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Burgess v. Seligman/Opinion of the Court

This is an action brought by the plaintiff, Burgess, against J. & W. Seligman & Co., as stockholders of the Memphis, Carthage & Northwestern Railroad Company, under a statute of the state of Missouri, to recover a debt due to him by the company. The plaintiff, in his petition, alleges that on the fifth on November, 1874, judgment was rendered in his favor against the corporation by the district court of Cherokee county, Kansas, for $73,661, which remains unsatisfied; that in December, 1874, the corporation was dissolved; and that the defendants, at the date of the dissolution and of the judgment, were, and still are, stockholders of the corporation to the amount of $6,000,000, on which there is due and unpaid $1,000,000; and he demands judgment for the amount of his debt. Joseph Seligman, the principal defendant, answered, denying that the defendants were ever stockholders, or subscribers to the stock, of the corporation, and setting forth certain facts and circumstances (stated in the findings) under which the stock alleged to be theirs was merely deposited in their hands by the corporation in trust for a temporary purpose by way of collateral security, to be returned when that purpose was accomplished.

The cause was tried by the court, and judgment was rendered for the defendants on certain findings of fact; and the question here is whether the facts as found are sufficient to support the judgment.

The principal facts upon which the case must turn are substantially the following:

The Memphis, Carthage & Northwestern Railroad Company was a     corporation organized under the general laws of missouri,      with an authorized capital of $10,000,000. On the tenth of     March, 1872, a contract in writing was entered into between      the corporation and J. & W. Seligman & Co., (the defendants,)      which is set forth in the findings. In the recitals of this     contract it was stated that certain municipal subscriptions,      in the shape of bonds, to the amount of $645,000, had been      obtained in aid of its construction; and that a portion of      the road (27 miles) was already graded, bridged, and tied,      and the right of way obtained, and all paid for by the      proceeds of said subscriptions; and that the company now      sought additional capital for procuring iron and equipment      for the road by the sale of its first-mortgage bonds. It was,     therefore, agreed that the railroad company should furnish      the capital necessary to completely prepare the road for the      iron, and would execute and deposit with the defendants their      entire issue of first-mortgage bonds, to-wit, $5,000,000, and      a majority of their capital stock authorized to be issued;      'said stock to remain in the control of said party of the      second part [J. & W. Seligman & Co.] for the term of one year     at least.' The latter agreed to purchase 2,000 tons of      railroad iron under the railroad company's direction, and      from time to time to make advances of cash during the      completion of the road, not exceeding $200,000, (including      the amount paid for iron,) and to receive interest thereon at      the rate of 7 per cent. per annum until reimbursed by sale of     the bonds. They were to have the privilege for the term of 12     months of calling any portion of the five millions of bonds at the rate of 70 cents currency and      accrued interest, less 2 1/2 per cent., and if more bonds      were sold than enough to iron the road, they should advance      funds to purchase rolling stock, $2,000 per mile, the balance      to remain with them on deposit, on interest at the rate of      call loans, to pay any deficiency in net earnings of the road      to meet demands for interest on the bonds. If the bonds, or     part of them, could not, for any unforeseen cause, be      negotiated during the next 12 months, the company were to      repay to J. & W. Seligman & Co. all moneys advanced by them,      with interest at the rate of 7 per cent. per annum, and a     commission of 2 1/2 per cent. on all bonds returned. This is     the purport of the written agreement.

On the first of May, 1872, a trust deed was executed by the     company on its railroad and appurtenances to Jesse Seligman      and John H. Stewart, trustees, to secure the company's bonds. On the eleventh of May, 1872, the following resolution of the     directors was passed: 'It is ordered by the board of      directors that in making negotiations for money with J. & W.      Seligman & Co., certificates for a majority of the capital      stock of this company be issued to the said J. & W. Seligman      & Co., to hold in turst for the period of 12 months, and that      such certiflcates be signed by the president and secretary,      with the corporate seal of this company affixed.' A stock      certificate for 60,000 shares, or $6,000,000, was accordingly      issued in the usual form to J. & W. Seligman & Co. This      certificate was delivered to the defendants, but the court      finds that they never subscribed for the stock, nor agreed to      do so, and obtained it only in the manner set forth. The list     of stockholders on the stock-book of the company, required by      law to be kept, contains the names of certain townships which      contributed aid to the road, and several individuals,      including J. & W. Seligman, but not the amount of shares      held. The stock transfer-book (also required by law)     contained the same list, with date, number of shares, and      amount carried out opposite to each name. The name of J. & W.     Seligman appeared therein as follows:

NAMES. RESIDENCE. DATE. NO. OF SHARES. AMOUNT IN DOLLARS.

* *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *

J. & W. New York,  Dec. 20,  60,000,  6,000,000,

Seligman. N.Y.   1872. sixty thousand, six millions.

(held in escrow.)

* *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *

The court further found that shortly after the contract of     March 14, 1872, Joseph Shippen, an attorney of St. Louis, saw      and examined its provisions, and a few days after told      Burgess (the plaintiff) of the contract, and that thereby the      Seligmans were to have control of the road, and of the stock      and bonds, and told Burgess it would be well for him to have      a talk with Joseph Seligman before entering into contract      with the railroad for its construction. Burgess accordingly     saw Seligman, and testifies that the following conversation      ensued: 'I told him I had been constructing on that Carthage      road, and that I understood he was interested in the road      now, and I would like to talk to him on that matter; that      this company owed me-or Cunningham, who was the president of      the corporation-that he owed me then some money for work I      had done between there and Pierce City, and I wanted to know      what the prospect was for pushing the work forward, the means      of getting the iron, and so on, and he said: 'I think the      best thing you can do is to go on with the work westward, and      we will have ample means to get hold of the local bonds.' It      seems Cunningham had represented to him that there was local      means enough to grade the road, and he suggested to me then      that I would be safe in going on and entering into such a      contract, and then he mentioned that he thought it would be      better for all parties if the road was built and the work      prosecuted westward.'

Afterwards, on June 14, 1872, Burgess entered into a contract     with the railroad company for the construction of the road      from Carthage, Missouri, to Independence, Kansas. He     immediately began work under the contract, and so continued      until the fall of 1873. The bonds of the company to the     amount of $864,000 were issued, and were negotiated and sold      by J. & W. Seligman & Co., they themselves becoming holders of over $400,000      thereof. The stock issued to them was voted on by proxy at     two successive annual meetings for election of directors. The     company being unable to meet its interest on the bonds, the      road and property were delivered to the trustees of the      mortgage and sold in December, 1874, and Joseph Seligman and      Josiah Macy, as a bondholders' committee, became purchasers      thereof, and the railroad corporation was dissolved, in      conformity with the laws of Missouri, about the same time.

On the fifth of November, 1874, Burgess obtained judgment in     the district court of Cherokee county, Kansas, against the      railroad corporation for work and materials under his      contract, for the sum of $73,661, which judgment recited that      it was entered by agreement, with a stipulation that it would      be entitled to a credit of the amount which had been paid by      the railroad company to subcontractors and laborers of the      plaintiff, when the exact amount thereof should have been      ascertained and proper vouchers furnished. No credits,     however, were claimed. The present action was brought to     recover the amount of this judgment. The findings also set     out the contract made by Burgess and his associate with the      railroad company, fourteenth June, 1872, for constructing the      road, by which it appeared that they agreed to take their pay      in township bonds, so far as the same should be furnished.

Upon these facts the court gave judgment in favor of the defendants. Burgess brings the case here by writ of error.

The statutory provision upon which the action is founded is the twenty-second section of article 1 of the act of Missouri relating to private corporations, (1 Wagner's St. c. 37,) which declares as follows:

'If any company, formed under this act, dissolve, leaving     debts unpaid, suits may be brought against any person or      persons who were stockholders at the time of such dissolution      without joining the company in such suit, and if judgment be      rendered and execution satisfied, the defendant or defendants      may sue all who were stockholders at the time of dissolution      for the recovery of the portion of such debt for which they      were liable.' By section 9 of article 2 of the same chapter, it is enacted as follows:

'No person holding stock in any such company as executor,     administrator, guardian, or trustee, and no person holding      such stock as collateral security, shall be personally      subject to any liability as a stockholder of such company,      but the person pledging such stock shall be considered as      holding the same, and shall be liable as a stockholder      accordingly, and the estates and funds in the hands of such      executor, administrator, guardian, or trustee shall be      liable, in like manner and to the same extent, as the      testator or intestate, or the ward or person interested in      such fund, would have been if he had been living and      competent to act, and held the stock in his own name.'

The first question for consideration is whether the plaintiff's claim was established. He relied on the judgment recovered by him against the corporation in Kansas. It is contended by the defendants that this judgment does not establish any debt due to the plaintiff. But we think that the objection is not sound. The judgment, as against the corporation and its privies, does establish the debt named therein as due to the plaintiff, but subject to a defeasance for such an amount as might be shown to have been paid to subcontractors and laborers by the corporation. The defendants, as well as the corporation, were at liberty to show any credits which, by the stipulation, were properly applicable in reduction of the amount of the judgment. None such were shown, or attempted to be shown. Until such credits were shown the judgment stood valid for the whole amount. It was not for the plaintiff, but for the defendants, to show that any such credits existed.

