Cf. the Railway Regulations, Ch. 6.
It will be possible to differentiate between different markets on the basis of the rules. However, equality must be practised within a single market. Discount schemes may also be introduced in accordance with the Railway Regulations, § 6-4, but these can only apply to prices levied for a specific part of the infrastructure.
In line with EU Regulation 2015/909, Article 6, Bane NOR has selected an econometric method for calculating the direct unit costs/marginal costs linked with supplying the basic service package and access to service facilities. For further information, please see Bane NORs implementeringsplan, the Bane NOR implementation plan that was submitted to the Norwegian Railway Authority on 14 July 2017.
Performance improvement schemes have been implemented from 1 January 2017, see section 6.5. See also Annex 4 to the ATS.
Bane NOR has established a reservation charge for capacity allocated but not used; see section 6.4.2.
Cf. the Railway Regulations, §§ 6-2 – 6-5.
The minimum access package includes the services listed in Ch. 5.2. These will be priced on the basis of points a), b) and d) above.
Cf. the Railway Regulations, §§ 6-2 and 6-9 (2).
Access to Bane NOR's additional technical areas as described in the Network Statement, Ch. 5.3 is priced according to marginal costs in the same way as the basic service package, cf. Ch. 6.1.1.
Access to additional technical areas belonging to parties other than Bane NOR are priced at full cost pursuant to the Railway Regulations, § 6-9 (2).
Please see also Bane NORs tjenestekatalog; Bane NOR's catalogue of services, which was compiled for the Ministry of Transport and Communications in connection with the railway reform.
Cf. the Railway Regulations, § 6-9 (2).
Bane NOR establishes prices for the use of services at Bane NOR's additional technical areas as described in Ch. 5.3, and these are priced at full cost, including a reasonable profit. For further information on the principles for setting prices, etc., see the ATS, section 13.3.
Cf. the Railway Regulations, § 6-9 (3).
Bane NOR sets prices for the use of additional services. Insofar as these services are only offered by Bane NOR, these services can at most be priced at full cost including a reasonable profit. For further information on the principles for setting prices, etc., see the ATS, section 13.4.
Bane NOR sets prices for the use of ancillary services. Insofar as these services are only offered by Bane NOR, these services can at most be priced at full cost including a reasonable profit. For further information on the principles for setting prices, etc., see the ATS, section 13.4.
Using other services requires a separate agreement with Bane NOR or whoever provides the service, and the price will be set out in the relevant agreement. As a rule, other services provided by Bane NOR to RUs will be priced at market conditions.
Cf. the Railway Regulations, Ch. 6 (§§ 6-1 to 6-5), Directive 2012/34/EU and the Commission Implementing Regulation 2015/909/EU.
The charging scheme consists of two components, one of which is linked with the use of infrastructure (track price), and the other is linked to the use of capacity on an overloaded part of the rail network (capacity price). The track price is also specified for passenger and freight traffic respectively, as well as various market areas within these fields.
This charge gives RUs entitlement to the basic service package as defined in the ATS, section 9.1.1.
The charges for access to the basic service package (cf. the Railway Regulations, §§ 4-1 and 6-2) and access to service facilities must be set at the cost arising «as a direct consequence of the rail service in question». Bane NOR is of the opinion that the term «direct consequence» can be understood as a marginal cost principle. Furthermore, the regulation uses a «mandatory clause» (§ 6-2 (3)), and this is understood as a minimum payment.
Bane NOR has performed an econometric analysis on the basis of costs linked with corrective (remedying faults) and preventive maintenance of the infrastructure and traffic load measured in gross tonne-kilometres. This is in line with EU regulation 2015/909. Both costs and traffic load are measured for each line number for the years 2014-2016. The econometric model takes into account the fact that the lines have different technical designs in the form of the number of point switches, tunnels, speeds, etc. The model operates with two products/services, namely passenger rail traffic and freight rail traffic. The calculations are documented in the Bane NOR implementation plan dated 14.07.2017; and this plan, along with a separate documentation report Bane NORs implementeringsplan relating to track price supplements, forms the basis for the price rates specified in section 6.3.1.
The Railway Regulations, § 6-2 (4), provide a basis for a supplement to the price so that it reflects the lack of capacity in an identifiable part of the rail network. For a capacity price to have a genuine effect, the line section must be used by a number of train companies/groups. If only one train company/group operates, this nevertheless has to prioritise which trains it does and does not want to operate. Economists refer to this by saying that their capacity cost is already internalised in the train company's/group's own business administration. If there are a number of train companies/groups on the same section, any capacity cost is not internalised. Therefore, the purpose of a capacity price is precisely to internalise the capacity cost in the train companies'/groups' own business administration. This brings about consistency between socio-economic and business-related correct distribution of capacity. The capacity price is similar to congestion charging on roads.
The supplement is an indicator that transport of greater value should be given priority over transport of less value in conflicts where the prioritisation criteria do not necessarily give the same results. The price is not based on the capacity costs applied by an RU to others in the geographical area in question.
Capacity pricing was introduced in Oslo, Stavanger, Bergen and Trondheim in 2017. There is only one RU between Ganddal and Stavanger at the moment and this will also be the case in future, and hence it is not correct from a socio-economic standpoint to have a capacity price as any lack of capacity is internalised at the RU in question. When the Ulriken project is complete and there is a double track between Arna and Bergen, there will hardly be a lack of capacity in this area. Traffic volume in Trondheim is limited, Bane NOR feels it is not particularly appropriate to have a separate capacity price in this area.
Only in the Oslo area should a lack of capacity result in a capacity price. As long as the capacity in this area is not auctioned off, the price should indicate to relevant applicants that passing through this area at certain times of the day will cost the applicant more. The price is applicable to all applicants and all types of train; also including empty trains getting into position.
The charge can also take into account the environmental costs – including noise – generated by rail traffic for third parties. This does not imply that the charges can be adjusted downwards (compensated for) on a permanent basis as a consequence of missing prices for other modes of transport. Bane NOR has been unable to identify good solutions for establishing charges relating to environmental costs, but setting charges for noise resulting from old brake technology will be assessed in greater detail. Positive incentives will also be assessed in this context.
Surcharges will be established in order to achieve full cost coverage if the market can stand this. Full cost coverage is understood to mean coverage of both fixed and variable (indirect and direct) maintenance costs. The charges cannot have greater surcharges so that one or more market segments «drop out». In the event of any surcharges, Bane NOR must analyse the market segments for which this is relevant. The regulation provides more detailed rules on how the market segments can be divided up. Market segmentation must be reviewed at least every five years.
Bane NOR has assessed the market areas of relevance in a Norwegian context. These areas are based on separation between freight traffic and passenger traffic. The figure below shows the areas assessed.
In a Norwegian context, it may be relevant to separate out industrial system trains as a separate market area from the combination/wagon load segment. However, there are varying abilities and desires to pay more than the marginal cost within this segment (timber, ore and hazardous goods) as well.
The timber industry operates on tight financial margins, and there will be a major risk of loss of traffic if the charges are set higher than the marginal cost.
A similar situation will also apply to the transport of hazardous goods. There is also a desire society for such products to be transported by rail rather than by road.
Ore businesses have traditionally had a major ability to pay. This transport has also faced infrastructure charges previously when trains were operated with axle loads in excess of 25 tonnes.
As stated in the Railway Regulations, § 6-3, there is a difference between the traffic included in agreements with governmental and/or regional traffic agencies and where a payment is linked for the service(s) – referred to here as «PSO» – and other passenger services. Within other passenger services, it will also be relevant to differentiate between train products that routinely stop at the main airport – referred to here as «Main airport» – and other passenger transport.
Current passenger transport to Oslo Airport Gardermoen is covered both by trains with purchase agreements and trains without purchase agreements. Defining this traffic as a separate market area may mean the same charges for all trains operating services to the Main airport.
The marginal costs are not constant throughout the entire network. The marginal cost calculations confirm this. The table below shows the suggested division into sections that can be combined with the above market differentiation.
On the basis of the principles of competition neutrality, Bane NOR wishes to agree possible discounts in each individual case in accordance with the Railway Regulations, § 6-4, in order to promote new services. These agreements will specify the period and scope of the discount.
It is Bane NOR's perception that freight traffic should be given incentives to increase the use of these sections. Although the railway network around the terminals for combination traffic may see higher section usage, Bane NOR is of the opinion that if this is to be meaningful, the discount must cover the entire section; e.g. Alnabru – Ganddal and not just Kongsberg – Ganddal.
This will be in addition to whatever emerges from the implementation plan; the sample calculation in section 6.3.1. Bane NOR will come back to the issue of whether the discounts should be gradually reduced towards 2025 the next time it updates the basic pricing.
c.	Operation of museum trains under the museum's own auspices. Such operations must not inconvenience other traffic. If the museum trainers charted by a third party, the charge will be paid as for other trains.
f.	Transportation of converter units to and from workshops and between converter stations.
For the other railway-related services – cf. the Railway Regulations, § 6-9 – the prices are based on full cost. Full cost means costs that are considered to be involved in producing the service in question, plus a reasonable profit. Bane NOR has used 4% interest on book values as reasonable profit. What is involved in full cost is specified in greater detail in the ATS, section 13.3.
All tariffs are specified exclusive of value-added tax, and Bane NOR invoices include value-added tax.
Oslo local is defined here as the sections Drammen-Eidsvoll, Oslo S-Grefsen and Oslo S-Ski-Rakkestad. Not to be confused with the train products in the area.
The prices in 2019 will be adjusted in accordance with Statistics Norway's price index for operation and maintenance of road systems; see section 6.6.
PASSENGER TRAIN: The basic price and capacity price will be introduced in full as of 1.1.2018. The supplement based on market differentiation in accordance with § 6-3 of the Railway Regulations will be introduced in full as of 1.1.2019 (R19).
