a sale or lease of its property; or against any other action which might be injurious to the company. But a mere sale by stockholders of their right to vote upon their shares in order that the buyer may acquire control of the company, is against public policy and void. Therefore an agreement for value by the majority of the stockholders of a railroad company, that their stock should be registered in the name of the president of another company, with power to him to deliver an irrevocable proxy to an appointee of such company to vote such stock at an election of directors of the first named company, was declared illegal and void. The court said that a sale by a stockholder of the power to vote upon his shares was unlawful for very much the same reason that a sale of his vote by a citizen at the polls, or by a director of a corporation at a meeting of the board, is illegal. Each is a violation of duty; in effect, if not in purpose, a betrayal of trust.12 Upon similar principles what are known as "voting trusts," when executed for the purpose of enabling another corporation or body of men, to get control of the affairs of the company to the injury and loss of the other stockholders, have been declared to be against public policy and void. Neither can a corporation directly or indirectly, by proxy or otherwise, acquire the right to vote the shares of its stockholders; for that would be to remove all check upon the extravagance, or dishonesty, or incompetency of the managers of its affairs.1 In view of this rule, it may be seriously doubted whether proxies given to the officers of a corporation are valid, since such officers would thereby be placed in a position to pass upon their own conduct in the administration of the corporate affairs.

Subject to the foregoing exceptions there seems to be no limitation upon the right to appoint proxies. Wherever a person has a private right he may delegate it to another to act for him, where no personal duty is necessary. It is indifferent to the rest of the

world whether the man having the right acts in person or not. 15

Revocation.-An agency is always revocable at the will of the principal, unless the agent has acted upon the power so that he would be damnified by a revocation; or unless the agency be coupled with an interest in the agent. Story says that this principle is too plain to require the citation of authorities.16 A proxy can stand upon no higher ground in this respect than an ordinary agent. "The power and charge of a proxy or other agent, expire by the change of the will of the person who made choice of him. For the choice is his, and he may revoke his order whenever he sees fit."'17 Especially must this be true where the appointment was made by the principal for his personal convenience, and not in consideration of anything passing from the proxy. It is customary to insert in some proxies a provision that they shall be irrevocable. If the decision that the sale or execution of a proxy for valuable consideration is void as against public policy, 18 be sound, it is difficult to see upon what ground such a provision could be enforced. And if made without consideration it would stand upon the same footing as other nude or voluntary contracts, if, indeed, such an appointment can be considered to rise to the dignity of a contract. If the proxy be infected with the taint of illegality, the "irrevocable" clause will not receive the slightest consideration. Thus it was held that the owners of trust certificates which had been pooled for the purpose of forming a "voting trust" whereby an improper control over the affairs of the company would be gained, had a right to revoke such trust, and exercise the power to vote themselves, even though the trust purported to be irrevocable.19 And in another case it was held that a stockholder who had given a proxy, was justified in revoking it, even though given for a valuable consideration, when about to be used for a fraudulent purpose.20 Stockholders who place their

stock in the hands of a trustee to be voted in

management of the affairs of the company, may revoke such trust whenver they see fit, notwithstanding the "irrevocable" clause. That clause binds no one.21

The proxy may be revoked in express terms by repossessing the written evidence thereof with intent to revoke, or by notifying the proper officials of the corporate body that the instrument or power has been revoked. The writer has been unable to find any decision as to what shall be deemed a constructive revocation of a proxy. In the case of Eyre v. Lovell, it was held that a general proxy to vote whenever the principal is absent was not revoked by the fact that once after the execution of the proxy the principal appeared and voted in person. But there can be no doubt that an election of the principal to appear and vote in person would be a revocation of a limited or special proxy. And upon the principle that a power dependent upon the will of the donor is revoked by any

21 Griffith v. Jewett, 15 Weekly Law Bul. (Ohio) 419, Peck, J., saying: "We can perceive no reason why any number of stockholders, either by means of a proxy, or by vesting the legal title in another may not authorize him to vote upon this stock; and as such is the substance of this argument, we consider it not illegal. So long as the parties to it are satisfied with it no other person may complain, and the "irrevocable" clause does not affect the rights of any one. But if the equitable owner elects to withdraw the legal title from the holder thereof, the case assumes a different aspect. As we have heretofore seen it is a dry trust; the trustees having no interest to set up in favor of its continuance; but the parties have agreed that the power to vote vested in these trustees shall be irrevocable. Can this provision be sustained as against the demands of certificate holders, that they be permitted be vote? If such demand be not complied with, the party holding the entire beneficial interest in the stock cannot cast the vote thereof, while it may be voted upon by one having no interest in it or in the company; and so it may come to pass that the ownership of the majority of the stock of a company may be vested in one set of persons, and the control of the company irrevocably vested in others. It seems clear that such a state of affairs would be intolerable, and it is not contemplated by the law, the universal policy of which is, that the control of stock companies shall be and remain in the owners of the stock. The right to vote is an incident of the ownership of the stock, and cannot exist apart from it. Hafer v. Railroad Co., 14 Wkly. Law Bul. 68; Freon v. Carnegie Co., 43 Ohio St. 38. The owners of these trust certificates are, in our opinion, the equitable owners of the shares of stock which they represent, and being such the incidental right to vote upon the stock necessarily pertains to them. They may permit the trustees, as holders of the legal title, to vote in their stead if they choose, but when they elect to exercise the power themselves, the law will not permit the trustees to refuse it to them."