The next and principal question is whether J. & W. Seligman & & Co., or J. & W. Seligman, were stockholders of the Memphis, Carthage & Northwestern Railroad Company within the meaning of the law. Did the 60,000 shares of stock belong to them? or did they hold it by way of trust or as collateral security for the fulfillment of the company's obligations in relation to the bonds? The courts in England, and some in this country, have gone very far in sustaining a liability for unpaid subscriptions to stock against persons holding the same in any capacity whatever, whether as trustees, guardians, or executors, or merely as collateral security. It cannot be denied that, in some cases, the extreme length to which the doctrine has been pushed has operated very harshly; and in cases in which the corporation itself has no just right to enforce payment, and where no bad faith or fraudulent intent has intervened, it may be doubted whether creditors have any better right, unless by force of some express provision of a statute. The Missouri statute recognizes the justice of making a discrimination between those who hold stock in their own right, and those who hold it merely in a representative capacity, or as trustees, or by way of collateral security.

Upon a careful examination of the facts found in this case we do not see how a reasonable doubt can exist that the Seligmans held the stock in question as trustees and custodians by way of collateral security for themselves and the purchasers of the bonds. That was clearly the intent of the parties, declared in almost so many words; and that intent must prevail, unless, by some inadvertency in carrying it our, the Seligmans have been unwittingly caught in some legal snare of which the creditors can take advantage. By the contract exccuted between them and the corporation they were to act as its financial agents in the disposal of its bonds, and to make advances of maney from time to time to enable the company to get the necessary iron for completing its road and equipment for running it. The company were to prepare the superstructure and procure the ties, and everything necessary by way of preparation for laying the iron down; and was to do this by means of the resources it had already secured, and expected to obtain, fron the township subscriptions, in order that the mortgage to be given as security for the bonds might be good and valid for that purpose; and the company further agreed to deposit with Seligman & Co. a majority of its capital stock, to remain in their control for the term of one year at least. The reasonable inference is that this deposit of stock was to be made for the purpose alleged in defendant's answer, namely, as security for the payment of the bonds, and to enable Seligman & Co. to control the corporation, and see that its affairs were honestly conducted and the earnings properly applied. The resolution of the directors, adopted for carrying out this agreement, is to the same purport and effect: it directs that, in making negotiations for money with Seligman & Co., certificates for a majority of the capital stock should be issued to them to hold in trust for the period of 12 months; and when the stock was entered upon the transfer-book in the name of J. & W. Seligman, it was characterized as being 'held in escrow.'

The terms used may not have been strictly technical. The issuing of the stock in their names may not have been a 'deposit' or an 'escrow' in the strict sense of those words; but the intent is very clear that the stock was not to be regarded as their stock, but as belonging to the company, though in their names, and that it was to be held by them simply as a security. They never subscribed for the stock; they never became indebted to the company for it; the company never acquired any right to demand from them a single dollar on account of it. Though issued in form, it was only issued in a qualified sense, to subserve a specific purpose by way of collateral security for a limited period, and was returnable to the company when that purpose should be accomplished. It seems to us that the Seligmans, in taking and holding the stock, held it merely in trust by way of collateral security for themselves and others, and that they were, therefore, within the express exception made by the law in favor of those holding stock in that way.

It is urged, however, that they are estopped from claiming the benefit of this exemption by their conduct in being represented and voting at stockholders' meetings. But if the law allows stock to be held in trust, or as collateral security, without personal liability, and if, as we suppose, the clear effect of the contract was to create such a holding in this case, we do not see how the doctrine of estoppel can apply. The only parties to complain would be the other stockholders, who might, perhaps, complain that stock held merely in trust, or as collateral security, is not entitled to participate with them in the privilege of voting. But from them no complaint is heard. Creditors could not complain, for, on the hypothesis that stock may lawfully be held at all in trust, or as collateral security, without incurring liability to them, the act of voting on the stock cannot injure or affect them. In the absence of such a law the case might be very different. Undoubtedly it has been held, in cases innumerable, that acting as a stockholder binds one as such; but that is where the law does not allow stock to be held at all without incurring all the liabilities incident to such holding. The present is an action at law based upon the supposed liability of the defendants under a statute which makes the distinction referred to, and which does not make all stockholders liable indiscriminately. We think that this makes a material difference. If the defendants can show, as we think they have shown, that they are within the exception of the statute, the statutory liability does not apply to them.

It is by no means clear, however, that J. & W. Seligman did not have a right to vote on the stock, even as against the stockholders. When the law provides that if a person holds stock as a trustee, or by way of collateral security only, he shall not be personally liable for the company's debts, it supposes that the stock shall be holden, and that the pledgee or trustee shall be the holder. If, then, the law is to have any force or effect, the mere fact of holding cannot be set up as a bar or estoppel against proof of the manner and character of such holding. And if such pledgee or trustee may be a holder of the stock in that character, is he bound to be perfectly passive in his holding? He will not be entitled to any dividends or profits, it is true, or, if he receives dividends or profits, he must account therefor; but is it certain that he may not lawfully vote on the stock? An executor administrator, guardian, or trustee certainly may vote; and where is the rule to be found that a holder for collateral security, under a law which permits such holding, may not vote on the stock so held without losing his character as a mere pledgee? But, as before said, if the pledgee in voting the stock exceeds his rights as such pledgee, it cannot have the effect of making the stock his own. No one is injured, and no one can complain except the other stockholders whose rights are invaded.

The line of authorities usually quoted to show that those who actually hold stock, and who manifest a voluntary or intentional holding by voting on it, or receiving dividends or other benefit from it, consists mainly of cases in which parties have been held as corporators or associates as between themselves and the corporation or joint-stock association, and as such incidentally liable to the creditors of such companies. Sir Nathaniel Lindsley, in his able Treatise on Partnership, has amply discussed the whole subject upon the platform of the English decisions. His fundamental prosposition is this: 'The type, then, of a member or shareholder of a company is a person who has agreed to become a member, and with respect to whom all conditions precedent to the acquisition of the rights of a member have been duly observed. * *  * In practice, difficulties are only prewsented where this standard is not reached; and the important question really is to what extent it can be departed from, and membership be nevertheless constituted.' Volume 1, p. 128. He then devotes many pages to show, by adjudged cases, how a man may be held as a corporator by the company itself, by holding himself out as such, as by taking dividends, etc. Now, in the present case, the relation of J. & W. Seligman & Co. to the corporation is expressly settled and fixed by the written contract between them. We have already examined that contract, and have shown that the stock issued by the corporation to J. & W. Seligman & Co. was issued to them only as trustees and by way of collateral security. The proposition that the corporation could hold them as subscribers to its stock would be in flat defiance of the contract in whole and in every part. We do not know of any iron rule of law which would prevent them from showing this contract relation between them and the company. It is the origin and foundation of their whole connection with it. The sufficiency of the evidence to control their status towards the company is another thing. Its competency seems to us free from doubt. When examined, it shows, as before stated, that as between them and the company the latter has no claim whatever against them in relation to the stock except to have it returned when properly required, after the purpose of its issue had been accomplished. It belongs to the company, and to it alone. J. & W. Seligman are mere trustees or custodians of it for a special purpose, that purpose being collateral security.

In this connection we may properly refer to the decision of the court of appeals of Maryland in the case of Matthews v. Albcrt, 24 Md. 527, which was a case arising upon the Maryland statute from which that of Missouri was copied, so far as relates to the exception of those holding stock in trust or as collateral security. That was a suit in equity brought against stockholders to render them liable for the company's debts. One of them, by the name of Tieman, had loaned money to the corporation, and, as security for its payment, a certificate of stock had been issued to him. After its issue an indorsement was made on it by the president of the corporation to the effect that it had been deposited with Tieman as collateral security for the loan. The court said:

'The claim of W. H. Tieman is for $2,000, money alleged to be     loaned to the company on the eighth of January, 1859. But it     is insisted by the appellees lees that Tieman, instead of      being a non-stockholding creditor, is, according to the      evidence, a stockholder, and as much liable as the Alberts. We do not concur in this view of the relation of Tieman to     the company. In our opinion his claim is for money loaned,     and the stock transferred to him was held by him as      collateral security for his loan, and, so holding it, he is      not personally subject to any liability as stockholder, but      is protected by the provision of the twelfth section of the      act of 1852, c. 338.'

A similar decision in a case arising upon a like statute in New York was made by the commissioners of appeal of that state in the case of MacMahon v. Macy, 51 N. Y. 155. The New York railroad act of 1850, as amended by the act of 1854, made stockholders liable to creditors of the company for the amount unpaid on their stock: but the eleventh section of the act contained precisely the same provision as that in the ninth section of the Missouri law, that no person holding stock as executor, administrator, guardian, or trustee, and no person holding stock as collateral security, should be personally subject to any liability as stockholders, imposing the liability, how ever, as the Missouri law does, on the pledgeor or cestui que trust. Macy was sued as a stockholder, and it was shown on the trial that the stock held by him was transferred to him as collateral security. The referee refused to give any effect to this evidence, holding that parol evidence could not be received to contradict or vary the written assignments or transfers, which were absolute in form. The commissioners of appeal, on this branch of the case, said:

'In this he erred. It is always competent to show that an     assignment or conveyance absolute in form, was only intended      as a security. There is nothing in any statute which makes     the books of the company incontrovertible evidence of      ownership of stock. A person may be the absolute legal and     equitable owner of stock without any transfer appearing upon      the books.'

