Chapter II: Part 2

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.

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.

=Broker.=--A broker, unlike an auctioneer, usually has no special property in the goods he is authorized to sell. Ordinarily also he must sell them in the name of the principal, and his sales are private. He receives a commission usually called brokerage. He can act only as the agent of the other party when the terms of the contract are settled and he is instructed to finish it. Brokers are of many kinds. They relate to bills and notes, stocks, shipping, insurance, real estate, pawned goods, merchandise, etc. A bill and note broker who does not disclose the principal's name is liable like other agents as a principal. He is also held to an implied authority, not only to sell, but that the signatures of all the parties thereon are genuine. Unless he indorses it he does not warrant their solvency.

An insurance broker is ordinarily employed by the person seeking insurance, and is therefore unlike an insurance agent, who is a representative of an insurance company, and usually has the authority of a general agent. A delivery of a policy therefore, to an insurance broker, would be a delivery to his principal. He is a special agent. Unless employed generally to keep up his principal's insurance, he has no implied authority to return a policy to be cancelled, and notice to him that a policy had ceased, would not be notice to his principal.

An insurance broker must exercise reasonable care and diligence in selecting none but reliable companies, and in securing proper and sufficient policies to cover the risks placed to be covered by insurance; and if he selects companies which are then in good standing he would not be liable should they afterward become insolvent.

Merchandise brokers, unless factors, negotiate for the sale of merchandise without having possession or control of it. Like other agents they must serve faithfully and cannot act for both parties, seller and buyer, in the same transaction, without the knowledge and consent of both. In many transactions he does thus represent both by their express or implied authority, and therefore binding both when signing for them.

A real estate broker in the employ of his principal is bound to act for his principal alone, using his utmost good faith in his behalf. And a promise by one of the principals in an exchange of real estate, after the completion of the negotiations, to pay a commission to the other party's broker, to whom he owed nothing, is void for lack of a consideration.

To gain his commission a broker must produce a person who was ready, able and willing both to accept and live up to the terms offered by the owner of the property. Nor can a property owner escape payment of a broker's commission by selling the land himself and at a price less than the limit put on the broker.

The business of a pawnbroker is legally regulated by statute, and the states usually require him to get a license. As the business may be prohibited, a municipality or other power may regulate and control his business. The rate of interest that he may charge is fixed by statute. The pawnee may lose his right by exacting unlawful interest. Nor has the pawnee the right to retain possession against the true owner of any article that has been pawned without his consent or authority. If the true owner has entrusted it to someone to sell, who, instead of selling, pawns it, the pawner is protected in taking it as security. The sale of pawned goods is usually regulated by statute. If none exists, and there is no agreement between the parties, the sale must be public after due notice of the time and place of sale. If there is any surplus, arising from the sale, he must pay it to the pawner, and not apply it on another debt that he may owe the pawnee. The pawner, or an assignee or purchaser of the pawn ticket may redeem it within the time fixed by law or agreement, or even beyond the agreed time if the pawnee has not exercised his right of sale. Subject to the pawnee's claim, the pawner has the same right over the article pawned as he had after pawning it, and may therefore sell and transfer his interest as before. Lastly the pawner is liable for any deficiency after the sale of the thing pawned, unless released by statute. See _Agency_.

=Carrier.=--Carriers are of two kinds, private and public. A private carrier may contract orally or in writing, and must use such care in carrying the goods entrusted to him as a man of ordinary intelligence would of his own property. If he carries these gratuitously his obligation is still less, nevertheless he must even then take some care of them. Suppose he agreed to carry a package for another to the latter's home, and on the way, being weary or sleepy, should sit down by the wayside where people often pass and fall asleep and on awakening should find the package missing, would he be responsible? Authorities differ. Suppose the package was a very valuable one. A court might hold that the man who gave it to him was a fool for entrusting such a package voluntarily with him. Suppose however that he was a highly trustworthy man, well known throughout the neighborhood, then no fault could be imputed to either, and the owner would be obliged to bear the loss.

