Indeed, far from being justified by the cases, the supposed rule that any restriction of competition is illegal was inconsistent with at least one case which held a contract by a seller of a business not to compete with the buyer legal as simply incidental to the sale of the good-will.10 It is also inconsistent with the language of Peckham, J., himself in these same railroad cases in which he insists that the Act must be given a reasonable construction and not held to make illegal ordinary business transactions." The supposed rule was at best embodied in a dictum, never lived up to by the court, and deprived of all force even as a dictum when, by its repudiation by Brewer, J., in his concurring opinion in the Northern Securities case, it became the dictum of only a minority of the court. 12

Thus the court before the principal cases were decided recognized that the general wording of the Act necessitated the judicial framing of some standard of illegality. The principal cases recognize the only standard fairly to be inferred from the words of the Act, namely, the standard imposed by the common law at the time of its adoption.13 This demands that a restraint be reasonable in its relation to the necessities of the parties to some lawful transaction, and in its relation to the public. It is certainly unreasonable in its relation to the public when it interferes with the right of strangers to the combination to compete.15 Thus this construction strikes at the evils of combination without infringing on the constitutional guaranty of freedom of contract. How far a combination not involving the universally recognized classes of public service companies may be unreasonable merely on account of its size must be regarded as still unsettled by direct decision. On principle it would seem that this must depend largely on the nature of the business in each particular case. Where the business is such that competition is still possible, it would seem that the right of outsiders to compete is not interfered with unless resort is had to unfair methods to suppress competitors who will not join the combination; for only by such methods may an effective monopoly be maintained. But in many businesses, because of the cost of plant necessary to conduct them, or other considerations, a combination of great size may come to be a virtual monopoly,16 even though it has attained its position simply by a process of legitimate business development. As such a combination would be as effective an obstacle to free competition as if it had used unfair methods to throttle competition, it may well be questioned whether its mere size would not render it illegal.

whether the use of the word "reasonable" in these cases had any reference to the nature of the combination, apart from the reasonableness of the rates that it fixed. 10 Cincinnati, etc. Packet Co. v. Bay, 200 U. S. 179. It was said here that this restraint was not direct." Exactly what was meant by “direct” seems uncertain. 11 See United States v. Joint Traffic Association, 171 U. S. 505, 566, 567.

12 See Northern Securities Co. v. United States, 193 U. S. 197, 361. Even if the present construction of the Act be regarded as merely dictum, because the defendants in the principal cases were subject to dissolution under any construction, it is a dictum subscribed to by eight out of nine of the judges.

13 See Standard Oil Co. v. United States, 221 U. S. 1, 60.

14 United States v. Addyston Pipe & Steel Co., 85 Fed. 271, aff. 175 U. S. 211. 15 Addyston Pipe & Steel Co. v. United States, supra; Montague & Co. v. Lowry, supra; Swift & Co. v. United States, supra.

16 See I WYMAN, PUBLIC SERVICE CORPORATIONS, §§ 120 et seq.

ATTACHMENT OF STOCK CERTIFICATES. - A recent Rhode Island case raises the question whether the certificates of stock in a foreign corporation, that are owned by a non-resident, but bailed to a third party within the state, can be reached by attachment. Maertens v. Scott, 80 Atl. 369 (R. I.). The court held that as the certificates are not the stock itself and as the stock lies outside the jurisdiction the certificates can neither be attached nor garnished. An analogous question has been presented to the New York and Minnesota 2 courts, differing, however, from the principal case in that the certificates were pledged as collateral security instead of being merely bailed. These courts held that the non-resident debtor's interest could be garnished. To show that all three cases are right and why they are distinguishable requires more than an examination of the various garnishment statutes. It requires an analysis of the very nature of stocks and stock-certificates.

7

8

"Stock" has been defined as "the sum of all the rights and duties of a stockholder."3 On theory, the certificates are the tangible indicia of title to these intangible rights. In fact, they represent the stock to a certain degree. But it is the presence of the duties, as well as the rights, in the stockholder that prevents the certificates from ever completely representing the stock in a way analogous to a bill of lading. Nor are the certificates negotiable instruments, for they are not demands for money. Yet they are, in practice, more than mere title deeds, for the corporation may refuse to transfer the stock upon its books without their surrender. It is this quality that has given them a quasi-negotiable character. Thus the courts have held that they are taxable, subject to larceny, can be administered by an executor in the jurisdiction in which they are found, and that they pass to a bona fide purchaser free from equities. This last result has been reached by the decision that, by endorsing them with a blank power of attorney, their owner becomes estopped to deny the transfer of the stock they represent. They have accordingly come largely to be used as collateral security for the payment of loans. As to what is the legal effect of such a transfer the courts do not agree. But whether it passes the legal title as in the case of negotiable instruments, or whether it merely passes an equitable interest with a power of sale, secured by an irrevocable power of attorney and the custody of the certificates, it is certain that the pledgee acquires something of value, which, under certain circumstances, he may lawfully sell, and with the proceeds reimburse himself for his loan. The pledgor, of course, has a right to any surplus resulting from this sale. Now the situs of this right is with the pledgee 10 and it was against this right that the creditors of the pledgors went in the New York and Minnesota cases. This right, analogous to an equity of redemption in the stock, was cre