223 Dougl. (Eng.) 55.

act of the donor inconsistent with that power, it seems clear that the execution of a second proxy would be a revocation of the first. The appointment of a proxy vests no interest in the appointee; and he would have no right to complain if at any time his principal saw fit to revoke his powers in express terms, or to appoint another in his place. A proxy, like a "last will and testament" is a mere expression of will, and there seems to be no reason why an act which amounts to a constructive revocation in the one case, should not be given the same effect in the other.

Washington, D. C.

CHAPMAN W. MAUPIN.

A GOOD AND MARKETABLE TITLE.

In this day of frequent exchange of title in realty, there arise many questions under contracts of sale and purchase, judicial sales and otherwise, as to the character and sufficiency of the title bought and sold. Under special contracts of sale and purchase of realty various terms are used to designate the title intended to be granted, such as "warranty," "good title," "marketable title," etc., and the terms are not always used with proper understanding of their signification. It is the purpose of this paper to help remove doubt or misunderstanding in so far as the terms "good title" and "marketable title" are concerned. To begin with, there is but little, if any, real distinction between the terms "good title" and "marketable title," since they must in either case be free from reasonable doubt. If there is a doubtful question of fact or law relating to an outstanding right then the title passed cannot be good nor marketable. But this doubtfu. fact must have an existence beyond a mere possibility, or the claimed outstanding right becomes a mere possibility, and, according to ordinary experience perhaps, has no basis for its existence. Any purchaser at a judicial sale is entitled to receive a transfer of title that is conclusive, so far as any reasonable doubt is concerned, such a title as would be marketable, at least. The purchaser bids at the sale upon the understanding that there no undisclosed defects. He pays his

are

1 Cambrelling v. Parton, 125 N. Y. 615. 2 Fleming v. Burnham, 100 N. Y. 1-10.

money upon this assumption and the seller receives it upon the same assumption. Merely captious objections of defects which no reasonable man would rely upon, or those arising upon mistaken knowledge of the law, will not avail to relieve the purchaser upon the plea of the title not being good. Where the court is called upon to compel a purchaser to take a title under a judicial sale there may arise questions based upon a mere fact or upon pure law, and in either case there may be doubt of such a character as to relieve the purchaser, although in a direct proceeding between the parties in right, all being before the court, it might be decided otherwise. The reason is easily understood. The purchaser is entitled to a good or marketable title, and one open to a reasonable doubt is not good. The court could not make a title good by passing upon an objection based upon disputed facts, or a doubtful question of law, in the absence of the party in whom this doubt has its origin. The cloud would remain against the title. This would be unjust to the purchaser to thus compel him to take a title, depending for its validity upon a question of fact, which might be changed upon a new inquiry, or left open to opposing inferences. No, a real question and a real doubt must exist. Then the title is not good. It will be noticed in the above case of Fleming v. Burnham, that a distinction is pointed out by the court (Andrews, J.) where the objection to the title is made by an unwilling purchaser in an application made to the court to compel him to accept title, and where the question is raised between the very parties to the right, in a direct proceeding to test this question. A "good title" means one free from incumbrance. A title is doubtful when its condition invites litigation; a purchaser cannot be compelled to take such a title if he thereby exposes himself to a lawsuit. When doubts are raised by extrinsic circumstances, which neither the purchaser nor the court can satisfactorily investigate for want of means, the court will refuse to compel the purchaser to accept the title. But suppose the means at hand to ascertain the condition of the title

6

and it proves satisfactory, then the court will compel specific performance. It was held in a New York case, that a marketable title is such an one that a reasonable purchaser, well informed as to the facts and their legal bearings, willing and anxious to perform his contract, would, in the exercise of that prudence which business men ordinarily bring to bear upon such transactions, be willing to and ought to accept. In this same case the mere fact that the record showed "no seal" in a deed where the original was under seal, and the record afterwards amended by a re-registration of the deed with seal, constituted no defect in title. That title was good."

