Auctioneer.—An auctioneer, employed by a person to sell his property, is primarily the owner's agent only, and he remains his exclusive agent to the moment when he accepts the purchaser's bid and knocks down the property to him. On accepting the bid the auctioneer is deemed to be the agent of the purchaser also, so far as is needful to complete the sale; he may therefore bind the purchaser by entering his name to the sale and by signing the memorandum thereof. His signing is sufficient to satisfy the Statute of Frauds in any state conferring on an agent authority to make and contract for the sale of real and personal property without requiring his authority to be in writing. His agency may begin before the time of the sale and continue after it. Again, the entry of the purchaser's name must be made by the auctioneer or his clerk immediately on the acceptance of the bid and the striking down of the property at the place of sale. It cannot be made afterward. The auctioneer at the sale is the agent of the purchaser who by the act of bidding calls on him or his clerk to put down his name as the purchaser. In such case there is little danger of fraud. If the auctioneer could afterward do this he might change the name, substitute another, and so perpetrate a fraud.
A sale by auction is complete by the Sales Act when the auctioneer announces its completion by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from sale unless the auction has been announced to be without reserve.
Authority may be conferred on an auctioneer in the same manner as on any other agent for the sale of similar property, verbally or in writing. Even to make a contract for the sale of real estate, oral authority to the auctioneer is sufficient, in the absence of a statute to the contrary.
Authority to sell property does not of itself imply authority to sell it at auction, and the purchaser therefore who has notice of the agent's authority or knowledge sufficient to put him on inquiry, acquires no title to the property thus purchased. If goods are sent to an auction room to sell, this is deemed sufficient evidence of authority to sell them in that manner and to protect whoever buys them.
As an auctioneer is ordinarily a special agent, the purchaser is supposed to know the terms and conditions imposed by the seller on the agent. The seller or owner therefore is not bound by any terms stated by the auctioneer differing from those given to him. If the owner has imposed no terms on him, then he has the implied authority usually existing in such cases.
An auctioneer has authority to accept the bid most favorable to the seller when the sale is made without reserve and to strike down the property to the purchaser. He cannot therefore consistently with his duty to his principal refuse to accept bids, unless the bidder is irresponsible or refuses to comply with the terms of the sale. He is justified in rejecting the bids of insane persons, minors, drunken persons, trustees of the property, and perhaps in some cases of married women.
An auctioneer cannot transfer his duty to another. This rule does not prevent him from employing others to do incidental things connected with the keeping and the moving of the property. He cannot sell on credit contrary to his instructions or custom; nor would he be secure in following custom if instructed to do otherwise. After the bid has been accepted the bidder has no authority to withdraw it without the owner's consent, nor can he be permitted to do so by the auctioneer. Nor can he sell at private sale if his instruction is to sell publicly, nor can he justify himself even if he acted in good faith and sold the property for more than the minimum price fixed by the owners. Nor can he sell the property to himself, nor authorize any other person to bid and purchase for him either directly or indirectly. It is impossible with good faith to combine the inconsistent capacities of seller and buyer, crier and bidder, in one and the same transaction.
He has no authority to warrant the quality of property sold except custom or authority is expressly given to him. Nor is he an insurer of the safety of the goods entrusted to him for sale; he must however use ordinary and reasonable care in keeping them. Lastly, an auctioneer should disclose his principal and contract in his name. If one bought property therefore supposing it belonged to A, when in fact it belonged to B, through any manipulation of the auctioneer, the bidder would not be bound.
Automobile.—The members of the public have a right to use the public avenues for the purpose of travel and of transporting property: nor has the driver of horses any right in the road superior to the right of the driver of an automobile. Each has the same rights, and each is equally restricted in exercising them by the corresponding rights of the other.
Again, the public ways are not confined to the original use of them, nor to horses and ordinary carriages. "The use to which the public thoroughfare may be put comprehends all modern means of carrying including the electric street railroad and automobile." It has been declared that the fact that motor vehicles may be novel and unusual in appearance and for that reason are likely to frighten horses which are unaccustomed to see them, is no reason why the courts should adopt the view of prohibiting such machines.
The general rule is that all travelers have equal rights to use the highways. An automobile therefore has the same rights and no more than those of a footman.
The mere fact that automobiles are run by motor power, and may be operated at a dangerous and high rate of speed, gives them no superior rights on the highway over other vehicles, any more so than would the driving of a race horse give the driver superior rights on the highway over his less fortunate neighbor who is pursuing his journey behind a slower horse.
There is no authority or power in the state to exclude non-resident motorists from the public ways, nor have the states power to place greater restrictions or burdens on non-resident automobilists than those imposed on their own citizens.
