v. Kirkpatrick, 76 Tex. 217. 11 Stewart v. W. U. Tel. Co., 66 Tex. 580. is certainly policy to restrict in so far as possible actions, the losses of which are in such a measure shadowy and uncertain. If suits of this nature be recognized who shall define the limits of their existence? Granted that in actions ex delicto the wrongdoer is liable for the natural and probable consequences of his wrongful act, but in such cases as these by what standard are the damages to be measured? As to the right of the sender to recover damages for mental suffering occasioned by reason of the failure of a telegraph company to promptly transmit and deliver his message, where the Texas rule is followed no doubt can exist. In Alabama it has been held that where the face of the dispatch plainly suggests the necessity for prompt delivery, the sender's mental anguish is an element for which he may recover damages in an action against a telegraph company for the delay in the delivery of such telegraphic message.12 Until recently the Indiana courts permitted such recovery, not because of the mere breach of contract, but because of the failure of the telegraph company to perform a duty which rests upon it as a servant of the people.13 But in the case of the W. U. Tel. Co. v. Ferguson, 14 this decision has been overruled, the court holding that the principle upon which it was based was totally foreign to the law. In Illinois the courts while evincing a leaning toward the Texas rule have inclined to a more conservative view, and have held that the sender of a telegraphic message may recover nominal damages at least for the mental suffering sustained by reason of the failure of the telegraph company to promptly deliver such message.15 The primary objection to permitting recovery in damages for injuries of this kind must lie in the fact that the wrong sustained is necessarily of such a nature as to be, to a certain extent at least, shadowy and uncertain. The grief of the one man cannot be measured by that of another. It . is indeed questionable whether the damages sustained can properly be assessed, or their monetary value estimated. It is obvious that there can exist no true legal basis for 12 W. U. Tel. Co. v. Henderson, 89 Ala. 510. 13 Reese v. W. U. Tel. Co., 123 Ind. 294. 14 59 N. E. Rep. 416. 15 Logan v. Tel. Co., 84 Ill. 468. |