new theory.18 In the financial world it is rapidly gaining in favor." The non-par value theory has gained the approval of the great majority of the students of corporate problems,50 while a few of equal prominence dissent.51 But the stock exchange reports show for the most part that the new theory has come to stay. It is really remarkable that a theory creating such a great change as the non-par value theory does could gain strength so rapidly. Having its first legislative sanction in 1912, in the small space of ten years it has literally swept the country. The new theory has found entrance into every state in the Union with the exception of six. Almost all of the larger corporations are adopting the new theory.52 All arguments against the non-par value stock fall into two classes: First, technical defects that may be corrected by subsequent legislation, or second, defects that may apply equally to stock of all classes. To me it marks only another step toward justice and a complete disclosure of all camouflage that seeks to defeat justice. Mr. Shepard has summed up the whole doctrine in one word, "Truthfulness."

48. The same report shows the following industrial and miscellaneous stocks of non-par value listed: Air Reduction Co., Atlantic Fruit Co., Atlas Tack Co., Chandler Motor Co., Case Plow Co., Consolidated Cigar Co., Famous-Players Lasky Corporation, Fisk Rubber Co., Hydraulic Steel Co., Iron Products Co., Montgomery Ward Co., New York Ship Building Co., Pierce Arrow Automobile Co., and many others that space will not permit listing.

49. The following extract from the Bulletin of the Investment Bankers' Association, October 1920, fairly representing the financial institution of the country, shows the attitude of the financial world toward the new theory. The extract follows:

"The principle of the non-par value stock is now better understood and the use of shares is increasing, and growing in public favor. It is illogical that a share of stock should be used both as a measure of value and as an evidence of title. There is no theory on which all shares of all companies can be made to sell at $100, or any so-called par value; and if sold at par the shares may appreciate or depreciate in value, and the next issue of the same corporation may have to be sold at a higher or lower rate. On the other hand, the share as an evidence of title always represents an undivided interest in the property. Non-par value shares seem best to meet the requirements for which shares of stock were invented. The laws requiring shares of stock to have a fixed par value and in many states to be sold at less than par have been responsible very largely for the so-called overcapitalization of industries and watering of corporate securities. The stocks have been used as an evidence of ownership and a basis for the distribution of earnings. If they had no par value they would perform this function exactly; they could be sold for what they are worth without subterfuge or evasion. Their use in public utilities capitalization is to be encouraged and would simplify some of their problems, and it is believed would encourage the investment in utility equities which is so necessary." Reprinted in the Corporation Journal January 1921 page 307.

50. The following writers favor non-par value stock: Francis Lynde Stetson, Victor Morawetz, Edmund M. Shepard, Louis Marshall, Charles E. Hughes, Elihu Root, Richard H. Hollen, Richard S. Tuthill, Raymond F. Rice, Albert J. Harno, Joseph F. Francis.

51. Leading in the dissent is William W. Cook.

52. Report of the New York Stock Exchange December 1921.

LIABILITY WITHOUT FAULT IN THE MODERN CIVIL AND COMMON LAW-III*

BY KENZO TAKAYANAGI

LIABILITY FOR THE VIOLATION OF ANOTHER'S INTEREST THROUGH
NON-CULPABLE MISTAKE

In the Continental law, the general rule seems to be that nonculpable mistake operates as an excuse for the violation of another's interest. Thus, if A destroys B's property, thinking without any fault that it is his own, A would not be liable to B. At least this seems to be the prevailing view under the German Civil Code,2 though a few writers uphold a contrary view.212 To this general rule there are two exceptions.

211

(1) Self-help. Where a person resorts to self-help under an erroneous assumption that necessary conditions exist to make his act justified, is he liable for damage thus caused to the other party? The German law answers the question in the affirmative, imposing causation liability.218 The Swiss law, on the contrary, adopts culpa liability.21 Juristic opinion seems to favor causation liability.215

(2) Temporary execution, provisional attachment, and provisional disposition. Under the German common law there has been much discussion as to whether causation or culpa liability is to be imposed where a person resorts to provisional legal remedies for the temporary security of a right under an erroneous assumption that he has a right to do so.216 The German Civil Code of Procedure decided this question in favor of causation liability.217 The German solution was followed by Switzerland and Austria.218 Jurists now generally favor such a solution.219

*Continued from Vol. XVI 163, 268.