COMBINATION/WAGON LOAD: The basic price will be introduced gradually over 4 years from 1.1.2018; i.e. 25% in 2018, 50% in 2019, etc. The capacity price will be introduced in full as of 1.1.2018.
ORE AND MINERAL TRANSPORT: The basic price will be introduced as of 1.1.2018. The supplement based on market differentiation in accordance with § 6-3 of the Railway Regulations will be introduced in full as of 2019 (R19).
OTHER INDUSTRIAL TRAINS: To be introduced in a similar way to combination/wagon load.
Access to Bane NOR's additional technical areas is priced in accordance with the marginal cost. For stations, the price is included in the basic service package (the infrastructure charge), cf. Ch. 6.3.1 above, as the stations are located at main tracks. For freight terminals, the price is in accordance with the marginal cost and not included in the basic package as these are linked to main tracks via sidings. Access to the additional technical areas of others are priced at full cost pursuant to the Railway Regulations, § 6-9.
Access to freight terminals under the auspices of Bane NOR is priced in accordance with the marginal cost. Bane NOR has not had an economic model appropriate for cost charges for services of this type. Therefore, a «template figure» has been used on the basis of infrastructure costs for Alnabru and Ganddal in 2015 with regard to freight terminals and holding sidings. This gives an annual cost of NOK 650 per metre for combination/wagon load terminals, excluding tied-up capital. The costs for timber terminals will be significantly lower.
All stations with routine stops for passengers to board and leave the train are listed in an annex (new annex under construction) showing the relevant prices.
Access to Bane NOR's holding sidings is priced in accordance with the marginal cost and is included in the basic service package.
Stabling of rolling stock for freight is not priced at the moment. Bane NOR will devise practical solutions in consultation with the RUs.
Stabling (i.e. parking) of passenger trains will be priced at full cost including a reasonable profit.
As for freight terminals, Bane NOR has no specific accounting data for the individual stabling areas as regards operation and maintenance. As this involves largely the same activities as at freight terminals, the same cost per metre is used here as a basis; NOK 650 per metre.
In connection with the Bane NOR opening balance, the stabling areas are included in the valuation. Book values as at 1.1.2017 are used.
The need for stabling is also established in connection with the timetable process. The prices are initially a one-year «subscription» and are set on a per-metre basis. Only two stabling areas, namely Lodalen and Drammen, will be used by several train companies. The prices are set on an hourly basis for these two stabling areas.
Additional services must be priced as described in section 6.1.4.
The tariffs applicable at any time are available on kundeportalen; the Bane NOR customer portal . When services are requested by or offered to several parties, Bane NOR will set prices and publish these on its website.
RUs pay a fixed annual rent for each preheating facility. The tariffs applicable at any time are available on the Bane NOR customer portal.
If new preheating facilities are required, Bane NOR will pay for the investment cost but the RU initiating the construction work will have to pay three years' rent for the preheating facilities in advance.
Ancillary services must be priced as described in section 6.1.5.
Other services must be priced as described in section 6.1.6.
Non-usage charges are included in reservation charges, cf. section 6.4.2.
Cf. the Railway Regulations, § 6-7.
Reservation charges are levied for allocated infrastructure capacity that is cancelled or not used by the applicant. The applicant may be an RU or another infrastructure capacity applicant pursuant to the Railway Regulations, § 1-3, letter j). The infrastructure capacity applicant is obliged to pay the reservation charges levied. Reservation charges are not levied on IMs for the IM's own transport for maintenance of the infrastructure, etc., cf. the Licensing Regulations, § 23 (1), second sentence.
The reservation charge is set on the basis of information on allocated infrastructure capacity, the reason for cancellation or non-usage and the recorded time of cancellation or non-usage. Reservation charges are levied for cancelled or unused parts of allocated infrastructure capacity, including capacity allocated as part of the ad hoc process, and only for reasons where the applicant is directly responsible and which were entered with a code for the applicant or RU in TIOS.
The track price in the table includes all price elements in section 6.3.1 and is calculated on the basis of the planned route.
Allocated infrastructure capacity can be cancelled free of charge up to 60 days before the train's departure time. Cancellations or non-usage taking place after this time will be subject to reservation charges in accordance with table 6.10. Allocated infrastructure capacity cannot be cancelled less than 72 hours before the train's departure time.
No reservation charges will be levied in the event of acute incidents occurring. These will come under the performance scheme.
At the present time, Bane NOR does not wish to provide an incentive scheme linked with ETCS equipment beyond what has already been established via 50 % dekning av JBFs installasjonskostnader; the agreement on 50% coverage of RUs' installation costs.
Cf. the Railway Regulations, § 6-6.
A scheme for improving performance, including a dispute resolution scheme, has been incorporated in ATS annex 4, and will be applicable from 1 January 2017. The scheme is not applicable to driving as stated in chapter 6.2.1.3, or to trains without routes, including side dump cars.
Once a year, Bane NOR will publish annual average performance levels achieved by RUs on the basis of the most important agreed parameters in the performance scheme.
The purpose of the performance scheme is not just to impose penalties when the agreed performance level is not achieved, but also to provide incentives to achieve greater operational stability or a higher performance level. Furthermore, the individual incidents are what affect the parties' costs, along with passengers' travel costs and product owners' transport costs. The scheme must be easy to understand and the parties must perceive the financial consequences of problems more directly, along with improvements in operational stability.
The scheme is based on absolute values for hours of delay and cancellations, and where the payment begins as of the first recording of an incident. It is suggested that passenger train cancellations are counted as of the first recorded cancellation. As stated, freight trains will be kept outside the scheme linked with cancellations until 1.4.2019 at the latest.
From 2018, this will include codes 5, 6 and 7. Code 5 is exempted from cancellations as these will be included in the Alternative transport scheme «Rail replacement services» for passenger trains, and for freight trains they are already included in the compensation scheme for freight traffic.
The rates in 2019 will be adjusted in accordance with Statistics Norway's price index for operation and maintenance of road systems; see section 6.6.
This means a price adjustment in arrears and provides a great deal of predictability for RUs as the price level is known for 4 years at a time and adjustment of the following year's prices will be completed in the third quarter of the previous year. At the same time, it will be possible to monitor the index throughout the year.
Infrastructure prices on the rail network are set and levied by Bane NOR within the scope of Directive 2012/34/EU with any later amendments, cf. the Railway Regulations, §§ 6-1 to 6-5.
Bane NOR may decide to change the established price structure.
These changes must fall within the framework drawn up in the Railway Regulations, Ch. 6.
Relevant users will be notified in writing of changes to prices for access to and services at additional technical areas, and changes to prices for additional services and ancillary services at a consultation at which RUs will be given a deadline of at least three months in which to comment.
Bane NOR issues invoices for all services. Invoiced amounts and data are placed on the Bane NOR Customer Portal.
Invoicing occurs on the 15th of each subsequent month.
RUs are obliged to provide the necessary information for calculating the value of the service. If RUs fail to supply the necessary information, Bane NOR may set the value based on its own judgement.
When an invoice is based on reporting from RUs themselves, Bane NOR may request the data for their own report.
Bane NOR may establish more detailed guidelines on invoicing.
The gross weight for all trains must be reported regularly. Completed wagon record, cf. TJN, Ch. 4, and ADR/RID 2015, which are considered to constitute satisfactory reporting.
The wagon record must be submitted in an electronic format.
Payment terms (including non-payment) Payment must take place within 30 days. Interest on arrears will be charged on overdue payments, cf. the Act relating to interest on overdue payments, § 2.
If an RU fails to pay, Bane NOR will be entitled to withdraw train paths allocated to the RU. Such withdrawal of train paths may only take place in the event of major payment default.


text:
This is a consolidation of eight actions brought by the German Savings Institution and seven other plaintiffs, in the circuit court of the city of St. Louis, against the De la Vergne Refrigerating Company and John C. De la Vergne, its president and principal stockholder, personally, for a failure to deliver to plaintiffs certain stock in the Refrigerating Company.
Certain personal property was seized upon on attachment issued, a forthcoming bond given therefor, and the several actions were afterwards removed to the circuit court for the eastern district of Missouri upon the joint petition of the defendants. In that court the several actions were consolidated and sub- [175 U.S. 40, 41] mitted upon an agreed statement of facts upon which judgment was entered for the defendants.
From the judgment so entered in the circuit court, a writ of error was taken from the circuit court of appeals, the judgment of the court below reversed, and the cause remanded with directions to grant a new trial. 36 U. S. App. 184, 70 Fed. Rep. 146, 17 C. C. A. 34.
From this judgment a writ of error was prosecuted by the Refrigerating Company, one of the defendants. The judgment was affirmed by the court of appeals by an equal division. 49 U. S. App. 777, 84 Fed. Rep. 1016, 28 C. C. A. 681. Whereupon the Refrigerating Company applied for and was allowed a writ of certiorari from this court.
Messrs. Frederick W. Lehmann, Charles H. Aldrich, and Charles Nagel for petitioner.
Messrs. Leo Rassieur, J. M. Wilson, and Eleneious Smith for respondent.
The facts of the case are substantially as follows: The Consolidated Ice Machine Company (hereinafter referred to as the Consolidated Company) was a corporation organized under the laws of Illinois, and was engaged in the business of manufacturing and selling refrigerating and ice-making machines. The entire amount of issued stock of such corporation was $100, 000, held in various proportions by the plaintiffs in this consolidated cause. Having become insolvent, the company, on October 14, 1890, made an assignment under the general laws of Illinois, for the benefit of creditors, to one Jenkins, who, at the date of the contract sued upon, was engaged in winding up its business. The assignment on its face purported to convey to Jenkins and his successors in trust the entire real and personal 'property and effects of every kind and description' belonging to the corporation, 'or in which it has any right or interest,' the same being fully and particularly enumerated and described in an inventory, which, however, does not appear in the record. Its assets consisted mainly of a plant for the manufacture of refrigerating and ice-making machines in Chicago; of patent rights, outstanding accounts, and the goodwill of its business, which appears to have been an extensive one.
