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These cases have been consistently followed in all cases coming before the Supreme Court on writ of error to the federal courts. Olcott v. Supervisors (1872) 16 Wall. 678; Loeb v. Trustees (1900) 179 U. S. 472.
The same case that was presented to the Supreme Court in Gelpcke v. City of Dubuque, supra, came before the Supreme Court on a writ of error to the Supreme Court of Iowa in R. R. Co. v. McClure (1870) 10 Wall. 511, and it was held that the decision of the Iowa Couri was not the passing of a law, and so though the decision might impair the obligation of a contract, the United States Supreme Court had no jurisdiction. In accordance with this decision it has been laid down in many subsequent cases that the prohibition upon the State passing a law impairing the obligation of a contract has reference only to constitutional amendments and legislative enactments, and does not refer to the judicial decisions of the State courts. Knox v. Exchange Bank (1870) 12 Wall
. 379; Central Land Co. v. Laidley (1894) 159 U. S. 103; Bacon v. Texas (1895) 163 U. S. 207.
The different result reached in cases coming before the Supreme Court on writ of error to the federal courts from that reached in cases coming up on writ of error to the State courts, can only be explained on the theory that the federal courts in this class of cases exercise an independent jurisdiction co-ordinate with that of the State courts. This position seems to represent the later tendency of the Supreme Court decisions.
There is another class of cases very similar to R. R. Co. v. McClure, which the Supreme Court will review on a writ of error to the State Court. That is the class of cases where a second statute is passed which it is claimed impairs an existing contract obligation, and the State Court decides the statute under which the contract obligation is claimed to arise to be unconstitutional, and therefore that no contract obligation is impaired by the subsequent statute. In such a case the Supreme Court has carried the principle of Jefferson Branch Bank v. Skelly, supra, a step farther and holds that the Supreme Court will review the construction of the State Constitution by the State Court, and decide for itself whether the original statute is constitutional or not. Louisiana v. Pilsbury (1881) 105 U. S. 278; Mobile & Ohio R. R. v. Tennessee (1893) 153 U. S. 486; McCullogh v. Virginia (1898) 172 U. S. 116.
In the latter case the Supreme Court of Virginia, after years of litigation during which the statute had been passed upon by the United States Supreme Court and declared to be valid, held the statute to be unconstitutional. . Subsequent to the passage of the statute claimed to create the contract obligation, an act was passed which would have impaired the contract obligation claimed, if such obligation was in existence. The United States Supreme Court held that this decision was a violation of the Constitutional prohibition. The reasoning was as follows. Since the subsequent act had the same result, whether its effect was to deprive the plaintiff of a certain right assured to him under a valid contract, or whether he was deprived of his enjoyment of the right claimed because it was held that he had no contract, in either case the plaintiff is deprived of the enjoyment of a privilege, and therefore by the decision of the State Court the
subsequent act is given effect and the contract is impaired by the passing of the subsequent act. The difficulty with the reasoning is that if the statute was unconstitutional, the Legislature had no power to make the contract, and there is no contract obligation to be impaired.
If the Court could go as far as it did in this case to find an act which can be called “passing a law," they could well have gone still further. As a practical matter it does not seem to be open to argument that the same result is produced upon contracts made upon the faith of a former decision by a change of decision, as is produced by the repeal of a law by which contract obligations are created. It would not be impossible to construe the words of Article I, Section 10, to include a change of judicial decision. It might be said that the passing of a law consists in the passing of a statute plus the the judicial construction of it, and that each change of decision results in the passing of a new law. The logic of the last suggestion is not very convincing, but it might justify the enlarged construction if any justification were necessary. The question is purely one of construction and policy.
The objection to such an enlarged construction is that the State courts would be deprived of almost all their final jurisdiction in cases involving a contract right, and the United States Supreme Court would be flooded with such a mass of litigation that the Court as at present constituted could never handle it.
FAILURE TO Give Notice of IntenTION TO ExcavaTE.-In Davis v. Summerfield et ux. (N. Car. 1902) 42 S. W. 818, it was held that the defendant's failure to notify the owner of the adjacent lot of the extent of his proposed plan of excavation amounted to negligence and rendered him liable for the resulting injury to the plaintiff's house.