Common carriers are far more numerous and important. Receiving a reward they are required to exercise more care in the business. The old rule of the common law was very strict, but this has been greatly modified. A carrier may modify the rule by contract, and the bill of lading received by the shipper is regarded as one, and sets forth his liability. In a general way he can relieve himself from all liability except from his own negligence, and there are cases which hold that he can relieve himself even from that if the shipper, for the sake of having his goods carried at a lower price, is willing to relieve him, in other words is willing to assume all the risk himself.

A carrier can limit his liability for the loss of baggage entrusted to his care and when one receives a receipt describing the amount of the carrier's liability in the event of loss. Nor can he hold the company on the plea of ignorance by declaring he has not read it, for it is his duty to read the receipt. Again, a carrier is thus liable only when a traveler's baggage is entrusted to his care; if therefore he keeps his grip or umbrella and on looking around makes the painful discovery that he has been relieved of them, he cannot look to the carrier for compensation.

The law requires carriers to carry all who pay their fare, and are in a sufficiently intelligent condition to take care of themselves. In like manner the law requires them to take all freight that may be offered, though it may make reasonable rules with regard to the time of receiving it, mode of packing, etc. A regulation therefore that furniture must be crated is reasonable, and a carrier may refuse to take it unless it is thus prepared for shipment. So also is a rule requiring glass to be boxed though the distance may be short for carrying it. A carrier may also object to carrying things out of season, potatoes or fruit for example in the winter in the northern states where there is great danger of freezing, unless the shipper assumes the risk. Vast quantities of perishable goods are carried, but usually under definite regulations and contracts. So, too, the shipper must declare the nature of the thing carried. Should he put diamonds in his trunk, he could not recover for their loss, for he has no business to carry such a valuable thing in that way. He must make known the contents for the carrier's protection. He cannot carry an explosive in secrecy. To attempt to do such a thing is a manifest wrong to the carrier.

A carrier has a lien or right to hold the freight until the charge for transporting it is paid, but if it is delivered, the lien ceases and cannot be restored. If the carrier keeps it until the freight charge is paid discretion must be used, and unnecessary and unreasonable expense must not be incurred in so doing.

A different rule applies to carrying passengers than applies to freight, because the latter is under its complete control, while passengers are not. Nevertheless the law requires a high degree of care in carrying passengers, and is responsible in money damages should injury occur through the carrier's negligence. In many states statutes exist limiting the amount that a carrier must pay when life is lost through its negligence to five thousand dollars or other sum, while a much larger sum is often recovered for an injury, loss of a leg, arm or the like. From the carrier's point of view therefore it is often obliged to pay less for killing than for injuring people; this is one of the strange anomalies of the law.

When a passenger is injured and no agreement can be made with the carrier for compensation, a suit is the result and the chief question is one of fact, the extent of the injury, and the degree of negligence of the carrier. If, on the other hand, the passenger was in fault himself and contributed to the injury then the more general rule is he can recover nothing. In some states the courts attempt to ascertain the negligence of both parties, when both are at fault, and then award a verdict in favor of the one least in fault. This is a difficult rule to apply however just it may seem to be.

A passenger who stands on a platform or on the steps of a street car, when there is room inside, assumes all the risks himself. But if there is no room within and the conductor knows he is outside, and permits him to ride, he is under the same protection as other passengers. An interurban car had stopped and A who was carrying two valises attempted to board it. The act of the conductor, who was on the rear platform, in reaching down and taking one of the valises amounted to an invitation to A to board the car. In signaling to the motorman to start the car when A was stepping to the vestibule from the lower step, thus causing the injury to him, was negligence for which the company was liable.

A sleeping car company operating in connection with ordinary trains is not a common carrier, nor an innkeeper as to the baggage of a passenger. Yet it is liable for ordinary negligence in protecting passengers from loss by theft. In a well-considered case the judge said: "Where a passenger does not deliver his property to a carrier, but retains the exclusive possession and control of it himself, the carrier is not liable in case of a loss, as for instance, where a passenger's pocket is picked, or his overcoat taken. A person asleep cannot retain manual possession or control of anything. The invitation to make use of the bed carries with it an invitation to sleep, and an implied agreement to take reasonable care of the guest's effects while he is in such a state that care upon his own part is impossible. I think it should keep a watch during the night, see to it that no unauthorized persons intrude themselves into the car, and take reasonable care to prevent thefts by occupants."