It is asserted by the plaintiffs, who are stockholders in this company, that the assets exceeded in value the liabilities of the company, and that the company was not in reality insolvent, but had assumed contracts to such an extent that, with its limited capital, it was unable to carry them out. [175 U.S. 40, 49] However this may be, subsequently to the assignment, and on April 16, 1891, the company itself, by its president as party of the first part, and its stockholders as parties of the second part, entered into an agreement with the De la Vergne Refrigerating Machine Company, a corporation organized under the laws of New York (hereinafter called the Refrigerating Company), as party of the third part, and John C. De la Vergne, of the state of New York, president of that company, party of the fourth part. This agreement is the basis of the action. After reciting that the Refrigerating Company was willing to acquire such right as the Consolidated Company and its stockholders could assign in and to the assets of such company; that under the laws of Illinois the Consolidated Company was not entitled to the post session of its assets in the hands of the assignee until its obligations had been discharged; that the Refrigerating Company was incorporated with a stock of $350,000 when its assets were worth $1,400,000; and that its stockholders were considering a plan of increasing the stock to $2,000,000, of which $1,000,000 was to be turned over to the Consolidated Company under the terms of the agreement.
Therefore, in view of these facts, the Consolidated Company and its stockholders covenanted with the Refrigerating Company and its president, De la Vergne, to sell and convey unto the Refrigerating Company all their right, title, and interest in and to the assets of the party of the first part, subject to the payment of its obligations, and subject to the custody thereof in the legal custodian, R. E. Jenkins, assignee as aforesaid.
By the fourth clause, the stockholders agreed within ten days from the date of the agreement to assign to De la Vergne, for the benefit of the Refrigerating Company, all stock of the insolvent company which had been issued, and which they guaranteed had been paid in full; and within sixty days thereafter the Refrigerating Company and its president [175 U.S. 40, 50] agreed to issue and deliver to the stockholders of the Consolidated Company stock in the Refrigerating Company to the amount of $100,000.
By the fifth clause, the stockholders in the Consolidated Company covenanted to accept, in lieu of the stock of the Refrigerating Company, $ 100,000 in cash, at the option of De la Vergne, the president of the company.
By the seventh clause, the stockholders of the Consolidated Company agreed that for a period of ten years they would not enter into or become engaged in the selling or making of refrigerators or ice machines, directly or indirectly, within the United States, excepting the state of Montana.
Within the ten days provided by the agreement, certificates representing one thousand shares of the stock of the Consolidated Company, with written assignments executed by the parties who held the certificates, were delivered to De la Vergne, although ninety-five of these shares were held by P. J. Lingenfelder and Leo Rassieur as executors, and ninety were held by them as trustees under the will of one Jungenfeld, deceased. These shares were assigned by the parties without an order authorizing them to do so from the probate court of St. Louis, in the state of Missouri, in which the estate of Jungenfeld was in the process of administration. Two days after the receipt of these certificates De la Vergne's attorney wrote to Mr. Rassieur, calling his attention to certain technical defects, which were immediately remedied by suitable instruments of further assurance. No objection was then made that the assignments of the executors and trustees were insufficient for want of an order of the probate court authorizing the same.
In the following July demands were several times made by Mr. Rassieur for himself and his associates for the $100,000 in stock or money stipulated by the contract, but no response was received until September, when Mr. Fitch, acting for the Refrigerating Company, announced for the first time that the defendants declined to carry out their part of the contract. The reasons for the refusal do not seem to have been substantial ones. The letter contained an announcement that Mr. [175 U.S. 40, 51] De la Vergne's counsel was ready to return the papers sent to him to whomsoever was legally entitled to their custody. There was no reconveyance to the Consolidated Company of whatever was covered by the contract, the covenant of its stockholders to refrain from transacting business for ten years was never released, and none of the certificates and assignments of stock were ever delivered back. It appeared, however, that in the meantime the Refrigerating Company had secured the former New York office of the Consolidated Company; had employed its agent in making contracts with former customers of that company, which contracts were taken in the name of such agent. He was, however, furnished with the means by which they were carried out, and assignments were taken from him, which practically secured the goodwill of the company, although the Chicago assets were allowed to go to sale by the assignee. At this sale Mr. De la Vergne was present and offered for the tangible assets the sum of $25,000.
In their answer as amended, defendant set up as justification for a refusal to perform the contract that no assets of the Consolidated Company ever came into the possession of the defendants, since all, including the goodwill, had been transferred to Jenkins, the assignee, for the benefit of its creditors, and remained in his possession and control until they were disposed of under the direction of the probate court for the benefit of creditors, and that they were insufficient to discharge the liabilities; that the contract sued upon purporting to be executed on behalf of the Refrigerating Company by De la Vergne, its president, was executed without authority; that no benefit of any kind ever accrued to the company under the contract; that the company never received any of the consideration moving to it under the contract; that it never received any of the assets of the Consolidated Company, nor any of the stock; that it never in any manner ratified or approved the contract, but, on the contrary, rejected the same, and that the plaintiffs well knew at the time of making the contract that De la Vergne had no power or authority to bind the Refrigerating Company; that the defendants notified the plaintiffs that they would not be bound by the contract, and [175 U.S. 40, 52] that such rejection of the contract was acquiesced in by the plaintiffs, and that, relying upon such acquiescence, the defendants abandoned all interests in the Consolidated Company; that the contract was in reality for the stock of the Consolidated Company, and that the Refrigerating Company was not authorized by its charter, by the laws of New York or of Illinois, to purchase such stock, and that the agreement was ultra vires; and further, that the Refrigerating Company had no authority to stipulate for an increase in its capital stock, as was attempted under the contract, and that the contract was against public policy and wholly void.
As the general assignment to Jenkins, executed October 14, 1890, was most sweeping in its terms, and included all the real and personal property and effects of every kind and description belonging to the corporation, or in which it had any right or interest, it was doubtless sufficient to pass the goodwill of the business, which was an incident either to the premises, to the name of the corporation, or to the tangible property with which the business was carried on. Churton v. Douglas, Johns. V. C. (Eng.) 174, 188; Menendez v. Holt, 128 U.S. 514 , 32 L. ed. 526, 9 Sup. Ct. Rep. 143; Metropolitan Bank v. St. Louis Dispatch Co. 149 U.S. 436 , 37 L. ed. 799, 13 Sup. Ct. Rep. 944; Willett v. Blanford, 1 Hare, 253; Wedderburn v. Wedderburn, 22 Beav. 84; Bradbury v. Dickens, 27 Beav. 53; Williams v. Wilson, 4 Sandf. Ch. 379; Sheppard v. Boggs,1 9 Neb. 257; Wallingford v. Burr,2 17 Neb. 137.
This was evidently the view taken by the assignee, since he subsequently advertised the goodwill of the business for sale, and sold the same under an order of the court to Clarence A. Knight and Otto C. Butz, who afterward sold the same, including certain of the assets, to John Featherstone's Sons. [175 U.S. 40, 53] It is difficult, even if the contract were legally executed, to see what assets of value belonging to the Consolidated Company passed to the Refrigerating Company under it, except perhaps the possibility that the assets would prove more than sufficient to pay the debts; or that a settlement might be effected with a majority in number and amount of the creditors, when, under the laws of Illinois, the assignor would be entitled to a reconveyance and redelivery of the assigned assets. In such case the goodwill would doubtless return with the other assets to the assignor, i. e., the corporation, but not to the stockholders, and the right to sue for a breach of the contract would belong to the corporation, or its assignee. There was also a covenant that the Consolidated Company would not engage in a similar business within ten years from the date of the contract. The Refrigerating Company, however, did not avail itself of this opportunity to compromise with the creditors of the Consolidated Company, but allowed the assignee to dispose of the assets, which, on a forced sale, lacked $150,000 of being sufficient to pay the debts of the Consolidated Company.
In addition to this, however, there was no corporate action taken authorizing any such conveyance by the corporation, and such conveyance would not, under the laws of Illinois which conform in this particular to the general law, be within the power of the stockholders, even though they all signed it without formal action at a meeting held for that purpose. Sellers v. Greer, 172 Ill. 549, 40 L. R. A. 589, 50 N. E. 246; Hopkins v. Roseclare Lead Co. 72 Ill. 373; Humphreys v. McKissock, 140 U.S. 304, 312 , 35 S. L. ed. 473, 475, 11 Sup. Ct. Rep. 779; Allemong v. Simmons, 124 Ind. 199, 23 N. E. 768; Smith v. Hurd, 12 Met. 371, 385, 46 Am. Dec. 690; England v. Dearborn, 141 Mass. 590, 6 N. E. 837; Cook, Stockholders, 709.
It is true that the president of the Consolidated Company assumed to sign the contract as president, and to bind the company, but it is scarcely necessary to say that the president of a corporation has no power as such to make a general conveyance of the assets of the corporation without at least the assent of the board of directors. England v. Dearborn, 141 Mass. 590, 6 N. E. 837; Titus v. Cairo & F. R. Co. 37 N. J. L. [175 U.S. 40, 54] 98, 102; McCullough v. Moss, 5 Denio, 567; Fulton Bank v. New York & S. Canal Co. 4 Paige, 129, 134; Walworth County Bank v. Farmers' Loan & T. Co. 14 Wis. 325; Stokes v. New Jersey Pottery Co. 46 N. J. L. 237; Morawetz, Priv. Corp. 537; 4 Thomp. Corp. 4622.
