Digital Commons @ UM Law

Maryland Law ReviewVolume 1 | Issue 3 Article 7Validity of State Compensating Tax on Use WithinState of Chattels Purchased Outside State.Henneford V. Silas Mason Company, Inc.Follow this and additional works at: http://digitalcommons.law.umaryland.edu/mlrPart of the Taxation-State and Local CommonsThis Casenotes and Comments is brought to you for free and open access by the Academic Journals at DigitalCommons@UM Carey Law. It has beenaccepted for inclusion in Maryland Law Review by an authorized administrator of DigitalCommons@UM Carey Law. For more information, pleasecontact smccarty@law.umaryland.edu.Recommended CitationValidity of State Compensating Tax on Use Within State of Chattels Purchased Outside State. Henneford V. Silas Mason Company, Inc., 1 Md.L. Rev. 263 (1937)Available at: http://digitalcommons.law.umaryland.edu/mlr/vol1/iss3/7MARYLAND LAW REVIEWVALIDITY OF STATE COMPENSATLNG TAX ONUSE WITHIN STATE OF CHATTELS PURCHASEDOUTSIDE STATE. HENNEFORD V. SILASMASON COMPANY, INC.1The State of Washington, after imposing a tax of 2% ofthe selling price on all retail sales made in the State, leviedan additional "compensating" tax of 2%6 of the purchaseprice for the privilege of using within the State any articleof tangible personal property purchased by the user. Itwas provided that the compensating tax did not apply ex-cept as to property bought at retail, and, where the sale oruse of such property had already been subjected to a taxunder the laws of any State of the United States, it wasabated to the extent of any tax so paid.2 Plaintiffs-appel-lees brought suit in a Federal court to enjoin the collectionof the tax with reference to materials purchased outsidethe State and used within it. A three-judge court grantedthe injunction (one judge dissenting), and held the tax in-valid as a burden on interstate commerce.' On appeal,HELD (two justices dissenting): Reversed; such a tax isneither a tax upon the operations of interstate commercenor a burden thereon because of any hampering or discrim-inatory effect.The obvious purpose of the taxing statute was to meetthe objections normally raised by merchants near Statelines to a retail sales tax-namely, that the sales tax worksunfairly upon them in that it either drives prospective cus-tomers across the State line or forces the merchants toabsorb the tax instead of passing it on to their customers.In view of the strenuous and heretofore successful opposi-tion to a sales tax in Maryland, founded on such considera-tions, the case assumes considerable local importance.It is well established that a State may not tax the saleto a buyer within the State of goods which at the time ofsale are in another State nor the solicitation within theState of orders for goods which are at the time in anotherState." It is equally well established that a State may val-1 57 S. Ct. 524 (1937).:Washington Laws, 1935, Ch. 180.Silas Mason Company, Inc. v. Henneford, 15 F. Supp. 958 (E. D.Wash.). The State Supreme Court, also by a divided court, bad held thetax valid in Vancouver Oil Co. v. Henneford, 183 Wash. 317, 49 Pac. (2d)14 (1935).'Robbins v. Shelby County Taxing District, 120 U. S. 489, 30 L. Ed. 694,7 S. Ct. 592 (1887); Real Silk Hosiery Mills, Inc. v. Portland, 268 U. S.325, 69 L. Ed. 982, 45 S. Ct. 525 (1925). But cf. Wiloll Oil Corp. v. Penn-sylvania, 294 U. S. 169, 79 L. Ed. 838, 55 S. Ct. 58 (1935).CASENOTES AND COMMENTSidly tax the sale of goods brought into the State, whetherin the original package or not, if such goods, prior to theirsale,, have come to rest and become mingled with the gen-eral mass of property within the State ;' provided alwaysthat the tax does not discriminate against such goods be-cause of their origin.' And a line of recent cases has sus-tained also the power of a State to tax the use within theState of goods brought in from outside, where such goodshave come to rest within the State prior to the use.7 Theselast decisions are considered as controlling by the SupremeCourt in the present case.The lower court, in holding the tax unconstitutional,relied primarily on Baldwin v. Seelig,8 and emphasized thatthe purpose of the statute was to protect local merchantsagainst the competition of interstate commerce. In thatcase, the Supreme Court had said :? "Neither the powerto tax nor the police power may be used by the State ofdestination with the aim and effect of establishing an eco-nomic barrier against competition with the products of an-other state or the labor of its residents. Restrictions soconstrued are an unreasonable clog upon the mobility ofcommerce. They set up what is equivalent to a rampart ofcustoms duties designed to neutralize advantages belongingto the place of origin. They are thus hostile in conceptionas well as burdensome in results . . . The importer mustbe free from imposts framed for the very purpose of sup-pressing competition from without and leading inescapablyto the suppression so intended."In the present case, the Supreme Court distinguishesBaldwin v. Seelig upon the ground that there the New Yorkstatute in effect regulated the price at which milk subse-quently sent to New York could be sold outside of NewYork, by prohibiting the sale in New York of milk producedand sold outside the State to New York dealers, unless such5 Woodruff v. Parham, 8 Wall. 123, 19 L. Ed. 352 (1869); SonnebornBros. v. Cureton, 262 U. S. 506, 67 L. Ed. 1095. 43 S. Ct. 643 (1923).6 Welton v. Missouri, 91 U. S. 275, 23 L. Ed. 347 (1876).7 Hart Refineries v. Harmon, 279 U. S. 499, 73 L. Ed. 475, 49 S. Ct. 188(1929) ; Gregg Dyeing Co. v. Query, 286 U. S. 472, 76 L. Ed. 1232, 52 S. Ct.631 (1932) ; Nashville, C. & St. L. Ry. v. Wallace, 288 U. S. 249. 77 L. d.730, 53 S. Ct. 345 (1933) ; Edelman v. Boeing Air Transport, 289 U. S. 249,77 L. Ed. 1155, 53 S. Ct. 591 (1933); Monamotor Oil Co. v. Johnson, 292U. S. 86, 78 L. Ed. 1141, 54 S. Ct. 575 (1934). But a tax on the use withinthe State of gasoline purchased outside Is invalid as applied to gasolineused as fuel upon an interstate ferry line, since the tax here is directlyupon the operations of Interstate commerce. Helson v. Kentucky, 279 U. S.245, 73 L. Ed. 683, 49 S. Ct. 279 (1929).8 294 U. S. 511, 79 L. Ed. 1032, 55 S. Ct. 497 (1935).* Ibid, 294 U. S. 527.MARYLAND LAW REVIEWoutside sale was at a price fixed by New York; whereas theWashington statute left the outside seller free to chargeany price he wished and to ship his goods into Washingtonin such amounts as he desired. That the motive behindthe adoption of the statute was to lessen interstate competi-tion for local retailers was stated to be immaterial, the taxbeing valid apart from its motives.It is difficult completely to reconcile the holding herewith the broad language quoted above from the Baldwincase, and it would seem that the doctrine there enunciatedmust be materially limited. Both' the purpose and effectof the compensating tax were certainly to protect the localmerchant against the lower prices of outside competitorsby taking away from local buyers the saving effected bybuying outside the State. Indirectly, at least, Washingtonwas enabled to project its sales tax outside the State andmake it apply to interstate sales. Yet it was the attemptof New York to project its policy with respect to salesprices of milk across State lines that was condemned in theBaldwin case as an attempt to "place itself in a positionof economic isolation;" and it was there stated that thiswas not made justifiable by reason of a desire to "protecther inhabitants from the cut prices and other consequencesof Vermont competition."It would seem that, under the instant case, the Statesare to be regarded as having power to protect their mer-chants against injurious competition from without, to theextent that interstate sellers may be forced, indirectly atleast, to compete on equal terms with local sellers. Inother words, that interstate commerce is only to be re-garded as burdened where it is placed at a disadvantageas compared with local merchants. Whether adopting thecompensating tax will in practice enable the States to over-come the difficulties rising out of their inability to tax inter-state sales directly, would seem at least questionable. Thedifficulty of administration is obvious, except as to largebuyers or as to property whose ownership would be a mat-ter of record in the taxing State.1010 See note (1936) 11 Wasbington L. R. 54.265

Validity of State Compensating Tax on Use Within State of Chattels Purchased Outside State. Henneford V. Silas Mason Company, Inc.

Capacity of Child to Secure Court Order Against Father for Future Support in Excess of Amount Stipulated in Separation Agreement Between Parents - Yost v. Yost