1 Simpson v. Jersey City Contracting Co., 165 N. Y. 193.

2 Puget Sound National Bank v. Mather, 60 Minn. 362.

3 See LOWELL, TRANSFER OF STOCK, § 4.

4 See Cook, CORPORATIONS, § 480 et seq.

5 See LOUGH, CORPORATION FINANCE, 65.

6 See Re Whiting, 150 N. Y. 27.

7 See McAllister v. Kuhn, 96 U. S. 87.

8 Stern v. The Queen, [1896] 1 Q. B. 211.

9 McNeil v. Tenth National Bank. 46 N. Y. 325.

10 II HARV. L. REV. 108-112.

ated within the State at the time the loan was made. The presence of the certificates was necessary to make it of value, but they were not the right itself. And so the principal case is clearly sound, for there no rights were created within the state in favor of the non-resident bailor. He still had the legal and equitable title to the stock. The bare certificates were not attachable, for they could not have been sold on execution because the sheriff could not get or give title to the corresponding stock. This basic distinction between a bailment and a pledge of stock has not, however, always been clearly recognized in the cases.11

JUSTIFIABLE RELIANCE ON SELLER as Basis FOR IMPLIED WARRANTY OF QUALITY. The law of implied warranty in sales is comparatively modern. In the old cases, if the buyer did not himself require an express warranty of quality, the law implied none. Now, however, it is well settled that in some cases aside from any express stipulations of the parties a seller is held to warrant at least the merchantability of his goods. The basis of this obligation is the justifiable reliance of the buyer upon the seller's superior knowledge and greater judgment in the sale. What will justify the buyer's reliance is essentially a question of fact. In determining this question, all the circumstances of the sale should be considered. But the courts tend to formulate fixed rules to govern given states of fact. Thus some American courts distinguish sharply between sales by a manufacturer, and sales by a dealer, crystallizing into a rule the probability that a manufacturer knows more about his products than a dealer.

The result of the tendency to lay down fixed rules, rather than to view all the facts broadly to determine when a warranty arises by implication, is well illustrated by the cases involving implied warranties of fitness for a particular purpose. That a product is fit for the general purpose of its manufacture is but another way of saying that it is merchantable. But under certain circumstances a warranty will be implied not only that articles are merchantable but that they are fit for a particular purpose. In a recent New York case, the plaintiff, a manufac

11 Winslow v. Fletcher, 53 Conn. 390. Based on the interpretation of a local statute, the decision of this case is probably right, but the language of the court is too broad and fails to make the distinction pointed out in this note.

1 Barr v. Gibson, 3 M. & W. 390; Parkinson v. Lee, 2 East 314; Gossler v. Eagle Sugar Refinery, 103 Mass. 331.

2 Jones v. Just, L. R. 3 Q. B. 197.

3 See Kellogg Bridge Co. v. Hamilton, 110 U. S. 108, 116; Omaha Coal, Coke & Lime Co. v. Fay, 37 Neb. 68, 75

* See Preist v. Last, [1903] 2 K. B. 148, 154; WILLISTON ON SALES, §§ 231, 236.

5 Stanford v. National Drill & Mfg. Co., 114 Pac. 734 (Okl.); Obenchain & Boyer v. Incorporated Town of Roff, 116 Pac. 782 (Okl.). The cases cited are two recent cases which give a decision after a general statement of the law without any discussion of the particular facts involved.

6 See 16 HARV. L. REV. 590. A number of authorities for and against this distinction are collected in WILLISTON ON SALES, §§ 232, 233.

7 Professor Williston illustrates this principle by saying that the general purpose of a reaping machine is to reap. But if the machine could not reap, it would not be even merchantable. See WILLISTON ON SALES, § 235.

Kellogg Bridge Co. v. Hamilton, supra; Bierman v. City Mills Co., 151 N. Y. 482.

turer, sold the defendant some cloth, which the plaintiff knew was to be used in making clothes. Upon examination the cloth proved to be unfit for that purpose, and in a suit for the balance of the price it was held, that there was an implied warranty of the cloth's availability for the intended purpose. Rhodesia Mfg. Co. v. Tombacher, 129 N. Y. Supp. 420 (Sup. Ct., App. Term). It is usually stated that where a manufacturer contracts to supply an article which he manufactures to be applied to a particular purpose so that the buyer necessarily trusts to his judgment, the law implies an undertaking on his part that the article is reasonably suited to the known purpose; but where a known, described, and definite article is ordered, although it is stated to be required for a particular purpose, if the specified article be supplied, there is no warranty that it shall answer the particular purpose intended. Under this statement, extreme cases can be decided very easily, but there is a middle ground which it does not cover. In the law of express warranty, in order that a buyer may hold his seller, it is not necessary that he shall have relied exclusively on the warranty in making the purchase.10 Likewise, in the law of implied warranty, the buyer need not have relied solely on the judgment of the seller to claim the advantage of an implied warranty." It is in the decision of a close case, where the buyer in part selects his own article, yet at the same time relies upon the seller's greater knowledge, that the rule, as ordinarily stated, falls short of being an accurate test. That a just result is oftentimes reached, nevertheless, by the American courts is evidenced by the decision of the principal case. But it is submitted that, to weigh a close question in the law of implied warranty accurately, the facts themselves must be balanced, and all rules or presumptions of fact must be laid aside.12