All the judges of the commission concurred in this opinion.

We do not well see how any different conclusion could logically have been arrived at. If the law declares that stock held as collateral security shall not make the holder liable, surely it must be competent to show that it is so held. And when this fact is once established, there is an end of the application of estoppel, unless it can be invoked by some party who has been specially misled by the conduct of the defendants.

It is urged by the plaintiff in this case that the defendants are estopped as to him, because of a certain conversation between Joseph Seligman and himself before he entered into the contract for construction. We have carefully examined the account given of this conversation by the plaintiff himself, and we see nothing in it which at all compromits the defendants on the question of their actual status and position in the affairs of the company. Especially may this be said in view of the fact that, prior to that conversation, an attorney, who had inspected the contract of Seligman & Co., told him of it, and that it would be well for him to have a talk with Joseph Seligman before entering into contract with the railroad company for its construction. The general purport of the conversation which he afterwards had with Seligman was that Seligman advised him to take the contract and go on with the work, as the best thing for all parties, as there would be ample means to get hold of the local bonds, which would be sufficient to grade the road. Surely there was nothing in this conversation to estop the defendants from showing what their real position was with regard to the stock which they held.

But the appellant's counsel, with much confidence, press upon our attention the decisions of the supreme court of Missouri on the questions involved in this case, and on the very transactions which we are considering. That court, since the determination of this case by the circuit court, has given judgment in two cases adversely to the judgment in this, and to the views above expressed. The first case was that of Griswold v. Seligman, decided in November, 1880; the other, that of Fisher v. Seligman, decided in February, 1882, in which the former case was substantially followed and confirmed. The case of Griswold v. Seligman seems to have been very fully and carefully considered. We have read the opinion of the court and the dissenting opinion of one of the judges with much attention, but we are unable to come to the conclusion reached by the majority.

We do not consider ourselves bound to follow the decisions of the state court in this case. When the transactions in controversy occurred, and when the case was under the consideration of the circuit court, no construction of the statute had been given by the state tribunals contrary to that given by the circuit court. The federal courts have an independent jurisdiction in the administration of state laws, co-ordinate with, and not subordinate to, that of the state courts, and are bound to exercise their own judgment as to the meaning and effect of those laws. The existence of two co-ordinate jurisdictions in the same territory is peculiar, and the results would be anomalous and inconvenient but for the exercise of mutual respect and deferonce. Since the ordinary administration of the law is carried on by the state courts, it necessarily happens that by the course of their decisions certain rules are established which become rules of property and action in the state, and have all the effect of law, and which it would be wrong to disturb. This is especially true with regard to the law of real estate, and the construction of state constitutions and statutes. Such established rules are always regarded by the federal courts, no less than by the state courts themselves, as authoritative declarations of what the law is. But where the law has not been thus settled, it is the right and duty of the federal courts to exercise their own judgment; as they also always do in reference to the doctrines of commercial law and general jurisprudence. So, when contracts and transactions have been entered into, and rights have accrued thereon under a particular state of the decisions, or when there has been no decision of the state tribunals, the federal courts properly claim the right to adopt their own interpretation of the law applicable to the case, although a different interpretation may be adopted by the state courts after such rights have accrued. But even in such cases, for the sake of harmony and to avoid confusion, the federal courts will lean towards an agreement of views with the state courts if the question seems to them balanced with doubt. Acting on these principles, founded as they are on comity and good sense, the courts of the United States, without sacrificing their own dignity as independent tribunals, endeavor to avoid, and in most cases do avoid, any unseemly conflict with the well-considered decisions of the state courts. As, however, the very object of giving to the national courts jurisdiction to administer the laws of the states in controversies between citizens of different states was to institute independent tribunals, which, it might be supposed, would be unaffected by local prejudices and sectional views, it would be a dereliction of their duty not to exercise an independent judgment in cases not foreclosed by previous adjudication. As this matter has received our special consideration, we have endeavored thus briefly to state our views with distinctness, in order to obviate any misapprehensions that may arise from language and expressions used in previous decisions. The principal cases bearing upon the subject are referred to in the margin, but it is not deemed necessary to discuss them in detail. #fna

In the present case, as already observed, when the transactions in question took place, and when the decision of the circuit court was rendered, not only was there no settled construction of the statute on the point under consideration, but the Missouri cases referred to arose upon the identical transactions which the circuit court was called upon, and which we are now called upon, to consider. It can hardly be contended that the federal court was to wait for the state courts to decide the merits of the controversy and then simply register their decision; or that the judgment of the circuit court should be reversed merely because the state court has since adopted a different view. If we could see fair and reasonable ground to acquiesce in that view, we should gladly do so; but in the exercise of that independent judgment which it is our duty to apply to the case, we are forced to a different conclusion. The cases of Pease v. Peck, 18 How. 598, and Morgan v. Curtenius, 20 How. 1, in which the opinions of the court were delivered by Mr. Justice GRIER, are precisely in point.

The cardinal position assumed by the state court is that, inasmuch as certificates of stock were in fact issued to and accepted by J. & W. Seligman, and they voted on the stock, they are absolutely estopped from denying that they are the owners of the stock, subject to all the liabilities incident to that relation; and that they cannot have the benefit of the exception accorded by the law to those who hold stock as collateral security, because, as the court holds, that exemption only appelies to those who have received stock in that way from some stockholder who can be made liable as a stockholder, and not to those who have received stock from the corporation itself by way of collateral security.

The first position, that the acceptance of the stock, and voting upon it, absolutely precluded the defendants from denying that they are owners of the stock, has been already considered. The great mass of authorities relied on by the supreme court of Missouri, on this part of the case, English as well as American, are cases in which parties have been held as corporators or associates as between themselves and the corporation, and upon that footing have been held responsible to creditors when the rights of creditors have been in question. We think that we have sufficiently shown that these authorties cannot govern the case in hand if any effect is to be given to the law of Missouri, exempting from personal liability those who hold stock in a ficuciary character or by way of collateral security. We will, therefore, briefly examine the other position, that this law does not apply to those who receive stock as collateral security from the corporation itself.

The argument that the exemption from liability in cases of stock held as collateral security applies only to those who have received it from third persons who were stockholders, and who can be proceeded against as such, seems to us unsound, and contrary both to the words and the reason of the law. It takes for granted that stock cannot be received as collateral security from the corporation itself and still belong to the corporation, and yet we know that such transactions are very common in the business of this country. The words of the statute are positive, and relate to all holders of stock for collateral security. They are as follows: 'No person holding stock in any such company as executor, administrator, guardian, or trustee, and no person holding such stock as collateral security, shall be personally subject to any liability as stockholder of such company.' The reason of this law is derived from the gross injustice of making a a person liable as the owner of stock when he only holds it in trust or by way of security, and from the inexpediency of putting a clog upon this species of property, which will have the effect of making it unavailable to the owner, or of deterring prudent and responsible men from accepting positions of trust where any such property is concerned. It seems to us that not only the law, but the reason upon which it is founded, applies to the holders of stock as collateral security, whether received from an individual or from the corporation itself. It is argued, however, that the remaining words of the law are repugnant to this view. These words are as follows:

'But the person pledging such stock shall be considered as holding     the same, and shall be liable as a stockholder accordingly,      and the estates and funds in the hands of such executor,      administrator, guardian, or trustee shall be liable, in like      manner and to the same extent, as the testator or intestate,      or the ward or person interested in such fund, would have      been if he had been living and competent to act, and held the      stock in his own name.'

The argument is that these words imply that there must always be some person or estate to respond for the stock, or else the exemption cannot take effect. The obvious answer is that this clause fixes the liability upon the pledgeor as a stockholder, where there is a pledgeor who can be made liable in that character. When the corporation pledges its own stock as collateral security, though it cannot be proceeded against as a stockholder eo nomine, the reason is because it is primary liable, before all stockholders, for all its debts. In such a case the clause last quoted would not strictly apply to it; but the holder of its stock as collateral security would be within both the letter and the spirit of the first clause. It is supposed that some flagrant injustice would ensue if there was not some one who could be reached as a stockholder in every case of stock pledged as collateral security; hence, stock pledged by the corporation itself must be regarded as belonging to the pledgee, though no other pledgee of stock is treated in this way. Where is the justice of this? Why should the stock be necessarily considered as belonging to some one besides the corporation itself? Is any one harmed by considering the corporation as its true owner? If the stock had not been issued as collateral security, it would not have been issued at all; it would not have been in existence. Would the creditors have been any better off in such case? They are better off by the issue of the stock as collateral, because the general assets of the company have received the benefit of the moneys obtained by means of the pledge. The more closely the matter is examined, the more unreasonable it seems to deny to a pledgee of the corporation the same exemption which is extended to the pledgee of third persons. We think that the one equally with the other is protected by the express words and true spirit of the law.

We might pursue the subject further, and examine in detail the suggestions and authorities adduced by the learned court which decided the cases of Griswold v. Seligman and Fisher v. Seligman, but it is unnecessary. What we have said is sufficient to indicate substantially the grounds on which we feel obliged to dissent from its conclusions. In our judgment the facts found by the court below make out a clear case of stock held in trust and by way of collateral security only, and the judgment rendered thereon was correct.

