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    Brode, Appellant, v. Philadelphia.

      Constitutional law — Statutes—General rule as to constitutionality.

    1. An act of assembly is to be declared void only when it violates the constitution clearly, palpably, plainly, and in such manner as to leave no doubt or hesitation in the mind of the court passing upon its constitutionality.

      Constitutional law — Municipalities—Stock in corporations — Lending credit to corporations — Article IX, sec. 7, of the constitution — Act of April 16, 1907, P. L. 80 — Contract between municipality and street railway company.

    2. The Act of April 15, 1907, P. L. 80, entitled, “An act authorizing contracts between cities, boroughs or townships, of the one part, and street passenger railway companies, surface, elevated or underground, or motor power companies, leasing and operating the franchises and property of such companies, of the other part, affecting, fixing and regulating the franchises, powers, duties and liabilities of such companies, the management of the same, the relations and respective rights of the contracting parties, and the ultimate acquisition by such cities, boroughs and townships, of the property, leaseholds and franchises of said contracting companies/’ does not violate art. IX, sec. 7, of the constitution of Pennsylvania, by which the general assembly is forbidden to “authorize any county, city, borough, township or incorporated district to become a stockholder in any company, association or corporation, or to obtain or appropriate money for, or to loan its credit to, any corporation, association, institution or individual.”
    3. There is nothing in the constitution which prohibits the general assembly from empowering a municipality to contract for the payment to it by a street railway company, or motor power company, of fixed sums in lieu of the performance of certain duties, or of the payment of license fees or charges imposed in its favor by general law or ordinance, or by the charter of the leasing or operating company; nor is it violative of any constitutional provision to permit a municipality in making such a contract to provide for its own protection that it may select a certain number of persons to act as directors of the railway or motor power company in conjunction with the directors elected by the stockholders thereof.
    4. The ordinance of the city of Philadelphia approved July 1, 1907, Phila. Ordinances, 153, and entitled, “An Ordinance authorizing the execution of a contract between the City of Philadelphia and the Philadelphia Rapid Transit Company, affecting, fixing and regulating the duties, powers, rights and liabilities of the City and of the Philadelphia Rapid Transit Company, and its subsidiary companies, and the relation and respective interests of the contracting parties, providing for the future management and extension of the street railway system controlled by the Philadelphia Rapid Transit Company, and the final acquisition of its leaseholds and property by the city, and repealing so much of former ordinances as is inconsistent herewith,” is not unconstitutional, conforms to the Act of April 15, 1907, P. L. 80, and does not exceed the powers conferred by that act on the city, because the contract is with a motor power company operating some lines not within the city limits; nor does the ninth clause of the ordinance violate art. Ill, sec. 20, of the constitution as providing for a commission to invest the moneys of the city.
    5. The ordinance of July 1, 1907, is a contract which the city councils themselves had power to make, and is not such a contract as requires the approval of the city solicitor under the first section of art. VIII of the Act of June 1, 1885, P. L. 37.
    Mr. Justice Mestrezat dissents.
    Argued Jan. 3, 1910.
    Appeal, No. 368, Jan. T., 1909, by plaintiff, from decree of C. P. No. 1, Phila. Co., Sépt. T., 1908, No. 4362, dismissing bill in equity in case of Elmer E. Brode v. City of Philadelphia, John E. Rey-burn, mayor of said city, Philadelphia Rapid Transit Company and Market Street Elevated Passenger Railway Company.
    Before Fell, C. J., Brown, Mestrezat, Potter, Eiain, Stewart and Moschzisker, JJ.
    Affirmed.
    Bill in equity to annul a contract and to declare void an ordinance of the city ’of Philadelphia dated July 1, 1907. The defendants demurred to the bill. Before Kinsey, J.
    The ordinance in question was as follows:
    “an ordinance
    “Authorizing the execution of a contract between the City of Philadelphia and the Philadélphia Rapid Transit Company, affecting, fixing and regulating the duties, powers, rights and liabilities of the City, and of the Philadelphia Rapid Transit Company, and its subsidiary companies, and the relations and respective interests of the contracting parties, providing for the future management and extension of the street railway system controlled by the Philadelphia Rapid'Transit Company, and the final acquisition of its leaseholds and property by the City, and repealing so much of former ordinances as is inconsistent therewith.
    “Section 1. The Select and Common Councils of the City of Philadelphia do ordain, That the City of Philadelphia in accordance with the powers granted by the Act of the General Assembly of Pennsylvania, approved April 15th, 1907, P. L. 80, and entitled 'An Act authorizing contracts between cities, boroughs or townships of the one part, and street passenger railway companies, surface, elevated or underground, or motor-power companies leasing and operating the franchises and property of such companies, of the other part, affecting, fixing and regulating the franchises, powers, duties and liabilities of such companies, the management of the same, the relations and respective rights of the contracting parties, and the ultimate acquisition by such cities, boroughs and townships of the property, leaseholds and franchises of said contracting companies,’ as well as of all other powers inherent in the City of Philadelphia shall enter into a contract with the Philadelphia Rapid Transit Company, owner, lessee and operator of various surface, elevated and underground street railways in the City of Philadelphia which shall be in the form following for the purpose of accomplishing the objects set out in the recitals and covenants therein contained: ....
    “Sec. 2. The Mayor is hereby authorized and directed to execute, acknowledge and deliver the said contract on behalf of the City (which contract shall be recorded), and to fill in the blank left for the date in the above agreement.
    “Sec. 3. The Ordinance entitled, ‘An Ordinance to regulate passenger railways’ approved July 7th, 1857, Phila. Ordinances, 248, together with all supplements thereto, and all other ordinances and parts of ordinances, and all contracts inconsistent herewith are hereby repealed, cancelled and annulled. This repeal to take effect only upon due execution and delivery by both parties of the contract provided for in the first section of this Ordinance.”
    The agreement was as follows:
    “Agreement entered into this First day of July, one thousand, nine hundred and seven, between the City of Philadelphia of the one part (hereinafter called the City), and the Philadelphia Rapid Transit Company, of the other part (hereinafter called the Company).
    “Whereas, Beginning about the year 1857 different companies to the number of upwards of fifty, incorporated by the Commonwealth of Pennsylvania, have been granted consent by the City to occupy various streets of the City for the purpose of transporting passengers from point to point along the same, which franchises and consents have been granted subject to various conditions and restrictions;
    “And Whereas, These companies were subsequently leased for long terms of years by traction or motor-power companies, which have installed the electrical system of propulsion of cars, all of which leases have now, by assignments and various conveyances, become vested in the Company, which thus controls and operates as one general system practically all of the street passenger railway companies in the City of Philadelphia;

