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COLUMBIA Law REVIEW.
Published monthly during the Academic Year by Columbia Law Students.
PARTNERSHIP-Rights in EQUITY OF Person NominATED FOR MEMNERSHIP ACCORDING TO POWER IN PARTNERSHIP AGREEMENT.-- Where articles of partnership for a definite period give to a partner the right to nominate into the firm another person, what rights has that person in case the remaining partners refuse to admit him? This is the question which arises in Byrne v. Reid (1902) 71 L. J. Ch. Div. 830. The Court answers that the members of the firm having consented in advance to his admission, such a person is entitled to the usual remedies granted in equity to actual partners and decrees his recognition as a partner by the execution of a partnership deed. This result apparently is favored by the leading English writer on the subject. Lindley, Partnership, 6th ed. 368. It seems a logical advance from the doctrine of continuing partnerships there maintained. Where the parties have agreed to continue the relationship for a specified term the English Courts of Chancery will give extensive remedies in the nature of specific performance, although avoiding the use of that term. Unless the partnership is one at will a member does not inherently possess the power of dissolution. Allhusen v. Borries (1867) 1; W. R. 739. Equity will enjoin violations of the agreement indirectly enforcing a continuation of the parinership relation, England v. Curling (1844) 8 Beav. 129. So an injunction will be granted where one party seeks by unwarranted acts to compel the plaintiff to agree to a dissolution. Lindley, Partnership, 6th ed. 527.
If, then, an English court will not concede the power of a partner to force a dissolution in such cases it does not infringe upon its principles in compelling the acceptance of a person to whom the partners
have once agreed. Nor does its action in doing so work violence to the rule against assisting beneficiaries under a contract. That objection troubled the court in Page v. Cox (1851) 10 Hare 163. It was avoided by holding the surviving partner a trustee for the deceased partner's widow, the partnership articles having provided for the succession of the widow on the death of either partner. But in fact the person nominated for membership in such cases is not a beneficiary. He is an actual partner who has been accepted by all parties to the agreement. When the law is settled that any partners remaining hold the interest of one retiring in such cases entirely at the disposition of the person duly appointed (Page v. Cox, supra) and that such partners cannot alone dissolve the firm (Allhusen v. Borries, supra) the decision at issue is not surprising in ordering that the appointee be allowed to enjoy actual membership in the firm.
But it is unlikely that such a result would be reached in the United States. The English doctrine of continuing partnerships is here generally repudiated.. Burdick, Partnership, 330. In the words of one of our courts : “There can be no such thing as an indissoluble partnership. Every partner has an indefeasible right to dissolve the partnership
Even where the partners covenant with each other that the partnership shall continue seven years either partner may dissolve it the next day; the only con-equence being that he thereby subjects himself to a claim for damages for breach of his covenant.” Skinner v. Dayton (1822) 19 Johns. 513 at p. 538, approved and applied by Cooley, C. J., in Solomen v. Kirkwood (1884) 55 Mich. 256. This doctrine is generally put upon the ground that mutual confidence is of the essence of a parinership. Karrick v. Hanniman (1897) 168 U. S. 328. Now, one of the reasons for the usual refusal of equity to compel the specific performance of partnership articles is the absence of the assurance that the relation, if established, would continue. The court will not decree an unavailing act. Since the dissenting partners would the next moment have the power to work a dissolution, it is therefore very improbable that an American court would deem it wise to administer such relief as that given the plaintiff in the case under discussion.
Property Rights In UNDERGROUND WATER Flowing in DEFINED BUT UNKNOWN CHANNELS. — It is well settled that when water flows underneath the surface in a defined and known channel, a riparian proprietor has the same rights to its reasonable use which he would have enjoyed if the stream had been on the surface, that is, in such a case the principles applicable to surface streams, govern, and not the principles which relate to precolating waters. However, as there have been few decisions in which the right to use water flowing in an underground channel has been directly in issue, some doubt has existed as to just what qualities are necessary to make an underground channel " defined and known.” A recent English case, Bradford Corporation v. Ferrand et al. (1902) 71 L. J. Ch. Div., p. 859, has thrown much light on the subject. There it was decided that it is not sufficient to prove by the evidence of scientific experts and by excavation that the water flows in a defined channel, but that the course of the channel must be ascertainable by the reasonable in
ference of men of ordinary powers without the use of exploratory excavations. In other words, it is necessary that the average man by reasonable diligence should be able to mark out with certainty the course of the stream. Otherwise all property rights in the underground stream belong, as in the case of percolating waters, to the owner of the soil, and a lower riparian proprietor has no right to a use of the water.
