possession of its true owner. To have even a qualified ownership the
thing must be lost, and this does not happen unless possession has
been lost casually and involuntarily so that the mind has no recourse
to the event. A thing voluntarily laid down and forgotten is not lost
within the meaning of the rule giving the finder title to lost
property; and the owner of a shop, bank or other place where the thing
has been left is the proper custodian rather than the person who was
the discoverer.
If a lost article is found on the surface of the ground, or the floor
of a shop, in the public parlor of a hotel, or near a table at an
open-air place of amusement, or in the car of a railroad it becomes,
except as against the loser, the property of the finder, who
appropriates it regardless of the place where it was found. Once a
boat was found adrift and the finder made the needful repairs to keep
it from sinking, yet the owner was mean enough to refuse to pay for
them. The court compelled him to make good the amount to the finder.
The law regards the possession of an article which is lost as being
that of the legal owner who was previously in possession, until the
article is taken into the actual possession of the finder. If the
finder does not know who the owner is and there is no clue to the
ownership, there is no larceny although the finder takes the goods for
himself and converts them to his own use. If the finder knows who the
owner is or has a reasonable clue to the ownership, which he
disregards, he is guilty of larceny.
Another class of cases must be noticed. Very often articles are
delivered to another to have work done on them, hides to be tanned, or
raw materials to be worked up into fabrics. Can a creditor of the
bailee pounce on tanned hides or completed fabrics as belonging to him
and take them in satisfaction of his debt? Both parties have in truth
an interest in the goods, and in general it may be said that the
bailor cannot thus be deprived of his interest and may follow the
goods and recover them or their value.
If they are destroyed while executing the agreement, who must lose? If
the bailee is not negligent or otherwise at fault, and the loss
happened by internal defect or inevitable accident, the bailor would
be the loser. And if workmen had been employed thereon, the bailor
would also be obligated to pay for their labor.
To what extent can a bailee limit his liability by agreement? A bailee
who was a cold storage keeper, stated in his receipt "all damage to
property is at the owner's risk." This limitation related, so a court
decided, to loss resulting from the nature of the things stored. A
bailee received some cheese and gave a receipt slating that it was to
be kept at the owner's risk of loss from water. It was injured from
the dripping of water from overhead pipes. The bailee was,
notwithstanding his receipt, held liable.
A bailor need not always be the owner of the thing bailed. He may be a
lessee, agent, or having such possession and control as would justify
him in thus acting. He should give the bailee notice of all the
faults in the thing bailed that would expose him to danger or loss in
keeping it. For example, if it were a kicking horse, he should warn
the bailee to keep away from his legs.
The courts have been often troubled about the degree of care required
of bailees, as it differs under varying circumstances. A bank that
permits a depositor to keep a box of jewelry or silver in its vault
for his accommodation, while absent from home and without receiving
any compensation therefor, is not required to exercise the same degree
of care as a safe deposit company whose chief business is to do such
things and is paid for its service. Nevertheless a bank must exercise
reasonable care, such care as is used in keeping its own things.
Suppose your package is stolen by the cashier or paying teller, is the
bank responsible? That depends. If the bank knows or suspected the
official was living a gay life, it ought not to keep him, and most
banks would not. It is the better legal opinion, that a bank ought not
to keep a president, cashier or other active official who is
speculating in stocks, for the temptation to take securities not
belonging to them has been too great in many cases for them to
withstand. On the other hand if a long-trusted official, against whom
no cause for suspicion had arisen, should steal a package from the
safe, the bank would not be responsible for the loss any more than if
it had been stolen by an outsider. The bank did not employ him to
steal, but to perform the ordinary banking duties.
A bailee is usually a keeper only. But the nature of the property may
require something more to be done. If he is entrusted with a milch
cow, he must have her milked, or with cattle in the winter time which
require to be served with food, he must supply it, otherwise they
would starve. If he is keeping a horse which is taken sick, proper
treatment should be given.
When the period of bailment is ended, the thing bailed must be
returned. If it consisted of a flock of sheep, cattle and the like,
all accessions must also be delivered. In many cases the bailee is not
required to return the specific property, but other property of the
same kind and quality. Thus if one delivers wheat for safekeeping,
which is put in an elevator, the contract is fulfilled by delivering
other wheat of similar kind and quality; or, if the wheat is to be
made into flour, by delivering the proper amount of the same quality
as the specific wheat bailed. A bailee has a lien for his service and
proper expenditures in caring for and preserving the thing bailed, but
not for any other debt the bailor may owe him. And if the bailee is a
finder who has bestowed labor on the article found in good faith, the
same rule applies.