Maryland Law ReviewVolume 1 | Issue 2 Article 3Editorial SectionFollow this and additional works at: http://digitalcommons.law.umaryland.edu/mlrThis Editorial Section is brought to you for free and open access by the Academic Journals at DigitalCommons@UM Carey Law. It has been acceptedfor inclusion in Maryland Law Review by an authorized administrator of DigitalCommons@UM Carey Law. For more information, please contactsmccarty@law.umaryland.edu.Recommended CitationEditorial Section, 1 Md. L. Rev. 141 (1937)Available at: http://digitalcommons.law.umaryland.edu/mlr/vol1/iss2/3Maryland Law ReviewPublished in December, February, April, and June by Maryland Law Review, Inc.Copyright, 1937, by Maryland Law Review, Inc.$2.00 Per Volume 75 Cents Per NumberEDITORIAL STAFFJOHN S. STRAHORN, JR., Faculty EditorJOHN RITCHIE, III, Assistant Editor and Business ManagerALLEN E. BUZZELL, Chairman, Student Editorial BoardADVISORY EDITORIAL BOARDALEXANDER ARMSTRONG H. H. WALKER LEWISROBERT R. BOWIE ARTHUR W. MACHENFREDERICK V. BRUNE CHARLES C. MARBURYHERBERT M. BRUNE, JR. WI.LIAM L. MARBURY, JR.ROBERT R. CARMAN CHARLES MARKIELLHOWARD H. CONAWAY EDGAR G. MILLER, JR.PAUL L. CORDISH AMBLER H. MossW. PAGE DAME, JR. REUBEN OPPENHEIMERJOSEPH C. FRANCE NORWOOD B. ORRICKHILARY W. GANS CHARLES R. POSEY, JR.CHARLES MCHENRY HOWARD ROSZEL C. THOMSENSYLVAN HAYES LAUCHHEIMER HERBERT T. TIFFANYCHARLES T. LEVINESS, III F. W. C. WEBBAnd the part-time and full-time faculty members of theUniversity of Maryland Law School.STUDENT EDITORIAL BOARDIRVING J. APPLEFELD WILLIAM S. JAMESTALBOT W. BANKS BERNARD S. MEYERALLEN E. BUZZELL JAMES C. MORTON, JR.RICHARD E. CULLEN JOHN G. ROUSE, JR.S. RAYMOND DUNN JESSE J. RUBINSHERLEY EWING BENSON J. SAKSCLIFFORD H. GRAVES EDWARD A. SCHAUB, JR.EDWARD D. HIGINBOTHAM J. EDWARD TYLER, IIICONCERNING THE REVIEWBecause of an apparent misunderstanding on the partof a few of those concerned, the REVIEW wishes briefly toreiterate the announcement made in the preceding numberconcerning the arrangement with the co-operating Bar As-sociations under which members of any of them are receiv-ing free subscriptions to Volume One. Under the arrange-ment by which the Maryland State Bar Association, the BarEDITORIAL SECTIONAssociation of Baltimore City, and the Junior Bar Associa-tion of Baltimore City are co-operating in the founding ofthe REVIEW any person who is a member of any one ormore of those organizations will receive a free subscrip-tion to the REVIEW so long as his organization continues toco-operate in the publication of the REVIEW in the presentmanner.Under the current arrangement with those organiza-tions, any member of any of them is to receive a free sub-scription to Volume One of the REVIEW, which consists offour issues, viz., the December, 1936 one, the current Feb-ruary, 1937 one, and the forthcoming April and June is-sues. Some of the Bar Association members apparentlyhave had the erroneous impression either that they wereexpected to pay for the REVIEW or that they were receiv-ing only the December, 1936 issue free.At the annual meeting of the members of MARYLANDLAW REVIEW, INC., held on January 18, 1937, Allan H.Fisher, Esq., Second Vice-President of the Bar Associa-tion of Baltimore City was elected to membership on theBoard of Trustees of the REVIEW, vice Robert R. Carman,Esq., and Thomas M. Jacobs, Esq., President of the Jun-ior Bar Association of Baltimore City, was similarly electedto membership, vice Herbert M. Brune, Jr., Esq. By ac-tion of the new Board of Trustees, Messrs. Carman andBrune were elected to membership on the Advisory Edi-torial Board of the REvIEw.NEWS OF THE BAR ASSOCIATIONSAt a meeting of the Bar Association of Baltimore Cityheld on December 14, 1936, the following new officers wereelected for the ensuing year: W. Conwell Smith, President;E. Paul Xason, First Vice-President; Allan H. Fisher,Second Vice-President; Eldridge Hood Young, Treasurer,and Robert France, Secretary. Committee Chairmen forthe current year are: Admissions, Gerald W. Hill; Amend-MARYLAND LAW REVIEWment of the Law, L. Wethered Barroll; Professional Ethics,Ralph Robinson; Grievances, Joseph Bernstein; Judiciary,John Henry Skeen; and The Unlawful Practice of the Law,G. C. A. Anderson.At a meeting of the Bar Association of Baltimore City,held on February 2, 1937, the Association went on recordas approving ten proposed amendments to the Marylandstatute law. See Daily Record, February 2, 1937, and same,February 3, 1937. Two of the proposed acts deal withthe improper practice of law. Another proposes to reformthe practice for the adjudication of lunatics. Two othersprovide, respectively, for local actions for wrongful deathsoccurring in foreign jurisdictions and for judicial noticeof foreign laws in Equity cases. Another proposes anamendment to the Maryland Constitution to provide com-pensation for the damaging of property when the grade ofa road or street is changed. Others dealt with the index-ing of land records, funeral expenses, and the taking oftestimony in Equity cases. The proposed bill to deal withthe effect of birth, adoption, or legitimation on a previouslyexecuted will was referred back to the Committee onAmendment of the Law for correction.At the same meeting the Association went on record asopposed to the proposed bill to permit women to serve onjuries, and it also unanimously approved the actions of theJudiciary and Executive Committees in recommending thereappointment of Judge Duke Bond of the Supreme Benchof Baltimore City to serve from the impending expirationof his term until the next following general election.NEWS OF THE LAW SCHOOLDean Howell and Messrs. Reiblich, Reno, Ritchie, Ruge,and Strahorn of the full-time faculty attended the Thirty-Fourth Annual Meeting of the Association of AmericanLaw Schools, which was held in Chicago, Illinois on Decem-ber 29, 30 and 31, 1936. During 1936 Dean Howell servedas Chairman of the Association's Special Committee onEDITORIAL SECTIONNon-Member Schools and Professor Reno served as a mem-ber of the same Committee. During 1936 Professor Ritchieserved as a member of the Association's Committee on Cur-riculum. At the recent meeting Professor Reiblich was ap-pointed to serve for 1937 as a member of the Council ofthe Round Table on Equity for the next Annual Meeting.The Yale Law Journal for February, 1937 publisheda review written by Professor Ritchie of the Second Edi-tion of Cases and Materials on the Law of Credit Transac-tions by Wesley A. Sturges.THE SPECIAL SESSION OF THE LEGISLATUREAn extraordinary session of the General Assembly ofMaryland was held from December 8th to 12th, 1936. Theonly act passed, aside from the appropriation bill for theexpenses of the session, was Chapter 1, the "Unemploy-ment Compensation Law," which added a new article tothe Code known as Article 95A to be entitled "Unemploy-ment Compensation." It was necessary to call a specialsession to enact the law during 1936 in order to avoid theloss to the State of certain tax money which otherwisewould have gone entirely to the Federal Government.In view of the possibility of the law's being amendedat the current regular session of the General Assembly theREviEw will postpone presenting the substance of the lawto its readers until after the adjournment of the currentsession, so that any amendments to the law may be pre-sented along with it.

Editorial Section

Maryland Law ReviewVolume 1 | Issue 2 Article 7Constitutional Law-delegation to President ofPower to Declare Embargo on Exportation ofArms. United States v. Curtiss-Wright ExportCorporationFollow this and additional works at: http://digitalcommons.law.umaryland.edu/mlrPart of the Constitutional Law CommonsThis Casenotes and Comments is brought to you for free and open access by the Academic Journals at DigitalCommons@UM Carey Law. It has beenaccepted for inclusion in Maryland Law Review by an authorized administrator of DigitalCommons@UM Carey Law. For more information, pleasecontact smccarty@law.umaryland.edu.Recommended CitationConstitutional Law-delegation to President of Power to Declare Embargo on Exportation of Arms. United States v. Curtiss-Wright ExportCorporation, 1 Md. L. Rev. 167 (1937)Available at: http://digitalcommons.law.umaryland.edu/mlr/vol1/iss2/7MARYLAND LAW REVIEWin mind the same tests, in construing Article 75, Section 157,which it would have applied if Article 23, Section 103 hadbeen brought to its attention6 and the decision seems inline with the substantial weight of authority.7Many of the cases, however, involving solicitation of or-ders, hold that a foreign corporation engaging in such ac-tivity is not required to qualify and pay a franchise tax,not on the ground that it is not "doing business," but on theground that such business is interstate commerce. Underthese authorities solicitation of orders may render a cor-poration subject to the jurisdiction of the courts. The par-ticular significance of the present decision is that the Mary-land Court appears to regard the regular solicitation of or-ders as not in fact the doing of business. Although consider-ations relating to undue burdens on interstate commercewere not present, the Court evidently felt that the sametests should be applied as in the case of foreign corpora-tions, and thus avoided the confusion which would resultfrom adopting different standards for the two classes ofcases.CONSTITUTIONAL LAW-DELEGATION TO PRESI-DENT OF POWER TO DECLARE EMBARGO ONEXPORTATION OF ARMS. UNITED STATESV. CURTISS-WRIGHT EXPORTCORPORATION'Defendants were indicted for conspiring to sell arms inthe United States to a foreign government in violation ofthe Joint Resolution of Congress of May 28, 19342. In thelower court, a demurrer to the indictment had been sus-tained, on the ground that the joint resolution constitutedan improper delegation of power by Congress to the Presi-dent.8 On appeal, held (one justice dissenting) :-Reversedand cause remanded; the powers of the Federal Govern-ment in respect of foreign affairs differ fundamentally inorigin and nature from its powers in respect of domesticaffairs; even assuming that the challenged legislation wouldhave constituted an improper delegation of power as to8 Examination of the briefs in the principal case discloses that Art. 23,Sec. 103 was not cited to the Court.7 Prentice-Hall Corp. Service, Pars. 7120-7122.