In the case of Cambrelling v. Parton, above cited, the facts involved and which were held by the court as not casting a sufficient cloud upon the title to render it defective, were as follows: A sale was had pursuant to judgment for partition and one Litmann became the purchaser, who having ascertained that one of the heirs at law of the original owner of the fee had not been made a party to the suit for partition, but that he had left home, disappeared, as it were, and was probably dead, and in consequence his share in the title as an heir of his father, the owner of the fee, had reverted to his brothers and sisters, the parties to the suit for partition. The question of the time of death of this heir was in doubt, as even his death may have been, although no objection was made on the score that this heir was alive. The question in dispute, of course, would be, whether or not this heir had survived his father. There was publication of process, and all the proceedings were regular. The court then said: "The fact claimed to constitute the only defect in the title is such a very remote and improbable contingency and is such a slender possibility only," that the rule should be applied as above stated. And under like circumstances the New York courts have invariably held the title good. The California

5 Kostenbader v. Spotts, 80 Pa. 434-5. See Cronter v. Crouter, 133 N. Y. 55. A mere possibility, however, of a law suit is not sufficient. It must be reasonably sure; such doubt as would induce a prudent man to pause and hesitate as to his action. See

10

court held a good title to be one free from litigation, as suggested by the Pennsylvania court in Kostenbader v. Spotts, cited above. Free from palpable defects and grave doubts should consist of both legal and equitable titles and should be deducible of record. It was held by the Illinois court in a divided opinion, however, that a title was not good and marketable when the abstract showed that in the chain of title one of the conveyancers by mistake named the wrong grantee, a person not shown to have been in existence, and such mistake was corrected in a proceeding to which such wrongly named grantee was not made a party. It was contended that he or his legal representatives or heirs should have been made parties to such proceedings to correct such mistake, on the ground that he might possibly assert title to the property at some time. Under an ordinary contract of sale of real estate it is incumbent upon vendor to transfer a marketable title, one free from all reasonable doubt.11 The Minnesota court has held with the New York courts, that a marketable title must be free from reasonable doubt,12 and the title is subject to reasonable doubt if the facts throw a cloud on it, which renders it suspicious in the minds of reasonable men. 13 One who holds the legal title in trust for others by a deed in which no particular trusts nor powers are expressed cannot make a good title, 14 and a title acquired by adverse possession may be good and a vendee compelled to accept.15 An agreement to convey a "good title" does not necessarily entitle the vendor to a warranty deed. 16 The doctrine of constructive Williams, 115 Id. 586; Mutual Life Ins. Co. v. Woods, 121 Id. 302. In Kilpatrick v. Barron, 125 Id. 751, al though the court held that the title was good, relieved the purchaser from liability, because the title as it stood did not meet the agreement under which the title was to be transferred. The validity of the title depended upon the construction of a will, one question of which was as to whether descendents of children of the testator born after his death and prior to the time appointed for a sale were entitled to take under the will.

notice has been generally applied to the examination of title to realty. It is the duty of the purchaser to investigate the title of the vendor, and to take notice of any adverse rights or equities of third persons which he has the means of discovering, and as to which he is bound to take notice. If he makes all the inquiry which due diligence requires and still fails to discover the outstanding right he is excused, but not so if he fails to use due diligence." Other authorities might be cited in support of this rule, but it is not deemed necessary as the rule seems to be well established, and the case above is cited simply to call attention to New York authority on this doctrine, because the subject of titles has received a good deal of attention at the hands of the New York courts, and the rules governing the same have become pretty well settled.

PERCY EDWARDS.

17 Parker v. Connor, 93 N. Y. 124.

BUILDING AND LOAN ASSOCIATIONS-FORECLOSURE OF MORTGAGE-RULE FOR COM PUTING AMOUNT DUE-FINES.

ROBERTS v. AMERICAN BUILDING & LOAN ASSN.

Supreme Court of Arkansas, July 8, 1896.

1. The equitable rule for ascertaining the amount due on a building association loan, on default of the borrower, and a foreclosure and cancellation of his stock, is to ascertain the amount of stated dues and interest which will become due in the future, to the time of the maturity of the stock, as estimated. The principal which, with interest for the supposed time, will amount to the dues and interest so calculated, will be the present value of the anticipated payments; and to this the arrearages due, and the fines for the time between the date of the default and the entry of the decree of sale, should be added.