Agisters and livery-stable men have no lien at common law, like
carriers for keeping the animals entrusted to them because they are
under no obligation to take them into their keeping. In Pennsylvania a
different rule was long ago declared, and has ever since been
maintained. As he can agree on terms, he may make such as are
agreeable to both parties. Elsewhere he can impose his own terms, and
may demand his pay in advance, or create, by contract, a lien if he
pleases. A person who is hired as a groom to a horse for a specified
time and at a fixed price, has no lien on the horse for his service,
but has a lien for feed, keeping and shoeing, which should have been
furnished by the owner. A contract to do this is not necessary to
create the lien, it arises as if the horse had been left for keep and
care without saying more.
=Bankruptcy.=--Before the enactment of the federal Bankruptcy Act of
1898, every state had a bankruptcy act of its own, which was generally
called an insolvency law. The federal act has superseded these by
virtue of the power granted to congress in the federal constitution
"to establish uniform laws on the subject of bankruptcies throughout
the United States."
The United States district courts in the several states are made
courts of bankruptcy and have power to adjudge all persons bankrupt
who have their principal places of business, residence and domicile
within their respective districts; and jurisdiction also over others
who simply have property within their jurisdiction.
Any person who owes debts, or business corporation, may become a
voluntary bankrupt. So may an alien. He may also become an involuntary
bankrupt if he has had his principal place of business here, or has
been domiciled within the jurisdiction of the court for the preceding
six months, or has property within its jurisdiction. Some corporations
are still denied voluntary action, as well as minors and insane
persons.
Who may become an involuntary bankrupt? Any person, except a
wage-earner, or farmer, any unincorporated company, and any
corporation engaged principally in manufacturing, trading, printing,
publishing, or mercantile pursuits, owing debts to the amount of one
thousand dollars. What is a manufacturing corporation, within the
meaning of the law, is not even yet fully known. A corporation engaged
principally in smelting ores is one; and a mining corporation, whose
principal business is to buy and sell ores, is deemed a trading
corporation and may become an involuntary bankrupt.
Next we may inquire, what are acts of bankruptcy? One of them is an
admission of a person's inability to pay his debts. And this may be
done by a corporation through its properly organized officers. Another
act of bankruptcy is to convey, transfer, conceal or remove property
with the intention to defraud creditors. And by concealment is meant
the separation of some tangible thing like money from the debtor's
estate, and secrete it from those who have a right to seize it for
payment of their debts. The transfers of property covered by the act
are those which the common law regards as fraudulent. If, for example,
at the time of the transfer of his property one is so much indebted
that it will embarrass him in paying his debts, the transfer will be
deemed fraudulent; but a voluntary transfer, made by one who is free
from debt, cannot be impeached by subsequent creditors. The intention
to hinder, delay or defraud creditors is a question of fact to be
ascertained by proper judicial inquiry.
A general assignment for the benefit of creditors is an act of
bankruptcy. Likewise a general assignment for the benefit of creditors
made by the majority of the board of directors and of the stockholders
is an act of bankruptcy. A petition for the appointment of a receiver
of a corporation under a state statute is not an assignment for the
benefit of creditors and therefore is not an act of bankruptcy.
Another act of bankruptcy is to suffer or permit, when one is
insolvent, any creditor to acquire a preference through legal
proceedings. The term preference includes not only a transfer of
property, but also the payment of money within four months from the
time of filing his petition in bankruptcy. It is immaterial to whom
the transfer is made if the purpose be to prefer one creditor to
another. Like a fraudulent transfer the intent to prefer must be
proved, though this may sometimes be presumed, as when the necessary
consequence of a transfer or payment made by an insolvent debtor is to
liquidate the debt of one creditor to the entire or partial exclusion
of others.
Passing to the filing of the petition a voluntary petitioner should
file his petition in the court of bankruptcy in the judicial district
where he has principally resided for the preceding six months. When
there is no estate and no claim has been proved and no trustee has
been appointed, a bankrupt may withdraw his petition on paying the
costs and expenses. The petition must be accompanied by a schedule of
the petitioner's property, showing its kind and amount, location,
money value, and a list of his creditors and their residences when
known, the amount due to them, the security they have, and a claim to
legal exemptions, if having any. After filing a voluntary petition the
judge makes an adjudication. He may do this ex parte, that is without
notice to creditors.
A petition may be filed against a person who is insolvent and has
committed an act of bankruptcy within four months after such action.