      “And Whereas, The Company has also acquired through stock ownership and leases control of all the franchises which have been granted for the construction of elevated and underground passenger railways within the City and has under construction and in partial operation an elevated and underground railway from the western end of Market street along Market street to Delaware avenue, and also has franchises for the construction of a subway on Broad street and an elevated railway to Frankford;
    “And Whereas, The terms, conditions, restrictions and liabilities which have been imposed upon these various companies (all of which shall be taken as included in the words ‘subsidiary companies’ wherever the same are hereinafter used) differ widely, and there is dispute and uncertainty with respect to the effect of many of the provisions thereof, and it is believed that it is to the interest of the public as well as of the parties hereto to supersede the former regulations, and to define and regulate the relations between the parties hereto so as to make them fixed, fair and uniform;
    “And Whereas, The City should have a voice in the management of the Company and a supervision of its accounts and expenditures;
    “And Whereas, A large sum of money is required to improve, complete and extend the present system of the Company in order that it shall better serve the public; and for this purpose it is essential that the position of the Company be clearly defined, and the securities of itself and its underlying properties unquestioned, and its rights to make extensions in the future assured, in order that it may obtain credit to finance the increased transit facilities so necessary for the welfare of the public and the development of the City;
    “And Whereas, It is desirable that arrangements should be made requiring the direct payment into the City Treasury of a fixed sum in lieu of a license fee per car, and a further sum to represent the cost of maintaining street pavements and caring for the streets occupied by passenger railway tracks, in order to enable the City to have control of this municipal work. And it is further desirable that provision should be made for the sharing by the City in the earnings of the Company from further growth of the City (without in any way making the City liable for any of the obligations of the Company), and the ultimate acquisition by the City of the leaseholds and property of the Company.
    “Now, Therefore, In consideration of the covenants and undertakings herein on behalf of each party with the other, and the payments to be made by the Company to the City, and the readjustment by the City of the obligations of the Company, and the confirming of the rights and franchises of itself and its underlying companies under the conditions herein contained, it is covenanted and agreed between the parties hereto as follows:
    “First. — The Company shall, by appropriate action within thirty (30) days after this contract is executed, make a call on its stockholders for the portion of its capital stock unpaid, which shall be made payable in installments of five (5) dollars each, the last of which shall be payable not later than December 31, 1908. All of the said fund shall be expended for the completion of improvements now undertaken, the providing of new lines, power and equipment. No further increase of capital stock or funded indebtedness (saving where the latter is by way of renewal or substitution of or for indebtedness now existing, or validly incurred hereafter under the provisions hereof) shall be made by the Company or any of its subsidiary companies at any time or for any purpose without the consent of the City, nor shall any further leases, obligations or guarantees be assumed by the Company at any time during the term of this agreement without such consent, nor shall the Company, during said term, part with any of the stocks, leaseholds or franchises without like consent. And there shall be stamped across the face of all certificates of stock and leases held by the Company, notice that the same are held subject to the terms of this agreement, except securities held in the Fire Insurance Fund of the Company, which may be sold from time to time to meet fire losses or for the purpose of reinvestment.
    . “Second. — In case at any time hereafter the Company shall be desirous of making any additions to its existing system by the extension of old lines or the incorporation of new companies or any additions to its power or equipment, or any betterments to its lines, power or equipment, the expenditures for which require additional capital and are properly chargeable to capital account, it shall present a communication to Councils setting forth the necessity for such extensions, additions or better-ments, together with the estimated and probable cost of the same, and a plan for raising the capital necessary to cover the expenditures required for the purpose; but no such plan shall be effective, nor shall the Company make any issues of stock or bonds, or incur any guarantees or liability for the purpose of carrying out said plan until the same shall receive the approval of the City.
    “Third. — In case at any time in the future Councils shall either of its own initiative or upon petition of any of the citizens, determine that new lines of surface, elevated" or underground railway should be constructed within the City, it shall, by ordinance, determine the route of such line, and the terms and conditions under which it shall be built, financed and operated, and the Company shall have ninety (90) days after the passage of such ordinance to take such corporate action as may be necessary to accept the same, certified copies of which action shall be duly filed with the Mayor within said period of ninety (90) days; but if the Company shall fail to accept said plan within said period of ninety (90) days, or shall reject the same within said time or, after accepting the same, shall fail to enter upon the work in good faith, and prosecute the same as required in such ordinance, then the City may offer the right to construct and operate said road under said terms and conditions to such other persons, company or corporation as may be willing to undertake the same: Provided, however, That any rights acquired by the Company under this section, and the section immediately preceding, shall be subject to all the terms and conditions of this contract with respect to a voice in the management, supervision of accounts, division of profits after the return of six (6) per cent upon the capital invested, and the right to ultimately acquire all the interest of the Company at the expiration of fifty (50) years from the date of this contract: And Provided, further, That in the case of the construction of new lines the capital necessary therefor shall, as far as practicable, be raised upon bond issues bearing the guarantee of the Company as to principal and interest, which bonds shall be issued in denominations of one hundred (100) dollars, five hundred (500) dollars, and one thousand (1000) dollars, and be offered to public subscription, but in no case shall they be sold for less than par; and to such extent as it may be impracticable to finance new enterprises upon bonds, or in case additional capital is needed for the purpose of extension, additions and betterments to existing lines, power or equipment, the same may be raised by an increase in the capital stock of the Company, but only with the express consent of the City, and all such increases shall be full paid at par in cash, and be subject to all the provisions herein contained with respect to the original thirty million (30,000,000) dollars of capital stock of the Company.
    “Fourth. — The Mayor cx officio, and two citizens of Philadelphia, to be chosen from time to time by the Councils of said City, to serve for four years and until their successors are elected shall, as representatives of the City, be members of the Board of Directors of the Company, and, as such, exercise all the powers of Directors, and vote upon all questions which may come before the said Board with like effect as if they had been duly elected directors of the stockholders of the Company, but without incurring any liability as directors,, and the Company shall adopt such amendment to its By-Laws as may be necessary to give full effect to this provision.
    “Fifth. — The Company shall, on or before the first day of October in each year, beginning in the year 1908, file in the office of the City Controller a full statement of its receipts and expenditures for the preceding fiscal year ending June 30th, and the City Controller shall thereupon examine the books, accounts and vouchers of the Company for said fiscal year for the purpose of ascertaining the correctness of the said reports, and report to Councils the result of such examination.
    “Sixth. — The Company shall not declare or pay any dividend to its stockholders beyond a return of six (6) per cent per annum, cumulative from January 1, 1907, on the actual amounts of capital paid into the treasury in cash, calculated from the date of the several payments, without at the same time appropriating from earnings and surplus and paying into the City Treasury a sum equal to that portion of the total dividend which is in excess of the said six (6) per cent return, so that the City shall share with the stockholders equally and all net earnings properly distributable as dividends over and beyond a return of six (6) per cent per annum, cumulative from January 1st, 1907, upon the paid in capital stock of the Company.
    “Seventh. — The Company as the owner of all of the -capital stock of the Market Street Elevated Passenger Railway Company, in which Company is vested the right to build a subway on Broad street and an elevated railway to Frankford, does hereby covenant and agree that the said Market Street Elevated Passenger Railway Company will surrender and release to the City the right to build said subway on Broad street, which surrender the City does hereby accept; and the franchises to construct the said elevated railway to Frankford is hereby confirmed, and the time for the construction of the same is hereby extended to three (3) years from the first day of June, 1907. Provided, however, That the building and financing of said road shall be under and subject to all of the conditions in paragraph three hereof; And Provided, further, That in case a subway on Broad street should hereafter be constructed by the City or by any other corporation, the Company shall make such arrangement relating to the' construction and operation of the same around or under the City Hall, as may be agreed upon by a Board of Arbitration, one of whom shall be appointed by the City, one by the Company, and the third by the two so appointed, and the decision of any two shall be binding and conclusive on both parties.
    “Eighth. — The City hereby confirms to the Company and its subsidiary companies all of the consent, rights and franchises heretofore granted to, and exercised by them, and each of them, including the right of operation by the overhead trolley system, free of all terms, conditions and regulations, not herein provided for, and does further give up and surrender and agree not to exercise any rights which it may possess in respect to a repeal or resumption of any of the said rights now possessed or heretofore granted, or a taking over of any of said properties, any law, ordinance or contract now in force, or hereafter passed to the contrary, notwithstanding: Provided, however, That the present rates of fare may be changed from time to time, but only with the consent of both parties hereto: and Provided, further, That nothing in this contract contained shall be construed to limit the power of the City to make all rules and regulations, relating to the operation and management of the lines controlled by the Company, necessary and proper to be made under the police power.
    “Ninth. — In addition to the various payments to be made by the Company to the City as herein provided, the Company shall establish a sinking-fund to be in the custody and control of a commission composed of the Mayor of the City, the President of the Company, and the President of the Board of Directors of City Trust, and make the following payments in the same, viz.: Beginning with the month of July, 1912, the payment shall be at the rate of ten thousand (10,000) dollars monthly for a period of ten (10) years, then at the rate of fifteen thousand (15,000) dollars monthly for a further period of ten (10) years, then at the rate of twenty thousand (20,000) dollars monthly for a further period of ten (10) years, then at the rate of twenty-five thousand (25,000) dollars monthly for a further period of ten (10) years, and finally at the rate of thirty thousand (30,000) dollars monthly for the balance of the term of this contract. These payments shall be treated by the Company as fixed charges reducing the income applicable to dividends to its stockholders and to the City; and no dividend shall be payable to the stockholders of distribution of surplus earnings made to the City as long as any such payment shall be in arrears. The said Commission in investing and reinvesting the money so raised shall be confined to the class of securities made by statute as proper investment for trustees; except that the stock of the Company may be purchased at a price not above par, and the bonds and underlying securities may be purchased on a four (4) per cent income basis and the Commission shall have the right to subscribe for stock or bonds issued under paragraphs two and three hereof. Any stock of the Company so acquired shall not be resold or reissued. The Commission shall, on or before the first day of October in each year after the establishment of said sinking-fund, file a full and accurate account of the said fund for the preceding fiscal year of the Company with the City Controller, who shall examine the books, accounts, securities and vouchers relating thereto and report to Councils the right of such examination. The City reserves the right at any time after the said fund may'have reached the amount of five million (5,000,000) dollars to require by ordinance of Councils that the same shall be paid over to the City Treasury and become the absolute property of the City, at the same time requiring a further payment towards said fund as provided for hereunder shall be made directly into the City Treasury.
    “Tenth. — The Company shall, in addition to the other payments herein provided for, during the first full terms of ten (10) years next succeeding the date of this contract, pay into the City Treasury in each year the sum of five hundred thousand (500,000) dollars in cash; during the second full term of ten years next succeeding the date of this contract pay into the City Treasury in each year the sum of five hundred and fifty thousand (550,000) dollars in cash; during the third full term of ten years next succeeding the date of this contract pay into the City Treasury in each year the sum of six hundred thousand (600,000) dollars in cash; during the fourth full term of ten years next succeeding the date of this contract pay into the City Treasury in each year the sum of six hundred and fifty thousand (650,000) dollars in cash; during the fifth full term of ten years next succeeding the date of this contract pay into the City Treasury in each year the sum of seven hundred thousand (700,000) dollars in cash; all of which said annual payments shall be paid in equal monthly installments upon the last day of each month, which sums have been fixed, and which payments, when made, shall be in lieu and satisfaction of all obligations and liabilities on the part of the Company, and its subsidiary companies, for the paving, repaving and repair of the streets occupied by their surface lines, the obligation of the companies with respect to the removal of snow therefrom, and all license fees with respect to the cars that run upon said streets or over the various City bridges or the system of operating said cars, and shall be in lieu of the right of the City hereafter to impose upon the Company, or its subsidiary companies similar obligations or charges; but in case any additional streets shall hereafter be occupied by the Company by reason of additional surface lines or extensions made under the provisions of paragraphs two and three of this contract, then the Chief of the Bureau of Highways, Department of Public Works, shall certify the number of square yards of street paving upon the streets so occupied and the character of such paving, there shall thereafter be added to the yearly sum to be so paid an amount equal to seven (7) cents per square yard of macadam pavement, and eight (8) cents per square yard of asphalt pavement, and six (6) cents per square yard of other character of pavement of said streets, or in case the Company should at any time with consent of the City abandon the use of any street then the Chief of Bureau of Highways, as aforesaid, shall certify the number of square yards of the various kinds of pavements upon the streets so abandoned, and the annual payment thereafter to be made shall be reduced in the same manner, at the rates named above. Nothing herein contained is intended to relieve the Company, or its subsidiary companies, from taxation upon any class of real estate now taxable, nor from taxation on dividends as provided in their respective charters, nor to affect the matters for which special provision has been made in this contract. To such extent, however, as taxes and assessments not upon such real estate or dividends may hereafter be imposed upon the Company for the benefit of the City, the City shall credit upon the taxes that may thus be hereafter imposed all payments made hereunder as well also as the sums which shall be divided with and paid to the City out of earnings as provided for in clause six: Provided, however, That nothing herein contained shall relieve the Company from the obligation to replace or repair pavement removed or damaged by any construction or repair work which the Company may undertake with reference to its tracks or conduits.
    “Eleventh. — The City reserves the right to purchase all the property, leaseholds and franchises of the Company, subject to all indebtedness now existing or hereafter lawfully created hereunder upon July 1st, 1957, or upon the first day of any July thereafter by serving six months notice on the Company of its intention so to do, and upon paying to the Company upon the date named in said notice an amount equal to par for its capital stock then outstanding, to wit: the thirty million (30,000,000) dollars of capital now authorized plus any additional capital stock issued with the consent of the City hereunder. The fund in' the sinking-fund if not theretofore paid over to the City, shall be available to the City for the purpose of making or assisting in making the said payment for the property of the Company. This contract shall continue in force until such right is exercised, but whenever the right is exercised the City shall succeed to and become the owner, subject as aforesaid, of all the franchises, leaseholds, rights, property and privileges theretofore vested in the Company, and the City may either operate the same or lease the right to operate the same for such terms and upon such conditions as it may deem fit. The rights of the City under this paragraph shall be assignable and may be put up at public auction to the highest bidder therefor. The Company reserves its franchise to be a corporation with a power to operate passenger railway systems and may become a bidder for such rights.
    “Twelfth. — Nothing in this contract contained, and no act lawfully done by the City hereunder, shall in any way render the City liable for any of the debts, obligations or liabilities of the Company, unless and until it shall exercise in the manner aforesaid its option of purchase, nor shall the credit of the City be pledged or loaned to the Company, nor shall it become a joint owner or stockholder in the Company, nor shall the payment to the City of a sum equal to the excess of dividends over and above six (6) per cent as hereinbefore provided, be in any way construed as making it a partner in the enterprise of operating the said system, but said payment is made upon the conditions of this agreement and is on account of the additional taxes, assessments and obligations which might otherwise be put upon the Company by or for the benefit of the City.