2. The monthly fines provided for by the by-laws of a building and loan association are not by way of penalties, but are to be considered as liquidated damages, fixed by consent of the parties, for the loss

The appellee brought this suit to foreclose a mortgage which was given to secure the following note, to wit: $2,000.00. Minneapolis, Minn., Dec. 11th, 1888. For value received, on or before nine years from date I promise to pay to the order of the American Building and Loan Association, at its home office in Minneapolis, Minnesota, the sum of two thousand dollars, with interest at the rate of six per cent. per annum on the sum of one thousand dollars, payable monthly. It is understood that this note is given for a loan obtained on twenty shares of stock of said American Building and Loan Association, and if the maker hereof fails to make any monthly payments on the said stock, or to pay any installment of the interest, for a period of six months after the same is due, then the whole amount of this note shall at once become due and payable. But if the maker hereof shall pay all installments of the interest which become due hereon, and all fines and monthly payments which become due on said stock, until said stock becomes fully paid in, and of the value of $100 per share, and before any of said installments of interest or monthly payments shall have been past due for a period of six months, then, upon the surrender of said stock to said association, this note shall be deemed to be fully paid and canceled. This note is understood to be made with reference to, and under, the laws of the State of Minnesota. (Signed) Mary A. Roberts. Leonidas Roberts." On the margin of the face of the note is the following: "If this note is paid before seven years from date, there shall be allowed such rebate from the amount of the premium as the board of directors of said association

shall deem equitable. Premium, $1,000.00. Loan, $1,000.00." The mortgage executed at the same time by appellants recites that the conveyance of the land therein described is upon a consideration of $2,000 paid to appellants by the appellee. The mortgage contains the following conditions, viz.: "This mortgage being given to secure a loan made on twenty shares of stock in said American Building and Loan Association, the monthly payments of which amount to $12.00 per month, said party of the first part does further covenant and agree to make the said monthly payments on said stock as they shall become due, until said stock shall become fully paid in." "Provided, nevertheless, that if the said party of the first part," etc., "** * shall pay to the party of the second part, at its home office, one thousand dollars and interest, according to the conditions of one certain promissory note, bearing even date, payable after three years from, and before nine years from, date, for the sum of one thousand dollars, with interest on the same at 6 per cent. per annum before and after maturity, until paid, interest payable monthly, then this deed shall be null and void, otherwise to remain in full force and effect. But if default be made in the payment of said sum or sums of money, or of any installment of interest thereon,

*

or of any monthly payment on said stock, for a period of six months after the same shall fall due, or any part of either, or in any condition in this mortgage contained, then in either or any such case the whole principal sum or sums secured by this mortgrge, and the interest thereon accrued up to the time of such default, shall, at the election of said second party, its successors or assigns, or his or their agent, become thereupon due and payable immediately upon said default; and the said party of the first part does hereby authorize and empower the said party of the second part, its successors or assigns, the owner hereof, its agent and attorney, at its or their election, and without notice of such election, to foreclose at once this mortgage for the whole of said principal sum or sums and accrued interest, as herein provided, or to foreclose for such sum or sums and interest and money paid as may be due and payable by the terms of said note hereby secured, and sell the said hereby-granted premises at public auction, and convey the same to said purchaser in fee simple,-agreeably to the statutes in such case made and provided, and out of the moneys arising from such sale to retain the principal and interest then accrued, on the sum or sums so elected to be foreclosed for, together with any and all costs and charges of such foreclosure, including one hundred dollars attorney's fees for foreclosing this mortgage; paying the overplus, if any, to the said party of the first part," etc. The complaint alleged that the bylaws of the association provide that each member should pay his shares of capital stock in monthly installments of 60 cents upon each share, beginning 30 days from the date of his certificate of stock, and that every member neglecting to pay such installment when due and payable should forfeit and pay to the association 10 cents per month, as a fine, for each share of stock so owned by him, and so in default. The breaches of the condition of the mortgage alleged were that the monthly installment of dues on said 20 shares of stock due and payable on the 11th day of May, 1890, and for each subsequent month, amounting to $84, and the installments of interest for the same period, amounting to $35, and the fines accruing for the same period, amounting to $14, had not been paid. The amount claimed to be due at the institution of the suit was $2,000, with interest on $1,000 at 6 per cent. per annum from the 11th day of April, 1890, and an attorney's fee of $100; and plaintiff elected to claim for the $2,000, with interest at 6 per cent. on $1,000, and for $100 attorney's fee, and asked judgment accordingly, and for sale of 20 shares of stock to satisfy same, and for sale of property mortgaged and the proceeds to be applied to the payment o the remainder of said judgment, if any, after application of proceeds of sale of stock. The bill was filed the 18th of November, 1890. The answer admitted the execution of a note for $1,000, but denied that a note of $2,000 was executed. It admitted the execution of the mortgage, but al