Judgment affirmed.


text: Talk:Burgess v. Seligman/Opinion of the Court

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


text:
Turner v. Maryland

John K. Cowen and E. J. D. Cross, for plaintiff in error.

''Chas. J. M. Gwinn'', for defendant in error.

BLATCHFORD, J.

title: Turner v. Maryland


text: Talk:Turner v. Maryland

title: Talk:Turner v. Maryland


text:
Turner v. Maryland/Opinion of the Court

This is a writ of error to the court of appeals of the state of Maryland, and the question presented for our consideration is the constitutional validity of certain provisions in the tobacco inspection statutes of Maryland.

The plaintiff in error, Turner, was indicted in the criminal court of Baltimore. The indictments contained two counts. The first count alleged that Turner packed in a hogshead tobacco grown by him on a farm belonging to him in Charles county, in Maryland, and marked the hogshead with his full name and his place of residence in said county, and shipped it to the city of Baltimore; that it was not delivered at any tobacco warehouse in said city, under the management or control of any inspector of tobacco appointed for said warehouse by the governor of the state of Maryland, under the constitution and laws of said state, nor to any one of said inspectors of tobacco, nor to any one acting under the authority of any one of said inspectors of tobacco, to be weighed, passed, or marked, and it was not weighed, passed, and marked by any such inspector of tobacco, nor by any person acting under the authority of any one of said inspectors of tobacco; but that the said Turner exported it from said city to Bremen, in Germany, without having procured it to be weighed, passed, and marked by any such inspector of tobacco, or by any person acting under the authority of any one of said inspectors of tobacco. The second count contained the same allegations, and the further averment that the said Turner did not, prior to said exportation, pay or cause to be paid any sum of money due for outage, or any sum of money due for storage, to the state of Maryland, on said hogshead, to any such inspector of tobacco, or to any other person having authority to receive the same, although certain sums of money were due and payable by him to said state for outage and storage on said hogshead.

Separate demurrers were filed to each count of the indictment, and then a written stipulation was filed by the parties, as follows:

'It is agreed in this case (1) that the matters and facts     charged in the indictment in this case are true, as therein      stated; (2) that for the more speedy final determination of      the questions of law involved in this case the demurrers      which the traverser has entered to this indictment shall be      overruled pro forma by the court; (3) that after such      overruling of the demurrers the case shall be forthwith      submitted to the court, without the intervention of a jury,      upon the admission contained in the first paragraph of this      agreement.'

The demurrers were then overruled. The court then rendered a judgment that Turner pay a fine of $300. On the same day, Turner, by petition to said criminal court, setting forth that he had been adjudged guilty of a misdemeanor, and by the judgment of said court ordered to pay the sum of $300 to said state, prayed an appeal to the court of appeals of Maryland, assigning errors in the record. That court affirmed the judgment, and Turner has brought the case into this court by a writ of error, alleging that the statutes of Maryland on which the indictment was founded, and the validity of which was sustained by the state court, are repugnant to the constitution of the United States.

It is claimed by the defendant in error that the statutory provisions, the validity of which is denied by the plaintiff in error, are 'inspection laws,' within the meaning of clause 2 of section 10 of article 1 of the constitution of the United States, which clause is as follows:

'No state shall, without the consent of the congress, lay any     imposts or duties on imports or exports, except what may be      absolutely necessary for executing its inspection laws; and      the net proceeds of all duties and imposts laid by any state      on imports or exports, shall be for the use of the treasury      of the United States; and all such laws shall be subject to      the revision and control of the congress.'

By chapter 346 of the Laws of Maryland of 1864, a new tobacco inspection law was enacted, as part of the Code of Public Local Laws, in place of and expressly repealing certain portions of said Code. It provides (section 1) for the appointment of five tobacco inspectors, one for each state tobacco warehouse in the city of Baltimore. By section 5 each tobacco inspector is required to employ such clerks and laborers, and provide and keep on hand such books, implements, and materials, as may be necessary for the economical and effective discharge of his duties as such inspector, and the salaries of the various clerks and laborers are prescribed, to be paid from the receipts in the respective offices, with the requirement that the inspectors shall at no time employ more labor than shall be necessary for the effective performance of the work to be done. There are provisions to facilitate the landing of tobacco at the wharves in front of the warehouses, and its removal therefrom, and to secure the safe preservation of the tobacco after its delivery at the warehouse. Section 10 is as follows:

'It shall be the duty of each tobacco inspector to cause each     hogshead of tobacco landed or delivered at the warehouse to      which he is appointed to be numbered in succession as      received, and to cause said number to be entered in a book      kept for that purpose, together with the time said hogshead      was received, the name of the vessel or other conveyance, if      known to him, by which said hogshead was brought to the city      of Baltimore, and of the owner or consignee of said tobacco,      and the initials or other marks on said hogshead, identifying      the same; and, when said hogshead shall be removed from said      warehouse, he shall cause an entry to be made, in some book      kept for that purpose, of the time when the same was so      removed, the name of the person to whom the same delivered, and of the vessel or other      conveyance by which the same was taken away.'

It is provided by section 12 that each inspector shall cause all the tobacco in the warehouse to which he may have been appointed to be inspected as speedily as practicable, in regular order, as numbered; and by section 13 that he shall cause each hogshead of tobacco, before it is uncased, to be weighed, and the tobacco in each hogshead and the cask itself to be separately weighed, and the weight of each hogshead, as first weighed, and the gross and net weight of the tobacco therein contained, after inspection, to be entered in a proper book, with sufficient reference to its marks and numbers as previously recorded; and by section 14 that he shall mark on the side of each hogshead, with a marking iron, its warehouse number and weight, and the net weight of tobacco contained therein, and its warehouse number on each head, with blacking; and, by succeeding sections, that he shall uncase and break all tobacco, in whatever state raised, and draw samples from each hogshead, and tie each lot of samples together, and label it with the warehouse number of the hogshead, and the number of the warehouse, and the date of inspection, and the name of its owner, or, if known, the initials or other marks on the hogshead, and deliver it sealed, if the tobacco be merchantable, to the owner, with a certificate stating the date of inspection, the warehouse mark and number of the hogshead, the weight thereof, and the net weight of the tobacco in it, and that unmerchantable tobacco shall be reconditioned, packed, reweighed, and reinspected, and then sampled and certified; and by section 27 that every hogshead shall be liable to the charge of $1.50 outage, if weighing less than 1,100 pounds, and to 15 cents additional for every 100 pounds, which shall be paid by the purchaser thereof to the inspector, before it is removed. Penalties are imposed by section 40 for erasing, altering, or adding to any mark placed by the inspector on any hogshead or any label of any sample, and for fraudulently taking any tobacco from a sample, or substituting other tobacco for any in such sample, and for counterfeiting any inspector's certificate or seal. Section 41 is as follows:

'After the passage of this act it shall not be lawful to     carry out of this state, in hogsheads, any tobacco raised in      this state, except in hogsheads which shall have been inspected, passed,      and marked agreeably to the provisions of this act, unless      such tobacco shall have been inspected and passed before this      act goes into operation; and any person violating the      provisions of this section shall forfeit and pay the sum of      $300, which may be recovered in any court of law of this      state, and which shall go to the credit of the tobacco fund.'

This section was amended by chapter 291 of the Laws of 1870, by re-enacting it with the following addition:

'Provided, that nothing herein contained shall be construed     to prohibit any grower of tobacco, or any purchaser thereof,      who may pack the same in the county or neighborhood where      grown, from exporting or carrying out of this state any such      tobacco without having the same opened for inspection, but      such tobacco so exported or carried out of this state without      inspection shall in all cases be marked with the name in full      of the owner thereof, and the place of residence of such      owner, and shall be liable to the same charge of outage and      storage as in other cases; and any person who shall carry or      send out of this state any such tobacco, without having it so      marked, shall be subject to the penalty prescribed by this      section.'

Section 42 prescribes the size of the casks in which tobacco raised in Maryland shall be packed, and forbids the inspector to inspect or pass it until packed in a hogshead of proper dimensions.

By chapter 36 of the Laws of 1872, entitled 'An act to add a new article to the Code of Public General Laws regulating the inspection of tobacco,' some additional regulations were made, and some existing provisions were re-enacted, and some changes were made, and all inconsistent provisions of law were repealed; but the only material additions or changes made, so far as the present case is concerned, were these: By section 11, every inspector shall have uncased and break every hogshead of tobacco delivered for inspection, in so many places for Maryland and Ohio, and in so many places for Kentucky and Virginia, and, if the tobacco is sound, take a sample, and mark the hogshead with its number, the year of inspection, and the initials of the owner on each head and on the bilge, and the tare and net weight on the bilge. By section 15, each inspector shall keep in a book 'the name of the owner, the number, gross, tare, and net weight of every hogshead of tobacco inspected by him, the state where grown, the consignee of the same, the name of the vessel by which shipped out, and the name of the party shipping the same, and for every hogshead so inspected by him he shall issue his certificate or note, stating in such certificate or note the name or initials of the owner, the number of the hogshead, the state where grown, the date of inspection, and the gross, tare, and net weight of the hogshead, and he shall make no delivery of inspected tobacco from his warehouse except upon surrender of the certificate or note corresponding with the number of the hogshead.' By section 26, 'no tobacco of the growth of this state shall be passed or accounted lawful tobacco unless the same be packed in hogsheads not exceeding 54 inches in the length of the staves, nor exceeding 46 inches across the head, and the owner, or his agent, of tobacco packed in any hogshead of greater dimensions shall repack the same in hogsheads of the size herein prescribed, at his own expense, before the same shall be passed.'