The classification of such underground streams, which may be definable, but can be ascertained only by excavations and the abstruse speculations of scientific persons, with percolating waters rather than with surface streams is the logical classification. The right which every riparian proprietor has to the ordinary use of a stream running past his land is a natural right incident to the ownership of the soil. This right existing ex jure nature has not been extended by the courts to water percolating through the soil in no known channel. Such water belongs to the owner of the soil in which it percolates on the theory that it is part of the soil, and that the owner of the soil holds everything usque ad clæum et ad infernos. See 1 COLUMBIA Law REVIEW 120. The arguments that have led the courts to refuse to recognize between adjacent landowners correlative rights in water oozing and filtering through the soil apply with equal force to these unknown subterranean streams.
In Bradford Corporation v. Ferrand a spring issued from the defendants' land which the plaintiff maintained was fed by a subterranean stream flowing in a defined channel. But no observer by a reasonable inference from the existing facts could tell there was such a channel under the surface. If the plaintiff should be allowed to prove his coniention by excavating upon the defendants' land, there is no reason to prevent his digging up the soil of any number of proprietors and thus extending the stream for miles. No proprietor of land above could sink a well without the danger of incurring liability for interfering with the spring, inasmuch as the plaintiff by resorting to a newly discovered method of examination might be able to show the stream was flowing there also in a defined channel. The leading cases Acton v. Blundell (1843) 12 M. & W. 324 and Chasemore v. Richards (1859) 7 H. L. C. 349 refused to recognize correlative rights between adjacent proprietors in percolating waters on the ground that the recognition of such rights would prevent the improvement of property, for an owner can rarely cultivate his soil without interfering with the subterranean water percolating in his neighbor's land. To admit correlative rights in defined but unknown subterranean streams would burden landed proprietors with a larger liability than was unsuccessfully contended for in those cases, for while water generally percolates a comparatively short distance a defined stream might be shown to flow many miles.
That there is no right in underground water when the course of its channel is unknown, and that the channel may not be defined by excavation has been held in the three other cases, two in Ireland and one in Pennsylvania, where the question has arisen. Haldeman v. Bruckhardt (1863) 45 Pa. St. 514; Ewart v. Belfast Poor Law Guardians (1881) 9 L. R. Ir. 172; Black v. Ballymena Commissioners (1886) 17 L. R. Ir. 474. In Hale v. McLea (1879) 53 Cal. 578, where the
course of an underground stream was marked by shrubs and bushes, which would grow nowhere except above such waters, it was held that the channel was well defined and that a lower riparian proprietor had a right to the flow of the water. It is not enough, however, that the presence of underground water in a given locality is ascertainable without excavation. In a recent case, Katz v. Walkinshaw (Cal. 1902) 71 Pac. 663, it was decided that the water in an artesian belt including several square miles of territory marked by shrubs and bushes was percolating water, since, “if there is any flow to this underground body of water thus held by pressure, it is by percolation."
Preferred Debts in RAILWAY FORECLOSUKES. - In Fosdick v. Schall (1878) 99 U. S. 235, the Supreme Court announced a rather startling doctrine as to preference of certain debts upon foreclosure of any railway mortgage. Holding that a claim for car rental was to be paid out of the assets in the hands of the receiver before satisfying the claims of bondholders, who had filed a bill to foreclose a mortgage upon a certain railway, Waite, C. J., for the Court, announced that the public interests inhering in the operation of railways demand that unsecured debts for labor, equipment and supplies be protected. The parties to the usual railway mortgage, said he, recognize this, and impliedly agree that the road's current earnings during a given period be applied first to its current debts ; hence, whenever this current fund is devoted to any other object, such diversion, as against the holders of these claims, is unlawful; and so, when the mortgagee seeks the aid of equity in foreclosure of his lien, he must do equity, and postpone his lien to these debts. The Court then proceeded to apply this doctrine to a debt for car springs sold to the railway just prior to the receivership, Hale v. Frost (1878) 99 U. S. 398, and to a debt for labor. Union Trust Co. v. II. Midland Co. (1886) 117 U.