The stockholders not only assumed to convey the property of the corporation without title thereto as well as without the requisite authority so to do, but, acting as individuals, they sold 'all their right, title, and interest in and to the assets' of the corporation, 'subject to the payment of its obligations, and subject to the custody thereof in the legal custodian, R. E. Jenkins, assignee as aforesaid.' As this transfer was no broader in its terms than those employed in the assignment by the company to Jenkins, and as the stockholders in any event would not have the power to transfer the assets of the corporation, this sale could operate only upon their stock; and that this was the intention is evident from the fourth clause of the contract, by which the stockholders agreed, within ten days from the date of the contract, to assign to De la Vergne all the stock of the Consolidated Company which had been issued, and which they guaranteed had been paid in full, and also by the fact that the certificates for such stock were all assigned by the holders and forwarded to De la Vergne. But again, it is difficult to see what the Refrigerating Company gained by this transfer of stock. Doubtless it gave them the control of the Consolidated Company, but as that company had assigned everything to Jenkins, including the goodwill, there was nothing left of value in the ownership of the stock. Apparently it could only operate upon the possibility that, by some favorable turn of fortune, the assets might prove more than sufficient to pay the debts, and thus the stock would become of some real value. However this may be, it is quite evident that one of the main objects of the transfer was to get possession of the stock and the right to use the name of the Consolidated Company, assuming that this did not pass to the assignee as part of the goodwill of the business.
But as the powers of corporations, created by legislative act, are limited to such as the act expressly confers, and the [175 U.S. 40, 55] enumeration of these implies the exclusion of all others, it follows that unless express permission be given to do so, it is not within the general powers of a corporation to purchase the stock of other corporations for the purpose of controlling their management. First Nat, Bank v. National Exch. Bank, 92 U.S. 122, 128 , 23 S. L. ed. 679, 681; Sumner v. Marcy,3 3 Woodb. & M. 105; Morawetz, Priv. Corp. 431; 1 Thomp. Corp. 1102; People, Peabody, v. Chicago Gas Trust Co.,4 130 Ill. 268, 8 L. R. A. 497; Milbank v. New York L. E. & W. R. Co. 64 How. Pr. 20; Mechanics' & W. M. Mut. Sav. Bank & Bldg. Asso. v. Meriden Agency Co. 24 Conn. 159.
Not only is this true as a general rule, but by the law of the state of New York, under which this corporation was organized, i. e., 'An Act to Authorize the Formation of Corporations for Manufacturing, Mining, Mechanical, or Chemical Purposes,' passed Feb. 17, 1848 (Laws 1848, chap. 40), it was declared in 8 that 'it shall not be lawful for such company to use any of their funds in the purchase of any stock in any other corporation.' This language is clear and explicit, and evidently covers purchases of stock in other corporations, whether engaged in the same or different business.
In this connection, however, our attention is called to an act passed by the legislature of New York June 7, 1853 (Laws 1853, chap. 333), amendatory of the act of 1848, the 2d section of which enacts that 'the trustees of such company may purchase mines, manufactories, and other property necessary for their business, and issue stock to the amountof the value thereof in payment therefor.' The position of the plaintiffs in this connection is that, under the authority to purchase 'other property necessary for their business,' it was competent for manufacturing corporations to purchase the stock of other similar corporations. But we do not so read the act. Its evident object was to permit manufacturing corporations to purchase mines from which they could extract their own ore, or manufactories of raw material, such as pig iron or lumber, which could furnish to them material to be worked up into their own products; and in case such purchases involved a larger outlay than their present resources would [175 U.S. 40, 56] justify, to issue new stock 'to the amount of the value thereof in payment therefor.' But there is nothing to indicate that the legislature intended to authorize them to purchase the stock of competing corporations, or corporations engaged in other business. It is only property necessary for their own current business they were authorized to purchase.
Another act amending the general corporation act of 1848, passed April 28, 1866 (chap. 838), was intended for a similar purpose. By section three it was enacted that 'it shall be lawful for any manufacturing company heretofore or hereafter organized under the provisions of this act, or the act hereby amended, to hold stock in the capital of any corporation engaged in the business of mining, manufacturing, or transporting such materials as are required in the prosecution of the business of such company, so long as they shall furnish or transport such materials for the use of such company, and for two years thereafter and no longer; and the trustees of such company shall have the same power with respect to the purchase of such stock and issuing stock therefor as are now given by law with respect to the purchase of mines, manufactories, and other property necessary to the business of manufacturing companies. But the capital stock of such company shall not be increased without the consent of the owners of two thirds of the stock, to be obtained as provided by sections twenty-one and twenty-two of the act herebe amended.' N. Y. Laws 1866, chap. 838.
The object of this act was evidently much the same as that of the prior act of 1853, that is, to enable manufacturing corporations to produce their own ore and manufacture their own raw materials. To meet the exigencies of this statute it is necessary that the company whose stock is purchased should at the time of the purchase be engaged in the business of mining, manufacturing, or transporting such materials as are required in the prosecution of the business of the purchasing company; and the right is limited to such time as they shall furnish or transport such materials for the use of such company, and for two years thereafter. It clearly has no application to a case where a manufacturing company pur- [175 U.S. 40, 57] chases the stock of an insolvent rival concern which has ceased to do business, and whose stock is bought for the evident purpose of preventing a reorganization, and of obtaining its patronage.
In the Revised Statutes of New York of 1889 (vol. 3, p. 1959), there is also an act, to which our attention is called by a supplemental brief, permitting manufacturing companies to increase or diminish their capital stock to any amount which may be sufficient and proper for purposes of the corporation, and also to extend their business to any other manufacturing business subject to the provisions of the act.
That neither of these acts were intended to give authority to corporations to purchase stock of other corporations engaged in the same business is evident from a subsequent act approved June 7, 1890, to take effect May 1, 1891, the 40th section of which provides that '. . . no corporation shall use any of its funds in the purchase of any stock of its own or any other corporation, unless the same shall have been bona fide pledged, hypothecated, or transferred to it, by way of security for, or in satisfaction or part satisfaction of, a debt previously contracted in the course of its business, or shall be purchased by it at sales upon judgments, orders, or decrees which shall be obtained for such debts, or in the prosecution thereof. But any domestic corporation transacting business in this state, and also in other states or foreign countries, may invest its funds in the stocks, bonds, or securities of other corporations owning lands in this state or such states, if dividends have been paid on such stocks continuously for three years immediately before such loans are made, or if the interest on such bonds or securities is not in default, and such stock, bonds, or securities shall be continuously of a market value 20 per cent greater than the amount loaned or continued thereon.' N. Y. Laws 1890, chap. 564, art. 3, p. 1073.
Had the former acts given the unlimited authority to purchase insisted upon by the plaintiffs this act would have been entirely unnecessary, and, instead of enlarging the power previously possessed, would have operated as a restriction upon it. That this act of 1890 does not assist the plaintiffs is evident not only from the fact that the act did not take effect [175 U.S. 40, 58] until after the contract was made, but from the further fact that it merely authorizes corporations to invest their funds in the stocks, bonds, or securities of other corporations if dividends have been paid for three years before the loans are made, or if the interest on their securities is not in default, and such securities are worth 20 per cent greater than the amount loaned thereon. This act evidently refers to loans and not to purchases, since the section expressly provides that no corporation shall use its funds in the purchase of any stock, either of its own or any other corporation, unless by way of security for antecedent debts.
The truth is, that the legislature of New York, instead of repealing the prohibitory clause in the original act of 1848, concerning the purchase of stock in other corporations, has modified it but slightly, by slow degrees, and in special cases, to enable a manufacturing corporation to control more perfectly its own legitimate business operations, and has thereby manifested the more clearly its intention to preserve the original inhibition.
Our conclusion upon this branch of the case is that, as the main, if not the sole, object of the purchase from the plaintiffs was to acquire their stock in the Consolidated Company, such purchase was ultra vires the Refrigerating Company.
2. Is this defense available to the Refrigerating Company? Whatever doubts might have been once entertained as to the power of corporations to set up the defense of ultra vires to defeat a recovery upon an executed contract, the rule is now well settled, at least in this court, that where the action is brought upon the illegal contract it is a good defense that the corporation was prohibited by statute from entering into such contract, although in an action upon a quantum meruit it may be compelled to respond for the benefit actually received.
The earliest case in which this doctrine is distinctly laid down is that of Pearce v. Madison & I. R. Co. 21 How. 441, 16 L. ed. 184, in which it appears that two railroad companies, which had been consolidated, gave their promissory notes in payment for a steamboat to run in connection with the railroads. It was held that, as there was no authority in the [175 U.S. 40, 59] railroad companies to engage in running steamboats, there could be no recovery on the notes, and that as the plaintiff was not the owner of the boat and had sued upon the notes as an indorsee, there could be no recovery. The same doctrine has been applied to leases ultra vires a corporation, and it has been uniformly held that there could be no recovery upon the lease itself, though there might be in an action for use and occupation of the property. Pittsburgh, C. & St. L. R. Co. v. Keokuk & H. Bridge Co. 131 U.S. 371, 384 , 33 S. L. ed. 157, 161, 9 Sup. Ct. Rep. 770; Central Transp. Co. v. Pullman's Palace Car Co. 139 U.S. 24, 48 , 35 S. L. ed. 55, 64, 11 Sup. Ct. Rep. 478; S. C. 171 U.S. 138 , 43 L. ed. 108, 18 Sup. Ct. Rep. 808; McCormick v. Market Nat. Bank, 165 U.S. 538, 550 , 41 S. L. ed. 817, 822, 17 Sup. Ct. Rep. 433; Thomas v. West Jersey R. Co. 101 U.S. 71 , 25 L. ed. 950; California Nat. Bank v. Kennedy, 167 U.S. 362 , 42 L. ed. 198, 17 Sup. Ct. Rep. 831; Buckeye Marble & Freestone Co. v. Harvey,5 92 Tenn. 116, 18 L. R. A. 252; Union P. R. Co. v. Chicago, R. I. & P. R. Co. 163 U.S. 564 , 41 L. ed. 265, 16 Sup. Ct. Rep. 1173.