That the so-called natural right to lateral support exists only in favor of land in its natural state, and does not extend to the support of buildings erected upon it, is stated broadly by all the text writers. The statement as an absolute rule of law, however, would be erroneous. For to say that A owes B no duty whatsoever to protect the buildings which B has placed on the confines of his land, is to say that A is protected in any excavation he may choose to make even though he act with a total disregard for the damage that may accrue to B's buildings. It would seem that the true test should be what is a reasonable user by A and B, each considering the circumstances of the other. If it is not unreasonable for A to improve his land by building on it, even though he thereby increases the lateral pressure on B’s land, then it is not unreasonable to require B to use due care in excavating. Accordingly we find the rule that one landowner does not owe his neighbor any support for the extra weight of superstructures on his land, qualified by the statement that is the lateral support is“ negligently” withdrawn from land encumbered with buildings, a liability arises. Dodd v. Holme (1834) i Ad. & El. 493; Austin v. H. R. R. Co. (1862) 25 N. Y. 334; Shafer v. Wilson (1875) 44 Md. 268. Just how much care must be exercised is not clearly stated in any of the cases. The one excavating need not use the same degree
of care in regard to his neighbor that he would use were the buildings his own, Charles v. Rankin (1856) 22 Mo. 566; nor is he bound to shore up his neighbor's building, Peyton v. Mayor of London (1829) 9 B. & C. 725. Whether he is bound to give notice of his intention to excavate is a question about which the authorities are conflicting. The doubts expressed in the earlier cases were settled in England in Chadwick v. Trower (1839) 6 Bing. N. C. i where it was said : “ The duty of giving notice in such cases seems to be one of those imperfect obligations which are not enforced by our law.” In the United States, however, there is some authority in support of tbe decision in the principal case that failure to give notice is negligence per se ; Lasala v. Holbrook (1833) 4 Paige 163 ; Shultz v. Byers (1891) 53 N. J. L. 442. Other cases, however, hold merely that by giving notice the defendant is relieved from the duty of taking extra precautions. Shrieve v. Stokes (1848) 8 B. Mon. 453 ; City of Covington v. Geyler (1892) 93 Ky. 275 ; Bohrer v. The Dienhart Harness Co. (1898) 19 Ind. App. 489 ; Bonaparte v. Wiseman (1899) 89 Md. Still others speak of it as a reasonable precaution.
Winn v. Abeles (1886) 35 Kans. 85.
The latter case suggests the true test. The necessity of giving notice should depend on what under the circumstances of each case is reasonably required. A failure to give notice at all, or, as in the principal case, a failure to give notice of the extent of the proposed excavation, should be sent to the jury as evidence—though not conclusive-of that want of due care which the defendant should have used. Montgomery v. Trustees (1883) 70 Ga. 38.
Mutual CONTROL or CorpoRATIONS BY EXCHANGE OF MAJORITY OF Stock. -A new scheme of combining corporations, even more ingenious in its conception and more startling in its possibilities than that of a holding company, has been frustrated by the New Jersey Court of Chancery. The directors and majority stockholders of an insurance company, and the directors of a trust company, many of the latter being also among the former, formed a plan by which the trust company was to acquire a majority of the stock of the insurance compiny, was to double its own capital, and was then to issue the new stock to the insurance company, which, having already some shares of the first issue, would then have a controlling interest in the trust company,
The result would be that the directors elected at the first election held by either company after the plan was executed would have complete control of both companies, and would hold a position from which they could never be dislodged. At the suit of some minority stockholders of the insurance company, however, the execution of the plan was enjoined. The grounds of the injunction were first, that the statutory power of the insurance company to “purchase” stocks of other corporations " for the purpose of investment" did not include an authority to subscribe to a new issue of shares for the purpose of controlling the company issuing them ; and second, that the directors had no right to use the funds of the company in intentionally bringing about a situation where the voting power of stock would be separated from the beneficial interest in it. Robotham v. Prudential Ins. Co. (N. J. 1903) 53 Atl. 842.
In regard to the first point, a corporation ordinarily has no implied power to subscribe to stock of a corporation in the process of organization. Smith v. Newark, etc. R. Co. (1894) 8 Ohio Circ. Ct. Rep. 583; Martin v. Ohio Stove Co. (1898) 78 Ill. App. 105. And it has been held that express power to invest in stocks gives no power to subscribe to the stock of a new corporation, Commercial F. Ins. Co. v. Florence Cotton Co. (1891) 99 Ala. 1. According to the principal case the same objection may be urged against a subscription to new stock of an old corporation.
The second point is a new application of a principle which seems to have become well established. At common law stock could not be voted by proxy. Taylor v. Griswold (1834) 14 N. J. L. 222 ; Com. v. Bringhurst (1883) 103 Pa. St 134. More recently voting trusts, under which stock is given in trust to vote as persons not the owners of it direct. when there is no legitimate pooling of interests, have been held void. Shepaug Voting Trust Cases (1890) 60 Conn. 576 ; White v. Thomas Tire Co. (1893) 52 N. J. Eq. 178. The objection appears to be that there is no necessary connection between the gove ernment of the corporation and any large interest in the stock. The present case comes squarely within that principle. The directors of the two corporations would be under no obligation to hold individually more than the shares required to qualify them as directors; and while in theory they would be voting as agents of the corporation, in fact they would vote free from all control. The situation, even if entered into with the best of faith, would be full of danger to the stockholders, and therefore one in which the corporation ought not to be placed. The same objection to the directors' voting the corporate holdings cannot be urged where there is no interchange of control, because there the directors can be made responsible.