- U. S. -, 81 L. Ed. 166, 57 S. Ct. 216 (1936).48 Stat. 811 (1934).'United States v. Curtiss-Wright Export Corporation, 14 F. Supp. 230(S. D. N. Y. 1936).CASENOTES AND COMMENTSthe conduct of internal affairs, it is nevertheless valid inthe field of external affairs, particularly in the light ofprior legislative practice.The Joint Resolution in question provided that "if thePresident finds that the prohibition of the sale of armsand munitions of war in the United States to those coun-tries now engaged in armed conflict in the Chaco may con-tribute to the re-establishment of peace between those coun-tries, and if after consultation with the governments ofother American Republics and with their cooperation, aswell as that of such other governments as he may deemnecessary, he makes proclamation to that effect," it shouldbe unlawful "except under such limitations and exceptionsas the President prescribes" to sell arms or munitions ofwar in the United States to the countries then at war orto those requesting them, "until otherwise ordered by thePresident or by Congress." It was followed by the Presi-dent's proclamation,' which, after reciting the terms ofthe Joint Resolution, declared that the President had foundthat the prohibition of the sale of arms and munitions ofwar "may contribute to the re-establishment of peace,"and that he had consulted with the governments of otherAmerican Republics and had been assured of the co-oper-ation of such governments as he had deemed necessary.The lower court, in holding the Joint Resolution uncon-stitutional, proceeded on the theory that it gave the Pres-ident power to make the embargo on the exportation ofarms effective, conditioned, not upon his finding the exist-ence of a specified condition of facts, but upon his opinionmerely as to the efficacy of the embargo to accomplish cer-tain desired ends; it consequently regarded the holding inthe Schechter case' as controlling, and was able to distin-guish such prior cases as The Brig Aurora v. United States6and United States v. Chavez,7 in which embargo statutesquite similar to that in the instant case had been upheld.8It would not have been difficult to have assigned satis-factory reasons for reversal, without departure from the'48 Stat. 1744 (1934).A. L. A. Schechter Poultry Corporation v. United States, 295 U1. S.495, 79 L. Ed. 1570, 55 S. Ct. 837 (1935).6 7 Cr. 382, 3 L. Ed. 378 (1813)." 228 U. S. 525, 57 L. Ed. 950, 33 S. Ct. 595 (1913).1 In the Brig Aurora case, the statute, providing for the suspension oftrade with Great Britain and France, authorized the President, in caseeither country should so revoke or modify certain edicts "as that theyshall cease to violate the neutral commerce of the United States," to pro-claim that fact, when the suspended trade might be renewed; the ques-tion of Invalid delegation was argued but received only slight considera-MARYLAND LAW REVIEWgeneral principles heretofore laid down with respect tothe delegation of legislative power.' The grounds assignedby the Supreme Court, however, are so novel as to affordroom for much speculation as to the precise effect and pos-sible future importance of the decision. °The Court, assuming without deciding that, if the JointResolution had related solely to internal affairs, it wouldhave constituted an unlawful delegation of legislative pow-er, points out that the whole aim of the Joint Resolutionwas to affect a situation entirely external to the UnitedStates. It declares that there are fundamental differencesbetween the powers of the Federal government in the fieldof foreign affairs and its powers in the field of domesticaffairs; that in the latter field, the primary purpose of theConstitution was to take from the general mass of legisla-tive powers theretofore possessed by the States certainpowers of government and confer these upon the Federalgovernment, but that in the former field, the States neverpossessed any powers and such international powers weretransmitted to the Federal government from other sources;that, in consequence, the doctrine, that the Federal govern-ment may exercise no powers except those specifically enu-merated in the Constitution and such implied powers as arenecessary to carry those enumerated into execution, is trueonly in the field of domestic affairs and does not apply tothe Federal government in respect of its international pow-ers." ' The Court then continues by stating that, in its deal-ings with other nations, the United States is representedonly by the President, so that the case presented a question,not only of an authority delegated to the President by Con-gress, but of such an authority plus the plenary and ex-clusive power of the President to represent the governmentin its international relations. It would be unwise, says theCourt, to require the laying down of "narrowly definite"standards to govern the action of the President in this field,and might result in serious embarrassment because of thedelicacy of the subject-matter; and this conclusion isstrengthened and supported by a long and unbroken legis-tion in the opinion. In the Chavez case, the joint resolution prohibitedthe exportation of arms and munitions to any American country, when-ever the President should find that in such country "conditions of domesticviolence exist which are promoted by the use of" such arms or munitionsprocured from the United States, and should so proclaim; the decisiondid not consider the question of improper delegation of power.I See note (1936) 36 Columbia L. R. 1162.20 Cf. Baltimore Daily Record, January 14, 1937.11 Cf. Corwin, The Commerce Power Versus States Rights (1936), Chap. 3.CASENOTES AND COMMENTSlative practice of authorizing action by the President as tosubjects affecting foreign relations and either leaving theexercise of such power to his unrestricted judgment or pro-viding a far more general standard for his guidance thanrequired in dealing with domestic affairs.Since there was no issue involved as to the respectivefields of power of the States and the Federal government,nor of the exclusive power of the Federal government inrespect of foreign relations, it is difficult to see the rele-vancy of so much of the opinion as deals with the origin ofthe Federal government's power in this field. Possibly thethought is, that since its foreign powers, due to a differencein nature and origin, are not subject to the usual limitationexpressed in and imposed by the 10th Amendment, they arealso not subject to the usual limitation with respect to dele-gation of power imposed by the principle of the separationof powers. But this hardly seems to follow.The question directly presented was whether Congress,in exercising the power, granted to it in the Constitution, toregulate foreign commerce, could make a regulation con-ditional upon a finding by the President that its enactmentwould contribute to a desired result. Whether this consti-tuted an abdication of the legislative function or not is atleast arguable; the long prior unbroken practice would,under accepted principles of constitutional construction,have operated strongly in favor of its validity. The Court,however, seems to have chosen to answer the question bystating that, in the field of international relations, an abdi-cation of the legislative function is permissible.The "unwisdom" of requiring Congress, in the field offoreign affairs, to lay down "narrowly definite" standardsfor the guidance of the President may be conceded. But ithas never been suggested that such standards are requiredin the field of domestic affairs; on the contrary, it has beenfrequently recognized that the practical necessities of gov-ernment would make their imposition unwise here as well. 12Nor is there any indication, in any prior decision, that adifferent rule as to the necessity of some recognizable leg-islative standard applies in the two fields. True, there is thepassing remark, in Panama Refining Co. v. Ryan, 3 that12 See, e.g., Panama Refining Co. v. Ryan, 293 U. S. 388, 421, 79 L. Ed.446, 459, 55 S. Ct. 241, 248 (1935). And compare the standards upheld assufficient in such cases as Union Bridge Co. v. United States, 204 U. S. 364,51 L. Ed. 523, 27 S. Ct. 367 (1907) ; Avent v. United States, 266 U. S. 127,69 L. Ed. 202, 45 S. Ct. 34 (1924) ; United States v. Chemical Foundation,272 U. S. 1, 71 L. Ed. 131, 47 S. Ct. 1 (1926) ; Federal Radio Commissionv. Nelson Bros. Co., 289 U. S. 266, 77 L. Ed. 1166, 53 S. Ct. 627 (1933).293 U. S. 388, 79 L. Ed. 446, 56 S. Ct. 241 (1935).170MARYLAND LAW REVIEWcertain early acts of Congress authorizing the President, instated circumstances, to lay and revoke embargoes, and toremit and discontinue restraints imposed by acts suspend-ing commercial intercourse with certain countries, "confid-ed to the President, for the purposes and under the condi-tions stated, an authority which was cognate to the conductby him of the foreign relations of the government." Theremark is seized upon by the Court in the instant case; butit seems clear from the context that there was no thought, inthe Panama case, of sanctioning an unlimited power of dele-gation in the regulation of foreign commerce, and no inti-mation that the general rule restricting the right of Con-gress to delegate legislative authority was other than a uni-form limitation upon the power of Congress in all its activ-ities." In holding that a different rule applies where thereis a question of delegation of Congressional power in thefield of international affairs, the decision offers many in-teresting and obvious possibilities.The case is also of interest with respect to the sufficiencyof the finding of fact embodied in the Presidential procla-mation. In Panama Refining Co. v. Ryan,5 it was held that,even as to a valid delegation to the President to make alegislative policy effective by proclamation, there must bea "finding, a statement of the grounds of the President'saction;" that otherwise the case would still be one of an"unfettered discretion." In the instant case, this is donesimply by a formal recital of the existence of the conditionsimposed by the Joint Resolution. Both the lower court andthe Supreme Court regard this as sufficient, the lower courtsaying that the mere statement that the prescribed thingshad been done was conclusive on the Court. This wouldseem to make a somewhat empty and meaningless thing ofthe rule enunciated in the Panama case, and lends point toJustice Cardozo's dissenting opinion therein, to the effectthat no such requirement is necessary since the Courtshould presume an exercise, by the President, of the author-ity confided to him pursuant to the conditions under whichconfided. It would seem that, in substance, such a presump-tion is actually here indulged.1, Foreign relations may indeed be said to have been directly involvedin such leading cases in establishing the general principles limiting dele-gation of legislative power as Field v. Clark, 143 U. S. 649, 36 L. Ed. 294,12 S. Ct. 495 (1892) and J. W. Hampton, Jr. & Co. v. United States, 276U. S. 394, 72 L. Ed. 624, 48 S. Ct. 348 (1928).-6 293 U. S. 388, 79 L. Ed. 446, 55 S. Ct. 241 (1935).