NATURE OF RIGHT OF LANDOWNER IN UNDERLYING OIL AND Gas. The limited nature of property rights in fluid substances occupying underground areas is well illustrated by cases dealing with petroleum and natural gas. The problem is to give each landowner the fullest possible enjoyment of what lies within his territory, and yet to make him regard the rights of others in the common reservoir. It was early decided that oil and gas are minerals forming part of the realty, and are assignable as such, but when severed they become personalty and may be sued for in trover and replevin. The true extent of the landowner's rights in them was, however, long sought through imperfect analogies. "Their fugitive and wandering existence" caused them to

3

The above statement is substantially a quotation from the opinion of Fuller, C. J., in Seitz v. Brewer's Refrigerating Machine Co., 141 U. S. 510, 518, 519.

10 See Chicago Tel. Supply Co. v. Marne & Elkhorn Tel. Co., 134 Ia. 252, 258.

11 Cf. West Michigan Furniture Co. v. Diamond Glue Co., 127 Mich. 651; Preist v. Last, supra.

12 For a general discussion of the subject of this note and a collection of authorities, see WILLISTON ON SALES, §§ 228–236.

1 Williamson v. Jones, 43 W. Va. 562.

2 Murray 9. Allred, 100 Tenn. 100.

3 See Kelley v. Ohio Oil Co., 57 Oh. St. 317, 328; Hail v. Reed, 15 B. Mon. (Ky.) 479.

be called minerals feræ naturæ, and to be compared to wild game, but that analogy fails as a test of property rights, because while the public in general has a right to reduce wild game to possession, only those owning the surface above the deposits can bore for oil and gas.5 And analogies drawn from the rules governing percolating water fail because that is regarded as being evenly distributed so that every surface owner is allowed to interfere with its flow regardless of the effect on his neighbors."

8

A recent decision of the Supreme Court of the United States recognizes the true nature of the right: that the surface owner has not really a property right in the underlying oil and gas, but only a right to reduce it to possession. Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61. This case holds that a statute forbidding the waste of water drawn from artesian wells in order to collect the carbonic acid gas contained therein does not deprive the surface owners of property without due process of law. The decision is rested largely upon the authority of a previous decision by the same court sustaining the constitutionality of a statute that forbade the wasting of natural gas as a process of pumping the oil with which it was mixed. This view reaches the conclusion toward which the authorities have tended. For it has been held that oil and gas are not in the landowner's possession until he has perfected a means of taking them from the ground, and that in the absence of statute his neighbors may draw them all from under his land, so that unless he taps the common reservoir for himself he may lose his potential rights in its contents.10 By thus regarding the subterranean deposit as a common supply belonging potentially to all the surface owners, but ultimately and actually to such of them as shall draw it off, the courts have upheld the state's right to regulate the means of taking possession of it," and to forbid its waste.12 And in one instance without the aid of a statute, it has been held, that a man can only draw it off in a reasonable manner with due regard for the rights of other potential owners.13 So in the principal case the regulation of the exercise of this right of potential ownership is not a taking of property without due process, but rather a safeguarding of the rights which all the adjoining landowners have in the common supply.

NATURE OF QUASI-CONTRACTUAL RELIEF APPLIED TO VOLUNTARY PAYMENTS. That quasi-contractual relief is equitable in its nature

See Westmoreland & Cambria Natural Gas Co. v. DeWitt, 130 Pa. St. 235, 249. 5 See Ohio Oil Co. v. Indiana (No. 1), 177 U. S. 190, 209.

Chasemore v. Richards, 7 H. L. Cas. 349; New Albany & Salem R. Co. v. Peterson, 14 Ind. 112. A few cases do hold that the offender must act reasonably. Swett

v. Cutts, 50 N. H. 439.

7 Ohio Oil Co. v. Indiana (No. 1), supra.

8 Westmoreland & Cambria Natural Gas Co. v. DeWitt, supra.

Hague v. Wheeler, 157 Pa. St. 324.

10 See Jones v. Forest Oil Co., 194 Pa. St. 379, 383..

"Jamieson v. Indiana Natural Gas & Oil Co., 128 Ind. 555.

12 Townsend v. State, 147 Ind. 625.

13 Manufacturers Gas & Oil Co. v. Indiana Natural Gas & Oil Co., 155 Ind. 461.