As the decision is the first in a new field, it suggests and leaves unanswered many interesting and important problems; for example, the rights of stockholders if two corporations should, in the course of occasional investments, find themselves accidentally in possession of a majority of one another's stock.
REAL PROPERTY-Delivery_OF DEED TO THIRD PERSON FOR GRANTEE NOT IN ESSE.— It has recently been held by the Supreme Court of Utah that a deed conveying land to a corporation not in esse at the time of the execution of the deed, placed by the grantor in the hands of a third person with instructions to deliver the same to the grantee when organized and so delivered by the third person, is admissible as prima facie evidence of title in the grantee in a suit aitacking the title collaterally. Santaquin Mining Co. v. High Roller Mining Co. (1903) 71 Pac. 77. The court proceeds apparenily upon the assumption that the grantor's intention was to constitute the depositary his agent to deliver to the grantee, when the latter came into being.
In Taw v. Bury (1558) Dyer 167, 6, a distinction is made between a delivery to a third person to the use of the grantee and such a delivery where the instrument was to be redelivered as the grantor's deed upon condition performed. This distinction has been fully estab
lished by later authority in England and America. Sheppard's Touchstone, 58-9; Doe d. Garnons v. Knight (1826) 5 B. & C. 671 (at 692-5); Wheelwright v. Wheelwright (1807) 2 Mass. 447. It appears, then, that where a deed is placed by the grantor in the hands of one not a party thereto, for delivery to the grantee, the transaction may assume one of three aspects: a delivery to the depositary as agent for the grantee, a delivery in escrow, or a mere entrusting of the instrument to an agent of the grantor with instructions to deliver. Whether the transaction takes one or the other of these forms is a question of fact. As a deed operates only from delivery, the crucial question is, when did the grantor actually or constructively give up posse-sion of the instrument with the intent that it should iake effect as his deed. Wheelwright v. Wheelwright (supra); Trask v. Trask (1894) 90 Iowa 318.
By the weight of authority a deed delivered to a third party for the grantee, the grantor parting thereby with his control over the instrument lakes effect as the grantor's deed in præsenti: Doe d. Lloyd v. Bennett (1837) 8 C. & P. 124; Foster v. Mansfield (1841) 3 Metcalf (Mass. ) 412; Bryan v. Wash (18+5) 7. III. 557. The two cases last cited represent two theories as to the acceptance by the grantee, necessary to complete the delivery. Foster v. Mansfield holds that before acceptance the instrument does not take effect as a deed, but that, when accepted, it takes effect by relation from the first delivery. In Bryan v. Wash the acceptance is presumed on delivery to the depositary, the grant being beneficial to the grantee, i. e. an unconditional gist. Under the latter theory a deed delivered absolutely to a third party for a grantee not in esse at the time of the delivery could not, it seems, vest title in the grantee subsequently: Morris v. Caudle (1899) 178 III. 9; Davis v. Hollingsworth (1901) 113 Ga, 210; Realty Co. v. Whitney (1991) 106 La. 257. But under the Massachusetts view, the courts of that State have intimated that a subsequent acceptance by a corporation not in esse at the time of delivery, would be valıd: Rotch's Wharf Co. v. Judd (1871) 108 Mass. 224.
A delivery in escrow presupposes a complete deed the operation of which is merely suspended until the performance of some condition, imposed, according to most authorities, by the grantor upon the grantee: Deardorff v. Foresman (1865) 24 Ind. 481, at 492; Fitch v. Bunch (1866) 30 Cal. 209. A delivery to the depositary upon a mere collateral contingency is considered not an escrow but a present deed: Sheppard's Touchstone, 58-9; Foster v. Mansfield (supra); Arnegaard v. Arnegaard (1898) 7 N. D. 475.
There are several objections to upholding a deed delivered in escrow to a grantee not in esse. The deed could not be considered complete, on such delivery, for lack of proper parties, and there seems to be a logical difficulty in holding that the grantor may impose upon a grantee not in esse, the condition that the latter shall come into being. No case appears to have arisen in which an attempt to do so has been made.
Where the depositary is merely the agent of the grantor to deliver, the latter retaining the control of the deed and being in a position to revoke it at any time, there would seem to be no doubt that a delivery by the agent after the grantee comes into being would be valid. This