A license to operate an automobile is merely a privilege. It does not constitute a contract, consequently it does not necessarily pass to a purchaser of the vehicle, and may, for a good reason, be revoked. Moreover the charge imposed for the privilege of operating a motor on the highway is not generally considered a tax, only a mere license or privilege fee.
An automobile may be hired from the owner. This is called in law a bailment. The bailor is not responsible generally for any negligence of the hirer in operating the car. Nor is the rule changed should the hirer be an unskilled person, unless he was an immature child or clearly lacking in mental capacity, or was intoxicated. Where the owner of an automobile delivered it to another by agreement, who was to pay the purchase price from the money derived from its use, and thereafter had complete control of the machine, his negligence could not be charged to the seller.
Again, where an automobile is hired and the chauffeur is also furnished by the owner, who pays him for operating the car, and the hirer has no authority over him except to direct his ways of going, the chauffeur is regarded as the servant of the owner. He, therefore, and not the hirer is responsible for the negligence of the chauffeur. Of course, the rule would be changed if the hirer assumed the management of the car: then the hirer alone would be liable for the chauffeur's negligence.
A party who hires an automobile from another is bound to take only ordinary care of it and is not responsible for damage whenever ordinary prudence has been exercised while the car was in his custody. If lost through theft, or is injured as a result of violence, the hirer is only answerable when these consequences were clearly the result of his own imprudence or negligence. The hirer though must account for the loss or injury. Having done this, the proof of negligence or want of care is thrown on the bailor.
If the hirer should sell the automobile without authority to a third party, the owner or bailor may bring an action against even an innocent purchaser who believed that the hirer had the title and power to sell.
There is an implied obligation on the hirer's part to use the car only for the purpose and in the manner for which it was hired. And if it is used in a different way and for a longer time, the hirer may be responsible for a loss even though this was inevitable.
Suppose the hirer misuses the car, what can the owner do? He can repossess himself, if this can be done peaceably, otherwise he must bring an action for the purpose. As the hirer acquires a qualified title to the property, he can maintain an action against all persons except the owner, and even against him so far as the contract of letting may set forth the relations between them.
When an owner or hirer undertakes to convey a passenger to a specified place and, while on the way, the car breaks down, if it cannot be properly mended at the time and the owner or hirer is able to furnish another, the law requires him to do so and thus fulfil his contract.
"The owner of a motor vehicle," says Huddy, "is of course entitled to compensation for the use of the machine. If a definite sum is not stated in the contract between the parties, there arises an implied undertaking that the hirer shall pay a reasonable amount. One who uses another's automobile without consent or knowledge of the owner, may be liable to pay a reasonable hire therefor. In case the hirer is a corporation, there may arise the question whether the agent of the company making the contract has authority to bind the company. Where a machine is hired for joy riding on Sunday, it has been held that the contract is illegal and the hirer cannot recover for the use of the automobile."
The speed of automobiles along the public highways may be regulated by law. A municipality may forbid the use of some kinds of motor vehicles on certain streets, but it cannot broadly exclude all of them from all the streets. The rules regulating travel on highways in this country are called, "the law of the road." The object of these rules is to prevent collisions and other accidents, which would be likely to occur if no regulations existed.
A pedestrian who is about to cross a street may rely on the law of the road that vehicles will approach on the proper side of the street. This rule however does not apply to travelers walking along a rural highway. Huddy says: "When overtaking or meeting such a person, it is the duty of both the pedestrian and the driver of the machine to exercise ordinary care to avoid a collision, but no rule is, as a general proposition, definitely prescribed as to which side of the pedestrian the passage shall be made."
The law of the road requiring vehicles to pass each other on the right, contrary to the English custom, has been reënforced in many or all the states by statutory enactments, and applies also to automobiles. When, therefore, two vehicles meet and collide on a public highway, which is wide enough for them to pass with safety, the traveler on the wrong side of the road is responsible for the injury sustained by the other. But a traveler is not justified in getting his machine on the right-hand side of the road and then proceeding regardless of other travelers; on the contrary, the duty of exercising reasonable care to avoid injuries to others still continues.
Not only must each one pass to the right, but each must pass on his own side of the center line of the highway, or wrought part of the road. And when the road is covered with snow, travelers who meet must turn to the right of the traveled part of the road as it then appears, regardless of what would be the traveled part when the snow is gone. After passing the rear of the forward vehicle an automobilist must exercise reasonable care in turning back toward the right into the center of the highway, and if he turns too soon he may be liable for damages caused by striking or frightening the horses. "If two vehicles meet in the street, it is the duty of each of them, as seasonably as he can, to get each on his own right-hand side of the traveled way of the street."