211. Oertmann, sec. 823, "Erl." 8, p. 1096, Seuff. Bl., Vol. LXVII, pp. 1 seq.; Weyl, "Verschuldungsbegriff," 135; Simon, "Deliktshaftung," 25 seq. 212. Liszt, "Deliktobligation," 58 seq.

213. German Civil Code, 231; so also Hungarian Draft, 1463.

214. Swiss Code of Obligations, 52 (3).

215. Rümelin, "Schadensersatz," 38; Unger, 49; Holder, Archiv P, Vol. LXXX, p. 52; Mauczka, 299.

216. See Kahne, Grün. Z., Vol. XIX, p. 99, seq.; Unger, "Handeln auf eigene Gefahr," 115 seq.

217. Articles 717, 302, 600, 945.

218. Swiss Law of Execution, 273; Austrian Law of Obligation, 376, 394. Cf. Bowman v. Brown, 55 Vt. 184 (1882).

219. Rümelin, "Schadensersatz," 38 seq.; Ritten, "Entweilige Verfügung," 65 seq.; Fischer, "Rechtswidrigkeit," 127 seq.; Unger, "Handeln auf

The Anglo-American law on the effect of innocent mistake in the law of torts is highly complex and obscure. Thus, Mr. Salmond thinks that inevitable mistake is commonly no defense at all, so far as the civil liability is concerned, though the rule may be surrounded with exceptions.220 Mr. Whittier is of opinion that the general rule should be that non-negligent mistake is a defense.221 Jeremiah Smith disagrees both from Salmond and Whittier and says in a more pragmatic spirit:

"We do not think that there is any general rule as to whether nonnegligent mistake does or does not exonerate from civil liability. Each particular set of cases seems to us to be decided upon special policy or expediency bearing on that particular set of facts."222

It seems that to make a person liable for damage caused through his non-negligent mistake as a general principle, as Mr. Salmond would like to have it under the Anglo-American law, is to obstruct freedom of action to an unjustifiable extent. Under the Anglo-American system, where the extent of liability of a person acting under a non-negligent mistake is wider than in the Continental law, it is significant that many exceptions are recognized whereby he is excused. Mr. Whittier, in particular, criticizes the existing law, though the reason he gives is chiefly inconsistency with the rule of tort that liability is a corollary of culpability. Perhaps the Continental law is too narrow; but to extend the exceptional cases of self-help, and other temporary measures, to secure a right to other cases generally and elevate causation liability to a principle covering cases of non-negligent mistake also will be unjustifiable.

What is the basis of the liability in this class of cases? What is the basis of the liability of a person who resorts to self-help or other temporary measures to secure his interest? It is sometimes suggested that the basis of the liability is the same as that of an enterpriser, i. e. the law's permission to subject another's interest to a peril.223 We think, however, that there is a slight distinction between the two. In the case of enterprise liability the perilous conduct is allowed by law unconditionally and it is an equivalent for the benefit derived from such permission that causation liability is

eigene Gefahr," 121 seq.; Mauczka, "Rechtsgrund," 227; Randa, "Schadensersatzpflicht," 149 seq.

220. Salmond, "Torts" (4 ed.), 16-17.

221. Whittier, H. L. R., XV, 335-52.

222. Smith, H. L. R., XXX, 327. See on this topic Holmes, "Common Law," pp. 96-100.

223. Rümelin, "Schadensersatz," 39, 72, 73; Müller-Erzbach, I, 379.

imposed. Here the permission to do an act is given only conditionally, i. e. that the act which involves a danger to another's interest is not objectively illegal, and whether that condition is fulfilled or not depends on the judicial determination of the court after the occurrence of the alleged harm. If that condition is fulfilled, the actor is not liable at all; if not, he is liable irrespective of fault. The basis of the liability does not consist so much in being allowed to carry on a perilous undertaking for his own benefit as in not sufficiently examining whether his conduct complies with predetermined conditions.224 Just as in enterprise liability, this form of liability aims at the prevention of damage by inducing the actor to use the utmost care in the examination of the conditions.

