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Under the general rule that a mortgagee is not accountable for rents unless he enters and takes them (see supra, II. a), it has been held that if he lets the mortgagor take the rents he is not accountable to a junior encumbrancer. Bailey v. Myrick (1859) 52 Me. 132; Cilley v. Huse (1860) 40 N. H. 358. Compare Demarest v. Berry (1863) 16 N. J. Eq. 481, wherein it was said: "If a mortgagee in possession permits the mortgagor to take the profits of the mortgaged premises, the

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mortgagee will be charged in favor of
subsequent encumbrances, with all the
profits he might have received.
So, if the mortgagee refuses to enter,
but suffers the mortgagor to take the
profits, and to protect his possession
by means of the mortgage."

A junior mortgagee in possession is not bound to account to the senior mortgagee. Leeds v. Gifford (1886) 41 N. J. Eq. 464, 5 Atl. 795, affirmed in (1888) 45 N. J. Eq. 245, 19 Atl. 621. W. A. S.

HYMAN MILLER et al., Doing Business as the Japanese Art & Jewelry Store et al., Appts.,

V.

CITY OF GREENVILLE et al., Respts.

South Carolina Supreme Court - April 6, 1926.

(134 S. C. 314, 132 S. E. 591.)

Municipal corporations, § 41 - regulation of auction sales.

1. Power to regulate the sale of merchandise at public auction is not one of the incidents to a municipal corporation, and can be exercised only when conferred by the legislature.

[See annotation on this question beginning on page 157.]

Auctions, § 1-right to conduct.

2. The business of auctioneer is one of common right.

[See 2 R. C. L. 1119; 1 R. C. L. Supp. 707.]

Property, § 3 right to sell.

3. The owner of property has a right to sell it in any manner he sees fit. [See 22 R. C. L. 38; 5 R. C. L. Supp. 1192.]

Municipal corporations, § 103

ordi

nance prohibiting auction sales validity.

4. An ordinance providing that no

auction sale can be conducted for more than six days in any calendar year, which must be successive and between the hours of 8 A. M. and 6 P. M. on said days, is unreasonable and oppressive, and void as violating the rights of citizens and as being contrary to the laws and policy of the state.

[See annotations in 31 A.L.R. 299; 39 A.L.R. 773.]

Municipal corporations, § 103 — ordinance limiting rights of auctioneers. 5. An ordinance which unreasonably limits the right of an auctioneer to sell the goods of another is void.

APPEAL by plaintiffs from an order of the Common Pleas Circuit Court for Greenville County (Wilson, J.) refusing a motion for an injunction pendente lite against the enforcement of an ordinance relating to auction sales. Reversed.

The facts are stated in the opinion of the court.

Mr. W. B. Bryson for appellants.
Mr. E. M. Blythe, for respondent:
The ordinance regulating auction
sales is valid.

Roanoke v. Fisher, 137 Va. 75, 119 S. E. 259; State ex rel. Cook v. Bates, 101 Minn. 301, 112 N. W. 67; Mogul v. Gaither, 142 Md. 380, 121 Atl. 32; Bf

falo v. Marion, 13 Misc. 639, 34 N. Y. Supp. 945; Dornberg v. Spokane, 31 A.L.R. 300 note.

Watts, J., delivered the opinion of the court:

"This is an appeal by the plaintiffs from an order of his honor, John S. Wilson, presiding over the court of common pleas for the county of Greenville, Thirteenth circuit, refusing plaintiffs' motion for an injunction pendente lite against defendants.

"The agreed facts, so far as they are material to this appeal, are as follows: That during the latter part of December, 1923, plaintiffs appellants, who were conducting a jewelry store in the city of Greenville, put on a sale and sold their stock of goods at public auction. On the 25th day of March, 1924, the city council of Greenville passed an ordinance relating to auction sales of jewelers' merchandise, which ordinance is set out in this appeal and attacked as invalid for the reasons specified herein.