By chapter 228 of the Laws of 1872, the charge for outage is fixed at $2 for every hogshead not exceeding 1,100 pounds, and 12 1/2 cents additional on every 100 pounds over 1,100 pounds, to be paid by the shipper of the tobacco or his agent.

In order to determine whether the statutory provisions in question are obnoxious to the objection made, their meaning must be ascertained. The act of 1864 requires the inspector to examine the hogshead to ascertain whether it is of the required dimensions, and then to inspect the tobacco itself by sampling the contents, and when this has been done, and the weight ascertained, the hogshead is passed. In regard to the addition made by the act of 1870, chapter 291, to section 41 of the act of 1864, the grower or purchaser of tobacco, packed in the county or neighborhood where it is grown, is permitted to export the same without having the hogshead opened for inspection by sampling its contents; but the act requires such hogshead to be marked with the name and residence of the owner, and it is made liable to the charge of outage as in other cases, and any one violating its provisions is subject to the penalty imposed by section 41 of the act of 1864. The act of 1870, in thus permitting the grower or purchaser of tobacco packed in the county or neighborhood where it is grown, to export the same without having the hogshead opened for inspection, does not dispense with any other requirement of the act of 1864 in regard to inspection. It provides, in express terms, that each hogshead thus packed shall be marked with the name and residence of the owner. It is necessary, therefore, that some one shall ascertain whether these requirements have been complied with, and whether the tobacco was, in fact, the growth of the county or neighborhood where it was packed. It also requires that such tobacco shall be liable to the same charge of outage as in other cases; and, as the charge of outage depends upon the weight of the hogshead, it is necessary that some one shall ascertain the weight of such hogshead, in order to determine the amount to be paid. It does not change, or in any manner dispense with, the statutory requirements in regard to the dimensions of the hogshead in which such tobacco is to be packed, and it is necessary that some one shall see that these requirements are complied with. These and other duties, it is obvious, are to be performed by the inspectors, and when they are performed the hogshead is to be passed and marked as provided by the act of 1864. When the words 'such tobacco so exported or carried out of this state without inspection' are read in connection with the preceding sentence, which permits the grower or purchaser to export such tobacco 'without having the same opened for inspection,' it is clear that the term 'without inspection' refers to inspection by opening the hogshead and sampling the contents.

The act of 1872, c. 36, changes some of the provisions of the act of 1864, omits others, and in express terms repeals all acts or parts of acts inconsistent with its provisions. The penal clause of the act of 1864, as amended by the act of 1870, which makes it unlawful to carry out of the state in hogsheads tobacco raised in the state, except in hogsheads inspected, passed, and marked according to the provisions of the act, is omitted in the act of 1872; but there is nothing, either in the title or the general frame-work of the act, or in the manner in which the subject-matter is dealt with, to justify the conclusion that the legislature intended the act of 1872 as a substitute for all prior legislation on the subject. The provisions of such prior laws are essential to give completeness to the system of which the act of 1872 is but a part. That does not, it is true, make it unlawful to export tobacco raised in the state unless the same shall have been inspected and passed, but it does provide that no tobacco, the growth of the state, shall be passed or accounted lawful tobacco unless the same be packed in hogsheads of certain prescribed dimensions. It does not say, in so many words, that the tobacco raised in the state and intended for exportation shall be delivered at one of the state tobacco warehouses; but it does provide for the appointment of inspectors of tobacco, clerks, and other officials, with fixed salaries, and assigns them to the tobacco werehouses, with no duty to perform unless it be the inspection of tobacco. In thus declaing that no tobacco, the growth of the state, shall be accounted lawful tobacco unless packed in the manner prescribed by the act, it is plain the legislature meant it to be the duty of the inspectors appointed by the act to ascertain whether such tobacco was thus packed in conformity with the requirements of the statute, and this they could not do unless such tobacco should be delivered at the state tobacco warehouses.

The legislature meant, and only meant, to select certain provisions from the public local law in relation to the inspection of tobacco, and to re-enact these in a public general law, and to leave such portion of the local law which it did not thus re-enact, and did not modify or repeal by inconsistent provisions, as existing parts of the local law. The act of 1872 did not modify or repeal section 41 of the act of 1864, as modified by the act of 1870, which constituted part of the local law; and under that section it was the duty of the plaintiff in error to have delivered the tobacco packed by him at one of the state tobacco warehouses, in order that the inspectors might ascertain whether it was packed in hogsheads of the proper dimensions, and whether it was packed in the county or neighborhood where it was grown, and marked as the statute directed. The legislature did not intend that merely marking the name of the grower or purchaser on the hogshead should release such grower or purchaser from the other requirements of the act. These views are those which were held by the court of appeals of Maryland in its opinion delivered in this case. 55 Md. 240. The result is that all that the act of 1870 does in regard to a grower or purchaser of tobacco raised in Maryland, who packs the same in hogsheads in the county or neighborhood where such tobacco is grown, and who exports it or carries it out of the state, is to dispense with the opening of such hogsheads for inspection, but that it does not dispense with any other requirement of the act of 1864 in regard to inspection; and that it is a part of such inspection for the inspector to see that the hogshead is marked with the name and place of residence of the owner, and to verify the claimed fact that the tobacco was raised in Maryland and packed in the county or neighborhood where it was grown, and to weigh the hogshead in order to determine the charge for outage, and to see that the hogshead conforms in dimensions to the requirement of the statute, so that the tobacco may be passed and accounted lawful tobacco. It is also apparent that not until the above and other duties have been performed by the inspectors can the hogshead be passed and marked as required by the act of 1864. This requires, in regard to the hogsheads specially mentioned in the proviso enacted in 1870 to section 41 of the act of 1864, that they be delivered at one of the state tobacco warehouses, and that the provisions of section 10 of the act of 1864 be observed; that is, that the inspector shall number each hogshead in succession, and enter the number in a book, with the time the hogshead is received, and the name, if known, of the conveyance by which it was brought to Baltimore, and the name of the owner or consignee of the tobacco, and the initials or other marks on the hogshead identifying it, and, on its removal, enter in a book the time of removal and the name of the person to whom it is delivered, and of the conveyance by which it is taken away; that, under section 12 of the act of 1864, it shall be inspected in all required particulars except opening it; that, under section 13 of that act, the inspector shall weigh the hogshead unopened and enter such weight in a book, with sufficient reference to its marks and numbers as previously recorded; that, under section 14 of that act, the inspector shall mark with a marking iron, on the side of each hogshead, its warehouse number and weight, and on each head its warehouse number; and that not until these things have been bone is the tobacco to be passed or accounted as lawful tobacco.

The plaintiff in error contends that section 41 of the act of 1864, as re-enacted by the act of 1870, violates the constitution of the United States, because (1) it is a regulation of interstate and foreign commerce, and a law levying a duty on exports, and does not fall within the class of laws known as inspection laws, because the proviso enacts that the tobacco to which it refers need not be opened for inspection; (2) said section, even though it is an inspection statute, discriminates against the non-resident buyer and manufacturer of leaf tobacco, and in favor of the state buyer and manufacturer, in imposing burdensome regulations on tobacco intended for export, and laying a tax of at least two dollars a hogshead on such tobacco when exported, while tobacco manufactured within the state is free from such regulations and such tax, and thus it discriminates against interstate and foreign commerce in tobacco, and in favor of local manufacturers and the internal trade of the state; (3) said section discriminates between different classes of exporters of tobacco, in that it permits tobacco exported by persons who pack it in the county or neighborhood where it is grown, to be exported when marked with the full name and residence of the owner, without inspection other than the examination of the outsides of the hogsheads, while exporters of another class must have the contents of their hogsheads subjected to examination.

The provisions of the constitution of the United States alleged to be violated are clause 2 of section 10 of article 1, before quoted, and that clause of section 8 of article 1 which provides that the congress shall have power 'to regulate commerce with foreign nations and among the several states.'

The Maryland court held that the charge of outage in this case was an inspection duty, within the meaning of the constitution; that the state had the power to prescribe the dimensions of the hogshead in which tobacco raised in Maryland shall be packed, and to require such hogshead to be delivered at one of the state tobecco warehouses, in order that the inspectors may ascertain whether it conforms to the requirements of the law, and whether it is the true growth of the state, and packed by the grower or purchaser in the county or neighborhood where it was grown; and that the charge of outage, to reimburse the state for the expenses thereby incurred, and in consideration of storage of the hogshead, is in the nature of an inspection duty, within the meaning of the constitution.

