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but the settlement in respect to which is to be upon bered that the fifth amendment is a limitation on the basis of the mere difference” between the the legislative power of congress. contract price and the market price of said cotton In Holden v. Hardy (169 U. S. 366) it was held futures, according to the fluctuations in the mar- that a statute of Utah providing that “the period ket, was illegal and void under the statutes of of employment of workingmen in all underground New York and Virginia. And in most of the mines or workings shall be eight hours per day, States there are statutes prescribing penalties for except in cases of emergency, where life or propmaking such contracts (see, also, Booth v. Illinois, erty are in imminent danger," does not violate 184 U. S. 425).

the provisions of the fourteenth amendment by In Frisbie v. United States (157 U. S. 160) it abridging the privileges or immunities of its citiwas held that the act of congress making it a mis- zens, or by depriving them of their property, or by demeanor for an attoi ney or other person prose- denying to them the equal protection of the laws. cuting a claim for a pension to demand or receive In this case the court cites, with approbation, the a greater fee than ten dollars for his services, was following from Chief Justice Shaw: not unconstitutional as an interference with the “Rights of property, like all other social and citizen's liberty of contract. The court says: “A conventional rights, are subject to such reasonsecond objection * is that the act under able limitations in their enjoyment as shall prevent which the indictment was found is unconstitutional them from being injurious, and to such reasonable because interfering with the price of labor and the restraints and regulations established by law as freedom of contract. This objection is also unten- the legislature, under the governing and able. While it may be conceded that, generally trolling power vested in them by the Constitution, speaking, among the inalienable rights of the citi- may think necessary and expedient." And therezen is that of the liberty of contract, yet such upon the court added: “ This power legitimately liberty is not absolute and universal. It is within exercised can neither be limited by contract nor the undoubted powers of government to restrain bartered away” (page 392). It is a matter that some individuals from all contracts, as well as all should be considered and well pondered over by individuals from some contracts. It may deny to the magnates of the “coal combine," that in this all the right to contract for the purchase or sale same case the Supreme Court of the United States of lottery tickets; to the minor the right to as- says: sume any obligations, except for the necessaries “ The legislature has also recognized the fact, of existence; to the common carrier the power to which the experience of legislators in many States make any contract releasing himself from negli- has corroborated, that the proprietors of these gence, and, indeed, may restrain all engaged in establishments and their operatives do not stand any employment from any contract in the course upon an equality, and that their interests are, to a of that employment which is against public policy. certain extent, conflicting. The former naturally The possession of this power by government in no desire to obtain as much labor as possible from manner conflicts with the proposition that, gener- their employes, while the latter are often induced ally speaking, every citizen has a right freely to by the fear of discharge to conform to regulations contract for the price of his labor, services or which their judgment, favorably exercised, would property.

pronounce to be detrimental to their health or The pension granted by the government is a strength. In other words, the proprietors lay matter of bounty. * Congress, being at down the rules and the laborers are practically liberty to give or withhold a pension, may pre-constrained to obey them. In such cases selfscribe who shall receive it, and determine all the interest is often an unsafe guide and the legislature circumstances and conditions under which every may properly interpose its authority. application therefor shall be prosecuted. No man " It may not be improper to suggest in this conhas a legal right to a pension, and no man has a nection that, although the prosecution in this case legal right to interfere in the matter of obtaining was against the employer of labor, who apparpensions for himself or others. The whole control ently, under the statute, is the only one liable, his of that matter is within the domain of congres-defense is not so much that his right to contract sional power. Having power to legislate on this has been infringed upon, but that the act works whole matter, to prescribe the conditions under a peculiar hardship to his employes, whose right which parties may assist in procuring pensions, it to labor as long as they please is alleged to be has the equal power to enforce by penal provisions thereby violated. The argument would certainly compliance with its requirements. There can be come with better grace and greater cogency from no reasonable question of the constitutionality of the latter class. But the fact that both parties are this statute” (Pages 165, 166). It will be remem- of full age and competent to contract does not

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necessarily deprive the State of the power to in- right of contract (Orient Insurance Company v. terfere where the parties do not stand upon an Daggs, 172 U. S. 557). equality, or where the public health demands that "In St. Louis, Iron Mountain, etc., Railway v. one party to the contract shall be protected against Paul (173 U. S. 404) a judgment of the Supreme himself. The State still retains an interest in his Court of Arkansas, sustaining the validity of an act welfare, however reckless he may be. The whole of the legislature of that State which provided is no greater than the sum of all the parts and that whenever any corporation or person engaged when the individual health, safety and welfare are in operating a railroad should discharge, with or sacrificed or neglected the State must suffer” without cause, any employe or servant, the unpaid (page 397).