      “‘Thirteenth. — Wherever hereunder the consent of the City is required it shall only be given by ordinance of Councils.
    “Fourteenth. — All contracts, agreements and bonds existing between the City and the Company and its subsidiary companies are hereby superseded and cancelled, excepting only the agreement to contribute the sum of four hundred thousand (400,000) dollars to the City toward the expense of removing certain grade crossings, as provided in the Ordinance of March 28th, 1906, Phila. Ordinances, 42, and the agreement entered into under the Ordinance of April 16th, 1906, Phila. .Ordinances, 86, with respect to the temporary removal of tracks on Twenty-first street, and the agreement entered into under the Ordinance of June 4th, 1906, Phila. Ordinances, 109, with respect to the postponement of the laying of tracks upon Broad street.
    “Fifteenth. — This' contract' shall take effect as of July 1st, 1907, and one-half of any payment made by the Company for license fees for the current year shall be allowed as a credit against the first six (6) monthly payments provided for in paragraph ten hereof.
    “In Witness Whereof, The parties caused these presents to be duly sealed and delivered as of, and to take effect the first day of July, 1907.” • ■ ■
    The court in an opinion by Kinsey, J., sustained the demurrers and dismissed the bill.

      Error assigned was decree dismissing the bill.

      John McClintock, Jr., with him A. Florence Yerger, for appellant.
    The act of 1907 is unconstitutional: Com. ex rel. v. Order of Vesta, 156 Pa. 531; Wilkes-Barre Hospital v. Luzerne County, 84 Pa. 55; Sharpless v. Phila., 21 Pa. 147.
    A municipal corporation of Pennsylvania never had implied authority to become a stockholder in a private corporation: Penna. R. R. Co. v. Phila., 47 Pa. 189.

      February 27, 1911:
    The city also loans its credit to the company, by having the mayor and two other citizens chosen by councils, “as representatives of the City,” exercise all the powers of directors of the company: Sharpless v. Phila., 21 Pa. 147; Beeson v. Lang, 85 Pa. 197.
    The ordinance and agreement of July 1, 1907, are not in compliance with the Act of April 15, 1907, P. L. 80. Their provisions far exceed the scope of said act: Pur-viance v. McClintee, 6 S. & R. 259; Edwards v. Tracy, 62 Pa. 374; Caldwell v. Miller, 127 Pa. 442.
    The agreement is not executed in accordance with the Act of June 1, 1885, P. L. 37, requiring the approval of city solicitor and the countersignature of the controller: Smart v. Phila., 205 Pa. 329; Hepburn v. Phila., 149 Pa. 335; McManus v. Phila., 201 Pa. 619; Com. v. George, 148 Pa. 463.

      James Gay Gordon, with him Ellis Ames Ballard and John G. Johnson, for appellee.
   Opinion by

Mr. Justice Brown,

By art. IX, sec. 7, of our constitution the general assembly is forbidden to “authorize any county, city, borough, township or incorporated district to become a stockholder in any company, association or corporation, or to obtain or appropriate money for, or to loan its credit to, any corporation, association, institution or individual.” This clause, in substance, was, as is stated in Wheeler v. Phila., 77 Pa. 338, borrowed from the constitution of the state of Ohio, and, in Walker v. City of Cincinnati et al., 21 Ohio St. 14, the supreme court of that state, speaking through its chief justice, said: “The mischief which this section interdicts is a business partnership between a municipality or subdivision of the State, and individuals or private corporations or associations. It forbids the union of public and private capital or credit in any enterprise whatever. In no project originated by individuals, whether associated or otherwise, with a view to gain, are the municipal bodies named permitted to participate in such manner as to incur pecuniary expense or liability. They may neither become stockholders nor furnish money or credit for the benefit of the parties interested therein. Though joint-stock companies, corporations and associations only are named, we do not doubt that the reason of the prohibition would render it applicable to the case of a single individual. The evil would be the same, whether the public suffered from the cupidity of a single person, or from that of several persons associated together. As this alliance between public and private interests is clearly prohibited in respect to all enterprises, of whatever kind, if we hold that these municipal bodies cannot do on their own account what they are forbidden to do on the joint account of themselves and private partners, it follows that they are powerless to make any improvement, however necessary, with their own means, and on their own sole account. We may be very sure that a purpose so unreasonable was never entertained by the framers of the constitution.” All this is unquestionably true. What is forbidden by our constitution is (1) a municipality’s becoming a stockholder in any company, association or corporation; (2) its obtaining or appropriating money for or loaning its credit to any corporation, association, institution or individual; and the first question to be considered on this appeal is whether the Act of April 15, 1907, P. L. 80, violates either of these inhibitions.

The act of 1907 is very brief and its provisions are free from all ambiguity. It provides that a municipality may enter into a contract with a street passenger railway company or motor power company leasing and operating the franchises and property of such other company within the municipal limits, for the purpose of fixing and regulating the franchises, powers, duties and liabilities of such companies and the rights of the respective contracting parties, and by such contract a municipality may, inter alia, agree to accept from the company or companies fixed payments in lieu of the performance of certain duties or of license fees or charges imposed in favor of the municipality by general law or ordinance or by the charters of the respective companies. The municipality is further empowered to contract for the appointment of a certain number of persons to act as directors of the company or companies in conjunction with the directors elected by the stockholders thereof, and for the ultimate acquisition by it, upon terms mutually satisfactory, of the leaseholds, property and franchises of the contracting company or companies. An act of assembly is to be declared void only when it violates the constitution clearly, palpably, plainly and in such manner as to leave no doubt or hesitation in the mind of the court passing upon its constitutionality: Sharpless v. Phila., 21 Pa. 147. Tested by this rule, how can it be said that the act of 1907 is violative of the section of the constitution referred to? In its twenty-four lines there is not to be found a word or clause that can be tortured into the expression of legislative intent that a municipality may become a stockholder in any company, association or corporation, or obtain or appropriate money for or loan its credit to any corporation, association, institution or individual. The granting of a franchise to a street railway company or to a motor power company leasing and operating the franchises and property of the other company necessarily involves a contract or agreement with the municipality granting the franchises, for the purpose of fixing and regulating the same and defining the powers, duties and liabilities of the company and the respective rights of each of the contracting parties. This is all the first sentence of the act of 1907 provides for. The second empowers the municipality to contract for the payment to it by a street railway or motor power company of fixed sums in lieu of the performance of certain duties or of the payment of license fees or charges imposed in its favor by general law or ordinance or by the charter of the leasing or operating company. This offends against nothing in the constitution. If, then, the legislature had the clear power to enact these provisions because not forbidden to do so, it follows as a corollary that it had the power to direct that á municipality, in making its contract with a street railway or motor power company, may, for the protection of its rights under the contract, provide that a certain number of persons shall act as directors of the company in conjunction with the directors elected by the stockholders thereof; and the final clause empowering the municipality to contract for the ultimate taking back of the franchises which it granted and for its acquisition of the leaseholds and property necessary to the exercise of the same is not a provision authorizing it to become a stockholder in a corporation or to appropriate its money for or loan its credit to a corporation. Nothing more need be said in support of the constitutionality of the act of 1907, and we pass to the second question raised by the appellant.