Constitutional Law-delegation to President of Power to Declare Embargo on Exportation of Arms. United States v. Curtiss-Wright Export Corporation

Arnold, Bridgewater M.

Conditional Sales of Chattels in Maryland

Jr., Jesse Slingluff

English

Mortgagee\u27s Rights in the Event of a Deficiency

Maryland Law ReviewVolume 2 | Issue 1 Article 4Editorial SectionFollow this and additional works at: http://digitalcommons.law.umaryland.edu/mlrThis Editorial Section is brought to you for free and open access by the Academic Journals at DigitalCommons@UM Carey Law. It has been acceptedfor inclusion in Maryland Law Review by an authorized administrator of DigitalCommons@UM Carey Law. For more information, please contactsmccarty@law.umaryland.edu.Recommended CitationEditorial Section, 2 Md. L. Rev. 43 (1937)Available at: http://digitalcommons.law.umaryland.edu/mlr/vol2/iss1/4Maryland Law ReviewPublished in December, February, April, and June by Maryland Law Review, Inc.Copyright, 1937, by Maryland Law Review, Inc.$2.00 Per Volume 75 Cents Per NumberEDITORIAL STAFFJOHN S. STRAHORN, JR, Faculty EditorHERBERT M. BRUNE, JR, Assistant Editor and Business ManagerBERNARD S. MEYER, Chairman, Student Editorial BoardADVISORY EDITORIAL BOARDALEXANDER ARMSTRONG ARTHUR W. MACHENROBERT R. BOWIE CHARLES C. MARBURYFREDERICK W. BRUNE WILLIAM L. MARBURY, JR.ROBERT R. CARMAN CHARLES MARKELLHOWARD H. CONAWAY EDGAR G. MILLER, JR.PAUL L. CORDISH AMBLER H. MossW. PAGE DAME, JR. REUBEN OPPENHEIMERJOSEPH C. FRANCE NORWOOD B. ORRICKHILARY W. GANS CHARLES R. POSEY, JR.CHARLES McHENRY HOWARD ROSZEL C. THOMSENSYLVAN HAYES LAUCHHEIMER HERBERT T. TIFFANYCHARLES T. LEVINESS, III F. W. C. WEBBH. H. WALKER LEWISAnd the part-time and full-time faculty members of theUniversity of Maryland School of Law.STUDENT EDITORIAL BOARDTALBOT W. BANKS LEWIS R. JONESGEORGE L. CLARKE ALVIN KATZENSTEINS. RAYMOND DUNN RICHARD H. LOVECHARLES E. EDMONDSON BERNARD S. MEYERSYLVAN A. GARFUNKEL ROLAND C. READYFRANCIS D. HANDY JESSE J. RUBINJOHN 0. HERRMANN BENSON J. SAKSEDWARD D. HIGINBOTHAMCONCERNING THE REVIEWThe three Bar Associations which co-operated in thefounding of the REvIEw a year ago have all renewed, foranother year, the arrangements under which Volume Onewas published. Thus it is that members of the MarylandState, Baltimore City, and Baltimore City Junior Bar Asso-ciations will receive the issues of the REVIEW appearingin 1937-1938 and which will constitute Volume Two.MARYLAND LAW REVIEWNew members of the Board of Trustees of MarylandLaw Review, Inc., are: Jesse N. Bowen, Esq., President ofthe Maryland State Bar Association, vice George WeemsWilliams, Esq., deceased; and Associate Professor HerbertM. Brune, Jr., of the faculty of the Law School, vice Pro-fessor John Ritchie, III, who has resigned from the LawSchool. Mr. Brune will also serve in place of Mr. Ritchieas Business Manager and Assistant Editor of the REVIEw.New members of the Student Editorial Board, replacingthose who have graduated, include Alvin Katzenstein of theFourth Year Evening Class; Francis D. Handy, Richard H.Love and Sylvan A. Garfunkel of the Third Year DayClass; Charles E. Edmondson, George L. Clarke, Lewis R.Jones and Roland C. Ready of the Second Year Day Class,and John 0. Herrmann of the Second Year Evening Class.All the members of last year's Student Board, save thosewho graduated, are also serving on this year's Board.The REvIEw has arranged with a local binder for thebinding of the past year's volume. Subscribers who wishto have their issues of Volume One bound up are advised tosend them to the binder, whose advertisement appears inthe back of this issue. Those who do not already havecopies of Volume One, but wish to purchase them, may se-cure them, bound or unbound, directly from the REVIEW, inaccordance with the REvIEw's own advertisement also ap-pearing in the back of this issue.The Shepard's Maryland Citations now include citationsof Maryland cases and statutes in the REviEw.During its first year of existence the REvIEw circulatedto over sixteen hundred subscribers. This included overthirteen hundred members (duplicate memberships ex-cluded) of the supporting bar associations and over twohundred paid individual subscriptions. Either by exchangeor subscription the REVIEW also went to sixty law schoollibraries and to forty state supreme court, city bar, or otherinstitutional libraries.EDITORIAL SECTIONNEWS OF THE BAR ASSOCIATIONSVolume Forty-two of the Transactions of the MarylandState Bar Association was published in October. It reportsthe proceedings of the Forty-second Annual Meeting whichwas held at Atlantic City, N. J., on June 24, 25 and 26, 1937.Hon. John S. Newman, retiring President, presided andaddressed the convention on "The Lawyer and the BarAssociation." Other principal addresses were by ThomasJ. S. Waxter, Esq., on "Public Welfare in Baltimore City";by Huntington Cairns, Esq., on "The Theory of Legal Sci-ence"; by Charles Markell, Esq., on "Trial by Jury-ATwo-horse Team or One-horse Teams"; by Hon. FrancisNeal Parke on "Several State Constitutional Problems";by Hon. Burton K. Wheeler on "The Constitution and theSupreme Court", and by Hon. Samuel B. Pettengill on"Shall Constitutional Government Survive?"The committee and other reports were considered andconsiderable business was transacted on the floor. Officersfor the ensuing year were elected as follows: President,Jesse N. Bowen, Esq.; Secretary, James W. Chapman, Jr.,Esq., re-elected; Treasurer, R. Bennett Darnall, Esq., re-elected. The nine Vice-Presidents elected were: Levin C.Bailey, Hon. J. Owen Knotts, Elmer R. Haile, GeorgeHenderson, James Clark, Hon. Charles W. Woodward,William S. Stanley, Hon. Robert F. Stanton and L. EdwinGoldman. The Executive Council will consist of RidgelyP. Melvin, Edward H. Burke, Charles Markell and WilliamL. Henderson.Hon. Arthur T. Vanderbilt, President of the AmericanBar Association, addressed the meeting of the Bar Associa-tion of Baltimore City which was held on December 13,1937. At the meeting the officers for 1937-1938 were elected,as follows: E. Paul Mason, President; Robert D. Bartlett,First Vice-President; Jacob S. New, Second Vice-President;Robert France, Secretary, re-elected; Eldridge Hood Young,Treasurer, re-elected.MARYLAND LAW REVIEWThe Junior Bar Association of Baltimore City, at ameeting held October 8, 1937, elected the following officersfor 1937-1938: Charles J. Stinchcomb, Jr., President; A.Risley Ensor, Vice-President; Wilson K. Barnes, Secretary;R. Lee Slingluff, Jr., Treasurer, and Herbert Myerberg,Member at Large of the Executive Committee. The follow-ing Chairmen of the Standing Committees were appointed:Oscar Samuelson, Civics, Legislation and Judiciary Com-mittee; Robert R. Bowie, Legal Ethics Committee; CharlesMarkell, Jr., Program Committee; William C. Egan, Mem-bership Committee.At the meetings of October 29th and November 22nd, theAssociation gave further consideration to the Report of theCommittee on Economic Survey, which Report had beenpresented to the Association at the meeting of October 1,1937, by A. Risley Ensor, Chairman of the Committee, (seeDaily Record, October 5, 1937), and, as a result of thesemeetings, a Special Committee on Public Relations and aSpecial Committee on Fees were appointed.NEWS OF THE LAW SCHOOLThe enrollment in the Law School for the currentacademic year is 232, of whom 127 are in the Evening Schooland 105 in the Day School. The entering Evening SchoolClass includes 47 and that of the Day School has 35. Of theentire student body, 59% are residents of Baltimore City,36% of the Maryland counties, and 5% of other States. Ofthe student body, 21% had their pre-legal training at theUniversity of Maryland, and the remaining 79% had theirsat 51 various other colleges.Professor G. Kenneth Reiblich, who was on leave ofabsence during 1936-1937 for graduate study at the Colum-bia University Law School, has returned to the School andhas resumed the teaching of his courses in Trusts, PublicUtilities, and Conflict of Laws. Professor Reiblich receivedthe LL.M. degree at the conclusion of his year at Columbiaand is now engaged in the preparation of a dissertation tobe submitted to the Columbia faculty in completion of therequirements for the Jur. So. D. degree. He has also re-EDITORIAL SECTIONsumed active direction of the preparation of the Marylandannotations to the Restatement of Trusts of the AmericanLaw Institute. These are being prepared under the auspicesof the Maryland State and Baltimore City Bar Associations.Professor John Ritchie, III, has resigned from thefaculty in order to accept an appointment as Professor ofLaw at the University of Virginia Department of Law.Mr. Herbert M. Brune, Jr., A.B., Williams College,LL.B., Harvard University, has joined the faculty as Asso-ciate Professor of Law. Mr. Brune has practiced law inBaltimore since 1926. He was very active in the organiza-tion of the REVIEw when he was President of the Junior BarAssociation of Baltimore City. He is the author of thewell-known work on Maryland Corporation Law and hasalso assisted Mr. Tiffany in the revision of one of the latter'sworks on Property. Mr. Brune will teach the courses inNegotiable Instruments, Suretyship, and Mortgages for-merly taught by Professor Ritchie, and will also succeedhim as Business Manager and Assistant Editor of theREvimw.Mr. Bridgewater M. Arnold, Assistant Professor ofLaw, has been granted leave of absence because of illness.Mr. F. W. Invernizzi, A.B., LL.B., University of Mary-land, is serving as Instructor in Law during Mr. Arnold'sabsence and is teaching the latter's courses in Sales, EquityPleading, Partnership, and Creditor's Rights. Mr. Inver-nizzi has practiced law in Baltimore since his graduationfrom the Law School two years ago. Both before and afterhis graduation he assisted in the Maryland Annotation workon the Restatements of Agency, Conflict of Laws, and Con-tracts, and he has also served as research assistant in thepreparation of the mimeographed teaching materials usedin the Criminal Law and Domestic Relations courses at theLaw School.Mr. Huntington Cairns, Lecturer on Taxation, has beenappointed Assistant General Counsel of the United StatesTreasury Department. Because of the pressure of his newduties, Mr. Cairns' course in Taxation will not be givenduring the current year.MARYLAND LAW REVIEWAdditional shelving is being provided for the book-stackof the Law Library so as to make room for 20,000 morevolumes. The Law Library currently possesses some 15,000volumes which have completely filled the present shelves inthe reading room and book-stack. The additional shelvingis being placed immediately under the present two levels ofstack shelves in space left for the purpose when the buildingwas erected. The addition will provide four more levels.As soon as the new stacks are completed all the books willbe re-shelved in such a manner as to allow room for expan-sion; and the development of the Law Library will beaccelerated.The Law School has received as a gift from Mrs. CharlesH. Morgan, whose late husband was a graduate in the Classof 1889, two antique bronze statuettes on marble pedestals.These attractive objects, one depicting Caesar Augustusand the other copied from the Pompeiian Narcissus, havebeen placed in the Lounge of the Law Building.In November the Hon. W. Calvin Chesnut, Lecturer onFederal Procedure, served as one of the invited judgessitting to hear the moot-court arguments of student-counselin the Ames Competition of the Harvard Law School.Assistant Professor Russell R. Reno has been appointedMaryland Annotator to the Restatement of Property of theAmerican Law Institute and will prepare the annotationsunder the joint auspices of the Maryland State and Balti-more City Bar Associations.In early October Professor John S. Strahorn, Jr., reada paper on "A Lawyer's View of Vital Statistics" beforethe joint meeting of the American Association of StateRegistration Executives and the Vital Statistics Section ofthe American Public Health Association at the conventionof the latter organization held in New York City. Thepaper is being published in the December number of theJournal of the American Public Health Association.