wages of any such servant then earned should In Knoxville Iron Company v. Harbison (183 become due and payable on the date of such disU. S. 13) it was held that an act of the legislature charge without abatement deduction, of the State of Tennessee, requiring the redemp- affirmed. It is true that stress was laid in the tion in cash of store orders or other evidences of opinion in that case on the fact that, in the Conindebtedness issued by employes in payment of stitution of the State the power to amend corwages due to employes, does not conflict with any poration charters was reserved to the State, and it provisions of the Constitution of the United States is asserted that no such power exists in the present relating to contracts.

But it is also true that, inasmuch as the The court quotes extensively from the opinion right to contract is not absolute in respect to every of the State court sustaining the validity of this matter, but may be subjected to the restraints enactment, and thereupon adds: “The Supreme demanded by the safety and welfare of the State Court of Tennessee justified its conclusions by so and its inhabitants, the police power of the State full and satisfactory a reference to the decisions may, within defined limitations, extend over corof this court as to render it unnecessary for us to porations outside of and regardless of the power travel over the same ground. It will be sufficient to amend charters (Atchison, Topeka and Santa Fe to briefly notice two or three of the latest cases: Railroad v. Matthews, 174 U. S. 96). The judg

“In Holden v. Hardy (169 U. S. 366) the validity | ment of the Supreme Court of Tennessee is of an act of the State of Utah, regulating the affirmed" (183 U. S. pp. 21, 22). employment of workingmen in underground mines In view of these decisions, the last one made and fixing the period of employment at eight hours at the last term of the Supreme Court, can there per day, was in question. There, as here, it was any longer be any reasonable doubt as to the concontended that the legislation deprived the em- stitutional power of the State of Pennsylvania to ployers and employes of the right to make con- enact such legislation, even though it may interfere tracts in a lawful way and for lawful purposes; with the power, liberty or freedom of the corporathat it was class legislation and not equal or uni- tions in the “coal combine " to extort from the form in its provisions; that it deprived the parties miners contracts for their labor at less than a of the equal protection of the laws, abridged the living wage? privileges and immunities of the defendant as a It is well to remember the language of Chief citizen of the United States and deprived him of Justice Fuller, quoted in another connection: The his property and liberty without due process of right to contract is not absolute, but may be sublaw. But it was held, after full review of the jected to the restraint demanded by the safety and previous cases, that the act in question was a valid welfare of the State." Now the question arises: exercise of the police power of the State, and the Does the peace and good order, the safety and judgment of the Supreme Court of Utah sustain- welfare of the State of Pennsylvania and the ining the legislation was affirmed.

habitants of the anthracite coal region demand such “Where a contract of insurance provided that legislation? the insurance company should not be liable be- The arbitrary course of action taken by the yond the actual cash value of the property at the “coal combine” has brought this question before time of its loss, and where a statute of the State the people of Pennsylvania, and sooner or later of Missouri provided that in all suits brought upon the legislature of that State, either at a special or policies of insurance against loss or damage by regular session, will answer it. In this country fire, the insurance company should not be per- public opinion, putting on the robes of law and mitted to deny that the property insured was worth justice, is all powerful. at the time of issuing the policy the full amount In view of the long train of evils following the of the insurance, this court held that it was com- present struggle between the mine operators and petent for the legislature of Missouri to pass such mine workers over the price of wages, would not a law. even though it places a limitation upon the the proposed legislation come strictly within the

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so-called, but never closely defined, police powers back to work in the mines at the arbitrary prices of the State? Would not such legislation be as fixed by the corporations or else abandon the clearly within the police powers as the laws pro- benefit of all the special skill they have acquired hibiting or restricting the sale of intoxicating in mining hard coal and go away with their familiquors or laws making illegal contracts for the lies to other parts of the State or country. But purchase of “future delivery” cotton or grain? some men at the risk of law and bayonets and A sale is a contract. The sale of wine and beer is sharpshooters will sooner steal food than starve restrained by law. · Why does government in this to death. And as men of the brightest intellect case interiere with the liberty or freedom of when they become hard drinkers are led on step contracts?