The doctrine that no recovery can be had upon the contract is based upon the theory that it is for the interest of the public that corporations should not transcend the limits of their charters; that the property of stockholders should not be put to the risk of engagements which they did not undertake; that if the contract be prohibited by statute everyone dealing with the corporation is bound to take notice of the restrictions in its charter, whether such charter be a private act or a general law under which corporations of this class are organized. Zabriskie v. Cleveland, C. & C. R. Co. 23 How. 381, 398, 16 L. ed. 488, 497; Thomas v. West Jersey R. Co. 101 U.S. 71 , 25 L. ed. 950; Pennsylvania R. Co. v. St. Louis, A. & T. H. R. Co. 118 U.S. 290 , and 630, 30 L. ed. 83, and 284, 6 Sup. Ct. Rep. 1094, and 7 Sup. Ct. Rep. 24; Oregon R. & Nav. Co. v. Oregonian R. Co. 130 U.S. 1, 25 , 32 S. L. ed. 837, 841, 9 Sup. Ct. Rep. 409; Pittsburgh C. & St. L. R. Co. v. Keokuk & H. Bridge Co. 131 U.S. 384 , 33 L. ed. 161, 9 Sup. Ct. Rep. 770.
The difficulty with the position of the plaintiffs in this case is this: If the purchase of the stock was the main object of the contract the consideration was an illegal one, and the promise of the Refrigerating Company to furnish its own [175 U.S. 40, 60] stock in payment was ultra vires. If, upon the other hand, the object of the contract was to obtain the assets and goodwill of the Consolidated Company upon payment of its debts, then the promise of the Refrigerating Company to pay the plaintiffs therefor was without consideration, since the assets were the property of the Consolidated Company and not of its stockholders, and anything realized by the sale of such assets belonged to the company or its assignee, and should be devoted first to the payment of its debts. If there were anything of value beyond the control of the stock which passed to the Refrigerating Company under the contract, the assignee could not be dispossessed of it until all the debts were paid or compromised, when it would revert to the corporation but not to the plaintiffs. Their title to sue must rest upon their ownership of the stock, and if the defense of ultra vires be sustained, we know of no theory upon which the plaintiffs can recover. It certainly cannot be true that the plaintiffs can take to themselves the $100,000 stipulated by this contract and leave creditors of the corporation unpaid to the extent of $150,000.
[ Footnote 1 ] 2 N. W. 370.
[ Footnote 2 ] 22 N. W. 350.
[ Footnote 3 ] Fed. Cas. No. 13,609.
[ Footnote 4 ] 22 N. E. 798.
[ Footnote 5 ] 20 S. W. 427.

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By motion filed April 10, 2009 , defendants and third-party plaintiffs Bruce Weisfeld and FUBU the Collection ("defendants") request reconsideration pursuant to Local Civil Rule 6.3 of the Court's Memorandum Order issued March 27, 2009  ("Order") resolving (a) third-party plaintiffs' motion to interpose a second amended third-party complaint, and (b) third-party defendant James Todd Smith's motion to dismiss third-party plaintiffs' first amended complaint. The request focuses on the Order's holdings with respect to the applicability of an indemnity clause in the March 5, 1998 Operating Agreement of GTFM, LLC ("Agreement").
The background facts are explained in the Order, so only a minimal background is provided here. The Court held that the contract's indemnification clause covered only GTFM, LLC, and not GTFM, Inc. for covered damages, and that since GTFM, LLC is not a party the second amended complaint did not assert a claim for indemnity which is plausible on its face. (Order 7.) Third-party plaintiffs now assert that two other defendants — Bruce Weisfeld and FUBU LLC — are indemnified by the Agreement. Accordingly, they seek reconsideration of the Order so as to permit interposition of those third-party plaintiffs' contractual indemnification claims against Smith.
Local Civil Rule 6.3 provides that a party may submit a motion for reconsideration "setting forth concisely the matters or controlling decisions which counsel believes the court has overlooked." Loc. Civ. R. 6.3. Reconsideration of a court's previous order "is an extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources." USA Certified Merchs. LLC v. Koebel, 273 F. Supp. 2d 501, 503 (S.D.N.Y. 2003). "[T]o be entitled to reargument and reconsideration, the movant must demonstrate that the Court overlooked controlling decisions or factual matters that were put before it on the underlying motion. . . . [A] party may not `advance new facts, issues or arguments not previously presented to the Court.'" Hamilton v. Garlock, Inc., 115 F. Supp. 2d 437, 438-39 (S.D.N.Y. 2000) (citing Morse/Diesel, Inc. v. Fidelity Deposit Co. of Md., 768 F. Supp. 115, 116 (S.D.N.Y. 1991)). Furthermore, a motion for reconsideration "is not a motion to reargue those issues already considered when a party does not like the way the original motion was resolved." Houbigant, Inc. v. ACB Mercantile ( In re Houbigant, Inc.), 914 F. Supp. 997, 1001 (S.D.N.Y. 1996). "The decision to grant or deny a motion such as the one before the Court is within the sound discretion of the Court." Davey v. Dolan, 496 F. Supp. 2d 387, 389 (S.D.N.Y. 2007).
The Order simply did not explain whether the indemnification clause applied to plaintiff's claims against Weisfeld and FUBU. The Court will now correct that oversight.
The indemnification clause is found in Article X of the contract, titled "Transfer of, and restrictions on transfers of interests of members." Section 10.1 defines "Transfer." "Except as otherwise specifically provided in this Agreement, a Member shall not have the right to sell, assign, pledge, hypothecate, dispose of, exchange, gift, bequeath or otherwise transfer (collectively, "Transfer") all or any part of his Interest. A Transfer of an Interest also shall include. . . . [listing more types of transfers]."
Section 13.14 of the Agreement is a standard choice of law clause selecting New York law for the construction of its terms.
Nor does the indemnification clause indicate that it applies retroactively, yet all of plaintiff's claims arise out of events well prior to Smith's acquisition of an ownership interest in GTFM. An indemnity agreement "cannot be held to have a retroactive effect unless by its express words or necessary implication it clearly appears to be the parties' intention to include past obligations." Quality King Distributors, Inc. v. E M ESR, Inc., 36 A.D.3d 780, 827 N.Y.S.2d 700, 703 (2d Dep't 2007) (quoting Kane Mfg. Corp. v Partridge, 144 AD2d 340, 341, 533 N.Y.S.2d 948 (2d Dep't 1988)). Moreover the section prior to the indemnification clause, which deals with the effective date of transfers, provides for "retroactive allocation of losses" resulting from a Transfer to the beginning of the quarter in which that Transfer occurs. (Agreement § 10.13.) The drafters' inclusion of a retroactivity clause in the prior section forecloses the possibility that they intended retroactive application of the indemnification section without explicitly providing for it.
For the reasons stated above the Court finds that § 10.14 of the Agreement does not provide indemnification for the claims alleged by plaintiff. The Court's March 27, 2009 Memorandum Order is amended consistent with this order.


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In Part 1 of this discussion, June 19, 2011, we discussed the origins of the California scandal whereby CalTrans, our Department of Transportation got into the excess land business – taking of land ostensibly for a freeway, but actually in excess of what it meant to put to such use. You can read all about it by clicking here. In a rational world, you would have thought that after being nailed by the Little Hoover Commission wasting some $100,000,000 (in circa 1970 dollars) on excess land that CalTrans could neither use nor sell, those folks would have been chastized into straightening out their behavior. But no, it went right on.
The second chapter came in Orange County in 2006, when the Orange County Register ran an expose on CalTrans’ wasteful behavior, whereby it acquired land in connection with the widening of the I-5 freeway, but wasn’t doing anything with it. See Kimberly Kindy & Natalya Shulakovskaya, Highway Robbery, Orange County Register, Oct. 15, 2006, at p. 1 (News), describing how CalTrans acquired large holdings of land which it was not using, selling or maintaining, causing a loss to local taxing authorities of anywhere from $78 million to $100 million. CalTrans also incurred $29 million in liability for inverse condemnation damages for harm caused to other homes.
For additional coverage of these events, also see Steven Greenhut, California’s Biggest, Nastiest Landlord, Orange County Register, Nov. 26, 2006, at p. 1 (Commentary), and Associated Press, CalTrans Bought Houses, Let Them Decay, L.A. Daily Jour., Oct. 18, 2006, at p. 2.
Just how much money was wasted on this caper by our ever-watchful guardians of the public fisc was never entirely clear (at least not to the likes of us) but it clearly ran into the nine figures.
Man Bites Dog In South Carolina!
It bears noting, if only in passing, that the South Carolina Supreme Court (the same court, interestingly, which thought that denying David Lucas all economically viable use of his beachfront property in Lucas v. South Carolina Coastal Council was hunky dory) has held that when a lawyer is appointed to represent indigent criminal defendants, he is entitled to just compensation for the resulting taking of his property in the form of his time and labor, and even in some cases, for expenditures incurred in connection with handling such cases. The case is Brown v. Howard, No. 26991 (S.C. June 21, 2011).
This is an overdue decision. Maybe in the olden days a barefoot country lawyer could stroll down to the court house and do his share in providing legal representation to indigent criminal defendants. Though hardly de minimis, the economic burden of such representation was then comparatively modest. But given today’s economic burdens of running a law practice, it can get economically burdensome, and lawyers who undertake pro bono defense of people accused of murder or other serious crimes, can become de facto indentured servants for years on end. While the added economic burden thus placed on the criminal justice system by the requirement of appointed lawyer compensation is not to be sneezed at, it’s the same old story: the economic burden of such representation must fall somewhere, and it does not seem fair that it should fall only on defense lawyers, even as society demands that criminal defendants receive punctilliously fair and at times highly complex treatment by the criminal justice system. Once again, there ain’t no such thing as a free lunch, and a society that insists on a high level of representaton for indigent as well as paying defendants, incurs a cost in doing so.