The rights of travelers along intersecting streets are equal, and each must exercise ordinary care to avoid injury to the other. An automobilist nearing an intersection should run at proper speed, have his car under reasonable control, and along the right-hand side of the street. If two travelers approach the street crossing at the same time neither is justified in assuming that the other will stop to let him pass. When one vehicle reaches the intersection directly in advance of the other, he is generally accorded the right of way, and the other should delay his progress to enable the other to pass in safety.
The driver of an automobile may be charged with negligence if, without warning to a vehicle approaching from the rear, he turns or backs his machine and causes a collision. Indeed, it is negligence for a chauffeur to back his machine on a city street or public highway without looking backward; and especially if one backs his car on a street car track without looking for street cars.
If an obstruction exists on the right-hand side of a highway, the driver of a car may be justified in passing to the other side, and in driving along that side until he has passed the obstacle. Under such circumstances he has a right to be on the left side temporarily; and if he exercises the proper degree of care while there, is not liable for injuries arising from a collision with another traveler. But if the obstruction is merely temporary, it may be the duty of the driver to wait for the removal and not to pass on the wrong side of the highway.
An automobilist must exercise reasonable or ordinary care to avoid injury to other persons using the highway. What this is depends on many circumstances, and each case to some extent is decided by its own facts. Consequently thousands of cases have already arisen, and doubtless they will still multiply as long as automobiles are used and their users are negligent.
The competency of the driver is one of the unending questions. Of course he should be physically fit, not subject to sudden attacks of dizziness, possessing sufficient strength and proper eyesight and a sober non-excitable disposition. It is said, that a chauffeur is not incompetent who requires glasses. But he certainly would be if his eyesight was poor and could not be aided by the use of them.
The driver must at all times have his car under reasonable control so that he can stop in time to avoid injury. He must keep a reasonably careful lookout for other travelers in order to avoid collision; also for defects in the highway. If by reason of weather conditions, lights or other obstructions, he is unable to see ahead of him, he should stop his car. If there be no facilities for stopping for the night, a driver is not negligent should he proceed through the fog.
Passing to the liability of the owner of a car for the acts of his chauffeur, the general rule is, he is then liable when the chauffeur is acting within the scope of his owner's business. When the owner himself is riding in the car there is less difficulty in fixing the liability, but when the chauffeur uses the car without the owner's consent, he is not liable for the conduct of the driver. And this is especially so in using a car contrary to the owner's instructions and for the chauffeur's pleasure; or in using it for his own business with the owner's consent. And the same rule generally prevails whenever a member of a family uses his parent's car without his knowledge and consent, and especially when forbidden. But the parent is liable for the running of a car with his knowledge by a member of his family and for the convenience or pleasure of other members. See Chauffeur; Garage Keeper.
Bailor and Bailee.—To create this relation the property must be delivered to the bailee. Though a minor cannot make such a contract, yet if property comes into his possession he must exercise proper care of it. Should he hire a horse and kill the animal by rash driving, he would be liable for its value. A corporation may act as bailor or bailee, and an agent acting therefor would render the corporation liable unless he acted beyond the scope of his authority.
Suppose one picks up a pocketbook, does he become the owner? Is he a bailee? Yes, and must make an honest, intelligent effort to find the owner; if failing to do so, then he may retain it as his own, meanwhile his right as finder is perfect as against all others. Should the true owner appear, whatever right the finder may have against him for recompense for the care and expense in keeping and preserving the property, his status as finder does not give him any lien unless the owner has offered a reward to whoever will restore the property. To this extent a lien thereon is thereby created.
The statutes generally provide what a person must do who has found lost property. Suppose a person appears who claims to be the owner of the thing found, what shall the finder do in the way of submitting it to his inspection? In one of the recent cases the court decided that it was a question of fact and not of law whether the finder of lost property had given a fair and reasonable opportunity for its identification before restoring it, and whether the claimant should have been given an opportunity to inspect it in order to decide whether it belonged to him.
The finder does not take title to every article found and out of the 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 subpœna 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.
Are benefit societies charities? This question is important from the taxpayer's view, as charitable associations are taxed less than others or perhaps entirely relieved. An Indiana court has decided that a corporation which promises to pay a fixed sum as a benefit during a member's illness—he of course paying his dues—is not a purely benevolent organization, and therefore not exempt from taxation. Masonic lodges on the other hand, are generally regarded as charitable institutions. "The true test," says a judicial tribunal, "is to be found in the objects of the institution."
Again, a voluntary association may conduct in such a way as to create the impression or belief that it is a corporation, and is forbidden from denying its corporate liability for an injury or loss to a third person. It is a familiar rule that a person who transacts business with a partnership in the partnership name may hold all the members liable as partners, though he did not know all their names. This rule has sometimes been applied to a voluntary association, making it responsible as a corporation.