The preambles to the contract are but a recital of the conditions under which it was entered into by the parties to. it. They set forth good reasons for its execution, and nothing appears in them in contravention of the constitution or as indicating a purpose on’ the part of the city to do anything in excess of the powers conferred upon it by the act of 1907. Passing from the preambles to the terms of the contract as they appear in its fifteen clauses, there is not to be found in any one of them a line which provides that during the period for which it is to run a dollar of the city’s money, raised by taxation or otherwise paid into its treasury, is to be obtained by or appropriated to the Philadelphia Rapid Transit Company. The city does not, for any purpose whatever, assume any obligation or incur any liability and its credit is not involved, directly or indirectly, by the contract. During the term thereof the transit company must go on operating its franchises out of its own revenues, without being aided or having' its credit strengthened to the extent of a penny by any obligation or liability assumed by the city. If it succeeds, the success will be its own, and if it fails, the failure will be its own. As to this the contract is so . clear that the lay mind, cannot be misled in reading it. True, if the company shall so successfully operate its lines as to be able to declare dividends in excess of six per cent., the city will share in such excess, but its participation in such profits is, by the express terms of the contract, to be regarded "on account of the additional taxes, assessments and obligations which might otherwise be put upon the company by or for the benefit of the city.” All the moneys which the city is to receive from the company are for lawful considerations passing from it to the company. This, too, plainly appears from the face of the contract. In this connection it is proper to say but a word in disposing of the contention of the appellant that, by the contract, the city becomes .a partner of the transit company. As just stated, what it may receive out of the profits of the company will be in consideration of its forbearance to do what it might lawfully do, and the company understands that it is thus paying for immunity to be extended to it. The city and the company could not become partners, for neither possesses the corporate power to enter into a partnership with anyone, and of this all the world must take notice in dealing with either. That there was no intention on the part of the city or the company of attempting to do what neither had the power to do clearly appears from the twelfth clause of the contract, which formed a part of the ordinance published and recorded for the information of the appellant and every other taxpayer in the city of Philadelphia. That clause is as follows and contains all that need be said on this branch of the case: “Nothing in this contract contained, and no act lawfully done by the city hereunder, shall in any way render the city liable for any of the debts, obligations or liabilities of the company, unless and until it shall exercise in the manner aforesaid its option of purchase, nor shall the credit of the city be pledged or loaned to the company, nor shall it become a joint owner or stockholder in the company, nor shall the payment to the city of a sum equal to the excess of dividends over and above six (6) per cent, as hereinbeforé provided, be in any way construed as making it a partner in the enterprise of operating the said system, but said payment is made upon the conditions of this agreement and is on account of the additional taxes, assessments and obligations which might otherwise be put upon the company by or for the benefit of the city.”

It is argued that even if the act of 1907 is constitutional, the terms of the contract exceed the powers conferred by it upon the city, because the contract is with a motor power company operating some lines not within the city limits. This is straining the words of the act. The Philadelphia Rapid Transit Company has leased and operates a number of street railways “within the limits” of the city, and that it may have leased and now controls three lines beyond such limits does not affect the character in which it contracted with the city. Its chief lines are within the city, it's main business is done there and, in contracting with the city, it did so as a company which had acquired, through stock ownership and leases, control of all the franchises which have been granted for the construction of surface, elevated and underground passenger railways within the city. The capacity in which it contracted was that given it by the act, and that its operations may extend beyond the city does not affect such capacity. The question now before us is not whether the city, at the expiration of fifty years, if it should exercise the option given it, can take over the railway systems beyond its limits, and, even if we should anticipate that it will then be held that it cannot do so, the whole contract is not, for that reason, to be set aside. The outlying railways beyond the city limits lead to the city, and, though of advantage to the transit company, are but incidental to its main business, which is to operate street railways within the city limits. As to them it and the city had full power to make the contract, which is not void simply because the contracting parties may have included what, perhaps, ought to have been excluded. So far as they were able to contract their contract binds them, and its substance and general purpose are not affected by the interest which the transit company may have in the street railways beyond the city limits.

Another contention of the appellant is that the ninth clause of the contract is in violation of art. Ill, sec. 20, of the constitution, as it provides for a commission to invest the moneys of the city. The constitutional provision against which this clause in the contract is said to offend is that no power shall be delegated to a special commission to supervise the moneys belonging to a municipality. The ninth clause of the contract provides for the establishment of a sinking fund by the transit company, into which monthly payments are to be made, but the moneys in this fund, as established and increased from time to time, do not become the moneys of the city as soon as paid into it. The fund is the sinking fund of the Philadelphia Rapid Transit Company, and the moneys in it do not become the moneys of the city until, by a proper ordinance, after the fund reaches $5,000,000, the city shall require the same to be paid into its treasury. Then, and only then, does it become the absolute property of the city. In the interval the commission will have custody and control of the Rapid Transit Company’s sinking fund, and the investments which it is authorized to make will be, if made, confined to securities authorized by statute as proper for trustees, except that the stock of the company may be purchased at a price not above par, and the bonds and underlying securities may be purchased on a four per cent, income basis. And we are unable to see how this is affected by see. 22 of art. Ill of the constitution, which prohibits the legislature from authorizing the investment of trust funds by executors, administrators, guardians or other trustees in the bonds or stock of any private corporation, and agree with the learned court below that, “While it is true that the city could not purchase such stock directly with the city’s money, the said money is received from the company for the use of streets and as a release or in lieu of certain license fees, etc., and is to be held by a sinking fund commission for a length of time for a certain purpose. It is not, during the pendency of that uncompleted purpose, the money of the city, although it is provided that, by proper legal action, it may so become, whereupon it is to be paid immediately into the city treasury.' The transaction is, as a whole, as may be gathered from the purport of the entire contract, a plan by which the company is made to pay the purchase price of its own property if the city should ultimately determine to take it over, and in the meantime the purchase money is to be held apart until it shall be utilized for that purpose, or paid into the city treasury.” If the city should see fit not to exercise the option given it, the stocks and bonds purchased by the commission will be sold and the city will receive the moneys realized from their sale; but if, on the other hand, it should ultimately, in 1957, conclude to avail itself of the right given it under the contract to acquire all the property, leaseholds and franchises of the company, and art. IX, sec. 7, of our present constitution should still be in force, its acquisition of all the property Of the transit company would not constitute it a stockholder of that company within the prohibition of the constitution. That prohibition was to prevent a municipality “from becoming jointly interested as stockholder with any company, association or corporation:” Wheeler v. Philadelphia, supra. This would not be possible if the city should acquire everything belonging to the transit company, for that company would then go out of business and practically die a legal death. This, in effect, is what happens whenever a municipality takes over the property and franchises of a water company in pursuance of statutory authority, but it has never been pretended that in so doing it becomes a stockholder in such company.

The only other question raised by the learned counsel for the appellant which requires notice is as to the failure of the city solicitor to approve the contract. By the second clause of the first section of art. VIII of the Act of June 1, •1885, P. L. 37, the city solicitor is required to prepare all contracts to be made with the city and to indorse his approval on them before they shall take effect. But this is not such a contract. The city councils themselves, by their ordinance, passed in pursuance of the powers conferred upon them by the act of 1907, made the contract, and, therefore, no approval of the city solicitor was required. As to this the learned judge below correctly said: “We do not consider it noteworthy or important that the city solicitor did not approve this contract, for the reason that so much of the act of 1885 as refers to the approval by the city solicitor seems to us to be limited to contracts made between various executive officers of the municipality and other parties, wherein the form must be approved and, indeed, drawn by the city solicitor; and the same reasoning applies to the objection of the non-approval by the controller. This contract was made in the form in which it was executed by councils itself. The latter bodies possess the power and discretion, and upon them falls the responsibility of making such contracts within the legal limitations allowed them, and when they have so acted, the city solicitor would have no right or authority to pass upon their work, unless so requested to do by proper authority, and, indeed, that could not affect the legality of an ordinance after the same had been duly passed.”

Each ground of demurrer to the bill of complaint was well taken. The assignments of error are all overruled and the decree is affirmed at appellant’s costs.

Mr. Justice Mestrezat dissents.


source: Caselaw Access Project

author: Mr. Justice Moschzisker,

license: Public Domain

text:
    Law v. Waldron, Appellant.

      Insurance — Fire insurance —• Receivers — Contracts — Principal and agent.