Maryland Law ReviewVolume 1 | Issue 3 Article 5Cancellation of Accrued Dividends on PreferredStock Under General Reservation in Charter ofPower to Make Amendments Changing Terms ofOutstanding StockFollow this and additional works at: http://digitalcommons.law.umaryland.edu/mlrPart of the Corporation and Enterprise Law CommonsThis Casenotes and Comments is brought to you for free and open access by the Academic Journals at DigitalCommons@UM Carey Law. It has beenaccepted for inclusion in Maryland Law Review by an authorized administrator of DigitalCommons@UM Carey Law. For more information, pleasecontact smccarty@law.umaryland.edu.Recommended CitationCancellation of Accrued Dividends on Preferred Stock Under General Reservation in Charter of Power to Make Amendments Changing Termsof Outstanding Stock, 1 Md. L. Rev. 254 (1937)Available at: http://digitalcommons.law.umaryland.edu/mlr/vol1/iss3/5CASENOTES AND COMMENTSwhich had been created by the General Assembly in 1929,124began its work by procuring changes in the laws affectingthe adlministration of personalty in the Orphans' Court.The Commission proposes to continue its efforts in thisrespect by procuring an entire statutory revision of testa-mentary law and procedure.CANCELLATION OF ACCRUED DIVIDENDS ONPREFERRED STOCK UNDER GENERAL RESER-VATION IN CHARTER OF POWER TO MAKEAMENDMENTS CHANGING TERMS OFOUTSTANDING STOCKOf especial interest to corporation counsel in recentyears has been the question whether a scheme for capitaladjustment may include the cancellation of accrued divi-dends on preferred stock. Under the Maryland statutesuch a change requires unanimous consent of the holdersof the preferred issue affected unless the charter containsan appropriate reservation of the amending power.' Thelarger Maryland corporations in many, if not most, casesoperate under charters which contain express reservationsof amending power. A typical form of clause is as follows:"The corporation reserves the right to make any amend-ment authorized by law, including amendments changingthe terms of outstanding stock, provided that any suchamendment shall require the vote of the holders of two-thirds of the stock affected thereby."'This typical situation in Maryland may be contrastedwith the similar one in Delaware. Such reservations areseldom found in Delaware charters. The reason is thatsince 1915 the Delaware law has contained a provision thatan amendment altering or changing the "preferences" ofpreferred stock may be made, provided holders of a major-ity of the stock affected vote in favor of the change.' The12' Acbs, 1929, Ch. 527.1 Md. Code, Art. 23, Sec. 28.2Frequently the charter, in place of requiring consent of a majority ortwo-thirds of the stock affected, merely specifies the vote required by lawfor amendments not changing outstanding stock. Such vote is two-thirdsof each class of voting stock. Art. 23, Sec. 29. But under another sectionthe charter may specify that any action may be taken by a majority ofeach class, or by a majority of nll votes to which the shares of all classesof voting stock are, in the aggregate, entitled. Art. 23, Sec. 23.' Del. Rev. Code 1915, Sec. 1940; Del. Laws, Vol. 29, Ch. 113, Sec. 12.MARYLAND LAW REVIEWstatutory provision was "read into" the charter," and itwas thought that the language was broad enough to includeany desired change in the rights of preferred stock. TheChancellor held, however, that the statute did not permitcancellation of accrued dividends, although the right topreferential dividends accruing after amendment might betaken away by such amendment.' The statute was then re-vised to permit, by the same vote, amendments changingthe "preferences, or relative, participating, optional, orother special rights of the shares." '  The phrase "specialrights" had been relied on in an English case, cited by theDelaware Chancellor, which had permitted cancellation ofaccrued dividends by an "extraordinary resolution", undera reservation in the Articles of power to change specialrights of stockholders.7 This Delaware amendment wasadopted in 1927. In November, 1936, the Delaware Su-preme Court held that the language used in the amendedstatute was not broad enough to include cancellation of ac-crued dividends, and, if so interpreted, its application todividends accrued on stock issued prior to 1927 would beunconstitutional.' Reargument was denied on February19, 1937.9The United States District Court in Rhode Island hadpreviously held that a Delaware corporation, organized be-fore 1927, could not take advantage of the 1927 statute soas to cancel accrued dividends which were covered by ex-isting surplus.1" This distinction between accrued divi-dends covered by existing surplus and those not so coveredhas not been approved by the Delaware courts.11As a result of the recent Delaware decision several cor-porations chartered in that state have abandoned plans forreadjustment of their capital structure which included can-cellation of accrued dividends.2 On the other hand several' Peters v. United States Mortgage Co., 13 Del. Ch. Rep. 11, 114 Atl. 598(1921); Morris v. American Public Utilities Co., 14 Del. Ch. Rep 136, 122Ati. 696 (1923).5Morris v. American Public Utilities Co., supra.6 Del. Laws, Vol. 35, Ch. 85, See. 10.ILast v. Butler & Co., Ltd., (1919) Ch. Div. 36. And see In re WelsbachIncandescent Gas Light Co., Ltd., (1904) 1 Ch. 87.8 Keller v. Wilson & Co., (Del. Sup. Ct. 1936), Prentice-Hall Corp. Serv.,Par. 20, 677; reversing 180 Atl. 584 (Del. Ch. 1935).9 Prentice-Hall Corp. Serv., Par. 20, 728. The decision has been approvedin (1937) 35 Mich. L. Rev. 620; (1937) 23 Va. L. Rev. 579.10Yoakam v. Providence Bltmore Hotel Co., 34 F. (2d) 533 (D. C. R. I.1929).11 See opinion of Del. Sup. Ct. in Keller v. Wilson & Co., aapr, note 8."Prentice-Hall Corp. Serv., Par. 20, 678.CASENOTES AND COMMENTSMaryland corporations have announced that they are goingforward with similar plans.Pertinent parts of the Maryland statute are as follows:"Every corporation of this State ... may...amend its charter and thereby accomplish any one ormore of the following objects: . .. the classification orreclassification of all or any part of the capital stock;and the making of any other amendment that may bedesired provided that such amendment shall containonly such provisions as it would be lawful or proper toinsert in an original certificate of incorporation madeat the time of making such amendment." 8Since the new capital stock provisions can be so wordedas to "contain only such provisions as it would be lawfulor proper to insert in an original certificate", avoidingmention of the right to accrued dividends under the pre-vious wording of the charter, the broad power to make "any. . . amendment that may be desired" seems to cover thecancellation of accrued dividends. Under the power to re-classify, the Articles of Amendment, it may be assumed,would contain an additional clause transforming the oldcumulative dividend stock into the new stock. While thepower to reclassify might not be sufficient by itself, 4 it may" Md. Code, Art. 23, Sec. 28, last amended by Acts, 1922, Ch. 309. Anextended history of the amending provisions of the Maryland corporationstatute appears in Brune, Maryland Corporation Law, 76-82, Sec. 63."I See Breslav v. New York & Queens El. Lt. & P. Co., 291 N. Y. S. 932,decided by the Appellate Division of the New York Supreme Court, Decem-ber 4, 1936, Prentice-Hall Corp. Serv., Par. 20, 697, N. Y. Law Journal,December 14, 1936, affirmed without opinion by N. Y. Ct. of Apps. March 16,1937. The Breslav case, holding that the power to classify and reclassifyshares did not authorize an amendment making non-callable stock callable,contains a comprehensive review of the cases on valid and invalid exerciseof a general reserved power to amend. Examples given of valid ezercis6:Lord v. Equitable Life Assur. Soc., 194 N. Y. 212, 87 N. . 443 (1909)(mutualization of stock insurance company by enfranchisement of allpolicyholders) ; Looker v. Maynard, 179 U. S. 46 (1900) (cumulative vot-ing for directors) ; Miller v. The State, 15 Wall. 478 (1873) (change invoting rights); Hinckley v. Schwarzschild & S. Co., 107 App. Div. 470, 95N. Y. Supp. 357 (1905) (authorizing issuance of preferred stock) ; Somer-ville v. St. Louis Mining & Milling Co., 46 Mont. 268, 127 Pac. 464 (1912)(authorizing majority of stockholders to assess holders of full-paid stock) ;Randle v. Winona Coal Co., 206 Ala. 254, 89 So. 790 (1921) (authorizingconversion of par value stock into stock of no par value) ; Davis v. Louis-ville Gas & Electric Co., 16 Del. Ch. 157, 142 AtI. 654 (1928) (authorizingthe majority of the stockholders of all classes to withdraw the right toretire Class A stock and, after certain dividends had been paid on Class Aand Class B stocks, to abolish Class B's superior Interest In the sharingof further dividends by equalizing the stock of both classes) ; Gardner v.Hope Ins., 9 R. I. 194 (1869) (non-assessable stock made assessable);Venner v. U. S. Steel Corp., 116 Fed. 1012 (1902) (change in rates ofdividends). Examples of invalid exercise: Lord v. Equitable Life Assur.MARYLAND LAW REVIEWbe invoked to sustain the procedural directions for issuanceof the new stock in place of the old.As previously indicated, amendments "changing theterms of outstanding stock", require unanimous consent ofthat stock in the absence of a charter reservation. Thestatutory provision is as follows:"No amendment of the charter of a corporationshall be valid which changes the terms of any of theoutstanding stock by classification, reclassification orotherwise, in the absence of a reservation in the char-ter of the right to make such amendment, unless suchchange in the terms thereof shall have been authorizedby the holders of all of such stock at the time outstand-ing, by vote at a meeting or in writing with or withouta meeting; and in the case of any such change of termsof outstanding stock, the articles of amendment shall,in addition, to other matters required by law, affirma-tively set forth that the holders of such stock have dulyauthorized such change of terms. The word 'terms'as used in this section in reference to stock is intendedto mean only the contract rights of the holders thereofas expressed in the charter and shall be so construed. "15Soc., supra (deprivation of right to vote for all directors; reason: rightto vote is "vested") ; Stokes v. Continental Trust Co., 186 N. Y. 285, 78N. E. 1090 (1906) and Dunlay v. Avenue M Garage & R. Co., 253 N. Y. 274,170 N. E. 917 (1930) (deprivation of pre-emptive right; reason: pre-emptive right is an "inherent" right) ; Page v. American & British Manu-facturing Co., 129 App. Div. 346, 113 N. Y. Supp. 734 (1908) (reduction ofvoting power by reduction of stock; reason: right to vote Is "vested");Yoakum v. Providence Biltmore Hotel Co., 34 F. (2d) 535 (D. C. R. I. 1929)(elimination of sinking fund and dividend arrearages; reason: impair-ment of "vested" rights) ; Sutton v. Globe Knitting Works, 276 Mich. 200,267 N. W. 815 (1936) and Vanden Bosch v. Michigan Trust Co., 35 F. (2d)643 (C. C. A. 6th, 1929) (postponement of redemption date; reason: im-pairment of "vested" rights); Garey v. St. Joe Mining Co., 32 Utah 497,91 P. 369 (1907) (making non-assessable stocks assessable; reason: im-pairment of obligation of contract) ; Coombes v. Getz, 285 U. S. 434 (1932)(repeal of statutory liability of directors to creditors for money embezzledby officers; reason: impairment of "vested" rights); Roberts v. Roberts-Wicks Co., 184 N. Y. 257, 77 N. E. 13 (1906) (elimination of dividend ar-rearages; reason.: impairment of "vested" rights) ; General Investment Co.v. American Hide & Leather Co., 98 N. J. Eq. 326, 129 AtI. 244 (1925)(elimination of dividend arrearages; reason: impairment of "vested"rights); Lonsdale v. International Mercantile Marine Co., 101 N. J. Eq.534, 139 At. 50 (1927) (elimination of dividend arrearages; reason: im-pairment of "vested" rights): Pronlk v. Spirits Distributing Co., 38 N. J.Eq. 97, 42 AtI. 586 (1899) (reduction of dividend rate; reason: impairmentof "vested" rights).See also for other illustrations of the extension of and limitations uponthe reserved power in (1927) 75 Univ. of Pa. Law Review 725; (1930) 43Harvard Law Review 656; (1929) 20 Columbia Law Review 88; (1928) 14Cornell Law Quarterly 85; and 105 A. L. R. 1452.1 Md. Code, Art. 23, Sec. 28.CASENOTES AND COMMENTSThe "reservation in the charter of the right to makesuch amendment" excepts a corporation from the require-ment of obtaining a vote of the stock affected (if non-votingstock), unless the charter itself so requires. Moreover, thelanguage of this portion of the statute lends strong sup-port to the view that any amendment changing the terms ofoutstanding stock may be made under a charter reserva-tion."0 The right of a preferred stockholder to accumulatedunpaid dividends is called by the Delaware Court a "vestedright", a "right in the nature of a debt", rights that "ac-crue to them (stockholders) by virtue of the contract." ' TConsideration of the nature of the right, and these char-acterizations of it, place it among the "contract, rights ofthe stockholders as expressed in the charter", which is theMaryland statutory definition of the "terms of outstandingstock." 18 If, under the statute, these contract rights can-not be changed except with unanimous consent of theholders, in the absence of a charter reservation, is it notclear that the existence of the reservation permits thechange by such vote as the charter may specify?Other considerations, beyond the scope of this note, mayenter into the situation. The reservation itself must beappropriately worded. Doubt may be expressed whether areservation which does not specify the vote required foran amendment changing outstanding stock may safely berelied upon.19 Moreover, in all cases in which rights of1o Unless affirmative force is given to this language, the requirement ofunanimous consent, in the absence of a reservation, seems meaningless. Itmay be argued that affirmative force can be accorded the provision withrespect to changes in future dividends, future relative preferences, orfuture voting rights without authorizing cancellation of dividend arrear-ages. This assumes, however, that the clause requiring unanimous consentfor certain amendments is broader In scope than the reservation in thatclause. Such a conclusion would seem to require a distortion of the wordsused, for, taken literally, the language requiring unanimous consent is in-operative when the charter contains an appropriate reservation. Hencethe reference to a charter reservation may be expected to furnish a con-trolling consideration, either through its own affirmative force or throughinfluencing a broad rather than narrow interpretation of the general powerof amendment previously referred to. The question is purely one of statu-tory construction, as there are no Maryland cases sufficiently near the pointto be of assistance on either side of the argument.17 Keller v. Wilson & Co., supra, note 8. Whether these rights are"vested" would seem to depend upon whether Section 28 authorizes themto be taken away without unanimous consent of the holders thereof, bysuch vote as is specified in the charter. Use of the term "vested rights",therefore, adds nothing to the force of the stockholder's contention, as it isan argument from the conclusion-it begs the question. If Section 28authorizes dividend arrearages to be cancelled, the right to such dividendscan be vested only In a defeasible sense.28 Md. Code, Art. 23, Sec. 28.19 Cf. Brune, Maryland Corporation Law, p. 75, note 53.MARYLAND LAW REVIEWstockholders are readjusted, by amendment, consolidationor otherwise, to the advantage of a controlling group orclass, it is believed that a court of equity may inquire intothe fairness of the proposed change and whether it servesthe interests of the corporation as a whole.20 Clearly, ifthe unfairness of the plan is so gross and apparent as toconstitute fraud, the courts will interfere in spite of theadoption of the plan in strict accordance with statutory andcharter provisions."EFFECT OF BANKRUPTCY DISCHARGE ON REVO-CATION OF MOTOR VEHICLE OPERATOR'SLICENSE FOR FAILURE TO SATISFY JUDG-MENT. ELLIS V. RUDY, COMMISSIONER.1The petitioner-appellant's license to operate a motorvehicle in the State of Maryland was suspended by the ap-pellee-Commissioner of Motor Vehicles because he failed"to satisfy a final judgment against him for damages onaccount of personal injury resulting from the ownership,maintenance, use or operation of a motor vehicle," within30 days after it became final, as required by the MarylandFinancial Responsibility Law. Later the petitioner wasadjudicated a bankrupt and was granted a discharge inbankruptcy. This was admittedly a defense to any fur-ther action on the judgment. Petitioner applied for reissueof his license on furnishing proof of financial responsibility.The Commissioner refused on the ground that the statuterequires the license to remain suspended while the judg-ment is "unstayed, unsatisfied and subsisting and until" it"is satisfied or discharged and until proof of ability to re-spond in damages for future accidents is furnished" andheld that a discharge in bankruptcy is not a satisfaction ofthe judgment within the contemplation of the Act. Thepetitioner brought a proceeding for a writ of mandamusto compel the reissue of the license. The trial court sus-tained a demurrer to the petition and petitioner appealed.HELD: Reversed and remanded for issuance of writ.20 See authorities cited Brune, op cit., p. 82.*1 See Homer v. Crown Cork & Seal Co., 155 Md. 66, 88, 141 Atl. 425(1928) ; Mortgage Bond Assn. v. Baker, 157 Md. 809, 145 Atl. 876 (1929);Hagerstown Furniture Co. v. Baker, 155 Md. 549, 142 Atl. 885 (1928).2- Md. -, 189 AtI. 281 (1937).$Md. Code Supp., Art. 56, Sees. 187 to 18TR, Inel.