LIABILITY FOR COSTS

In the Roman and German common law there has been much discussion as to the nature and conditions of the liability for costs.225 The modern law agrees in making the defeated party pay the costs irrespective of fault.228 Inasmuch as the nature of costs is looked upon as compensation,227 this liability is also a case of liability for compensation without culpability. The extent of compensation is usually confined to costs, and does not cover other damage. For the compensation of such other damage culpability is necessary.228

Thus, if a person thinks that he has a right of action against another, he may bring an action. If a person sued thinks that he has no duty to submit to the demands of the plaintiff, he is allowed to defend himself. The law, however, allows these measures to be taken on the condition that objectively he is entitled to do so. In this respect, the basis of the liability is similar to that of the liability for self-help and temporary measures for the security of a right. The law thus indirectly requires the exercise of the utmost care in bringing or defending an action and tries to fulfill one of the most important of juridical policies-the prevention of useless and frivolous litigation. From this basic idea we can understand why the recovery is confined to costs but not to other damage. For if the law allows recovery for full damage, the risk attending litigation

224. See Voigt, Fälle 70, 72, Anm. 3.

225. Unger, "Handeln auf eigene Gefahr," 104 Anm. 2.

226. German Law of Civil Procedure, 41; Austrian Law of Civil Procedure, 130; Italian Code of Civil Procedure, 370; Japanese Code of Civil Procedure, 72. See also Sedgwick, "Damages," I, 283.

227. Gaupp-Stein, ZPO, Vol. I, Vorbemerkung zu sec. 891, “Erl.” 2. 228. Gaupp-Stein, op. cit., "Erl." 3. Cf. Pollock, "Torts" (9 ed.), 326; Salmond, "Torts" (4 ed.), 537.

will become too great, and people will hesitate to resort to legal proceedings, thereby frustrating the object that the state had in view when it recognized the court system for the protection of right. The reason why the rule is different from that in self-help and temporary measures for the protection of a right is not far to seek. In the latter class of cases the steps are extraordinary measures attended with serious peril, while 'court help' is a normal measure for the protection of a right through the organs of the state.

IMMINENT ACTS; USE OF ANOTHER'S LAND; EMINENT DOMAIN

The law in some cases allows a person to violate another's interest for the protection of a superior interest, either private or public. Such a person is often required to compensate the damage caused to the other person whose interest is violated. Such is the liability in imminent acts, use of another's land, and eminent domain. (1) Imminent acts. The German Civil Code, for instance, says in Art. 904—

"The owner of a thing is not entitled to forbid the interference of another with the thing, if the interference is necessary for averting a present danger and the threatened injury is proportionately great in comparison with the injury caused to the owner by the interference. The owner may, however, require compensation for the damage.”220

(2) Use of another's land. To cite again from the same code (Art. 867):

"If a thing comes out of the power of its possessor and is afterwards found upon land in the possession of another person, the possessor of the land shall permit him to search for and remove it, unless the thing has been taken possession of in the meantime. The possessor of the land may demand compensation for any damage arising from the search and removal. He may, if the injury is to be apprehended, refuse his permission until security is given; the refusal is not permitted if there is danger in delay."230

(3) Eminent domain. This is a case where the law in view of superior public interest allows the violation of another's interest, but imposes the duty of compensation on the party who exercises

229. See also Swiss Code of Obligation, 52 (2); Swiss Civil Code, 701; Portuguese Civil Code, 2396, 2397; Hungarian Draft, 406 seq.; Unger, 24 seq.; Mauczka, 318; Adler, 21. Cf. Sourdat, "Responsabilité," I, 524, 725; Giorgi, "Obblig.," V, no. 157, seq.; Wigmore, "Cases on Torts": "Summary," 262-267.

230. German Civil Code, 912, 917, 962; Swiss Civil Code, 674, 694, 700; Hungarian Draft; Unger, 9, Anm. 8; Pavlicek, "Haftung," 27; Mauczka, 237 seq.; 301 seq.