As the scope of the state's operations widens with the growing complexity of social and economic conditions, the problem of determining what are proper governmental functions becomes increasingly difficult. This is illustrated by a recent case in the Supreme Court of the United States. The state of South Carolina, in its efforts to regulate the liquor traffic, had established a dispensary system, and prohibited the sale of liquor by any but its own officers, who sold under certain wholesome restrictions. Under its internal revenue system, the United States imposed upon the dispensers a license tax, from which the state claimed exemption on the ground that the dispensary system was a means employed by it in the execution of its police power. The court, however, though bound by a previous ruling 11 to concede that this dispensary system was a valid exercise of the state's police power, supported the tax on two main grounds: first, that unless it were held valid, the states might cut off the nation's income by engaging in all the industries subject to internal revenue taxes; and second, that in carrying on the liquor business the state was not performing the ordinary functions of a government. A minority of the court, in a strong dissenting opinion, took issue on the second point, and further argued that not only did the first point lose its force because of the undoubted power of the states to cut off the nation's revenue directly by absolutely forbidding the sale of liquor entirely, but also that it amounted to this: "that the government created by the Constitution must now be destroyed, because it is possible to suggest conditions, which, if they arise, would in the future produce a like result." State of So. Carolina v. U. S., U. S. Sup. Ct., Dec. 4, 1905. Though opinions may differ as to what are the proper functions of state government, it seems that the majority of the court, influenced by the nightmare of a socialistic state contributing nothing to the national revenue, drew the line in this case much too sharply. Nothing comes more clearly within the police power of a state than the liquor trade. Nothing is more clearly a governmental function than the exercise of the police power. If, as the Supreme Court itself has held, 12 the state in engaging in the liquor business, is making a valid use of its police power, and is not engaging in a private business for profit, it would seem to follow that in so doing it is performing a governmental function which must not be interfered with by taxation. POWERS COUPLED WITH AN INTEREST. -The authority of an agent may, in general, be revoked at will by a principal. But where a power of attorney is given as security, it is irrevocable inter vivos.1 To the general rule that all agencies are terminated by the principal's death, the only wellrecognized exception is that of a power coupled with an interest. The act of the agent being conceived of as the act of the principal, this necessarily follows, since the act of a dead principal would be an impossibility; but where the agency is coupled with an interest, the act may be valid as the act of the agent even after the principal's death. To define this interest, therefore, becomes of grave importance. The prevailing American view is that the interest must be an interest 11 See Vance v. Vandercook Co. (No. 1), 170 U. S. 438. 12 Vance v. Vandercook Co., supra. 1 Walsh v. Whitcomb, 2 Esp. 565. 3 in the thing itself which constitutes the subject matter of the agency, and not a mere interest in the proceeds from the exercise of the power.2 Thus a power of sale in a mortgage, a power to carry on a business together with an assignment of the business, are powers coupled with an interest; while a power to sell property and reimburse one's self from the proceeds, a power to an insurance agent to retain fifty per cent of the premiums as commissions, are examples of powers not coupled with an interest. Mere possession of the subject matter of the agency has been held in an early New York case to be such an interest as will render the power irrevocable," though this seems to be doubted in a recent decision of the Appellate Division of the New York Supreme Court which fails to mention the earlier adjudication. Hoffman, Administrator v. Union Dime Savings Institution, 109 N. Y. App. Div. 24. An apparent extension of the rule to an entirely new class of cases is made by the United States Supreme Court in holding that a power given to a firm of attorneys to prosecute and compromise a suit and to receive a percentage of the proceeds as compensation is not terminated by the principal's death, being coupled with an interest. Its principle has, however, been limited and in effect, it would seem, overruled by a subsequent decision of the same court in which the only distinction made was that the authority did not include a power to compromise. The trend of recent decisions seems to favor strongly the narrower definition. The conception of a power coupled with an interest is found in Coke, whose definition corresponds with that to be found in the American cases." The modern English view, however, is said to be broader. Where a power is given for a valuable consideration to secure some benefit to the donee of the authority, the power is said to be coupled with such interest as to make it irrevocable.10 This does not require an interest in the subject matter of the agency; an interest in the proceeds from the exercise of the power is sufficient. On the continent, indeed, the law seems settled in favor of the broader rule." The issue in the English cases, however, was as to the revocability of the power inter vivos, an entirely different thing from its termination by death; and they could have been decided in the same way under the narrower rule laid down by Chief Justice Marshall.2 While the statements of text-writers and the language used by courts undoubtedly do go so far as to consider such a power not terminated by the principal's death, no express decision has been found in support of the broader doctrine. CIVIL LIABILITY ARISING FROM VIOLATION OF MUNICIPAL ORDINANCES. An exception, everywhere recognized in the United States, to the fun 2 Hunt v. Rousmanier's Admrs., 8 Wheat. (U. S.)