"This action was begun on the 14th day of November, 1924, by the service on defendants of a summons, verified complaint, and rule to show cause why the enforcement of the ordinance should not be enjoined pendente lite. The rule to show cause was argued before his honor, John S. Wilson, presiding judge of the court of common pleas for Greenville county, then in session, on the 22d day of November, 1924, and an injunction pendente lite refused."

The exceptions are:

"(1) That his honor erred in holding that § 4388, vol. 3, Code of 1922, conferred upon the city of Greenville the power to pass the ordinance, which did not regulate, but virtually prohibited, the sale at auction of the goods therein mentioned.

"(2) That his honor erred in refusing to hold the ordinance unreasonable and oppressive, and that it makes an unjust and unnecessary discrimination between merchandise located in Greenville for a period of one year or longer and merchandise

located in Greenville for a shorter period, in that the former can be sold at auction, although restricted, while the latter is prohibited absolutely.

"(3) That his honor erred in refusing to hold that the ordinance violated the inherent right to sell property in a legitimate way, which is incident to ownership and a vested property right protected by the United States Constitution.

"(4) That his honor erred in not holding that the ordinance was void because contrary to the laws and policy of the state.

"(5) That his honor erred in not holding that the ordinance was void because it virtually prohibits the employment of an agent to sell jewelers' merchandise at public auction, and therefore an unreasonable restraint upon the right to contract, performance of the contract being prohibited.

"(6) That his honor erred in not holding that the ordinance was void because it placed an unreasonable and unnecessary burden upon interstate commerce.

"(7) That his honor erred in holding that a case for an injunction pendente lite had not been made, and in refusing to hold, upon the whole case, that plaintiffs were entitled to the injunction, and in refusing, and not granting, the injunction."

Municipal

The exceptions are sustained for the reason that the power to regulate the sale of merchandise at public auction is not one of the incidents corporationsto a municipal cor- regulation of poration, and such powers can be exercised only when it has been conferred on a municipal corporation, by the Legislature.

auction sales.

duct.

The business of an auctioneer is a lawful and useful one; from time immemorial it has Auctions— been recognized as right to consuch. It is a common right. The ordinance virtually prohibits auction sales by providing in § 6 that no auction sale can be conducted for more than six days in

(134 S. C. 314, 132 S. E. 591.)

any calendar year, which must be successive and between the hours of 8 A. M. and 6 P. M. on said days. Selling goods or any property at public auction is legitimate and a common right. Any citizen has a right to sell any property he owns, either by person, agent, or auctioneer. The person so selling his property by auction cannot be restricted to six days as provided for by the ordinance in question. The ordinance concedes that it is legitimate to sell six days during certain hours. Limiting to six days is unreasonable, and the ordinance is void, because it practically prohibits the seller to auction off his goods and

Property

right to sell.

merchandise. The owner of property has the right to sell his property in any manner he sees fit. In the case of State v. Ray, 131 N. C. 814, 60 L.R.A. 634, 92 Am. St. Rep. 795, 42 S. E. 960, the court held invalid an ordinance making it unlawful for "groceries, dry goods stores and other places where merchandise is bought and sold (except drug stores)," to be kept open later than 7:30 P. M. as an unauthorized deprivation of liberty and property.

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ANNOTATION.

Regulations affecting auctions or auctioneers. [Auctions, § 1.]

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chandise are attended with greater risk to the public, and laws regulating such sales are valid and are within the proper exercise by the state of its police power.