    1. Where a receiver is appointed to take control of all the property of a corporation and to assume the entire management of its affairs, the corporate officers are thereby suspended, and in respect of compensation for services thereafter the corporation is guilty of no breach of contract, since the order of the court operates on both parties alike and prevents the officers and agents from interfering with the receiver’s management, and performance of contracts for services to the corporation would be illegal.
    2. This rule is peculiarly applicable to an insurance company engaged in business which could not be conducted by receivers, and whose receivership is forced by large and unexpected losses, and not brought about for the purpose of ending contracts with agents.

      Affidavit of defense — Practice—Precision—Set-off.
    3. Affidavits of defense should aver the facts depended upon with reasonable precision and distinctness. Averments of set-off must be as specific as those used in a statement of claim. The defendant in respect to such a claim is the actor, and the obligation is upon him to aver his set-off in terms incapable of being misunderstood. An affidavit of defense is to be taken most strongly against the defendant, for it is to be presumed that he has made it as favorable to himself as his conscience would allow him.

      Affidavit of defense — Judgment for part appearing to be due — Act of July 15,1897, P. L. 276.

    4. Before entering judgment under the Act of July 15, 1897, P. L. 276, the court of common pleas ought to see that the items which it holds to be insufficient are enumerated in the rule for judgment or specially indicated in the written adjudication of the court.
    Argued Jan. 3, 1911.
    Appeal, No. 95, Jan. T., 1910, by defendant, from order of C. P. No. 1, Phila. Co., Dec. Term, 1909, No. 2,653, making absolute rule for judgment for want of a sufficient affidavit of defense in case of John H. Law and George W. Law, copartners, trading as Law Brothers, Trustees for the Royal Insurance Company, Ltd., of Liverpool, England, v. Alfred M. Waldron.
    Before Fell, C. J., Brown, Mestrezat, Potter, Elkin, Stewart and Moschzisker, JJ.
    Affirmed.
    Assumpsit to recover balance alleged to be due by an agent.
    The material averments of the statement of claim and the affidavit of defense are set forth in the opinion of the Supreme Court.
    The court by Brégy, P. J., filed the following opinion:
    This is a rule for judgment for so much of the amount claimed in the plaintiffs’ statement as to which, the affidavit of defense is insufficient, but as the rule itself does not set out the items it becomes the duty of the court, if it thinks the rule should be made absolute under Pierson v. Krause, 208 Pa. 115, to set them out.
    The defendant was the local agent in Philadelphia and the surrounding counties of the German National Insurance Company and the German Insurance Company of Freeport. These companies went into the hands of receivers on November 19, and 20, 1906, and thereafter defendant rendered accounts showing that $7,137.19 was due the companies, but making certain claims in the nature of offsets, these not being allowed, and the rights of the insurance companies having been assigned to the plaintiffs this suit was brought to recover $6,178.97, being the above amount less certain allowances with interest from November 20, 1906. The defendant filed an affidavit of defense in which he charged himself with $7,137.19, and claimed the offsets set out in his accounts and certain others, whereupon the plaintiffs took this rule. The court is of opinion that the amount admitted to be due by the defendant, namely, $7,137.19, should have deducted from it the following items, for which credits were asked in the account rendered the German National Insurance Company, viz.: November balance, $11.61, contingent 1906, as per schedule B, $358.15, and also the following items for which credits were asked in the account rendered the German Insurance Company of Freeport, viz.: November balance, $415.55, contingent 1896, as per schedule B, $752.11; $50,615 net reinsurance. Amount, as per bill, $2.52 — $1,539.94. Leaving due the plaintiff, $5,597.25. That the remaining items claimed as credits by the defendant cannot be allowed under the contract.
    According to the plaintiffs’ statement, the total amount claimed, allowing part of the credits above mentioned, was $6,178.97, but as all of the above credits have been allowed in full, there must be deducted from that amount in addition, $581.72, leaving due as above, $5,597.25. The rule is therefore made absolute for this amount with interest from November 29, 1906, and judgment is entered for the plaintiff for $6,699.90.

      Errors assigned were as follows: (1) The learned court erred in entering judgment for the plaintiffs for the sum of $6,699.90; (2) the learned court erred in not discharging plaintiffs’ rule for judgment for the amount as to which the affidavit of defense was insufficient.

      Frank B. Shattuck, with him John Reynolds, for appellant.
    Under the Act of July 15, 1897, P. L. 276, the lower court cannot enter a valid judgment on a rule for the amount as to which the affidavit of defense is deemed insufficient, without giving reasons therefor: Pierson v. Krause, 208 Pa. 115; New York Trust Co. v. Langcliffe Coal Co., 227 Pa. 630.
    The defendant is entitled to claim losses by reason of the breach of the contract though the companies had gone into the hands of a receiver; and further, the entire question of dispute between the accounts was one for the jury: Spader v. Mfg. Co., 47 N. J. Eq. 18 (20 Atl. Repr. 378) ; Bolles v. Drug Co., 53 N. J. Eq. 614 (32 Atl. Repr. 106) ; Bowe v. Milk Co., 44 Minn. 460 (47 N. W. Repr. 151); Rosenbaum v. U. S. Credit System Co., 61 N. J. L. 543 (40 Atl. Repr. 591); Merchants’ & Mfrs. Nat. Bank v. Spratt & Co., 108 Pa. 97; Griffith v. Lumber Co., 55 W. Ya. 604 (48 S. E. Repr. 442).

      February 27, 1911:

      C. Berkeley Taylor, for appellees.
    The loss of commissions by breaking the contract cannot be allowed, the break being the act of the law and not that of the parties and damnum absque injuria: People v. Globe Life Ins. Co., 91 N. Y. 174; Lorillard v. Clyde, 142 N. Y. 456 (37 N. E. Repr. 489); Mason v. Standard Distilling Co., 85 N. Y. App. Div. 520 (83 N. Y. Supp. 343); Labaree v. Crossman, 100 N. Y. App. Div. 499 (92 N. Y. Supp. 565); Stannard v. Reid Co., 114 N. Y. App. Div. 135 (99 N. Y. Supp. 567); Malcomson v. Wappoo Mills, 88 Fed. Repr. 680; Lenoir v. Linville Imp. Co., 126 N. C. 922 (36 S. E. Repr. 185); Griffith v. Blackwater Co., 46 W. Ya. 56 (33 S. E. Repr. 125); In re United Mutual Fire Ins. Co., 22 R. I. 108 (46 Atl. Repr. 273); Dickinson v. Calahan, 19 Pa. 227; Schlater v. Winpenny, 75 Pa. 321; Louchheim v. Weighing Co., 12 Pa. Superior Ct. 55; Kern’s Est., 176 Pa. 373; Blakely v. Sousa, 197 Pa. 305.
   Opinion by

Mr. Justice Moschzisker,

The plaintiffs took a rule for judgment for “so much of the amount claimed by the statement as to which the affidavit of defense is insufficient.” The rule was made absolute and a judgment entered, from which the defendant has appealed.

In January, 1904, the defendant signed a contract with the German National Insurance Company, of Illinois, to act as its general agent in Philadelphia and vicinity, and in March, 1904, he entered into a precisely similar contract with the German Insurance Company, of Illinois. These contracts provide, art. I, for the appointment of the defendant as the general agent of the respective companies in the designated territory, with power, inter alia, to appoint subagents. Article II, “ . said first party agrees to pay said second party thirty (30) per cent commission on all net premiums written in said territory, whether by said second party or through agents appointed by said second party, and a contingent sum of money equal to ten (10) per cent of the net profits of the business written .... in the territory .... to be computed on a basis of income and outgo, as follows: — income—Gross premiums less return premiums, amounts paid for reinsurance annually. Outgo-losses paid annually, after deducting reinsured losses collected; losses outstanding unpaid, insurance department fees, State and local taxes and licenses, State and local board expenses and all regular and approved incidental expenses of agents charged by agents and said second party to the first party.” Article III: “ . said second party agrees to devote the necessary time to the interests of the said first party in the appointment and supervision of agents, inspection of risks, adjustment of losses and such general work pertaining to a general agent’s occupation without further compensation.The said second party .... to assume all liability for balances of the agents and other representatives appointed in said territory by said second party, and agrees to hold said first party free from any and all loss or damage therefrom, and further agrees to remit .... (monthly) to said first party all balances due.It is agreed that this contract shall continue and remain in force so long as mutually agreeable to the contracting parties, and the same may be modified or terminated at any time at ninety days’ notice by either party giving a written notice to the other of the intention to modify or terminate the same.”