Three or more creditors who have provable claims amounting to five
hundred dollars in excess of securities held against a debtor may file
the petition, or if all the creditors are less than twelve, then one
of them may file the petition provided the debtor owes him the above
stated amount. Creditors holding claims which are secured, or have
priority, must not be considered in determining the number of
creditors and the amount of claims for instituting involuntary
proceedings. The petition should state the names and residences of the
petitioning creditors, also that of the bankrupt, his principal place
of business, the nature of it, his act of bankruptcy, that it occurred
within four months of the filing of the petition, and that the amount
of the claims against him exceed five hundred dollars. The petition
must be signed and properly verified, and may be afterward amended for
cause in the interest of justice. On the filing of the petition a writ
of subpoena is issued addressed to the bankrupt commanding him to
appear before the court at the place and on the day mentioned to
answer the petition. The next step, after serving the petition, is for
the bankrupt to file his answer. Meanwhile his property may be seized
by a marshal or receiver on proof that he is neglecting it or that it
is deteriorating.
Within ten days after one has been judicially declared to be a
bankrupt, he must file in court a schedule of his property, including
a list of his creditors and the security held by them. Then follows
the first meeting of the bankrupt's creditors, within thirty days
after the adjudication. The judge or referee must be present at this
meeting, also the bankrupt if required by the court. Before proceeding
with other business the referee may allow or disallow the claims of
creditors presented at the meeting, and may publicly examine the
bankrupt, or he may be examined at the instance of any creditor. At
this meeting the creditors may elect a trustee.
Subsequent meetings may be held at any time and place by all the
creditors whose claims have been allowed by written consent: the
court also may call a meeting whenever one fourth of those who have
proved their claims file a written request to that effect.
Only a creditor who owns a demand or provable claim can vote at
creditors' meetings. Nor can other creditors through filing objections
to a claim prevent a bona fide claimant from voting. A creditor of an
individual member of a bankrupt partnership cannot vote. Nor can
creditors holding claims that are secured or that have priority vote
only to a limited extent, so far as their claims are on the same basis
as other creditors. To entitle secured and preferred creditors to vote
at the first meeting on the whole of their claims, they must surrender
their securities or priorities. If a portion of a creditor's debt is
secured and a portion is unsecured, he may vote on the unsecured
portion. An attorney, agent, or proxy may represent and vote at
creditors' meetings, first presenting written authority, which must be
filed with the referee. The referee who presides at the first meeting
makes up or decides on its membership. Matters are decided at the
meeting by a majority vote in number and amount of claims of all the
creditors whose claims have been allowed and are present.
The next stage in bankruptcy proceedings is the proving and allowance
of claims. Only such debts are provable as existed at the time of
filing the petition. Every debt which may be recovered either at law
or in equity may be proved in bankruptcy. A claim barred by the
statute of limitations is not provable, nor is a contingent liability.
On the other hand a debt founded on a contract express or implied may
be proved, for example, damages arising from a breach of a contract
prior to the adjudication in bankruptcy. Again, if there are
agreements or covenants in a contract of a continuing character the
bankrupt is still liable on them notwithstanding his discharge in
bankruptcy. If the amount of a claim is unliquidated the act sets
forth the mode of proceeding. Among other claims that may be proved
are judgments, debts founded on an open account, and rents.
The claims of creditors who have received preferences are not allowed
unless they surrender them. Thus money paid on account by an insolvent
debtor must be surrendered before a claim for the balance due on the
account can be proved. If proceedings are begun by the trustee to set
aside a preferential transfer to a creditor who puts in a defense, he
cannot thereafter surrender his preference and prove his claim. If a
creditor in proving his debt fails to mention his security, if he has
any, he will be deemed to have elected to prove his claim as
unsecured.
Claims that have been allowed may be reconsidered for a sufficient
reason and reallowed or rejected in whole or in part, as justice may
require, at any time before the closing of the estate. The
reëxamination may be had on the application of the trustee or of any
creditor by the referee, witnesses may be called to give evidence, and
the referee may expunge or reduce the claim or adhere to the original
allowance.
The appointment of the trustee by the creditors at their first meeting
is subject to the approval or disapproval of the referee or the judge.
Should the creditors make no appointment the court appoints one. As
soon as he has been appointed it is the duty of the referee to notify
him in person or by mail of his appointment. If he fails to qualify
or a vacancy occurs, the creditors have an opportunity to make another
appointment. If a trustee accepts he must give a bond with sureties
for the faithful performance of his duties. He may also be removed for
cause after notice by the judge only. Should he die or be removed
while serving, no suit that he was prosecuting or defending will abate
but will be continued by his successor.
The trustee represents the bankrupt debtor as the custodian of all his
property that is not exempt; also the creditors, and gathers all the
bankrupt's property from every source and protects and disposes of it
for the best interests of the creditors, and pays their claims. In
short, he succeeds to all the interests of the bankrupt, is an officer
of the court and subject to its orders and directions. He must deposit
all moneys received in one of the designated depositories, can
disburse money only by check or draft, and at the final meeting of the
creditors must present a detailed statement of his administration of
the estate. During the period of settlement he must make a report to
the court in writing of the condition of the estate, the money on
hand, and other details within the first month after his appointment,
and bi-monthly thereafter unless the court orders otherwise.