The contention of the plaintiff in error is that a law which otherwise would be an inspection law ceases to be such if no provision is made for opening the package containing the article and examining the quality of its contents. On this subject the Maryland court held that, in order to constitute an inspection law, an examination of the quality of the article itself is not necessary, but that to prepare the products of a state for exportation it may be necessary that such products should be put in packages of a certain form, and of certain prescribed dimensions, either on account of the nature and character of such products, or to enable the state to identify the products of its own growth, and to furnish the evidence of such identification in the markets to which they are exported. In opposition to these views, which appear to us to be sound, we are asked to hold that the provisions under consideration do not fall under the head of inspection laws, in a case where the question is presented without any finding of any facts to show that what may be thus necessary in regard to a product is not necessary in regard to tobacco, and with every presumption to the contrary arising out of the course of legislation, as to the inspection of tobacco, by the state of Maryland. The legislature of the state of Maryland, from the earliest history of the colony and since the formation of the state government, has made the inspection of tobacco raised in that state compulsory. That inspection has included many features, and has extended to the form, size, and weight of the packages containing the tobacco, as well as to the quality of the article. Fixing the identity and weight of tobacco alleged to have been grown in the state, and thus preserving the reputation of the article in markets outside of the state, is a legitimate part of inspection laws, and the means prescribed therefor in the statutes in question naturally conduce to that end. Such provisions, as parts of inspection laws, are as proper as provisions for inspecting quality, and it cannot be said that the absence of the latter provisions, in respect to any particular class of tobacco, necessarily causes the laws containing the former provisions to cease to be inspection laws.

It is easy to see that the use of the precaution of weighing and marking the weight on the hogshead and recording it in a book is to enable it to be determined at any time whether the contents have been diminished subsequently to the original packing, by comparing a new weight with the original marked weight, or, if the marked weight be altered, with the weight entered into the warehouse book. The things required to be done in respect to the hogshead of tobacco in the present case, aside from any inspection of quality, are to be done to prepare and fit the hogshead, as a unit, containing the tobacco, for exportation, and for becoming an article of foreign commerce or commerce among the states, and are to be done before it becomes such an article. They are properly parts of inspection laws, within the definition given by this court in Gibbons v. Ogden, 9 Wheat. 203. In a note to the argument of Mr. Emmet in that case, at page 119, are collected references to many statutes of the states, in the form of inspection laws, showing what features have been generally recognized as falling within the domain of those laws-such as the size of barrels or casks, and the number of hoops on them; what pieces of beef or pork, and what quantity and size of nails, should be in one cask; the length, breadth, and thickness of staves and heading, lumber, boards, shingles, etc.; and the branding of pot and pearl ashes, flour, fish, and lumber, and the forfeiture of them, if unbranded. These were cited as instances of the exercise by states of the power to act upon an article grown or produced in a state, before it became an article of foreign or domestic commerce, or of commerce among the states, to prepare it for such purpose. It was in reference to laws of this character that it was said, in argument, in Gibbons v. Ogden, that the enactments seemed arbitrary, and were not founded on the idea that the things, the exportation of which was thus prohibited or restrained, were dangerous or noxious, but had for their object to improve foreign trade, and raise the character and reputation of the articles in a foreign market. It was in reference to such laws, among other inspection laws, that Chief Justice MARSHALL, in Gibbons v. Ogden, (page 203,) after remarking that a power to regulate commerce was not the source from which a right to pass inspection laws was derived, said:

'The object of inspection laws is to improve the quality of     articles produced by the labor of a country; to fit them for      exportation; or, it may be, for domestic use. They act upon     the subject before it becomes an article of foreign commerce,      or of commerce among the states, and prepare it for that      purpose. They form a portion of that immense mass of     legislation which embraces everything within the territory of      a state not surrendered to the general government; all which      can be most advantageously exercised by the states      themselves.'

It was not suggested by the court that those particular laws were not valid exercises of the power of the state to fit the articles for exportation, or that in addition to, or even aside from, ascertaining the quality of the article produced in a state, the state could not define the form of the lawful package or its weight, and subject form and weight, with or without quality, to the supervision of an inspector, to ascertain that the required conditions in respect to the article were observed.

In addition to the instances cited in Gibbons v. Ogden, the diligence of the attorney general of the state of Maryland has collected and presented to us, in argument, numerous instances #fna

In view of such legislation existing at the time the constitution of the United States was adopted and ratified by the original states, known to the framers of the constitution who came from the various states, and called 'inspection laws' in those states, it follows that the constitution, in speaking of 'inspection laws,' included such laws, and intended to reserve to the states the power of continuing to pass such laws, even though to carry them out and make them effective, in preventing the exportation from the state of the various commodities, unless the provisions of the laws were observed, it became necessary to impose charges which amounted to duties or imposts on exports to an extent absolutely necessary to execute such laws. The general sense in which the power of the states in this respect has been understood since the adoption of the constitution, is shown by the legislation of the states since that time, as collected in like manner by the attorney general of Maryland, #fnb covering the

Objection is made that the Maryland laws are not inspection laws, but are regulations of commerce, because they require every hogshead of tobacco to be brought to a state tobacco warehouse. But we are of opinion that, it being lawful to require the article to be subjected to the prescribed examination by a public officer before it can be accounted a lawful subject of commerce, it is not foreign to the character of an inspection law to require that the article shall be brought to the officer instead of sending the officer to the article. It is a matter as to which the state has a reasonable discretion, and we are unable to see that such discretion has been exercised in any such manner as to carry the statutes beyond the scope of inspection laws.

There is another view of the subject which has great force. Recognized elements of inspection laws have always been quality of the article, form, capacity, dimensions, and weight of package, mode of putting up, and marking and branding of various kinds, all these matters being supervised by a public officer having authority to pass or not pass the article as lawful merchandise, as it did or did not answer the prescribed requirements. It has never been regarded as necessary, and it is manifestly not necessary that all of these elements should coexist in order to make a valid inspection law. Quality alone may be the subject of inspection, without other requirement, or the inspection may be made to extend to all of the above matters. When all are prescribed, and then inspection as to quality is dropped out, leaving the rest in force, it cannot be said to be a necessary legal conclusion that the law has ceased to be an inspection law.

As is suggested in Neilson v. Garza, 2 Woods, 287, by Mr. Justice BRADLEY, it may be doubtful whether it is not exclusively the province of congress, and not at all that of a court, to decide whether a charge or duty, under an inspection law, is or is not excessive. There is nothing in the record from which it can be inferred that the state of Maryland intended to make its tobacco-inspection laws a mere cover for laying revenue duties upon exports. The case is not like that of Jackson Mining Co. v. Auditor General, 32 Mich. 488, where a state tax imposed on mineral ore exported from the state before being smelted was held to be a tax on interstate commerce, no such tax being imposed on like ore reduced within the state. The question of the right of Maryland, under the constitution of the United States, to require that the dimensions and gross weight of a hogshead containing tobacco grown upon its soil shall be ascertained by its officers before the tobacco shall be exported, is a question of law, because the question is as to whether such law is an inspection law. Moreover, the question as to whether the charges for such examination and its attendant duties are 'absolutely necessary,' was not before the state court, and was not passed upon by it, and cannot be considered by this court.

It is urged, however, that the Mayland law is a regulation of commerce and unconstitutional, because it discriminates between the state buyer and manufacturer of leaf tobacco and the purchaser who buys for the purpose of transporting the tobacco to another state or to a foreign country. But the state, having the right to prescribe the form, dimensions, and capacity of the packages in which its products shall be encased before they are brought to, or sold in, the public market, has enacted (Laws 1872, c. 36, § 26) that no tobacco of the growth of the state shall be passed or accounted lawful tobacco unless it be packed in hogsheads of a specified size. This regulation covers all tobacco grown in the state and packed in hogsheads, without reference to the purpose for which it is packed. If the tobacco is to be dealt in within the limits of the state, the examination as to dimensions is properly left to the contracting parties, probably under the view that the seller for the home market will have a sufficient stimulus to observe the requirement of the law in a desire to maintain the reputation of his commodity. But if the tobacco is to be exported as lawful tobacco, the state may, with equal propriety, prescribe and enforce an examination by an officer, within the state, of a hogshead containing tobacco grown in the state and intended for shipment beyond the limits of the state, in order to ascertain, before the hogshead is carried out of the state, and before it becomes an article of commerce, that it is of the dimensions prescribed as necessary to make it lawful tobacco.

In Cooley v. Board of Wardens, 12 How. 299, a law of Pennsylvania provided that a vessel not taking a pilot should pay half pilotage, but that this should not apply to American vessels engaged in the Pennsylvania coal trade. It was held that the general regulation as to half pilotage was proper, and that the exemption was a fair exercise of legislative discretion acting upon the subject of the regulation of the pilotage of the port of Philadelphia. The court said that, in making pilotage regulations, the legislative discretion had been constantly exercised, in this and other countries, in making discriminations, founded on differences both in the character of the trade and in the tonnage of vessels engaged therein. Any discrimination appearing in the present case is of the same character as that in the pilotage case, and fairly within the discretion of the state. Such discretion reasonably extends to exempting from opening for internal inspection an article grown in the state, when it is marked with the name of an ascertained owner, and to requiring that an article grown in the state shall be opened for internal inspection when it is not intended to be put on the market on the credit of an ascertained owner and is not identified by marks as owned by him. So, too, in the exercise of the same discretion, and of its power to prescribe the method in which its products shall be fitted for exportation, it may direct that a certain product, while it remains 'in the bosom of the country' and before it has become an article 'of foreign commerce or of commerce between the states,' shall be incased in such a package as appears best fitted to secure the safety of the package and to identify its contents as the growth of the state, and may direct that the weight of the package, and the name of the owner of its contents, shall be plainly marked on the package, and may also exempt the contents from inspection as to quality, when the weight of the package and the name of the owner are duly ascertained to be marked thereon. Such a law is an inspection law, and may be executed by imposing a 'tax or duty of inspection,' which tax, so far as it acts upon articles for exportation, is an exception to the prohibition on the states against laying duties on exports, the exception being made because the tax would otherwise be within the prohibition. Brown v. State, 12 Wheat. 419, 438. At the same time we fully recognize the principle that any inspection law is subject to the paramount right of congress to regulate commerce with foreign nations and among the several states.