Cancellation of Accrued Dividends on Preferred Stock Under General Reservation in Charter of Power to Make Amendments Changing Terms of Outstanding Stock

Mullen, James Morfit

Maryland Law ReviewVolume 1 | Issue 3 Article 2Jurisdiction over Non-resident Motorists for SuitsArising from Local AccidentsJames Morfit MullenFollow this and additional works at: http://digitalcommons.law.umaryland.edu/mlrPart of the Jurisdiction CommonsThis Article is brought to you for free and open access by the Academic Journals at DigitalCommons@UM Carey Law. It has been accepted forinclusion in Maryland Law Review by an authorized administrator of DigitalCommons@UM Carey Law. For more information, please contactsmccarty@law.umaryland.edu.Recommended CitationJames M. Mullen, Jurisdiction over Non-resident Motorists for Suits Arising from Local Accidents, 1 Md. L. Rev. 222 (1937)Available at: http://digitalcommons.law.umaryland.edu/mlr/vol1/iss3/2MARYLAND LAW REVIEWJURISDICTION OVER NON-RESIDENT MOTORISTSFOR SUITS ARISING FROM LOCAL ACCIDENTS.By JAMES MoaRrr MULLEN*The automobile presents one of the major problems oftoday. It has been said that there are now on the streetsof Baltimore City ten thousand more automobiles than therewere a year ago. Any one familiar with the work of thecourts in Baltimore City knows that the law courts arelargely kept busy by litigation growing out of automobileaccidents. The criminal courts get a substantial amountof work from appeals from the Traffic Court. On the otherhand, the equity courts have a minimum of litigation result-ing from automobiles.Any one with an impersonal interest in the work of thecourts would probably deprecate legislation which tends toincrease the work of the law courts in connection with auto-mobiles. But whatever may be the merits of this abstractproposition, it would seem very unfair for a non-residentowner of an automobile to come into this State, cause anaccident herein, and still not be liable to suit in the courtsof the locality where the accident occurred. Legislationwas necessary to supply this lack in the law of this State,because the Maryland Court of Appeals had decided1 thatwhen a non-resident came to Maryland for the purpose ofanswering criminal proceedings growing out of the opera-tion of an automobile within the State, he was immune fromcivil process.Maryland, like many other States, has enacted legisla-tion to provide for local suits against non-resident ownersof automobiles for accidents occurring within this State.There have been three such statutes passed.The first statute2 was abortive because, though it wasmodeled upon a valid statute of another State, it sought tomake an improvement therein which succeeded only in in-validating the statute. The vitiating provision was that* Of the Baltimore City bar. A.B., 1899, Johns Hopkins University;LL.B., 1906, University of Maryland.1 Feuster v. Redshaw, 157 Md. 302, 145 Atl. 560, 65 A. L. R. 1370 (1929).2 Acts, 1929, Ch. 254.222MARYLAND LAW REVIEWnotice of any suit filed in this State was required to be givenby registered mail to the defendant, and that the addressto which such notice was sent was conclusively presumed tobe correct, if it were an address given by such defendantin any proceeding at or subsequent to the accident involved,or if the defendant's last address appeared upon the rec-ords of the officials enforcing the Maryland Motor VehicleLaw.The present statute was enacted in 19318 and wasamended in 19331 to permit its provisions to apply to suitsbrought before Justices of the Peace.While the validity of the present legislation has neverbeen specifically sustained either by the Maryland Courtof Appeals or by the Supreme Court of the United States,yet in view of the general characteristics necessary to theconstitutionality of such acts as determined by those Courtsthere can be no question about the validity of the presentMaryland law. The present law has, however, been indi-rectly approved by the Maryland Court of Appeals in twocases concerning its effect, which are referred to below.The gist of the present statute is that when the accidentoccurs in this State for which it is claimed that a non-resi-dent owner (unavailable to process in this State) is re-sponsible, suit may be instituted in the local courts of thisState by the person affected. Service of process may behad upon the Secretary of State, who is, by reason of theuse of the Maryland roads by the non-resident owner,deemed to be the agent of such non-resident owner for ser-vice of process. In addition, notice of the suit must be sentby registered mail to the non-resident owner, and an af-fidavit must be filed in the case showing that this require-ment has been complied with. The statute provides theform of notice to be sent to the non-resident owner.The necessary requirements for the constitutionality ofsuch legislation have been clearly outlined by the SupremeCourt of the United States in two cases,5 and by the Mary-Acts, 1931, Ch. 70.'Acts, 1933, Ch. 288, Md. Code Supp., Art. 56, Secs. 190-A, B.5 Hess v. Pawlowskl, 274 U. S. 352, 71 L. Ed. 1091, 47 B. Ct. 632 (1928);Wuchter v. Pizzutti, 276 U. S. 13, 72 L. Ed. 447, 48 S. Ct. 259 (1928).NON-RESIDENT MOTORISTSland Court of Appeals in holding the Act of 1929 invalid.'From these three cases, two essentials to the validity ofsuch legislation are clearly set out. One is that no personaljudgment can be entered in any court within a State ex-cept where it is based upon the personal service of processwithin the State either upon the defendant sought to besued, or upon his authorized representative. In Maryland,as well as in other States, the legislation complies with thisrequirement by specifying that the use of Maryland roadsis an inferential appointment of the Secretary of State asthe authorized representative within Maryland to acceptservice of process for the non-resident automobile owner.The second requirement is that in addition to the serviceas above, sufficient notice must be given the defendant. InGrote v. Rogers,1 this was described as follows:"In determining the question as to the constitu-tionality of the act, we must consider what may be done,and not merely what has occurred, under its provi-sions. . . . The test of its validity, as against the ob-jections urged in this case, is the inquiry whether itcontains such requirements, with respect to the trans-mission of the notice, as to make it reasonably probablethat the non-resident defendant will be informed of thesuit by which he is sought to be personally affected.The concern and object of such a provision should beactual notice to the defendant, and its prescribed courseof procedure should tend to insure that result. In ouropinion, the statute under discussion does not affordsuch an assurance. It fails to meet the test of reason-able probability that a compliance with its terms wouldgive the defendant actual knowledge of the suit, and itis, therefore, invalid under the constitutional limita-tion which has been invoked."The 1929 Act was held invalid, because in an excess ofzeal the Maryland Legislature provided that the addressesgiven by the defendant as above referred to should be con-clusively. presumed to be correct, and, as the Court pointedout in Grote v. Rogers, it could very well be that the ad-dress given by the defendant at the time of the accidentGrote v. Rogers, 158 Md. 685, 149 AtI. 547 (1980),Drid, 158 Md. 694, 695.MARYLAND LAW REVIEWmight be correct, but he might have changed it before suit isfiled and it was not, therefore, reasonably probable that hewould receive actual notice of the suit.The present statute, however, provides machinerywhereby it is reasonably probable that a non-resident de-fendant will be informed of the suit, which is technicallysustained by personal service upon the Secretary of State.In dealing with this type of legislation Mr. Justice But-ler, in Hess v. Pawlowski, says the following in connectionwith the Massachusetts statute there involved:"Motor vehicles are dangerous machines, and evenwhen skillfully and carefully operated, their use isattended by serious dangers to persons and property.In the public interest the state may make and enforceregulations reasonably calculated to promote care onthe part of all, residents and non-residents alike, whouse its highways. The measure in question operatesto require a non-resident to answer for his conduct inthe state where arise causes of action alleged againsthim, as well as to provide for a claimant a convenientmethod by which he may sue to enforce his rights.Under the statute the implied consent is limited to pro-ceedings growing out of accidents or collisions on ahighway in which the non-resident may be involved.It is required that he shall actually receive and receiptfor notice of the service and a copy of the process.""It is interesting to note that while the Maryland statuterequires the plaintiff (or his attorney) to give notice byregistered mail to the non-resident defendant, and to filein the case an affidavit showing compliance with this re-quirement, in other States, the reasonable probability ofactual notice to the defendant is provided in other ways.In Pennsylvania, the statute' requires that the processbe served upon the Secretary of Revenue, and the require-ment of notice is merely that the Sheriff shall mail it to thelast known address of the defendant. He is not requiredto send it even by registered mail, and under the test re-ferred to above, this requirement affords a reasonableprobability that the defendant will in this manner be ap-p274 U. S. 852 356, 71 L. Ed. 1091, 1094, 47 S. Ct. 632, 633 (1926).I'urdon's Penna, Stat., Title 75, Sees, 1201-1206.NON-RESIDENT MOTORISTSprised of the suit. The Pennsylvania statute has beenheld sufficient in a decision handed down in 1933 by a UnitedStates District Court.10Similarly, the Minnesota" and Wisconsin"2 statutes re-quire the service of process to be served upon a State of-ficial and the plaintiff is required to mail notice to the de-fendant at his last known address. It is not necessary tosend by registered mail, or to show by the registry returnreceipt, that the notice has actually been delivered. Bothof these statutes, together with a similar Connecticut stat-ute, have been held valid."8While there has been no specific decision either by theMaryland Court of Appeals or by the Supreme Court of theUnited States on the validity of the present Maryland law,it has been twice before the Maryland Court of Appeals.In the case of Wagner v. Scurlock,4 it was held that thenotice was properly given, but that in any event, the per-sonal appearance of the defendant in the case waived anypossible insufficiency of the notice.In the case of Employers' Liability Assurance Corpora-tion v. Perkins,)5 there was a fuller discussion of the Act.There was some discussion by Judge Parke of the require-ments of the statute, and the specific decision was, thatwhere a notice is sent a non-resident defendant by regis-tered mail, and it appears from the registry return receiptthat the notice was actually receipted for by the wife of thenon-resident defendant, this is a sufficient compliance withthe requirement of reasonable probability that the defend-ant be notified, because the wife, by virtue of her maritalrelation, has authority, where not disaffirmed, to sign theregistry return receipt.In neither of the two cases was there any questionraised as to the validity of the present Maryland law, and'0 Carr v. Tennis, 4 Fed. Supp. 142 (D. Pa. 1933).1 Mason's Minn. Stat., Sees. 2684-2688.12Wisconsin Stat., Sec. 85.05 (3)."8 Jones v. Paxton, 27 Fed. (2d) 364 (D. Minn. 1928) ; State v. Belden,211 N. W. 916 (Wise. 1927) ; Hartley v. Vitlello, 113 Conn. 74, 154 At. 255(1931). See also Vols. 15-16, Huddy, Ency. of Automobile Law, Sec. 82,where the matter is discussed and all of the late authorities cited.14166 Md. 284, 170 Atl. 539 (1963).15169 Md. 269, 181 AtI. 436 (1935).226MARYLAND LAW REVIEWany discussion of the statute now in force in this Statewould seem only to revolve around how far it is applicable.One of the first questions is, who is liable to suit? TheMaryland statute is broad in that it provides for suitagainst non-residents "while operating, or causing to beoperated automobiles within this State." This would,therefore, provide for suit against the owner of the car,when it was being operated by a chauffeur under authorityfrom the owner. In some States, however, the non-residentstatutes have a more limited application. In New York, forinstance, it has been decided 8 that where a car is beingoperated by the defendant's chauffeur, there can be no suitagainst the owner, as the New York statute is restricted toactual operation by the owner.The Maryland statute might, however, raise anotherquestion. As it applies in its terms to "operating, or caus-ing to be operated", a query is, therefore, suggestedwhether under the Maryland statutes, where a non-residentowner lends his car to another person, and the latter is onhis own business operating the car within the State ofMaryland, the non-resident owner can be sued in Marylandunder the present law. In other words, is the case of merepermissive operation covered by the Maryland statutes?The author ventures the suggestion that the answer to thisquery is "No' .The answer suggested by the author to the inquiry justpropounded pertains only to the procedural question ofwhether under this law such a suit could be instituted inMaryland; and it may be that this question is only academicin view of the settled decisions by the Maryland Court ofAppeals holding for non-liability for mere permissive oper-ation of a car, and rejecting what is generally known as the"Family Car Doctrine".So far, no question has arisen in this state as to theeffect of the Maryland statute when a non-resident owner ischarged with being responsible for an accident in the oper-ation of his automobile on Maryland roads and dies before16 O'Tier v. Sell, 252 N. Y. 400, 169 N. E. 624 (1930)."7 Authorities for this point of jurisdiction are.cited in current annota-tions to Huddy, Ency. of Automobile Law, Vols. 15-16, Sec. 85.NON-RESIDENT MOTORISTSsuit can be filed. It has been held, however, by the courtsof other states that, in such event, the personal representa-tive of the non-resident owner cannot be sued under thestatutes there in question.18A recent decision by the United States District Courtof Maryland"0 involves an interesting point. One defend-ant was the wife of a naval officer who, with her husband,resided in Annapolis at the time of the alleged accident,which occurred in Maryland, and for a year thereafter.After this defendant removed her residence from Mary-land, she was sued under the Maryland non-resident own-er's law in the Anne Arundel County Circuit Court. Thissuit was removed to the Federal Court. A motion to quashhad been filed in the State court on the ground that the ser-vice attempted to be had in Maryland could not lie in thiscase where the person sued was a resident at the time ofthe accident. Judge Chesnut held that it was not the inten-tion of the statute to cover the case of a Maryland residentwho subsequently became a non-resident.This decision is certainly in entire consonance with thepurposes of the act as hereinabove set out, to the effect thata non-resident of Maryland, using the public highways ofMaryland, impliedly consents to the appoin~ment of theSecretary of State as an agent to accept service of process.There is no such implied appointment in the case of aMaryland resident using Maryland roads.This case also invites an interesting query to which webelieve there has been no answer in the Federal courts.Can an original suit, when diversity of citizenship exists,be brought in the Federal courts against a non-residentunder the provisions of this statute? A suggestion thatoccurs is whether if a non-resident insurance company orother corporation can be sued in the Maryland FederalCourt by service upon an agent resident in Maryland, andappointed to accept service of process, is there an analogybetween this case and the implied appointment of the Secre-tary of State of Maryland by the non-resident automobile10 Buddy, Ency. of Automobile Law, Vols. 15-16, p. 152, current annota-tions.',3 Suit v. Shailer and Pickton, Daily Record, March 18, 1937.MARYLAND LAW REVIEWowner from the mere fact of the use of the Maryland publicroads? The author of this article does not venture toanswer this inquiry.In discussing the extent of the operation of the Mary-land statute, for prrposes of convenience the phrase "Non-resident Owner" is used. The Maryland statute, however,does not in terms apply simply to an owner operating hisown car, or causing it to be operated within the State ofMaryland. It broadly provides that the use of the roadsand highways of Maryland shall be deemed to be an ac-ceptance of the provision of the Maryland law as to theappointment of the Secretary of State as agent to acceptservice of process in any suit growing out of an accidentin which such non-resident may be involved "while oper-ating, or causing to be operated a motor vehicle" on theMaryland highways.The Maryland law makes no provision as to the venueof suits filed under its provisions, and in the absence ofsuch a provision, it is submitted that a person suing inMaryland for an accident in this State, involving a non-resident motor vehicle owner, may proceed in any court inthe State which he may see fit to select. Certainly, this hasbeen the practice in proceeding under the Marylandstatute.The Maryland law applies in its terms only to accidentson the "public highways within the limits of this State".So it would seem to follow that the act affords no redressfor accidents occurring on private roads, or elsewhere thanon public highways. Some interesting questions mightarise under this feature of the law.The Act, of course, does not restrict its application toresident plaintiffs, and accordingly its benefits are accordednot only to residents of Maryland, who may be injured inthe operation of an automobile by a non-resident, but alsoto residents of States other than Maryland who are simi-larly damaged. There are authorities in other States tothe effect that non-residents have the same right to sueunder such statutes as is thereby given to residents.2120 Huddy. loc. eit, supra note 18.NON-RESIDENT MOTORISTSPerhaps the length of time the Maryland statute hasbeen in force reduces to a moot question a discussion as towhether or not the statute has any retroactive effect.There have been conflicting decisions on this subject in thecourts of other States.2On the whole, in view of the extreme mobility of auto-mobiles, in spite of the fact that automobile litigation isincreased by this legislation, no one could question thewisdom or justice of giving to Maryland residents the rightto bring suit in the courts of Maryland against non-resi-dents claimed to be responsible for automobile accidentsoccurring upon the public highways of Maryland.While the author does not intend to be facetious in thisdiscussion, yet in view of the recent large growth in the useof "trailers", and the custom of persons of moderate meanshaving their actual residence in "trailers", there might besome practical difficulty in complying with the requirementof the Maryland statute that notice be given to the non-resident automobile owner by registered mail.21 A discussion will be found in Huddy, Encyc. of Automobile Law, Vols.15-16, pp. 153-155.