In Ex parte West (Cal.) supra, a municipal ordinance providing that in case of sale at public auction, of jewelry, the merchant must obtain a permit therefor and submit an itemized list of the articles to be sold, specifying quality, quantity, and grade thereof, and that such auction should not continue more than thirty days and should be conducted between the hours of 8 A. M. and 6 P. M., was held valid, the court saying: "It is asserted, and, we think, truthfully, that jewelry auctions are often mere

schemes for trapping and defrauding the unwary; that the people, in general, are unskilled in the art of determining the purity of gold and silver or the genuineness of diamonds, particularly at a glance under artificial light; and that the sale of those articles under such circumstances in competition at public auction necessarily exposes many persons to misfortunes against which this character of legislation might probably protect them. . . . In view of the foregoing authorities, we conclude that the municipality, in making the classification complained of, and in applying the provisions of said ordinance to jewelry

auctions only, acted entirely within the lawful exercise of its constitutional power."

But in the reported case (MILLER v. GREENVILLE, ante, 155) it was held that the power to regulate the sale of merchandise at a public auction was not one of the incidents to a municipal corporation, and could only be exercised when conferred by the legislature. The court further held that limiting the sale to six days a week was unreasonable and oppressive, and was contrary to the laws and policy of the state, the right to sell property in a legitimate way being an incident to the right of ownership. W. S. C.

WEBER ENGINE COMPANY, Appt.,

V.

D. S. ALTER et al., etc., Doing Business as D. S. Alter & Company. Kansas Supreme Court — April 10, 1926.

(120 Kan. 557, 245 Pac. 143.)

Business trusts, § 1 as corporations.

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1. An agreement and declaration of trust considered, and held, although an unincorporated company, it is deemed to be a "corporation" within the meaning of § 6 of article 12 of the Constitution, since the agreement under which it is organized and operates gives it powers and privileges not possessed by individuals or partnerships, and therefore it could only transact business within the state by conforming to the regulations imposed by statute upon corporations.

[See annotation on this question beginning on page 169.] Business trusts, § 1 individual liability.

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2. Under articles of association in form of declaration of trust, the trustees and shareholders are individually

Headnotes by HOPKINS, J.

liable for the association's debts, notwithstanding attempted limitation of liability.

[See annotations in 7 A.L.R. 617; 31 A.L.R. 853.]

APPEAL by plaintiff from a judgment of the District Court for Sedgwick County (Wall, J.) in favor of defendants in an action brought to recover the purchase price of a gas engine and accessories. Reversed. The facts are stated in the opinion of the court. Messrs. Edmund H. McVey, Samuel R. Freet, Robert C. Foulston, George Siefkin, and Sidney L. Foulston, for appellant:

The defendants were engaged in a business enterprise for profit, and while so doing incurred the debt in

suit. Whether the defendants' organization is classified as "a joint adventure or enterprise," or as "a joint stock association organized under a declaration of trust," is immaterial, because, under the law of Kansas, such an organization or association

(120 Kan. 557, 245 Pac. 143.)
must be classified and treated as a
corporation.

Home Lumber Co. v. Hopkins, 107
Kan. 153, 10 A.L.R. 879, 190 Pac. 601;
Harris v. United States Mexico Oil Co.
110 Kan. 532, 204 Pac. 754.

It is clearly against the intent and policy of the law of the state of Kansas to permit individuals to secure to themselves, by personal contract or otherwise, the benefit of corporate exemptions, without compliance with the requirements of the state law. Any other situation would make a mockery of the corporate law of the state and of the statutory guards which the state has so carefully enacted for the protection of the public.

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36 Cyc. 1122; Harvey Co. v. Braden, - Tex. Civ. App. —; 260 S. W. 655; Victor Ref. Co. v. City Nat. Bank, Tex. Civ. App. —, 263 S. W. 622; Wells V. Mackay Teleg.-Cable Co. Tex. Civ. App., 239 S. W. 1001; Harris v. United States Mexico Oil Co. supra. Inasmuch as the defendants doing business under the name of David S. Alter & Company did not comply with the law of the state of Kansas regarding corporations, the association and its shareholders are not entitled to the privileges and exemptions created by the corporate law of the state limiting the liability of shareholders, and the organizers and members of the association are liable individually in like manner as partners.