The general provision of the Maryland statute is that it shall not be lawful to carry out of the state, in hogsheads, any tobacco raised in the state, except in hogsheads which shall have been inspected, passed, and marked agreeably to the provisions of the act. These provisions include the doing of many things in addition to an inspection of quality. If the tobacco is grown in the state, and packed in the county or neighborhood where grown, it may be carried out of the state without having its quality inspected, if it be marked in the manner prescribed. But it still is necessary it should be inspected in all other particulars, and inspected also to ascertain that it was grown in the state and packed where grown, and is marked as required. If it does not answer the latter requirements it is to be further inspected as to quality. The necessity thus existing for subjecting the hogshead to inspection under all circumstances, a charge of some kind was proper for outage; that is, a charge payable, on withdrawing the hogshead, for labor connected with receiving and handling it, and doing the other things above mentioned. Such charge appears to be a charge for services properly rendered.

The above views cover the objection made that the Maryland law discriminates between different classes of exporters of tobacco, and favors the person who packs it for exportation in the county or neighborhood where it is grown, as against other exporters. Whatever discrimination in this respect, or in respect of purchases for exportation, before referred to, results from any provisions of the law, is a discrimination which, we think, the state has a right to make, resulting, as it does, wholly from regulations which affect the article before it has become an article of commerce, and which attach to it as and when it is grown, and before it is packed or sold. The tobacco is grown with these regulations in force, and the state has a right to say what shall be lawful merchantable tobacco. This is really all that has been done in regard to the tobacco in question.

In this case no inspection is involved except that of tobacco grown in Maryland, and we must not be understood as expressing any opinion as to any provisions of the Maryland laws which refer to the inspection of tobacco grown out of Maryland.

The judgment of the court of appeals of Maryland is affirmed.

title: Turner v. Maryland/Opinion of the Court


text: Talk:Turner v. Maryland/Opinion of the Court


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People of the State of New York v. Compagnie Generale Transatlantique

William M. Evarts, Lewis Sanders, and ''Geo. N. Sanders'', for plaintiff in error.

Frederick R. Coudert, for defendant in error.

MILLER, J.


text: Talk:People of the State of New York v. Compagnie Generale Transatlantique


text:
People of the State of New York v. Compagnie Generale Transatlantique/Opinion of the Court

This was an action commenced in the court of common pleas for the city and county of New york to recover of the defendant the sum of one dollar for each alien passenger brought into New York by its vessels, for whom a tax has not before been paid, with penalties and interest. The case was removed into the circuit court of the United States for the southern district of New York, which court, on demurrer to the complaint, rendered a judgment in favor of the defendant. To that judgment this writ of error is prosecuted.

The tax in this case is demanded under section 1 of a statute of New York, passed May 31, 1881, entitled 'An act to raise money for the execution of the inspection laws of the state of New York.' The section reads thus:

'Section 1. There shall be levied and collected a duty of one     dollar for each and every alien passenger who shall come by      vessel from a foreign port to the port of New York for whom a      tax has not heretofore been paid, the same to be paid to the      chamberlain of the city of New York by the master, owner,      agent, or consignee of every such vessel within 24 hours      atter the entry thereof into the port of New York.'

It has been so repeatedly decided by this court that such a tax as this is a regulation of commerce with foreign nations, confided by the constitution to the exclusive control of congress, and this court has so recently considered the whole subject in regard to similar statutes of the states of New York, Louisiana, and California, that unless we are prepared to reverse our decisions, and the principles on which they are based, in the cases of Henderson v. Mayor of New York and Chy Lung v. Freeman, 92 U.S. 259-275, there is little to say beyond affirming the judgment of the circuit court, which was based on those decisions.

The argument mainly relied on in the present case is that the new statute of New York, passed after her former statutes had been declared void in the Passenger Cases, 7 How. 283, and in the recent case of Henderson v. Mayor, is in aid of the inspection laws of the state. This argument is supposed to derive support from another statute, passed three days earlier, entitled 'An act for the inspection of alien emigrants and their effects by the commissioners of emigration.'

This act empowers and directs the commissioners of emigration 'to inspect the persons and effects of all persons arriving by vessel at the port of New York from any foreign country, as far as may be necessary to ascertain who among them are habitual criminals, or pauper lunatics, idiots, or imbeciles, or deaf, dumb, blind, infirm, or orphan persons, without means or capacity to support themselves and subject to become public charge, and whether their persons or effects are affected with any infectious or contagious disease, and whether their effects contain any criminal implements or contrivances.'

Subsequent sections direct how such characters, if found, shall be dealt with by the board. Other sections of the act of May 31st direct the chamberlain of the city to pay over to the commissioners of emigration all such sums of money as may be necessary for the execution of the inspection laws of the state of New York, and the net produce of all duties received by him under that act, after the necessary payments to the commissioners of emigration, to the treasury of the United States.

These two statutes, construed together, it is argued, are inspection laws within the meaning of article 1, section 10, clause 2, of the constitution of the United States, to-wit:

'No state shall, without the consent of the congress, lay any     imposts or duties on imports or exports, except what may be      absolutely necessary for executing its inspection laws; and      the net produce of all duties and imposts laid by any state      on imports or exports shall be for the use of the treasury of      the United States, and all such laws shall be subject to the      revision and control of the congress.'

What laws may be properly classed as inspection laws, under this provision of the constitution, must be determined largely by the nature of the inspection laws of the states at the time the constitution was framed. In the opinion of this court in the case of Turner v. State, ante, 44, delivered by Mr. Justice BLATCHFORD contemporaneously with the one in the present case, an elaborate examination of those statutes, many of which are cited, is to be found, and similar citations are found in a foot-note to the report of Gibbon v. Ogden, 9 Wheat. 119. We feel quite safe in saying that neither at the time of the formation of the constitution nor since has any inspection law included anything but personal property as a subject of its operation. Nor has it ever been held that the words 'imports and exports' are used in that instrument as applicable to free human beings by any competent judicial authority. We know of nothing which can be exported from one country or imported into another that is not in some sense property-property in regard to which some one is owner, and is either the importer or the exporter. This cannot apply to a free man. Of him it is never said he imports himself or his wife or his children. The language of section 9, art. 1, of the constitution, which is relied on by counsel, does not establish a different construction:

'The migration or importation of such persons as any of the     states now existing shall think proper to admit, shall not be      prohibited by the congress prior to the year 1808, but a tax      or duty may be imposed on such importation, not exceeding $10      for each person.'

There has never been any doubt that this clause had exclusive reference to persons of the African race. The two words 'migration' and 'importation' refer to the different conditions of this race as regards freedom and slavery. When the free black man came here he migrated; when the slave came he was imported. The latter was property, and was imported by his owner as other property, and a duty could be imposed on him as an import. We conclude that free human beings are not imports or exports within the meaning of the constitution. In addition to what is said above, it is apparent that the object of these New York enactments goes far beyond any correct view of the purpose of an inspection law. The commissioners are 'to inspect all persons arriving from any foreign country to ascertain who among them are habitual criminals or pauper lunatics, idiots or imbeciles, * *  * or orphan persons, without means or capacity to support themselves, and subject to become a public charge.' It may safely be said that these are matters incapable of being satisfactorily ascertained by inspection. What is an inspection? Something which can be accomplished by looking at or weighing or measuring the thing to be inspected, or applying to it at once some crucial test. When testimony or evidence is to be taken and examined, it is not inspection in any sense whatever. Another section provides for the custody, the support, and the treatment for disease of these persons, and the transportation of criminals. Are these inspection laws? Is the ascertainment of a guilt of a crime to be made by inspection? In fact, these statutes differ from those heretofore held void only in calling them in their caption 'inspection laws,' and in providing for payment of any surplus, after the support of paupers, criminals, and diseased persons, into the treasury of the United States-a surplus which, in this enlarged view of what are the expenses of an inspection law, it is safe to say will never exist.

A state cannot make a law designed to raise money to support paupers, to detect or prevent crime, to guard against disease, and to cure the sick, an inspection law, within the constitutional meaning of that word, by calling it so in the title.

Since the decision of this case in the circuit court, congress has undertaken to do what this court has repeatedly said it alone had the power to do. By the act of August 3, 1882, entitled 'An act to regulate immigration,' a duty of 50 cents is to be collected for every passenger not a citizen of the United States who shall come to any port within the United States by steam or sail vessel from a foreign country, from the master of said vessel, by the collector of customs. The money so collected is to be paid into the treasury of the United States, and to constitute a fund to be called the immigrant fund, for the care of immigrants arriving in the United States, and the relief of such as are in distress. The secretary of the treasury is charged with the duty of executing the provisions of the act, and with supervision over the business of immigration. No more of the fund so raised is to be expended in any port than is collected there. This legislation covers the same ground as the New York statute, and they cannot coexist.