There is a distinction between the great express companies of the country and local express companies receiving baggage from travelers for transportation to their immediate destination. In the latter case there is nothing in the nature of the transaction or the custom of the trade which should naturally lead the shipper to suppose that he was receiving and accepting the written evidence of a contract, and therefore he is not bound by the terms of the receipt received, unless there is other evidence that he assented thereto.

Though the United States is a common carrier for carrying mails, it cannot be held liable because it is a branch of the government. Mail matter may be carried by private persons, but this is limited to special trips. By statute no person can establish any private express for carrying letters or packets by regular trips or at stated periods over any post route, or between towns, cities or other places where the mail is regularly carried.

A public officer in performing his duties is exempt from all liability. But a postmaster is liable to a person injured by his negligence or misconduct and for the acts of a clerk or deputy authorized by him. The assistant unless thus shielded must answer for his own misconduct. A rider or driver employed by a contractor for carrying the mails is an assistant in the business of the government. Although employed and paid, and liable to be discharged at pleasure by the contractor, the rider or driver is not engaged in his private service; he is employed in the public service and therefore the contractor is not liable for his conduct.

=Chattel Mortgage.=--A chattel mortgage is a conveyance of personal property, as distinguished from real property, to secure the debt of the lender or mortgagor. The essence of the agreement is, if the mortgagor does not repay the money as he has agreed to do, the mortgagee becomes the owner of the property. Until the mortgagor fails to execute his part of the agreement, he retains possession of the property. By statutes that have been enacted everywhere, the mortgagee's interest, or conditional title in the property conveyed to him, is secure by recording the deed even though the mortgagor still retains possession.

The usual form of a chattel mortgage is a bill of sale with a conditional clause, stating the terms of the loan and that, on the mortgagor's failure to pay, the mortgagee may take possession of the property. Any persons who are competent to make a contract may make a chattel mortgage, and an agent may act for another as in many other cases. When thus acting his authority may be either verbal, or written, or may be shown by ratification. Persons also who have a common ownership in chattels, tenants in common or partners for example, may mortgage either their common or individual interests. A husband may give a chattel mortgage to his wife, and she in turn can give one to him. Likewise a corporation may make such a mortgage.

The law is broader in the way of permitting a minor, married woman, or corporation to be mortgagees when they cannot act as mortgagors of their property. Two or more creditors may join in such a mortgage to secure their separate debts. If the debt of one of them is fraudulent, his fraud, while rendering the mortgage fraudulent as to him, will not affect its validity as to the other.

How must the mortgaged property be described? With sufficient clearness to enable third persons to identify the property. The description must contain reasonable details and suggest inquiries which if followed will result in ascertaining the precise thing conveyed. A description of a baker's stock "stock on hand," would be too meager, so would be a description of "our books of account, and accounts due and to become due," but cattle described by their age, sex and location will satisfy the law, though the cattle of other owners should form part of the same herd, when they can be ascertained by following out the inquiries suggested by the mortgage. Again, a description that is wholly false avoids the mortgage, but if it is false only in part, this may be rejected and the mortgage remain valid for the remainder.

More generally the nature of the chattels conveyed determine largely the character of the description. Thus animals may be described by weight, age, height, color and breed; vehicles by their style and manufacturer's name; furniture by piece or set; crops growing or to be grown by their location and year. A general claim of "all" articles in a stated place is regarded as sufficient. Oral evidence is admissible to aid the description in identifying the subject-matter of the mortgage, and to explain the meaning and extent of the terms of the description.

A mortgage may be given for a future advance of money. Nor need the mortgage state that it is thus given; and the fact may be proved orally. But when the right of third parties are affected, such a mortgage is not valid against them unless the specific sum that is to be secured is set forth. Likewise to render a mortgage secure against attaching creditors of the mortgagor, there must be a distinct statement of the condition or terms of the mortgage; in other words the creditors have a right to know what interest the mortgagee really has in the property that secures to him rights superior to their own. The rule should also be stated that where the rights of third parties are in issue, it must appear that the mortgagee acquired the mortgage before they had any rights to the property.