by step from the commission of one crime to that It is not because the sale, by itself, is wrong. of another, so we find that a disagreement as to But laws are made with a view to human nature wages for mining coal leads to strikes, and strikes and the way men are often inclined to act. Men of any considerable duration are always followed ought not to become drunkards. They ought not by want and destitution, by mobs and murder. to spend their earnings for drink - ought not to In the lar uag of the Supreme Court of Coloquit all work and allow their wives and children rado (23 Col. 507): “While it is difficult to define to come to want and destitution — ought not to the boundaries of the police power, it admittedly fight and commit murder. But men who become extends to the protection of the lives, health and drunkards often do some or all of these things. property of the citizens and the preservation of This train of evils, to the very end, follows far good order and the public morals. We may proptoo often the sale, and especially the unlicensed erly take cognizance of the fact that the most sale, of intoxicating liquors. In order to prevent serious disturbances which have occurred in this or lessen such evil consequences we have anti- country for the last twenty-five years have grown saloon and temperance laws interfering with the out of controversies between employer and emliberty or freedom of contract. The safety and wel- ploye. No one doubts the authority or questions fare of the State and its inhabitants demand and the duty of the State to interfere with such force justify the enactment of laws controlling the sale as may be necessary to repress such disturbances of intoxicating liquors.

and maintain the public peace and tranquility; and So, in considering what would be proper legis- as well may the State provide in advance against lation for the prevention or settlement of contro- certain kinds of fraud and oppression which leads versies between corporations and miners, the wise to these outbreaks.” legislator will take into account human nature, as The mine operator has no moral right to extort it is and has been for over a quarter of a century from the mine worker his labor at less than a reain the coal fields. The corporations own the mines sonable price. The mine operator in the “coal and duly-qualified miners own the labor. They combine” of the anthracite region is strong, very are dependent upon each other for their earnings. strong, but the strongest is never strong enough Unworked mines will remain subject to taxes, and to be always master, unless he transforms his idle miners will become subject to want and desti- strength into right and obedience to duty." tution. The corporations and miners differ as to September 3, 1902. the price of labor. The corporations refuse to give

R. M. BENJAMIN. what the miners regard as only a reasonable living wage. The miners refuse to labor for less than RIGHTS OF CREDITORS OF A CORPORthat. The corporations and the miners have the ATION DISPOSING

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ITS WHOLE utmost liberty or freedom of contract, just as the PROPERTY TO ANOTHER CORPORwine seller and the wine bibber have in the absence ATION. of all laws for controlling the sale of intoxicating liquors.

In these days of extensive reorganization, merger The corporations arbitrarily fix the price they and consolidation of the great corporate interests will give for labor, and will not listen to proffers of the country, the rights of a creditor of a corporaby the miners for compromise. The idle miners tion, whose entire property and franchises has ought not to molest or use any violence toward passed from its hands to the ownership and control

of another corporation, becomes a question of inother miners from any quarter. They ought not

creasing importance and of frequent concern. to insult or throw stones at the troops ordered

In the case of a consolidation of two or more corpoto the mines by the State authorities on the derations, where no provision is made by statute or by mand of the corporations. Sooner than do either the arrangement of the constituent corporations, the of these things the one hundred and forty-seven latter practically going out of existence, the rule thousand miners of the anthracite region should go ' which seems to derive most support from the au

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thorities, as well as from reason, is, that the con- of making payment in cash, the stock of the transsolidated corporation is answerable for all the debts feree corporation is issued, either to the selling of the constituent companies (1). In such cases, corporation

the stockholders thereof in a judgment in personam may be recovered against amounts equal to their previous holdings, or prothe consolidated corporation for the debts of either portioned thereby. of the constituents; and all liens upon the property In any event, the demands of corporate creditors of such constituents are preserved and capable of must be satisfied before a distribution of the assets being asserted against the consolidation (2). is made among stockholders. Otherwise, a distribu

But as to a reorganized corporation, the rule is tion would be a conversion, and this usually, by different, it being quite generally held that the new statute, is an act which makes stockholders personcorporation is not liable for the debts of the old ally liable for corporate debts, in addition to the corporation, unless it voluntarily assumes to pay right of the creditor of compelling a return of the such indebtedness or becomes liable by force of stock, and subjecting it to the payment of his desome statutory enactment (3). The assumption of mands. The transaction being a fair one, the value such liability may be express or implied from the of the stock received by the selling corporation peculiar circumstances of the case (4).