As you may suspect, this development in the law has already been covered by a number of blogs, so rather than repeat this stuff, we refer you to the blog of out esteemed colleague Robert Thomas who runs the inversecondemnation.com blog and who has already covered this bit of news, providing links to other blogs. Click here to get his take on this decision.
Lowball Watch – New Jersey. With a Moral.
The Jersey Journal (nj.com) reports that the New Jersey Appellate Division (that state’s intermediate level appellate court) has affirmed an award of $18.6 million for the taking of a 3.4-acre parcel of land by the Jersey City Redevelopment Agency. Terrence McDonald, Court Rejects Challenge to $18.6M Award in Jersey City Eminent Domain Case, June 25, 2011 – Click here.
The taking took place in 2004. The Redevelopment Agency offered $3.9 million. A jury awarded $18.6 million which, with interest, has grown by now to $22 million, a sum that, as it happens, comes close to the owners’ trial valuation testimony of $25.3 million.
What is most interesting about this case to us is the Agency’s reaction. Even though in this case it is the redeveloper who is supposed to pay the judgment, evidently the Redevelopment Agency has learned a sobering lesson. Its Executive Director is quoted as saying the Agency “has retooled its position regarding eminent domain in recent years and [this] case is partially responsible.” The Agency “has been much more hesitant to seize properties via eminent domain.” Which is a nice illustration of our general belief that economic solutions are best because they are self-enforcing. When the redevelopment agency and its redevelopers are made to understand that there is no free lunch, that they won’t be able to pursue their grandiose plans on the backs of property owners whose land is targeted for acquisition, and that they will have to pay the true amount — or something approaching it — of the cost of doing business, they will be more likely to use the power of eminent domain with restraint, and invoke it only when necessary and economically sound. There is nothing like an economic disincentive to trying to redevelop on the cheap, at the expense of condemnees whose land fortuitously winds up in the path of the project.
Our observation has been that no matter how much the legislature fiddles with the statutory right to take, chances are that even on their face the legislative changes won’t amount to a hill of beans, because they always have an exception for “blight,” a term that is so amorphous as to cover a multitude of municipal sins. The recent New York cases (Goldstein and Kaur) provide excellent examples of how far judges can go in rubber-stamping condemnor plans. In other words, even when not as intellectually corrupt as New York law, when it comes to the right to take, judges are likely to interpret laws in favor of the condemning agencies. At least that has been the sad history of American eminent domain law.
The Star Ledger (NJ.com) reports that a Monmouth County jury awarded $2.8 million to a developer, on the city’s offer of $880,000. The developer was in the midst of developing the subject property and wanted to be the designated redeveloper for this site. But the city chose another one. Mary Ann Spoto, Asbury Park Developer Awarded $2.8 Million for City’s Abandone Eminent Domain Project, Jan. 23, 2011. For the story, clich here.
These houses were acquired years ago by CalTrans for an extension to the 70 Freeway, that has not been built due to fierce resistance of the City of South Pasadena — which is another story worthy of telling, but which will have to be told another time.
This isn’t the first time that CalTrans wound up with land it acquired but then could neither use nor sell. In our experience, this kind of boondogglery goes back to the 1960s. Check out People etc. v. Superior Court (Rodoni), 68 Cal.2d 103 (1968). There, Caltrans, intending to put a 0.65-acre parcel of Roy Rodoni’s Central Valley farmland to use as part of the Interstate 5 right of way, filed a condemnation action seeking to take his entire 54-acre farm. Why take over ten times as much land as would be put to freeway use? Because, said CalTrans, taking only the half-acre would landlock the remainder, making severance damages high, so taking it all would cost less. How is that possible, you ask? How can taking ten times more land be cheaper than taking one tenth of the take? It isn’t. But do read on.
What we have here is government-style arithmetic, which goes something like this. Under eminent domain law, when a condemnor takes only a part of a larger parcel of land, it has to pay for the part taken, plus severance damages measured by the diminution in value of the remainder. So by taking all of it, “reasoned” CalTrans, it would not have to pay severance damages, and — voila! — it would save money. But what about the cost of the whole 54-plus acres, as opposed to the cost of only the half-acre that would be used for the freeway and as such be compensable in a partial taking? After all, an entire parcel of land can only be worth 100% of its fair market value, no more and no less. So if you take and pay for all of it, you necessarily pay the highest possible price, as opposed to taking only a part of it whose value necessarily has to be less than the whole, because the remainder (even a landlocked remainder) is always worth something, if only when sold to a neighbor at a bargain price.
But alas, the majority of the California Supreme Court endorsed CalTrans’ argument, granting CalTrans the opportunity to go to trial and demonstrate that the cost of the partial taking would not be “excessive” and would save the state money.
CalTrans argued that it could “save” by selling the excess land and recouping its money, but the problem with that was that this collided with the settled rule forbidding excess condemnation for recoupment purposes — i.e., the taking of land in excess to the public project being built, in order to resell it, hopefully at a profit and use the sales price to offset the acquisition cost. The court’s majority, in an opinion by Chief Justice Traynor, more or less bought this argument but insisted that CalTrans prove on remad that it would actually save money by taking all of Rodoni’s land.
So what happened then? We are not really sure, but rumor had it at the time, that faced with the arithmetically impossible task of showing that the cost of acquisition of 0.65-acre of farm land would equal or exceed the cost of acquition of 54 acres of that land, CalTrans threw in the towel and settled, paying only for the partial taking and letting Rodoni keep the excess land.
But that was not the end of the story. Shortly thereafter the Little Hoover Commission undertook a study of CalTrans’ excess land acquisition program, and — surprise, surprise! — revealed that the state’s excess land acquisition program, far from being the money-saver CalTrans claimed it to be, was a rathole for public funds. CalTrans was found to be sitting on some $100 million worth of excess land that it acquired but could neither use nor sell. In fact, as revealed by the Los Angeles Times, the program was so poorly managed, that CalTrans’ excess holdings included some $10 million worth of land that CalTrans was not even aware it owned. And remember — those were 1960s dollars — probably four times as much in today’s dollars.
It was a different story in the federal court where in Sherwood v. Bradford, 246 F.Supp. 550 (S.D.Cal. 1965) District Judge Peirson Hall enjoined the construction of the 210 Freeway because CalTrans had been using excess condemnation. But that case settled.
It seemed at the time that the Legislature put an end to this story when, in 1976, it enacted Cal. Code Civ. Proc. Sec. 1240.410 tightening up the definition of a remnant and providing that excess condemnation of remnants would not be permissible where the condemnee could prove that the condemnor “has a reasonable, practicable, and economically sound means to prevent the property from being a remnant.” And if there is one thing condemnors hate, it is having to defend the extent of their takings on the merits. Moreover, the Legislature also provided that in cases of takings leaving genuine economic remnants, the owner as well as the condemnor can request that they be acquired and compensation be paid for them. Gov’t. Code Sec. 7267.7. This made the excess taking game a two-sided affair, so we don’t see any overtly excess condemnation cases these days, and presumably, CalTrans is no longer acquiring land that it then fails to use.
Our thanks to the Volokh Conspiracy folks for their reminder that today is Magna Carta day. Not only that, but they have also posted the full text of that document. Reading it reminds us of two things. First, provisions of the Magna Carta are mostly devoted to protection of property rights. Most of that other good stuff concerning personal liberties hat we have enshrined in the Bill of Rights is conspicuous by its absence. So next time you hear someone extoll the virtues of that Great Charter, remind him of that fact.
So next time you hear someone go on about how there is no right to a trial by jury in eminent domain cases, because supposedly there was no such right in England when Seventh Amendment was adopted, remind him about that “lawful judgment of his equals” passage. To say nothing of more modern British law, discussed in DeKeyser’s Royal Hotel v. The King, a 1919 British Court of Appeal decisions that reviews British history on this point and concludes that eminent domain (or compulsory purchase) cases were tried to juries until at least 1845.
Little did we know when we started to cover the topic of attempted undercompensation by condemning agencies a while back, that it would prove to be so frequently recurring. Here is a doozy from Louisiana, as reported by Ownerscounsel.com. The case caption is State of Louisiana v. Monteleone, et al.
1987 State DOT offer for taking of some 153 acres out of a 14,034.948-acre tract of wetlands: $46,558. Jury verdict (at the end of first trial): $91,672. This judgment was reversed on appeal for jury misconduct. See 976 So.2d 791 (2008).
At the end of the second (non-jury) trial, the verdict was $214,534.14 for the part taken, plus $1,584,442.54 in severance damages, plus interest on the additional just compensation of $1,584,442.54, plus expert cost in the amount of $173,030.00, plus $900,000.00 in attorney’s fees. Interest on expert costs and attorneys’ fees is yet to be calculated.
Altogether, according to our calculator, the total award comes to some $4,288,472, or some 92 times the original offer.
The Owners Counsel reports (June 10, 2011) a verdict from Tulsa, Oklahoma, as follows. Condemnor’s initial offer for approximately 12 acres of agricultural land: $365,000. Commissioners’ award: $1,402,850. Jury verdict: $3,100,000.
Additionally, since the jury verdict exceeded the commissioners’ award by more than 10%, under Oklahoma law the owners are entitled to attorneys’ fees and costs. These have not yet been calculated.