McLennan v. Hopkins, 2 Kan. App. 260, 41 Pac. 1061; Central Nat. Bank V. Sheldon, 86 Kan. 460, 121 Pac. 340; 30 Cyc. 397, 398; Hall Lithographing Co. v. Crist, 98 Kan. 723, 160 Pac. 198; Murdock v. Lamb, 92 Kan. 857, 142 Pac. 961.

The exempting clause in the trust agreement is without effect.

20 R. C. L. p. 1074, § 321; Lyon v. Denison, 80 Mich. 371, 8 L.R.A. 358, 45 N. W. 358; Oliver's Estate, 136 Pa. 43, 9 L.R.A. 421, 20 Am. St. Rep. 894, 20 Atl. 527; People ex rel. Platt v. Wemple, 117 N. Y. 136, 6 L.R.A. 303, 2 Inters. Com. Rep. 735, 22 N. E. 1046; People ex rel. Winchester v. Coleman, 133 N. Y. 279, 16 L.R.A. 183, 31 N. E. 96; Hibbs v. Brown, 190 N. Y. 167, 82 N. E. 1108; 9 Fletcher, Cyc. Corp. § 6106; Wells v. Mackay Teleg.-Cable

-, 239 S. W.

Co. Tex. Civ. App.
1001; Industrial Lumber Co. v. Texas
Pine Land Asso. 31 Tex. Civ. App. 375,
72 S. W. 875.

Messrs. Chester I. Long, Joseph D.

Houston, Austin M. Cowan, Claude I. Depew, James G. Norton, W. E. Stanley, and W. B. Harms, for appellees:

Corporations, as defined by Constitution, need not comply with statutes relating to creation of corporations.

Harris v. United States Mexico Oil Co. 110 Kan. 532, 204 Pac. 754; Hamilton v. Young, 116 Kan. 128, 35 A.L.R. 496, 225 Pac. 1045; Home Lumber Co. v. Hopkins, 107 Kan. 153, 10 A.L.R. 879, 190 Pac. 601.

Shareholders may restrict their individual liability.

Hamilton v. Young, 116 Kan. 128, 35 A.L.R. 496, 225 Pac. 1045; Home Lumber Co. v. Hopkins, 107 Kan. 153, 10 A.L.R. 879, 190 Pac. 601; Harris v. United States Mexico Oil Co. supra; Central Nat. Bank v. Sheldon, 86 Kan. 460, 121 Pac. 340.

Plaintiff cannot question defendants' compliance with corporate laws, and is estopped to deny corporate existence of association.

Root v. Wear, 98 Kan. 234, 157 Pac. 1181; Broseghini v. Sheridan Coal Co. 92 Kan. 113, 139 Pac. 1025; Morawetz, Priv. Corp. § 748; Whitney v. Wyman, 101 U. S. 397, 25 L. ed. 1052; Gartside Coal Co. v. Maxwell (C. C.) 22 Fed. 197; Nebraska Nat. Bank v. Ferguson, 49 Neb. 109, 59 Am. St. Rep. 522, 68 N. W. 370; Stout v. Zulick, 48 N. J. L. 599, 7 Atl. 363; Clausen v. Head, 110 Wis. 405, 84 Am. St. Rep. 933, 85 N. W. 1028; Bon Aqua Improv. Co. v. Standard F. Ins. Co. 34 W. Va. 764, 12 S. E. 771; Bushnell v. Consolidated Ice-Mach. Co. 138 Ill. 67, 27 N. E. 596.

Hopkins, J., delivered the opinion of the court:

This controversy presents two questions: First, whether a "Massachusetts trust" or "business trust" may transact business in this state without corporate license; and, second, whether failure to secure corporate license renders those composing such a "trust" liable as individuals for its debts. The action was one to recover from certain of the individuals composing such a trust the purchase price of a gas engine and accessories. The defendants. prevailed, and plaintiff appeals.

The plaintiff is a corporation with an office in Kansas City, Mo. The defendants, operating under a trust agreement, with office in Wichita,

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