approximating the reasonable value of the property In the absence of a specific grant of power so to disposed of, the creditor merely subjects the stock do, neither the directors nor a majority of the stock received to the satisfaction of his debt. This is the holders of a corporation may, against the consent of most common as well as the most practicable remany member thereof, dispose of the whole of the edy; but it is not the only one if the selling corporacorporate property, where the corporation is a sol- tion is insolvent. In such case, even if the transfer vent and going concern (5). The stockholders of is made upon a valuable consideration and no fraud the corporation all agreeing upon such a course, is, in fact, intended the property made be followed however, it is as much within the power of the cor- into the hands of the transferee or its assignees, poration to dispose of its whole property and fran- unless a purchaser for value and without notice, and chises by a sale thereof, except in well-understood attached by the creditors. For, by the very act of cases, as in the case of an individual, and the same transferring its whole property, the selling corporalimitations upon the right are imposed in behalf of tion has, for a time at least, placed its property creditors. In either case, the rule of justice before beyond reach of its creditors, in fraud of their rights generosity prevails, and the rights of creditors re- as such (6). ceive similar protection.

It is too frequently true that the transaction beThe transaction not being tainted with fraud or tween the two corporations is not an honest one, dishonesty, and the payment of the price of the but a fraudulent scheme devised for the spoilation property transferred being made in cash, the case of the rights of the creditors of the selling corporapresents no difficulty, as the amount received must tion. In many cases the transferee is a be applied at once to the payment of the corporate dummy,” consisting principally of the stockholddebts in the order of their priority, the amount ers of the old corporation, or of others acting for remaining, if any, constituting a fund to be dis- them, and organized solely for the purpose of receivtributed among the stockholders.

ing such a transfer. It is well settled that an inBut usually a different method is pursued. Instead solvent corporation cannot transfer its property to

another in fraud of the rights of corporate creditors, (1) Thompson v. Abbott, 61 Mo., 176; Mt. Pleasant v. and that it cannot, for such purpose, under the form Beckwith, 100 U. S., 514; Pullman Car Co. v. Missouri of law, reorganize and hold its property against Pacific Co., 115 U. S., 587; Louisville, etc., R. Co. v. Boney, 117 Ind., 501; Columbus,

them and without their consent (7).

etc., Powell, 40 Ind., 37; State v. Baltimore, etc., R. Co., As a general rule, the creditor of a debtor who has 77 Md., 489; Coggin v. Central R. Co., 62 Ga., 685; Chi- fraudulently conveyed away his property, cago, etc., R. Co. v. Moffett, 75 111., 524; 7 Thompson bring his action immediately against his debtor and on Corp., sec. 8241; 2 Spelling on Priv. Corp., sec. 721; 2 Mora wetz on Priv. Corp. (2d ed), secs. 809, 954-957;

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reduce his claim to judgment. An execution Elliott on Priv. Corp. (3d ed.), sec. 198; 2 Clark & thereon remaining unsatisfied, he may sue in equity Marshall on Priv. Corp., secs. 357-358; 3 Cook on Corp., to set aside the fraudulent transfer and subject the

property fraudulently conveyed to the satisfaction (2) Central Railroad & Banking Co. v. Georgia, 92 of his judgment, unless, of course, the rights of an U. S., 665; Mississippi Valley R. Co. v. Chicago, etc., R. Co., 58 Miss., 846; Rutten v. Union Pacific R. Co., innocent purchaser intervene (8). But this does 17 Fed., 480; see, also, cases cited in note 1.

not always constitute the sole remedy. An excep(3) Fernschild v. Yuengling, etc., Co., 154 N. Y., tion, or, it may be added, an addition, thereto, has 667; Ewing v. Composite, etc., Co., 169 Mass., 72; 2 arisen in that class of cases in which the new corpoCook on Corp. (4th ed.), sec. 673; 7 Thompson on Corp., sec. 8275; 2 Morawetz on Priv. Corp. (2d ed.), sec. 811; ration is made up wholly or substantially of the 2 Clark & Marshall on Priv. Corp., sec. 342.

(4) Reed Bros. Co. v. First National Bank of Weep- (6) McVicker v. American Opera Co., 40 Fed., 861. ing Water, 46 Neb., 168.

(7) See cases cited infra. (5) 2 Cook on Stock and Stockholders and Corp. (8) Bump on Fraudulent Conveyances, 522; 3 PomLaw, sec. 667, collecting cases in note 1, at page 955. eroy's Equity Jur., sec. 1415.