,^In November, 1906, both of the insurance companies went into the hands of a receiver appointed by the circuit court of Cook county, Illinois. The receiver by leave and under the instructions of the court sold the assets of the two companies to the Royal Insurance Company. At the request of the pin-chaser these assets, including the claims against the defendant, were duly assigned to the plaintiffs. In January, 1910, the plaintiffs brought the present action for $6,178.97, with interest from November 20, 1906. The statement of claim averred that the defendant, as agent of the German National Insurance Company, owed monthly balances aggregating $1,583.01, against which he was entitled to a credit of “$328.87, Contingent commissions” and “$11.61 November balance,” leaving $1,254.14 as the net amount due on that account; and that, as agent of the German Insurance Company, he owed monthly balances aggregating $5,554.18, less a credit of $629.35, “Contingent commissions,” leaving $4,924.83 as the net balance due on that account. The defendant filed an affidavit of defense in which he admitted the balance of $1,583.01, but claimed set-offs as follows: (1) “November balance, $11.61;” (2) “Contingent 1906 as per scheduleB, $358.15;” (3) “Loss of commission by Co. breaking contract as per schedule A, $378.54;” (4) “Commission on return premiums from March, 1906, to November, 1906, which was credited to the Company by error, $785.60;” (5) “Closing out agencies as per schedule C, $120.43;” (6) “Adj. expenses as per vouchers, $105.50;” (7) “Loss paid by A. M. Waldron, July 3, 1908, policy 468,337 . . . . not in reinsurance schedule . . . ., $23.30;” thus wiping out the entire $1,583.01 and showing $200.12 due the defendant. The defendant also admitted the balance of $5,554.18, but claimed as set-offs: (8) “November balance, $415.55;” (9) “Contingent 1906 as per schedule B, $752.11;” (10) “506,015 net reinsurance Am. as per bill, $2.52;” (11) “Loss of commission by Co. breaking contract as per schedule A, $1021.50;” (12) “Commission on return premiums from March, 1906, to November, 1906, credited to Company by error, $1,847.89;” (13) “Cochran Agency as per bill, $202.06;” (14) “Adj. expenses as per vouchers, $506.50;” (15) “Closing out agencies as per schedule C, $852.47;” thus wiping out the entire $5,554.18 and showing $46.42 due defendant. The court allowed items 1, 2, 8, 9 and 10; but refused items 5 to 7, inclusive, and 11 to 15, inclusive, holding the affidavit to be insufficient as to them.

The affidavit states what the defendant avers to be true accounts between himself and the two insurance companies, and these accounts contain the several items claimed as set-offs. Of those allowed .as a defense, items 1, 2 and 9 were conceded, either in whole or in part, in the statement .of claim, while items 8- and 10 were not conceded. However, there is no complaint as to the items allowed, and with them we have no further concern. Those disallowed may be grouped in two classes; first, items 3, 4, 11 and 12, as claims growing out of what the defendant alleges to be a breach of the contracts; and, items 5, 6, 7, 13, Í4 and 15, as claims due under the terms of the contracts.

Concerning the . first class, the affidavit avers that the’ insurance companies did not notify the defendant of their intention to go into the hands of a receiver or intimate any desire to terminate the contracts; that the defendant was entitled to ninety days’ notice, and that-the discontinuance of business by the insurance companies without the giving of such notice constituted a breach of the contracts. As to items 4 and 12, the defendant admits that “had the plaintiff companies continued on with the business .... the claim-of commissions on returned premiums must have been credited to the companies.” As to items 3 and 11 the defendant contends that he is “entitled to a reasonable amount as damages for the breach of the contracts.” In the schedules referred to in connection with these latter items, the basis of the figures claimed is shown to be a calculation of the daily average of the net premiums, and the multiplication thereof by ninety. Upon this product the defendant makes an arbitrary claim of fifteen per cent as the reasonable amount which he could have earned had the contract lasted ninety days longer. Aside from the question of the sufficiency of the averments covering these several items, or of the defendant’s right to claim them as damages arising from the alleged breach, we are of opinion that, as a matter of law, the facts averred do not constitute a breach of the contracts.

In 34 Cyc. 267, the rule is stated, “Where a receiver is appointed to take control of all the property of the company and to assume the entire management of its affairs,the corporate officers are thereby suspended, and in respect of compensation for services thereafter the corporation is guilty of no breach of contract, since the order of the court operates upon both parties alike and prevents the officers and agents from interfering with the receiver’s management, and performance of contracts for services to the corporation would be illegal; this rule is recognized even though the corporation is not dissolved in the proceeding.” We do not appear to have any Pennsylvania case directly on this subject, but in Louchheim v. Weighing Company, 12 Pa. Superior Ct. 55, it is held: “Where a corporation’s charter is declared void for nonpayment of taxes and a receiver is appointed, a claim by its manager for services rendered after the date of the forfeiture cannot be allowed. . . . The contract relation is terminated .... as completely as by death of individual parties to the contract.” And in Hammond’s Appeal, 123 Pa. 503, we held that when an insolvent corporation has made an assignment for the benefit of creditors, upon acceptance by the assignee the relations of its officers to it are “effectually dissolved by operation of law.” An examination of the cases from other jurisdictions, cited in 34 Cyc. 267, shows the rule as stated in the text to be supported in New York and other states, but not in New Jersey.

Whether or not this rule shall be applied seems to depend upon the circumstances in each case; but we are convinced that it is applicable to the facts in the case at bar. Llere the insurance companies were engaged in a business which could not be conducted by receivers. It is one of the many instances where the appointment of a receiver would be in effect an injunction upon the further continuance of the business: Appeal of Newcastle & Franklin Rd. Company, 3 Walker, 281; Treat v. Penna. Mutual Life Insurance Co., 199 Pa. 326; and we must assume that the plaintiff, when he entered into the agreements with these corporations, knew and contemplated that in such a contingency his agency contracts would come to an end. The clause providing for the ninety days’ notice was only applicable to a discontinuance of the contracts during the ■ natural business life of the companies and cannot be construed to apply to the circumstances of the present case. There is not any averment in the affidavit of defense that the receivership was- other than an entire one, that it was necessitated by the improper conduct of the corporations or their officers, or that it was brought about for the -purpose of ending the contracts in question. In point of fact the defendant states that the business under the contracts was carried on with entire satisfaction until th,e earthquake in San Francisco “greatly impaired the finances of both insurance companies;” and, no doubt, that is the real explanation of their failure. There was no breach of the contracts on the part of the companies, and hence the items in question were properly disallowed.

Concerning thé second class of items, we find no warrant in the contracts for items 5 and 15. As to items 6 and 14, the affidavit fails to aver that these are what is termed in the contracts, “approved incidental expenses,” or otherwise to bring them within the provisions of the contracts covering allowances to the defendant; again, the vouchers referred to are not to be found in the record. Item 13 is so vaguely averred that it is difficult to tell exactly what is meant, but, from other parts of the record, it appears to cover premiums due by a subagent. If this is so, under the terms of the contracts, it is an improper charge against the insurance companies. Item 7 represents an insurance loss paid by the defendant some years after the receivership, but it is not averred with sufficient precision to enable us to determine whether or not it should be allowed.

Affidavits of defense should aver the facts depended upon with reasonable precision and distinctness: Markley v. Stevens, 89 Pa. 279. Averments of set-off must be as specific as those used in a statement of claim. The defendant in respect to such a claim is the actor, and the obligation is upon him to aver his set-off in terms incapable of being misunderstood: Loeser v. Warehouse, 10 Pa. Superior Ct. 540. An affidavit of defense is to be taken most strongly against the defendant, for it is to be presumed that he has made it as favorable to himself as his conscience would allow: Comly v. Simpson, 6 Pa. Superior Ct. 12; Kemp v. Kemp, 1 Woodw. 154. With these familiar rules in mind, we cannot say that the court below erred in holding the present affidavit insufficient as to any of the items disallowed.

It is urged by the appellant that the record should be returned to the common pleas because of its failure to comply with the rule laid down in Pierson v. Krause, 208 Pa. 115. We are convinced by the brief opinion filed that the court below intended to bring itself within the letter of the rule in question. But the learned judges of that court would have greatly facilitated the work of review, had they given us the benefit of their own labors by a separate adjudication of the different items, or classes of items, held to be insufficient, with a brief statement of their reasons for so determining, instead of enumerating the items thought to be sufficient with a mere general dis-allowance of those held to be insufficient. Before entering judgment under the Act of July 15, 1897, P. L. 276, the common pleas ought to see that the items which they hold to be insufficient are enumerated in the rule for judgment or specially indicated in their written adjudication.

The assignments of error are overruled and the judgment is affirmed.


author: Mr. Justice Fell,

text:
    Barclay, Appellant, v. Barclay.

      Partnership — Evidence—Decree pro confesso — Admission against interest — Estoppel—Adjudication by orphans’ court.