__174. 3 Conners v. Holland, 113 Mass. 50; Durbrow v. Eppens, 65 N. J. Law 10. 4 Fisher v. Southern Loan & Trust Co., 138 N. C. 90; Andrews v. Travelers' Insurance Co., 24 Ky. Law Rep. 844. Knapp v. Alvord, 10 Paige (N. Y.) 205. 6 Jeffries, Admr. v. The Mutual Life Insurance Co., 110 U. S. 305. 7 Missouri, ex rel. Walker v. Walker, 125 U. S. 339. 8 Fisher v. Southern Loan & Trust Co., supra; Andrews v. Travelers' Insurance Co., supra Black v. Harsha, 7 Kan. App. 794. Co. Litt. 49b, 52b, 181b. 10 Smart v. Sandars, 5 C. B. 895, 917; In re Hannan's Express Gold Mining & Developing Co., [1896] 2 Ch. 643. 11 See I Holtzendorff, Encyklopädie der Rechtswissenschaft 599. damental rule that the authority to make laws cannot be delegated by the legislature, allows certain powers of local legislation to be conferred upon municipal corporations. The police powers of the state are commonly granted to municipalities, and ordinances passed under that delegated power are as binding within the municipal limits as are the acts of the legislature itself. There is no conflict as to the direct effect of such ordinances, but courts differ in interpreting the indirect effect. The Supreme Court of Missouri recently refused to follow the earlier decisions in that state,2 which hold that civil liability between individuals cannot be created by municipal ordinance. Sluder v. St. Louis Transit Co., 189 Mo. 107. 1 It is the generally accepted doctrine that such liability may result from legislative enactment and that a private individual can recover in a tort action if he is damaged by a breach of duty imposed by the legislature. Courts state the ground for recovery in different ways. Some call the breach negligence per se. Others call it prima facie evidence of negligence. They all go so far as to hold that if the legislature imposes a duty which is owed to citizens as individuals and not to the municipality or public at large, a plaintiff to whom the duty is owed, can, unless the legislature has showed a contrary intent, recover for damage caused to him by a breach. The liability of the defendant is really not based upon negligence, as the exercise of care cannot be offered as a defense. Nor is he absolutely liable for the results of his unlawful action, for it has been held that the defendant may show a justification for his violation of the law and thus escape civil liability. It is of course necessary for the plaintiff to establish the causal relation between the defendant's breach and his own damage in order to make out his case, and the mere fact that the defendant is acting unlawfully at the time is not enough to make him liable. The liability results from the legislature's implied intent to impose it. The duty in many statutes is created wholly or in part for the benefit of individuals. The temptation to violate the duty for the sake of pecuniary gain is frequently so great that it is advisable to add to the penalty expressly imposed civil liability in those cases where the breach results in damage to an individual. 7 A few jurisdictions refuse to allow a tort action when the duty is imposed by a municipal ordinance. They argue that the municipality is empowered to pass laws for particular local purposes, but that it cannot create new civil liabilities between individuals. They hold that limited punishments may be inflicted by the municipality for breach of the ordinances, but that the legislature cannot delegate the power to subject individuals to civil liability where the damages recoverable have no definite limit. The only duty owed under an ordinance, according to these authorities, is to the municipality. 8 An A large majority of jurisdictions, however, make no distinction between legislative and municipal enactments, and this position seems correct. act of the legislature passed under the police power creates civil liability. 1 Barbier v. Connolly, 113 U. S. 27. 2 See Byington v. St. Louis Rd. Co., 147 Mo. 673. 8 Dodge v. The Burlington, C. R. & M. Rd. Co., 34 Ia. 276. 4 The Illinois Central Rd. Co. v. Gillis, 68 Ill. 317. 5 See Hanlon v. South Boston Horse Rd. Co., 129 Mass. 310. 7 Philadelphia and Reading Rd. Co. v. Ervin, 89 Pa. St. 71. 8 Hayes v. Michigan Central Rd. Co., 111 U. S. 228. The legislature can delegate the right to pass that act. It is difficult to see why the act should have one effect when the legislature passes it itself, and another when the legislature's delegate passes it. It is binding law in both cases. In each a duty is created. There is no evidence that the legislature intends to delegate only part of its power. If the legislature creates the duty by a clause in the city's charter, the duty is owed to individuals. If the charter empowers the municipality to create the duty, it is reasonable to suppose that the legislature intends the same result to follow.9 RESCISSION AND REFORMATION FOR MUTUAL MISTAKES OF FACT. A distinction should be drawn between three classes of cases in which, on account of a mutual mistake of fact, equity is asked to give affirmative relief in the nature of rescission or reformation. The simplest of them arises from a failure to complete the formation of a legal contract. For example, the ostensible