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members of the old corporation. In such a case, the same, and that the new must respond to the the transaction not being bona fide, the creditor may obligations of the old. The evidence is clear proceed at once and primarily against the new or enough that there was a hidden purpose in the reorganized corporation, and hold it liable for the change of corporate existence to escape possible debts of the old, at least, to the extent of the prop- liabilities which equity does not tolerate. A mere erty which it has so fraudulently received.

change of name cannot avoid obligations. The This exception seems to have been first recognized new corporation took all the property of the old, and applied in the case of Hibernia Insurance Co. went forward with its business, had the same stockv. St. Louis & New Orleans Transportation Co. holders, cxcept a few formal ones; was, in short, (10 Fed. 596). The facts in that case were as fol- the old corporation, and now seeks to avoid the lows: The Baggage Transportation Co. became in- obligations of the old, rescuing the property of the debted to the plaintiff as subrogee. Before judg- latter from the demands the former was bound to ment had been obtained upon such indebtedness, meet. Can this be done? The old corporation and the Transportation Company transferred to the its property were liable to the demands of the plaintdefendant, the St. Louis Company, all of its prop- iff. The new corporation must respond to the exerty, no provision in the transfer being made for tent of the property acquired, and possibly to the the debt of the plaintiff, the president and principal full extent; that is, if property sufficient therefor stockholder of the Transportation Company actively is in its possession. This is a proceeding in equity bringing about such transfer. Both the corpora- wherein mere colorable pretenses are to be disretions were made defendants and the prayer was for garded. Shifting of corporate names cannot defeat a decree as for a moneyed judgment against both positive rights, any more than the change of the defendants. The court upon demurrer held the name of a natural person can absolve him from his suit properly brought and in affirming the liability personal obligations. of the St. Louis Company to the extent of the “The evidence discloses that the obligations of property received, said: “A corporation having in the Baggage Company still subsist against its corcurred liabilities, is dissolved practically by trans- porate successor; at least, to the extent of the ferring all its property to another corporation assets acquired." formed possibly for the very purpose of leaving the The same principle was recognized in the cases creditors of the former (creditors at large) with-of Hancock v. Holbrook (40 La. Ann. 53) and out any adequate means of realizing their just dues. Montgomery Web Co. v. Dienelt et al. (133 Pa. St. There is too much of this, as judicial experience i 583), in both of which it was held that the rights has shown. The change of organization is too of creditors may not be defeated by the stockholdoften a mere change of name, designed solely to ers of the old corporation forming a new one and defeat the rights of creditors. The corporation has taking over the property of the old, the new corpoone name to-day, and to escape its liabilities, goes ration being liable for the debts of the old to the through the form of a new organization and takes extent of the property received. a new corporate name, with a transfer of all the

This question seems next to have arisen distinctly assets of the old corporation. Should that contriv- in Blanc v. Paymaster Mining Company (95 Cal. ance succeed? Should not a court of equity hold 524), a case in which an insolvent corporation had the new answerable for the debts of the old to the made an assignment of all its property to its managextent of assets received ?

* If the new cor- ing officer for the purpose of paying the debts of the poration knew, as charged, that the demands corporation. The assignee made a pretended public against the old were outstanding, and with that sale of the property, at which he was the purchaser knowledge received all the property of the old cor- at a merely nominal sum, subsequent to which he, poration without consideration, why should it not with the other officers and stockholders of the debe held to have acquired that property cum onere?” funct corporation, proceeded to organize the defend

Upon a subsequent trial of the cause ant (appellee) corporation, and turned over to it (Hibernia Insurance Co. v. St. Louis & New Orleans all of the property of the old corporation frauduTransportation Co. (13 Fed. 516, 520-521]) Treat, lently purchased by him. No valid judgment had D. J., in his concurring opinion, again said: “It is been recovered by appellant against the old corporathe duty of the court to examine the whole transac- tion; and neither was it made a party to this suit, tion, and to cut through mere paper transfers de- the new corporation being alone made defendant signed to obstruct or destroy the rights of parties. in the proceeding to recover a debt owing from the The evidence sufficiently discloses that the new cor- old corporation. It was insisted that the creditor poration was a mere continuance of the old, with must first have recovered judgment against his substantially the same parties in interest - -a mere debtor, the old corporation, and execution thereon change of name. Whether that change, with attend- be unsatisfied before he is entitled to resort to an ant transfers, was designed or not to defeat all equitable action to reach property fraudulently outstanding demands of the old corporation, it is transferred by his debtor; but the court held that evident that substantially the two corporations are it was not necessary that the appellant should have

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