    1. In. an action upon promissory notes where the defendant sets up as a defense that he was a partner of the plaintiff; and that there had been no prior accounting between them, the court makes no error in admitting in evidence the record of a decree pro confesso against the plaintiff, in an equity suit against him and another by the defendant for an accounting as partners, where such evidence is admitted, and treated in the charge, not as an estoppel, but merely as an admission against interest and the admission for such purpose is acquiesced in by the plaintiff.
    2. In an action upon promissory notes against an administrator and another, a verdict for the administrator is properly directed, where the record of the orphans’ court offered in evidence shows that the plaintiff had presented the notes in suit as a claim at the audit of the administrator’s account, and that the' claim was disallowed because it was barred by the presumption of payment, and also on the ground that the claimant had been a partner of the decedent, that the amount which he claimed had been carried on the books of the firm to his credit, blended with other moneys arising from his share of profits, and that his interest in the partnership had been sold at sheriff’s sale.
    3. While the orphans’ court has no jurisdiction to settle a partnership account,, it may consider the demand of one claiming as a firm creditor against the estate of a deceased partner.
    Argued Jan. 4, 1911.
    Appeal, No. 113, Jan. T., 1910, by plaintiff, from judgment of C. P. No. 5, Phila. Co., June T., 1907, No. 4086, on verdict for defendants in case of William K. Barclay v. John K. Barclay and the Philadelphia Trust, Safe Deposit & Insurance Company, Administrator. of Samuel G. DeCoursey, late trading as Barclay & Barclay.
    Before Fell, C. J., Beown, Mes-tbezat, Potter, Stewart and Moschzisker, JJ.
    Affirmed.
    Assumpsit upon promissory notes, the amounts and dates of which were as follows: July 1, 1868, $53,897.83; July 1, 1868, $20,000; July 15, 1868, $702.17 and a receipt dated July 14, 1869, for $1133.90. Before Martin, P. J.
    At the trial counsel for John K. Barclay made the following offer:
    Mr. Pepper: I also offer in evidence the record of the equity suit of John K. Barclay v. William K. Barclay and Samuel G. DeCoursey, March Term, 1896, No. 861, in C. P. No. 2.
    Mr. Mason: I ask for an offer of proof.
    Mr. Pepper: The purpose of the offer is to show that in this proceeding the bill was filed by the present defendant, John K. Barclay, against the present plaintiff, William K. Barclay and Samuel G. DeCoursey, in which it was averred that the three were members of the firm of Barclay & Barclay and that the bill was served upon the defendant and that the decree pro confesso was made against the defendant, which decree has not been opened. This for the purpose to constitute the basis of our contention that until that decree is opened, the plaintiff cannot in this court or any other court in this jurisdiction assert to the contrary of that which the decree established. He is estopped by that decree from disputing the fact of his partnership.
    Objected to.
    (After argument.) Mr. Pepper: I renew my offer of the record in the case which I have specified. I offer the whole record and read for the purpose of getting on the notes the first paragraph of the bill, which is as follows:
    1. He and the two defendants were heretofore copart-ners, trading as Barclay & Barclay. The place of business of the copartnership was the city of Philadelphia.
    And the second prayer for relief which was as follows:
    2. That an account be taken of the late partnership transactions as of the first day of July, 1890, and that the balances for and against the said partners severally be ascertained.
    From the answer filed by DeCoursey in that case in paragraph 2, as follows:
    2. The defendant admits the truth of the averments contained in the second paragraph of the bill of complaint.
    And the docket entries which show that on May 12, 1896, the affidavit of service, of the bill was filed and that on May 12, 1896, judgment pro confesso against William K. Barclay for want of appearance was entered.
    Mr. Mason: I have no objection to the offer if it be confined to proof of the admission on the part of the plaintiff in this action. If that is the purpose of it and if that is the effect to which it is confined, I have no objection, but I object to the offer of the record just at this time.

      February 27, 1911:
    Objection overruled. Exception for plaintiff. [1]
    Other facts appear by the opinion of the Supreme Court.
    The court directed a verdict for the defendant, The Philadelphia Trust, Safe Deposit and Insurance Company, Administrator of Samuel G. DeCoursey.
    Verdict and judgment for defendants. Plaintiff appealed.

      Errors assigned, amongst others were (1) ruling on evidence, quoting the bill of exceptions, and (10) in directing a verdict for the administrator.

      Henry Budd, with him Franklin S. Edmonds, and William C. Mason, for appellant.
    The record of the equity suit should not have been admitted as an estoppel: Roemer v. Newman, 26 Fed. Rep. 332; Frow v. De la Vega, 15 Wall. 554; Clason v. Morris, 10 Johns. 524; Rose v. Wood-ruff, 4 Johns. Ch. 547; Russell v. Lathrop, 122 Mass. 300; Dusing v. Nelson, 7 Col. 184; Johnson v. Everett, 9 Paige Ch. 636; Brush Electric Co. v. Western Electric Company, 76 Fed. 767; Himiston v. Sainthrop, 2 Wall. 106; McGourkey v. Ry. Co., 146 U. S. 536.
    The law is clear that the orphans' court has no jurisdiction to determine the existence of a partnership or to settle the accounts of one: Weigley v. Coffman, 144 Pa. 496; Bayley’s App., 60 Pa. 354.

      H. Gordon McCouch of Dickson, Beitler & McCouch, for the administrator of S. G. DeCoursey.
    G. W. Pepper, with him W. B. Bodine, Jr., for John K. Barclay.
   Opinion by

Mr. Justice Fell,

■ We do not find that the record in this case raises the question elaborately argued on behalf of the appellant, whether a decree, pro confesso, for want of an appear anee, entered against one of the defendants in a bill for ..a partnership accounting estops him in a subsequent proceeding between the same parties from denying that he was a partner. This action was brought in 1907 to recover on obligations of a partnership given to the plaintiff in 1868 and 1869. The main ground of defense was that the plaintiff was a member of the partnership when the obligations were given and therefore could not maintain an action until there had been a partnership accounting. In support of this ground the defendant offered in evidence the record of a proceeding in equity for a partnership accounting in which the plaintiff in this action was one of the defendants, in which a decree, pro confesso, for want of an appearance, was entered against him. When the offer was made, it was stated that the purpose was to establish an estoppel. A general objection was made to the offer, but the plaintiff’s counsel said that he made no objection to the admission of the record as proof of an admission by the plaintiff in this action. The evidence was admitted and was treated only as an admission against interest. If it had been regarded as an estoppel, it would have ended the case. After its admission, the plaintiff notwithstanding an objection by the defendant was allowed to testify that he had not been a member of the firm. The record was referred to in the charge as an item of evidence merely, and it was submitted to the jury with the other evidence on the question of partnership.

The defendants in this action were John K. Barclay and The Philadelphia Trust, Safe Deposit & Insurance Company, Administrator of Samuel G. DeCoursey, late trading as Barclay & Barclay. A verdict was directed in favor of the administrator on proof by it of a record of the orphans’ court which showed that the identical claim on which this action is based was presented to that court at the audit of the administrator’s account, and disallowed, and that the adjudication of the auditing judge was confirmed by the court in banc. The decree of the orphans’ court was affirmed by this court in DeCoursey’s Estate, 211 Pa. 92. It is argued that the orphans’ court disallowed the claim because it was without jurisdiction and that its decree was final as to that matter only, and did not affect the right of the plaintiff in any other proceeding to recover on the merits of his claim. We do not find that this contention is sustained by the record of the orphans’ court. The claim was disallowed by the auditing judge because it was barred by the presumption of payment, the claim being then thirty-six years old; and because the evidence showed that the claimant was a member of the firm of Barclay & Barclay and that the amount which he claimed was carried on the books of the firm to his credit, blended with other moneys arising from his share of profits and that his interest in the partnership had been sold at sheriff’s sale. The adjudication ends as follows: “Thus, it would seem, all possibility of right on the part of William K. Barclay as against the firm of which he was a member or as against either of his former partners has been completely eliminated.” This was a direct finding as to the validity of the claim against the decedent’s estate. It is true that the orphans’ court has no jurisdiction to settle a partnership account: Miller’s Estate, 136 Pa. 239; Weigley v. Coffman, 144 Pa. 489, and it did not undertake to do so. But it had jurisdiction to consider the demand of one claiming as a firm creditor against the estate of a deceased partner. This it did and its decree is conclusive.

We find no merit in any of the assignments and the judg-. ment is affirmed.


author: Mr. Justice Stewart,

text:
    Muckle, Appellant, v. Westinghouse Electric and Manufacturing Company.

      Contract — Buyer and seller — Principal and agent — Commissions. -

    In an action to recover commissions on the sale of goods, a nonsuit is properly entered where there is nothing in the evidence to show that the defendant ever agreed to pay commissions to plaintiffs, or ever employed them as agents to make sales, the proof being that the plain-' tiffs were given by the defendant merely a qualified preferential right to sell in a particular territory, on prices furnished by defendant, to which plaintiffs added a percentage in making offers to customers.
    February 27, 1911:
    Argued Jan. 4, 1911.
    Appeal, No. 122, Jan. T., 1910, by plaintiffs, from order of C. P. No. 5, Phila. Co., Sept. Term, 1906, No. 789, refusing to take off nonsuit in case of M. R. Muckle et al., copartners, trading as M. R. Muckle, Jr. & Company v. Westinghouse Electric & Manufacturing Company.
    Before Fell, C. J., Brown, Mestrezat, Potter, Stewart and Moschzisker, JJ.
    Affirmed.
    Assumpsit to recover commissions on sale of goods. Before Ralston, J.
    At the trial it appeared that the plaintiffs claimed to recover the sum of $14,641.30, being five per cent on the sum of $292,826 for electrical apparatus alleged to have been sold to the Philadelphia Rapid Transit Company through the plaintiffs’ efforts as agents, and under an agreement by which they were to receive five per cent on the selling price. The defendant denied that it ever agreed to pay the plaintiffs any commissions on sales, or had ever employed them as agents.
    Other facts appear by the opinion of the Supreme Court.
    The court entered a compulsory nonsuit which it subsequently refused to take off.

      Error assigned was refusal to take off nonsuit.

      Ira Jewell Williams, with him Simpson & Brown, for appellants.