The federal Bankruptcy Act prescribes what property passes to the
trustee and also what is exempt. Whatever property on which a levy
could have been made by judicial process against the bankrupt passes
to the trustee. On the other hand, the income given to a legatee for
life under a will providing it shall not be subject to the claims of
creditors does not pass to the trustee. If the bankrupt has an
insurance policy with a cash surrender value payable to himself or
personal representatives he may pay or secure this sum to the trustee
and continue to hold the policy. And a policy of insurance payable to
the wife, children, or other kin of the bankrupt is no part of the
estate and does not pass to the trustee.
After one month, and within a year from the adjudication of
bankruptcy, the bankrupt may apply for a discharge. The petition must
state concisely the orders of the court and the proceedings in his
case. Creditors must have at least ten days' notice by mail of the
petition, and then the judge hears the application for discharge, and
considers the proofs in opposition by the parties in interest. Unless
some creditor objects and specifies his ground of objection, the
petition will be granted. The Bankruptcy Act states several reasons
for refusing a discharge, especially when the bankrupt has concealed
his property instead of making an honest, truthful statement
respecting it, or has not kept proper books of account with the
fraudulent intent to conceal his true financial condition and defraud
his creditors.
Lastly a person may be punished by imprisonment for two years or less
on conviction of having knowingly and fraudulently concealed, while a
bankrupt or after his discharge, any property belonging to his estate
as a bankrupt, or made a false oath in any bankruptcy proceeding, or
made any false claim against his estate or used such a claim in making
a composition with his creditors.
=Beneficial Associations.=--Beneficial associations possess a varied
aspect, they are both social and business organizations. Often the
members are bound together by secret obligations and pledges.
Trades-unions have a double nature, they are created for both
beneficial and business purposes. Originally their beneficial
character was the more important feature. Benefit societies may be
purely voluntary associations or incorporated either by statute or
charter.
The articles of association formed by the members are essentially an
agreement among them by which they become bound to do specified things
and incur liabilities. They thus establish a law for themselves
somewhat like a charter of a corporation. They may adopt such rules as
they like provided they are not contrary to the laws of the land. As
the members, having made the rules, are presumed to know them, they
are therefore bound by them.
The legal status of such associations, their right to sue and be sued,
the liability of the members to the public for the debts of the
association, though most important questions, are not as well settled
as they might be. In many states statutes exist defining their right
to sue and be sued, and their liability to creditors. Yet these
statutes do not cover all cases. Generally persons who associate for
charitable or benevolent purposes do not regard themselves in a legal
sense as partners. Nevertheless in fixing their liability to
creditors, dividing their property, and closing up their affairs, the
courts often, though not always, treat their association as a
partnership, and the members as partners. Thus the highest court in
New York declared that an unincorporated lodge, which had been
mis-managed, was not a partnership. The members sought to dissolve the
lodge, and distribute its property. The court said there was no power
to compel the payment of dues, and the rights of a member ceased after
his failure to meet his annual subscription. On the other hand, the
supreme court in the same state held that the members of a voluntary
association were liable to its creditors by common law principles.
"Where such a body of men join themselves together for social
intercourse and pleasure, and assume a name under which they commence
to incur liabilities by opening an account, they become jointly liable
for any indebtedness thus incurred, and if either of them wishes to
avoid his personal responsibility by withdrawal from the body, it is
his duty to notify the creditors of such withdrawal."
If one or more members order work to be done or purchase supplies, he
or they are personally liable unless credit was given to the
association.
What can the members do? They cannot change the purpose for which the
association was formed without the consent of all, still less can the
executive board convert the association into a corporation. No member
has a proprietary interest in the property, nor right to a
proportionate part while he is a member, or after his withdrawal.
Should an association dissolve, then the members may divide its
property among themselves.
Sometimes a quarrel springs up in one of these associations, the
members divide, who shall have the property? The members of more than
one church organization have fought this question, first among
themselves, afterwards in the courts. Suppose a quarrel breaks out in
a branch association and two parties are formed, which of them is
entitled to the property? The party that adheres to the laws and
usages of the general organization is regarded as the true
association, and is therefore entitled to the enjoyment of the
property. Though that party may be a minority of the faithful few, the
members are enough to continue the organization.
Sometimes societies of a quasi religious character exist which persons
join, surrendering their property and receiving support. Suppose a
member should leave, and afterwards sue to recover his property. This
has been attempted, and usually ends in failure.