The judgment of the circuit court is affirmed.


text: Talk:People of the State of New York v. Compagnie Generale Transatlantique/Opinion of the Court


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United States Burnett v. Teller

By an act passed March 3, 1873, entitled 'An act to revise, consolidate, and amend the pension laws,' (17 St. 569, § 4; Rev. St. § 4698,) it was provided that from and after June 4, 1872, all persons entitled by law to a less pension than thereinafter specified, who, while in the military or naval service of the United States and in the line of duty, had been so permanently and totally disabled as to render them utterly helpless, or so nearly so as to require the regular personal attendance of another person, should be entitled to a pension of $31.25 per month. Afterwards, by an act passed June 18, 1874, a pension of $50 per month was granted to the persons described in the act of March 3, 1873, in lieu of the pension of $31.25 granted by that act. By an act approved June 16, 1880, it was provided as follows:

'All soldiers and sailors * * * who are now receiving the pension of $50 per month,' under the act last aforesaid, 'shall receive, in lieu of all pensions now paid them by the government of the United States, and there shall be paid to them, in the same manner as pensions are now paid to such persons, the sum of $72 per month.' The act further declared 'that all pensioners whose pensions shall be increased by the provisions of this act from $50 per month to $72 per month, shall be paid the difference between said sums monthly, from June 17, 1878, to the time of the taking effect of this act.'

Prior to the passage of the last-mentioned act congress had passed an act, which was approved March 3, 1879, 'granting an increase of pension to Ward B. Burnett,' which was as follows:

'That the secretary of the interior be, and he is hereby, authorized and directed to place on the pension roll the name of Ward B. Burnett, and pay him a pension of $50 per month in lieu of the pension he now receives; but nothing in this act contained shall entitle the said Ward B. Burnett to arrears of pension.' 20 St. 665.

On October 20, 1882, Ward B. Burnett, the person named in the special act above mentioned, filed in the supreme court of the District of Columbia, as relator, in the name of the United States, a petition against Henry M. Teller, secretary of the department of the interior, in which he recited the foregoing legislation of congress, and averred that he was a survivor of the war with Mexico, and other wars, of which he was an officer in the army of the United States; that he was wounded at the battle of Cherubusco on August 24, 1847; that for wounds received in battle he was granted, under a general pension law of congress, a pension at the rate of $30 per month, which he received from August 1, 1848, until March 3, 1879; that under the special act of the date last mentioned a pension certificate, dated June 6, 1879, signed by the secretary of the interior and countersigned by the commissioner of pensions, was ecuted and delivered to him, on which he was paid from March 3, 1879, to June 4, 1882, a pension at the rate of $50 per month.

The petition further alleged that the relator had applied to the commissioner of pensions to be paid the increased rates of pension authorized by the said acts of congress, approved respectively June 8, 1872, June 18, 1874, and June 16, 1880, and had received another pension certificate, dated July 17, 1882, which recited that the relator was entitled to a pension at the rate of $30 per month, to commence on August 1, 1848, and of $31.25 per month from June 4, 1872, and of $50 per month from June 4, 1874, and $72 per month from June 17, 1878; that on July 21, 1882, the relator returned to the secretary of the interior the pension certificate which had been issued to him under the special act of congress passed March 3, 1869, granting him a pension of $50 per month; that when he returned said certificate he was without the advice of counsel, and was fearful that he would be deprived of his greater pension under the general pension laws; and that on October 4, 1882, relator respectfully demanded in writing of the secretary of the interior that he return to him said certificate, which the secretary, by his decision made October 18, 1882, refused to do. The petition prayed for the writ of mandamus to compel the secretary to return said certificate to the relator, and to cause to be paid to him the accrued pension due thereon.

The secretary of the interior filed an answer to this petition, in which he alleged that, since June 4, 1872, the relator had received, under the general session laws, payments as follows: From June 4, 1872, to June 4, 1874, the sum of $750, being at the rate of $31.25 per month; from June 4, 1874, to June 17, 1878, the sum of $2,421.66, being at the rate of $50 per month; from June 17, 1878, to June 4, 1882, the sum of $3,424.80, being at the rate of $72 per month; from June 4, 1882, to September 4, 1882, at the same rate, $216,-making in all the sum of $6,812.46; and that, in addition to these payments under the general laws, he had received, under the special act of March 3, 1879, granting him by name a pension at the rate of $50 per month, payments as follows: From March 3, 1879, to June 4, 1882, the sum of $1,951.67, being at the rate of $50 per month.

The answer further alleged that on July 21, 1882, the relator addressed a letter of that date to the secretary of the interior, with which he returned the certificate dated June 17, 1882, issued to him under the special act of March 3, 1879, granting him a pension of $50 per month. That letter was as follows:

'WASHINGTON, July 21, 1882.

'Hon. H. M. Teller, Secretary of the Interior-SIR: To relieve your department from further embarassment in reference to what has been styled Gen. Ward B. Burnett's claim of double pension, I hereby return to you my certificate, and relinquish any claim that I may have under it from date of this letter, made under a special act of congress, (increase,) dated March 3, 1879, upon which I have been drawing $50 per month, and shall be satisfied with receiving my pension under the general pension laws, granted by yourself, under the several opinions of the attorney general, dated July 17, 1882, until congress, in its bounty, shall think it proper to increase my pension of $72 per month, under said general pension laws, again.

'I have the honor to be, very respectfully, yours,

'WARD B. BURNETT.'

 * The case having, by stipulation of parties, been heard in the first instance at the general term of the supreme court of the district, a judgment was rendered dismissing the petition. This writ of error is prosecuted to review that judgment.

''Jas. H. Mandeville'', for plaintiff in error.

''Sol. Gen. Phillips'', for defendant in error.

WOODS, J.

title: United States Burnett v. Teller


text: Talk:United States Burnett v. Teller

title: Talk:United States Burnett v. Teller


text:
United States Burnett v. Teller/Opinion of the Court

The relator does not claim that there is anything due him under the pension laws prior to June 4, 1872. It appears from the answer of the secretary of the interior, and there is no evidence to the contrary, that since June 4, 1872, the relator has received every cent that is due him under the general pension laws. The special act of March 3, 1879, declared that the pension of $50 thereby granted should be in lieu of the pension the relator was then receiving, and, at least, cut off all claim to arrears of pensions under that act. All, therefore, that is left of his case is his contention that he is entitled not only to the pension of $72 per month allowed him by the general act of June 16, 1880, and which has been paid him, but in addition thereto the pension of $50 per month granted him by name by the special act of March 3, 1879. It appears from the answer of the secretary of the interior that the relator was, under the advice of the department of justice, paid both pensions from March 3, 1879, to June 4, 1882. The complaint of the relator is that the payment of double pensions is not continued, and it is for the purpose of enforcing his right to his special pension of $50, in addition to the general pension of $72, that he asks that the secretary of the interior may be compelled to return the certificate issued to him under the special act. The right of the relator to double pensions, if he ever had such right, has been effectually cut off by section 5 of the act of July 25, 1882, which declares 'that no person who is now receiving or shall hereafter receive a pension under a special act shall be entitled to receive, in addition thereto, a pension under the general law, unless the special act expressly states that the pension granted thereby is in addition to the pension which said person is entitled to receive under the general law.' It was competent for congress to pass this act. No pensioner has a vested legal right to his pension. Pensions are the bounties of the government, which congress has the right to give, withhold, distribute, or recall, at its discretion. Walton v. Cotton, 19 How. 355. Therefore, the contention of the relator, that having received the pension of $72 under the general law, he is also entitled to the pension of $50 granted him by the special act, is without ground to rest on. His pension certificate, issued under the special act, can be of no service to him unless he wishes to relinquish the pension of $72 under the general law, and fall back upon the pension of $50 granted him by the special act. But he expresses no such purpose. His object is to get the certificate in order to draw double pensions, which the law says he shall not have. He voluntarily surrendered his pension under the special act, in order to receive the larger pension to which he became entitled on the passage of the general act of June 16, 1880. As he is not entitled to any pension money upon the certificate under the special act, which he voluntarily surrendered, unless he waives his right to receive the larger pension given him by the general law, which he does not do, a judgment that the certificate be returned to him would be futile. From all that appears by the record the relator has been accorded by the officers of the department of the interior and of the pension bureau all his rights. Up to September 4, 1882, he has been paid all the pension money due him under any act of congress. After that date he is entitled under existing laws to a pension of $72 per month and no more, and this the pension bureau is ready to pay him. The supreme court of the district was, therefore, right in refusing the writ of mandamus, and its judgment must be affirmed.


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Cushing v. Laird Foster

J. Langdon Ward and R. D. Benedict, for Cushing and others.

James Thomson, C. Van Santvoord, A. J. Vanderpoel, and J. H. Ashton, for Laird, and Foster & Thomson.

GRAY, J.

title: Cushing v. Laird Foster


text: Talk:Cushing v. Laird Foster

title: Talk:Cushing v. Laird Foster