The statutes require that chattel mortgages should be acknowledged and recorded. In some states the requirements are strict in respect to the disinterestedness of the official who takes the acknowledgment. An affidavit is another requirement. This must state several things, especially that the mortgage was given in good faith, and the nature and amount of the consideration.

What may be mortgaged? In general, any personal property that may be sold; many of the statutes define it. They cover a life insurance policy, corporation stock, railway rolling stock, seamen's wages, growing crops and trees, profits from the use of a steamboat, premiums earned by a horse, book accounts, leasehold interests, nursery stock, besides many other things. Whenever fixtures annexed to real estate retain the character of personal property they may be mortgaged. And when animals are mortgaged their natural increase are included. A mortgage made of an unfinished article will hold the article when finished if it can be identified.

By the common law nothing could be mortgaged that was not in existence at the time of the mortgage. By statute a mortgage may cover after-acquired property, and this statute has become very important especially with merchants, manufacturers, and others who are constantly changing their stocks of goods.

When the mortgagor fails to pay his debt, the right of the mortgagee to proceed in taking the property is usually regulated by statute, except when the parties have agreed themselves and in conformity with statute. The rights of the mortgagee depend in many cases on the title, whether that has passed to him by virtue of the mortgage, or whether it still remains conditionally in the mortgagor. Where the mortgagor still retains the title, a clause is often put into the mortgage to the effect that, should the mortgagor default in payment, the mortgagee may take possession of the property and sell it; and such a provision is valid and enforcible. Where the title is vested or transferred to the mortgagee by virtue of the mortgage, this is equivalent to giving him possession whenever he chooses to demand it. In other states the mortgagee's discretion is not so broad, before taking possession he must have reasonable grounds for believing himself insecure, that the mortgagor has done, or threatens to do, something that would impair the mortgagee's security.

Where the common law prevails and no statute has been enacted regulating the rights of parties, an important question is still unsettled in cases of a mortgage given on a stock of merchandise which permits the mortgagor to remain in possession and to sell the property mortgaged in the course of trade. Can he do this? In many states such a mortgage is regarded as fraudulent to creditors, in other states if such a mortgage is not, on proper judicial inquiry, proved to be a fraud, it will be upheld.

A provision in a mortgage that it shall cover after acquired property is regarded in some states as an executory agreement that it shall be held by the mortgagee as security; and the mortgagee may take possession of it, should the mortgagor fail to pay his debt, in accordance with his promise, before the rights of third persons have intervened. See _Mortgage_.

=Chauffeur.=--In many states minors are forbidden by statute to run automobiles. If therefore the owner of a car permits a minor to drive his car, he may be held liable for the injuries resulting from the driver's negligence. Should a chauffeur's license not disclose physical disabilities the license is not void, nor is he a trespasser in operating the machine on the highway. Such a license though defective is valid until revoked by the proper authority.

If discharged before the expiration of the term of his employment, an employer is still liable for his chauffeur's pay unless he has been unwilling or unable to fulfill his contract. If, however, he has been prevented by sickness or similar disability, he can recover, not perhaps the amount stated in the contract, but the worth of his services during the period of serving his employer.

A chauffeur may recover damages from his employer for injuries received while operating his car. The basis of the action is his employer's negligence. If the engine "kicks back" while he is cranking the car, and the employer contributed to the result by moving the spark lever, he is liable. If he is injured while running a car from a defective brake of which he had knowledge, he cannot recover. But if the employer knew, and the chauffeur did not know that the brake was defective, he could recover if injured in consequence of it. The employer is under no duty to warn his chauffeur of obvious dangers, or instruct him in matters that he may be fairly supposed to understand. If a chauffeur is riding at the owner's request, who is driving the car, he may recover if injured by the negligence of the owner in running the machine. Under the Workmen's Compensation Laws a chauffeur who is injured while running his car beyond the speed limit prescribed by statute can recover nothing. Nor is he justified by the custom of other chauffeurs in disregarding the rule. Lastly, if the owner of a car is injured, physically or financially, by reason of the wrongful conduct of his chauffeur, he has a remedy against him. See _Automobile_; _Garage Keeper_.