      Francis S. Laws, for appellee.
   Opinion by

Mr. Justice Stewart,

A, careful examination of the evidence submitted on part of the plaintiffs leaves us in no doubt whatever as to the correctness of the ruling in the court below directing a nonsuit. We find nothing that even tends to support the plaintiffs’ contention that they were to receive from the defendant company a commissioh on the sale of the electrical apparatus supplied to the Philadelphia Rapid Transit Company. The agreement embodied in the letter from the defendant company, under date of January 17, 1898, addressed to the plaintiffs, and upon which, the plaintiffs rely as the written contract governing the case, is not only silent as to any commissions governing sales, but it clearly establishes a relation between the parties inconsistent with agency, and which in itself excludes the idea of compensation at the expense of the defendant company, whether by commission or otherwise. We state the whole case when we say that it was not a contract of employment; the contract committed the defendant to nothing, and all it gave the plaintiff was a qualified, preferential right to sell the electrical apparatus manufactured by the defendant company within the territory embraced in the limits of the Philadelphia district, to such parties as had not theretofore, and were not then, customers of the defendant company through its established Philadelphia agency. In the exercise of this preferential privilege it was in the power of the plaintiffs in submitting its bid for any construction work where electrical apparatus, such as was manufactured by the defendant company, was to be employed, to add to the cost of. the machinery whatever commissions it chose, being careful only not to make it so great as to defeat the sale. It is quite possible that still other advantages resulted to the plaintiffs by acquiring the preferential right,, but it does not concern us to inquire how the plaintiffs were to be advantaged; it is enough to know that the contract contains no stipulation for employment, and none for compensation moving from the defendant. This is conclusive that neither was contemplated. Nor is- there anything in the subsequent correspondence between the- parties with respect to this particular sale which suggests any different understanding on the part of either. Compensation from the defendant by commission, or otherwise, is not once referred to. From the interview, at which representatives of the different, companies interested in the sale were present, including a. representative of the defendant company, when the amount of the bid to the traction company was being considered, nothing can be derived which lends support to the plaintiffs’ contention; nothing there said by the representative of the defendant company can be construed as an admission of defendant’s liability for any compensation.. On the contrary, the reply to plaintiffs’ proposal to lower their bid to the traction company, by reducing their own margin, instead of recognizing a liability on the defendant for the commissions, clearly indicates that in his understanding it was a matter about which his company had no concern whatever. It is unnecessary to go further into, the case. We have made sufficient reference to the evidence on which plaintiff relied for a recovery to show the correctness of the court’s ruling. The nonsuit having been properly directed, there was no error in refusing to remove it.

Judgment affirmed.


author: Per Curiam,

text:
    Stewart, Appellant, v. Stewart.

      Deed — Defeasance—Mortgage—Act of June 8, 1881, P. L. .84 — Evidence.

    A bill in equity to declare the cancellation of a deed is properly dismissed on a demurrer where the bill, without any allegations of fraud, merely avers that at or immediately after the execution of the deed, the defendant executed in writing a paper in which he acknowledged that the absolute conveyance was to secure a loan, and agreed on the repayment of the loan to reconvey the real estate, and that plaintiff was induced to execute the deed by a verbal agreement on part of the defendants not to place it upon record, which agreement they had violated by recording the deed.
    Argued Jan. 5, 1911.
    Appeal, No. 188, Jan. T., 1910, by plaintiff, from decree of C. P. No. 3, Phila. Co., June Term, 1909, No. 2,185, dismissing bill in equity in case of David Stewart v. William L. Stewart and Ruth' Bitting Stewart.
    Before Fell, C. J., Brown, Mestrezat, Potter and Stewart, JJ.
    Affirmed.
    Bill in equity to declare the cancellation of a deed.
    The bill averred that the plaintiff was the owner of two properties situate at the corner of Thirteenth and. Hamilton streets in the city of Philadelphia. The bill further averred: that on November 21, 1908, the plaintiff borrowed from his son, the defendant, William L. Stewart, the sum of $12,500 and in consideration thereof and at the request of his son, executed to his son, an absolute conveyance of the two properties and that at or immediately after the execution of this deed upon the demand of the-plaintiff, the defendant, William L. Stewart, executed in writing a paper which he signed, in which paper he acknowledged that the absolute conveyance to him was to secure him in his loan of $12,500 and that by this paper the defendant agreed on the repayment of the loan to reconvey all of the property.
    It was further set forth that the plaintiff was induced to execute the conveyance to his son because of the positive agreement made verbally by his said son that he would not place the conveyance upon record, but the defendant recorded the deed on December 31, 1908, and that the agreement executed by the defendant, William L. Stewart, was given by the plaintiff to his wife, for safe keeping and that this paper was put by his wife into a tin box- rented by her from a trust company; that without his knowledge or consent his son got from his wife, the agreement, and the paper is now in the hands of the defendant.
    It was also alleged that the defendant procured the conveyance of the properties and subsequently procured thé defeasance for the purpose of making it appear of record that he is the absolute owner of the property con-yeyed tó' him for the purpose of cheating and defrauding the plaintiff.
    Defendants demurred to the bill.

      The court sustained the demurrer and dismissed the bill. Ferguson, J., filing the following opinion:
    This is a demurrer to a bill in equity. In brief the allegation of the bill is that the plaintiff, on November 21, 1908, borrowed from his son, the defendant, William L. Stewart, the sum of $12,500, and in consideration thereof executed to the defendant an absolute conveyance of certain real estate; that at or immediately after the execution of the deed, the defendant executed in writing a paper in which he acknowledged that the absolute conveyance was to secure him in his aforesaid loan of $12,500 and agreed, on the repayment of the loan, to reconvey the said real estate; and that the plaintiff was induced to execute the aforesaid conveyance by a verbal agreement on the part of the defendants not to place the conveyance upon record, which agreement they violated by the recording of the deed.
    We are of opinion the bill cannot be sustained. The Act of June 8, 1881, P. L. 84 provides: “No defeasance to any deed for real estate regular and absolute upon its face, made after the passage of this Act, shall have the effect of reducing it to a mortgage, unless the said defeasance is made at the time the deed is made and is in writing, signed, sealed, acknowledged and delivered by the grantee in the deed to the grantor, and is recorded in the office for the recording of deeds and mortgages in the county where the said lands are situated, within sixty days from the execution thereof; and such defeasances shall be recorded and indexed as mortgages by the recorder.” The requirements of the Act are plain, and the Supreme Court has repeatedly said in effect that its terms do not need interpretation. See Sankey v. Hawley, 118 Pa. 30; Molly v. Ulrich, 133 Pa. 41; Crotzer v. Bittenbender, 199 Pa. 504. Unless, therefore, the plaintiff by his allegations of fact shows that the requirements of the Act of 1881 have been fulfilled, his bill cannot be sustained. The bill alleges that the defeasance was in writing, and although it does not expressly so aver, it may be that a liberal construction of the lan-gffage of the averment would justify a conclusion that the defeasance was signed by the defendant, but there is no ■ averment that it was sealed or acknowledged in the sense that it was acknowledged before a person authorized by .law to take acknowledgments of instruments in writing, neither is there an averment that it was recorded within sixty days after the execution thereof. There is an averment that the alleged defeasance, whatever its form, was given by the plaintiff to his own wife, who permitted it to get into the hands of the defendant, and while this averment might justify a conclusion of fraudulent dealing, : the bill is absolutely wanting in averments as to the time when any of the facts averred occurred. If they occurred ■after sixty days from the date of the execution of the de-feasances, it could not avail the plaintiff, because the requirement: of the act as to sealing, acknowledging and recording would make the paper ineffectual were there a decree awarding its delivery.
    It is suggested that when fraud is alleged, the provisions of the act of 1881 are not operative, but there are no allegations of fraud in this bill. In paragraph 6 it is alleged that the acts complained of were for the purpose of cheating and defrauding the plaintiff, but that is a mere conclusion without an averment of facts upon which it could be based, and, in addition, it may be said that it is a fraud, if one at all, which occurred after the deed was delivered. The only fraud which could avail the plaintiff would be one which was perpetrated at the time of the execution and delivery of the deed. The only other avermeñt which bears upon the subject of fraud is the averment in paragraph 3 which is to the effect that the deed was executed upon the agreement by the defendant that he would not place the same upon record. We do hot think that this can be held to be a legal fraud. If the deed was delivered as set out. in paragraph 1, and was upon its face an absolute conveyance, its purpose was to secure the loan, and - a mere promise not to record is not a fraud. The recording of.a'deed is merely a formality for the purpose of rendering permanent and giving notice to the world that which has been previously consummated by the parties. The delivery of the deed was the effectual act, and we cannot find anything in the averment of the promise not to record which would justify our holding it to be such a fraud as would avoid the act of 1881. If there was fraud in the obtaining of possession of the defeasance, the bill is lacking in the necessary averments. As above stated, no dates are given. Neither is there a copy of the defeasance set out nor explanation given of its absence, and no steps appear to have been taken by rule or otherwise to obtain a copy for the purpose of pleading. The acts complained of in the amendments to the bill are acts which are well within the province of an owner of the real estate to make.
    February 27, 1911:
    There remains to be considered the question whether or not the provisions of the Act of April 23, 1909, P. L. 137, apply to this case. In our opinion, that act, which contains no clause indicating an intention that it shall be retroactive in its effect, cannot apply to affect a deed which was executed five months before its passage.
    The demurrer is sustained, and the bill dismissed.

      Error assigned was decree dismissing the bill.

      James W. M. Newlin, with him Harry Cessna, for appellant.

      Thomas James Meagher, for appellees.
   Per Curiam,

The decree is affirmed on the opinion of the court of common pleas.