The articles of association regulate the admission of members. A physician who applied for membership in a medical society was rejected because of unprofessional conduct. A code of medical ethics adopted by the society was declared to be binding only on the members, and therefore did not touch the conduct of one prior to his becoming a member of the society. If the membership of a society is confined to persons having the same occupation, a false representation concerning one's occupation would be a good reason for his expulsion. In admitting a member, if no form of election has been prescribed, each candidate must be elected separately. This must also be done at a regular meeting or at one properly called for that purpose. A call therefore to transact any business that may be legally presented is not sufficient.
If a society requires a ceremony of initiation, is the election of a member so complete that he is entitled to benefits without proper initiation? In one of the cases the court said: "The entire system, its existence and objects, are based upon initiation. We think, there can be no membership without it, and no benefit, pecuniary or otherwise, without it."
Controversies concerning property rights of religious societies are generally decided by one of three rules: (1) "was the property a fund which is in question devoted to the express terms of the gift, grant or sale by which it was acquired, to the support of any specific religious doctrine or belief or was it acquired for the general use of the society for religious purposes with no other limitation; (2) is the society which owned it of the strictly independent or congregational form of church government, owing no submission to any organization outside of the congregation; (3) or is it one of a number of such societies, united to form a more general body of churches, with ecclesiastical control in the general association over the members and societies of which it is composed."
Many benefit societies provide for the payment of money to their sick members. The rules providing for the payment of these may be changed at any time as the constitution or articles of association of a society may prescribe. Consequently an amendment may be made diminishing the weekly allowance to a member who is sick, and also the time of allowing it. Of course in applying for the benefits a member must follow the modes prescribed.
The power to expel members is incident to every society or association unless organized primarily for gain. Gainful corporations have no such power unless it has been granted by their charter or by statute. The revision of the list of members by dropping names is equivalent to the expulsion of those whose names are dropped, and by a majority vote or larger one as the rules of the society may require. Nor can the power of expulsion be transferred from the general body to a committee or officer. The power to expel must be exercised in good faith, not arbitrarily or maliciously, and its sentence is conclusive like that of a judicial tribunal. Nor will a court interfere with the decision of a society except: first, when the decision was contrary to natural justice and the member had no opportunity to explain the charge against him; secondly, when the rules of the association expelling him were not observed; thirdly, when its action against him was malicious. Nor will a court interfere because there have been irregularities in the proceedings, unless these were of a grave character.
The charges must be serious, a violation of a reasonable by-law is a sufficient charge. To obtain, by feigning a qualification which did not exist, membership in a trades-union is sufficient cause for expulsion; so is fraud in representing one's self in his application for membership when in fact he has an incurable disease. On the other hand, the following charges are not sufficient to justify expulsion or suspension: slander against the society, illegally drawing aid in time of sickness, defrauding the society out of a small sum of money, villifying a member, disrespectful and contemptuous language to associates, saying the lodge would not pay and never intended to pay, ungentlemanly conduct. In harmony with a fundamental rule of law, a member who has once been acquitted cannot be tried again for the same offense.
As subordinate lodges of a benefit society are constituent parts of the superior governing body, there may be an expulsion from membership in a subordinate lodge for violating laws which generally caused expulsion from the society itself, and there may be a conditional expulsion or suspension. If an assessment is not paid at the fixed time, its non-payment, by the laws of the order, works a suspension, though a member may be restored by complying with the laws of the order.
An appeal by a member of a subordinate lodge from a vote of expulsion does not abate by his death while the appeal is pending. If, therefore, the judgment of the lodge is reversed, the beneficiary of the member is entitled to the benefits due on the member's death. A member who has been wrongfully expelled may be restored by a mandamus proceeding issued by a court. Before making the order the court will inquire into the facts and satisfy itself whether in expelling the applicant the society has properly acted in accord with its rules. Unless some rule or statute forbids, a member of a voluntary association may withdraw at any time. When doing so, however, he cannot avoid any obligations incurred by him to the association. On the other hand, it cannot, after his withdrawal, impose any other obligations on him.
It has often been attempted to hold the members of an association liable personally for a promised benefit in time of sickness. Says Bacon: "It may be a question of construction in each particular case whether the members are personally liable or not. The better rule seems to be that the members are not held personally liable."
An association cannot by its constitution or by-laws confer judicial powers on its officers to adjudge a forfeiture of property rights, or to deprive lodges or members of their property and give it to another, or to other members. To allow associations to do this is contrary to public policy. For the same reason an agreement to refer future controversies to arbitration cannot be enforced; it in effect deprives a party of his rights under the law. He may do this in a known case, this indeed is constantly done, but one cannot bar himself in advance from a resort to the courts for some future controversy of which he has no knowledge at the time of the agreement. This is a rule of law of the widest application.