Jurisdiction over Non-resident Motorists for Suits Arising from Local Accidents

Maryland Law ReviewVolume 1 | Issue 4 Article 8Surcharging Executors for Depreciation ofSecurities in Margin Account - Goldsborough, et al.v. De Witt, et al.Follow this and additional works at: http://digitalcommons.law.umaryland.edu/mlrPart of the Estates and Trusts CommonsThis Casenotes and Comments is brought to you for free and open access by the Academic Journals at DigitalCommons@UM Carey Law. It has beenaccepted for inclusion in Maryland Law Review by an authorized administrator of DigitalCommons@UM Carey Law. For more information, pleasecontact smccarty@law.umaryland.edu.Recommended CitationSurcharging Executors for Depreciation of Securities in Margin Account - Goldsborough, et al. v. De Witt, et al., 1 Md. L. Rev. 355 (1937)Available at: http://digitalcommons.law.umaryland.edu/mlr/vol1/iss4/8MARYLAND LAW REVIEWSURCHARGING EXECUTORS FOR DEPRECIATIONOF SECURITIES IN MARGIN ACCOUNT-GOLDS-BOROUGH, ET AL. V. DE WITT, ET AL. 1The testator died July 23, 1930 leaving a will whichnamed as executors his friends and legal advisers, the twodefendants-appellees. The will stated that no bond wasto be required and gave wide discretionary powers to theexecutors. The executors were members of a New Yorklaw firm doing a great deal of trust and administrationwork. They qualified on August 5 in the Orphans' Courtof Talbot County. Inventory and appraisements were re-turned on September 3 and showed the chief asset of theestate to be securities, valued as of the date of the testator'sdeath at $552,000 (in round figures). The major portionof these securities was in a margin account in a New Yorkbrokerage house, where the account was $426,000 againstwhich there were pledged securities, leaving the estate anequity of $234,000. The testator had also owned unpledgedsecurities worth $89,000 which were later sold and the pro-ceeds applied to the reduction of the broker's debt. (Therewas also in the estate considerable other personal propertyand valuable realty, the administration of which was in-volved in the case. This comment will be confined, how-ever, to a discussion of the securities.) The estate wascomfortably solvent. Upon application of the executors,the Orphans' Court granted numerous extensions of timefor selling the securities.The executor's petitions alleged the need for doing this"because of the business depression now existing through-out the country . . .", and expressed the hope "that withthe betterment of business conditions, which your petition-ers are hopeful will occur in the next few months . . .",that there would be a rise in the value of the securities.Aside from these petitions and orders of court thereon, noaccounting was filed until June 21, 1934. The final account-ing was made in May, 1935, and revealed a depreciation ofvalue in the securities of $295,000. The margin accounthad been carried all this time with frequent calls for moremargin and at one point had been saved by large guarantyaccounts opened by the executors individually.After losing in the Court of Appeals' on the question ofwhether issues could be sent to a jury, the widow (who had1189 A. 226 (Md. 1937).2Goldsborough, et al. v. De Witt, et al., 169 Md. 463, 182 A. 324 (1936).CASENOTES AND COMMENTSrenounced the will) and the beneficiaries filed exceptions tothe Administration Account and attempted inter alia to sur-charge the executors for the depreciation of the securities.The Orphans' Court overruled the exceptions and this ap-peal was taken. Held, Affirmed. Where records of theOrphans' Court disclosed granting of extensions, but thetestamentary beneficiaries took no action until May, 1935,lapse of time and laches precluded them from now question-ing the authority of the court to grant such extensions, eventhough granted as ex parte orders, but not procured byfraud, deceit, or mistake. Measure of executors' duty indetermining when and what securities to sell was to act ingood faith and due diligence with same degree of care asa reasonably and ordinarily prudent man would exercisein handling his own similar affairs. The executors couldcarry on the margin account for the purpose of realizationof the value of the securities.The problem presented by this case arises frequentlyafter an economic crisis.' The decedent leaves investments-when should the executors (or administrators) sell? Itis submitted that the courts are torn between two under-lying policies: first, the executor's primary duty to pre-serve the asssets of the estate, entailing a high degree offiduciary responsibility ;' second, the apparent injustice ofholding liable one who has acted as an ordinarily prudentman according to the customs and beliefs of the time.Since the courts recognize that decisions in this type ofcase depend largely on the particular facts and circum-stances involved,5 it is difficult to formulate any generalprinciples. The duty of an executor to sell goods of a per-'Calling in Confederate securities In southern states, Tompkins v. Tomp-kins, 18 S. C. 1 (1882) ; Involving railroad stock that depreciated in panicin 1873, Matter of Weston, 91 N. Y. 502 (1883) ; Depreciation following theWorld War, In re Varet's Estate, 181 App. Div. 446, 168 N. Y. S. 896(1918) ; "Presents the frequently recurring situation arising out of thepresent financial depression", In re Chaves' Estate, 143 Misc. 868, 257 N.Y. S. 641, 642 (1932).' "The purposes of administration are to collect the assets of the dece-dent, pay his debts and funeral expenses, etc. and make distribution to thepersons entitled thereto. But administration includes more than this; itinvolves all that may be done rightfully in the preservation of the assets,and all which may be done legally by the administrator in his dealings withcreditors, distributees, legatees, or which may be done by them in securingtheir right . . .", 23 C. J. 997. "In making investments of the funds of theestate the representative acts as trustee rather than as executor or admin-istrator and his duties and liabilities In respect to such investments aregoverned by the same rules as apply to other trustees.", 24 C. J. 72.5"The special and distinctive facts In each proceeding must determinethe liability or exoneration of the particular fiduciary", In re Sprong'sEstate, 144 Misc. 293, 259 N. Y. S. 77, 80 (1932).356MARYLAND LAW REVIEW 357ishable nature is clear.' However, whether securities ormore especially stocks owned on margin, come within themeaning of perishable goods is a debatable point.7 It hasbeen stated that "an administrator or an executor in theabsence of express authority therefor, is not permitted touse any part of the estate in trade, or manufacturing, orstock speculation, or other business venture, whereby thetrust fund is put at hazard; and the doing by him of any ofthese things has generally been regarded as a breach oftrust and a devastavit"' and yet the courts as a general rulehave declined to surcharge executors for losses occasionedby failure to close out non-margin accounts, when they wereacting with due care, good faith, and with a view to the bestinterests of the estate,9 even though in some cases the losseshave been stupendous. It has been held that good faith,due diligence, etc., may be evidenced by seeking the advice0 Schouler, Wills, Executors and Administrators, Vol. 2, Sec. 1325a andff.; Md. Code, Art. 93, Secs. 291, 292."Statute covering sale of perishable goods held not to include marginaccount, Off v. Russell, et al., 60 P. (2d) 331 (Calif. 1936) ; nor to include"all property subject to market fluctuation", In re Fisher's Estate, 128 Iowa626, 104 N. W. 1023, 1024 (1905) ; no difference between those held outrightand those held as collateral, In re McKee's Estate, 147 Misc. 889, 265 N.Y. S. 47 (1933) ; trustees could invest in mortgage "participations" underNew York Banking Law, In re Flint's Will, 240 App. Div. 217, 269 N. Y. S.470 (1934); investments in Montgomery Ward, Radio, Union Carbide,National City Bank, etc., considered not speculative, but "seasoned" and"good Moody ratings", In re Winburn's Will, 140 Misc. Rep. 18, 249 N. Y. S.758 (1931).On the other hand: See especially: In re Busby's Estate, 6 N. E. (2d)451 (Ill. App. 1937), decided by the Appellate Court of Illinois, and whichmay, therefore, be appealed to the Supreme Court of Illinois. This caseemphasizes more strongly than any other recent one the dangerous natureof a margin account, and apparently places a higher degree of responsi-bility on the executor than the principal case, since it rejects the doctrineof what a reasonable man would do handling his own affairs in favor ofthe doctrine of what a reasonable man would do in handling the propertyof another. See also: "Common prudence required that such a speculativeaccount be closed out at earliest practicable moment", In re Hirsch's Estate,101 N. Y. S. 893; an estate consisting mostly of common stocks termed"exclusively speculative", In re Stumpp's Estate, 153 Misc. 92, 274 N. Y. S.466 (1934) ; Margin account considered as speculative, Appeal of Matthew's,76 Conn. 654, 57 A. 694 (1904) ; duty to withdraw from marginal tradingaccount, In re Disbrow's Estate, 145 Misc. 584, 261 N. Y. S. 635 (1932).11 R. C. L. p. 136.o See: Matter of Weston, 91 N. Y. 502 (1883) ; In re Clark's Will, 257N. Y. 132, 177 N. E. 397 (1931) ; In re Winburn's Will, 140 Misc. Rep. 18,249 N. Y. S. 758 (1931) ; In re Chaves' Estate, 143 Misc. 868, 257 N. Y. S.641 (1932) ; In re Kent's Estate, 146 Misc. 155, 261 N. Y. S. 698 (1932) ;In re Andrew's Estate, 239 App. Div. 82, 265 N. Y. S. 386 (1933); U. S.Fidelity & Guaranty Co. v. Greer, 29 Ariz. 203, 240 P. 343 (1925) ; In reCurran's Estate, 312 Pa. 416, 167 A. 597 (1933) ; In re Megaree's Estate,117 N. J. E. 347, 175 A. 808 (1934) ; In re Cross' Estate, 176 A. 101, 117 N.J. E. 429 (195).CASENOTES AND COMMENTSof recognized men of affairs or business leaders, ° by set-tlement of the estate within a reasonable time" or by actingas would an ordinarily industrious and prudent man in theconduct of his own affairs. 