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Dual proceedings (administrative sanctions alongside criminal prosecution) may constitute a violation of the principle of ne bis in idem, also known as double jeopardy. However, since the 2016 case of A and B v. Norway, this no longer seems to hold true in all situations. In this case, the European Court of Human Rights (ECtHR) created a new set of rules for the application of the double jeopardy principle; dual proceedings are not excluded as long as certain conditions are met. Following this ruling, the road appeared to be open for double sanctions, for example in tax cases in which tax authorities may impose an administrative fine in combination with a criminal prosecution for the same facts. In the recent ruling of Jóhannesson and others v. Iceland, the ECtHR applied this previous ruling for the first time. The outcome was, however, different, as the ECtHR ruled against Iceland for violating the principle of double jeopardy.
The principle of ne bis in idem, also known as double jeopardy, means that nobody should be prosecuted and punished twice based on the same facts. The prohibition of double jeopardy can be found in Article 4 of Protocol no. 7 to the ECHR (this protocol has not yet been ratified by the Netherlands) and also in Article 68 of the Dutch Criminal Code. The application of these recent ECtHR rulings could serve as an inspiration to Dutch lawmakers, and may even bring about a substantive change in the double jeopardy principle under Dutch law.
According to the Grand Chamber in A and B v. Norway, Article 4 of Protocol No. 7 does not exclude dual proceedings, provided that certain conditions are fulfilled. In this case dual proceedings were allowed. However, the dual proceedings must be sufficiently closely connected in both substance and time.
whether the first sanction imposed is taken into account in the proceedings which result in the second sanction, so as to prevent the individual concerned bearing an excessive burden. This risk is least likely to be present where there is an offsetting mechanism, designed to ensure that the total amount of penalties imposed is proportionate.
The extent to which the administrative proceedings bear the hallmarks of ordinary criminal proceedings is also relevant. Dual proceedings are more likely to be permitted if the administrative sanctions are specific for the conduct in question and if the administrative proceedings do not carry a significant degree of stigma.
The two sets of proceedings do not necessarily have to be conducted simultaneously from beginning to end; the court stated that the proceedings do not have to become final at the same time, but the connection must be sufficiently close to prevent unnecessary delay and uncertainty. The weaker the connection in time, the greater the burden on the State to explain and justify any delay.
These principles concerning the close connection in substance and time were applied for the first time in Jóhannesson and others v. Iceland. In this case, the ECtHR ruled against Iceland for violating the principle of double jeopardy. The dual proceedings in this case did not meet the conditions necessary to permit dual proceedings as set out in A and B v. Norway.
The applicants, two Icelandic nationals and an Icelandic company, were audited by the Directorate of Tax Investigations in Iceland, starting in 2003. Based on the Directorate’s reports, the Directorate of Internal Revenue found that the applicants had failed to declare significant payments and, therefore, re-assessed the applicants’ taxes and imposed surcharges, which became final in 2008. The director of tax investigations had also reported the case to the public prosecutor in 2004. In 2006, the applicants were informed of their status as suspects in a criminal investigation and in late 2008, the public prosecutor indicted the applicants for aggravated tax offences.
The Reykjavik District Court ruled that the offences were based on the same facts as the decisions of the tax authorities, and that the tax surcharges had involved a determination of a criminal charge. It therefore dismissed parts of the indictment, applying the principle of double jeopardy. Upon the public prosecutor’s appeal, the Supreme Court overturned the ruling on the basis that domestic law provided for two separate sets of proceedings for tax offences and that the case law of the ECtHR had not been clear on this issue. On remand, the District Court convicted the applicants. In 2013, the Supreme Court upheld the convictions.
The applicants alleged that Article 4 of Protocol No. 7, which contains the principle prohibiting double jeopardy, had been violated. The fact that the surcharges qualified as criminal charges. or that the facts in both procedures were identical, was not disputed. The issue was whether or not there were two separate, cumulative procedures.
According to the government, the surcharge serves to ensure efficiency in the levy of taxes by deterring people from filing tax returns containing flaws or misstatements. The surcharge is effective and immediately applicable, making it appropriate to achieve this goal. The tax authorities said that they did not take a stand on the criminal character of the taxpayers’ actions, and the surcharges were deducted from the fines imposed in the criminal proceedings.
The Court agreed with the parties that the surcharges qualified as criminal charges and that the offences were the same in both proceedings. It then had to decide whether there was a duplication of proceedings.
First, the Court assessed the connection in substance. The two proceedings pursued complementary purposes and the consequences were foreseeable. The surcharges were properly taken into account in determining the penalty in the criminal proceedings. However, issues arose regarding the third factor; even though the police had access to the tax authorities’ reports and documents from the tax audit, the investigations were performed by two different authorities and the cases were examined by different courts. The collection of evidence, as well as the proceedings, were largely independent of each other.
Secondly, the Court assessed the connection in time. The proceedings started in 2003 and ended in 2013. This was not the applicants’ fault; the proceedings were only conducted in parallel for about one year, from August 2006 until August 2007. The criminal indictments in 2008 came over a year after the tax decisions were issued, and almost a year after those decisions acquired legal force. After 2008, the criminal proceedings continued until 2013, separate from the tax authorities and their proceedings, which ended in 2007.
In A and B v. Norway, the total length of the proceedings was about five years, the criminal proceedings continued less than two years after the tax decisions had acquired legal force, and the indictments were only months apart. As a result, the proceedings were sufficiently closely connected in time.
According to the judgment in the Jóhannesson case, all of the above, in particular the limited overlap in time and the largely independent collection and assessment of evidence, led to the conclusion that these dual proceedings did not meet the requirements and conditions that were set out in A and B v. Norway. The applicants suffered disproportionate prejudice because they were tried for the same offence by different authorities in different proceedings, which were not sufficiently closely connected in either substance or time. Therefore, Article 4 of Protocol No. 7 to the Convention had been violated.
This case seems to indicate that A and B v. Norway is to be interpreted restrictively and that the bar for meeting the conditions is set relatively high. The application of the recent ECtHR rulings could serve as an inspiration, and may even bring a substantive change in the explanation of the double jeopardy principle under Dutch law.

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You searched for proposal for settlement - В сложной финансовой ситуации приходит на помощь кредит наличными в Казахстане.
While there are times I will serve a proposal for settlement to create an argument to recover attorney’s fees, I always tell clients proposals for settlement create nothing more than an argument. In other words, you cannot bank on actually recovering attorney’s fees because of conflicting case law or case law that finds reasons to invalidate a proposal for settlement. Thus, when I serve a proposal for settlement, I make sure the client’s expectations are tempered. But, when I receive a proposal for settlement on behalf of a client, I make sure the client appreciates that they can be liable for attorney’s fees regardless of the conflicting case law in effect. Proposals for settlement, in my opinion, have become head scratchers.
The case of Starboard Cruise Services, Inc. v. DePrince, 43 Fla. L. Weekly D2581a (Fla. 3d DCA 2018) exemplifies the confusing nature of proposals for settlement. In this case, the defendant served a proposal for settlement conditioned on the plaintiff releasing all claims asserted in his amended complaint and dismissing the amended complaint with prejudice. The plaintiff’s amended complaint contained claims for monetary relief and a specific performance claim for equitable relief (where non-monetary damages were sought). Prior to trial, the plaintiff dismissed his equitable claim and proceeded to trial only on his claim for monetary relief. The jury found in favor of the defendant and the defendant filed a motion for attorney’s fees based on its proposal for settlement (that the plaintiff did not accept). The trial court denied the defendant’s motion for attorney’s fees finding that the proposal for settlement was invalid since it applied to plaintiff’s claims for monetary relief and equitable relief.
The appellate court agreed with the trial court finding that the defendant’s proposal for settlement was invalid because it was conditioned on the plaintiff releasing all his claims—his claims for monetary relief and his claim for equitable relief (where non-monetary relief was also sought). A proposal for settlement only applies to claims for money damages.
Due consideration is required when serving a proposal for settlement. Even with that consideration, there is still the possibility that the proposal for settlement will be deemed invalid, as was the circumstance in this case.
In an earlier posting I talked about proposals for settlement / offers of judgment. Again, these are used as a vehicle to create an argument for attorney’s fees down the road, particularly in cases where a party does not have a contractual or statutory basis to recover attorney’s fees. Please check out this article for more information on proposals for settlement because they have become an unnecessarily complicated vehicle with nuances that have resulted in an exorbitant amount of case law, some of which is conflicting. As a result, while the argument to recover fees is preserved by serving the proposal for settlement, it is an argument and not a guaranty.
Sometimes, parties with a contractual or statutory basis to recover attorney’s fees will still serve a proposal for settlement. This becomes tricky because the right to attorney’s fees per the contract or statute is not cut-off by virtue of the proposal for settlement.
Say, for example, a defendant serves a proposal for settlement. The plaintiff, however, prevails in the case through trial in a claim in which the plaintiff is entitled to contractual attorney’s fees. There are two considerations.
First, when determining the merits of a proposal for settlement, you need to look at the “net” judgment, which would include attorney’s fees and costs incurred by the opposing party (party receiving offer that prevailed in the case) through the date of the offer. See Leon F. Cohn, M.D., P.A. v. Visual Health and Surgical Center, Inc., 125 So.3d 860, 863 (Fla. 4th DCA 2013) (“Because Cohn prevailed on the breach of contract claim and the contract contained a provision awarding attorney’s fees to the prevailing party, we reverse and remand for the trial court to reconsider the issue of Cohn’s entitlement to fees after conducting an evidentiary hearing to determine the total net judgment, which shall include the amount of fees and taxable costs incurred by Cohn in litigating the breach of contract claim up to the date of the offer.”). Since the proposal for settlement is based on the net judgment, to determine whether the above defendant would be a prevailing party for purposes of recovering its attorney’s fees from the date of the proposal on forward would require an analysis to see what the total net judgment to the plaintiff would be factoring in fees and taxable costs through the date the defendant served the proposal. The issue in looking at the net judgment is to determine whether the defendant could offset some of the attorney’s fees entitled to the plaintiff by being entitled to attorney’s fees from the date of the proposal on forward.