The assignees of such claims, the Court has held, are also entitled to such preferment. Burnham v. Bowen (1884) 10 U. S. 776. The doctrine has been reaffirmed in two comparatively late cases. Va. and Al. Coal Co. v. Central Ra. Co. (1897) 170 U. S. 355 ; Southern R. R. v. Carnegie Steel Co. (1900) 176 U. S. 257.
Having fairly started the doctrine on its course, the Supreme Court then took up the harder task of limiting it, commencing with Kneeland v. Am. Loan and Tr. Co. (1890) 136 U. S. 89. There an intervention for car rental was denied, on the two principal grounds that (1) there were no surplus earnings; (2) as the original bill was filed by a judgment creditor for reorganization, the mortgagee could not be required to do equity. Later it was held that the intervenor must show that he looked to the surplus earnings as the source of his payment, and not the general credit of the railway. Thomas v. Car Co. (1893) 149 U. S. 95. In Porter v. Steel Co. (1887) I 20 U. S. 649, this doctrine was held not to apply to debts incurred in the construction of the line; and the Court has strongly stated, obiter, that it is to be enforced only in railway foreclosures. Wood v. Guarantee Trust Co. (1888) 128 U. S. 416.
In addition to the limitations upon the doctrine of Fosdick v. Schall, already outlined, others have become well defined. In South
ern Ry. Co. v. Chapman Jack Co. (C. C. A. 4th Circ. 1902) 117 Fed. 424, debts for jack-screws sold to a railroad company over six months previous to the receivership were held not entitled to preference ; while the sale of the same kind of articles, made within that period, was held to create a preferred debt. This limit of six months is well settled in the lower courts. Cent. Trust Co. v. East Tenn. R. Co. (1897) 80 Fed. 624, and has been adopted by the Supreme Court, Union Trust Co. v. II. Mialand Co., supra.
Still another recent decision, Southern Ry. Co. v. Ensign Mfg. Co. (C. C. A. 4th Circ. 1902) 117 Fed. 417, raises the point as to preference of a debt for goods supplied to one line to be used upon another. There the intervenor sold car-wheels to the A railway, with knowledge that the purchaser intended to use them upon the B line, which was under lease to the A company: On foreclosure of a mortgage covering only the A railway, it was held that the claim could not be preferred. The Court well distinguishes Southern Ry. v. Carnegie Steel Co. supra, where, though the rails in question were used upon a subordinate road, yet the latter was covered by the mortgage under foreclosure. The obverse is presented by Coal Co. v. Central R. R., supra, where, on a state of facts very like those in the Ensign Mfg. Co's case, the foreclosure was of a mortgage upon the leased line, instead of that of its lessee; in which case the debt was given preference.
An important question is, out of which fund are these debts, when allowed, to be paid? If the surplus earnings have, in fact, been “diverted,” clearly the corpus must meet the debt. If the lower court has itself, after denying the intervention “diverted " the earnings by ordering their application to other things, the appellate court can, on reversal, direct payment out of the corpus. Burnham v. Bowen, supra. If the operation of the road by the receiver has resulted in surplus earnings, payment can be made from them. Southern Ry. v. Carnegie Steel Co.; Coal Co. v. Central R. R., supra. But if there has been no surplus either before or after the receivership, the debt cannot be preferred, and the corpus cannot be touched. St. Louis R. Co. v. Cleveland R. Co. (1888) 125 U. S. 558; Niles Tool Co. v. Ry. Co. (1902) 112 Fed. 561.
ConstitUTIONAL LAW--EMINENT Domain--INJURY TO BUSINESS. The Fifth Amendment to the Constitution of the United States and the constitutions of the various States provide that private property shall not be taken for public use without just compensation. A recent Massachusetts case decides that a mere injury to an established business without the actual appropriation of the land on which it is carried on is not a “taking of property” in such a sense as to entitle its owner to compensation therefor. Sawyer v. Commonwealth (1902) 65 N. E. 52. The Court says on p. 53 : “A business is less tangible in nature and more uncertain in its vicissitudes than the rights which the Constitution undertakes absolutely to protect. It seems to us, in like manner, that the diminution of its value is a vaguer injury than the taking or appropriation with which the Constitution deals.
In Monongahela Nav. Co. v. U. S. (1892) 148 U. S. 312, it was held that this provision extends only to property taken; that what is physically appropriated must be paid for; but that this is as far as the