2 On the other hand, evidenceof undue regard for one class of beneficiaries,"3 or domi-nance of a personal interest of the executor's, 4 or grossdelinquency in settling the estate 5 may lead the court tofind such negligence as to warrant surcharging the execu-tor. Another factor involved is the weight to be givento the fact that the decedent bought the stocks.' It is clearthat there is a difference between speculative buying andmere retention of securities 7 (which may even be "non-legals" according to the statutory law for trustees in theparticular jurisdiction). The court may consider the ex-ecutor's retention of investments, which ordinarily an ex-ecutor could not make, as the "result of exercise of theirsound judgment", while other authorities will declare thatthe situation was such as to make it "the duty of an ex-ecutor or administrator to make changes in the investmentsin order to render them more secure . ..and thereby with-draw the securities from such perilous business". Mar-ketability is another question which may influence thecourt; it is recognized that unlisted stocks or those in aclosed corporation may require more time to liquidate thanthe more familiar shares which are traded daily.2" It hasbeen contended that trust companies and others who hold10 People's National Bank & Trust Co. v. Bichler, 115 N. J. E. 617, 172A. 207 (1934) ; In re Clark's Will, supra note 9; In re Booth's Estate, 264N. Y. S. 773 (1933) (but surcharged Trust Company acting as executor forfailure to sell after its own trust committee had advised sale of theparticular stocks).11 One year, In re Andrew's Estate and In re Winburn's Estate, supranote 9.121 In re Kent's Estate; U. S. Fidelity & Guaranty Co. v. Greer, and In reCross Estate, supra note 9; In re McCafferty's Will, 147 Misc. 179, 264N. Y. S. 38 (1933).18 In re Andrew's Estate, 239 App. Div. 32, 265 N. Y. S. 386 (1933).1' In re Stumpp's Estate, 153 Misc. 92, 274 N. Y. S. 466 (1934).1 5 In re Junkersfeld's Estate, 244 App. Div. 260, 279 N. Y. S. 481 (1935).Emphasis is sometimes put on the decedent's apparent faith in theparticular stocks. See In re McKee's Estate, 147 Misc. 889, 265 N. Y. S.47 (1933) where decedent had been a "specialist" in the stock involved.17 In re Clark's Will, 257 N. Y. 132, 177 N. E. 397 (1931) ; In re Kent'sEstate, 146 Misc. 155, 261 N. Y. S. 698 (1932).Is In re Curran's Estate, 312 Pa. 416, 167, A. 597, 600 (1933). See alsoIn re Bernheimer's Estate, 106 Misc. Rep. 719, 175 N. Y. S. 594 (1919) ; Inre Chaves' Estates, 143 Misc. 868, 257 N. Y. S. 641 (1932).19 11 R. C. L. 143-144. See also Appeal of Matthews, 76 Conn. 654, 57 A.694 (1904) ; In re Disbrow's Estate, 145 Misc. 584, 261 N. Y. S. 635 (1932)In re Busby's Estate, 6 N. E. (2d) 451 (Ill. App.1937).90 In re Yund's Estate, 152 Misc. 785, 274 N. Y. S. 831 (1934). -MARYLAND LAW REVIEWthemselves out as experts in administration of estates andhave available superior facilities should be held accountablefor a higher degree of care and diligence than individualexecutors and trustees ;21 but another case2" declared thatthe creation of such a distinction was a legislative function.Naturally, the terms of the will have a bearing on the lati-tude of discretionary power which is to be allowed the ex-ecutor without incurring liability.3 Another factor whichfrequently plays an important part is whether or not thebeneficiaries have become estopped to question the actionof the executors. Of course, a direct and unsolicited ap-proval of the executor's plans should, and will prevent thebeneficiaries from later objecting, when later developmentsprove the judgment to have been disastrously mistaken.Consultation with the beneficiaries has been held to nega-tive liability on the part of the executors," as also has thecontinued acquiescence of the beneficiaries." But in onecase27 the court used the following language: "Such in-quiries (as to the course of administration) expose the bene-ficiaries to no liability whatever. They do not involve thebeneficiary in the estate administration, and this is so evenif there be an expression of viewpoint by the beneficiary.It is only where there is an absolute assumption by thebeneficiary of the fiduciary's function, under conditionswhich on general legal principles impose responsibility forthe result, that a fiduciary should be permitted to defendthe failures of his administration by charging them to thebeneficiary. Any other administrative policy would be sureto result in grave harm. A lowering of the bars of this2l (1931) 5 University of Cincinnati Law Review, 1, 26, 51; "Holding itselfout as a specialist in trust affairs it should be held to a high degree of care",In re Cross' Estate, 115 N. J. E. 611, 172 A. 212, 214 (1934) (Reversed butno criticism of this statement in 117 N. J. E. 429, 176 A. 101 (1935)." In re Flint's Will, 240 App. Div. 217, 269 N. Y. S. 470 (1934).23 See: Matter of Weston, 91 N. Y. 502 (1883) where the will providedthat certain stocks were "to be held firmly"; and In re Cross' Estate, 117N. J. E. 429, 176 A. 101 (1935), where a provision allowing executor toborrow up to a certain amount to keep from selling at an unfavorable timewas considered to warrant holding on to the stock.21 Where he has acted in good faith and "his course of conduct has beenrequested, authorized, or assented to by the heirs or distributees, withknowledge of all the material facts, this may excuse him from any liabilityto them for resulting losses, even though he has deviated from the line ofhis duties", 24 C. J. 127-128.25 In re Curran's Estate, 312 Pa. 416, 167 A. 597 (1933).2" In re Clark's Will, 257 N. Y. 132. 177 N. E. 397 (1931) ; People's Na-tional Bank and Trust Co. v. Bichler, 115 N. J. E. 617, 172 A. 207 (1934)." In re Pinney's Estate, 156 Misc. 844, 282 N. Y. S. 680. 690 (1935).CASENOTES AND COMMENTStype of defense would undoubtedly result in escape fromliability by unfaithful fiduciaries. 128In the principal case the court worked out estoppel fromvarious conferences, letters of approval (although for themost part solicited by the executors after the stocks hadbeen retained for some time), and from the fact that therecords of the Orphans' Court with the petition and ordersthereon were always open to the beneficiaries.a Since thebeneficiaries had not objected to the course of conduct untilthe filing of the administration account in May, 1935, it washeld that their silence and failure to object worked an es-toppel. It is submitted that the amount of control whichin practice executors have over the entire estate, the in-formality of ex parte proceedings before the Orphans'Courts, and the great reliance of both court and beneficiaryupon the executors, when considered from a practical view-point and not from legalistic reasoning, make this principleone which should be carefully limited. Perhaps, as in theinstant case, it should be used as an additional factor inexonerating executors otherwise free from fault, but itshould certainly never be used as the sole ground fordenying surcharge where the executors have dealt negli-gently or in bad faith with the funds. It is also submittedthat more responsibility should attach in the case of marginaccounts than in the case of stocks owned outright, for thedanger of total loss is more imminent-in only three cases29where the executors were not surcharged for alleged delayin liquidating securities were margin accounts involved.On the whole, it seems that the Maryland Court of Ap-peals has followed the general tendency to relieve fromliability executors who have acted in good faith, with duediligence, and with the best interest of the estate in mind.It must be remembered that ordinarily executors wouldhave nothing to gain personally by an extended adminis-28 See also In re Stumpp's Estate, 153 Misc. 92, 274 N. Y. S. 466 (1934)(silence does not estop beneficiaries) ; In re Frame's Estate, 245 App. Div.675, 284 N. Y. S. 153 (1935) (inquiries not an estoppel, nor does meresilence show acquiescence as beneficiaries have a right to assume thatexecutors are acting legally)."8a In view of the impossibility of appealing from the (non-final) ordersof the Orphans' Court which authorized the continuance of the marginaccount it would seem improper to predicate an estoppel against the bene-ficiaries. On the other hand, the Court's interpretation can be justified onthe basis that the beneficiaries did not object to the executors' course ofconduct in the Orphans' Court itself.29 In re McKee's Estate, 147 Misc. 889, 265 N. Y. S. 47 (1933); In reLazar's Estate, 189 Misc. Rep. 261, 247 N. Y. S. 230 (1030) Peck v. Searle,117 Conn. 578, 169 A. 602 (1934).MARYLAND LAW REVIEW 361tration period. And also it should be remembered that itis all too easy to criticize after the results have occurred.And yet, the fiduciary capacity of an executor should leadthe courts to restrict the tendency. Since the executor isdealing, not as an adult with his own money, but as a trus-tee on behalf of beneficiaries, who only too frequently areentirely dependent on the preservation of the estate fortheir futures, too much weight should not be given to thefact that the deceased made the original investments. Thedefense of estoppel should be carefully scrutinized to seeif the executors actually relied on the consent or advice ofthe beneficiaries. It should appear convincingly that theexecutors recognized the danger of total loss involved inmargin accounts and that they were actually trying torealize the assets and not trying to speculate. Executorsshould be made to realize that the burden of responsibilitycan easily be shifted by seeking consent of court and bene-ficiaries upon a full disclosure of the situation.

University of Maryland, Baltimore

Not a member yet

Validity of State Compensating Tax on Use Within State of Chattels Purchased Outside State. Henneford V. Silas Mason Company, Inc.

Capacity of Child to Secure Court Order Against Father for Future Support in Excess of Amount Stipulated in Separation Agreement Between Parents - Yost v. Yost

Editorial Section

Constitutional Law-delegation to President of Power to Declare Embargo on Exportation of Arms. United States v. Curtiss-Wright Export Corporation

Conditional Sales of Chattels in Maryland

Mortgagee\u27s Rights in the Event of a Deficiency

Editorial Section

Cancellation of Accrued Dividends on Preferred Stock Under General Reservation in Charter of Power to Make Amendments Changing Terms of Outstanding Stock

Jurisdiction over Non-resident Motorists for Suits Arising from Local Accidents

Surcharging Executors for Depreciation of Securities in Margin Account - Goldsborough, et al. v. De Witt, et al.

8,321

9,748