Second, the proposal for settlement does not cut-off the opposing party’s contractual right to fees incurred after the proposal for settlement is served. See Tierra Holdings, Ltd. v. Mercantile Bank, 78 So.3d 558 (Fla. 1st DCA 2011). The above plaintiff would still be entitled to its attorney’s fees if deemed the prevailing party under the contract through the trial. The issue, as discussed above, is whether the defendant could offset some of the fees entitled to the plaintiff by being entitled to attorney’s fees from the date of the proposal on forward.
Let’s use real numbers. Assume the defendant served the proposal for settlement to the plaintiff for $100,000. The plaintiff has a contractual right to attorney’s fees. The plaintiff rejects the proposal for settlement and at trial the plaintiff is awarded $40,000. Now, let’s assume the total net judgment through the date of the proposal for settlement factoring in fees and costs entitled to the plaintiff as the prevailing party under the contract is $60,000. This $60,000 is at least 25% less than the defendant’s proposal for settlement of $100,000, meaning the defendant would be entitled to its attorney’s fees from the date of the proposal on forward. Assume those reasonable fees are $75,000. Assume the plaintiff’s total reasonable fees are $90,000.
Under step one, the defendant would presumably be the prevailing party for purposes of fees per the proposal for settlement and be entitled to its reasonable fees of $75,000 from the date of the proposal through trial. The reason being is that the total net judgment to the plaintiff at the time the defendant served the proposal when factoring in fees and costs was at least $25% less than the defendant’s proposal for settlement.
Under step two, the plaintiff is still entitled to its attorney’s fees for prevailing under the contract, which are $90,000 through trial. Thus, the $75,000 owed to the defendant in fees would simply be credited in a judgment given to the plaintiff (reducing the plaintiff’s judgment by $75,000). For example, if the court entered an attorney’s fees judgment, the plaintiff would be entitled to $15,000 in fees, or the difference between the $90,000 and the $75,000.
To be entitled to attorney’s fees, there needs to be a contractual or statutory basis to recover attorney’s fees (absent serving a proposal for settlement). There is oftentimes the misconception in breach of contract cases that the party that recovers a positive net judgment will automatically recover their attorney’s fees. While, certainly, sometimes this is the case, this is NOT what you should be banking on. The law has tried to progress to a point where it does not want certain cases to be driven solely by the prospect of recovering attorney’s fees just because you won $1.
The Florida Supreme Court in Moritz v. Hoyt Enterprises, Inc., 604 So.2d 807 (Fla. 1992) held that in a breach of contract action the significant issues test applied to determine the prevailing party for purposes of awarding attorney’s fees. A party prevails on the significant issues if the party prevails on any significant issue in the case that achieved a benefit sought by the parties in the action.
A year later, the Florida Supreme Court in Prosperi v. Code, Inc., 626 So.2d 1360 (Fla. 1993) addressed this significant issues test in the context of a construction lien action where the contractor received a net judgment in its favor but did not prevail on its construction lien (that provided a statutory basis for fees). In this case, the owner prevailed on the contractor’s lien claim but the contactor prevailed in a breach of contract action and, therefore, recovered a net judgment in its favor. For purposes of the case, a net judgment was “when the claimant fails to foreclose a mechanic’s lien but obtains a judgment for the underlying claim which exceeds any claim of the owner.” Prosperi, 626 at n.1. Here, the Court explained that recovering a net judgment is a significant factor to determine the prevailing party for purposes for purposes of attorney’s fees, but was NOT the only consideration. The equities of the case must be considered at the trial court’s discretion to determine the party that prevailed on the significant issues to be deemed the prevailing party for purposes of attorney’s fees.
Years later, this issue was brought up again to the Florida Supreme Court in Trytek v. Gale Industries, Inc., 3 So.3d 1194 (Fla. 2009), as to whether the significant issues test applied when a contractor obtained a net judgment against an owner on its lien even though the lien amount was reduced by the owner’s claim for repair costs. In finding that the significant issues test applied, the court further explained that the trial court has discretion to examine all factors including issues litigated, claim amount, amount recovered, and counterclaims, and can determine that neither party was the prevailing party for purposes of attorney’s fees.
As you can see, the trend to determine the prevailing party for purposes of attorney’s fees in a breach of contract action is to apply the significant issues test. Because the trial court has the discretion to examine the equities to determine the party that prevailed on the significant issues in a given case, there is not any objective or bright-line rule to refer to in order to determine whether your situation will deem you the prevailing party for purposes of attorney’s fees. This component makes it challenging to predict how a trial judge or arbitrator may rule and whether a party will be deemed the prevailing party for purposes of attorney’s fees. Recovering a net judgment is still an important factor, but it will not be the sole deciding factor because the prospect of a party recovering $1 and being deemed the prevailing party for purposes of attorney’s fees may prevent that party from becoming reasonable with their settlement terms.


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Messrs. William F. Tammany and John H. Light for plaintiff in error.
This is scire facias, where the statutes of Connecticut provide a similar remedy, to recover savings bank accounts attached by trustee process in the hands of the plaintiff in error, judgment having been recovered in the original suit by the defendant in error and execution taken out. The garnishee submitted itself to the judgment of the court, admitting deposits, but setting up that after the attachment the accounts had been assigned to the United Hatters of North America, and that the assignee claimed the dividends that had accrued since the writ was served. The assignee was cited, appeared, and made the claim. The principal, except an item of $428.52, now has been paid, and the right to the dividends is the only question in the case. The circuit court of appeals decided that the attaching creditor had the better right. L.R.A. 1917B, 938, 236 Fed. 444.
There is no doubt that under the statutes of Connecticut, as usual elsewhere, a garnishment reaches only effects of the defendant in the hands of the garnishee at the time of service upon the latter, as distinguished from contingent liabilities that do not become effects in the garnishee's hands until a later time. Gen. Stat. 1902, 880, 931. But the commonest object of such attachments is a right, regarded as a thing within reach of the process because of the power of the court over the person subject to the corresponding obligation. Barber v. Morgan, 84 Conn. 618, 623, 80 Atl. 791, Ann. Cas. 1912D, 951; Osborn v. Lloyd, 1 Root, 447; Harris v. Balk, 198 U.S. 215, 222 , 49 S. L. ed. 1023, 1026, 25 Sup. Ct. Rep. 625, 3 Ann. Cas. 1084. If the right is vested, the attachment reaches the whole of it, and therefore, there being no doubt that a debitum in praesenti solvendum in future could be attached (Gen. Stat. 936), it was admitted at the argument that in the case of an interest-bearing debt the subsequently accruing interest was held as well as the principal. The obligation to pay the one stands on the same footing as the obligation to pay the [242 U.S. 357, 359] other; the two are one; they are limbs of the same contract; and there is no reason for splitting them up. Adams v. Cordis, 8 Pick. 260, 269. It may be true that, apart from statute, the attachment of stock in a corporation would not hold subsequently declared dividends; but, if so, that is because the stockholders have no right to the dividends until they are declared, which may never be if the directors see fit to convert earnings into capital. Gibbons v. Mahon, 136 U.S. 549 , 34 L. ed. 525, 10 Sup. Ct. Rep. 1057. Compare Norton v. Norton, 43 Ohio St. 509, 525, 3 N. E. 348. The question then narrows itself to whether the so-called dividends of savings banks are analogous to dividends of a corporation, or to interest due by contract upon a debt.
The plaintiff in error is an ordinary savings bank without stockholders. It is subject to a fiduciary duty to hold and invest for the benefit of its depositors all the funds that it receives, and to pay over to them all the net income earned, after the retention of enough to constitute a small safety fund. Gen. Stat. 3440, 3441. This duty certainly is no less because created by statute rather than by contract. It is guarded by other statutes limiting the investments allowed and requiring inspection, with the object of making principal and income secure rather than large. Gen. Stat. 3428, 3457. The minimum amount of the dividends generally is as fixed in practice as if it were written in a bond. The practical certainty that a savings bank will pay is greater, in short, than that an average debtor will pay 6 per cent according to his promise in a note. The only element of uncertainty other than that conditioning all future conduct is the possibility that the dividend may be greater than that which experience has led the depositor to expect. He has a vested right to the dividends,-a vested right that the corporation should take the most prudent steps to secure them, with an identified fund devoted to the result. We do not perceive why the possibility of there being no earnings because [242 U.S. 357, 360] of fraud or a cataclysm, or a possibility of the earnings being greater than was expected, should make the right less a present one, subject to and covered by the attachment, than the right to the capital, which runs the same risks (Bunnell v. Collinsville Sav. Soc. 38 Conn. 203, 9 Am. Rep. 380), or than that arising from the promise of a debtor, who may fail or abscond, or, if a corporation, may have no assets.
The case certainly is not weakened, it rather seems to us to be strengthened, by the fact that the statutes of Connecticut provide that the levy of attachments and executions upon even the shares of a corporation shall include dividends growing due thereon. The provision indicates a policy, and although, of course, the words do not include dividends from savings banks, as, in our opinion, they did not need to, it is only by imagining unreal distinctions that the policy embodied in the statute, and extending by the common law to interest due upon contract, can be held to exclude the claim to subsequently earned income of ordinary savings banks, when that claim, as we have tried to show, is a vested right. Middletown Sav. Bank v. Jarvis, 33 Conn. 372, 379. See Norton v. Norton, supra.
No argument against our conclusion can be based on the right to release the attachment by giving a bond equal to the value of the effects attached. Gen. Stat. 849, 852. We presume that ordinarily a plaintiff would be satisfied with a bond for the principal of a debt or deposit. If he should raise a question we will wait for the Connecticut courts to decide whether he might or might not be entitled to more.
Finally, the assignment, of course, has no effect upon the rights of the defendant in error. If the attachment would have held dividends as against the original defendant, it holds them as against the assignee.

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