agreement may be capable of two reasonable interpretations, one of which is accepted by each party, as where A, with two lots in Boston, agrees to sell "my lot in Boston. Other elements of a contract, a supposed party, or consideration, may be non-existent. Since the invalidity of the contract is recognized at law, the intervention of equity is generally unnecessary. If, however, a bond or a deed has been delivered by way of partial performance, a bill quia timet might bring relief through cancellation of the instrument. In a second class of cases a legally valid contract has been entered into under a mutual mistake as to certain material facts which form the conscious inducement of the contract. The mutual error may be as to the quality or identity of land sold, the quantity of land in a parcel (rescission, however, being usually granted in the latter case only where the error is considerable), the nature or character of a chattel. Here there can be no true reformation, since there is no previous contract with which the mistaken agreement can be squared. Hence equity will conclude that there would have been no contract had the mutual error not been made, but cannot go further and create the contract that might have been formed. Sometimes, as where a party has received more or less land than he paid for, and justice is best subserved thereby, equity may allow the defendant an election between rescission and a money payment.1 But ordinarily rescission is the only remedy.2 In a recent New York case, for example, a real estate broker employed to sell lot A mistakenly pointed out lot B as the one for sale. The plaintiff agreed to buy and signed a contract properly describing lot A. Because of the blunder the court properly decreed a rescission. Silverman v. Minsky, 109 N. Y. App. Div. 1. Had authority been given the agent to dispose of lot B also, the case might be one for reformation on the principles which govern the third class of cases. In this class there is an initial contract, the expression or performance of which in a written contract or deed is, because of mutual mistake or the mistake of one party and the fraud of the other, incorrect. Here equity makes the performance or contract conform to the original agreement by such decree as seems proper. To this end one who has gained or retained 9 See Taylor v. The Lake Shore, etc., Rd. Co., 45 Mich. 74. property through the mistake in performance is said to be under an equitable obligation, broadly termed a constructive trust, to convey it to the other contracting party. Where, as might be true in the principal case, the writing has omitted land comprised in a prior oral agreement, some courts have refused to compel reformation, on the ground that they would be enforcing specific performance in the teeth of the Statute of Frauds. But in all these cases mistake, and not a contractual right of specific performance, is the basis of equitable relief. Business understanding and convenience, to be sure, forbid that mistake or surprise should always give rise to an equity. But the retention of property or of a written contract may at least, in the circumstances noted, be fastened upon as an unjust enrichment, analogous to that arising from actual fraud. POWER OF STATE TO EXCLUDE Foreign CORPORATIONS. The growing hostility towards corporations, especially those engaged in inter-state business, has led to highly restrictive regulations and, frequently, total exclusion by states of certain classes of foreign corporations.1 This renders timely a brief inquiry, in a recent article, into the limitations upon this power of a state. Upon the Power of One State to Exclude the Corporations of Another, by Eugene F. Ware in 17 Green Bag 699. A corporation is a creature of local law and cannot exist outside of the state of its creation. Yet, like a natural person, it may act elsewhere through agents. Whether a state will recognize the existence of a foreign corporation and permit it to do business therein is determined solely by the laws of that state. The common law, however, has generally recognized a foreign corporation. But, in the absence of constitutional limitations, the state has an undoubted right to regulate or exclude foreign corporations. To the Constitution, then, we must look for the curtailment of a state's right of control over foreign corporations. That a corporation is not entitled to the privileges of "citizens" under Article IV, sec. 2, is settled.* And, although a corporation is a "person " within sec. 1 of the Fourteenth Amendment, forbidding the denial of the equal protection of the laws "to any person within the jurisdiction," this does not prevent a state from imposing conditions to the admission into the jurisdiction of a foreign corporation, and a state may discriminate against different foreign corporations in imposing conditions upon their right to enter the state." Though the power to license implies the right to revoke, a state cannot, however, deprive a corporation of rights of property or contracts gained during its licensed activity, nor yet impair its own contract with the corporation." 3 Cole v. Fickett, 95 Me. 265. 4 Glass v. Hulbert, 102 Mass. 24; Davis v. Ely, 104 N. C. 16. See also Petesch v. Hambach, 48 Wis. 443. 5 Comstock v. Coon, 135 Ind. 640. See 2 Pomeroy, Eq. Jurisp., 3d ed., § 867 and note. 1 See Beale, Foreign Corp. Chap. VII. 2 Bank of Augusta v. Earle, 13 Pet. (U. S.) 519, 589. 3 Watts-Pierce Oil Co. v. Texas, 177 U. S. 28. Paul v. Virginia, 8 Wall. (U. S.) 168. 5 Smyth Ames, 169 U. S. 466, 522. Philadelphia Fire Ass'n v. New York, 119 U. S. 110. 7 See Bedford v. Eastern Building and Loan Ass'n, 181 U. S. 227; N. Y., Lake Erie, etc., Co. v. Pennsylvania, 153 U. S. 628. |